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/raid1/www/Hosts/bankrupt/TCR_Public/011221.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, December 21, 2001, Vol. 5, No. 249 Headlines ACT MANUFACTURING: Banks Nix Extended Waivers Under Credit Pact ANC RENTAL: Seeks Okay to Reject 28 Leases & Abandon Property ALGOMA STEEL: Reaches Tentative Collective Agreements with USWA AMERICA WEST: Will Further Amend Application for Loan Guarantees AMES DEPARTMENT: Seeks 210-Day Extension of Exclusive Periods AQUASEARCH INC: Special Bankruptcy Committee Appointed AUTOMATION SOLUTIONS: Hathaway Named Lead Bidder for IDC Assets BETHLEHEM STEEL: Has Until January 14, 2002 to File Schedules CASUAL MALE: Outstanding Indebtedness Approximates $193 Million CHIQUITA BRANDS: Signing-Up Weber Shandwick as PR Consultant COLLINS & AIKMAN: S&P Assigns Low-B Rating to New $325MM Notes COMDISCO INC: Proposes Sale Procedures for Certain LP Interests CONDOR TECHNOLOGY: Shareholders Approve Proposed Debt Workout DANA CORP: S&P Drops Ratings on Deteriorating Credit Protection DANA CREDIT: S&P Cuts Ratings to Low-B After Parent Downgrade ENRON CORP: Court Okays Payment of $2.1MM Carrier & Storage Fees FRUIT OF THE LOOM: Will Proceed with Sale of Assets to Berkshire FUELNATION INC: James L. Wilson Resigns as Company Director GLOBAL TECHNOVATIONS: Files Chapter 11 Petition in Delaware GLOBAL TECHNOVATIONS: Case Summary & 20 Largest Creditors HALO INDUSTRIES: Selling Assets in MI and Canada to Beanstalk HAYES LEMMERZ: Seeks Approval to Pay Consignment Vendors' Claims HAYES LEMMERZ: Miller Tabak Makes Senior Note Buy Recommendation IT GROUP: Likely Covenant Default Spurs S&P to Lower Ratings INTEGRATED HEALTH: Rejecting 9 Palm Garden Leases in Florida LTV CORP: Asks Court to Approve $15MM Loans to Tubular Division LTV: Ex-Steelworkers Rally Congressional Support to Save Unit LAIDLAW INC: London Guarantee Wants to File $30MM+ Late Claim LODGIAN INC: Files for Protection Under Chapter 11 in New York LODGIAN, INC: Chapter 11 Case Summary MARINER POST-ACUTE: Court Okays 5th Amended DIP Financing Pact METALS USA: Court Okays Bracewell & Patterson as Special Counsel NATIONAL AIRLINES: U.S. Trustee Balks at PwC Indemnification NATIONSRENT INC: Seeks Access to $55 Million of DIP Financing NATIONSRENT: Bankruptcy Filing Prompts S&P to Drop Ratings to D OWENS CORNING: IRS Wants to Set-Off Prepetition Tax Overpayments PACIFIC GAS: Disclosure Hearing Rescheduled for January 14, 2002 POLAROID CORP: Court Extends Lease Decision Period to March 11 POLAROID CORP: Appareo Plans to Acquire Digital Solutions Assets PRINTPACK: S&P Revises Low-B Rating Outlook to Positive RETURN ASSURED: Banking on Pending Merger to Continue Operations SHEFFIELD STEEL: Files for Chapter 11 Reorganization in Oklahoma SHEFFIELD STEEL: Case Summary & 20 Largest Unsecured Creditors SIMONDS INDUSTRIES: S&P Further Downgrades Junks Ratings STEAKHOUSE PARTNERS: Commences Trading on OTC Bulletin Board TELESYSTEM INTERNATIONAL: Closes US$15 Million Private Placement TIOGA TECHNOLOGIES: Nasdaq Delists Shares Effective December 19 VIDEO UPDATE: Court Confirms Movie Gallery-Backed Plan WARNACO GROUP: Seeks Approval of DIP Financing Pact Amendment WESTERN POWER: Fails to Comply with Nasdaq Listing Requirement WHEELING-PITTSBURGH: Inks Premium Financing Pact with Cananwill * Jay Alix Names Al Koch as Chairman & Grindfors as President * BOOK REVIEW: Ling: The Rise, Fall, and Return of a Texas Titan ********* ACT MANUFACTURING: Banks Nix Extended Waivers Under Credit Pact --------------------------------------------------------------- ACT Manufacturing, Inc. (Nasdaq: ACTM) announced that it had obtained and been operating last week under a Third Limited Waiver to its Credit Agreement with its domestic bank syndicate, which is led by The Chase Manhattan Bank. The limited waiver expired on December 14, 2001. The Company is currently in default under the Credit Agreement. The domestic bank syndicate has not agreed to any additional or extended waivers under the Credit Agreement, and the Company has fully utilized the available liquidity under the Credit Agreement. The Company's North American operations have very limited liquidity at this time. While the Company continues to pursue all alternatives, the Company has limited options available. Accordingly, the Company can provide no assurance that it will obtain any of the liquidity that it requires or any of the waivers or consents it requires from the domestic bank syndicate or other parties. The Company is considering, a number of actions, including additional layoffs at several locations and the possibility of seeking protection under the federal Bankruptcy Act, in order to preserve its assets and value. ACT Manufacturing, Inc., headquartered in Hudson, Massachusetts, provides value-added electronics manufacturing services to original equipment manufacturers in the networking and telecommunications, computer and industrial and medical equipment markets. The Company provides OEMs with complex printed circuit board assembly primarily utilizing advanced surface mount technology, electro-mechanical subassembly, total system assembly and integration, mechanical and molded cable and harness assembly and other value- added services. The Company has operations in California, Georgia, Massachusetts, Mississippi, France, England, Ireland, Mexico, Singapore, Taiwan and Thailand. ANC RENTAL: Seeks Okay to Reject 28 Leases & Abandon Property ------------------------------------------------------------- ANC Rental Corporation, and its debtor-affiliates seek entry of an order authorizing the Debtors to reject 28 Leases and to sell certain personal property, furniture, fixtures and equipment located at the leased premises free and clear of all Encumbrances, or if no buyer is found, to abandon the furniture & fixtures. The Debtors also request that the rejection of the Leases and the sale or abandonment of the furniture & fixtures be effective as of the date the Debtors provide written notice to such landlord or its agent and, if applicable, to such subtenant, under each Lease stating that the Debtors have vacated and no longer have any interest in the premises. Mark J. Packel, Esq., at Blank Rome Comisky & McCauley LLP in Wilmington, Delaware, tells the Court that the furniture & fixtures are of minimal value, although the Debtors intend to remove all of the furniture & fixtures to the extent that the Debtors determine that the cost to remove and store any furniture & fixtures in order to sell it would exceed any value that could be realized in a sale. If the Debtors intend to abandon any furniture & fixtures, Mr. Packel assures the Court that they will provide written notice of the furniture & fixtures they intend to abandon to the landlord or its agents. The Debtors also request that the rejection of each Lease be without prejudice to the Debtors' right to seek reimbursement from the landlord or subtenant under such Lease in the event that the Debtors have overpaid any of their rental or other obligations under the terms of such Lease. The Debtors request that the order approving the sale of the furniture & fixtures provide, that such sale is free and clear of all Encumbrances that may be asserted, with such Encumbrances to attach to the proceeds of the sale of the furniture & fixtures, subject to the rights, claims, defenses, and objections, if any, of all interested parties with respect thereto. If no buyer is found for the furniture & fixtures, Mr. Packel contends that the abandonment of the furniture & fixtures, which the Debtors may elect to leave at the premises, is appropriate because such furniture & fixtures is of inconsequential value and/or the cost of removing and storing such property exceeds its value to the Debtors' estates. If the Motion is granted and the Debtors are authorized to reject the leases, the Debtors will be relieved of the continuing obligation to: A. participate in leases and subleases that are no longer advantageous or beneficial to the Debtors and their estates; and B. pay ongoing lease payments, rent, and maintenance charges, among other things, on leases that are no longer beneficial to the Debtors and their estates. Mr. Packel claims that the sale of the furniture & fixtures free and clear of Encumbrances will allow the Debtors to realize value from the furniture & fixtures that the Debtors have little or no use for at their other locations and that is of inconsequential value to the Debtor's estate. (ANC Rental Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) ALGOMA STEEL: Reaches Tentative Collective Agreements with USWA --------------------------------------------------------------- Algoma Steel Inc., (TSE: ALG) announced that it has reached tentative agreement with its two USWA Locals on new collective agreements, meeting the requirements of the Company's Plan of Arrangement. Ratification votes on the new collective agreements are expected to take place on Friday, December 21st. Algoma Steel Inc., based in Sault Ste. Marie, Ontario, is Canada's third largest integrated steel producer. Revenues are derived primarily from the manufacture and sale of rolled steel products, including hot and cold rolled sheet and plate. AMERICA WEST: Will Further Amend Application for Loan Guarantees ---------------------------------------------------------------- America West Airlines (NYSE: AWA) announced that Wednesday it further amended its application for federal loan guarantees under the Air Transportation Safety and Stabilization Act following continued discussions with the Stabilization Board and its staff. The company's amended application includes a revised loan structure that reduces the portion of the loan guaranteed by the government from $400 million to $380 million, or approximately 85 percent of the $445 million loan, and now includes lenders with no material interest in or exposure to the company. Additionally, America West's seven-year business plan was revised to reflect actual 2001 financial performance, which is better than forecast in the company's original application, as well as an increase in recently negotiated concessions. The net effect of these adjustments is a seven-year plan that demonstrates America West's ability to repay the loan and retain comfortable cash balances of nearly $600 million. "We remain very confident that America West's application is in a form that can and should be approved," said W. Douglas Parker, chairman, president and chief executive officer. "Our application continues to show that America West is important to the efficiency and viability of the U.S. airline industry. As amended, our application meets the latest demands of the Stabilization Board, demonstrates increased comfort regarding loan repayment and increases compensation to the U.S. taxpayers." "Our business plan, which includes very conservative and reasonable assumptions about the industry's recovery and America West's ability to outperform the industry, clearly demonstrates the company's ability to repay the loan," added Parker. "We are so confident our seven-year plan assumptions are reasonable that we have made it available to the public." America West disclosed its seven-year plan through an 8-K filing with the Securities and Exchange Commission yesterday. Included in the revised application are third-party reviews of the company's business plan by two highly regarded aviation consulting firms, as well as credit assessments conducted by or for the proposed lenders, all of which conclude that America West's business plan is viable and the loan is prudently incurred. Additionally, the numerous creditors and business partners providing the more than $600 million in concessions, and their advisors, have reviewed the plan and reached similar conclusions. As a result of the even higher commitment to concessions, the improving economic outlook and the comfortable margin for error inherent in the seven-year plan, America West also enhanced its application by including a $3.8 million (1 percent) upfront fee and reducing the loan's average amortization from 5.8 years to 4.5 years. The total returns to taxpayers are now well in excess of the terms of a private commercial loan America West had negotiated in August 2001, but which never closed due to the terrorist attacks of September 11. On November 13, America West submitted an application to the Stabilization Board, outlining its success as a post- deregulation carrier, its solid financial and competitive position prior to September 11, a sound business plan and nearly $600 million in concessions and contributions that would result from the loan guarantees. Following discussions with staff members of the Board, the company amended its application on December 10 to include even more conservative business model assumptions regarding the rebound of the U.S. airline industry, a bottom-up seven-year forecast for each of its routes served and a revised loan structure including an increase in the at-risk portion of the loan. Additionally, returns to taxpayers were significantly increased through cash payments as well as the addition of warrants to acquire approximately 3.4 million Class B shares of America West Holdings Corporation. "Our application for federal loan guarantees clearly meets Congressional intent, the requirements and regulations governing the Loan Guarantee Program and the spirit of the Stabilization Act," added Parker. "It sets an exceptionally high hurdle for those that will follow. We continue to believe that the approval of America West's application is in the best interests of airline competition, the traveling public and the U.S. economy." America West Airlines, the nation's eighth-largest carrier, serves 88 destinations in the U.S., Canada and Mexico. Along with its codeshare partners, America West serves more than 170 destinations worldwide. America West Airlines is a wholly owned subsidiary of America West Holdings Corporation, an aviation and travel services company with 2000 sales of $2.3 billion. AMES DEPARTMENT: Seeks 210-Day Extension of Exclusive Periods ------------------------------------------------------------- Ames Department Stores, Inc., and its debtor-affiliates ask Judge Gerber to extend their exclusive period during which to file a plan of reorganization and solicit acceptances of that plan. The Debtors ask for a 210-day extension of their Exclusive Plan Filing Periods until July 16, 2002 and a concomitant extension of their Exclusive Solicitation Period until September 16, 2002. Martin J. Beinenstock, Esq., at Weil Gotshal & Manges LLP in New York, argues that extension of a debtor's exclusive periods afforded under 11 U.S.C. Sec. 1121 is customary is both customary and essential in the context of Ames' chapter 11 cases. In addition, ample cause exists to grant the Debtors such relief because the Debtors' cases are large and complex, and the Debtors must assess their holiday results before formulating a chapter 11 plan. Mr. Beinenstock relates that the Debtors' commencement of these chapter 11 cases represents an important effort to restructure their own financial and operational needs in today's fluid retail environment. The Debtors believe they have a strong and substantial market presence as one of the nation's leading regional discount retailers. To date, Mr. Beinenstock states that the Debtors have achieved major and solid accomplishments in the three and a half months since their chapter 11 cases commenced. The Debtors have achieved operating results surpassing its business plan and has prepared a forward-looking business plan for the statutory creditors' committee. It has also analyzed virtually its entire estate, and has closed and is closing a rational set of stores to pay down its debt and to leave an efficient and profitable core business of more than 330 stores. Mr. Beinenstock tells the Court that the current holiday selling season is the single largest selling season for retailers, including the Debtors. All of the Debtors' efforts must continue to remain focused on planning for and effectuating a strong holiday sale season. As such, Mr. Beinenstock contends that the Debtors' management cannot be distracted from the myriad issues attendant to the Debtors' business operations by seeking to negotiate a chapter 11 plan at this time as they must concentrate on business preservation and growth. After the holiday season, they will need sufficient time to analyze the results with the Committee and to formulate a consensual chapter 11 plan. Mr. Beinenstock argues that Courts well-recognize the benefits and practical necessities of extending a debtor's exclusive periods in large complex cases, particularly when there is no indication the debtor is abusing the chapter 11 process through such extensions. The Debtors and the Committee have worked constructively and the vital components underlying a chapter 11 plan are being developed as rapidly as possible. Mr. Beinenstock notes that it is irrefutable that the Debtors depend heavily on their holiday sales, which comprise a substantial portion of their annual profits. Notably, Debtors exceeded its plan in November and is working toward a very positive holiday season, which will lead to the parameters of exit financing which is already being formulated with Ames' lender. Additionally, Debtors has undertaken significant efforts to re- establish vendor and trade terms but absent the requested extension of Exclusive Periods, the Debtors are concerned their extensive efforts thus far will be adversely impacted. Notably: A. vendors may reduce any recently enhanced trade terms, B. vendors who have not yet agreed to improved terms may continue to decline to do so for fear a loss of exclusivity may create turmoil and uncertainty, or C. vendors may even decline to ship in an uncertain environment. Mr. Beinenstock contends that diverting attention of Debtors and its vendors away from the holiday season and the subsequent marketing and sales season would also be counterproductive as it would undermine the common goal of maximizing the Debtors' enterprise value. Finally, failure to extend the Exclusive Periods at this critical time would send a strong, adverse public message that the Debtors' reorganization efforts are floundering. Mr. Beinenstock explains that such a message would lead to a lack of confidence among the Debtors' key constituencies including employees, vendors, and customers. Employees may again fear for the security of their jobs, becoming less productive and causing unnecessary and harmful attrition; vendors may tighten credit terms or refuse to ship altogether; and disheartened customers may patronize other retailers. In short, failure to extend the Exclusive Periods could subvert the Debtors' overall business operations and progress to date. Mr. Beinenstock asserts that the chapter 11 process, which has been exceedingly orderly and constructive to date, can only be negatively impacted by termination of exclusivity. No one currently has a plan to propose, and no one will be precluded from asking the Court's permission to propose a plan if exclusivity is extended. Mr. Beinenstock claims that the extension only causes a putative plan proponent to ask permission before filing a plan. This way irresponsible or destructive plans and their concomitant effects on the business can be avoided. (AMES Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) AQUASEARCH INC: Special Bankruptcy Committee Appointed ------------------------------------------------------ An involuntary petition was filed on or about October 29, 2001, under Chapter 11 of the United States Bankruptcy Code, against Aquasearch Inc., in United States Bankruptcy Court, District of Hawaii (case 01-04260), by five purported creditors of the Company. On November 30, 2001, the Company consented to the entry of an Order for Relief and will continue to operate as a Debtor-in-Possession. A Special Bankruptcy Committee was appointed and delegated the authority to work with the Debtor's Responsible Person and legal counsel to assist in the administration of the Debtor-in- Possession under Chapter 11 of the Bankruptcy Code. The committee members are Richard Sherman, a member of Board of Directors and Debtor's Responsible Person, Richard Propper, a representative of Chardan Ventures, lender of Debtor-in- Possession financing, and Gregory Kowal, a representative of the petitioning creditors and shareholders. Aquasearch has 120 days to propose a plan of reorganization. AUTOMATION SOLUTIONS: Hathaway Named Lead Bidder for IDC Assets --------------------------------------------------------------- Hathaway Corporation (NASDAQ: HATH) announced that it has been selected as the Lead Bidder to acquire the business and related assets of the Industrial Devices Division (IDC) of Automation Solutions International LLC (ASI), located in Petaluma, California. ASI is currently a debtor-in-possession in a pending Chapter 11 bankruptcy case and the sale of IDC is being negotiated in accordance with bankruptcy procedures, which are to be submitted to the Bankruptcy Court for approval. Hathaway was selected by ASI, its secured creditor and Creditors' Committee as the Lead Bidder in a bidding process that was completed on Monday, December 17, 2001, subject to definitive documentation, overbidding and Bankruptcy Court approval. The bankruptcy sale procedures call for an auction on February 5, 2002, where other bids will be entertained provided they substantially exceed the undisclosed Hathaway lead bid amount. The sale procedures also provide for a break-up fee equal to five percent of Hathaway's Lead Bid amount to be paid to Hathaway if Hathaway is not the successful bidder. Under the sale procedures, Hathaway, as the Lead Bidder, legally retains the right to match any other bid received in the bankruptcy sale process. IDC was founded in 1975 and offers a wide range of mechanical and control products for automated positioning applications. IDC's products are used in many applications requiring control of linear position, thrust, speed or position. Examples of applications of its products include controlling the positioning of giant radio telescopes and plant robotic and industrial automation equipment. IDC pioneered the electric cylinder as a simpler, cleaner, more precise, more controllable and generally more cost-effective alternative to hydraulic and pneumatic positioning technology. During the last four quarters ended September 30, 2001, IDC had revenues of $14.2 million and a loss of $1.4 million. IDC's operating results have been significantly influenced by ASI's bankruptcy and the general economic slowdown. "If completed, the acquisition of IDC will be complementary to Hathaway's Motion Control products and markets," commented Dick Smith, President and CEO of Hathaway. "With IDC's products, Hathaway will enhance its ability to offer motion control systems solutions in addition to being able to supply components to OEMs and other suppliers of motion control systems." "We are optimistic that once out from under the influence of bankruptcy and with the strength of IDC's management team, IDC will quickly return to profitability," Mr. Smith said. Headquartered in Denver, Colorado, Hathaway designs, manufactures and sells advanced systems and instrumentation to the worldwide power and process industries, as well as motion control products to a broad spectrum of customers throughout the world. With subsidiaries in the United States and United Kingdom and joint venture investments in China, Hathaway is a leading supplier of systems automation and integration solutions to the world power industry and a leader in motion control products. BETHLEHEM STEEL: Has Until January 14, 2002 to File Schedules -------------------------------------------------------------- Judge Lifland granted Bethlehem Steel Corporation's request and extended the deadline by which the Company must file its schedules of assets and liabilities, schedules of executory contracts and unexpired leases, and statements of financial affairs to January 14, 2002. (Bethlehem Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) CASUAL MALE: Outstanding Indebtedness Approximates $193 Million --------------------------------------------------------------- Casual Male Corporation is highly leveraged. The Company's outstanding consolidated indebtedness for borrowed money (including current maturities but excluding undrawn letters of credit) totals approximately $193.0 million. This relatively high level of indebtedness could be a factor in determining feasibility of any plan of reorganization that is required to be confirmed in connection with the Company's Chapter 11 cases. This level of indebtedness also could impair the Company's ability to obtain additional financing and requires the Company to dedicate a significant portion of its net cash flow from operations to the payment of principal and interest on this indebtedness, and puts the Company at increased risk in the event it defaults under any indebtedness. Net sales from continuing operations increased by $60.7 million to $471.8 million in fiscal 2001 from $411.1 million in fiscal 2000, primarily due to a $35.5 million increase in sales generated by the Repp Big & Tall retail store, catalog and e- commerce businesses acquired in May 1999 and the introduction of the Casual Male Catalog and e-commerce website during the period. The sales increase was also the result of (i) an increase in the average number of Casual Male Big & Tall stores, outlet stores and Work 'n Gear stores in operation during fiscal 2001 as compared to fiscal 2000, (ii) a 3.2% increase in comparable store sales (comparable store sales increases/decreases are based upon comparisons of weekly sales volume in Casual Male Big & Tall stores, outlet stores and Work 'n Gear stores that were open in corresponding weeks of the comparison periods, as well as comparisons, beginning in September 2000, of weekly sales volume in the Repp Big & Tall stores, which were open in corresponding weeks of the comparison periods) and (iii) an additional week in fiscal 2001, which accounted for additional sales of $6.6 million. The Company's operating income from continuing operations increased by $3.8 million to $26.1 million in fiscal 2001 from $22.3 million in fiscal 2000. As a percentage of sales, operating income was 5.5% in fiscal 2001 as compared to 5.4% in fiscal 2000. Net loss for fiscal 2001 was $101.9 million as compared to net earnings for fiscal 2000 of $8.9 million. CHIQUITA BRANDS: Signing-Up Weber Shandwick as PR Consultant ------------------------------------------------------------ Chiquita Brands International, Inc., sought and obtained the Court's permission to retain Weber Shandwick Worldwide as its public relations consultant. Robert W. Olson, Senior Vice President of Chiquita Brands International, Inc., relates that Weber Shandwick is a communications firm that has extensive experience in crisis communication, involving matters such as corporate transactions, bankruptcies, reorganizations and restructurings. Weber Shandwick has extensive experience in assisting financially troubled companies with public relations, including companies that have been in bankruptcy, Mr. Olson adds. According to Mr. Olson, the Debtor has retained the services of Weber Shandwick as public relations consultant since December 20, 2000. As of the Petition Date, Mr. Olson reports, Weber Shandwick's billing for professional services rendered during the year prior to the Petition Date equaled approximately $673,000. Many persons and entities will be interested in the Debtor's bankruptcy, Mr. Olson foresees. The cooperative participation of many of these persons and entities will be necessary for the Debtor to successfully reorganize, Mr. Olson asserts. According to Mr. Olson, Weber Shandwick will be able to help the Debtor protect, retain and develop the goodwill and confidence of these constituencies by assisting the Debtor in: (a) communicating reliably, accurately and effectively; (b) speaking with a unified, authoritative voice; (c) presenting a coherent, consistent message; (d) managing the Debtor's disclosure of information; (e) correcting, counteracting and controlling damage in regard to the rumors and misinformation that inevitably will arise; (f) deterring and dissuading irrational, uninformed, panicked or other behavior deleterious to the estate and the reorganization; and (g) otherwise protecting the goodwill of the Debtor. In addition, Mr. Olson remarks, by having a public relations consultant, other professionals in the case and company officers who might otherwise have to spend significant amounts of time on public relations matters will be able to focus better on their respective competencies and jobs in the management and reorganization of the Debtor. According to Andy Polansky, President of the New York office of Weber Shandwick, a retention agreement between Weber Shandwick and the Debtor provides that Weber Shandwick will be paid for its services on an hourly basis: President $400 Principal 375 Sr. Managing Dir. / EVP 350 Managing Directors / SVP 325 Director / VP 250 Group Managers 215 Account Supervisors 190 Senior Associates 175 Associates 150 Junior Associates 125 Account Coordinators 75 Interns 50 In addition, Mr. Polansky tells Judge Aug, the Debtor will reimburse Weber Shandwick for any out-of-pocket expenses reasonably incurred by Weber Shandwick in the performance of its services. "To the best of my knowledge and belief, neither I nor Weber Shandwick holds or represents any interest adverse to the Debtor's estate," Mr. Polansky declares. Weber Shandwick has in the past represented, currently represents, and likely in the future will represent creditors of the Debtor in matters unrelated to these cases, Mr. Polansky admits. However, Mr. Polansky assures the Court, Weber Shandwick will not represent any other entity in connection with this chapter 11 case. Weber Shandwick is a "disinterested person" within the meaning of section 101(14) of the Bankruptcy Code, Mr. Polansky concludes. (Chiquita Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) COLLINS & AIKMAN: S&P Assigns Low-B Rating to New $325MM Notes -------------------------------------------------------------- Standard & Poor's assigned its single-'B' rating to Collins & Aikman Products Co.'s $325 million senior unsecured notes due 2011, to be issued under Rule 144A with registration rights. At the same time, Standard & Poor's assigned its double-'B'-minus rating to the company's $700 million senior secured bank credit facility. The senior notes and bank facility will be guaranteed by the company's parent, Collins & Aikman Corp. In addition, all existing ratings on the two companies were affirmed. The outlook is stable. Proceeds from the new debt issue and credit facility will be used to fund the acquisition of Textron Inc.'s Automotive Trim Division (TAC-Trim) and to refinance existing debt. Total consideration for the purchase includes $735 million in cash and assumed debt, $326 million of preferred shares and 18 million of common shares to be issued to Textron. In addition, Textron will provide $87 million of lease financing for certain retained equipment and will be entitled to a payment in 2007 of up to $125 million to be calculated based on Collins & Aikman's EBITDA during the five-year period ending 2006. The cash portion of the purchase price will be partially financed with $160 million in proceeds from the issuance of common shares to Collins & Aikman's largest shareholder, Heartland Industrial Partners, L.P. The transaction is expected to close by year-end 2001. The ratings reflect Collins & Aikman's leading market positions in the highly competitive and cyclical automotive supply industry, combined with a weak financial profile. The acquisition of TAC-Trim will result in some improvement in Collins & Aikman's business profile by increasing product, customer, and geographic diversity, and providing greater scale in key product areas. TAC-Trim, with fiscal 2000 sales of $1.87 billion and EBITDA of $229 million, is a leading manufacturer of integrated cockpits, instrument panels, interior trim, and exterior components. Collins & Aikman's credit protection measures will also improve with pro forma total debt (including the addition of securitized accounts receivable) to EBITDA on a last 12-month basis declining to the 4.2 times area from about 5.0x as of September 30, 2001. Nevertheless, financial risk will remain high, reflecting the company's high debt leverage and thin cash flow protection. The combined company will be the number-one or number-two supplier in more than a dozen automotive interior trim product categories, including instrument panels, door trim, acoustic materials, and fabric seat covering. Collins & Aikman will also be a leading supplier of integrated cockpit modules, a market that is expected to show above-average growth during the next few years. Risks include integration challenges resulting from the company's aggressive growth strategy. Upon completion of the TAC-Trim acquisition, Collins & Aikman will have more than doubled its size during the past year. The company's ability to successfully integrate manufacturing, product development, information systems, and corporate cultures is a major risk factor. Nevertheless, the retention of several senior managers of TAC-Trim and the delay in closing the acquisition, which has provided additional time to formulate consolidation plans, should help to smooth the integration process. Additional challenges include the uncertain outlook for automotive production in the next few years, ongoing pricing pressure from manufacturers, and the potential effect from the weakened U.S. and global economies. High financial risk results from the company's heavy debt load and thin cash flow protection. Collins & Aikman's operating results have been hampered during the past year by reduced and erratic automotive production levels in North America, new vehicle launch costs, pricing pressures, and the negative effects of the Sept. 11 attacks. Sales declined 13% and EBITDA declined 25% during the first nine months of 2001 compared with the same period in 2000. TAC-Trim's results have also declined, with sales down 17% and EBITDA down 30% during 2001. The price of the TAC-Trim acquisition has been reduced by about $100 million and the proportion of equity in the deal has increased to reflect changed economic circumstances. Lower costs from integration and restructuring actions, combined with new business awards, should partially offset the effects of reduced auto production levels. Fair financial flexibility is provided by adequate liquidity, the ability to sell assets, and the support of Heartland Industrial Partners. Future acquisitions are expected to be financed in a way that preserves financial flexibility. Over time, Standard & Poor's expects EBITDA interest coverage to average 2.5x and total debt to EBITDA to average between 4.0x and 4.5x, satisfactory levels for the rating. The rating on Collins & Aikman's new bank facility is the same as the corporate credit rating. The facility consists of a $212.5 million revolving credit facility, a $175 million tranche A term loan, and a $312.5 million tranche B term loan. The facility will mature in 2005. Financial covenants will include maximum debt leverage and minimum interest coverage ratios. Security will be provided by most assets but collateral protection is reduced by the pledge of a sizable portion of accounts receivable associated with a securitization program. The company's cash flows were significantly discounted to simulate a default scenario and capitalized at an EBITDA multiple reflective of the market. While lenders should realize meaningful recovery of principal, it is not clear that a distressed enterprise value would be sufficient to cover the entire facility. Outlook: Stable Collins & Aikman's strong market positions, and good customer and geographic diversity should limit downside risk. Upside potential is constrained by cyclical and competitive industry conditions, an aggressive growth strategy, and a heavy debt load. Ratings Assigned Collins & Aikman Products Co. $700 mil. senior secured notes rating* BB- $325 mil. senior unsecured notes* B Ratings Affirmed Collins & Aikman Corp. Corporate credit rating BB- Collins & Aikman Products Co. Subordinated debt rating* B Senior secured debt* BB- * (guaranteed by Collins & Aikman Corp.) * * * DebtTraders reports that Collins & Aikman Products Co.'s 11.500% bonds due 2006 (COLAIK) trade between 92 and 96. See http://www.debttraders.com/price.cfm?dt_sec_ticker=COLAIK for real-time bond pricing. COMDISCO INC: Proposes Sale Procedures for Certain LP Interests --------------------------------------------------------------- Comdisco, Inc., and its debtor-affiliates ask Judge Barliant for an order approving procedures to sell their interests in certain limited partnerships free of liens, claims and encumbrances without requesting further Court approval. According to George N. Panagakis, Esq., at Skadden, Arps, Slate, Meagher & Flom, in Chicago, Illinois, the Debtors have decided to sell its investment interests in certain limited partnerships in order to eliminate certain capital obligations, minimize risk of investment loss, and eliminate costs associated with participation in the limited partnerships. Mr. Panagakis tells the Court that the Debtors own limited partnership interests in these Delaware Limited Partnerships: Comdisco's Remaining Net Asset Value Name of Fund Commitment Commitment as of 9/30/01 ------------ ---------- ---------- --------------- Charles River Partnership XI, LP $5,000,000 $4,625,000 $284,302 DCM III, LP $1,000,000 $825,000 $143,896 New Enterprise Associates 10 LP $10,000,000 $8,500,000 $1,587,512 Oak Investment Partners X $12,000,000 $11,400,000 $1,079,865 Redwood Ventures IV $5,000,000 $3,750,000 $2,557,521 Seapoint Ventures II $1,500,000 $1,350,000 $121,302 Vantage Point Venture Partners III $5,000,000 $2,250,000 $2,422,944 Vantage Point Venture Partners IV $10,000,000 $9,200,000 $693,831 Weiss Peck & Greet Venture Associates $7,500,000 $7,500,000 $907,986 Mr. Panagakis informs Judge Barliant that each of the Limited Partnerships has as its primary objective the provision of venture capital to, and investment in, technology-related and/or growth-oriented businesses. Ms. Panagakis explains that the investments made by the Limited Partnerships are of a high-risk nature, as is the Debtors' investment interest in the Property. Under each of the Limited Partnership agreements, Mr. Panagakis says, the limited partners are required to make certain capital contributions in accordance with the applicable Limited Partnership agreement. According to Mr. Panagakis, the net asset value of the Debtors' interest in any individual Limited Partnership interest does not exceed $3,000,000, and the aggregate net asset value of the Property does not exceed $10,000,000. Mr. Panagakis tells the Court that the Debtors have marketed the Property to 30 parties who are known to the Debtors and the Debtors' financial advisors as the most likely candidates to have an interest in purchasing the Property. Of those 30 parties, Mr. Panagakis says, 11 parties expressed an interest in purchasing one or more of the interests in the Limited Partnerships. But to date, Mr. Panagakis relates, only one of these parties has submitted a firm bid (which bid has since expired). "None of these parties is willing to act as a stalking horse in a competitive bidding process without any compensation," Mr. Panagakis informs Judge Barliant. That's why, Mr. Panagakis explains, the Debtors want the Court's approval to sell the Property pursuant to the Notice Procedures without further approval of the Court. According to Mr. Panagakis, the Debtors seek to sell the Property as a whole or in any combination of one or more specified Limited Partnership interests. Mr. Panagakis contends that these Notice Procedures and the streamlined sale process will permit the Debtors to obtain the best recovery for the Property. The Debtors propose these "Notice Procedures" be implemented for the sale of the Property in lieu of a separate notice and a hearing: (a) The Debtors will give notice of the sale of any and all Properly to: (i) the United States Trustee, (ii) counsel to any official committee formed in these cases, (iii) any known holder of alien, claim or encumbrance, if any, against the specified property to be sold, and (iv) the notice party to any Limited Partnership with consent rights or rights of first refusal. The Sale Notice shall be served by facsimile, so as to be received by 5:00 p.m. (Eastern Time) on the date of service. The Sale Notice shall specify: (1) the Property to be sold, (2) the identity of the proposed purchaser (including a statement of any connection between the proposed purchaser and the Debtors), and (3) the proposed sale price. (b) The Notice Parties shall have five business days after the notice is sent to object to or request additional time to evaluate the proposed transaction. If counsel to the Debtors receives no written objection or written request for additional time prior to the expiration of such five-day period, the Debtors shall be authorized to consummate the proposed sale transaction and to take such actions as are necessary to close the transaction and obtain the sale proceeds. (c) If a Notice Party objects to the proposed transaction within five business days after the notice is sent, the Debtors and such objecting Notice Party shall use good faith efforts to consensually resolve the objection. If the Debtors and the objecting Notice Party are unable to achieve a consensual resolution, the Debtors will not take any further steps to consummate the proposed transaction without first obtaining Bankruptcy Court approval of the proposed transaction upon notice and a hearing. (d) Liens shall attach to the net proceeds of the sale, subject to any claims and defenses the debtor may possess with respect thereto, and any amounts in excess of such liens shall be utilized by the Debtors in accordance with the terms of the Debtors' post-petition financing arrangement. (e) Nothing in the foregoing procedures shall prevent the Debtors, in their sole discretion, from seeking Bankruptcy Court approval at any time of any proposed transaction upon notice and a hearing. (Comdisco Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONDOR TECHNOLOGY: Shareholders Approve Proposed Debt Workout ------------------------------------------------------------- Condor Technology Solutions, Inc. (OTCBB:CNDR) announced at its annual meeting of stockholders that the company's proposed debt restructuring was approved, as contemplated by the company's new four-year credit facility. The restructuring with its Lender Group, led by First Union National Bank, provides for the conversion of approximately one- third of the company's bank debt and restructures the balance. The converted debt, in the form of a $12.1 million note, will be cancelled upon issuance of company equity to a trust established by the Lender Group. The meeting of stockholders also reelected Peter T. Garahan as a director of the company and appointed BDO Seidman as the company's independent accountants. Condor Technology Solutions is a technology and communications company specializing in the organization, analysis and creative distribution of business information. The company's business practices include Web development, business intelligence, contact center services, infrastructure support and marketing communications. Condor Technology Solutions was founded in 1998. It is headquartered in Baltimore, Maryland, with offices and operations throughout the Northeast. The company's Web site is http://www.cndr.com DANA CORP: S&P Drops Ratings on Deteriorating Credit Protection --------------------------------------------------------------- Standard & Poor's lowered its ratings on Dana Corp. and removed the ratings from CreditWatch where they were placed September 27, 2001. The outlook is now stable. The rating actions reflect the continuing deterioration in Dana's credit protection measures and Standard & Poor's expectation that challenges associated with the implementation of a significant restructuring program during a period of weakening demand and heightened competitive pressures will prevent the company from restoring its financial profile to previously expected levels over the near to intermediate term. Dana is a major supplier of automotive components to both the original equipment and replacement markets. The company also produces parts for off-highway and industrial applications and provides lease financing through its subsidiary, Dana Credit Corp. (Dana recently announced that it intends to sell the businesses of Dana Credit.) Despite Dana's leading market positions for many of its products, a diversified customer base, a solid aftermarket distribution network, and good global diversification, the company also faces challenging and cyclical markets. Industry pressures have intensified in the past year due to sharp declines in heavy-duty truck production; declining production schedules in the passenger car/light-truck market; increasing pricing pressures; and continuing softness in the aftermarket. These pressures have led to a significant deterioration in the company's financial profile. For the first nine months of 2001, Dana reported net income (excluding nonrecurring items) of $19 million, compared with $375 million for the same period of 2000. Full-year 2000 net income declined to $334 million (after $173 million in restructuring and integration charges) from $513 million in 1999 (after $181 million in restructuring and integration charges). In response to the earnings pressures, Dana recently announced that it was cutting its dividend, pursuing the sale of the businesses of Dana Credit, and accelerating the restructuring of its operations. It expects to take a $445 million after-tax charge to cover the restructuring, which will involve the closure or consolidation of more than 30 facilities worldwide and a reduction in headcount of at least 15%. Much of the restructuring is expected to occur during the next few quarters. These actions should position the company to perform better during a period of industry stress. However, over the near term, they will put additional pressure on cash flow and reduce financial flexibility. Dana is currently in the process of renegotiating its bank lines. Given the challenging near-term outlook for Dana's end markets and the significant restructuring occurring next year, Standard & Poor's believes that covenant compliance will remain tight. The ratings are based on the assumption that: * Dana will be successful in renewing its 364-day facility and amending its five-year facility; * Dana will remain in compliance with bank covenants and retain a sizeable level of unused borrowing capacity under these lines; and * Funds from operations to debt will average in the mid- to upper-teen-percentage area over the near term, with debt to capital averaging in the 60% area (adjusted for operating leases). Outlook: Stable Upside rating potential is limited by difficult industry fundamentals and the challenges associated with the significant restructuring program underway at the company. Benefits from restructuring actions and ongoing efforts to improve financial flexibility should limit downside risk. Ratings Lowered, Removed From CreditWatch Dana Corp. TO FROM Long-term corporate credit rating BB BBB- Senior unsecured debt BB BBB- Senior unsecured bank loan BB BBB- Commercial paper B A-3 Short-term corporate credit B A-3 DANA CREDIT: S&P Cuts Ratings to Low-B After Parent Downgrade ------------------------------------------------------------- Standard & Poor's lowered its counterparty credit and senior unsecured debt ratings on Dana Credit Corp., a 100%-owned subsidiary of Dana Corp. The ratings remain on CreditWatch with developing implications, where they were placed on October 17, 2001, following Dana Corp.'s announcement that it has engaged the firm of Lazard Freres and Co. to pursue the sale of Dana Credit Corp. CreditWatch with developing implications indicates that the ratings could be raised, lowered, or affirmed, depending on the creditworthiness of any potential acquiring company. The ratings actions mirror the downgrade of Dana Credit's parent, Dana Corp., and the effects of Dana Corp.'s ratings on the funding capabilities of Dana Credit Corp. Ratings Lowered; Still on CreditWatch Developing TO FROM Dana Credit Corp. Counterparty credit ratings BB/B BBB-/A-`3 Senior unsecured BB BBB- ENRON CORP: Court Okays Payment of $2.1MM Carrier & Storage Fees ---------------------------------------------------------------- Enron Corporation, and its debtor-affiliates ordinarily utilize the services of common carriers to store, ship, transport and deliver supplies and materials used in their business operations to and from their operational facilities. According to Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, the Debtors estimate that, as of the Petition Date, such common carriers hold approximately $7,300,000 to $12,300,000 worth of goods. This includes approximately $2,700,000 a day for shipments of pulp and lumber, coal and other supplies and materials, Mr. Rosen notes. The value of the supplies and materials in the possession of the common carriers substantially exceeds the amounts owed to the common carriers, Mr. Rosen advises Judge Gonzales. Additionally, the Debtors lease warehouse space in numerous locations around the world to store lumber, pulp, steel, oil, gas, fuel, petrochemical and plastics. The costs associated with leasing the required storage, warehouse and transloading spaces are paid by the Debtors in the ordinary course of business, Mr. Rosen explains. As a result of these chapter 11 cases, Mr. Rosen says, these warehousemen hold the Debtors' goods and may refuse to release such goods pending payment from the Debtors of their pre-petition obligations, thereby disrupting the Debtors' operations. According to Mr. Rosen, the goods in the warehousemen's possession are worth approximately $17,000,000. This amount substantially exceeds the amounts the Debtors owe to the warehousemen, Mr. Rosen notes. If the Debtors do not pay the pre-petition common carrier and warehousemen charges, Mr. Rosen relates, the supplies and materials held by the common carriers and warehousemen will be subject to possessory liens under applicable state law. Besides, Mr. Rosen reminds the Court, the Uniform Commercial Code grants to creditors holding possessory liens priority in payment over consensual lien creditors. As secured creditors, Mr. Rosen observes, the common carries and warehousemen are entitled to receive full payment for their charges pursuant to any confirmed plan of reorganization in these cases. Thus, Mr. Rosen points out, payment of such charges and fees gives the common carriers and warehousemen no more than that to which they are already entitled. On the other hand, Mr. Rosen warns, absent the payment of the amount owed, common carriers and warehousemen are likely to retain the Debtors' supplies and materials in their possession, which value exceeds the outstanding pre-petition charges. As of the Petition Date, Mr. Rosen tells the Court, the Debtors owe common carriers and warehousemen an aggregate of approximately $2,125,000. At this critical point, Mr. Rosen contends, any interruption in the delivery of such goods would have a detrimental effect on the Debtors' reorganization efforts. Thus, the Debtors seek an order authorizing, in the exercise of their business judgment, the payment of the pre-petition common carrier and warehousemen charges. After due deliberation, Judge Gonzalez permits the Debtors - in their discretion and exercise of their business judgment - to pay all pre-petition: (a) Common Carrier Charges, (b) Warehousemen Charges, (c) Pre-petition Customs Duties, (d) Pre-petition Broker Charges, and (e) Foreign Obligations, all on the same basis, and in accordance with the same practices and procedures, as in effect prior to Petition Date. However, the Court prohibits the Debtors to make payments in excess of $21,300,000 absent further order of the Court. Judge Gonzalez further requires the Debtors to file an accounting of any payments made pursuant to this Order as soon as practicable. (Enron Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) FRUIT OF THE LOOM: Will Proceed with Sale of Assets to Berkshire ---------------------------------------------------------------- The Fruit of the Loom auction planned for Tuesday, December 18, 2001, was canceled after no bids were received by the December 13 deadline. The auction was to be held in the New York offices of Milbank, Tweed, Hadley & McCloy, Fruit of the Loom's counsel. Fruit of the Loom will present the results of that process to Judge Peter J. Walsh at a scheduled hearing on January 2, 2002, at 4:00 pm. The lack of competing bids allows Fruit of the Loom to move forward with the next step in the Berkshire asset sale - the drafting of a reorganization plan that relies on the Berkshire agreement for its payout to creditors. A committee of Fruit of the Loom's creditors and the Court must then approve the plan. (Fruit of the Loom Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) FUELNATION INC: James L. Wilson Resigns as Company Director ----------------------------------------------------------- Effective December 12, 2001, FuelNation Inc., received a letter of resignation from James L. Wilson, who resigned his position as a director of the Company. Mr. Wilson submitted a letter to the Company, citing the fact that the Company was in the process of obtaining the majority consent of its shareholders to undertake a "reverse split" of its issued and outstanding common stock, whereby the Company intends to issue one share of its common stock for every 30 shares of common stock issued and outstanding as of the proposed record date of such reverse stock split. Mr. Wilson's letter stated that he was not comfortable having this action authorized without the Company calling a special meeting of shareholders to authorize such action. The Company has stated that it believes, by obtaining the majority consent of its shareholders to adopt the reverse split, it is complying with the laws of the State of Florida, the Company's state of incorporation. The Company will obtain the written consent of the holders of a majority of the Company's issued and outstanding common stock to implement this reverse split. If and when the Company does obtain the approval of this reverse stock split from the holders of a majority of the issued and outstanding common stock, the approval of this measure would have been assured had the Company called a special meeting of shareholders. Additionally, because of the Company's limited capital, management believes that it is in the best interests of the Company and its shareholders to undertake this action, in order to avoid incurring additional costs. FuelNation says that the actions recommended by Mr. Wilson only incur substantial costs and expenses for the Company. * * * According to a report in the Troubled Company Reporter on November 16, FuelNation's independent certified public accountants issued a going concern note. In addition, 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. These factors among others, the Company's auditors said, raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time. GLOBAL TECHNOVATIONS: Files Chapter 11 Petition in Delaware ----------------------------------------------------------- Global Technovations, Inc. (AMEX:GTN) announced that the Company, the exclusive provider of the patented MotorCheck On- Site Oil Analyzer, "Blood Test For Your Car" technology, and four of its affiliates, On-Site Analysis, Inc., ARCS Safety Seat, Inc., Top Source Automotive, Inc., and Top Source Oil Analysis, Inc. filed for reorganization under Chapter 11 of the United States Bankruptcy Code. The filing, which was made in the United States Bankruptcy Court for the District of Delaware, will enable the Company to conduct business as usual with the Court's protection, while implementing its new business plan. Importantly, GTI also announced that it has received a $1.5 million debtor-in-possession (DIP) financing commitment from The Mennen Trust. The DIP facility will provide the parent company and its subsidiary, On-Site Analysis, Inc. ("OSA") with much- needed working capital to meet immediate and future operating cash flow needs and to fulfill the Company's business obligations, including all employee wages and new vendor invoices. Will Willis, Chairman and CEO of GTI, stated, "Although we have worked diligently to find alternative means to fund operations, the cessation of operations and liquidation of the Company's wholly-owned subsidiary, Onkyo America, Inc., made it impossible to secure adequate working capital financing. The Chapter 11 reorganization of the Company and its affiliated debtors is intended to maximize the value of our assets for the benefit of creditors and position the surviving entity to emerge from this process in a stronger financial condition. Furthermore, the Chapter 11 filing will allow us to return our focus to expanding the distribution and use of the Company's MotorCheck technology." Global Technovations, Inc., develops, assembles and markets the patented MotorCheck and TruckCheck On-Site Analyzer, "an oil analysis mini-lab in a box", solid state spectroscopic analyzers for liquid petroleum marker detection systems, the PetroAnalytics line of diesel fuel and gasoline properties analyzers for the automotive, truck and heavy-duty equipment service markets. GLOBAL TECHNOVATIONS: Case Summary & 20 Largest Creditors --------------------------------------------------------- Lead Debtor: Global Technovations, Inc. 7108 Fairway Drive Suite 200 Palm Beach Gardens, FL 33418 Bankruptcy Case No.: 01-11667 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- On-Site Analysis, Inc. 01-11668 ARCS Safety Seat, Inc. 01-11669 Top Source Automotive, Inc. 01-11670 Top Source Oil Analysis, Inc. 01-11671 Type of Business: GTI is a public holding company. Through its On-Site Analysis, Inc., subsidiary, GTI develops, assembles and markets the patented Motor Check and Truck Check On-Site Analyzer. The On-Site Analyzer is an oil analysis mini- lab for the automotive, truck and heavy-duty equipment service markets. GTI, through its Onkyo America, Inc. subsidiary, manufactures, assembles and distributes audio speakers for the automotive, computer, television and telephone industries. Chapter 11 Petition Date: December 18, 2001 Court: District of Delaware Debtors' Counsel: Thomas E. Lauria, Esq. John Cunningham, Esq. White & Case LLP First Union Financial Center 200 S. Biscayne Boulevard Miami, Florida 33131-2352 Tel: 305 371 2700 -and- Jeffrey M. Schierf, Esq. The Bayard Firm 222 Delaware Avenue Suite 900 Wilmington, Delaware 19801 Tel: 302 655 5000 Total Assets: $25,068,730 Total Debts: $22,390,246 Debtors' 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ GMAC Business Credit, LLC Loan $14,932,303 461 Fifth Avenue 21st Floor New York, NY 1017 Tel: 212 489 4755 Fax: 212 489 3980 Onkyo Europe Loan $3,850,000 Electronics GMBH Industriestrasse 18/20, 82110 Germering, Germany Tel: 49 089 84398 0 Fax: 49 089 84932 65 Onkyo Malaysia SDN.BHD Loan $3,850,000 Piot 105, Kawasan Perusahaan Darulaman Bandar Darulaman 06000 Jitra, Kedah Darul Aman, Malaysia Tel: 04 603 825 7490 Fax: 04 603 825 7478 NCT Audio Production Contract $3,500,000 One Dock Street Suite 300 Stamford, CT 06902 Tel: 203 961 0500 Fax: 203 348 4106 Onkyo Corporation Loan $3,300,000 201, Nissin-Cho Neyagawa-Shi Osaka 574-8450, Japan Tel: 011 81 3 3548 1580 Fax: 011 81 7 2832 8178 FNF Capital, Inc. Loan $1,602,245 7701 France Avenue South, Suite 120 Edina, MN 56435 Tel: 952 826 3019 Fax: 952 826 3050 Republic Bank Lease Loan $528,292 802 North 500 West Suite 103 West Bountiful, UT 84088 Tel: 801 566 2600 Fax: 404 874 0905 Transportation Alliance Loan $313,121 Bank 4185 Harrison Blvd. Suite 200 Ogden, UT 84403 Tel: 801 334 4800 Fax: 801 334 4818 McDaniel Associates Contract $195,000 Cadwalader, Wickersham & Contract $167,878 Taft Pullman Bank - Lease Loan $166,320 Ocean Optics, Inc. Trade Debt $142,437 Fluid Metering, Inc. Trade Debt $102,524 Samir Financial Services Contract $85,000 Galaxie Labs, Inc. Trade Debt $69,772 Cambridge Applied Systems Trade Debt $58,500 L-Tronics Incorporated Trade Debt $51,656 ICS Advent Trade Debt $41,346 Reet Corp. Trade Debt $40,868 Insight Trade Debt $37,101 HALO INDUSTRIES: Selling Assets in MI and Canada to Beanstalk ------------------------------------------------------------- HALO Industries, Inc., (OTC Bulletin Board: HMLOQ) a promotional products industry leader, announced its intent to sell its Troy, MI-based business and the stock of HALO Canada, Inc., its wholly owned subsidiary, to The Beanstalk Group, pending approval from the U.S. Bankruptcy Court in Wilmington, Delaware. The Beanstalk Group is a full service licensing agency and consultancy. Terms of the transactions were not disclosed. HALO's Troy, MI business includes satellite offices in Orlando, FL and Norfolk, VA. HALO Canada has offices in Toronto, Vancouver and Calgary. HALO acquired both the Troy, MI business and HALO Canada though the acquisition of Creative Concepts in Advertising in January 1997. "The sale will dramatically strengthen our financial position by eliminating most, if not all, of our bank debt. It will also reduce our dependence on a single, high revenue client," said Marc Simon, HALO's president and chief executive officer. "The related nature of these business units made them unique candidates for divestiture." Unlike most of HALO's approximately 20 other locations in North America, both the Troy, MI business and HALO Canada have maintained standalone infrastructures since their acquisition. Since its filing of Chapter 11 bankruptcy on July 30, 2001, HALO has continued to conduct business operations and meet all of its employee, vendor and customer obligations. "The completion of this transaction also reduces some of the complexities related to our previously announced transition of overhead functions to Sterling," said Simon. In late September, HALO announced that its management and support functions would migrate from Niles, Illinois, to a new HALO service center in Sterling, Illinois, co-located with its Lee Wayne subsidiary. The Beanstalk Group, with nearly 100 professionals around the globe, is the world's leading licensing management agency and consultancy. With offices in New York, Detroit, Los Angeles and London, Beanstalk offers clients the opportunity to execute strategic licensing programs with global reach. Current Beanstalk clients include AT&T, The Coca-Cola Company, Harley- Davidson, Ford Motor Company, The Stanley Works, Mary-Kate and Ashley, McDonald's, and Master Lock. For more information, please visit http://www.beanstalk.com HALO Industries, Inc. (OTC Bulletin Board: HMLOQ), based in Deerfield, IL with offices worldwide, is a promotional products leader and brand marketing organization. HAYES LEMMERZ: Seeks Approval to Pay Consignment Vendors' Claims ---------------------------------------------------------------- Mark S. Chehi, Esq., at Skadden Arps Slate Meagher & Flom LLP in Wilmington, Delaware, informs the Court that a significant part of Hayes Lemmerz International, Inc.'s inventory includes goods delivered to the Debtors under consignment agreements for incorporation into finished product. Many of the Debtors' Consignment Vendors depend upon their business with the Debtors for their livelihood and likewise, Debtors depend upon the availability of Consigned Goods on favorable trade terms in order to offer their products to their customers on a competitive basis. The Debtors recognize that without the establishment of Court- authorized consignment procedures, the Consignment Vendors would suffer from considerable uncertainty as to whether the Consigned Goods would become embroiled in the chapter 11 processes and whether and when a claim arising out of the delivery of such pre-petition Consigned Goods would be paid. Mr. Chehi submits that the Consignment Vendors may file various motions seeking relief from the automatic stay to exercise rights they may have to demand return of Consigned Goods or seeking to compel the Debtors to assume or reject their consignment agreements. The Debtors prefer to avoid such litigation in favor of continuing their pre-petition relationships with Consignment Vendors. In order to insure that the Consignment Vendors are protected while at the same time allowing the Debtors to continue to utilize Consigned Goods, and in order to avoid the necessity of litigation pertaining to the status of Consigned Goods as property of the Debtors' estates, the Debtors request that the Court approve procedures concerning Consigned Goods, including an authorization to pay Consignment Vendors, in the Debtors' sole discretion, for Consigned Goods held and received by the Debtors in the ordinary course of business, consistent with the Consignment Vendors' pre-petition consignment agreements with the Debtors and/or by the pre-petition course of dealing between the Consignment Vendors and the Debtors. The Debtors request that they be permitted to continue to accept Consigned Goods from any Consignment Vendor under a consignment agreement with the Debtors and to continue to pay such Consignment Vendor in the ordinary course of the Debtors' businesses. Additionally, to the extent that Consignment Vendors are willing to continue to provide Consigned Goods to the Debtors post-petition under ordinary and customary trade terms, the Debtors request authority to pay such Consignment Vendors in the ordinary course of business for any Consigned Goods used by the Debtors post-petition, including Consigned Goods ordered or delivered but not paid for pre-petition. The Debtors do not believe that payment for Consigned Goods ordered or delivered pre-petition will exceed $9,000,000. Mr. Chehi contends that such relief will allow the Debtors to continue to utilize Consigned Goods post-petition and at the same time reward those Consignment Vendors who continue to provide such Consigned Goods post-petition by dispelling any uncertainty that might arise regarding the delivery of Consigned Goods. In addition, the Debtors wish to avoid any requirement that the Consignment Vendors need file financing statements pursuant to the Uniform Commercial Code with respect to Consigned Goods. Without this relief, Mr. Chehi fears that the Debtors' Consignment Vendors will be subjected to unnecessary uncertainty, expense and risk. The Debtors believe that it is unnecessary for Consignment Vendors to file post-petition financing statements pursuant to the Uniform Commercial Code with respect to Consigned Goods. Mr. Chehi argues that the filing of such financing statements could cause confusion and generate unnecessary litigation, while the Debtors have a firm understanding of their existing relationships with Consignment Vendors. Avoiding the necessity to file financing statements will generate goodwill among the Consignment Vendors and encourage them to do business with the Debtors. Mr. Chehi points out that the Debtors face an analogous situation, because the Debtors cannot survive unless they have a continuous supply of raw materials, much of which is provided to them by vendors on a consignment basis. The loss of access to favorable trade terms available through consignment transactions will have an immediate and detrimental impact on the Debtors' business. Mr. Chehi believes that Consignment Vendors may cease doing business with the Debtors and/or embroil the estates in ceaseless litigation over the validity and priority of claims to Consigned Goods, which may then put the Debtors' post-petition financing and continued operations in jeopardy. Accordingly, the Debtors believe that continuing to pay in the ordinary course, Consignment Vendors who continue to do business with the Debtors clearly constitute a necessary payment practice. Assuming the Debtors could seek authority to assume certain of the consignment agreements, Mr. Chehi claims that it would be costly and time consuming if undertaken by motions pursuant to section 365 of the Bankruptcy Code. By contrast, permitting the Debtors to pay claims for Consigned Goods in the ordinary course of business will promote the expeditious administration of these cases by eliminating the substantial time and expense incident to involving the Court in each consignment agreement individually. Because the Debtors will be making payments only on account of Consigned Goods that are incorporated into finished product and resold, and only to Consignment Vendors who continue to offer favorable trade terms to the Debtors, Mr. Chehi asserts that the estates' ability to generate revenue will be enhanced rather than impaired by the relief requested in this Motion. (Hayes Lemmerz Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) HAYES LEMMERZ: Miller Tabak Makes Senior Note Buy Recommendation ---------------------------------------------------------------- Miller Tabak Roberts Securities LLC, a leading broker/dealer specializing in corporate high-yield, convertible bonds, distressed bank loans and emerging market debt, announced that in connection with the recent bankruptcy filing by Hayes Lemmerz International Inc., Steve Schoene, a Senior Vice President in the research department, initiated coverage of Hayes (NYSE: HAZ), the world's largest supplier of wheels to the automotive industry and has issued a buy recommendation on Hayes' Senior Notes (11-7/8% due 2006) and Term Loan bank debt. According to Schoene, "Based on our work, which includes review of Hayes' preliminary re-statement of past financial results and recent documents filed with the bankruptcy court, we believe that Hayes' Senior Notes and bank debt are attractive based on current prices and our analysis of the company's overall workout values." Miller Tabak Roberts Securities, LLC is a globally-focused fixed income firm recognized for providing institutional clients worldwide with focused, independent research and trading expertise in US corporate high yield and convertible bonds, distressed bank loans and emerging market debt. MTR also operates as a leading market-maker servicing broker-dealers throughout the United States. MTR is headquartered in New York City with offices in Dallas, TX and Miami, FL, and can be found on the Internet: http://www.MTRdirect.com DebtTraders reports that Hayes Lemmerz's 11.875% notes due 2006 (HAYES1) trade in the high 40s. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=HAYES1 IT GROUP: Likely Covenant Default Spurs S&P to Lower Ratings ------------------------------------------------------------ Standard & Poor's lowered its ratings on IT Group Inc. and maintained them on CreditWatch with negative implications. The downgrade follows the company's announcement that it will not be in compliance with the year-end 2001 financial covenants of its senior secured credit agreement. Previously, IT Group was expected to be in compliance with the covenants for the fourth quarter and the year. The worsening liquidity situation stems mainly from continued weak operating environment, ineffective project execution, and failure to reduce high debt levels. In response, the firm has undertaken actions to reduce costs, sell certain noncore assets, access additional sources of capital, and better manage its working capital. Considerable uncertainties remain whether those efforts will be successful in restoring profitability and financial flexibility and providing a cushion to meet debt service requirements in 2002. Ratings could be lowered again unless IT Group's financial profile is strengthened to a level consistent with current expectations. If the company is successful in its negotiations with the banks, however, ratings will likely be affirmed and removed from CreditWatch. IT Group is a leading provider of environmental consulting, engineering and construction, remediation, and facilities management services, with a solid backlog of about $4.8 billion. The U.S. government accounts for about 55% of revenues (the Department of Defense is by far the largest customer), with the balance from commercial, state and local government clients. Standard & Poor's will monitor ongoing developments to assess the impact on credit quality. Ratings Lowered; Remain on CreditWatch with Negative Implications TO FROM IT Group Inc. Corporate credit rating B B+ Senior secured (bank) debt B B+ Subordinated debt CCC+ B- INTEGRATED HEALTH: Rejecting 9 Palm Garden Leases in Florida ------------------------------------------------------------ Integrated Health Services, Inc., and its debtor-affiliates ask the Court to issue an order, pursuant to Secs. 105(a) and 365(a) of the Bankruptcy Code and Rule 6006 of the Bankruptcy Rules authorizing them to reject nine leases, each related to certain non-residential real property and improvements located in the State of Florida, by and between Palm Garden Healthcare, Inc. (Lessor) and each of Debtor (a) IHS-l d/b/a Palm Garden of Clearwater, (b) IHS-3 d/b/a Palm Garden of Jacksonville, (c) IHS-4 d/b/a Palm Garden of Largo, (d) IHS-5 d/b/a Palm Garden of North Miami Beach, (e) IHS-7 d/b/a Palm Garden of Orlando, (f) IHS-8 d/b/a Palm Garden of Pinellas, (g) IHS-9 d/b/a Palm Garden of Port St. Lucie, (h) IHS-10 d/b/a Palm Garden of Sun City Center, and IHS-11 d/b/a Palm Garden of Tampa, as lessees, respectively. Besides the 9 Divesting Leases, there are five other leases between the same Lessor and five other direct or indirect subsidiaries of IHS (the Palm Garden Leases). In this motion, the Debtors do not seek to reject the five other Palm Garden Leases. The Debtors are aware that each of the 14 Palm Garden Leases contains a cross-default clause and a cross-renewal clause, but believe they are of no consequence because each applies only to other leases with the same tenant and each tenant has only one lease with Palm Gardens. The Debtors have determined at this time that, of the fourteen Palm Garden Facilities operated by the Debtors, the nine Divesting Facilities are unprofitable and should be divested. Each of the Divesting Leases loses money, and is projected to continue to do so, for a combined annual negative EBTTDA of $4,105,493. Consistent with the Debtors' reorganization strategy of preserving those healthcare facilities that contribute value to their estates, and divesting itself of those facilities that impose financial burdens on their estates, the Debtors seek Court authorization to reject the Divesting Leases pursuant to Sec. 365 of the Bankruptcy Code. Palm Garden's Limited Objection The Lessor Palm Garden Healthcare, Inc. (PGHI) objects to the Debtors' motion. In particular, PGHI objects to the Debtors' allegations of financial performance of the nine Rejected Facilities. PGHI also requests for an opportunity for discovery and an opportunity to be heard so that the significant factual and legal issue as to whether the Debtors may "cherry pick" among these fourteen leases should be allowed. PGHI alleges/argues as follows: -- Integrated Health Services, Inc. and the fourteen subsidiary Debtors (the IHS Subs) were formed simultaneously for the purpose of entering into fourteen template leases that were part of a single integrated lease transaction where IHS leased all of the Nursing Home facilities of Florida Convalescent Centers, Inc., a total of 1,880 licensed beds. -- Each of the IHS Subs simultaneously applied for licenses to operate the 14 facilities and all 14 licenses were simultaneously issued. -- IHS guaranteed the payment and performance of all obligations of all 14 of the IHS Subs and management of all of the 14 IHS Subs are controlled by management of IHS. IHS charges each of the IHS Subs a management fee. -- Each of the 14 leases contained delayed "Lease Commencement" dates (and corresponding all or nothing termination rights) based upon the satisfaction of numerous mutuality conditions contained in each lease many of which required that Landlord be in obligations that are in common to all the 14 leases. -- At the time of the filing of the IHS Chapter 11 cases, all 14 of the IHS Subs were in default of the same financial covenant contained in section 5 of all 14 leases. Those defaults have not been cured. In addition, several of the 14 IHS Subs incurred other defaults in the payment of utility bills which were secured by surety bonds issued to various utilities by PGHI or one of its affiliates. PGHI contends that IHS and the 14 IHS Subs were and are willing parties to a single integrated non-severable transaction with PGHI and its affiliates. "The evidence will show that the parties to the leases clearly intended that the cross default and cross renewal provisions would apply to all of the IHS single purpose/single asset entities that simultaneously entered into the leases," PGHI tells the Court, "The evidence will show that the Debtors' position is based on nothing more than a drafting error in the leases and that the Debtors knew of the error and fully intended for the transaction to be one single integrated transaction." PGHI therefore objects to the Debtors' motion and requests the opportunity for limited discovery, a hearing and either pre- or post-hearing briefing before the entry of any order authorizing the rejection or assumption of less than all of the 14 leases. PGHI objects specifically to the statements of the Debtors concerning projected profitability. PGHI believes that at least seven of the nine proposed locations are profitable nursing homes. PGHI tells the Court that the pro forma financial statements previously provided to PGHI by the Debtors show different projected annualized results for all nine locations. PGHI alleges that the Debtors have grossly inflated the expense figures. "The Debtors should be required to submit evidence as to how they arrived at such figures," PGHI asserts, "In the alternative, PGHI should be given an opportunity to provide the Court with what it believes to be adequate and proper financial data." In the event the Court is inclined to authorize IHS to reject any of the nine leases, PGHI contends that such rejections should be conditioned upon satisfaction of all of the following: a) the Debtors should first be ordered to propose a specific procedure for transition for the nine nursing homes at risk and the Debtors should be required to pay all post-petition rent and other obligations, as provided for specifically in the leases, until such time as the transition is complete. Moreover, during this transition phase, the Debtors should be required to operate the nine leased locations under the supervision of the Court and must maintain each facility as a going concern without movement of patients (unless requested by the patient) or staff to their other locations which will now compete with former Palm Garden locations until such time as the Landlord can find suitable tenants to take over the facilities so as to minimize the rejection damage and guaranty claims which will be asserted against the various Debtors' estates. b) the rejection effective date and the rejection damage claim filing date must not be set unless and until the relevant IHS Sub has complied with each and every relevant Florida and Federal law, rule or regulation applicable to the transfer of the facilities and their licenses. c) The Landlord must be free to disclose and the Debtors must be ordered to cooperate in providing to prospective tenants the Debtors' historical operating revenue and expense and loss experience, along with other information consistent with the standard due diligence provisions typical in the leasing of nursing homes. d) The principals of Florida Convalescent Centers, Inc. must be excused from their covenants not to compete in any markets and the Debtors must be ordered and restrained from using the Palm Gardens name at any location, including those which it intends to retain. e) The Debtors must be restrained from abandoning or rejecting its Medicare provider numbers for the facilities pending any transition. (Integrated Health Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) LTV CORP: Asks Court to Approve $15MM Loans to Tubular Division --------------------------------------------------------------- The LTV Corporation, and its debtor-affiliates switch gears from the focus on LTV Steel and present a Motion seeking Judge Bodoh's approval of interim Debtor-In-Possession loans for their LTV Tubular business. The "LTV tubular" facilities include LTV Steel's pipe and conduit facilities in Counce, Tennessee; Ferndale, Michigan; Elyria, Ohio; Marion, Ohio; and Youngstown, Ohio; and Debtor The Georgia Tubing Corporation's facility in Cedar Springs. The Reasons for the Borrowing The Debtors advise Judge Bodoh that they believe that they can obtain maximum value for LTV Tubular if it is sold as a going concern. The modifications to the APP proposed in this Motions will only fund the shutdown of the integrated steel business. Accordingly, by this Motion the Debtors seek approval of postpetition financing for LTV Tubular in order to fund operations and preserve its going concern. The Debtors note that their existing DIP financing matures on June 30, 2002, and provides for mandatory commitment reductions of (a) $100 million on September 30, 2001, (b) $100 million on December 31, 2001, and (c) $200 million on March 31, 2002. Due in large part to the Debtors' continuing efforts to reduce costs and due in part to excess proceeds from the sale of VP Buildings, the Debtors have been able to continue operations after the $100 million commitment reduction on September 30, 2001. As of the Motion date, the Debtors expect to have approximately $470.7 million in outstanding borrowings under the Existing DIP Financing. However, LTV Tubular has an immediate need to borrow funds and continue to use the collections of accounts receivable and inventory sales to fund operations pending a sale of LTV Tubular's assets, or else it will be forced down the path of the integrated steel business. The APP severs the ties between the integrated steel business and LTV Tubular and the Copperweld Companies, which creates a series of short term and long term financing needs. LTV Tubular will begin operations without any cash on hand other than collections from accounts receivable that occur after the implementation of the APP. Accordingly, LTV Tubular will require immediate cash to fund operations until it establishes a sufficient cash flow. Additionally, while current projections indicate that LTV Tubular is cash-flow- positive, these projections consider LTV Tubular's performance over the course of an entire year. LTV Tubular will require access to a revolving credit facility to accommodate normal fluctuations in cash receipts and disbursements. The Debtors turned to the existing DIP Lenders to provide the necessary funding for LTV Tubular because the existing DIP financing is currently secured with a first priority lien on the LTV Tubular assets. After "significant discussions", JPMorgan Chase and others of the existing DIP lenders have agreed to provide a facility with a total commitment up to $30 million. The Debtors seek interim authority to borrow up to $15 million of the Commitment immediately. Terms and Conditions Term and Amount of Commitment: The Lenders have agreed to provide a total commitment in the amount of $30 million, with a sublimit of $3 million for Letters of Credit. The Commitment will remain available for one year and will be repaid in full on December 5, 2002, but subject to certain mandatory prepayments. Letters of Credit will expire no later than 60 days after the maturity date of this loan. Priority and Liens: (a) Superpriority administrative claims that will be (i) senior to the superpriority administrative claims in respect of the obligations under the existing DIP Facility, and (ii) pari passu with the superpriority claims granted to certain creditors of Copperweld; (b) First-priority lien on any cash deposited in the Letter of Credit account; (c) Lien on all property of the Debtors that is subject to valid and perfected liens in existence on the Petition Date, valid liens in existence on the Petition Date which are perfected after the Petition Date, and Permitted Liens under the previous and new Credit Agreements; and (d) A senior priming lien on all tangible and intangible property of the Debtors that is subject to existing liens that presently secure the obligations under the existing DIP Facility. This priming lien, however, will be subject to and junior to any valid and perfected liens in existence on the Petition Date, valid liens in existence on the Petition Date which are perfected after the Petition Date, and Permitted Liens under the previous and new Credit Agreements. These claims and liens are not subject to a carve-out as is normally present in other financings of this type. Consent of the Primed Parties: The Lenders are also existing DIP Lenders and are consenting to the priming of their own liens in the existing DIP Financing. The Debtors expect and believe that the other existing DIP Lenders will consent to priming of their liens. Currently, VP Buildings, Inc., and the LTV Steel Mining Company, Inc., hold claims which are secured by previously approved Junior Contribution Liens on the inventory and accounts receivable of LTV Steel and Georgia Tubing to secure claims that these Debtors may have based on the use of proceeds from the sale of its assets to repay obligations under the existing DIP financing in excess of borrowings under that financing actually received by the Debtor in question. VP Buildings and LTV Steel Mining have agreed to subordinate their junior contribution liens in order to allow the Debtors to grant these priming liens. Fees: Upon closing, a facility fee in the amount of 2% of the Commitment. In addition, the Debtors have agreed to pay a commitment fee in the amount of 1/2 of 1% of the average daily unused total commitment which shall be paid monthly in arrears. The financing also includes certain fees for Letters of Credit, such as a fee to Lenders at the rate of 5% per annum of the daily average of the Letters of Credit outstanding for the period through June 5, 2002, and 7.5% per annum for the period thereafter up to the maturity date, a fee to the fronting banks of 1/4 of 1% per annum of the amount of each Letter of Credit issued by the fronting bank, as well as "other customary fees and expenses" of the fronting banks. The financing does not include other fees such as closing fees, administration fees and syndication fees. Interest Rates: The JPMorgan Chase alternate base rate, which is a prime rate, plus 4% for the period through June 5, 2002, and 6.5% for the period thereafter up to the Maturity Date or, at the Debtors' option, at LIB(R plus 5% for the period through and including June 5, 2002, and 7.5% for the period thereafter through and including the Maturity Date. Upon the occurrence and during the continuation of any default in then payment of principal, interest or other amounts due under the Credit Agreement, interest shall be payable on demand at 2% above the then-applicable rate. Minimum Borrowings: Minimum borrowings shall be $1 million with no more than five LIBOR loans outstanding at one time. Mandatory Prepayments: The Loans are to be prepaid prior to the Maturity Date upon the occurrence of any of: (i) if at any time the total amount of outstanding loans and Letters of Credit exceeds the lesser of the Total Commitment or the Borrowing Base by the amount of such excess; (ii) the Termination Date by the amount of the Total Loans outstanding and Letters of Credit outstanding; (iii) the sale of any of the assets or properties of the Debtors associated with the Tubular business (other than inventory in the ordinary course of business) for cash in excess of $250,000 by an amount equal to 100% of the net cash proceeds from such sale. Upon the occurrence of an event of default, notwithstanding the APP and any other modification of the financing, the Debtors have agreed to use 100% of the available proceeds and 100% of any further sale or disposition of assets or properties of the Debtors associated with the Tubular Business to repay the obligations under the financing. Covenants: Same as those in the existing DIP Facility, with two modifications: LTV Tubular may not make any more than $3 million of capital expenditures per quarter up to an aggregate amount of $9 million during the term of the financing; and LTV Tubular is to maintain a minimum of $10 million of cumulative EBITDA for the previous six months. (LTV Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-00900) LTV: Ex-Steelworkers Rally Congressional Support to Save Unit ------------------------------------------------------------- Laid off steelworkers from LTV Steel Corp. facilities in Cleveland, Indiana Harbor, IN and Hennepin, IL returned to Capitol Hill Thursday to rally congressional support behind the Emergency Steel Loan Guarantee Amendments of 2001 aimed at winning final approval of a loan to save their jobs and the healthcare benefits of 60,000 retirees and surviving spouses. U.S. Sen. Paul Wellstone (D-MN) has drafted legislation to amend the existing Emergency Steel Loan Guarantee Act of 1999 to strengthen flexibility of the original law so that LTV Steel would be eligible for a loan guarantee. Currently, the federal loan board has determined LTV is not eligible for the guarantee, since the company is not making steel while in a 'hot idle' operational status. National City Bank and Key Bank have indicated willingness to extend a $250 million Loan to LTV, but only if the federal loan guarantee is approved. About 200 active and retired LTV steelworkers will be arriving late tonight in buses at their 'Steel City Camp Solidarity' on the campus of the George Meany Labor Studies Center in Silver Spring, MD., where others have remained in tents since last week's efforts. Prior to the holiday recess, the steelworkers will be making daily lobbying visits for a final appeal to Congress in support of the Wellstone amendment. Some Cleveland steelworkers will stop in Youngstown before coming to Washington, where they will observe today's federal bankruptcy court proceedings on LTV Steel. A bankruptcy judge will decide whether to allow efforts to save the company to continue, or to go forward with an asset sale and closure. LAIDLAW INC: London Guarantee Wants to File $30MM+ Late Claim ------------------------------------------------------------- The General Bar Date for these cases expired on October 16, 2001, according to Walter H. Curchack, Esq., at Robinson, Silverman, Pearce, Aronsohn & Berman, LLP, in New York, New York. However, Mr. Curchack notes, neither Laidlaw Inc., nor any other party has filed a plan of reorganization. London Guarantee Insurance Company and the Debtors are parties to several Indemnity and Security/Claims Agreements with London Guaranty as surety: Contingent Claim Against Date of Agreement Other Parties ------------- ----------------- ------------- Laidlaw Inc. and May 23, 2000 Greyhound Canada Laidlaw Ltd. Transportation Corporation, Autobus Transco (1998) Inc., Capital Bus Sales (1988) Ltd., and Gray Line of Vancouver Holding Limited, et al Laidlaw Inc. Dec. 23, 1998 Penetang-Midland Coach Lines Limited, and its successors and assigns Laidlaw Inc. and Jan. 31, 1991 any and all present and future subsidiary companies Laidlaw Inc. and Aug. 31, 1993 each of their respective successors and assigns Mr. Curchack informs Judge Kaplan that the total outstanding amount of such Bonds and Policies is $30,353,803 and is comprised of: $7,802,285 in performance bonds; $354,699 in labor and material bonds; $23,001 in commercial surety bonds; and $15,173,819 plus $7,000,000 in respect of policies Mr. Curchack emphasizes that London Guarantee has rights of subrogation and other surety rights in respect of all such bonds, policies and claims. But when London Guarantee received the bar date order, Mr. Curchack relates, it was not specifically addressed to the claims department. It was only after the deadline that the firm was reminded of the bar date. Mr. Curchack asserts that London Guarantee's failure to file a proof of claim constitutes excusable neglect. "London Guarantee only missed the claims bar date by 4 days, a very short time particularly given the recent filing in this case," Mr. Curchack notes. Furthermore, Mr. Curchack adds, the omission was in good faith. In addition, Mr. Curchack maintains that these chapter 11 cases have not progressed to the point where otherwise meritorious assertions of excusable neglect should be disallowed as impairing the judicial process or the timely administration of the Debtors' bankruptcy estate. "The Debtors are still in the process of receiving and assessing timely filed claims," Mr. Curchack adds. Also, Mr. Curchack observes that no disbursements to unsecured claimants have been made from the Debtors' estate. As such, Mr. Curchack insists that the allowance of London Guarantee's claim will not impair the timely disposition of these bankruptcy cases. "There is no danger of prejudice to the Debtors if London Guarantee's claim is allowed," Mr. Curchack asserts. Thus, London Guarantee asks Judge Kaplan for permission to file its unsecured claim in the amount of $30,353,803 after the bar date. (Laidlaw Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) LODGIAN INC: Files for Protection Under Chapter 11 in New York -------------------------------------------------------------- Thursday, Lodgian, Inc. (OTC Bulletin Board: LODN) voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in Federal Court in New York. The filing was precipitated by the weaker U.S. economy, the decline in travel since the events of September 11, and the company's heavy debt load. Lodgian, Inc., and most of its operating subsidiaries were included in the filing. The company announced that it has received a commitment for up to $25 million for debtor-in-possession financing, subject to court approval, from a group of lenders led by Morgan Stanley and Lehman Brothers, Inc. This financing will allow the company to operate in the normal course during the bankruptcy proceedings. David E. Hawthorne, the company's CEO since October 1, 2001, said: "The Chapter 11 filing brings us closer to completing the operating and financial restructuring begun by the company in June, 2001. We intend to emerge from bankruptcy in 2002 with strong prospects for revenue and earnings growth. We appreciate the continued support of our many vendors, employees and lenders." Lodgian, Inc., is one of the largest owner/operators of full and mid-priced hotels in the United States, with 106 hotels located in 32 states and one hotel in Windsor, Canada. The company operates hotels under nationally recognized hospitality franchises such as Marriott, Holiday Inn, Hampton Inn, Sheraton and Radisson. LODGIAN, INC: Chapter 11 Case Summary ------------------------------------- Lead Debtor: Lodgian, Inc. 3445 Peachtree Road, NE, Suite 700 Atlanta, GA 30326 Bankruptcy Case No.: 01-16345-brl Debtor affiliates filing separate chapter 11 petitions: Lodgian Financing Corp. 1075 Hospitality, L.P. Albany Hotel, Inc. Ami Oeprating Partners, L.P. Apico Hills, Inc. Apico Inns of Green Tree, Inc. Apico Inns of Pittsburgh, Inc. Atlanta-Boston Holdings L.L.C. Atlanta-Boston Lodging L.L.C. Atlanta-Hillsboro Lodging, L.L.C. Brecksville Hospitality, L.P. Brunswick Motel Enterprises, Inc. Columbus Hospitality Associates, L.P. Dedham Lodging Associates I, L.P. Dothan Hospitality 3053, Inc. Dothan Hospitality 3071, Inc. East Washington Hospitality Limited Partnership Fort Wayne Hospitality Associates II, L.P. Gadsden Hospitaluty, Inc. Hilton Head Motel Enterprise, Inc. Impac Hotel Group, L.L.C. Impac Hotel Management L.L.C. Impac Hotels I, L.L.C. Impac Hotels II, L.L.C. Impac Hotels III, L.L.C. Island Motel Enterprises, Inc. Kinser Motel Enterprises Lawrence Hospitality Associates, L.P. Little Rock Lodging Associates, Limited Partnership Lodgian Ami, Inc. Lodgian Anaheim, Inc. Lodgian Capital Trust I Lodgian Hotels, Inc. Lodgian Mount Laurel, Inc. Lodgian Ontario, Inc. Lodgian Richmond, L.L.C. Manhattan Hospitality Associates, L.P. McKnight Motel, Inc. Melbourne Hospitality Associates, L.P. Minneapolis Motel Enterprises, inc. Moon Airport Motel, Inc. NH Motel Enterprises, Inc. Penmoco, Inc. Raleigh-Downtown Enterprises, Inc. Saginaw Hospitality, L.P. Second Fayetteville Motel Enterprises, Inc. Servico Austin, Inc. Servico Cedar Rapids, Inc. Servico Centre Associates, LTD. Servico Columbia II, Inc. Servico Columbia, Inc. Servico Council Bluffs, Inc. Servico Fort Wayne, Inc. Servico Frisco, Inc. Servico Grand Island, Inc. Servico Hilton Head, Inc. Servico Hotels I, Inc. Servico Hotels II, Inc. Servico Hotels III, Inc. Servico Hotels IV, Inc. Servico Houston, Inc. Servico Jamestown, Inc. Servico Lansing, Inc. Servico Management Corp. Servico Market Center, Inc. Servico Maryland, Inc. Servico Metairie, Inc. Servico New York, Inc. Servico Niagara Falls, Inc. Servico Northwoods, Inc. Servico Omaha Central, Inc. Servico Omaha, Inc. Servico Pensacola 7200, Inc. Servico Pensacola 7330, Inc. Servico Pensacola, Inc. Servico Rolling Meadows, Inc. Servico West Des Moines, Inc. Servico Wichita, Inc. Servico Windsor, Inc. Servico Inc. Sheffield Motel Enterprises Sioux City Hospitality, L.P. Washington Motel Enterprises, Inc. Worcester Hospitality Associates, L.P. Type of Business: The Debtors are one of the largest owners and operators of both full and limited-service hotels in the United States with 106 hotels containing approximately 19,893 rooms located in 32 states and one hotel in Windsor, Canada. Chapter 11 Petition Date: December 20, 2001 Court: Southern District of New York (Manhattan) Judge: Burton R. Lifland Debtors' Counsel: Adam C. Rogoff Cadwalader, Wickersham & Taft 100 Maiden Lane New York, NY 10038 (212) 504-6000 Fax: (212) 504-6666 Tel: (212) 504-6000 Total Assets: $1,073,232,000 Total Debts: $968,664,000 MARINER POST-ACUTE: Court Okays 5th Amended DIP Financing Pact -------------------------------------------------------------- Mariner Post-Acute Network, Inc. debtors sought and obtained an Order approving a Fifth Amendment to the "Revolving Credit and Guaranty Agreement" dated as of January 18, 2000, with Foothill Capital Corporation, successor to The Chase Manhattan Bank as agent and lender, and with various other lenders, which provides for, among other things: (1) an extension of the maturity of the DIP Agreement and the use of the Prepetition Senior Secured Lenders' cash collateral from December 31, 2001 to April 1, 2002; (2) payment by the MPAN Debtors to Foothill and other DIP Lenders an amendment fee totaling $250,000; (3) modification of provisions relating to the Management Protocol to permit a reduction of the amount of the overhead payment that the MHG Debtors pay to MPAN by $1 million per month; (4) modification of certain financial covenants in the DIP Agreement, including with respect to capital expenditures, cumulative EBITDA, and patient census; The Debtors do not think confirmation of their Plan of Reorganization will occur prior to December 3l, 2001. The extension provides the Debtors with the use of cash collateral and the credit facility through April 1, 2002. The Debtors believe that this should provide them with sufficient time to confirm and implement a plan. The modification of the overhead payments is required by the Senior Secured Lenders. The MHG Prepetition Senior Secured Lenders, who have filed their own Plan of Reorganization, as amended, which provides for the reorganization of the MHG Debtors separate from the MPAN Debtors, have agreed to defer solicitation of acceptances of their plan indefinitely in order to attempt to achieve a joint plan of reorganization for the entire Mariner Group. The MPAN Debtors believe that such a joint plan will provide for greater value to the MPAN Debtors' estates. However, the process of attempting to confirm such a joint plan may delay the MHG Prepetition Senior Secured Lenders from realizing the value of their collateral. The proposed reduction of the overhead payments will help to compensate the MHG Prepetition Senior Secured Lenders for this delay in the event that a joint plan ultimately cannot be achieved. The Debtors believe that the modification of the overhead payments made pursuant to the Management Protocol is fair, reasonable, and appropriate under the circumstances. At the request of NovaCare Holdings, Inc., which asserts a "constructive trust" on certain monies that may be due to the Debtors from the federal government so that the order would not affect the paroles' rights in certain litigation pending in the Court, the Final Order as proposed by the Debtors and signed by Judge Walrath, includes the following language: " ... as to Prudent Buyer appeal Money only: this Order shall be subject to the Court's decision on the motions to dismiss filed by the Defendants in the adversary proceeding captioned Novacare Holdings, Inc. v. Mariner Post-Acute Network, Inc., et al., Adversary Proceeding No. 00-1577 (MFW) (the "NCR Action"), and any appeal thereof, to the same extent as the Original Final Order and the first day and interim orders approving the DIP Credit Agreement and granting adequate protection in connection therewith (collectively, the "DIP Orders"); and (ii) the entry of this Order shall not impact, impair, or in any way affect either the ruling on the motions to dismiss (including any appeal thereof) or the relief being sought by Novacare Holdings, Inc. ("NCH") in the NCH Action beyond any impact, impairment, or any other effect of the DIP Orders on the motions to dismiss or the relief being sought by NCH in the NCH action; ..." (Mariner Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900) METALS USA: Court Okays Bracewell & Patterson as Special Counsel ---------------------------------------------------------------- Metals USA, Inc., and its debtor-affiliates sought and obtained an order authorizing them to employ and retain Bracewell & Patterson LLP as their Special Counsel during the course of these chapter 11 proceedings. John A. Hageman, the Debtors' General Counsel, relates that the Debtors desire to retain Bracewell because they have significant need of legal advice to assist them in complying with rigorous reporting and other requirements imposed by the Securities and Exchange Commission. The employment of Bracewell will greatly benefit the Debtors' estates as the Firm has worked with the Debtors as their chief legal counsel on securities regulation, financings and related matters for a substantial period of time. Debtors believe that the approval of the employment of Bracewell is necessary to assist in preserving the value of the estates while the reorganization process is ongoing and further believe that Bracewell's experience and familiarity with Debtors' circumstances will allow it to render services that will benefit the estates and all other parties-in-interests in these cases. Mr. Hageman states that the services which the Debtors may request Bracewell to perform include: A. Advise the Debtors in respect of their obligations to report on their financial condition to the Securities and Exchange Commission; B. Advise Debtors regarding their obligations to shareholders; C. Assist Debtors regarding their obligations to shareholders; D. Assist Debtors in preparing any reports required by the Securities and Exchange Commission; and E. Provide such other legal services as may be requested by the Debtors. Mr. Hageman contends that the retention and employment of Bracewell will benefit the Debtors because the Firm is familiar with the corporate structure, financial history and operations of the Debtors and has been primarily responsible for assisting the Debtors in their efforts to comply with securities regulation for some time. Alfredo R. Perez, a partner of the law firm Bracewell & Patterson LLP, informs the Court that prior to the filing of these cases, Debtors paid Bracewell a total of $1,815,504 for the 90 days prior to the petition date for pre-petition services rendered and related expenses. Mr. Perez submits that the Firm will charge the Debtors on an hourly basis in accordance with hourly rate for each professional who performs services for or on behalf of the Debtors as has been established and in effect for such person. The current hourly rates for the services of the Firm's professionals are: Partners $200 to $600 Associates $140 to $325 Legal Assistants/Clerks $ 75 to $125 Mr. Perez relates that the professional primarily responsible for assisting the Debtors will be Robin J. Miles, whose hourly rates is $400. In addition, Bracewell is customarily reimbursed for all expenses incurred in connection with the representation of a client in a given matter, including identifiable expenses that would not have been incurred except for the representation of the particular client. Mr. Perez assures the Court that neither the Firm nor any of its professionals holds or represents interests adverse to the Debtors nor has any connection with the Debtors, creditors and other parties-in-interests, except for: A. The Firm has represented the Debtors and their equity sponsor since the Debtors were formed and continued to do so in matters unrelated to these cases. Bracewell has also represented Steven Harter, a member of the Debtors' Board in matters unrelated to these cases. B. The Firm has represented in the past U.S. Trust Company in matters unrelated to these cases. C. Bracewell has represented IBM, U.S. Steel Corp., Mitsubishi and Mitsui & Co. (USA) in matters unrelated to these cases. D. Bracewell has represented Credit Suisse First Boston, First Union National Bank, U.S. Trust Company, Bank One, Chase Manhattan Bank, Goldman Sachs, State Street bank and Salomon Smith Barney in matters unrelated to these cases. E. The Firm has traditionally represented the Debtors in their financings. In addition, Bracewell has represented Bank of America, General Electric, Guaranty Business Credit, Am South, Fleet Bank and Bank One Texas in matters unrelated to these cases. (Metals USA Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONAL AIRLINES: U.S. Trustee Balks at PwC Indemnification ------------------------------------------------------------ Linda Ekstrom Stanley, the United States Trustee charged with overseeing the administration of cases in the District of Nevada, complains to Judge Riegle about National Airlines, Inc.'s application seeking permission to employ PricewaterhouseCoopers LLP as its Accountant and Auditors under the terms of a November 7, 2001, Engagement Letter. The UST objects to these release and indemnification provisions contained in that Engagement Letter: [T]he Company [the debtor] releases PricewaterhouseCoopers LLP and its personnel from any and all claims, liabilities, costs and expenses attributable to any knowing misrepresentation by management. Further, in no event shall PricewaterhouseCoopers LLP be liable to the Company, whether a claim be in tort, contract or otherwise (a) for any amount in excess of the total professional fees paid by the Company under this engagement letter; or (b) for any consequential, indirect, lost profit or similar damages related to PricewaterhouseCoopers LLP's services provided under this engagement letter, except to the extent finally determined to have resulted from the willful misconduct or fraudulent behavior of PricewaterhouseCoopers LLP relating to such services. In addition, the Company agrees to indemnify and hold harmless PricewaterhouseCoopers LLP and its personnel from any and all claims, liabilities, costs and expenses relating to PricewaterhouseCoopers LLP's services under this engagement letter, except to the extent finally determined to have resulted from the willful misconduct or fraudulent behavior of PricewaterhouseCoopers LLP relating to such services. In the unlikely event that differences concerning our services or fees should arise that are not resolved by mutual agreement, . . . the Company and PricewaterhouseCoopers LLP agree not to demand a trial by jury in any action, proceeding or counterclaim arising out of or relating to our services and fees for this engagement. "These provisions are intended to (1) shield PWC from its own negligence, (2) limit or reduce the liability exposure for its negligence, and (3) waive the right of the parties to the agreement to demand a jury trial. Further, the terms of this agreement are intended to bind any Trustee appointed in this case. The US Trustee objects to the limitation on liability and indemnification provisions as contrary to the interests of the estate because they are calculated to negate or limit the estate's recovery of damages for any subsequent wrongdoing by PWC without any demonstrated benefit in return. They also are inconsistent with the duty of care and high degree of professionalism and expertise with which PwC purports to perform its services to justify the amount of compensation it will receive in these cases. Further, the US Trustee objects because approval of PwC's employment under these terms and limitations may bind any trustee subsequently appointed in this case. Finally, the US Trustee objects because this limitation on liability may bind any assignee of the debtor with respect to any claims which could be asserted by the debtor against PWC. These limitations may diminish the value of any such assignment," Barry H. Jenkins, Esq., argues on Ms. Stanley's behalf. Mr. Jenkins says that PwC fails to present any facts or special circumstances why the rule employed by most courts should be ignored to allow PwC to enjoy liability protections which have not been afforded to the many other professionals who have been employed in this case. The disputed provisions are intended to protect the professional, not the estate, the U.S. Trustee argues, directing the Court's attention to In re Merry- Go-Round Enterprises, Inc., 244 B.R. 327 (Bankr. D. Md. 2000)(chapter 7 trustee's malpractice suit against financial advisor employed by former chapter 11 debtor settled for $185 million). If approved by the Court, these release and indemnification provisions will negate the estate's future cause of action for professional malpractice, and thereby deprive the estate of a potentially valuable asset to make the estate whole for any misconduct by PWC. The majority of courts have found that indemnity, exculpation and other similar liability protections are inappropriate and unreasonable employment terms for bankruptcy professionals which cannot withstand judicial scrutiny under section 328. In re Gillett Holdings, Inc., 137 B.R. 452, 458 (Bankr. D. Colo. 1991) (entirely improper and unacceptable); In re Drexel Burnham Lambert Group, Inc., 133 B.R. 13, 27 (Bankr. S.D.N.Y. 1991) ("[s]imply stated, indemnification agreements are inappropriate"); In re Mortgage & Realty Trust, 123 B.R. 626, 631 (Bankr. C.D. Cal. 1991) ("[i]ndemnification is not consistent with professionalism"); In re Allegheny Int'l, Inc., 100 B.R. 244, 247 (Bankr. W.D. Pa. 1989) ("holding a fiduciary harmless for its own negligence is shockingly inconsistent with the strict standard of conduct for fiduciaries"). Indeed, bankruptcy courts in Delaware have rejected such protections for financial advisors. In re United Companies Financial Corp., 241 B.R. 521, 524 (Bankr. D. Del. 1999) (disapproving financial advisors' use of indemnification provision and damages cap). "The Court should not allow PWC to use these provisions to shield itself from its own acts of negligence or misconduct or limit damages which may be asserted as a consequence of these acts," the U.S. Trustee tells Judge Riegle. "Given the high amount of fees that PwC will charge the estate for its services, it is not unreasonable to expect the firm to be fully accountable for its work product and the services it provides. Furthermore," the U.S. Trustee adds, "PwC should be perfectly capable of managing its risk of liability exposure through appropriate insurance coverage and recouping its insurance costs from the substantial fees it will be paid in these cases." National Airlines filed its voluntary Chapter 11 petition on December 6, 2000, in the U.S. Bankruptcy Court for the District of Nevada. NATIONSRENT INC: Seeks Access to $55 Million of DIP Financing ------------------------------------------------------------- "It is essential that [NationsRent Inc., and its debtor- affiliates] obtain postpetition financing to continue their ordinary course, day-to-day operations, service their customers, accomplish their long-term operational restructuring goals and effectuate their reorganization," Joseph H. Izhakoff, NationsRent's Vice President, General Counsel and Secretary, tells Judge Walsh. Although the Debtors have considerable assets, Paul E. Harner, Esq., at Jones, Day, Reavis & Pogue adds, immediate access to credit under a new post-petition debtor-in-possession financing facility is necessary to enhance the Company's liquidity and provide customers, employees, vendors, suppliers and other key constituencies with confidence that the Debtors have more than sufficient resources available to maintain their operations in the ordinary course. "Absent this key source of liquidity or the full cooperation of these parties at this critical early stage," Mr. Harner says, "the Debtors' could suffer the loss of customer patronage and vendor support, which would, in turn, impair their ability to maximize the value of their estates and reorganize successfully." Prior to filing for chapter 11 protection, NationsRent turned to its existing Bank Lender to arrange for DIP Financing. Those talks culminated in the documentation of a DIP Facility that, subject to Bankruptcy Court approval, provides the Debtors with up to $55,000,000 of super-priority senior secured post-petition credit on these terms: Borrowers: NationsRent, Inc., and each of its Debtor affiliates Lender: Fleet National Bank, and any assignee Administrative Agent: Fleet National Bank Syndication Agent: Fleet National Bank Swing Lender: Fleet National Bank Issuing Bank: Fleet National Bank Lead Arranger: Fleet Securities, Inc. Book Manager: Fleet Securities, Inc. Commitment: In the form of a revolving credit facility, the Lender will provide the Borrowers with access to: $20,000,000 on entry of an Interim DIP Financing Order by the Bankruptcy Court and $55,000,000 after: (A) satisfaction of certain Cash Management Obligations, (B) appointment by the Debtors of an interim president and chief restructuring officer (C) assignment by Fleet to an eligible assignee acceptable to Fleet and the Debtors, respectively, of at least $27,000,000 of the Total Commitment, (D) satisfaction of any condition to interim funding that has been deferred in the discretion of the Administrative Agent and (E) entry of the Final Order. The DIP Facility includes a $20,000,000 sublimit for standby and (if agreed by the Administrative Agent) documentary letters of credit Mandatory Reduction: The Loan Agreement provides that the Maximum Commitment will be reduced by $5,000,000 on November 30, 2002 Borrowing Base: Borrowings are limited to the sum of: (a) 80% of eligible accounts, eligible instruments and eligible chattel paper arising from the Debtors' sale or lease of inventory in the ordinary course; minus (b) amounts specified as reserves determined by the Agents in their reasonable discretion (including a $3,500,000 Reserves for the Carve- Out) Availability: The sum of the aggregate outstanding amount of direct borrowings plus undrawn letters of credit and drawn but unreimbursed letters of credit under the DIP Facility shall not exceed an amount equal to the lesser of: (a) the Maximum Commitment and (b) the Borrowing Base. Swing Line Lending: The Administrative Agent will establish a loan commitment amount of $10,000,000 for swing line loans. The swing line loans shall be available upon the same terms that revolving credit loans would be available under the DIP Facility but for the requirement of a minimum amount. Superprioritv Claims and Collateral Security: Subject to the Carve-Out, all Loans. unreimbursed obligations under Letters of Credit, including those relating to Specified Existing Letters of Credit, and all other obligations under the DIP Facility are: (1) entitled to superpriority claim status, pursuant to section 364(c)(1) of the Bankruptcy Code, senior to any superpriority claim granted as adequate protection in respect of the Prepetition Lenders and any other claims of any entity, including any claims under sections 503, 507, 1113 and 1114 of the Bankruptcy Code; and (2) secured by a first priority perfected security interest in and lien on all of the assets, whether now owned or hereafter acquired, of the Debtors and their estates, including avoidance power claims arising under Chapter 5 of the Bankruptcy Code, other than avoidance power claims against the Prepetition Lenders. Carve-Out: The Lenders agree to a $3,500,000 carve-out for payment of unpaid professional fees and disbursements incurred following any Event of Default by professionals retained by the Debtors and any statutory committees appointed in the chapter 11 cases and for payment of U.S. Trustee fees pursuant to 28 U.S.C. Sec. 1930 and to the Clerk of the Bankruptcy Court. Maturity Date: June 13, 2003 Interest Rates: Base Rate plus 2.5% Fees: The Debtors agree to pay a variety of Fees: * an $825,000 Facility Fee; * a $550,000 Arranger Fee * a monthly $50,000 Agent's Fee if the Debtors don't draw on the Facility and a retroactive $100,000 monthly Agent's Fee if the Debtors do draw on the Facility; * 3.25% per annum letter of credit fees; * 0.5% per year on every dollar not borrowed Financial Covenants: The Debtors covenant with the Lenders that their Adjusted Consolidated EBITDA will not fall below: ($2,828,000) for the month of January 2002; ($2,874,000) for the two-month period ending February 2002; and for each successive three-month period, Minimum Adjusted Consolidated EBITDA will be no less than: Three-Month Minimum Adjusted Period Ending Consolidated EBITDA ------------- ------------------- March 2002 $1,720,000 April 2002 7,327,000 May 2002 17,318,000 June 2002 23,533,000 July 2002 28,984,000 August 2002 32,458,000 September 2002 33,594,000 October 2002 32,976,000 November 2002 27,135,000 The Debtors covenant with the Lenders that their Cumulative Cash Flow will not fall below: For the Minimum Month Ending Consolidated Cash Flow ------------- ---------------------- January 2002 ($5,834,000) February 2002 (3,966,000) March 2002 (7,786,000) April 2002 (19,796,000) May 2002 (21,366,000) June 2002 (8,889,000) July 2002 (10,906,000) August 2002 4,736,000 September 2002 20,823,000 October 2002 16,795,000 November 2002 35,957,000 The Debtors covenant with the Lenders that they will limit their aggregate capital expenditures to: For the Period From the Petition Date Through the Month Ending Maximum CapEx ----------------- ------------- January 2002 $4,197,000 February 2002 9,252,000 March 2002 18,325,000 April 2002 26,559,000 May 2002 31,085,000 June 2002 32,243,000 July 2002 33,291,000 August 2002 34,765,000 September 2002 35,814,000 October 2002 36,695,000 November 2002 37,576,000 Management Search Covenant: The Debtors promise to: (A) commence and diligently maintain a search for the selection of an industry-experienced interim president and chief restructuring officer who is also experienced in restructuring operations of financially distressed companies; and (B) commence and diligently maintain an expeditious search, using a nationally-recognized executive search firm, for a permanent president and chief executive officer with industry experience who is also experienced in restructuring operations of financially distressed companies, and hire that person by June 30, 2002. By this Motion, the Debtors ask Judge Walsh for permission to enter into the DIP Facility, perform their obligations under the Credit Agreement, and borrow up to $20,000,000 from Fleet on an interim basis pending a Final DIP Financing Hearing. (NationsRent Bankruptcy News, Issue No. 1; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONSRENT: Bankruptcy Filing Prompts S&P to Drop Ratings to D --------------------------------------------------------------- Standard & Poor's lowered its subordinated debt rating on NationsRent Inc., to 'D' from single 'C'. At the same time, the rating was removed from CreditWatch were it was placed November 14, 2001. Standard & Poor's lowered its corporate credit and secured debt ratings on NationsRent to 'D' on December 4, 2001. The company's total outstanding debt was about $1.1 billion as of September 30, 2001. The rating action follows the company's announcement that it intends to reorganize under Chapter 11 of the U.S. Bankruptcy Code, and has filed a voluntary Chapter 11 petition. In addition, NationsRent announced that it has obtained up to $55 million of debtor in possession financing led by Fleet Bank, subject to court approval. This financing will enable the company to continue normal operations while moving through the reorganization process. Fort Lauderdale, Florida-based NationsRent is one of the country's leading construction equipment rental companies, operating 230 locations in 27 states. The company has suffered from poor operating performance during the last 12 months due to the weak economy, slower-than-expected rental revenue growth, and ongoing operational issues at several of its branches. This weak operating performance, combined with the company's onerous debt burden, contributed to the need for the filing of Chapter 11. According to DebtTraders, NationsRent Inc.'s 10.375% bonds due 2008 (NATRENT) trade between 1 and 2. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NATRENTfor real-time bond pricing. OWENS CORNING: IRS Wants to Set-Off Prepetition Tax Overpayments ---------------------------------------------------------------- The United States Internal Revenue Service moves for an order for relief from the automatic stay to set off the Debtors' pre- petition tax overpayments against Owens Corning's pre-petition tax debts. Christopher J. Kayser, Esq., Trial Attorney for the U.S. Department of Justice Tax Division, in Wilmington, Delaware, relates that for the 1990 tax year, Debtors filed an Application for Tentative Refund, claiming a $5,285,721 overpayment of taxes. On November 5, 2001, the IRS allowed the overpayment in full but has not issued a tax refund because Debtors has $481,242,891 in outstanding pre-petition tax debts which, may be offset against the $5,285,721 overpayment. These tax debts, reflected on the proof of claim IRS filed on March 22, 2001, are for deficiencies in income taxes, withholding for U.S. source income of foreign persons, and FICA and withholding taxes. With the exception of the FICA and withholding taxes which have since been assessed and paid, Mr. Kayser submits that Debtors' tax debts remain unassessed. For the 1995 and 1996 tax years, debtor Fibreboard filed an amended corporate income tax return, claiming an overpayment of taxes in the amount of $26,435 for 1995 and $312,773 for 1996, which the IRS has not yet allowed either claim for overpayment. Fibreboard currently has $1,454,660 in federal income tax debts for the 1992, 1993, and 1994 tax years of which $120,992 has been assessed. The remaining $1,333,668 balance is unassessed. Mr. Kayser believes that Debtors' bankruptcy petition "does not affect any right of a creditor to offset a mutual debt" that arose prior to the bankruptcy petition. Though a creditor's right to offset mutual pre-petition debts is subject to the automatic stay imposed, the stay may be lifted for cause. The IRS's right to setoff does not require the tax liability to be assessed. Mr. Kayser explains that a tax liability arises, as a matter of law, as a consequence of realizing income over the course of a particular tax year, not as a consequence of an assessment. On the date the return is due to be filed, a taxpayer has "a positive obligation to the United States: a duty to pay its tax." That the unassessed tax liability may be disputed does not impair the IRS's ability to effectuate the offset. Until relief from stay is granted and setoff approved, Mr. Kayser asserts that the IRS has a right to retain the tax overpayment for periods prior to the bankruptcy petition date. (Owens Corning Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Disclosure Hearing Rescheduled for January 14, 2002 ---------------------------------------------------------------- At a Status Conference held on December 4, 2001, the Court ordered that the December 19, 2001 hearing on approval of the original Disclosure Statement of Pacific Gas and Electric Company, and its debtor-affiliates is vacated. No later than December 19, 2001, the Debtor is to file its revised Plan of Reorganization and revised Disclosure Statement. The revised The revised Disclosure Statement should describe specifically (1) the laws and regulations Debtor seeks to preempt through confirmation of its revised Plan of Reorganization; (2) the governmental units affected by any such preemption and (3) how the various transactions contemplated by the revised Plan of Reorganization will affect certain executory contracts and Debtor's obligations under those contracts. The court will hold a hearing On January 14, 2002, at 9:30 a.m., to consider objections to the adequacy of the revised Disclosure Statement; provided, however, it will not consider at that hearing the matters to be considered at the January 25, 2002, hearing. The January 25, 2002 hearing will be conducted at 9:30 a.m. on the issue of whether the revised Plan Of Reorganization is facially invalid based upon sovereign immunity and/or preemption. All outstanding objections to the adequacy of the original Disclosure Statement will be preserved and do not need to be refiled. The court will permit parties in interest to make oral objections to the adequacy of the revised Disclosure Statement provided they have, prior to the hearing, met and conferred (in person or telephonically) with counsel for the Debtor concerning any contentions that the revised Disclosure Statement is inadequate. Any written objections to the adequacy of the revised Disclosure Statement parties choose to file must be filed and served no later than January 10, 2002, but only if the objectors "meet and confer" with Debtor's counsel. No later than January 8, 2002, the California Public Utilities Commission, the Attorney General for the State of California, and any other governmental unit contending that the revised Plan Of Reorganization is facially invalid based upon sovereign immunity and/or impermissible federal preemption, and that, therefore, the revised Disclosure Statement should not be approved, are to file their briefs on those issues. Any briefs submitted in connection with this matter are to be delivered personally or by facsimile to counsel for the Debtor, the UST, PG&E Corporation as co-proponent of the revised Plan of Reorganization, and the Committee on January 8, 2002. No later than January 22, 2002, the Debtor, PG&E Corporation, and the Committee shall file and serve their responses to the briefs addressing sovereign immunity and/or preemption and filed by the January 8 deadline. Those briefs shall be delivered personally or by facsimile on January 22 to counsel who submit briefs as described above. (Pacific Gas Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) POLAROID CORP: Court Extends Lease Decision Period to March 11 -------------------------------------------------------------- Finding that good and sufficient cause exists to extend the time within which Polaroid Corporation, and its debtor-affiliates must elect to assume or reject the Unexpired Leases, Judge Walsh grants the Debtors' motion. The Debtors have until March 11, 2002 or the date of the confirmation of their plan of reorganization to make a decision on the Unexpired Leases. (Polaroid Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) POLAROID CORP: Appareo Plans to Acquire Digital Solutions Assets ---------------------------------------------------------------- Appareo Software, Inc., and Polaroid Corporation announced that Appareo Software plans to acquire the assets and related business of Polaroid Digital Solutions, Inc., a subsidiary of Polaroid Corporation, for $4.8 million. A motion seeking immediate approval of the sale is being filed in U.S. Bankruptcy Court in Wilmington, Del., in connection with the court's oversight of Polaroid's voluntary Chapter 11 filing (Case Number 01-10864). Appareo Software, a leader in advanced knowledge management solutions, agreed to purchase the assets and business of PDSI from Polaroid yesterday afternoon. The agreement must now receive court approval before it can be finalized. The closing is yet to be scheduled, but it is expected to take place before January 31, 2002. Based in St. Joseph, Mich., PDSI is a leading provider of electronic forms, digital photo imaging and automation tools for the real estate, insurance and corporate inspection communities. PDSI markets software under the ACI, MCS, CSA, Lighthouse, PolaroidForms and Polaroid brands. Stuart McNeill, chief executive officer of Appareo states, "The acquisition of PDSI's assets and business represents a key step for Appareo in furthering its strategy of owning highly targeted, market leading software verticals, with strong earnings. In the mortgage services industry, PDSI has been a technology leader for the past 22 years. The skill of PDSI's management team, depth of technical personnel, and strength of their client list will greatly assist us in gaining additional market share in our chosen verticals." "This is another step forward in our plan to sell assets that are not part of our core instant imaging business. We're pleased that Appareo Software found a strategic fit for PDSI and that they clearly recognize the value of the business," said Gary T. DiCamillo, Polaroid chairman and chief executive officer. Appareo Software Inc. is the product of a merger between Appareo Software Inc., a Vancouver-based software firm leading the innovation of advanced knowledge management solutions, and Group West Systems Ltd., a company specializing in delivering industrial strength application technologies and e-Commerce business solutions, in March of 2001. Appareo is in the business of providing a broad range of services and solutions to highly specific market niches. Additional information about Appareo is available on the company's web site at http://www.appareo.com Polaroid Corporation is the worldwide leader in instant imaging. Polaroid supplies instant photographic cameras and films; digital imaging hardware, software and media; secure identification systems; and sunglasses to markets worldwide. Additional information about Polaroid and its reorganization is available on the company's web site at http://www.polaroid.com PRINTPACK: S&P Revises Low-B Rating Outlook to Positive ------------------------------------------------------- Standard & Poor's revised its outlook on Printpack Inc. to positive from stable. At the same time, Standard & Poor's affirmed its ratings on the company. The outlook revision recognizes the company's ongoing improvements in its financial profile. Management's consistent productivity improvement and cost reduction efforts have led to meaningful improvements in profitability and cash generation. Printpack has used free cash flow to reduce total debt to around $420 million in 2001 from a peak level of $590 million in 1997, which has exceeded targets factored into the ratings. To preserve these improvements, management is expected to maintain a disciplined approach towards growth, and modest bolt-on acquisitions are likely to be funded through free cash flow. The ratings on Printpack reflect its fair business position as a leading domestic player in the fragmented, flexible plastic packaging market, offset by aggressive debt leverage. With annual revenues of about $1 billion, privately-held Printpack enjoys a leading market share in the relatively stable snack foods segment, and also has strong niche positions in packaging for cookies, and confectionery and bakery products. Market leadership is supported by long-standing customer relationships with leading food and consumer product companies, technological innovation, and an improving cost structure. Still, competition from alternative suppliers and substitute products is keen, and ongoing consolidation among customers will intensify pricing pressures. The company's financial profile has shown an improving trend during the past three years. As of September 30, 2001, funds from operations to total debt and EBITDA interest coverage improved to 24% and 4 times, respectively, reflecting good progress towards improving these key measures of credit quality. Although capital spending is expected to increase modestly in the intermediate term, ongoing cost-cutting initiatives should continue to offset competitive pressures and bolster cash flow generation. Financial flexibility is supported by about $69 million in availability under Printpack's revolving credit facilities (includes a receivables securitization facility) as at Sept. 30, 2001, and the absence of meaningful debt maturities until 2004. Outlook: Positive The ratings could be raised moderately within the near term, if Printpack can continue to bolster its financial profile, while balancing the company's growth objectives. Current trends should support further improvements to Printpack's profitability and cash flow generation. Ratings Affirmed, Outlook Positive Printpack Corp. Rating Corporate credit BB- Senior unsecured debt B+ Subordinated debt B RETURN ASSURED: Banking on Pending Merger to Continue Operations ---------------------------------------------------------------- Return Assured Inc., has incurred losses from operations and has obligations that could exceed the Company's working capital that raise substantial doubt about its ability to continue as a going concern. The Company has entered into a Merger and Share Exchange Agreement with Internet Business's International, Inc. and intends to complete the Merger during fiscal year 2002. The Company has brought to market the world's first proprietary business-to-business and business-to-consumer value added "web seal of approval" which provides a service that guarantees customers who order products through the web sites of merchant members that the merchants' stated return policy will be honored. The "web seal of approval" is designed to meet the needs of small and medium sized businesses by removing the risk and uncertainty that are responsible for incomplete online transactions. The Company offers a risk-free shopping experience because it guarantees to fulfill the terms of a participating merchant's return policy in cases where the merchant will not. The Company's revenues for the fiscal year 2001 were weaker than expected. The timing of the commencement of Return Assured operations has coincided with a significant downturn in the entire Internet sector and although initial sign-ups with a number of merchants were encouraging, follow through revenue has been very disappointing. Moreover, the slow generation of sales of Return Assured's "Web Seal of Approval" is highly correlated with an increase in competing products offered by large portals like Yahoo! and AOL. The initial rush of inquiries and sign ups, announced in early January, has fallen off significantly due to the increased competition. Return Assured is in the process of further development and expects to generate larger revenues in the comparable period next year as the Company redefines its strategy based on its announced and forthcoming merger with Internet Business's International, Inc. Gross profit was $2,003 for the year ended August 31, 2001 as compared with nil for the year ended August 31, 2000, which represents 5% of sales. Although the Company does not have a year over year comparison, the gross profit was lower than expected. This shortfall is attributed to substantial discounts provided to first-time customers in order to adopt the Return Assured "Web Seal of Approval" and essential staff being spread across lower than expected revenues. To improve the Company's overall financial results, the Company has reduced staff to a minimum in the financial services area. The Company is looking towards a redefinition of the Return Assured "Return Seal of Approval" and the areas of operations once the merger with IBUI is completed. The Company has incurred net losses of $9,681,732 and $2,261,306 for the years ended August 31, 2001 and 2000, respectively. In addition, the holders of the Preferred Stock currently have the right to redeem their shares for cash. If that were to happen, the Company would not be able to meet this obligation. The Company believes the pending Merger will be sufficient for the Company to continue as a going concern. SHEFFIELD STEEL: Files for Chapter 11 Reorganization in Oklahoma ---------------------------------------------------------------- To help the company to restructure its balance sheet, Sheffield Steel Corporation has found it necessary to file for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The filing includes Sheffield Steel and it's subsidiaries, Waddell's Rebar Fabricators, Inc., and Wellington Industries, Inc. Sheffield Steel intends to continue normal operations and does not foresee any significant interruption in the shipment of product to its customers. In its news release (dated December 7, 2001), the company says, "As you are aware, the U.S. steel industry has been under significant pressure from imported steel products, low product pricing and high energy costs. These factors, coupled with the reduced demand, have made it very difficult over the past 18 months." It continues, "The support of our customers, vendors and creditors is paramount to our efforts to emerge as a much stronger and more viable company." Sheffield Steel is a mini-mill producer of SBQ and MBQ hot- rolled bar products, concrete reinforcing bar and fabricated products including fabricated rebar, steel fence posts and railroad track spikes. The company's headquarters and largest manufacturing facility is located in Sand Springs, Oklahoma where it has an annual billet making capacity of 600,000 tons. It also has a rolling mill in Joliet, Illinois and two fabrication shops in the Kansas City area. SHEFFIELD STEEL: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Lead Debtor: Sheffield Steel Corporation a/k/a Sheffield Steel-Sand, a division of Sheffield Steel Corp. a/k/a Sheffield Steel-Kansas City, a division of Sheffield Steel Corp. a/k/a Sheffield Steel-Joliet, a division of Sheffield Steel Corp. d/b/a HMK Sheffield Steel Corporation 220 North Jefferson Street Sands Springs, Oklahoma 74063 Bankruptcy Case No.: 01-05508 Debtor affiliates filing separate chapter 11 petitions: Waddell's Rebar Fabricators, Inc. Wellington Industries, Inc. Type of Business: Sheffield Steel Corporation is a leading regional mini-mill producer of steel products and has been in the steel making business for over 69 years. Chapter 11 Petition Date: December 7, 2001 Court: Northern District of Oklahoma Debtors' Counsel: Neal Tomlins, Esq. Tomlins & GOins Utica Plaza Building 2100 South Utica Ave., Ste. 300 Tulsa, Oklahoma 74114 Tel: 918 747 6500 Approximate Assets: $117,000,000 Approximate Debts: $186,000,000 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ State Street Bank and Notes $110,000,000 Trust Company, as Trustee Corporate Trust Administration Goodwin Square 225 Asylum Street Hartford, CT 06103 Tel: 860 244 1889 Fax: 860 244 1817 Prudential Notes $21,000,000 Tom Luther 4 Gateway Center 7th Floor Newark, NJ 07102 Tel: 973 802 8804 Email: thomas.luther@prudential.com Deutsche Banc Notes $10,000,000 Alex Brown Inc L. Spencer Wells Vice President Distressed Products Group 31 West 52nd Street 3rd Floor New York, NY 10019 Tel: 212 469 2578 Fax: 212 469 2884 Email: spencer.wells@db.com Franklin Funds Notes $10,000,000 Dick Kuersteiner 901 Mariners Island Blvd. San Mateo, CA 94404 Tel: 650 312 4525 Fax: 650 312 3589 Email: rkuersteiner@frk.com John Hancock Funds Notes $9,000,000 Lee P. Crockett Second Vice President 101 Huntington Avenue Boston, MA 02199-76503 Tel: 617 375 6869 Fax: 617 375 1837 Email: lcrocket@jhancock.com Delaware Investments Notes $5,000,000 Ryan Avrett One Commerce Square 39th Floor Philadelphia, PA 19103 Tel: 215 255 8673 Fax: 215 255 1158 Email: ravrett@delinvest.com Black Diamond Capital Notes $2,000,000 Management, LLC Les Meier One Conway Park 100 Field Drive, Suite 140 Lake Forest, IL 60045 Tel: 847 615 9000 Email: les@bdcm.com Chilmark Partners Notes $2,000,000 John C. Haeckel 875 North Michigan Suite 3460 Chicago, Illinois 60611 Tel: 312 984 9711 x 133 Fax: 312 337 0990 Email: jhaeckel@chilmarkpartners.com Deltec Asset Notes $1,000,000 Management LLC Gary E. Hindes Managing Director 645 Fifth Avenue New York, NY 10022 Tel: 212 546 6296 Fax: 212 546 6646 Email: ghindes@deltec-ny.com Tejas Securities Notes $1,000,000 John J. Helms 2700 Via Fortuna Suite 400 Austin, TX 78746 Tel: 512 314 0722 Email: jhelms@tejassec.com Sand Springs Metal Trade Debt $1,939,275 Processing Michael Strauss PO Box 580 Sand Springs, OK 74063 TEL: 918 241 1111 Yaffe Metals Trade Debt $595,654 Vic Ray PO Box 916 Muskogee, OK 74402 Tel: 918 245 0257 Borg Compressed Trade Debt $519,120 Steel Corp. Vic Ray PO Box 916 Muskogee, OK 74402 Tel: 918 587 2511 Republic Technologies, Trade Debt $486,943 Inc. PO Box 99725 Chicago, IL 60690 Tel: 330 670 3085 American Compressed Trade Debt $369,784 Steel, Inc. Denis Battrum PO Box 87-9300 Kansas City, MO 64187 Tel: 816 842 7372 Tulsa County Treasurer Trade Debt $304,260 Dennis Semler 500 S. Denver Avenue Tulsa, OK 74103 Tel: 918 596 5071 UCAR Carbon Company, Inc. Trade Debt $212,851 Yaffe Iron & Metal Trade Debt $189,324 Co., Inc. Olympic Mill Services Trade Debt $138,637 Delta Fabrication & Trade Debt $136,918 Machine SIMONDS INDUSTRIES: S&P Further Downgrades Junks Ratings -------------------------------------------------------- Standard & Poor's lowered its ratings on Simonds Industries Inc. At the same time, the ratings on the company were placed on CreditWatch with negative implications. About $100 million in debt securities is affected. The ratings action and CreditWatch placement follow the company's announcement that it has retained Credit Suisse First Boston to assist Simonds in addressing alternatives to strengthen the company's highly leveraged balance sheet. In the near term, the company's financial flexibility is extremely limited, with a $5.1 million interest payment due Jan. 15, 2002, which Simonds has indicated that it is highly unlikely it will make. Credit protection measures are very weak, with total debt to EBITDA around 9.5 times and EBITDA interest coverage of about 1.0x as of September 29, 2001. The company had about $18 million in availability under the company's $40 million revolving credit facility at September 29, 2001. Simonds manufactures industrial cutting and sharpening tools, including saw blades, files, knives, steel rule, and filing room equipment. The company's products are sold into the wood, pulp and paper, packaging, and metal cutting markets. Simonds continues to experience earnings pressures due to soft international markets, extremely weak pulp and paper markets, and very soft industrial cutting markets. In addition, the company continues to experience manufacturing inefficiencies at several of the company's facilities. Standard & Poor's will monitor Simonds' financing plans and operating prospects. If the company fails to make its January 15, 2002, interest payment, the ratings will be lowered to 'D'. Ratings Lowered, Placed on CreditWatch Negative Simonds Industries Inc. TO FROM Corporate credit rating CC CCC+ Subordinated debt C CCC- STEAKHOUSE PARTNERS: Commences Trading on OTC Bulletin Board ------------------------------------------------------------ Steakhouse Partners, Inc. (OTC Bulletin Board: SIZL) announced that its common stock was delisted from the NASDAQ SmallCap Stock Market, effective as of the opening of business Wednesday, due to the Company's failure to meet NASDAQ's net tangible assets/ market capitalization/ net income requirements. The Company's common stock is now traded on Nasdaq's Over-the- Counter Bulletin Board Market. Steakhouse Partners, Inc., through its wholly owned subsidiary Paragon Steakhouse Restaurants owns and operates 65 steakhouses in 11 states. It is considered the leader in the mid-upper ($25 to $35 per plate/customer) priced steakhouse segment. TELESYSTEM INTERNATIONAL: Closes US$15 Million Private Placement ---------------------------------------------------------------- Telesystem International Wireless Inc. (TIW) confirms that as expected, it closed on December 14, 2001, a US $15 million private placement. TIW has issued a total of approximately 24.5 million Special Warrants to Capital Communications CDPQ Inc., an affiliate of J.P. Morgan Partners LLC, and Telesystem Ltd. The Special Warrants were issued at a price of approximately US $0.61 each, exercisable for a new series of convertible debentures or, depending on certain conditions, one (1) subordinate voting share of TIW at no additional cost. TIW has filed a preliminary prospectus with the securities commissions of each of the provinces of Canada to qualify the securities to be issued on the exercise of the Special Warrants. The placement is a first tranche of a US $90 million private placement announced as part of the Company's recapitalization plan. The issuance of an additional tranche of US $75 million of Special Warrants is conditional on the successful completion of TIW's purchase offer and consent request for its 7.00% Equity Subordinated Debentures ("ESD") which are scheduled to expire on January 9, 2002. Should the holders of ESDs not consent to the amendments to the ESD indenture, the first US $15 million tranche of Special Warrants will be exercisable into a new series of convertible debentures. Those new convertible debentures will be senior in rank to the ESDs and the US $300 million in Convertible Debentures held by certain affiliates of J.P. Morgan Partners LLC and an affiliate of Hutchison Whampoa Limited, but junior to other indebtedness of the Company. They will carry an interest rate of 25% per year mature 5 years from their issuance, and each US $1,000 in principal amount will be convertible at any time at the option of the holder into subordinate voting shares at the market price for such shares at the time of conversion. TIW is a global mobile communications operator with 4.9 million subscribers worldwide. The Company's shares are listed on the Toronto Stock Exchange ("TIW") and NASDAQ ("TIWI"). TIOGA TECHNOLOGIES: Nasdaq Delists Shares Effective December 19 --------------------------------------------------------------- Tioga Technologies (NASDAQ: TIGA) announced that it has received notice from Nasdaq that its appeal of the staff determination to delist the Company's shares from the Nasdaq National Market has been denied. Effective with the opening of business on December 19, 2001, the Company's ordinary shares will no longer trade on the Nasdaq National Market. The Company's ordinary shares may trade on the Over-the-Counter-Bulletin Board (OTCBB) market following the delisting, if brokers are interested in making a market in the shares. Given that Tioga's shares have been delisted from the Nasdaq National Market within one year following their listing on the Tel Aviv Stock Exchange (TASE), they will also be delisted from the TASE, unless Tioga publishes a prospectus in Israel within two months of the delisting from the Nasdaq National Market. Tioga Technologies Ltd. (NASDAQ: TIGA) is a leading provider of standard ICs for broadband communications with expertise in both systems and deployment. Tioga's digital subscriber line (DSL) ICs enable the digital transmission of voice, video and data over standard telephone lines. Tioga develops chips employing a range of DSL technologies including ADSL/G.lite, HDSL, SDSL, and VDSL. Tioga is headquartered in San Jose, California, and maintains its R&D center in Tel Aviv, Israel. For more information, please visit our web site at http://www.tiogatech.com VIDEO UPDATE: Court Confirms Movie Gallery-Backed Plan ------------------------------------------------------ Movie Gallery, Inc. (Nasdaq/NM: MOVI) announced that Video Update's plan of reorganization was confirmed Tuesday by the United States Bankruptcy Court. As a result, Movie Gallery anticipates that its acquisition of approximately 320 Video Update stores will be consummated Friday, December 21, 2001, at which time it will operate 1,410 stores in 41 states and five Canadian provinces. Joe Malugen, Chairman and Chief Executive Officer of Movie Gallery, said, "We are excited about the court's approval of Video Update's plan of reorganization. The bankruptcy process for the nearly 4,000 associates of Video Update has been long and tough, and we appreciate their attitude and efforts and look forward to adding them to the Movie Gallery family. We are equally excited about our entry into Canada and several additional states in a transaction that increases our store base by approximately 30% and that we expect to be accretive beginning in the first quarter of next year. We currently expect the Video Update stores will add $95 million to $105 million in revenues and $10 million to $12 million in adjusted EBITDA to the Company's fiscal 2002 operating results." Movie Gallery currently owns and operates a total of 1,090 video specialty stores located in 31 states. Movie Gallery is the leading provider of movie and video game rentals and sales in rural and secondary markets in the United States. WARNACO GROUP: Seeks Approval of DIP Financing Pact Amendment ------------------------------------------------------------- The Warnaco Group and its debtor-affiliates ask Judge Bohanon for an order approving an amendment to the DIP Credit Agreement. According to J. Ronald Trost, Esq., at Sidley, Austin, Brown & Wood, in New York, New York, the principal purpose of the amendment is to modify the DIP Credit Agreement to accommodate business performance in light of the events of September 11, 2001, general economic weakness and the difficult retail environment. Basically, Mr. Trost says, the amendment: (i) includes changes to financial covenants, borrowing commitments and other provisions of the DIP Credit Agreement, and (ii) provides for the payment of certain fees to the Lenders and the Administrative Agent. Mr. Trost tells the Court that the Debtors have revised their financial projections and business plans to reflect current business performance and projections including economic developments since the Petition Date and the events of September 11, 2001. After discussions, Mr. Trost reports that the Debtors and the Lenders have agreed to adjust the DIP EBITDAR Covenant to reflect the Debtors' current business plan. The DIP EBITDAR Covenant measures the Debtors' earnings before interest, taxes, depreciation, amortization, and certain restructuring charges. "The DIP Amendment also reduces the level of commitments under the DIP Facility from $600,000,000 to $475,000,000 to reflect the stronger than planned post-petition liquidity performance of the Debtors due to better working capital management," Mr. Trost relates. In October, Mr. Trost says, the Debtors and the Lenders agreed that, in the event the Debtors required a waiver of the DIP EBITDAR Covenant with respect to the quarter ending September 30, 2001, that the Lenders would grant such a waiver. In connection with that agreement, Mr. Trost continues, the Debtors paid the Lenders a contingent $600,000 consent fee equal. But ultimately, Mr. Trost informs Judge Bohanon, the Debtors determined that an EBITDAR waiver with respect to the September 30 quarter was not necessary. Mr. Trost tells the Court that the fee payable by the Debtors' for the DIP Amendment has taken into account the Debtors' payment of the Contingent Fee. The principal terms of the DIP Amendment are: * Under section 2(e) of the DIP Amendment, the new minimum EBITDAR requirement will be: Test Period Minimum EBITDAR ----------- --------------- Three Months Ending December 31, 2001 $7,300,000 Four Months Ending January 31, 2002 $3,000,000 Five Months Ending February 28, 2002 $7,570,000 Six Months Ending March 31, 2002 $18,940,000 Seven Months Ending April 30, 2002 $25,200,000 Eight Months Ending May 31, 2002 $27,780,000 Nine Months Ending June 30, 2002 $36,760,000 Ten Months Ending July 31, 2002 $40,150,000 Eleven Months Ending August 31, 2002 $46,780,000 Twelve Months Ending September 30, 2002 $56,450,000 Twelve Months Ending October 31, 2002 $57,840,000 Twelve Months Ending November 30, 2002 $62,870,000 Twelve Months Ending December 31, 2002 $73,640,000 * These EBITDAR amounts will be adjusted to reflect potential sales of divisions or subsidiaries. (a) The Tranche B Commitment will be reduced from $225,000,000 to $100,000,000 upon execution of the DIP Amendment. (b) The Tranche B Commitment will be reduced to $50,000,000 on April 30, 2002. (c) The Tranche B Commitment will be reduced to $0 on July 31, 2002. (d) Upon execution of the DIP Amendment, Warnaco will have access to 70% of the Tranche B Commitment with the ability to increase to the full Tranche B Commitment level with the consent of two-thirds of the Tranche B Lenders. (e) Prior to April 30, 2002, the Debtors must have delivered executed agreements to the Lenders with one or more independent third party buyer(s) with respect to the sale(s) of stock or assets of the Debtors to an independent third party buyer(s) on terms that provide for: (1) aggregate net cash sale proceeds not less than $200,000,000, (2) consideration, timing of closing and other conditions, which represent a bona fide effort of Warnaco and/or a Subsidiary thereof to consummate the sale of the assets or stock to be sold, and (3) no less than 50% of the consideration is in cash. The Administrative Agent may, however, in its sole reasonable discretion, extend this date. (f) Prior to June 30, 2002, the Debtors must have delivered executed agreements to the Lenders with one or more independent third party buyer(s) with respect to the sale(s) of stock or assets of the Debtors to an independent third party buyer(s) such that the aggregate net cash proceeds thereof would be sufficient to enable the Borrower to repay (and provide cash collateral in respect of all Letters of Credit) the entire amount of the Facilities and all post petition administrative claims and such proceeds shall be used for such purposes. The Administrative Agent may, however, in its sole reasonable discretion, extend this date. (g) Prior to July 31, 2002 the Debtors must cause a plan of reorganization to be filed with the Bankruptcy Court and such plan of reorganization is to provide for payment in full of the Obligations under the DIP Credit Agreement, on or prior to the consummation thereof and shall otherwise include terms and conditions satisfactory to the Requisite Lenders. The Administrative Agent may, however, in its sole reasonable discretion, extend this date. (h) Various changes were made to: (1) adjust the levels of permitted capital expenditures to reflect the Debtors revised business plan, (2) permit certain asset transfers as part of the IZKA settlement, and (3) adjust the definition of the Tranche A borrowing base with reference to the Chargebacks. As consideration for the modifications in the DIP Amendment, Mr. Trost explains that the Debtors will be required to pay various fees to the Lenders and the Administrative Agent. Specifically: -- The Debtors are obligated to pay a maximum net amendment fee of $1,187,500 to the Lenders. This amount will be payable, at the net rate of 1/4 of 1% (0.25%) of the aggregate amount of the Tranche A Commitments and the Tranche B Commitments (after giving effect to the DIP Amendment) on a pro rata basis to those Lenders which consent to the DIP Amendment and takes into account the Contingent Fee paid by the Debtors to the Lenders on October 25, 2001. -- In addition, the Administrative Agent under the DIP Facility and The Chase Manhattan Bank will be paid a fee totaling of $570,000, as reflected in a separate letter agreement between the Administrative Agent, The Chase Manhattan Bank and the Debtors. Thus, the Debtors also seek the Court's approval of payment of the Amendment Fee (including, to the extent necessary, the payment of the Contingent Fee) and the Agency Fee. According to Mr. Trost, the Loan Parties shall cause a plan of reorganization to be filed with the Bankruptcy Court on or prior to July 31, 2002 and such plan of reorganization shall provide for payment in full of the Obligations on or prior to the consummation and shall otherwise include terms and conditions satisfactory to the Requisite Lenders. The Administrative Agent may, in its sole reasonable discretion extend this date, Mr. Trost adds. Furthermore, Mr. Trost relates, the Group will not permit Capital Expenditures to be made or incurred during each of the Fiscal Years to be in excess of these maximum amounts: Fiscal Year ending on or about Maximum Capital Expenditures ------------------------------ ---------------------------- December 31, 2001 $28,000,000 December 31, 2002 $18,000,000 December 31, 2003 $15,000,000 Mr. Trost clarifies that this DIP Amendment is actually the second amendment to the DIP Credit Agreement. But the first amendment, which was executed on August 27, 2001, only related to certain technical and minor matters. Under the DIP Order, Mr. Trost notes, the Debtors were authorized to agree to such amendments without additional Court approval. (Warnaco Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) WESTERN POWER: Fails to Comply with Nasdaq Listing Requirement -------------------------------------------------------------- Western Power & Equipment Corp. (Nasdaq:WPEC) announces that it has received a Nasdaq staff determination that an additional issue will be considered at the Company's written hearing with respect to its compliance with the Nasdaq Marketplace Rules scheduled for Thursday, January 10, 2002. The staff determination indicates that the Company does not currently comply with the annual report requirement, as set forth in Nasdaq Marketplace Rule 4350(b) because it has not sent a copy of its annual report for its fiscal year 2000 to shareholders. The Company previously announced that it had received a Nasdaq staff determination indicating that it had failed to regain compliance with the proxy statement and annual meeting filing requirements set forth in Nasdaq Marketplace Rules 4350(e) and (g), respectively. Because the Company's securities would therefore be subject to delisting from the Nasdaq SmallCap Market, the Company is appealing the staff determination before the Panel at the written hearing. There can be no assurance that the Panel will grant the Company's request for continued listing. The Company has filed a preliminary Notice of Annual Meeting of Shareholders and Proxy with the Securities and Exchange Commission and is awaiting comments with respect to the same. Upon receipt and compliance with any such comments, the Company will schedule a combined shareholders' meeting for the 2001 and 2000 fiscal years in the early part of 2002. Accordingly, the Proxy will incorporate by reference the Annual Reports on Form 10-K for the July 31, 2001 and 2000 fiscal years. Similarly, both the 2001 and 2000 Annual Reports on Form 10-K will be sent to shareholders of record with the Proxy. Western Power & Equipment Corp. sells, leases, rents, and services construction and industrial equipment for Case Corporation and over 30 other manufacturers. The Company currently operates 16 facilities in Washington, Oregon, northern Nevada, California, and Alaska. WHEELING-PITTSBURGH: Inks Premium Financing Pact with Cananwill --------------------------------------------------------------- PCC, WPSC and the related and subsidiary Debtors ask Judge Bodoh to authorize WPSC to enter into an insurance premium-financing agreement with Cananwill, Inc. The policies of insurance to be financed must be maintained by the Debtor to keep the business operations and assets of the estate insured for the benefit of the creditors and the Debtors. In order to pay for the policies, which are necessary for an effective reorganization, the Debtors have unsuccessfully attempted to obtain unsecured credit, as required by the Bankruptcy Code. However, Cananwill has agreed to finance the payment of the premiums for these policies for a cash down-payment of $1,805,625, and an amount financed of $5,416,875, to be paid in nine monthly payments of $612,988.54, bearing interest at an annual percentage of 4.41%, for total payments to Cananwill of $5,516,896.86. As part of this agreement, the Debtors grant to Cananwill a power of attorney to cancel the policies financed under this agreement if the event of a payment default by the Debtors. To secure payment of the amounts due to Cananwill, the Debtors grant to Cananwill a security interest in unearned or returned premiums and other amounts due to the Debtor under the policies that result from cancellation of the policies. Upon default, the Debtors agree that the automatic stay of creditor action is terminated to permit Cananwill to cancel the policies and exercise its security interest. Any amount remaining owing to Cananwill, including its attorney's fees, are to be given the status of an administrative expense. Acting promptly on this important requirement, Judge Bodoh grants his approval of the Motion and his authorization for WPSC to carry out its terms. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) * Jay Alix Names Al Koch as Chairman & Grindfors as President ------------------------------------------------------------- Jay Alix & Associates, the nation's market leader in corporate turnarounds and restructurings, has promoted its managing principal, Al Koch, to chairman and named Michael Grindfors as president. Koch, managing principal of JA&A since 1995, will take on a more strategic role, focusing on the growth of the organization and the achievement of significant corporate objectives. Grindfors, formerly a managing director at Goldman Sachs in London, will relocate to Michigan to oversee the firm's Detroit, Chicago, New York and Dallas offices. Founder Jay Alix said the two moves "show that Jay Alix &Associates rewards outstanding performance while simultaneously seeking infusions of new skills and talent during this period of tremendous growth." Under Koch's leadership the firm has increased revenues by 300 percent while quadrupling its staff of turnaround professionals and opening two new offices. He also expanded client services, adding a comprehensive bankruptcy administration practice, an IT transformation practice, and professionals whose skills focus specifically on helping companies with early intervention to avoid crisis. Koch led several of the firm's larger, more complex client restructurings, including Oxford Health Plans, Allegheny General Hospital and Ryder System, Inc. Grindfors previously held the position of managing director in the investment banking division of Goldman Sachs in London. Prior to that, he was a senior partner at The Boston Consulting Group, where he led the Scandinavian practice and subsequently the New York City practice. Grindfors has also led operational turnarounds for such international companies as Etonic, maker of high-performance athletic shoes and Tretorn GmbH, a manufacturer of tennis equipment. As president of Etonic, Grindfors increased both productivity and revenues. At Tretorn, which had suffered several years of losses before his presidency, he reversed revenue slides and returned the company to profitability. Jay Alix & Associates is a nationally recognized leader in providing corporate turnaround and debt restructuring expertise to underperforming companies and troubled divisions or operating units of Fortune 1000 companies. JA&A professionals act as interim operating managers and financial advisors to boards of directors, senior managers and other constituents in need of operating or financial improvements. They also provide IT transformation services and a full range of litigation consulting and valuation services. JA&A's client roster includes a significant number of Fortune 500 companies. * BOOK REVIEW: Ling: The Rise, Fall, and Return of a Texas Titan ---------------------------------------------------------------- Author: Stanley H. Brown Publisher: Beard Books Softcover: 309 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/1893122832/internetbankrupt Summed up neatly, this is Jim Ling, founder and CEO of Ling- Temc0-Vought, once the fourteenth-largest corporation on the Fortune 500 list: That he was able to get control of -- and combine -- the sixth largest steel company, the eighth largest airline, the eighth largest defense contractor, the third largest meat packer, the largest sporting-goods maker, and a string of other companies in an almost random group of industries may well be the most significant thing to be said about him. Or maybe it is the fact that he performed all this from a base of little education, no connections, no money, no status, no leverage of any kind, but solely on the strength of what he discovered and created. As fascinating as Ling was, this book offers so much more. Stanley H. Brown presents a remarkable knowledge of and intriguing insights into corporate history and institutional behavior. He understands what makes organizations work, whether corporate, religious, or military. Although it has been more than 25 years since Jim Ling was on top of the world, he and his story remain hard to beat. He was a man of integrity. Faced with defeat, he conjured up innovative solutions. He picked up the pieces and tried something else, and even investors once burned went back for more. He believed in himself and his ventures absolutely, so much so that he kept all his own money and his children's money in LTV stock, and was wiped out when it went bust. Ling was born one of six children in Hugo, Oklahoma. A devout Catholic in the fundamentalist Bible Belt, his father killed a fellow worker in a rage after years of enduring anti-Catholic torment and, although acquitted, was so racked with guilt he left the family to live in a monastery. Ling's mother died when he was eleven. He never finished high school. After a short stint in the Navy during World War II, during which time he became an electrician, he started Ling Electric in Dallas. Post- war Dallas was good to bright men who worked hard. The company grew exponentially. Ling discovered public investors and began infusing them with his enthusiasm, enthusiasm that made them hand over lots of money to him. And he began to acquire companies at a dizzying pace, bigger and bigger companies: meatpacker Wilson & Co., steelmaker Jones & Laughlin, Braniff Airlines, LTV Aerospace, Wilson Sporting Goods, and many other, smaller companies. He was a masterful financier with seemingly endless ideas on making money work. So where did it go wrong? Ling's over-conglomerated conglomerate spun out of control. He was a micromanager extraordinaire and kept too much decision-making power to himself. He was a victim of his own success and overfed ego. He fought long and hard with the Justice Department in an antitrust suit over Jones & Laughlin, but the country's suspicion of conglomerates in the late 1960s got the better of him. In the end, he was ousted by his own people but, true to form, went on to try something new. The author researched this book very thoroughly. He convinced Ling to keep a journal during some critical moments and interviewed all the major players. Read it for the story of Ling, but also learn about what makes people tick. * Stanley H Brown is a former writer and editor at Business Week, Fortune, and Forbes. His columns have appeared in numerous publications. He commutes between Manhattan and Detroit. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. 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. 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