/raid1/www/Hosts/bankrupt/TCR_Public/020201.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, February 1, 2002, Vol. 6, No. 23
Headlines
ANC RENTAL: Court Okays Paul Hastings as Environmental Counsel
ACXIOM CORP: S&P Rates $175 Million Credit Facility at BB+
ADVANTICA RESTAURANT: Will Release Q4 2001 Results on Feb. 11
AMERICAN COMM'L: Won't Make $15.1MM Payment on 10.25% Sr. Notes
AMERICAN SKIING: Falls Below NYSE Continued Listing Criteria
AMES DEPARTMENT: Brings-In Jefferies & Co. as Financial Advisor
AQUASEARCH INC: Hires Buttke Bersch to Replace Ernst & Young
ARMSTRONG HOLDINGS: Futures Rep Hires YCS&T as Local Counsel
BETHLEHEM STEEL: Appointment of Joint Fee Review Panel Approved
BRIDGE INFORMATION: 2nd Amended Disclosure Statement Addenda
CALPINE CORP: Energy Unit Inks Netting Agreement with Enron
CAPITOL COMMUNITIES: Dev't Unit Resolves Payment on Resure Loan
COMDIAL CORP: Bank of America Extends Forbearance Until Feb. 28
CONSECO INC: Will Take Funding Actions to Eliminate Cash Gap
COVANTA ENERGY: Working with Co-Agent Banks for Waiver Extension
DBS HOLDINGS: Management Evaluating Additional Financing Options
DAW TECHNOLOGIES: Nasdaq Delists Shares Effective January 25
EVTC INC: Fails to Meet Nasdaq Continued Listing Requirements
FEDERAL-MOGUL: Claimants Get Okay to Hire Caplin as Lead Counsel
FOSTER WHEELER: Secures Covenant Waivers Under Credit Agreement
GENEVA STEEL: Wants Schedule Filing Deadline Extended to Mar. 7
GLASSTECH HOLDING: Files for Voluntary Chapter 11 Reorg. in DE
GLASSTECH HOLDING: Case Summary & Largest Unsecured Creditors
GLOBAL CROSSING: Shares Now Trade on OTC Bulletin Board
GLOBALNET: Crescent to Swap $2MM Conv. Note for 3.2MM Shares
HANGER ORTHOPEDIC: S&P Rates Proposed $200 Mill. Sr. Notes at B-
HAYES LEMMERZ: Committee Hires Akin Gump as Bankruptcy Counsel
HOULIHAN'S RESTAURANTS: Court OK's Logan & Co. as Claims Agent
HURRY INC: Board Considering Options to Wind-Down Operations
IT GROUP: Wants to Pay $1.2M in Prepetition Subcontractor Claims
INTEGRATED HEALTH: UST Appoints Premiere Creditors' Committee
JACKSON CHU: Chapter 11 Case Summary
KAISER ALUMINUM: Will Not Make Interest Payment on 12.75% Notes
KAISER ALUMINUM: Moody's Hatchets Ratings to Junk Level
KMART CORP: Will Maintain Existing Cash Management System
KOMAG INC: Net Loss Drops to $34.1 Million in 2001 4th Quarter
LTV CORP: Equity Panel's Retention of Water Tower Draws Fire
LTV CORP: 10 Parties Intend to Bid for Integrated Steel Assets
LEVEL 3 COMMS: S&P Further Junks Ratings & Maintains Watch Neg.
LODGIAN INC: Brings-In PricewaterhouseCooopers as Accountants
MATSUSHITA: Will Close & Liquidate Refrigerator Compressor Unit
MCLEODUSA INC: Files Chapter 11 with Prepack Reorg. Plan in DE
MCLEODUSA: Case Summary & 20 Largest Unsecured Creditors
MICROFORUM INC: Secures CCAA Protection to Reorganize in Canada
NATIONSRENT INC: Gets Okay to Reject Ultra Motor Sport Agreement
ON SEMICONDUCTOR: SVP & Sales Director Michael Rohleder Resigns
PHYCOR INC: Files for Chapter 11 Protection with Prepack Plan
PHYCOR INC: Case Summary & 20 Largest Unsecured Creditors
POLAROID CORP: Court Extends Removal Period through July 9, 2002
PROBEX CORP: Raises $1.25MM Financing through Private Placement
SAKS INC: S&P Assigns BB+ to $700 Million Sr. Secured Bank Loan
SERVICE MERCHANDISE: Wants to Implement Wind-Down Employee Plan
SOLECTRON CORP: Weak Operating Results Spur S&P's Low-B Ratings
SUNRISE ASSISTED: S&P Rates $100M 5.25% Subordinated Notes at B-
TRANS WORLD: Court Sets Plan Confirmation Hearing for March 21
USEC INC: S&P Keeps Watch as Sourcing Negotiations Continue
USG CORP: Sustains Net Loss of $9MM on $822MM Sales in Q4 2001
W.R. GRACE: Seeks Approval to Acquire Addiment Inc. for $6.5MM
WARNACO GROUP: Wants Lease Decision Period Extended to July 31
WINSTAR COMMS: Court Approves Conversion of Case to Chapter 7
XEIKON INC: Fails to Comply with Nasdaq Listing Requirements
ZILOG: Solicits Acceptances for Prepack Plan of Reorganization
* BOOK REVIEW: The ITT Wars: An Insider's View of Hostile
Takeovers
*********
ANC RENTAL: Court Okays Paul Hastings as Environmental Counsel
--------------------------------------------------------------
ANC Rental Corporation, and its debtor-affiliates obtained
authority from the U.S. Bankruptcy Court to employ and retain
Paul Hastings Janofsky & Walker LLP as their special
environmental compliance, remediation and transactional counsel.
With the Court's approval of its employment, Paul Hastings will
continue to render these to the Debtors:
A. providing advice regarding compliance with federal and state
rules governing installation, operation, maintenance, and
closure of above and underground fuel storage tanks;
B. providing advice regarding cleanup of contamination at
Debtors' properties;
C. providing counsel with respect to compliance with direct and
indirect wastewater discharge requirements;
D. providing counsel with respect to compliance with rules
governing vapor emissions from fueling operations;
E. providing counsel with respect to complying with rules
governing used oil recycling, battery management, and
similar matters;
F. providing counsel in connection with responding to and
reporting accidental releases of hazardous materials;
G. performing environmental due diligence for real property
transactions;
H. fulfilling environmental regulatory obligations that arise
from ceasing operations at a site;
I. overseeing cleanup of historic petroleum releases at sites at
which Debtor is, or has formally operated, and ensuring
recovery of such expenses under pertinent contract
indemnities;
J. representation at multi-party Superfund sites;
K. drafting and reviewing environmental contract terms for
leases and concession agreements;
L. managing and processing of all environmental fees, permits,
and registrations;
M. managing and contracting for all compliance testing;
N. overseeing a statistical inventory reconciliation program as
a method of detecting leaks from fuel storage systems at
sites operated by Debtors;
O. submitting annual reports under the Emergency Planning and
Community Right-To-Know Act of 1986;
P. completing and updating all wastewater and storm water
compliance plans and authorizations;
Q. responding to routine regulatory, airport, landlord
inquiries/requests for environmental information and/or
responses; and
R. rendering such assistance as the Debtors and their counsel
deem necessary. (ANC Rental Bankruptcy News, Issue No. 7;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
ACXIOM CORP: S&P Rates $175 Million Credit Facility at BB+
----------------------------------------------------------
Standard & Poor's assigned its double-'B'-plus rating to Acxiom
Corp.'s $175 million senior secured revolving credit facility
due 2005, and double-'B'-minus rating to its $150 million
convertible subordinated notes due 2009. At the same time,
Standard & Poor's affirmed its ratings on the company. The
outlook is negative.
Net proceeds from the offering will be used to redeem its $115
million convertible subordinated notes due 2003 and repay $25.7
million senior notes due 2007.
Little Rock, Arkansas-based Acxiom provides database marketing,
data warehousing, and decision support services. Business risk
is tempered by the company's expertise in managing its
comprehensive consumer databases. More than half its direct
marketing assignments are performed for long-term clients, and
outsourcing contracts generally cover multiple years, offsetting
a concentrated customer base and providing a degree of revenue
predictability. However, the company is still a relatively small
participant in a growing and fragmented industry that may see
the entrance of several, much larger competitors. Channel
partnering and moderate acquisitions could continue, primarily
to expand participation in selected vertical markets, enhance
distribution capability, and provide additional operational
diversity.
For the nine months ended Dec. 31, 2001, revenues declined 16%
to $641 million, and Acxiom reported a net loss of $45 million
versus net income of $33 million in the same period last year.
To offset current market weakness, the firm has implemented
cost-reduction actions and has restored profitability for
September and December quarters. Additionally, the company
has generated good free cash flow from operations, which has
allowed Acxiom to pay down more than $100 million in debt
obligations during the last two quarters. Total debt to EBITDA
is under 3 times, and EBITDA interest coverage is in the 5x
area.
Outlook: Negative
The ratings will be lowered if Acxiom does not restore and
maintain adequate profitability measures for the rating over the
near term.
Ratings Assigned
Acxiom Corp.
$175 mil. senior secured revolving credit facility BB+
$150 mil. convertible subordinated notes BB-
Ratings Affirmed
Acxiom Corp.
Corporate credit rating BB+
Senior secured debt BB+
Subordinated debt BB-
ADVANTICA RESTAURANT: Will Release Q4 2001 Results on Feb. 11
-------------------------------------------------------------
Advantica Restaurant Group, Inc., (OTCBB: DINE) announced that
its quarterly conference call for investors and analysts will
take place on Monday, February 11, 2002 at 11:00 a.m. EST.
During this call Advantica will review the Company's financial
and operating results for the fourth quarter and fiscal year
ended December 26, 2001. These results will be released the
morning of the call, before the market opens.
Investors and interested parties are invited to listen to a
live, listen only broadcast of the Advantica conference call.
The call may be accessed through the Company's Web site at
http://www.advantica-dine.com From the main page follow the
link to "Investor Info" and then click the "Webcast" icon. A
replay of the call may be accessed at the same location later in
the day and will remain available for at least 30 days.
Advantica Restaurant Group, Inc. is one of the largest
restaurant companies in the United States, operating over 2,300
moderately priced restaurants in the mid-scale dining segment.
Advantica owns and operates the Denny's, Coco's and Carrows
restaurant brands. FRD Acquisition Co., the parent company of
Coco's and Carrows and a wholly owned subsidiary of Advantica,
is classified as a discontinued operation for financial
reporting purposes and is currently under the protection of
Chapter 11 of the United States Bankruptcy Code effective as of
February 14, 2001. For further information on the Company,
including news releases, links to SEC filings and other
financial information, please visit Advantica's website.
DebtTraders reports that Advantica Restaurant Group's 11.250%
bonds due 2008 (ADVRES1) are trading between 73.5 and 76. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ADVRES1for
real-time bond pricing.
AMERICAN COMM'L: Won't Make $15.1MM Payment on 10.25% Sr. Notes
---------------------------------------------------------------
American Commercial Lines LLC (ACL) said that efforts to review
the Company's financial restructuring opportunities will
continue.
The Company is encouraged by ongoing discussions with its senior
lenders and senior note holders to explore financial strategies
to restructure its bank and bond debt.
Consistent with those discussions, the Company has elected not
to make the $15.1 million interest payment on its 10.25 percent
senior notes. While this decision creates an event of default
under the indenture governing the Company's senior notes, a
majority of ACL's bondholders have agreed to continue working
with the company to fashion a satisfactory restructuring of the
Company's senior notes.
The interest payment was originally scheduled to be made on
December 31, 2001. At that time, ACL elected to utilize the 30-
day grace period provided under the terms of its senior notes.
ACL's cash reserves and current revenue generation are more than
sufficient to have made the interest payment, had the Company
elected to do so, and to maintain normal operations. Since
announcing its election to withhold the interest payment, ACL
has and will continue to make timely payments to all suppliers.
Michael C. Hagan, president and chief executive officer, said,
"Our banks and senior note holders have agreed to continue to
work with us in our restructuring efforts to resolve our debt
burden. We are making solid progress on the terms of our
financial restructuring plan that will be beneficial to all of
ACL's stakeholders. I am confident that we will be in a position
to finalize and implement our strategy in the near future."
American Commercial Lines LLC is an integrated marine
transportation and service company operating approximately 5,100
barges and 200 towboats on the inland waterways of North and
South America. ACL transports more than 70 million tons of
freight annually. Additionally, ACL operates marine
construction, repair and service facilities and river terminals.
AMERICAN SKIING: Falls Below NYSE Continued Listing Criteria
------------------------------------------------------------
American Skiing Company (NYSE: SKI) reported that it has been
advised by the New York Stock Exchange that the Company has
fallen below the NYSE's continued listing criteria.
The Company has failed to meet the NYSE's listing standard
requiring a total market capitalization of not less than $50
million, over a 30 day trading period, and stockholders' equity
of not less than $50 million. The Company was also advised that
it was below the NYSE's continued listing requirement for
minimum share price which requires an average closing price of
not less than $1.00 over a 30 consecutive trading-day period.
Under NYSE rules, the NYSE may grant a period of up to 18
months, from the date of notification of non-compliance, during
which the Company must come into conformity with the market
capitalization and stockholders' equity requirement. The NYSE
may also grant a period of up to 6 months, from the date of
notification of non-compliance, during which the Company must
come into conformity with the minimum share price requirement.
The Company has formally requested that the 18 month period be
granted and has begun discussions with the NYSE regarding its
business plan to achieve and maintain compliance with the market
capitalization and stockholders' equity standard as well as the
minimum share price requirement. If the plan is accepted by the
NYSE, the Company will be subject to quarterly monitoring by the
NYSE along with ongoing share price review. In addition, the
Company will make the key elements of the plan public as
appropriate. The Company is committed to maintaining its
listing status and has strongly communicated this to the NYSE.
There can be no assurance that the NYSE will decide to allow the
Company to remain listed or that the Company's actions will
prevent the delisting of its common stock.
Headquartered in Newry, Maine, American Skiing Company is the
largest operator of alpine ski, snowboard and golf resorts in
the United States. Its resorts include Killington and Mount
Snow in Vermont; Sunday River and Sugarloaf/USA in Maine;
Attitash Bear Peak in New Hampshire; Steamboat in Colorado; The
Canyons in Utah; and Heavenly in California/Nevada. More
information is available on the Company's Web site,
http://www.peaks.com
AMES DEPARTMENT: Brings-In Jefferies & Co. as Financial Advisor
---------------------------------------------------------------
Ames Department Stores, Inc., and its debtor-affiliates sought
and obtained approval from the Court to employ Jefferies &
Company, Inc. as their financial advisor nunc pro tunc to August
20, 2001.
The Debtors submit it is necessary to employ and retain
Jefferies to, among other things:
A. become familiar with and analyze the business, operations,
properties, financial condition, and prospects of the
Debtors;
B. advise the Debtors on the current state of the "restructuring
market";
C. assist in the preparation and/or review of the Debtors'
business plan, including store closures, projections, and
capitalization;
D. assist and participate in discussions and meetings with
various creditor groups;
E. provide expert testimony, as needed;
F. assist and advise the Debtors in developing a general
strategy for accomplishing a plan of reorganization;
G. assist and advise the Debtors in evaluating and analyzing a
plan of reorganization including the value of the
securities, if any, that may be issued to certain parties
under any plan of reorganization; and
H. render such other financial advisory services as may from
time to time be agreed upon by the Debtors and Jefferies.
The Debtors believe Jefferies possesses extensive knowledge and
financial expertise relevant to these cases, and that Jefferies
is well-qualified to advise the Debtors. David H. Lissy, the
Debtors' Senior Vice President and General Counsel, relates that
the Debtors selected Jefferies because of its expertise in
providing financial advisory services to debtors and creditors
in chapter 11 and other distressed situations, and because
Jefferies and its senior professionals have an excellent
reputation for providing high quality investment banking
services to debtors and creditors in bankruptcy reorganizations
and other debt restructurings. Jefferies provides a broad range
of corporate advisory services to its clients, including
services pertaining to general financial advice, mergers,
acquisitions, and divestitures, special committee assignments,
capital raising, and corporate restructuring.
In addition to Jefferies' understanding of the Debtors'
financial history and the industry in which the Debtors operate,
Mr. Lissy submits that Jefferies and its senior professionals
have extensive experience in the reorganization and
restructuring of troubled companies, both out-of-court and in
chapter 11 cases. The employees of Jefferies have advised
debtors, creditors, equity constituencies, and purchasers in
many reorganizations, being involved in over 100 restructurings
representing over $75,000,000,000 in restructured debt. Mr.
Lissy adds that Jefferies has extensive experience in
reorganization cases and has an excellent reputation for
services it has rendered in large and complex chapter 11 cases
on behalf of debtors, creditors and creditors' committees
throughout the United States such as in Heartland Wireless
Communications, International Wireless Communications,
MobileMedia Communications, ICO Global Communications Services
Inc., et al., AmeriServe Food Distribution, Inc., et al., Silver
Cinemas, Inc., Kaiser Group International, Inc., and Sunterra
Corporation, et al.
The Engagement Letter provides Jefferies will be compensated for
its services as follows:
A. Jefferies shall receive a monthly cash retainer fee in the
amount of $150,000. The first Retainer Fee shall be
prorated to $75,000 for the balance of the month of August
and payable upon signing of the Engagement Letter.
Thereafter, the Retainer Fee shall be paid on the first
business day of each month. The Retainer Fees paid under
this paragraph shall be credited against the aggregate
Restructuring Transaction Fees and Sale Transaction Fees
otherwise payable to Jefferies by the Debtors.
B. In the event the Debtors consummate a "Restructuring
Transaction" which commences or occurs during the term of
the Engagement Letter or as otherwise provided for, the
Debtors shall pay Jefferies in cash a fee in the amount
equal to 1.0% of the aggregate amount of the Debtors'
restructured liabilities. Restructuring Transactions
include transactions that restructure or convert the
company's debt, but exclude liquidations.
C. In the event of a "Sale Transaction" involving a sale of all
or a portion of any of the Debtors to another corporation
or other business entity, which transaction may take the
form of a merger or a sale of assets or equity securities
or other interests, the Debtors shall pay to Jefferies a
fee payable upon the closing of each Sale Transaction in an
amount equal to 1.0% of the transaction value of the Sale
Transaction. Sale Transactions include joint ventures and
leveraged buyouts, but exclude sales of inventory and
leases unless part of a sale of substantially all of the
company's assets.
D. In addition to the compensation to be paid to Jefferies,
without regard to whether any Restructuring Transaction is
consummated or the Engagement Letter expires or is
terminated, the Debtors shall pay to, or on behalf of,
Jefferies, promptly as billed, all substantiated
disbursements and out-of-pocket expenses incurred by
Jefferies in connection with its services to be rendered
hereunder; provided, however, that no fee, disbursements,
or out-of-pocket expenses in excess of $7,500 per month
shall be incurred without the prior consent of the Debtors;
and provided further, that the Debtors shall not be
responsible for the transcontinental travel costs of those
Jefferies employees not based on the east coast of the
United States.
E. Jefferies may resign at any time and the Debtors may
terminate Jefferies' services at any time, each by giving
prior written notice to the other. If the Engagement Letter
expires, Jefferies resigns or the Debtors terminate
Jefferies' services for any reason, Jefferies and its
counsel shall be entitled to receive all of the amounts due
up to and including the effective date of such expiration,
termination or resignation, as the case may be. If the
Agreement expires or Jefferies' services are terminated by
the Debtors, and the Debtors complete a transaction similar
to the contemplated Restructuring Transaction within one
year of the expiration or Jefferies being terminated, then
the Debtors shall pay Jefferies concurrently with the
closing of such transaction in cash the fees.
Richard Nevins, Jr., Managing Director of the firm of Jefferies
& Co., Inc., submits that the Firm does not represent and does
not hold any interest adverse to the Debtors' estates or their
creditors in the matters upon which Jefferies is to be engaged
and is a "disinterested person," as such term is defined in the
Bankruptcy Code. The Firm, however, has conducted a conflict
check and discovered relationships with parties-in-interests in
these cases including Abitibi Consolidated Sales Corporation;
Bank of New York; Bell Sports Corporation; Building One Service
Solutions; County Seat Stores; Global Health Sciences; Goldman
Sachs Group; Herballife International Trade; INSTINET; Kimco
Realty Corporation; Transamerica CBO I, Ltd.; and Weil, Gotshal
& Manges, LLP.
Mr. Nevins explains that Jefferies is a global investment
banking firm with broad activities covering trading in equities,
convertible securities, and corporate bonds in addition to its
financial advisory practice, is a large company with a national
practice and may represent or may have represented certain of
the Debtors' creditors or equity holders, or other parties in
interest, in matters unrelated to these cases. With more than
80,000 customer accounts around the world, it is possible that
one of its clients or a counter-party to a security transaction
may hold a claim or otherwise is a party in interest in these
chapter 11 cases. As a major market maker in equity securities
as well as a major trader of corporate bonds and convertible
securities, Jefferies regularly enters into securities
transactions with other registered broker-dealers as a part of
its daily activities. Mr. Nevin believes that some of these
counter-parties may be creditors of the Debtors but none of
these business relationships constitute interests materially
adverse to the Debtors herein in matters upon which Jefferies is
to be employed, and none are in connection with these cases.
Mr. Nevin informs the Court that the Debtors have agreed to
indemnify and hold harmless Jefferies and its affiliates, their
respective directors, officers, agents, employees, and
controlling persons, and each of their respective successors and
assigns, subject to certain conditions requested by the U.S.
Trustee. Those conditions require that any request for
indemnification by an Indemnified Person be made by means of an
Interim or Final Fee Application and that any request for
reimbursement of attorney's fees by an Indemnified Person
include the invoices and supporting time records from such
attorneys.
Mr. Lissy contends that the services of Jefferies as financial
advisors are necessary to enable the Debtors to execute their
duties as debtors and debtors in possession. (AMES Bankruptcy
News, Issue No. 12; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
AQUASEARCH INC: Hires Buttke Bersch to Replace Ernst & Young
------------------------------------------------------------
By letter dated January 16, 2002, Aquasearch Inc.'s Board of
Directors notified its principal independent accountant Ernst &
Young LLP that the Board had decided to terminate the Company's
relationship with E&Y.
On January 16, 2002, Aquasearch retained the accounting firm of
Buttke Bersch & Wanzek, PC to perform its year-end audit.
Aquasearch is a biopharmaceutical company dedicated to the
discovery, development, and commercialization of prescription
drugs and over-the-counter nutraceuticals from microalgae.
Aquasearch is a world leader in commercial photobioreactor
technology, which enables large-scale cGMP production of single
cell plants. Although plants have proven to be the most
successful source of new drugs, more than 30,000 species of
single cell plants remain unexploited in health and medicine.
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.
ARMSTRONG HOLDINGS: Futures Rep Hires YCS&T as Local Counsel
------------------------------------------------------------
Dean M. Trafelet, as legal representative for future claimants
in the chapter 11 cases of Armstrong Holdings, Inc., and its
debtor-affiliates, asks Judge Newsome to authorize and approve
his employment of the law firm of Young Conaway Stargatt &
Taylor LLP, nunc pro tunc to December 20, 2001, as his local
counsel to assist him on matters relating to local custom and
practice as well as general administration.
Subject to the Court's Orders, Young Conaway will render the
Future Representative services as:
(a) Providing legal advice with respect to the Future
Representative's powers and duties as Future Representative for
the Future Claimants;
(b) Taking any and all action necessary to protect and
maximize the value of the Debtors' estates for the purpose of
making distributions to Future Claimants and to represent Future
Claimants in connection with negotiating, formulating, drafting,
confirming and implementing a plan of reorganization and
performing such other functions as are set out in Code section
1103(c) or as are reasonably necessary to effectively represent
the interests of Future Claimants;
(c) Preparing, on behalf of the Future Representative,
necessary applications, motions, objections, answers, orders,
reports and other legal papers in connection with the
administration of these estates in bankruptcy; and
(d) Performing any other legal services and other support
requested by the Future Representative in connection with these
chapter 11 cases.
The attorneys presently designated to represent the Future
Representative and their current standard hourly rate are:
Hourly
Name Position Rate
---- -------- -------
James L. Patton, Jr. Partner $475
Edwin J. Harron Associate $330
Sharon M. Zieg Associate $240
Sandi Van Dyke Paralegal $130
James L. Patton, Jr., Esq., a partner with Young Conaway, avers
that Young Conaway does not hold or represent an interest
adverse to the Debtors' estates; is a disinterested person
within the meaning of the Bankruptcy Code; and has no connection
with the Debtors, their creditors or other parties in interest
in these cases. However, Mr. Patton advises that Young Conaway
has represented, represents, or may represent certain parties in
interest in other matters unrelated to the Debtors or these
cases, or have had other dealings with creditors of the Debtors
which are also wholly unrelated to these cases.
Specifically, Young Conaway has a large personal injury and
workers compensation practice and frequently represents clients
adverse to many of the insurance companies who provide coverage
to the Debtors and whose policies may be implicated during the
course of these proceedings. Members of Young Conaway also have
acted as arbitrators in numerous matters where certain of the
insurance companies involved with the Debtors were parties,
either directly or indirectly, to the underlying dispute.
Two partners of the firm currently act as local counsel for
various insurance companies in certain declaratory judgment
actions pending in Delaware involving non-asbestos-related
product liability, environmental and toxic tort coverage claims.
Some of these insurers may provide insurance to the Debtors.
The insurer-defendants in these matters include: American
International Group-related companies, including AIG Europe (UK)
Limited; AIU Insurance Company; American Home Assurance Company;
Birmingham Fire Insurance Company of Pennsylvania; Landmark
Insurance Company; Lexington Insurance Company; National Union
Fire Insurance Company of Pittsburgh, PA; and New Hampshire
Insurance Company; Allianz Insurance Company and Allianz
Underwriters Insurance Company; American Re-Insurance Company;
Commonwealth Insurance Company; Continental Casualty Company;
Employers Mutual Casualty Company; General Casualty Insurance
Company of Wisconsin; Highlands Insurance Company; Insco
Limited; International Insurance Company (including as
successor to International Surplus Lines Insurance Company);
Seaboard Surety Insurance Company; St. Paul Fire & Marine
Insurance Company; Westport Insurance Company (as successor to
Puritan Insurance Company); and Winterthur International America
Insurance Company. These partners also serve as local counsel
for certain AIG-related companies, American Re-Insurance Company
(as successor to American Excess Insurance Company), and
Employers Mutual Casualty Company in one declaratory judgment
action pending in Delaware which involves the enforcement of
settlement agreements relating to certain unrelated asbestos
claims.
Young Conaway also represents Continental Casualty Company,
Commonwealth Insurance Company, and Winterthur International
America Insurance Company in a "Y2K" coverage case brought by
Owens-Corning.
Three partners in the firm also serve as Delaware counsel to
individual defendants in three asbestos personal injury cases.
These cases are "Empson v. A.C.& S., Inc. et al" and "John L.
Cash and Shirley Ann Cash v. A.C.& S., Inc. et al" in the
Delaware Superior Court, where two Young Conaway partners
represent defendant American Optical Corporation, and "Ellis v.
A.C. & S. et al", where the same partners serve as local counsel
for Thiokol Corporation, a defendant. This case also is pending
in Delaware Superior Court.
Young Conaway also represents the debtor in the asbestos-related
chapter 11 case of "In re Fuller Austin Insulation Company"
filed in Delaware in 1998. Young Conway also represents the
unknown asbestos bodily injury claimants in the chapter 11 case
of Celotex Corporation in the Middle District of Florida in
1996, and represents the legal representative for unknown
asbestos bodily injury claimants in the chapter 11 cases of "The
Babcock & Wilcox Company" filed in the Eastern District of
Louisiana in 2000, and Owens Corning filed in Delaware in
2000. Retention of Young Conaway to represent the legal
representative for the unknown asbestos bodily injury claimants
in "Federal-Mogul Global, Inc. T&N Ltd. et al" case filed in
Delaware in 2001 is pending.
None of these representations are materially adverse to the
interests of the estates, any class of creditors or equity
security holders, or the Future Representative, Mr. Patton
assures Judge Newsome. Thus, Young Conaway is disinterested and
may serve as local counsel to the Future Representative
notwithstanding that it represents creditors in unrelated
matters. (Armstrong Bankruptcy News, Issue No. 16; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
BETHLEHEM STEEL: Appointment of Joint Fee Review Panel Approved
---------------------------------------------------------------
Bethlehem Steel Corporation, and its debtor-affiliates obtained
the Court approval to appoint a joint fee review committee. The
members of the Joint Fee Review Committee as proposed by the
Debtors are:
(a) Tracy H. Davis, Esq., a representative of the Office of
the United States Trustee for this District or her
designee;
(b) Stephen J. Selden, Esq., Deputy General Counsel to the
Debtors or his designee; and
(c) a designated member of the Committee.
The duties of the Joint Fee Review Committee will be to review
all billing statements and applications filed by Covered
Professionals for compliance with the applicable provisions of
the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure,
the Local Rules of the United States Bankruptcy Court for the
Southern District of New York, the Fee Guidelines promulgated by
the Executive Office of the United States Trustee, and any
applicable orders of this Court and make such reports to the
Court as may be appropriate. (Bethlehem Bankruptcy News, Issue
No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900)
BRIDGE INFORMATION: 2nd Amended Disclosure Statement Addenda
------------------------------------------------------------
The Court-approved Second Amended Disclosure Statement of Bridge
Information Systems and its debtor-affiliates reflects these
changes to provide for:
(A) Plan Administrator
Zachary Snow, Bridge Information Systems' Executive Vice
President, relates that a Plan Administrator will be appointed
if the Second Amended Joint Plan of Liquidation is confirmed.
According to Mr. Snow, the Plan Administrator will have the
authority to name or appoint directors and officers in place of,
or in addition to all or some of the present directors and
officers. The Plan Administrator shall also have the right to:
(1) amend the certificate of incorporation and bylaws of each
Reorganized Debtor;
(2) invest the Estates' and the Reorganized Debtors' Cash in:
(a) direct obligations of the United States of America,
(b) money market deposit accounts, and other bank
accounts that are issued by a commercial bank
organized under the laws of the United States of
America; or
(c) any other investments that may be permissible under
the Bankruptcy Code and any order of the Court
entered in these Chapter 11 cases;
(3) calculate and pay all distributions required to be made
under the Plan;
(4) establish, fund and administer the Reserves, and other
authorized accounts and escrows;
(5) employ, supervise and compensate professionals retained
to represent the interest of the Reorganized Debtors;
(6) make and file tax returns for any of the Reorganized
Debtors;
(7) object or seek to subordinate claims or equity interests
filed against any of the estates, as well as compromise
and settle such claims or equity interests including
Disputed Claims;
(8) seek estimation of contingent or unliquidated Claims;
(9) seek determination of tax liability;
(10) prosecute, settle, dismiss, abandon or dispose of
turnover actions;
(11) prosecute, settle, dismiss, abandon or dispose of
any and all causes of actions of the Reorganized Debtors;
(12) dissolve any and all of the Reorganized Debtors;
(13) perform any and all acts necessary or appropriate for the
conservation and protection of the assets of the estates
and the Reorganized Debtors; etc.
The Plan Administrator -- as well as other professionals
retained by the Plan -- shall be compensated from the
Liquidation Expense Reserve in accordance with the Budget and
Available Cash. After the Effective Date, Mr. Snow says, the
payment of fees and expenses to Plan representatives shall be
made in the ordinary course of business. On the other hand, Mr.
Snow notes, the Plan Administrator will be required to file with
the Court and serve with the Plan Committee periodic statements
containing a detailed invoice for services performed.
In addition, Mr. Snow continues, the Reorganized Debtors intends
to indemnify and hold harmless:
(i) the Plan Administrator,
(ii) officers and directors of the Reorganized Debtors,
(iii) Administrator Professionals, and
(iv) the Plan Committee and its members,
from any and all liabilities, losses, damages, claims, costs and
expenses due to their actions in the implementation of the Plan.
"But only if the Indemnified Parties acted in good faith," Mr.
Snow emphasizes. The legal fees shall be paid out of the
Available Cash.
According to Mr. Snow, the Plan Administrator is further
authorized to obtain all reasonably necessary insurance
coverage.
(B) Plan Committee
On the Effective Date, Mr. Snow anticipates, there shall be a
committee consisting of:
-- one individual to be designated by the Pre-petition Agents,
-- one individual to be designated by the Committee,
-- the third person to be designated by the designees of the
Pre-petition Agents and the Committee, or, if they cannot
agree, by the Plan Administrator.
Mr. Snow states that the identities of the Designees shall be
disclosed to the Court on or before the Confirmation Date.
Unlike the Plan Administrator, Mr. Snow says, the members of the
Plan Committee shall serve without compensation for their
performance of services.
(C) Procedures regarding Disputed Claims
(1) No distributions shall be made on account of any Disputed
Claim, unless such Claim becomes an Allowed Claim;
(2) The Debtors or the Plan Administrator may request the
Court to estimate any Disputed Claim;
(3) In the event the Court estimates any Disputed Claim, that
estimated amount may constitute either the Allowed amount
of such Claim or a maximum limitation on such Claim;
(4) If the estimated amount constitutes a maximum limitation
on such Claim, the Debtors or the Plan Administrator may
elect to pursue any supplemental proceedings to object to
any ultimate payment of such Claim;
(5) On and after the Confirmation Date, Claims which have
been estimated subsequently may be compromised, settled,
withdrawn or resolved without further Court order --
provided, however, that any such compromise, settlement
or resolution where the amount of the proposed Allowed
Claim exceeds the scheduled amount of such Claim by at
least $20,000 shall, until the Effective Date, require
the consent of the Committee and the Pre-petition Agents.
(D) Effective Date Payments
As soon as practicable after the Effective Date, the Plan
Administrator will remit the proceeds of Collateral to holders
of Allowed Claims in Classes 2, 3 and 4 and will remit Available
Cash to holders of Allowed Claims in Classes 1, 5 and 6 entitled
to such distributions under the Plan.
(E) Time Bar to Cash Payments
Checks issued by the Plan Administrator in respect of Allowed
Claims shall be null and void if not negotiated within 60 days
after the date of issuance. All funds held on account of such
voided check may be reallocated and used in accordance with the
provisions of the Plan.
(F) Deemed Consolidation
The Committee and the Debtors have agreed that there exists a
reasonable basis for a deemed consolidation of the Consolidated
Bridge Subsidiary Debtors for purposes of distributions under
the Plan, such as:
-- the interrelationship among the Consolidated Bridge
Subsidiary Debtors;
-- the benefits of deemed consolidation of the Consolidated
Bridge Subsidiary Debtors outweighs harm to creditors of BIS
America Administration Inc.; and
-- the prejudice resulting from not consolidating the
Consolidated Bridge Subsidiary Debtors.
The Consolidated Bridge Subsidiary Debtors shall be deemed
consolidated for these purposes under the Plan:
(i) all guarantees by any of the Consolidated Bridge
Subsidiary Debtors of the obligations of any of the other
Consolidated Bridge Subsidiary Debtors arising prior to
the Effective Date shall be eliminated so that any Claim
against any of the Consolidated Bridge Subsidiary Debtors
and any guarantee executed by any of the other
Consolidated Bridge Subsidiary Debtors and any joint or
several liability of any of the Consolidated Bridge
Subsidiary Debtors; and
(ii) each and every Claim against any of the Consolidated
Bridge Subsidiary Debtors shall be deemed to be one claim
against and obligation of the Consolidated Bridge
Subsidiary Debtors.
The deemed consolidation of the Consolidated Bridge Subsidiary
Debtors shall not affect:
(i) the legal and organizational structure of the Debtors;
(ii) pre and post-Commencement Date guarantees, liens and
security interests that are required to be maintained:
(x) in connection with any executory contracts, unexpired
leases or credit facilities that were entered into
during the Chapter 11 cases or that have been or will
be assumed, or
(y) pursuant to the Plan; and
(iii) distributions out of any insurance policies or proceeds of
any insurance policies. (Bridge Bankruptcy News, Issue No.
25; Bankruptcy Creditors' Service, Inc., 609/392-0900)
CALPINE CORP: Energy Unit Inks Netting Agreement with Enron
-----------------------------------------------------------
On November 14, 2001, Calpine's subsidiary, Calpine Energy
Services, LP, Enron North America Corp. and Enron Power
Marketing, Inc., entered into a Master Netting, Setoff and
Security Agreement. This Netting Agreement permits Calpine
Energy Services,LP on the one hand, and Enron North America
Corp., and Enron Power Marketing, Inc., on the other hand, to
set off amounts owed to each other under an ISDA Master
Agreement between Calpine Energy Services, LP and Enron North
America Corp., an Enfolio Master Firm Purchase/Sale Agreement
between Calpine Energy Services, LP and Enron North America
Corp., and a Master Energy Purchase and Sale Agreement between
Calpine Energy Services, LP and Enron Power Marketing Inc., (in
each case, after giving effect to the netting provisions
contained in each of these agreements).
As a result of the nationwide economic slowdown, the industry
experienced lower industrial demand during 2001 which, along
with unusually mild weather, reduced prices for power. In light
of these factors, Calpine revised its 2001 earnings (before
deduction of non-recurring merger costs in connection with the
Encal pooling-of-interests transaction) expectations to
approximately $1.95 per share from the $2.00 to $2.05 per share
guidance previously provided by the Company.
Calpine, the independent power producer, is the top US
geothermal producer; it owns 19 power plants at the largest
geothermal facility in the US and has 850 MW of generating
capacity from these plants. Natural gas is the company's main
power source: Calpine controls about 8,800 MW of generating
capacity through its interests in gas-fired power plants in the
US and Canada. It also has 31,500 MW in construction or
development stages. The firm markets energy to utilities,
wholesalers, and end-users. In addition, the company has about
1.7 trillion cu. ft. equivalent of proved natural gas reserves.
Calpine more than doubled its gas reserves with the acquisition
of Canada-based Encal Energy in 2001. In October 2001, Standard
& Poor's assigned its BB+ rating to Calpine's $2 billion debt
issue.
CAPITOL COMMUNITIES: Dev't Unit Resolves Payment on Resure Loan
---------------------------------------------------------------
On December 20, 2001, Capitol Communities Corporation's wholly
owned subsidiary, Capitol Development of Arkansas, Inc., and
Nathaniel S. Shapo, the Director of Insurance for the State of
Illinois, in his Capacity as the Liquidator for Resure, Inc.,
reached a settlement agreement to resolve payment on the
outstanding Resure loan evidenced by a first priority mortgage
against approximately 701 acres of residential land located in
Maumelle, Arkansas. The 2001 Settlement Agreement resolves the
Resure Motions and Competing Plan of Reorganization filed by
Resure with the United States Bankruptcy Code in the United
States Bankruptcy Court, Eastern District of Arkansas.
On July 21, 2000, the Operating Subsidiary, which holds
substantially all of the Company's assets, filed a voluntary
petition for relief under Chapter 11 of the United States
Bankruptcy Code in the Bankruptcy Court. Since then, the Company
has continued to operate its business as a debtor-in-possession,
but must seek Bankruptcy approval of the 2001 Settlement
Agreement, a transaction outside the ordinary course of
business.
The Bankruptcy Court entered an Order approving the 2001
Settlement Agreement on December 20, 2001, and dismissed all
pending motions by Resure, subject to the Liquidator for Resure
receiving approval of the agreement from the Circuit Court of
Cook County, Illinois, Chancery Division. The Cook County Court
issued an Order approving the 2001 Settlement Agreement on
January 9, 2002.
The 2001 Settlement Agreement requires Resure to forebear from
collecting on the Resure Note or entering any pleadings,
hearings or other actions for a forbearance period. This
Forbearance Period shall be through and including a date which
shall be the latter of a date (i) February 15, 2002, if the
Resure Liquidator has obtained a written Order from Cook County
approving the agreement on or before January 15, 2002, or (ii) a
date which is one day for each day after January 15, 2002, until
an Order is entered by Cook County; provided however, that if,
on or before six days prior to the Option A Date, the Operating
Subsidiary elects Option B by giving Resure written notice, then
the Forbearance Period shall be through and including a date
which shall be the latter of a date (i) April 15, 2002, if
Resure Liquidator has obtained and given notice to the Operating
Subsidiary of the entry of the Cook County Order prior to
January 15, 2002, or (ii) a date which is one day for each day
after January 15, 2002, until an Order is entered by Cook
County.
Under the terms of the Agreement, the Liquidator for Resure
agrees to accept $3,850,000 on or before the Option A Date in
full satisfaction of all claims against the Operating
Subsidiary. If the Operating Subsidiary elects the Option B
Date, a payment of $3,987,353.95, plus simple interest at an
annual rate of nine percent (9%) accrued from April 24, 2000,
until the payment date will be due.
If full payment required under Option A or Option B, is not
timely rendered to Resure, the Operating Subsidiary has agreed
to the entry of a Consent Foreclosure Decree and In Rem Judgment
in the Pulaski County Chancery.
COMDIAL CORP: Bank of America Extends Forbearance Until Feb. 28
---------------------------------------------------------------
Comdial Corporation (Nasdaq:CMDL) said that they have reached an
agreement with Bank of America to extend their forbearance
agreement until February 28, 2002. Comdial and Bank of America
are working together to reach a long-term solution before
expiration of the forbearance agreement.
Nick Branica, President and CEO of Comdial said, "This is a
positive step forward for Comdial. This demonstrates Bank of
America's continued confidence in what we have achieved to date
and our plans to get back to positive net income. We are now
putting our final finishing touches on our restructuring plan
and expect to fully complete the program by the end of this
quarter. As a result of our efforts we have seen dramatic
changes in our cost structure and we expect these improvements
to start showing up on the bottom line."
Comdial Corporation, headquartered in Sarasota, Florida,
develops and markets sophisticated communications solutions for
small to mid-sized offices, government, and other organizations.
Comdial offers a broad range of solutions to enhance the
productivity of businesses, including voice switching systems,
voice over IP (VoIP), voice processing and computer telephony
integration solutions. For more information about Comdial and
its communications solutions, please visit our web site at
http://www.comdial.com
CONSECO INC: Will Take Funding Actions to Eliminate Cash Gap
------------------------------------------------------------
Conseco, Inc. (NYSE:CNC) issued the "NEW Conseco Memo #18" from
CEO Gary C. Wendt and it was posted on Conseco's web site for
shareholders and/or electronically distributed to them Tuesday:
NEW Conseco Memo
# 18
To: Conseco Shareholders
From: Gary Wendt, Chairman & CEO
Date: January 29, 2002
I have not sent you a memo since October 30 when we released
our 3Q01 earnings. Included in that memo was our calculation
that we would have to generate $300 to $410 million of cash in
addition to that provided from operations in order to retire
debt on schedule and to meet our debt service commitments in
2002. Additionally, we noted several avenues open to us to
provide the required funds.
For obvious reasons, we have not wanted to address this
subject in a piecemeal way. Now, we are well into the execution
of specific funding actions, and [Tues]day I want to share with
you our plan to eliminate the cash gap.
First, I think it is important to review why the gap exists.
Our program to de-lever Conseco has been well documented
over the past year and a half. At the beginning of the
Turnaround, Conseco had $8.3 billion in debt and preferred
securities. Our stated goal was to reduce that by $3.5 billion
by the end of 2003. We are already 63% of the way to the goal
with a reduction of $2.2 billion. Our corporate debt reduction
plan, however, never did include the public debt held at our
subsidiary, Conseco Finance. From the outset, we planned on
refinancing the $414 million of public debt of the Finance
company, since the capital structure of this business seemed to
easily support this debt. After the September 11 attack,
however, the capital markets closed to this kind of security,
and we could not take the chance that they would re-open in time
to meet the maturities. Therefore, we thought it prudent to plan
on retiring the CFC public debt through other means. As you can
see, this additional CFC debt accounted for essentially all of
the $300 to $410 million cash gap we discussed in my October 30
memo. Without it, we would have been able to meet the 2002 debt
service demands as originally planned.
A review of these calculations follows:
Cash uses
($ millions)
As of 10/30/01
CFC 10.25% sub notes due 6/02
(original amount: $194) $149(a)
CFC 6.5% notes due 9/02
(original amount: $220) 206(a)
Conseco 8.5% notes due 10/02
(original amount: $450) 385(a)
Optional bank payment 150
Interest & preferred dividends 500
------
$1,390
(a) Some buyback of debt due in 2002 had been accomplished -- at
discounts -- prior to October 30, 2001. Additionally, some
buyback of debt due in 2002 has occurred -- at discounts --
since October 30. For the most recent tabulation, see our
news release dated January 16.
Cash Sources
($ millions)
As of 10/30/01
Excess cash on hand 50 - 60
Insurance segment operations 450 - 500
Finance segment operations 310 - 340
Corporate expenses (30) - (30)
TeleCorp (net of associated debt) 200 - 220
Cash generation as necessary 300 - 410
---------
$1,390
Since October 30, 2001, we've been analyzing the various
options available and have arrived at the following actions to
be taken:
-- Repurchasing the bonds at discounts in the open market,
when available;
-- Reinsuring parts of our supplemental health and/or life
insurance blocks;
-- Selling the Variable Annuities business;
-- Joint venturing the MH floorplan business;
-- Expanding an underutilized bank line at CFC;
-- Doing whole loan sales on some of our newly generated
home equity and home improvement receivables;
-- Selling miscellaneous non-core assets (3 items).
We expect to generate $750 to $800 million from these seven
action items. This is not a list of options; this is a list of
cash generating actions that we have already begun to execute.
Great care has been taken to assure that these items are
strategically sensible. We were actually exploring some of the
items prior to increased cash needs in 2002 as options for
improving return on equity for the company. Among the actions we
are taking purely to raise cash, none does any long-term
strategic harm to the company.
We have already repurchased $266 million -- a full 30% of
the original amounts outstanding -- of bonds due during 2002 at
discounts that exceed $35 million.
Of the remaining items on the list, the three largest are
the reinsurance transactions, the sale of the Variable Annuity
business, and the JV of the MH floorplan business. Each of these
actions has strategic benefits to the company.
The reinsurance transactions will smooth the company's long-
tail risk associated with our supplemental health and/or life
insurance lines of business. Additionally, it will enable us to
increase the efficiency of capital supporting these businesses.
In exchange for the cash and diminished future risk, we will
have a small reduction to future earnings, but an improvement to
our return on capital. We are well along in discussions with
reinsurance carriers to structure this transaction.
Our variable annuity business is not a good strategic fit
with our middle market customers, who are interested in more
predictable annuity products, including our fixed and equity
indexed products. In large measure, this is why the variable
annuity business does not meet our return expectations, and why
the sale of this business would have a modest impact on our
future earnings. On the other hand, this property would be
highly valuable to one of several companies pursuing a
leadership position in this segment. Lehman has been retained to
facilitate the sale of this business. Information was
distributed to interested buyers in December. Initial bid
indications have been received. We expect terms of the sale to
be finalized by the end of 1Q02.
The Manufactured Housing floorplan business is the lowest
return business within Conseco Finance, yielding only 6.8%
return on equity. We plan to joint venture via loan
participation with a company with a higher credit rating and
better leverage on its balance sheet, while allowing us to
retain a strong relationship with the dealers who utilize this
product.
The bank loan increase is already documented. Whole loan
sales of our high return receivables have good demand. And,
action on selling the miscellaneous items has already begun.
These last three actions, taken together, account for only 12%
of the $750 - $800 million we anticipate realizing from this
list.
The cash proceeds that we expect from these seven items --
two times the amount required -- would give us the flexibility
to assure that liquidity is not an issue in 2002 or 2003.
Additionally, the proceeds are large enough to pay back in
excess of $250 million of bank debt and to give us adequate
protection against any operating earnings shortfall in the near
term.
Before closing, let me also update you on another issue of
interest to analysts, investors and rating agencies. In the late
fall, we retained a major independent actuarial firm to update
the 2000 actuarial analysis of the company's insurance
operations. This consisted of a review of projected discounted
cash flows based on distributable statutory earnings, which was
used to analyze the recoverability of several of our balance
sheet accounts. The report concluded that DAC and PVP are
recoverable with substantial excess margin. This discounted cash
flow analysis will also be an element in our testing the value
of goodwill on our balance sheet. This review is still in
progress, in conjunction with our external auditors, and will be
completed within the schedule established by the FASB.
We will be reporting our progress on these action items as
we move forward.
* * *
DebtTraders reports that Conseco Inc.'s 10.500% bonds due 2004
(CNC8) are trading between 50 and 52. For real-time bond pricing
see http://www.debttraders.com/price.cfm?dt_sec_ticker=CNC8
COVANTA ENERGY: Working with Co-Agent Banks for Waiver Extension
----------------------------------------------------------------
Covanta Energy Corporation (NYSE: COV) said that it is working
with its bank group co-agents for requisite bank group approval
and satisfaction of conditions for an amendment to its Master
Credit Facility (formally known as the Revolving Credit and
Participation Agreement), which would grant Covanta, among other
things, an extension of its covenant waivers.
The proposed amendment extends the covenant waivers through
March 31, 2002, conditioned on the Company achieving certain
cash maintenance goals as of February 28, 2002. Absent this
agreement, the waivers would expire on January 31, 2002.
The co-agents to the Agreement are circulating this amendment to
the Facility's larger bank group and recommending approval of
its terms. While the Company is reasonably confident that
approval will be obtained and that all conditions will be met,
no assurance can be given until a majority of the bank group
approves the extension and the conditions are satisfied. Given
the number of banks involved, Covanta does not expect a
definitive response until some time next week.
"We are pleased that the co-agents have recommended additional
time and flexibility to allow us to continue the strategic
evaluation of our business," said Scott G. Mackin, Chief
Executive Officer and President of Covanta Energy. "Our core
energy and water operations continue to perform well, despite
the difficult economic environment. The proposed terms require
us to meet stringent cash maintenance goals, however, in order
to enable us to extend through March."
As previously stated, Covanta has been holding discussions with
its banks regarding the need for covenant waivers and access to
short term liquidity. The Company believes that it has
sufficient liquidity to continue immediate operations and is
considering various options to supplement its operating cash.
The Company will continue to discuss these issues with its banks
in conjunction with its comprehensive review of strategic
options.
Covanta has been downgraded by the debt rating agencies,
triggering certain requirements to post in excess of $100
million in performance and other letters of credit. At this
time, the Company does not have available commitments under its
Master Credit Facility to post such letters of credit, and the
Company is working with the counter-parties for whom such
letters of credit would run to modify agreements requiring them
to be posted. While no assurances can be given, the Company is
reasonably confident that it will be able to manage this issue
without material adverse impact to the Company overall.
Covanta Energy Corporation is an internationally recognized
designer, developer, owner and operator of power generation
projects and provider of related infrastructure services. The
Company's independent power business develops, structures, owns,
operates and maintains projects that generate power for sale to
utilities and industrial users worldwide. Its waste-to-energy
facilities convert municipal solid waste into energy for
numerous communities, predominantly in the United States. The
Company also offers single-source design/build/operate
capabilities for water and wastewater treatment infrastructures.
Additional information about Covanta can be obtained via the
Internet at http://www.covantaenergy.com or through the
Company's automated information system at 866-COVANTA (268-
2682).
DBS HOLDINGS: Management Evaluating Additional Financing Options
----------------------------------------------------------------
M-I Vascular Innovations, Inc. was incorporated in the State of
Delaware on January 20, 1999. The Company is in the development
stage and is involved in the design, development and manufacture
of coronary stents which are used to treat cardiovascular
disorder caused by narrowing or blockage of coronary arteries.
The Company determined, after animal testing, that the acquired
technology was no longer competitive and such stent technology
is no longer being developed by the Company. The Company has
internally developed new laser cut stent technology which
constitutes the Company's business.
On April 25, 2001, M-I executed a Share Exchange and Finance
Agreement with DBS, which is a development stage company
incorporated in Nevada. The main business of DBS prior to April
25, 2001 was its InvestorService.com website. This business
ceased operations as of April 25, 2001, and at the time of the
Agreement, DBS was a non-operating Company.
Since inception, the Company has suffered recurring losses,
totaling $10,399,001 as of November 30, 2001, and has a net
working capital deficiency. The Company has funded its
operations through the issuance of common stock, and through
related party loans, in order to meet its strategic objectives.
The Company anticipates that losses will continue until such
time, if ever, as the Company is able to generate sufficient
revenues to support its operations. The Company's ability to
generate revenue primarily depends on its success in completing
development and obtaining regulatory approvals for the
commercialization of its stent technology. There can be no
assurance that any such events will occur, that the Company will
attain revenues from commercializations of its products, or that
the Company will ever achieve profitable operations.
Management is currently evaluating additional financing
opportunities, but has no formal plan in place to raise the
required capital. There can be no assurance that the Company
will be able to obtain sufficient funds on terms acceptable to
the Company to continue the development of, and if successful,
to commence the manufacture and sale of its products under
development, if and when approved by the applicable regulatory
agencies. As a result of the foregoing, there exists substantial
doubt about the Company's ability to continue as a going
concern.
DAW TECHNOLOGIES: Nasdaq Delists Shares Effective January 25
------------------------------------------------------------
Daw Technologies, Inc. (Nasdaq: DAWK, DAWKE) said that its
stock, trading under the symbol "DAWK," has been delisted from
the Nasdaq National Market as of the open of business on January
25, 2002.
According to the Nasdaq Listing Qualifications Panel, Daw
"failed to present a definitive plan that will enable it to
evidence compliance with all requirements for continued listing
on that market within a reasonable period of time and to sustain
compliance with those requirements over the long term."
Daw intends to appeal the delisting decision to the Nasdaq
Listing and Hearing Review Council.
Daw was unable to comply with the Nasdaq listing standards as a
result of its inability to timely file its quarterly financial
report for the third quarter of 2001, due to its inability to
reconcile certain accounts from its European operations.
In attempting to reconcile the accounts, Daw and its former and
present independent auditors determined that it would be
necessary to restate previously issued financial statements for
fiscal years 1999 and 2000, and for all quarterly periods since
the creation of the company's European subsidiary in the fourth
quarter of 1999. Work on the restatement of those financial
statements continues, and the company will file applicable
amendments to its previously filed quarterly and annual reports
as soon as the restatement is completed. Once the required
filings are complete, the company's stock may qualify to be
traded on the OTC-Bulletin Board pending the company's appeal of
the Nasdaq delisting decision.
Despite the recent accounting problems in the company's European
office, the business of the company continues apace. The
company recently established a subsidiary in Guadalajara, Mexico
to serve the growing microelectronics and pharmaceutical
industries in Latin America, and the company's European
subsidiary is establishing a division offering the design and
installation of ultra high purity piping used in advanced
manufacturing applications.
Daw has also begun installing automated material handling
systems in 200 mm and 300 mm semiconductor fabs, and it is
anticipated that these services could eventually contribute a
substantial amount to the company's revenue. In addition, the
company's contract manufacturing business unit expects January
to be its best month ever, and several international parties
have expressed an active interest in some of the company's newly
developed cleanroom component products.
Daw Technologies, Inc. provides advanced manufacturing
environments for customers throughout the world, and specializes
in the design, engineering and installation of cleanroom and
mini-environment systems that meet stringent semiconductor and
pharmaceutical manufacturing requirements. The company also
provides contract manufacturing and specialized painting
services on an OEM (original equipment manufacturer) basis for
various customers. For further information, visit the company
on the Internet at http://www.dawtech.comor call 801-977-3100.
EVTC INC: Fails to Meet Nasdaq Continued Listing Requirements
-------------------------------------------------------------
EVTC, Inc. (Nasdaq: EVTC) said that it has requested a hearing
with The Nasdaq Stock Market appealing a notice from the staff
to delist the Company's securities, absent any such appeal.
Pending a determination following the requested hearing, any
delisting action will be stayed and the Company's securities
will continue to be traded on The Nasdaq Stock Market.
By that letter dated January 23, 2002, The Nasdaq Stock Market
staff notified the Company that the Company had failed to hold
an annual shareholders' meeting or solicit a proxy statement for
such a meeting in compliance with the requirements for continued
inclusion with The Nasdaq Stock Market under Marketplace Rules
4350(e) and (g). In addition, the Company was informed that it
had an outstanding fee owing for the listing of certain shares
at variance with Marketplace Rule 4310(c)(13).
FEDERAL-MOGUL: Claimants Get Okay to Hire Caplin as Lead Counsel
----------------------------------------------------------------
The Official Committee of Asbestos Claimants in Federal-Mogul
Corporation's chapter 11 cases obtained the authority from the
Court to retain nunc pro tunc to November 13, 2001 the law firm
Caplin & Drysdale as national counsel and approving Professor
Elizabeth Warren's employment as a special bankruptcy consultant
to Caplin & Drysdale.
Specifically, Caplin & Drysdale will be:
A. assisting and advising the Committee in its consultations
with the Debtors and other committees relative to the
overall administration of the estates;
B. representing the Committee at hearings to be held before the
Court and communicating with the Committee regarding the
matters heard and issues raised as well as the decisions
and considerations of the Court;
C. assisting and advising the Committee in its examination and
analysis of Debtors' conduct and financial affairs;
D. reviewing and analyzing all applications, orders, operating
reports, schedules and statement of affairs filed and to
be filed with this Court by Debtors or other interested
parties in this case; advising the Committee as to the
necessity and propriety of the foregoing and their impact
upon the rights of asbestos-health related claimants, and
upon the case generally; and, after consultation with and
approval of the Committee or its designee(s), consenting
to appropriate orders on its behalf or otherwise
objecting thereto;
E. Assisting the Committee in preparing appropriate legal
pleadings and proposed orders as may be required in
support of positions taken by the Committee and preparing
witnesses and reviewing documents relevant thereto;
F. coordinating the receipt and dissemination of information
prepared by and received from Debtors' independent
certified accountants or other professionals retained by
it as well as such information as may be received from
independent professionals engaged by the Committee and
other committees, as applicable;
G. assisting the Committee in the solicitation and filing with
the Court of acceptances or rejections of any proposed
plan or plans of reorganization;
H. assisting and advising the Committee with regard to
communications to the asbestos-related claimants
regarding the Committee's efforts, progress and
recommendations with respect to matters arising in the
case as well as any proposed plan of reorganization; and
I. assisting the Committee generally by providing such other
services as may be in the best interest of the creditors
represented by the Committee. (Federal-Mogul Bankruptcy
News, Issue No. 10; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
FOSTER WHEELER: Secures Covenant Waivers Under Credit Agreement
---------------------------------------------------------------
Foster Wheeler Ltd., (NYSE:FWC) reported 2001 year-end results
and announced that its board of directors has approved a
comprehensive plan to make significant improvements to the
company's operating performance.
The plan resulted from a rigorous management review of project
backlog, critical business processes at the project level, and
all spending categories. In addition to identifying significant
performance improvement opportunities, the plan includes an
after-tax charge of $101.5 million in the fourth quarter to
cover restructuring costs, a reduction of the current value of
claims, a reserve for overdue receivables, and cost overruns on
seven specific projects. The company has also recorded a reserve
of $155.8 million for domestic deferred tax assets.
"Since joining the company in late October, I have had the
opportunity to visit all major offices and several large project
construction sites," said Raymond J. Milchovich, chairman,
president and CEO. "My time has been spent evaluating the
quality and quantity of our backlog and the operating practices
being used at the project level.
"The steps taken as a result of this review are yielding
improvements in our financial performance, and I am highly
confident that we will meet or exceed our 2002 financial goals.
"Foster Wheeler enjoys an excellent reputation with our
customers for product quality and technological superiority. I
believe we can further enhance our performance and deliver even
greater customer value by concentrating on the core components
that make this business profitable -- the estimating, bidding,
and execution of projects.
"We have launched a project performance intervention to rapidly
effect necessary improvements. I have used this approach and
methodology on a number of occasions over the last five years
with consistent, breakthrough-level results in the business
units where the intervention was applied. I believe that the
execution of this improvement plan will lead to a fundamental
culture change at Foster Wheeler and we are already seeing
encouraging results from these efforts.
"We are creating a leaner, more flexible, faster moving, more
fiscally responsible company, capable of exceeding our
customers' expectations and building value for all of our
stakeholders," he emphasized.
Phase One: Comprehensive Performance Improvement Plan
-- Management has established cash as the key factor in the
decision-making process, and is now intensely focused on all
aspects of cash management. At the end of 2001, the company
had cash and cash equivalents of $224.0 million.
-- Management has conducted a thorough review of the quality
and quantity of projects in the company's current backlog,
including customer commitment, profit, schedule and risk. As
a result, management is highly confident that the existing
backlog supports the 2002 financial plan.
-- Management has performed a detailed analysis of
historical project performance to understand the root causes
of execution variability. The project performance
intervention will accelerate process improvements and
produce consistent results across operating companies.
-- All remaining areas of cost and spending are being
reviewed with a zero base budget approach. On January 15,
2002, corporate center overhead was reduced by 25 percent.
Worldwide overhead is currently being evaluated, and
management expects to reduce this by 15 percent by the
middle of 2003.
-- A disciplined process has been established for capital
spending approvals which has already resulted in significant
savings. The 2002 capital budget has been reduced by 68
percent from the average of 1998 to 2001.
Phase Two: Building Competitive Strength
Once management is satisfied with the progress being made in
Phase One, it will institute a careful strategic-portfolio
review to validate and refine its current business mix. Foster
Wheeler enjoys a number of differentiating strengths upon which
it can build and grow, and the review is designed to ensure that
each business has the resources, structure and strategic focus
to realize its true business potential.
Fourth-Quarter Charge and Reserve
In fourth quarter 2001, the company recognized an after-tax
charge and reserve of $257.3 million. The future net cash effect
of these items is expected to be slightly positive in the
aggregate.
The restructuring and contract costs of $101.5 million consisted
of:
-- an after-tax charge of $74.5 million (pretax, $114.6
million) for the write-off of seven project overruns ($34.7
million), disputed claims ($24.1 million), and overdue
receivables ($15.7 million); and,
-- a restructuring charge of $27 million (pretax, $41.6
million), which included workforce reductions in the United
States, subsidiary closures, and the cancellation of a
company-owned life insurance program.
The company also recorded a book reserve of $155.8 million for
domestic deferred tax assets under Financial Accounting
Standards Board (FASB) Statement No. 109 "Accounting For Income
Taxes".
Bank Waivers
The company has obtained a waiver under its revolving credit
facility through April 15, 2002, subject to the satisfaction of
certain ongoing conditions, including an extension or
refinancing of its lease financing and replacement of its
receivables sale arrangement. Having secured such waiver, it is
not currently in breach of the financial covenants under its
revolving credit facility. The company has also received a
waiver of the financial covenants under its lease financing
through its maturity on February 28, 2002. Management is in
discussions with its lenders regarding a long-term extension of
the company's credit facility and a replacement for its lease
financing and receivables sale arrangement.
Fourth-Quarter and Year-End 2001 Results
With the after-tax charge and reserve of $257.3 million, as well
as the $22.9 million net loss on the previously announced sale
of the company's power plant in Mt. Carmel, PA, the net loss in
the fourth quarter 2001 was $273.3 million on revenues of
$1,039.2 million. In the year-ago fourth quarter, net earnings
were $12.3 million on revenues of $1,088.8 million.
For the full year ended December 28, 2001, the company had a net
loss of $263.1 million, compared to net earnings of $39.5
million for the year ended December 29, 2000. Revenues for 2001
were $3.4 billion versus $4.0 billion in 2000.
New orders booked for the quarter ended December 28, 2001
amounted to $1.1 billion compared to $1.0 billion in 2000. New
orders booked for the full year were $4.1 billion compared to
$4.5 billion in 2000. The backlog of orders totaled $6.0 billion
versus $6.1 billion at the end of December 2000.
At the close of the fourth quarter 2001, the company had cash
and cash equivalents of $224.0 million compared to $167.6
million in third quarter 2001, a 34 percent increase. Also, net
debt decreased 13 percent from the end of the third quarter to
$813.5 million from $932.8 million, although it increased from
$776.3 million at year-end 2000.
Engineering and Construction Group Results
New orders in the Engineering and Construction (E&C) Group
during the fourth quarter were $932.1 million compared to $693.5
million in the fourth quarter of 2000, making the Group's
backlog $4.6 billion versus $4.5 billion at the end of 2000. The
Group had fourth-quarter revenues of $655.5 million, down from
$778.1 million in the fourth quarter of 2000.
For the year, E&C bookings decreased 9.0 percent to $2.8 billion
from $3.1 billion in 2000. Revenues were $2.2 billion, compared
to $3.0 billion in the same period of last year.
Energy Equipment Group Results
During the fourth quarter 2001, the Energy Equipment Group's new
orders decreased to $184.8 million from $377.2 million for the
fourth quarter of 2000. Backlog at the end of the quarter and
year was $1.5 billion compared to $1.7 billion in 2000.
For the year, bookings were $1.3 billion from $1.5 billion in
2000. Revenues for 2001 grew 16 percent to $1.3 billion from
$1.1 billion in the same period of last year.
Foster Wheeler Ltd. is a global company offering, through its
subsidiaries, a broad range of design, engineering,
construction, manufacturing and project development, as well as
management, research, plant operations, and environmental
services. The Corporation's operational headquarters are in
Clinton, New Jersey. For more information about Foster Wheeler,
visit our worldwide Web site at http://www.fwc.com
DebtTraders reports that Foster Wheeler Corporation's 6.750%
bonds due 2005 (FWC) currently trade between 80 and 83. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=FWCfor real-
time bond pricing.
GENEVA STEEL: Wants Schedule Filing Deadline Extended to Mar. 7
---------------------------------------------------------------
Geneva Steel asks the U.S. Bankruptcy Court for the District of
Utah for more time to file its schedules of assets and
liabilities and statements of financial affairs.
The Debtor tells the Court that it only has a limited number of
personnel available to compile the information needed since it
laid off majority of its workforce before filing for bankruptcy.
In this case, it will be impossible for the Debtor to complete
the Schedules within the time provided by the Court.
The Debtor expects that it will be able to file its Chapter 11
Schedules not later than 45 calendar days from the Petition Date
or on March 7, 2002.
Geneva Steel owns and operates an integrated steel mill located
near Provo, Utah. The Company filed for chapter 11 protection on
January 25, 2002. Andrew A. Kress, Esq., Keith R. Murphy, Esq.
and Stephen E. Garcia, Esq. at Kaye Scholer LLP represent the
Debtor in its restructuring efforts. When the Company filed for
protection from its creditors, it listed $264,440,000 in total
assets and $192,875,000 in total debts.
GLASSTECH HOLDING: Files for Voluntary Chapter 11 Reorg. in DE
--------------------------------------------------------------
Glasstech Holding Co. and its wholly owned operating subsidiary,
Glasstech, Inc., filed voluntary petitions to reorganize. The
filing on January 30 in the United States Bankruptcy Court for
the District of Delaware, together with the contemplated
reorganization, is expected to relieve the company of
significant debt and interest payments.
Negotiations have been ongoing between Glasstech and a majority
of its noteholders for some time and significant progress has
been made. Glasstech anticipates that this financial
restructuring will equitize the company and result in the
current noteholders receiving sizeable equity positions in the
company. Since a majority of the noteholders have indicated
support for a financial restructuring, it is anticipated that
Glasstech will move through the restructuring process quickly.
"The noteholders know the company is sound and that it is a good
business with good management," Mark D. Christman, Glasstech's
President and CEO, said. "Glasstech expects to promptly emerge
from these proceedings a much stronger company financially.
"This is a financial reorganization," Christman said.
"Operationally, Glasstech has the resources to continue to
service and supply the automotive and architectural markets
worldwide."
GLASSTECH HOLDING: Case Summary & Largest Unsecured Creditors
-------------------------------------------------------------
Lead Debtor: Glasstech Holding Co.
Ampoint Industrial Park
995 Fourth Street
Perrysburg, OH 43551
Bankruptcy Case No.: 02-10281-MFW
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Glasstech, Inc 02-10282
Type of Business: The Company designs and assembles glass
bending and tempering (i.e., strengthening)
systems that are used by glass manufacturers
and processors in the conversion of flat
glass into safety glass. Systems are sold
worldwide, primarily to automotive glass
manufacturers and processors and, to a lesser
extent, to architectural glass manufacturers
and processors.
Chapter 11 Petition Date: January 30, 2002
Court: District of Delaware
Judge: Mary F. Walrath
Debtors' Counsel: Laura Davis Jones, Esq.
Pachulski, Stang, Ziehl Young & Jones
919 N. Market Street
16th Floor
Wilmington, DE 19899-8705
Tel: 302 652-4100
Fax: 302-652-4400
Estimated Assets: $50 million to $100 million
Estimated Debts: $50 million to $100 million
Debtors' Consolidated List of 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Balfour Investors, Inc. Bond Debt $42,000,000
Jay Goldsmith
Rockefeller Center
620 Fifth Avenue
7th Floor
New York, NY 10020
Tel: 212 489 8040
Fax: 212 307 5781
United States Trust Bond Debt $23,000,000
Company of New York
Kevin Fox
Corporate Trust Department
114 West 47th Street
25th Floor
New York, NY 10036
Tel: 212 852 1662
Fax: 212 852 1626
PPM America, Inc. Bond Debt $5,000,000
Kenneth Schlemmel
225 West wacker Suite 1200
Chicago, IL 60606
Tel: 312 634 2528
Fax: 312 624 0741
McNaughtoo-Mckay Trade Debt $132,905
Electric Co.
Abbott Tool, Inc. Trade Debt $39,105
Thermal Ceramics Trade Debt $22,102
J&S Industrial Machine Trade Debt $19,813
Prod.
Northern Mfg. Co. Trade Debt $19,749
Schill Corp. Trade Debt $19,463
Ceradyne Thermo Materials Trade Debt $19,406
F.N. Cuthbert, Inc. Trade Debt $18,698
D&D Welding Inc. Trade Debt $15,870
Air Draulies, Inc. Trade Debt $14,897
Trent, Inc. Trade Debt $14,640
Derkin & Wise Inc. Trade Debt $14,476
Maintenance Materials Trade Debt $13,023
Apex Metal Fabr. & Trade Debt $12,284
Machine Co.
Applied Industrial Inc. Trade Debt $11,577
Bullard Co. Trade Debt $10,070
The University of Toledo Pledge of foundation $10,000
Foundation
Pepco Trade Debt $9,595
Townsend Brothers, Inc. Trade Debt $7,839
Industrial Gas Trade Debt $7,431
Engineering Co.
GLOBAL CROSSING: Shares Now Trade on OTC Bulletin Board
-------------------------------------------------------
Global Crossing said the company's common stock began trading on
the OTC Bulletin Board (OTCBB), effective as of the opening of
business on January 29, 2002. The OTCBB is a regulated quotation
service that displays real-time quotes, last-sale prices and
volume information in over-the-counter (OTC) equity securities.
OTCBB securities are traded by a community of market makers that
enter quotes and trade reports. The company's common stock will
trade under the ticker symbol of GBLXQ.
Global Crossing provides telecommunications solutions over the
world's first integrated global IP-based network, which reaches
27 countries and more than 200 major cities around the globe.
Global Crossing serves many of the world's largest corporations,
providing a full range of managed data and voice products and
services. Global Crossing operates throughout the Americas and
Europe, and provides services in Asia through its subsidiary,
Asia Global Crossing (NYSE:AX).
On January 28, 2002, Global Crossing and certain of its
affiliates (excluding Asia Global Crossing and its subsidiaries)
commenced Chapter 11 cases in the United States Bankruptcy Court
for the Southern District of New York and coordinated
proceedings in the Supreme Court of Bermuda.
Please visit http://www.globalcrossing.comor
http://www.asiaglobalcrossing.comfor more information about
Global Crossing and Asia Global Crossing.
According to DebtTraders, Global Crossing Holdings Ltd.'s 9.125%
bonds due 2006 (GBLX1) are trading from 4.5 to 5.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX1for
real-time bonds pricing.
GLOBALNET: Crescent to Swap $2MM Conv. Note for 3.2MM Shares
------------------------------------------------------------
On January 15, 2002, Crescent International, Ltd. delivered a
conversion notice for partial conversion of $1,200,000 principal
amount of the convertible note due April 9, 2004 in the
principal amount of $2,000,000 into 3,218,021 shares of
GlobalNet common stock at a conversion price of $0.3729 per
share thereby reducing the principal amount of the convertible
note to $800,000.
Such conversion notice was promptly accepted by the Company in
accordance with the terms of the convertible note and the
corresponding shares of Company common stock were delivered to
Crescent International. Previously, the Company filed a
registration statement to register, among other things, the
shares issuable under the convertible note. This registration
statement was declared effective by the Securities and Exchange
Commission on July 9, 2001.
GlobalNet, Inc. provides international voice, data and Internet
services over a private IP network to international carriers and
other communication service providers in the United States and
Latin America. At June 30, 2001, the company's balance sheet
showed that it had working capital deficiency of close to $7
million, and total shareholders' equity deficit of $3 million.
HANGER ORTHOPEDIC: S&P Rates Proposed $200 Mill. Sr. Notes at B-
----------------------------------------------------------------
Standard & Poor's assigned its single-'B'-minus rating to Hanger
Orthopedic Group Inc.'s proposed offering of $200 million senior
notes due 2009 (offered under rule 144A with registration
rights). These notes are unsecured and are disadvantaged
relative to secured debt, reflected in a one-notch differential
below the corporate credit rating.
At the same time, Standard & Poor's assigned its single-'B'-plus
secured bank loan rating to Hanger's proposed $75 million senior
secured credit facility due in 2007. Proceeds from these
financings will be used to pay off indebtedness under its
existing bank loan. The rating on this loan, which is much
larger than the new secured facility, will be withdrawn when the
deal closes.
Standard & Poor's also affirmed the single-'B' corporate credit
rating and triple-'C'-plus subordinated debt rating on the
company. The outlook is positive.
The bank loan is rated one notch higher than the corporate
credit rating. The five-year $75 million secured credit facility
is collateralized by stock in the company's subsidiaries and
substantially all of the company's assets. Based on Standard &
Poor's simulated default scenario which stresses cash flows,
there is reasonable confidence of full recovery of the entire
$75 million principal.
The low speculative-grade rating reflects Hanger's challenge to
capitalize on its leading health care niche position, while
burdened with substantial acquisition-related borrowing.
Bethesda, Maryland-based Hanger has a prominent market-leading
position in orthotics and prosthetics (O&P). It provides O&P
services in 597 patient-care centers located in 44 states and is
the largest distributor of O&P supplies. Hanger's weaker-than-
expected profitability and credit profile stemmed from its 1999
acquisition of NovaCare Orthotics & Prosthetics Inc. The
company's lackluster 2000 operating results reflected
integration issues and practitioner defections following the
large acquisition. However, it now appears that the
implementation of a strategic plan by a new management team
has tightened working capital management and reduced operating
costs.
Hanger will continue to have a debt-heavy capital structure,
with funds from operations as a percent of lease-adjusted debt
(including preferred stock) in the low double-digit range, but
its debt maturity schedule is less threatening, given the
operating improvement and new note offering.
Outlook: Positive
An upgrade is possible within the next couple of years, if
Hanger continues to demonstrate improved operating performance
and financial flexibility.
HAYES LEMMERZ: Committee Hires Akin Gump as Bankruptcy Counsel
--------------------------------------------------------------
The Official Committee of Unsecured Creditors of Hayes Lemmerz
International, Inc., and its debtor-affiliates, asks for Court
authority to employ and retain Akin Gump Strauss Hauer &
Feld LLP as its counsel, nunc pro tunc to December 17, 2001, to
assist it in these Chapter 11 cases.
Committee Co-Chair Leonard L. Rettinger, Jr., explains that in
choosing Akin Gump, the Committee considered the firm's valuable
role as counsel to an ad hoc committee formed prior to the
Petition Date, composed of institutional holders of significant
amounts of the Debtors' unsecured notes. As counsel to the
informal committee, the firm acquired valuable insight into the
Debtors' business operations, actively participated in the first
day hearing and has already begun meaningful dialogue to further
the Debtors' reorganization efforts.
The Committee will look to Akin Gump to:
A. advise the Committee with respect to its rights, duties and
powers in these Chapter 11 cases;
B. assist and advise the Committee in its consultations with the
Debtors relative to the administration of these chapter 11
cases;
C. assist the Committee in its investigation of the acts,
conducts, assets, liabilities and financial condition of
the Debtors and of the operation of the Debtors'
businesses;
D. assist the Committee in analyzing the claims of the Debtors
and creditors and in negotiating with such creditors;
E. assist the Committee in its analysis of and negotiations with
the Debtors or any third party concerning matters related
to the terms of a plan of reorganization for the Debtors;
F. assist and advise the Committee as to its communications with
the general creditor body regarding significant matters in
these chapter 11 cases;
G. represent the Committee at all hearings and other
proceedings;
H. review and analyze all applications, orders, statement of
operations and schedules filed with the Court and advise
the Committee as to their propriety;
I. assist the Committee in preparing pleadings and applications
as may be necessary in furtherance of the Committee's
interests and objectives; and
J. perform such other legal services as may be required and
deemed to be in the interests of the Committee in
accordance with the Committee's powers and duties.
Akin Gump will be compensated at its customary hourly rates:
Daniel H. Golden $675 per hour
Robert J. Stark $400 per hour
Matthew I. Kramer $320 per hour
Partner $400-$700
Counsel & Senior Counsel $275-$600
Associates $185-$400
Paraprofessionals $55 -$165
Messrs. Golden, Stark and Kramer will lead the engagement.
Mr. Golden assures the Court that Akin Gump is disinterested
within the meaning of 11 U.S.C. Sec. 101(14), except that the
Firm currently represents or in the past represented:
A. Major Shareholder: CIBC WG Argosy Merchant Fund 2,
B. Secured Creditors: CIBC, Credit Suisse First Boston, Merrill
Lynch, ABN AMRO Bank, AMEX, Bank of America, Bank of New
York, Bank of Nova Scotia, Bear Stearns Asset Management,
Citibank, Comerica Bank, Conseco, Credit Lynonnais,
Deutshce Bank AG, Erste Bank, Fidelity Advisors, Goldman
Sachs, Mellon Bank N.A., Natexis Banque, Societe Generale,
Firstar Bank and Sun America, Bank Leumi USA, Bank of
Montreal, Bank of Tokyo-Mitsubishi, First Union National
Bank, Fleet National Bank, ING Capital, Michigan National
Bank.
C. Bond Trustee: The Bank of New York.
D. Major Bondholders: ABN AMRO Incorporated, American Express
Trust Company, Banc of America Securities LLC, Bank of New
York, Banker's Trust Company, Bear Stearns Securities
Corp., Bank One Trust Company N.A., CIBC World Markets,
Citibank NA, City National Bank, Credit Suisse First
Boston, Dain Rauscher Incorporated, Deutsche Bank AG,
Donaldson Lufkin and Jenrette Securities. Goldman Sachs &
Co., J.P. Morgan Securities Inc., Legg Mason Wood Walker
Inc., Lehman Brothers Inc., Merrill Lynch Pierce Fenner &
Smith, Morgan Stanely & Co. Inc., Salomon Smith Barney,
UBS Warburg LLC, Wedbush Morgan Securities and Wells Fargo
Bank Minnesota NA, Charles Schwab & Co. Inc., The Chase
Manhattan Bank NA, Edward D. Jones & Co., First Union
National Bank, Fleet Securities Inc., Investors Bank &
Trust, Prudential Securities Inc., State Street Bank and
Trust Company, Sumitomo Trust & Banking Co. USA, Toyo Trust
Company of New York, and UMB Bank National Association.
E. Post-petition Lenders: CIBC World Markets Corp., Bank of
America Securities, and Salomon Smith Barney.
F. Underwriters: Gulf Insurance Company, Hartford Insurance
Company, Kemper Insurance Company, Great American Insurance
Company, Markel American Insurance Company, National Union
Fire Insurance Company, The St. Paul Insurance Company,
UNUM Life Insurance Company and Zurich Insurance.
G. Major Trade Creditors: Aloca Inc., Hondo of America
Manufacturing Inc., Delphi Automotive Systems, Alumax,
Industrial Systems Associates Inc., Rouge Steel, DuPont,
S.A. De C.V., Basf Corp.
H. Significant Contract Parties: Citibank, GE Capital, Dresdner
Kleinwort Benson, Heller Financial, US Bancorp, Bank of New
York, CIT Group Equipment, Sanwa/Fleet Capital, Siemens,
Bank of Montreal, Transamerica Finance Corp., KMPG.
I. Professionals: Jackson Walker Latham & Watkins, Lazard Freres
& Co. LLC, Skadden Arps, Slate, Meagher & Flom LLP.
Mr. Golden assures the Court that none of these engagements
represent a material component of Akin Gump's practice and none
of these engagements concern any issue related to these cases.
(Hayes Lemmerz Bankruptcy News, Issue No. 5; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
HOULIHAN'S RESTAURANTS: Court OK's Logan & Co. as Claims Agent
--------------------------------------------------------------
The U.S Bankruptcy Court for the Western District of Missouri
approves the employment of Logan & Company, Inc., as the notice,
claims, and solicitation agent and statement and schedules
preparer for Houlihan's Restaurants and its Debtor-affiliates.
The services that Logan & Company will render to the Debtors as
Notice/Claims Agent are:
1) mail notices required to be served upon creditors and
parties-in-interest;
2) transmit, receive, docket, maintain, photocopy and
microfilm claims and process other administrative information
related to the Debtors' bankruptcy cases;
3) provide services with during the solicitation of
acceptances to a plan or plans of reorganization including the
transmittal of disclosure statement(s) to creditors and other
parties in interest and the tabulation of ballots cast on the
acceptance or rejection of such plan or plans; and
4) assist Debtors in preparing statements and schedules.
Prior to the Petition Date, Logan received a $15,000 retainer to
secure the payment for prepetition services. The fees and
expenses of Logan incurred in the performance of the services be
treated as an administrative expense of the Debtors' Chapter 11
Estate and be paid by the Debtors in the ordinary course of
business.
Houlihan's Restaurants, Inc. filed for chapter 11 protection
together with affiliates on January 23, 2002. Cynthia Dillard
Parres, Esq. and Laurence M. Frazen, Esq. at Bryan, Cave LLP
represent the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed an
estimated debts and assets of more than $100 million.
HURRY INC: Board Considering Options to Wind-Down Operations
------------------------------------------------------------
Hurry, Inc. (formerly known as Harry's Farmers Market, Inc.)
(OTCBB:HURY) said that its Board of Directors has approved a
distribution of $0.38 per share to shareholders who are
shareholders of record as of the close of business on February
11, 2002.
The Company intends to begin the process of mailing the
distribution immediately after the record date. The distribution
is in connection with amounts received for the sale of the
Company's megastores and related assets to Whole Foods Market
Group, Inc., in October 2001. In addition to this distribution,
while no assurances can be given as to the timing and amount, if
any, the Company still hopes to make a further distribution to
shareholders after its Board of Directors has ascertained all
potential contingencies related to the ongoing operations and
winding up of the Company, as described below.
The Board of Directors of Hurry, Inc., is considering various
alternatives to wind down the affairs of the Company and
liquidate the remaining assets, in an effort to maximize
remaining value for the shareholders. The Board has approved an
agreement to transfer the assets of the Harry's In A Hurry store
on Ponce de Leon Avenue in Atlanta, Georgia to Market One, a
specialty grocer, for cash, the assumption of related
liabilities and a short term note related to the inventory,
effective on or about February 5, 2002. Since the sale of the
megastores to Whole Foods, the Company has closed three of its
Harry's In A Hurry stores, has now agreed to sell one of the
remaining stores and continues to operate two of such stores.
Management and the Board are continuing to seek alternatives for
the remaining Hurry, Inc. stores and assets, which may include
the sale or transfer of the properties and related assets and
liabilities, a sale of the outstanding shares of stock of the
Company, the closing of additional locations or other methods of
minimizing liability and enhancing shareholder value, to the
extent possible.
In determining any further distribution to shareholders, the
Directors continue to work at resolving certain contingencies
and ongoing liabilities, including, but not limited to, the
resolution of the working capital adjustment and other escrow
funds related to the Whole Foods transaction, the obligations of
the remaining leases for Harry's In A Hurry stores and ongoing
equipment leases. The Company remains currently solvent and
intends to comply with all legal requirements prior to making
any distributions.
In addition, as the size of the Company's operations continue to
decline, and in an effort to reduce costs and expenses wherever
possible, the Board has decided to reduce the size of the Board
to three total directors. Robert C. Glustrom and Peter Barr have
resigned from the Hurry, Inc. Board of Directors. The Company
would like to express its appreciation for the hard work and
dedication provided by Mr. Glustrom and Mr. Barr during their
respective tenures on the Board. In furtherance of the objective
to reduce costs, all corporate and administrative expenses have
been reduced, including personnel and a further reduction of
salary to Harry Blazer, the Chief Executive Officer and
President of the Company to an annual salary of $52,000.
Hurry, Inc., presently owns and operates three Harry's In A
Hurry convenience stores in the metropolitan Atlanta, Georgia
area. The stores specialize in perishable food products - fresh
fruits and vegetables; fresh meats, poultry and seafoods; fresh
baked goods; freshly made ready-to-eat, ready-to-heat and ready-
to-cook prepared foods; and deli, cheese and dairy products. In
addition, the stores feature lines of specialty, hard-to-find
and gourmet nonperishable food products, floral items and a full
line of wines and imported and domestic beers.
IT GROUP: Wants to Pay $1.2M in Prepetition Subcontractor Claims
----------------------------------------------------------------
The IT Group, Inc., and its debtor-affiliates request
authorization to pay the prepetition claims of certain
Subcontractors for certain prepetition services provided to the
Debtors in full satisfaction of any potential Liens and
Interests. The Debtors estimate that the aggregate amount of
prepetition claims to be paid pursuant to this motion is
approximately $1,205,000.
However, with respect to each such Subcontractor Claim, the
Debtors shall not pay a Subcontractor Claim unless the
Subcontractor has perfected or, in the Debtors' judgment, is
presently capable of perfecting or may be capable of perfecting
in the future one or more Liens or Interests in respect of such
claim and the payment of such claim shall be made with a full
reservation of rights regarding the extent, validity, perfection
or possible avoidance of any Liens or Interests.
The Debtors also request that all applicable banks and other
financial institutions be authorized and directed to receive,
process, honor and pay any and all checks drawn on the Debtors'
accounts to honor Subcontractor Claims whether such checks were
presented prior to or after the Petition Date, except to the
extent that the Debtors and the applicable financial institution
agreed prior to the Petition Date that an account on which the
Debtors draw such checks could be closed.
According to Harry J. Soose, the Debtors' Senior Vice President,
Chief Financial Officer and Principal Financial Officer, In the
ordinary course of the Debtors' businesses, the Debtors employ a
number of mechanics, tradespersons and subcontractors to perform
a variety of services that would give rise to a right to payment
that might be secured by a mechanics', materialmen's or other
similar lien. The Debtors call upon these Subcontractors on a
daily basis to render their services at many job sites
throughout the United States. The services provided by these
Subcontractors are necessary to the Debtors' abilities to
perform the services for which the Debtors are engaged and,
therefore, these services are critical to the going-forward
operation of the Debtors' businesses.
Mr. Soose believes that it is imperative that the Debtors honor
prepetition obligations to Subcontractors. As of the Petition
Date, a substantial number of Subcontractors had not been paid
for prepetition goods and services. In light of these
nonpayments, certain Subcontractors may refuse to perform
ongoing services for the Debtors. If a substantial number of the
Subcontractors were to do so, Mr. Soose fears the Debtors might
be unable to complete their obligations under contract. Thus,
the Subcontractors' failure to provide ongoing services would
adversely impact the operation of the Debtors' businesses and
the enterprise value of the Debtors' estates.
Marion M. Quirk, Esq., at Skadden Aprs Slate Meagher & Flom LLP
in Wilmington, Delaware, tells the Court that paying the
Subcontractor Claims is crucial to the Debtors' business in
order to successfully reorganize. Because certain of the
Subcontractors may not be party to enforceable agreements and
may be unwilling to do business with the Debtors' postpetition,
the Debtors request that the Court authorize the payment of the
Subcontractors pre- and postpetition claims in the ordinary
course of business to ensure that these essential services
continue uninterrupted. Mr. Quirk submits that the Debtors'
failure to pay the Subcontractors for prepetition goods and
services may result in many of the Subcontractors having a right
to assert Liens or Interests against business properties.
Notwithstanding the automatic stay, many of the Subcontractors
may perfect and assert Liens or Interests against the Debtors'
property, or that of the Debtors' clients, if such
Subcontractors' prepetition claims are not paid.
The Debtors could seek authority to assume certain of the
Contracts and cure the defaults but that process, however, would
be more costly and time-consuming. By contrast, Mr. Quirk
submits that permitting the Debtor to discharge Liens or
Interests by paying the subcontractor Claims, as necessary and
appropriate, will promote the expeditious administration of this
case by eliminating the substantial time and expense incident to
obtaining Court authority to assume each Contract individually.
Moreover, the Debtor will be making payments only on account of
Subcontractor Claims with respect to which the Subcontractor
would be entitled to assert one or more Liens or Interests, so
that any such Subcontractor potentially would be a secured
creditor of the Debtor's estate. (IT Group Bankruptcy News,
Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTEGRATED HEALTH: UST Appoints Premiere Creditors' Committee
-------------------------------------------------------------
Pursuant to the Court's order, the United States Trustee held a
meeting on January 4, 2002. At that meeting, the U.S. Trustee
appointed these creditors to the Committee of Unsecured
Creditors in connection with the Premiere Group cases, pursuant
to Section 1102(a)(1) of the Bankruptcy Code:
(1) Great Oaks Nursing Home, Inc.
P.O. Box 397, Roswell, GA 30077
Phone: (770) 993-9000, Fax: (770) 993-9003
Attn: Eugene M. Bishop
(2) Healthcare Services Group, Inc.
3220 Tillman Drive, Bensalem, PA 19020
Phone: (215) 639-4274, Fax: (215) 639-2152
Attn: Thomas Cook
(3) Angell Care Inc., Bermuda Village Limited Partnership
6000 Meadowbrook Mall, Suite 27, Clemmons, NC 27012
Phone: (336) 766-5666, Fax: (336) 766-0596
Attn: Don G. Angell
Don A. Beskrone, Esq. (Phone: (302) 573-6491; Fax: (302) 573-
6497) is the staff attorney from the Office of the U.S. Trustee
assigned to the Debtors' cases. (Integrated Health Bankruptcy
News, Issue No. 28; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
JACKSON CHU: Chapter 11 Case Summary
------------------------------------
Debtor: Jackson Chu Art & Products, Inc.
49 East 12th Street
New York, NY 10003
Bankruptcy Case No.: 02-10409-cb
Chapter 11 Petition Date: January 30, 2002
Court: Southern District of New York (Manhattan)
Judge: Cornelius Blackshear
Debtor's Counsel: David H. Wander, Esq.
Wander & Associates, P.C.
641 Lexington Avenue
New York, NY 10022
Tel: (212) 751-9700
Fax: (212) 751-6820
Estimated Assets: $1 million to $10 million
Estimated Debts: $500,000 to $1 million
KAISER ALUMINUM: Will Not Make Interest Payment on 12.75% Notes
---------------------------------------------------------------
Kaiser Aluminum & Chemical Corporation, the operating subsidiary
of Kaiser Aluminum Corporation (NYSE:KLU), said it does not
intend to make the $25.5 million interest payment on its 12-3/4%
Senior Subordinated Notes due 2003 ($400 million outstanding)
scheduled for Feb. 1, 2002, in light of current and anticipated
business and capital market conditions.
The company also is considering restructuring alternatives that
could result in the non-payment of principal and interest due
Feb. 15 on the 9-7/8% Senior Notes due 2002 (approximately $174
million outstanding) and interest due April 15 on the 10-7/8%
Senior Notes due 2006 ($225 million outstanding).
Although non-payment of interest on Feb. 1 will not cause a
default until the expiration of a 30-day grace period, a default
would occur if the company were to miss the Feb. 15 principal
and interest payment on its 9-7/8% Senior Notes.
In connection with a potential restructuring, Kaiser has
retained Lazard as its financial advisor and Jones, Day as its
legal advisor. The company also has obtained a waiver and
consent agreement with respect to its existing Credit Agreement
such that the company will continue to have the ability to
utilize the Credit Agreement as so modified.
"While we have not yet reached a definitive solution for our
debt maturities, we have determined that it is in the company's
best interest not to make this interest payment and to focus our
financial resources on our operational priorities," said Jack A.
Hockema, Kaiser's president and chief executive officer. "I want
to emphasize that we are making and shipping products with the
same high standards of quality and service that customers expect
from us -- and that we have adequate liquidity to run our
operations." As of Jan. 29, 2002, the company had unrestricted
invested cash of approximately $132 million.
The company also indicated that it has deferred the release of
its fourth-quarter 2001 financial results and the associated
conference call. No new date has been set. The release and
conference call previously had been set for Jan. 31.
Kaiser Aluminum Corporation is a leading producer of alumina,
primary aluminum and fabricated aluminum products.
DebtTraders reports that Kaiser Aluminum & Chemicals' 12.750%
bonds due 2003 (KAISER2) are trading between 62 and 65. See
http://www.debttraders.com/price.cfm?DT_SEC_TICKER=kaiser2for
real-time bond pricing.
KAISER ALUMINUM: Moody's Hatchets Ratings to Junk Level
-------------------------------------------------------
Moody's Investors Service drops the ratings for Houston, Texas-
based Kaiser Aluminum & Chemical Corporation (Kaiser) and Kaiser
Aluminum Corporation (KLU).
Moody's noted that Kaiser announced on January 15, 2002 to begin
discussion with noteholders regarding potential debt
restructuring but none has happened as intended. The company at
this time, have not had issued any information regarding other
refinancing options. Moody's relates that its downgrade is based
on the rating agency's assessment of how the company's
restructuring might arise.
Moody's expects that noteholders will experience loss on
principal and cuts the ratings accordingly.
The rating outlook is negative while there is approximately $1.0
billion of debt securities affected. The rating agency also
placed its rating for MAXXAM Group Holdings Inc.'s (MGHI)
guaranteed senior secured notes under review for possible
downgrade.
The ratings of Kaiser Aluminum & Chemical Corporation that are
downgraded:
TO FROM
* $174 million of 9.875% senior Caa2 B3
notes due 2002
* $225 million of 10.875% senior Caa2 B3
notes due 2006
* $400 million of 12.75% senior Ca Caa2
subordinated notes due 2003
* senior implied rating Caa2 B2
* senior unsecured issuer rating Caa2 B3
The preferred stock rating for Kaiser's parent, Kaiser Aluminum
Corporation, was lowered to (P)C from (P)Ca.
The Caa1 rating for MGHI's $88 million of 12% guaranteed senior
secured notes, due 2003, was placed under review for possible
downgrade.
KMART CORP: Will Maintain Existing Cash Management System
---------------------------------------------------------
Kmart Corporation uses an integrated, centralized cash
management system under which funds collected by Kmart are,
through a series of transactions, transferred to a concentration
account at Bank One Corporation and used, through other
accounts, to pay various operating expenses. Kmart's cash
management system is managed by responsible individuals at
Kmart's international headquarters in Troy, Michigan. The cash
management system facilitates cash forecasting and reporting,
monitors collection and disbursement of funds, and maintains
control over the administration of the various bank accounts
required to effect the collection, disbursement, and movement of
cash.
Funds are deposited in local bank accounts located throughout
the United States. Funds from those accounts are upstreamed to
a concentration account. The concentration account funds
various disbursement accounts. Kmart's cash management system
is funded primarily by receipts received from Kmart's domestic
retail stores. Although the financial results of Kmart's
foreign and domestic subsidiaries are consolidated into Kmart's
financial statements, most of Kmart's foreign subsidiaries
maintain separate bank accounts and cash management systems. In
fact, seventeen of Kmart's domestic subsidiaries maintain
separate bank accounts.
On average, more than $150 million passes through the Kmart cash
management system each day. Cash and checks received at each of
the more than 2,100 Domestic Retail Stores and some of the 18
distribution centers operated by Kmart are deposited on a daily
basis into approximately 290 accounts.
Weekly deposits into the Kmart Store Accounts range from a high
of approximately $1 billion during peak selling seasons to a low
of approximately $215 million in non-peak periods.
Kmart issues more than 10 million checks per year which,
together with ACH, wire and electronic transfers, result in
approximately 11 million total transactions per year being
processed through the Kmart Disbursement Accounts.
Kmart maintains accounts for non-payroll disbursements at
Comerica Bank, Bank One, Bank of New York, Wells Fargo, Bank of
America, JP Morgan Chase, Hamilton Bank and Wilmington Trust.
Disbursements to certain of Kmart's vendors (including Proctor &
Gamble, Sherwin Williams and Fleming Foods) are accomplished
electronically either via ACH transfers or wire transfer
directly from an ACH debit account or the concentration account
at Bank One to the vendors' accounts. Kmart maintains payroll
accounts at Bank One, Bank of New York, Wells Fargo, Bank of
America and Silicon Valley Bank.
J. Eric Ivester at Skadden, Arps, Slate, Meagher & Flom argues
that Kmart's cash management procedures constitute ordinary,
usual and essential business practices, and are similar to those
used by other major corporate enterprises. The cash management
system provides significant benefits to all of the Debtors,
including the ability to (a) control corporate fiends centrally,
(b) invest idle cash, (c) ensure availability of funds when
necessary, (d) allocate and distribute interest earned on fiends
in centralized accounts to each debtor and nondebtor subsidiary
and affiliate, and (e) reduce administrative expenses by
facilitating the movement of fiends and the development of more
timely and accurate balance and presentment information.
Furthermore, the use of a centralized cash management system
reduces interest expenses by enabling Kmart to utilize all
fiends within the system rather than relying upon short-term
borrowing to fluid the cash requirements of Kmart and its debtor
and nondebtor subsidiaries.
The operation of the Debtors' businesses requires that the cash
management system continue during the pendency of these chapter
11 cases. Requiring the Debtors to adopt new, segmented cash
management systems at this early and critical stage of this case
would be expensive, would create unnecessary administrative
problems, and would be much more disruptive than productive. Any
disruption could have a severe and adverse impact upon the
Debtors' ability to reorganize. Moreover, as a practical matter,
because of the Debtors' complex corporate and financial
structure, it would not be possible to establish a new system of
accounts and a new cash management and disbursement system
without substantial additional costs and expenses to the
Debtors' bankruptcy estates and a significant disruption of the
Debtors' business operations. Consequently, maintenance of the
existing cash management system, including Kmart's continued
ability to transfer funds to nondebtor subsidiaries and
affiliates and to transfer funds between its debtor and
nondebtor subsidiaries and affiliates, is not only essential but
is in the best interests of all creditors and other parties in
interest.
The Debtors' cash management system is complex, highly automated
and computerized. This allows the Debtors to centrally manage
all of their cash flow needs and includes the necessary
accounting controls to enable the Debtors, as well as creditors
and the Court, to trace funds through the system and ensure that
all transactions are adequately documented and readily
ascertainable. The Debtors will continue to maintain detailed
records reflecting all transfers of funds.
Kmart CEO Charles C. Conaway tells the Court that Kmart has
maintained its cash management system for more than sixteen
years. The cash management system is highly automated and
computerized and includes the necessary accounting controls to
enable the Debtors, as well as creditors and the Court, to trace
funds through the system and ensure that all transactions are
adequately documented and readily ascertainable. Kmart will
continue to maintain detailed records reflecting all transfers
of funds between itself and any debtor or nondebtor subsidiary
or affiliate and between its subsidiaries and affiliates, so
that all intercompany transactions can be readily ascertained.
"Motion granted," Judge Sonderby rules. (Kmart Bankruptcy News,
Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900)
KOMAG INC: Net Loss Drops to $34.1 Million in 2001 4th Quarter
--------------------------------------------------------------
Komag, Incorporated (OTC Bulletin Board: KMAGQ), the largest
independent producer of media for disk drives, announced
continued improvement in operating results during the fourth
quarter of 2001. Because of the improved operating performance,
the company increased its cash and short-term investment balance
by 47% to $17.8 million.
The company's net loss for the fourth quarter of 2001 was $34.1
million compared to a loss of $122.3 million in the third
quarter of 2001. Operating loss in the fourth quarter, not
including impairment charges of $10.4 million, reducing the book
value of real estate held for sale, and $4.0 million, primarily
related to idle equipment, was $15.1 million. This compares
favorably to the $19.8 million operating loss in the third
quarter of 2001. Compared to the fourth quarter of 2000, the
company narrowed its operating loss and net loss by 2% and 22%,
respectively, despite a 48% drop in sales. The improvement was
due in large part to discontinuing manufacturing at HMT's U.S.
facilities and integrating those operations into the company's
Malaysian factories. Further, the company's continued focus on
reducing the cost of materials and operating supplies, combined
with historically high yields, has improved product costs.
Net sales for the fourth quarter of 2001 were $58.0 million,
compared to $59.4 million in the third quarter of 2001 and
$111.2 million in the fourth quarter of 2000. The year-over-
year drop in sales is the result of a 36% decline in unit
shipments and an 8% decline in average selling price. Compared
to the third quarter of 2001, unit shipments increased by less
than 1% while average selling prices declined approximately 2%.
Throughout 2001, the company's sales have been negatively
impacted by the worldwide computer industry slump.
Fourth Quarter Review
During the fourth quarter of 2001 the company sold approximately
9.8 million disks. This was a marginal improvement compared to
9.7 million disks in the third quarter of 2001. Sales to
Western Digital accounted for 85% of the fourth quarter total
and sales to Maxtor comprised 13%. Production during the
quarter was 10.3 million disks.
"Our disks are qualified in a number of the industry's leading
programs. In the third quarter we began shipping our 40 gigabyte
(GB) per platter disks and during the fourth quarter these disks
represented over 12% of our sales. These are the highest storage
density disks available in the market. We are also a leading
supplier to emerging consumer applications such as the Xbox. We
believe we are on track to qualify next generation 60GB and 80GB
per platter programs during 2002 as our customers migrate to
this level of technology," said T.H. Tan, Komag's chief
executive officer.
As a result of this improvement in EBITDA and careful asset
management, the company increased its cash and short-term
investments by $5.7 million to $17.8 million at the end of the
fourth quarter. Mr. Tan stated "Our ability to generate cash is
critical to our future success. After a year of hard work, our
successful efforts to restructure our operations and
significantly lower our costs are finally showing up in our
financials. Compared to the fourth quarter of 2000 our fixed
manufacturing costs have decreased approximately $27 million per
quarter. Due to this fixed cost reduction we lowered our
breakeven point by more than 7 million disks per quarter,
significantly improving our prospects for a return to
profitability."
Chapter 11 Status
The company continues to diligently pursue the steps necessary
to emerge from its chapter 11 case. To date Komag has prepared
a Plan of Reorganization that has received affirmative votes
from seven of its eight classes of creditors. Proceedings
regarding confirmation of the Plan are scheduled to take place
over the next several months.
Outlook
The company does not expect material improvement in sales volume
during the first half of 2002. However, because of the
successful cost reduction efforts, the company expects EBITDA to
remain positive and for its cash balances to grow.
According to Mr. Tan, "Our yields are running higher than at any
time in Komag's history. By consolidating all of our
manufacturing in Malaysia, we have a cost structure that would
be unachievable elsewhere. Our Malaysian team has also exceeded
our expectations. They have continually improved quality and
productivity and we believe that we have one of the most capable
workforces in the world, regardless of industry. To be
competitive in our industry we must continuously strive for
excellence while we relentlessly reduce our costs. With the
inevitable economic rebound, we are looking forward to the
resumption of industry growth so we can take full advantage of
Komag's many positives."
Founded in 1983, Komag is the world's largest independent
supplier of thin-film disks, the primary high-capacity storage
medium for digital data. Komag leverages the combination of its
U.S. R&D centers with its world-class Malaysian manufacturing
operations to produce disks that meet the high-volume, stringent
quality, low cost and demanding technology needs of its
customers. By enabling rapidly improving storage density at
ever-lower cost per gigabyte, Komag creates extraordinary value
for consumers of computers, enterprise storage systems and
electronic appliances such as peer-to-peer servers, digital
video recorders and game boxes.
For more information about Komag, visit Komag's Internet home
page at http://www.komag.comor call Komag's Investor Relations
24-hour Hot Line at 888-66-KOMAG or 408-576-2901.
LTV CORP: Equity Panel's Retention of Water Tower Draws Fire
------------------------------------------------------------
The Committee of Unsecured Creditors of LTV Steel Company, Inc.,
represented by Paul M. Singer and Gregory L. Taddonio of the
Pittsburgh firm of Reed Smith LLP, objects to the Equity
Committee's Application to retain Water Tower as Advisors,
telling Judge Bodoh that the proposed retention of Water Tower
is contrary to his earlier Orders regarding the retention of
professionals. As the Committee reads the Application, Water
Tower seeks to delegate its responsibilities to other parties
not authorized by Judge Bodoh. In addition, the consulting
agreements under which Water Tower would operate are detrimental
to the bankruptcy estate as they contain blanket indemnification
provisions which could ostensibly require the Debtors to bear
responsibility for costs and claims over which they have neither
responsibility nor control. The Creditors' Committee further
reaffirms its position that, as the Equity Committee is
unwarranted, so is any advisor to that Committee.
The Noteholders' Committee Objects
Represented by Lisa B. Beckerman, Robert J. Stark, and Matthew
I. Kramer of the New York office of Akin Gump Strauss Hauer &
Feld, LLP, the Official Committee of Noteholders of LTV Steel
Company, Inc., objects to the Application. Approval of the
Application as it stands would require the Debtors to compensate
Water Tower for acting as financial advisor to current equity
holders who, in all likelihood, would not be entitled to any
recovery upon a successful reorganization or liquidation. Thus,
since current equity holders would receive no recovery, Water
Tower would provide no benefit to current equity holders and
would only burden the Debtors' estates.
In addition, the Application should be denied because it seeks
to retain Water Tower under Code section 328, rather than
section 330, despite Judge Bodoh's prior Order denying the
retention of CIBC World Markets Corporation as the Noteholders'
Committee's financial advisor under section 328. Further, the
Application should be denied because it fails to relieve the
Debtors from indemnifying Water Tower in the event that the firm
commits gross negligence or willful misconduct. Finally, the
Application should be denied because it fails to differentiate
the services that Water Tower Capital FA LLC, and Powell
Woodward & Associates will each provide as members of Water
Tower.
The DIP Lenders Object
Chase Manhattan Bank, as Agent for the DIP Lenders, joins the
many objectors to this Application. Describing this employment
as "unnecessary" and "a wasteful use of the Debtors' limited
resources", Mr. Philip J. Uher, joined by Joel M. Walker, each
of the Pittsburgh firm of Buchanan Ingersoll PC, says that the
Debtors are "hopelessly insolvent". The additional
administrative expenses that would result from the retention of
Water Tower will simply further diminish the Debtors' already
dwindling resources with no benefit to the parties that have an
economic interest in these cases - the creditors. Further, the
Applicant is actually seeking to employ two firms, which is
"clearly inappropriate" in these cases.
Any retention of Water Tower should be under Code section 328 -
not 330, which severely limits the Court's authority to review
the appropriateness of fees to those situations where the
original terms and conditions prove to have been improvident in
light of developments not capable of being anticipated at the
time". This proscription mandating a limited judicial role in
the evaluation of the reasonableness of fees is clearly
unacceptable in connection with the proposed retention.
The indemnity sought also would, among other things, require the
Debtors to indemnify Water Tower for actions it takes on the
instruction of the Committee. "There is no justification for
the indemnity sought", Mr. Uher says.
The US Trustee Objects Too
Ira Bodenstein, US Trustee for Region 9, appearing through Dean
P. Wyman as Acting Assistant US Trustee, and each of Amy L. Good
and Andrew R. Vara as Trial Attorneys, objects to this
Application as well based on the overbroad indemnity provision.
Saying "these indemnity provisions expose the debtors and the
estate to unlimited risk, and further unacceptably deprive the
equity committee of any redress against Water Tower for Water
Tower's own negligence, the Trustee says there is no reason to
grant Water Tower such broad indemnification rights. The
Trustee also objects to the vagueness of the "bonus" to be paid
to Water Tower, but says this may be amended and clarified at a
later date. Finally, the Trustee believes that the creation of
a separate limited liability company for the LTV engagement
should, without more, disqualify Water Tower, and that the
potential conflicts of interest arising from this are not
sufficiently disclosed.
LTV Steel Objects Too
Joining every other major constituency in objecting to this
Application, LTV Steel says that any part of the other
objections brought to this Application should be sufficient in
itself to warrant denial of the Application. The Debtors
further object to the inadequacy of the disclosure of potential
conflicts by Water Tower and its members, the "potential actual"
conflicts of interest of certain principals of WTC and Powell,
Water Tower's apparent violation of the Code's prohibition
against the sharing of fees by professionals retained in
bankruptcy cases, and the overbreadth of the indemnity
provision.
The Equity Committee's Reply
The Equity Committee, responding to the several objections based
on the indemnity agreement, describes it as "standard" and says
that Judge Bodoh said in the Order on CIBC World Markets Corp.
that the financial advisor to the Noteholders' Committee was
entitled to "standard" indemnification. Further, Water Tower
expressly agrees that LTV will not be liable for indemnification
in the event that any losses are judicially determined to be the
result of gross negligence or willful malfeasance on Water
Tower's part.
As to the potential conflicts of interest, Mr. Robert Powell
avers on behalf of Woodward & Associates that the only
connections are "non-material", and that Water Tower itself has
no connections at all. If any connections are subsequently
discovered, they will be disclosed to the Court. As to the LLC
structure, this structure is solely for the benefit of the
Equity Committee. Powell Woodward is included in the Water
Tower engagement team in order to provide steel-industry
specific expertise. All of the necessary disclosures are made.
The inclusion of Powell Woodward is described as providing
"invaluable industry-specific expertise and knowledge", and
Water Tower's structure is designed to provide the Equity
Committee with a seamless and integrate team to render services
that will enable the Equity Committee to maximize value for the
Committee and these estates. (LTV Bankruptcy News, Issue No. 23;
Bankruptcy Creditors' Service, Inc., 609/392-00900)
LTV CORP: 10 Parties Intend to Bid for Integrated Steel Assets
--------------------------------------------------------------
The LTV Corporation (OTC Bulletin Board: LTVCQ) announced that
10 parties have expressed interest in bidding for various
combinations of its Cleveland Works East, Indiana Harbor Works
and related integrated steel assets.
The interested parties have entered into confidentiality
agreements as a precondition to gaining access to the plants and
commercial, legal and technical data. The parties must submit
firm, written offers, along with bid deposits and other
information, by February 20, 2002. The Company said that it
would conduct an auction on February 27, 2002 at 9:00 a.m.,
Eastern Time, in Cleveland, Ohio. During the auction qualified
bidders will have an opportunity to modify their previously
submitted offers. LTV will then select the best and highest bid
for its integrated steel assets. A hearing to approve the sale
will be conducted on February 28, 2002 at 11:00 a.m., Eastern
Time, in the United States Bankruptcy Court, Northern District
of Ohio, Eastern Division. The Court is located in Youngstown,
Ohio.
"It is very gratifying to see the high levels of interest that
have been expressed in our steelmaking assets," said Glenn J.
Moran, chairman and chief executive officer of The LTV
Corporation. "We hope that these excellent, modern facilities
will soon return to productive use," he said.
LTV said that six of the parties were currently engaged in some
aspect of the steel business and seven were based in the United
States. LTV would not disclose the identity of any of the
interested parties.
LTV is operating under the terms of an Asset Protection Plan
designed to maximize the value of its assets for the benefit of
the Company's creditors. Under the Asset Protection Plan, the
integrated steel assets are being maintained on a "hot idle"
status until February 28. After that date, the facilities will
be converted to cold idle which will reduce the probability of
restarting the blast furnaces and other critical steelmaking
facilities. Prospective purchasers must demonstrate the
willingness and financial capability of assuming the cost of
maintaining the hot idle status if the closing of the
transaction is expected to occur past February 28. LTV Steel's
coke plants in Warren, Ohio and Chicago are being held on hot
idle until January 31, 2002. If the facilities are not sold as
of that date, the plants will be converted to cold idle which
would make reactivation unlikely.
LTV may consider bids that also propose to purchase additional
assets, including the flat rolled finishing facility at
Hennepin, Illinois and other business assets. LTV also noted
that it is not required to accept bids at auction that are not
judged to be in the best interest of the creditors. If the
integrated steel assets are not sold as operating units, the
Company will proceed to entertain other forms of asset sales.
The LTV Corporation, along with 48 subsidiaries, filed voluntary
petitions for relief under Chapter 11 of the U.S. Bankruptcy
Code on December 29, 2000. The cases were filed in the U.S.
Bankruptcy Court, Northern District of Ohio, Eastern Division
and jointly administered as Case No. 00-43866.
On December 7, 2001, the U.S. Bankruptcy Court issued an order
authorizing the implementation of an Asset Protection Plan. The
APP includes the shutdown and sale of all integrated steel
assets. The Plan also provides for the continued operation and
sale of Copperweld and LTV's tubular products business.
On December 18, 2001, the LTV Corporation declared that it was
the opinion of the Company that shares of its common stock were
worthless because the value expected to be generated by the sale
of assets would be insufficient to provide a recovery for common
shareholders in the reorganization process.
LEVEL 3 COMMS: S&P Further Junks Ratings & Maintains Watch Neg.
---------------------------------------------------------------
Standard & Poor's lowered its ratings of Level 3 Communications
Inc. The ratings remain on CreditWatch with negative
implications.
The downgrade is based on continued weak industry fundamentals,
the company's leveraged balance sheet, potential covenant
violations, and the continued decline in asset values in the
long-haul sector. The deterioration in asset value, in
combination with the level of bank debt in the company's capital
structure, warrants a two notch differential between the
corporate credit and senior unsecured debt ratings.
Level 3's 2001 fourth quarter and year-end results demonstrated
the progress the company is making operationally, particularly
on provisioning intervals, reducing its cost structure, and
shifting its customer base to more creditworthy customers.
However, industry conditions remain challenging, new sales
growth is being largely offset by customer disconnects, and the
company has indicated that a percentage of its recurring revenue
base is still at risk. More immediately, management has
indicated that it may violate a minimum revenue covenant as
early as the second quarter of 2002, and is in discussions with
its bank group.
At December 31, 2001, the company had cash and marketable
securities of about $1.5 billion, and total debt was $6.2
billion. Level 3 also had an undrawn $650 million revolving
credit facility. A $3.2 billion impairment charge was taken in
the fourth quarter of 2001, of which only about $35 million was
cash related. The company's capital spending and operating
expense reductions will help conserve cash, and current cash
balances provide near-term coverage of debt obligations. Still,
Level 3 will have to rapidly ramp up its recurring cash flow
base to service debt obligations beyond 2002. Resolution of the
CreditWatch listing will be based on the company's ability to
either meet or renegotiate current covenants.
Ratings Lowered and Remaining on CreditWatch Negative
Level 3 Communications Inc. TO FROM
Corporate credit rating CCC+ B-
Senior unsecured debt CCC- CCC+
Subordinated debt CCC- CCC
Shelf registration:
Senior unsecured prelim. CCC- prelim. CCC+
Preferred stock prelim. CC prelim. CCC-
LODGIAN INC: Brings-In PricewaterhouseCooopers as Accountants
-------------------------------------------------------------
Lodgian, Inc., and its debtor-affiliates ask the Court for
authority to employ and retain PricewaterhouseCoopers LLP as
their accountants and tax advisors, nunc pro tunc to December
20, 2001.
Michael J. Edelman, Esq., at Cadwalader Wickersham & Taft in New
York, tells the Court that PricewaterhouseCoopers will work
closely with the Debtors and their counsel as tax compliance
providers and tax consulting advisors in connection with these
Chapter 11 cases. The services of PricewaterhouseCoopers as tax
advisors are necessary in order to enable Lodgian to execute its
duties as Debtors and debtors-in-possession. Thus, the
employment of the said firm is necessary, essential and in the
best interest of the administration of these Chapter 11 cases.
Mr. Edelman submits that no amounts are owed by the Debtors to
PricewaterhouseCoopers as of the Petition Date. The Debtors
expect PricewaterhouseCoopers negotiate fixed fee or reduced
hourly billing rate arrangements with Lodgian for certain tax
services unrelated to these Chapter 11 cases. Such rates will be
no greater than the hourly rates charged to the firm's non-
bankruptcy clients.
In an affidavit, PricewaterhouseCoopers Partner Keith Ruth
states that on September 11, 2001, the Debtors and the firm
executed an engagement letter for the latter to provide tax
compliance outsourcing services to the Debtor. On December 10,
2001, another engagement letter was executed for the firm to
provide tax consulting services.
Given these relationships, Mr. Ruth contends that
PricewaterhouseCoopers is familiar with the Debtors' business
and that he and other professionals at the firm are well
qualified to act as tax advisors to the Debtors. In addition ,
PricewaterhouseCoopers professionals have significant experience
in representing companies in the hotel industry including that
of Six Continents.
The services expected of PricewaterhouseCoopers include:
A. Completing state and local income tax and franchise tax
returns; preparing annual federal and state income tax
returns for the Debtors beginning with the return for the
year ending December 31, 2001.
B. Consulting on tax matters and other related matters as the
Debtors or their counsel may request; and
C. Performing all other necessary accounting services in
furtherance of its role as tax advisor for the Debtors
Mr. Ruth states reveals that PricewaterhouseCoopers have
rendered financial or tax compliance or consulting services,
unrelated to these proceedings, to the sixteen of the Debtors'
twenty largest creditors: Oracle Corp., Chase Bank of Texas,
Alliant Food Service, Marriott, GMAC Commercial Mortgage Corp.,
Lodgenet Entertainment, Choice Hotels, Niagara Mohawk, Ernst &
Young LLC, Zurich American Insurance Group, Waste Management,
ITA, Office Depot, Pepsi and Guest Supply.
Mr. Ruth submits that PricewaterhouseCoopers will be compensated
for services rendered according to the terms in its engagement
letter with the Debtors. In addition, the firm will also seek
reimbursement of its out-of-the-pocket expenses incurred in
connection with the Debtors' cases. (Lodgian Bankruptcy News,
Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900)
MATSUSHITA: Will Close & Liquidate Refrigerator Compressor Unit
---------------------------------------------------------------
Matsushita Electric Industrial Co., Ltd. (NYSE: MC) announced
plans to discontinue production of refrigerator compressors at
Matsushita Refrigeration Company of America (MARCA) on March 28,
2002.
MARCA will then begin closing/liquidation procedures.
As the main reasons for closing the U.S. refrigerator compressor
production subsidiary, Matsushita cited the necessity to
restructure its ongoing refrigerator compressor production
operations from a global viewpoint, and intensified price
competition in the U.S. refrigerator compressor market, which
resulted in decreased profitability at MARCA. Production of
refrigerator compressors for the U.S. market will be shifted to
Matsushita's Asian factories in Singapore, Malaysia and China to
further enhance the company's strategy to achieve an optimum
global production structure in this product area.
MARCA, a joint venture of Matsushita Refrigeration Company (55%
share), Matsushita Electric Industrial Co., Ltd. (40% share),
and Matsushita Refrigeration Industries (S) Pte. Ltd. (5%
share), was established in Vonore, Tennessee in 1989. MARCA
supplied approximately 22 million refrigerator compressors to
major refrigerator manufacturers in North America over the past
10 years.
Matsushita Electric Industrial Co., Ltd. is one of the world's
leading producers of electronic and electric products for
consumer, business and industrial use, which it markets around
the world under the "Panasonic," "National," "Technics" and
"Quasar" brand names. Matsushita's shares are listed on the
Tokyo, Osaka, Nagoya, Fukuoka, Sapporo, Amsterdam, Dusseldorf,
Frankfurt, New York, Pacific and Paris stock exchanges. For more
information, visit the Matsushita web site at the following URL:
http://www.panasonic.co.jp/global
MCLEODUSA INC: Files Chapter 11 with Prepack Reorg. Plan in DE
--------------------------------------------------------------
McLeodUSA Incorporated (Nasdaq:MCLD), one of the nation's
largest independent competitive local exchange carriers, said
that it has signed lock-up agreements with the ad hoc committee
of holders of McLeodUSA senior notes to support a
recapitalization of the company.
Under the terms of the recapitalization, the bondholders will
receive up to $670 million in cash, $175 million of new
preferred stock convertible into 15% of the reorganized
Company's common stock, and 5-year warrants to purchase an
additional 6% of the common stock for $30 million. The ad hoc
committee, which holds 23% of the bonds, voted unanimously in
favor of the plan, which will eliminate approximately $3.0
billion of bond debt.
Additionally, the Company has signed lock-up and support
agreements with stockholders holding approximately 45% of its
Preferred Series A, Series D and Series E shares, including
funds managed by Forstmann Little & Co., to support the
recapitalization plan.
In order to complete this recapitalization as expeditiously as
possible, with the support of its Board of Directors, Secured
Lenders, Forstmann Little, the bondholders' ad hoc committee and
certain of its preferred stockholders, the Company Thursday has
filed a pre-negotiated plan of reorganization through a Chapter
11 bankruptcy petition filed in the United States Bankruptcy
Court for the District of Delaware. The Chapter 11 case includes
only the parent company, McLeodUSA Incorporated. None of the
operating subsidiaries, which include McLeodUSA
Telecommunications, McLeodUSA Publishing and Illinois
Consolidated Telephone Company (ICTC), are part of the
bankruptcy proceeding.
The recapitalization plan remains consistent with the plan
announced by the Company on December 3, 2001. The pre-negotiated
elements of the transaction provide for no disruption to the
Company's employees, trade creditors, customers and overall
operations. The recapitalization is a key step in positioning
McLeodUSA for the future by giving the Company a much improved
capital structure. Specifically, under the terms of the proposed
reorganization:
-- Holders of the Company's senior notes will receive
their pro rata share of a cash payment in an amount up to $670
million. This cash payment will be funded by (i) $570 million of
the $600 million of aggregate proceeds to be received from the
Company's previously announced agreement for the sale of its
directory publishing business to Yell Group (subject to a price
reduction of $200,000 per day if the transaction closes after
April 30, 2002, but prior to August 1, 2002); and (ii) $100
million in cash from a new equity investment of $175 million by
Forstmann Little. Bondholders will also receive their pro rata
share of (i) $175 million of new convertible preferred stock
which is convertible into common stock representing 15% of the
reorganized McLeodUSA common stock and which carries a
cumulative dividend of 2.5% per annum and (ii) 5-year warrants
to purchase an additional 6% of common stock for $30 million.
-- The $175 million new equity investment in the Company
by Forstmann Little will be in exchange for (i) approximately
23% of the reorganized McLeodUSA common stock and (ii) 5-year
warrants to purchase an additional 6% of common stock for $30
million.
-- Forstmann Little's Series D and Series E preferred
stock will be converted into common stock, representing
approximately 35% of the reorganized McLeodUSA common stock.
-- The Company's Series A preferred stock will be
converted into approximately 10% of the reorganized McLeodUSA
common stock.
-- Holders of the Company's existing Class A common stock
are expected to retain approximately 17% of the shares of the
reorganized McLeodUSA common stock.
-- Forstmann Little will be the largest shareholder of
McLeodUSA after the recapitalization with an approximate 58%
stake in the Company. Theodore J. Forstmann, Senior Partner of
Forstmann Little, will continue as Chairman of the Executive
Committee of the McLeodUSA Board of Directors.
-- Clark E. McLeod will remain Chairman of the McLeodUSA
Board of Directors, Stephen C. Gray will remain President and
Chief Executive Officer, and Chris A. Davis will remain Chief
Operating and Financial Officer of the Company.
During the bankruptcy proceedings, McLeodUSA expects to operate
its business in the ordinary course without interruption and
with no impact on its employees, customers and suppliers. The
Company has approximately $140 million in cash currently
available as of the date of the filing and has secured a
commitment for a $110 million exit financing facility from a
group of lenders arranged by JPMorgan, Bank of America and
Citibank. This exit revolver may be increased to as much as $160
million and will be available to McLeodUSA at the completion of
the recapitalization subject to customary conditions.
Accordingly, based on such cash availability, the Company does
not require and does not expect to obtain debtor-in-possession
financing.
The implementation of the pre-negotiated plan of reorganization
is dependent upon a number of conditions typical in similar
restructurings including, among other things, court approval of
the pre-negotiated plan of reorganization and related
solicitation materials. Additional terms and conditions of the
reorganization plan will be outlined in a disclosure statement
which will be sent to security holders entitled to vote on the
plan of reorganization after it is approved by the Court.
The Company expects the pre-negotiated plan of reorganization to
be effective in the second quarter of 2002. In accordance with
its policies, the Nasdaq Stock Market may delist the Company's
common stock and Series A preferred stock as a result of the
Company's filing under Chapter 11 of the U.S. Bankruptcy Code.
The Company intends to have its new common stock and preferred
stock listed on the Nasdaq Stock Market or another national
securities exchange upon completion of the reorganization.
As previously announced, the Company and its Secured Lenders
amended their existing $1.3 billion senior secured credit
facility to permit the use of proceeds from the sale of the
publishing business to retire outstanding bond debt in
connection with the plan. The Company and its Secured Lenders
have also modified the credit agreement to allow the Company to
retain and use the proceeds from all currently identified future
asset sales of non-core businesses and surplus assets for
general working capital purposes in addition to capital
expenditures. Subject to the consummation of the plan of
reorganization, the Company plans to eliminate $425 million of
bank debt by (i) a reduction of its current revolver commitment
by $140 million, (ii) a paydown of its term loan by $60 million
($35 million from the Forstmann Little investment and $25
million from the directory publishing proceeds), and (iii) offer
for sale its regulated incumbent local exchange subsidiary
Illinois Consolidated Telephone Company (ICTC). The ICTC sale
process is expected to begin after the completion of the
recapitalization and occur within the subsequent 14 months, with
up to $225 million of the proceeds applied to reduce the
Company's term loans.
McLeodUSA provides integrated communications services, including
local services, in 25 Midwest, Southwest, Northwest and Rocky
Mountain states. The Company is a facilities-based
telecommunications provider with, as of January 24, 2002, 31 ATM
switches, 59 voice switches, 485 collocations, 525 DSLAMs, and
over 31,000 route miles of fiber optic network. Visit the
Company's Web site at http://www.mcleodusa.com
DebtTraders reports that McLeodusa Inc.'s 11.375% bonds due 2009
(MCLD2) are trading between 24.5 and 25.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=MCLD2for
real-time bond pricing.
MCLEODUSA: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------
Debtor: McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C. Street SW
PO Box 3177
Cedar Rapids, IA 52406-3177
Bankruptcy Case No.: 02-10288-MFW
Type of Business: The Debtor and its affiliates provide
integrated communications services, including
local services, in 25 Midwest, Southwest,
Northwest and Rocky Mountain states. The
Company is a facilities-based
telecommunications provider with, as
September 30, 2001, 393 ATM switches, 58
voice switches, 437 collocations, 520 DSLAMs,
over 31, 000 route miles of fiber optic
network and 10,700 employees.
Chapter 11 Petition Date: January 30, 2002
Court: District of Delaware
Judge: Mary F. Walrath
Debtor's Counsel: David S. Kurtz, Esq.
Skadden, Arps, Slate, Meagher & Flom
(Illinois)
333 West Wacker Drive
Chicago, IL 60606
Tel: 312 407 0700
-and-
Gregg M. Galard, Esq.
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, DE 19801
Tel: 302 651 3000
Total Assets: $4,792,600,000
Total Debts: $4,566,200,000
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
United States Trust Public Debt $799,765,625
Company of New York
as Indenture Trustee for
the 11 2/8% Senior Notes
114 West 47th Street
New York, NY 10036
Tel: 212 852 1000
Fax: 212 852 1626
United States Trust Public Debt $518,619,792
Company of New York
as Indenture Trustee for
the 8 1/8% Senior Notes
114 West 47th Street
New York, NY 10036
Tel: 212 852 1000
Fax: 212 852 1626
United States Trust Public Debt $495,850,024
Company of New York
as Indenture Trustee for
the 10 1/2% Senior
Discount Notes
114 West 47th Street
New York, NY 10036
Tel: 212 852 1000
Fax: 212 852 1626
United States Trust Public Debt $307,125,000
Company of New York
as Indenture Trustee for
the 9 1/2% Senior Notes
114 West 47th Street
New York, NY 10036
Tel: 212 852 1000
Fax: 212 852 1626
United States Trust Public Debt $309,421,875
Company of New York
as Indenture Trustee for
the 8 3/8% Senior Notes
114 West 47th Street
New York, NY 10036
Tel: 212 852 1000
Fax: 212 852 1626
United States Trust Public Debt $236,273,437
Company of New York
as Indenture Trustee for
the 9 1/4% Senior Notes
114 West 47th Street
New York, NY 10036
Tel: 212 852 1000
Fax: 212 852 1626
United States Trust Public Debt $216,037,500
Company of New York
as Indenture Trustee for
the 11 1/2% Senior Notes
114 West 47th Street
New York, NY 10036
Tel: 212 852 1000
Fax: 212 852 1626
United States Trust Public Debt $159,750,000
Company of New York
as Indenture Trustee for
the 12% Senior Notes
114 West 47th Street
New York, NY 10036
Tel: 212 852 1000
Fax: 212 852 1626
Think Fast Consulting, Inc Trade Debt $148,310
Travel and Transport, Inc Trade Debt $100,000
IOS Capital Trade Debt $89,482
American Express Trade Debt $76,602
Allied Van Lines, Inc. Trade Debt $28,401
Ikon Office Solutions Trade Debt $18,629
Cedar Rapids Janitorial Trade Debt $16,739
Services
Wells Fargo Financial Trade Debt $9,441
Leasing
NPI Security Trade Debt $8,745
Xcel Energy Trade Debt $7,088
Tempe CC, LLC Trade Debt $6,098
Automated Maintenance Trade Debt $6,020
Systems, Inc.
MICROFORUM INC: Secures CCAA Protection to Reorganize in Canada
---------------------------------------------------------------
Microforum Inc. (TSE: MCF) said that it has voluntarily sought
and obtained protection under the Companies' Creditors
Arrangement Act (CCAA) pursuant to an Order from the Ontario
Superior Court of Justice. The initial Order, as is customary in
these matters, is for a period of 30 days.
Ernst & Young Inc. has been appointed by the Court as monitor
under the CCAA proceedings. Microforum has also retained TD
Securities Inc. to assist with identifying and evaluating
strategic alternatives for the Company, including the merger or
sale of all or part of the Company.
"We have taken this step in order to provide the Company with
the time and flexibility necessary to attempt to work towards
restructuring the Company's current debt obligations.
Microforum's objective is to file a plan of arrangement for
approval by the Court with a view to beginning meetings with
creditors and trade suppliers as soon as possible. Microforum's
customers will remain unaffected by this announcement as the
Company has sufficient funds on hand to enable it to continue
normal operations during the Initial Order. We are committed to
maintaining high service levels to customers during this
period", said Steven Schofield, President & CEO.
For additional information, a copy of the Affidavit filed in
support of the CCAA application can be found on the Company's
website http://www.microforum.com
Established in 1987, Microforum sells software solutions to
organizations that seek a competitive edge. The company is
listed on The Toronto Stock Exchange (TSE: MCF).
NATIONSRENT INC: Gets Okay to Reject Ultra Motor Sport Agreement
----------------------------------------------------------------
NationsRent Inc., and its debtor-affiliates sought and obtained
authority to reject a Primary Sponsorship Agreement with Ultra
Motor Sport LLC, effective December 28, 2001.
Michael J. Merchant, Esq., at Richards Layton & Finger P.A. in
Wilmington, Delaware, relates that on October 26, 1999, the
Debtors entered into a primary sponsorship agreement with Mattei
Motorsports LLC, which subsequently assigned its rights and
interests under the Sponsorship Agreement to Ultra Motorsports
LLC, owner and operator of a NASCAR Winston Cup Series Race
Team.
The Sponsorship Agreement provides that:
A. the Debtors are the primary sponsor with respect to
the activities associated with the operation of the Racing
Program;
B. the Owner provide for the preparation, entrance and
inclusion of a Race Vehicle and Race Team in all NASCAR
Winston Cup Point Series Race Events held during the 2000,
2001 and 2002 seasons;
C. the Race Vehicle display only the Debtors' Marks and the Race
Team appear at each Race only in Team Apparel; and
D. in addition to any required Contingency Payments, the Debtors
pay the Owners $6,000,000 on account of the NASCAR Series
2000 season, $6,250,000 on account of the 2001 NASCAR
Series season and $6,500,000 on account of the 2002 NASCAR
Series season.
Based on their review of the Sponsorship Agreement and after
consultation with the applicable members of the Debtors'
management team, the Debtors have determined that the burdens of
complying with the Sponsorship Agreement outweigh the benefits
to their estates of continued performance under the Sponsorship
Agreement. Mr. Merchant notes that the Sponsorship Agreement has
one year remaining with an associated payment of $6,500,000 due
from the Debtors. The Debtors do not believe that their estates
will realize sufficient value from the continuation of the
Sponsorship Agreement to justify the payment of the $6,500,000
on account of the NASCAR Series 2002 season. Accordingly, the
Debtors believe, in the exercise of their business judgment,
that continued performance under the Sponsorship Agreement would
be contrary to the interests of their respective estates and
creditors.
On December 10, 2001, Mr. Merchant informs the Court that the
Debtors provided notice to the Owners of their election to
terminate the Sponsorship Agreement and believe that the Debtors
have adequate grounds for the termination of the Sponsorship
Agreement. In the abundance of caution, however, the Debtors are
seeking to reject the Sponsorship Agreement in the event that
the Debtors' efforts to terminate the Sponsorship Agreement are
later deemed ineffective or invalid. (NationsRent Bankruptcy
News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
ON SEMICONDUCTOR: SVP & Sales Director Michael Rohleder Resigns
---------------------------------------------------------------
ON Semiconductor (Nasdaq: ONNN) reports that Michael Rohleder,
senior vice president and director of sales and marketing, has
left the company to pursue other opportunities.
Rohleder started with ON Semiconductor September 1999 as the
director of sales and marketing and spent the last 29 months
leading that group.
"Mike was instrumental in establishing ON Semiconductor as an
independent company and building our global sales and marketing
capabilities," says Steve Hanson, ON Semiconductor president and
chief executive officer. "We're grateful for Mike's many
contributions to the company and we wish him the best in his
future endeavors."
The company currently is engaged in a search for Rohleder's
replacement and expects to name one within the next 60 days. In
the interim, Hanson will assume responsibility for the sales and
marketing organization as the company continues to execute on
its strategy.
J. Daniel McCranie, as a member of the board of directors of ON
Semiconductor, will provide guidance and assistance during this
search and transition period.
McCranie brings a wealth of sales and marketing experience to
the equation, having spent 30 years in the semiconductor
business with increasing management, sales and marketing and
engineering responsibilities including vice president of sales
and marketing at Cypress Semiconductor.
Prior to joining ON Semiconductor, Rohleder was president and
chief executive officer of Wyle Electronics, a member of the
VEBA Electronic Group. Before that he was chief executive
officer of Insight Electronics, also a member of the VEBA
Electronic Group.
ON Semiconductor offers an extensive portfolio of power- and
data-management semiconductors that address the design needs of
today's sophisticated electronic products, appliances and
automobiles. For more information visit ON Semiconductor's Web
site at http://www.onsemi.com
ON Semiconductor and the ON Semiconductor logo are trademarks of
Semiconductor Components Industries, LLC. All other brand and
product names appearing in this document are registered
trademarks or trademarks of their respective holders.
* * *
As reported in the July 30, 2001 edition of Troubled Company
Reporter, Standard & Poor's lowered its corporate credit rating
on ON Semiconductor Corp., to single-'B'-plus from double-'B'-
minus. At the same time, the report said, Standard & Poor's
lowered the senior secured debt to single-'B+' from double-'B'-
minus and lowered the subordinated debt to single-'B'-minus from
single-'B'. The ratings outlook remains negative, S&P said.
According to S&P, the company's operating profitability has been
pressured by substantial revenue declines, causing the company
to be in noncompliance with covenants for its $150 million
revolving credit agreement in last year's June quarter. Ratings
was also made in anticipation that the company's banks will
waive the covenant violations and permit the company to proceed
with its restructuring plan.
PHYCOR INC: Files for Chapter 11 Protection with Prepack Plan
-------------------------------------------------------------
PhyCor, Inc., (OTCBB:PHYC) announced that it and 48 of its
subsidiaries have filed voluntary petitions for reorganization
relief and a pre-negotiated reorganization plan under Chapter 11
of the United States Bankruptcy Code with the United States
Bankruptcy Court for the Southern District of New York. As
previously disclosed in the Company's reports with the
Securities and Exchange Commission, the Company has been in
negotiations regarding a restructuring with an informal
committee of holders of PhyCor's 4.5% convertible subordinated
debentures and E.M. Warburg, Pincus and Co., which through its
affiliates holds all of the Company's zero coupon convertible
subordinated notes. PhyCor filed the Plan with the support of
certain of these creditors, which collectively hold
approximately two-thirds of PhyCor's outstanding indebtedness.
The bankruptcy filing relates to the Company and a substantial
majority of its subsidiaries, but it does not include PhyCor's
independent practice association businesses that currently
operate in California, Illinois, Kansas and Tennessee under the
names of North American Medical Management (NAMM) and PrimeCare.
The Company elected to seek Chapter 11 protection to realign its
capital structure and to preserve the value of its remaining
businesses for its creditors.
The Plan is subject to a number of conditions, including
approval by certain of the Company's creditors and confirmation
by the Court. If the Plan is confirmed, the general, unsecured
creditors of PhyCor, including the Bondholders and Warburg,
Pincus, will receive shares of reorganized PhyCor's common stock
or, in certain instances, cash in an amount equal to 11.7% of
their claims in full satisfaction of their claims.
Under the terms of the Plan, PhyCor's outstanding common stock,
options and warrants will be cancelled and current shareholders
and warrantholders will not receive any consideration, either in
cash or in newly issued stock. PhyCor currently has
approximately 75,000,000 shares of common stock outstanding,
2,454,051 stock options outstanding and 348,014 warrants
outstanding.
Because the Company's IPA operations, including the operations
of PrimeCare Medical Network, Inc., a subsidiary of PhyCor that
operates in California and holds a limited Knox-Keene license,
will remain entirely outside and not be a part of the Chapter 11
cases, the Company anticipates that the liabilities associated
with its NAMM operations will be paid in the normal course of
business. These entities are not dependent on PhyCor for cash,
claims payment processing, or other services.
The Company also announced that Thompson S. Dent has resigned as
President and Chief Executive Officer of the Company effective
immediately, but will continue as Chairman of the Board until
the Plan is consummated. Tarpley B. Jones, currently PhyCor's
Executive Vice President and Chief Financial Officer, has
succeeded Mr. Dent as President and Chief Executive Officer.
Mr. Dent has led the Company as Chairman, President and Chief
Executive Officer for the past 19 months during extremely
difficult and challenging times. During these months, the
Company paid down all of its outstanding bank indebtedness, sold
clinic assets, returned certain of its operating units to
profitability, and negotiated and prepared the Plan. Upon
confirmation of the Plan, a new Board of Directors for the
Company that will consist of Mr. Jones as Chairman and three
directors chosen by the Bondholders and one director chosen by
Warburg, Pincus will be appointed.
Mr. Dent said that while the Company and industry results over
the last several years leave him disappointed for bondholders,
creditors, shareholders and employees, he believes the Company
is now positioned for a successful emergence as a physician
network management organization.
Mr. Dent continued, "The greatest honor in my business career
has been to work for the last 14 years with a Board of
Directors, other Company co-founders, and a team of employees
who were incredibly talented and committed people of integrity.
The story of PhyCor is about a large group of employees who
cared deeply about improving healthcare and had a passion and
vision for being part of the solution. Most of those wonderful
people are no longer with the Company but continue their zeal to
affect positively the healthcare industry in their work with
other leading healthcare organizations. Those who are continuing
with the Company embody the values and talent that always
distinguished PhyCor. These employees are the key to the success
of the restructured company; however, it was through the efforts
of dozens of current and former employees that the Company was
able to accomplish what it has in the last 19 months and
preserve a core business upon which to build. I am enthused
about the future direction of the Company and the opportunity
for growth. It is my hope that the remaining employees enjoy
enormous success as they move forward."
Commenting on the future of operations, Mr. Jones said, "The
performance to date of PhyCor's IPA business establishes a base
to restructure the Company's balance sheet in a way that
provides the opportunity for a viable future for PhyCor and a
preservation of value for our creditors. Our California
operations in the Inland Empire through our PrimeCare subsidiary
and our NAMM operations in Northern and Southern California are
performing on plan. NAMM of Illinois, with operations in the
Chicago area, and our IPAs in Kansas City and Nashville are
profitable. Our physician group contract management and
physician group solutions businesses are also performing well.
The Chapter 11 filing is an important step in PhyCor's plans to
stabilize its capital structure and to offer its creditors the
opportunity to participate in the Company's future growth. It
will allow us to focus on providing services to our customers
through our remaining, viable businesses, which have revenues in
excess of $250 million. The Chapter 11 case is not expected to
have any impact on our continuing operations, and medical claims
arising under our IPA obligations will be paid on a timely basis
in the ordinary course of business."
The Plan, as well as the Company's Disclosure Statement, are on
file with the Court and are available for review and copying
during the Court's normal business hours.
PhyCor is a medical network management company headquartered in
Nashville, Tennessee that develops and manages IPAs, provides
contract management services to physician groups, and provides
consulting services to independent medical organizations.
PHYCOR INC: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------
Lead Debtor: Phycor Inc.
30 Burton Hills Blvd., Ste 400
Nashville, TN 37215
Bankruptcy Case No.: 02-40278-pcb
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Manhattan Physicians IPA NO 1 INC 02-40276-pcb
North American Medical Management 02-40277-pcb
First Physician Care, Inc. 02-40279-pcb
First Physician Care Of Riverbend Inc. 02-40280-pcb
First Physician Care of South Florida Inc. 02-40281-pcb
First Physician Care Of Tampa Bay Inc. 02-40282-pcb
FPCNT Inc. 02-40283-pcb
IPA Management Associates LP 02-40284-pcb
NAMM-Texas Investments LP 02-40285-pcb
North American Medical Management Inc. 02-40286-pcb
Managed Care Management Associates Inc. 02-40287-pcb
Phycor-Texas Gulf Coast LP 02-40288-pcb
Phycor Management Corporation 02-40289-pcb
Phycor Management Corporation-Florida, 02-40290-pcb
Inc.
PMC Of Colorado Inc. 02-40291-pcb
Phycor of Northern Michigan Medical 02-40292-pcb
Management, In
Phycor Of Charlotte, LLC 02-40293-pcb
Phycor Of Coachella Valley, Inc. 02-40294-pcb
Phycor Of Conroe, LP 02-40295-pcb
Phycor Of Corsicana LP 02-40296-pcb
Phycor Of Dallas LP 02-40297-pcb
Phycor of Denver Inc. 02-40298-pcb
FHS, Inc. 02-40299-pcb
Front Range Medical Management Inc. 02-40300-pcb
Phycor Of Fort Smith Inc. 02-40301-pcb
Phycor of Irving LP 02-40302-pcb
Phycor of Jacksonville Inc. 02-40303-pcb
Phycor of Kentucky, LLC 02-40304-pcb
Phycor of Kingsport, Inc. 02-40305-pcb
Phycor-Lafayette LLC 02-40306-pcb
Phycor of Mesa Inc. 02-40307-pcb
Phycor of Minot, Inc. 02-40308-pcb
Phycor of Murfreesboro Inc. 02-40309-pcb
Phycor of Northeast Arkansas Inc. 02-40310-pcb
Phycor of Northern California Inc. 02-40311-pcb
Phycor of Northern Michigan Inc. 02-40312-pcb
Phycor of Olean Inc. 02-40313-pcb
Phycor of Richmond Inc. 02-40314-pcb
Phycor of Roanoke, Inc. 02-40315-pcb
Phycor of San Antonio LP 02-40316-pcb
Phycor of Vero Beach, Inc. 02-40317-pcb
Phycor of West Houston LP 02-40318-pcb
Phycor of Wichita Falls, LP 02-40319-pcb
St. Petersburg Medical Clinic, Inc. 02-40320-pcb
The Member Corporation Inc. 02-40321-pcb
Synerphy of Rome, Inc. 02-40322-pcb
HPMDIRECT, Inc. 02-40323-pcb
Type of Business: Medical network management company.
Chapter 11 Petition Date: January 31, 2002
Court: Southern District of New York (Manhattan)
Judge: Prudence Carter Beatty
Debtors' Counsel: Kayalyn A. Marafioti, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Tel: (212) 735-3000
Fax: (212) 735-2000
Total Assets: $28,851,499
Total Debts: $338,443,734
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Suntrust Bank In Suntrust's $209,344,038
Faye Mcquiston Capacity As
Corporate Trust Division Trustee, Claim of
PO Box 305110 Holders Of Phycor
Nashville, TN 37230-5110 Inc 4.5% Convertible
Tel: 615-748-4559 Subordinated
Debentures Due
Warburg Pincus Equity Series a Zero $110,413,919
Ptnrs LP Coupon
Attn: Joel Ackerman Convertible
466 Lexington Ave Subordinated
New York, NY 10017 Notes Due 2014
Tel: 212-878-9215 as of 01/15/02
Warburg Pincus Series A Zero $3,505,203
Netherlands Equity I Coupon
Attn: Joel Ackerman Convertible
466 Lexington Ave Subordinated
New York, NY 10017 Notes Due 2014
Tel: 212-878-9215 as of 01/15/02
Hrt Of Roanoke Inc Lease Guarantee $2,835,831
Attn: West, Roger O
3310 West End Ave Ste 700
Nashville, TN 37203
Tel: 615-269-8175
Lewis-Gale Clinic Reimbursement $2,414,811
Russell T Shores And Property
1802 Braeburn Dr Reallocation
Salem, VA 24153 Agreement Dated
Tel: 540-772-3400 March 31, 2000
Warburg Pincus Series A Zero $2,336,802
Netherlands Equity Ii Coupon
Attn: Joel Ackerman Convertible
466 Lexington Ave Subordinated
New York, NY 10017 Notes Due 2014
Tel: 212-878-9215 as of 01/15/02
Lime Street, Ltd Litigation $1,250,000
Jeffrey C Roth
1500 San Remo Ave Ste 176
Miami, FL 33146
Tel: 305-662-4141
Busch Drive Ltd Litigation $1,250,000
Jeffrey C Roth
1500 San Remo Ave Ste 176
Miami, FL 33146
Tel: 305-662-4141
Reeves, Derril Separation $666,802
2000 Tyne Blvd Agreement
Nashville, TN 37215
Tel: 615-665-3012
Warburg Pincus Series A Zero $584,200
Netherlands Equity Iii Coupon
Attn: Joel Ackerman Convertible
466 Lexington Ave Subordinated
New York, NY 10017 Notes Due 2014 as
Tel: 212-878-9215 of 01/15/02
Merril Lynch Out of Pocket Expenses $44,839
GE Capital Copier Rental $33,799
HCIA Inc License Fee $30,959
GE Capital Copier Rental $20,689
Earthlink Inc Trade Debt $16,537
Danka Office Imaging Copier Maintenance & $16,511
Service
Moodys Investors Svc Surveillance Fee $15,000
Ingenix 2000 Maintenance Fee $10,000
Danka Office Imaging Copier Rental $6,617
Company
Danka Office Imaging Copier Rental $6,532
Company
POLAROID CORP: Court Extends Removal Period through July 9, 2002
----------------------------------------------------------------
Judge Walsh extends the period within which Polaroid
Corporation, and its debtor-affiliates may remove judicial and
administrative proceedings pending in various courts or
administrative agencies through July 9, 2002 or 30 days after
the entry of an order terminating the automatic stay with
respect to any particular action sought to be removed. (Polaroid
Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
PROBEX CORP: Raises $1.25MM Financing through Private Placement
---------------------------------------------------------------
Probex Corp. (AMEX: PRB), an energy technology company, reported
that it has recently completed a private sale of common stock to
two parties resulting in gross proceeds to the Company of $1.25
million. The funds are being used for general corporate and
working capital purposes.
Probex Chairman, President and CEO, Charles M. Rampacek, noted
that: "We were very successful last year in raising sufficient
funding for our general corporate and working capital purposes,
and the most recent funding is a continuing affirmation of our
technology and business plan. We are continuing to seek
additional interim funding to sustain our activities until
project financing is completed. While we believe that we will be
successful in this effort, there is no guarantee that we will
obtain the necessary interim funding required or in a timely
manner."
Probex is a Dallas-based energy technology company that
specializes in the production of high quality lubricating base
oils and associated products from collected spent lubricating
oils. The Company's patented, environmentally beneficial
ProTerra(TM) technology has demonstrated unparalleled advantages
in the highly economic creation of premium quality base oils
capable of meeting new motor oil standards without creation of
waste by-products. The goal of Probex is to become a world
leader in the production of premium quality lubricating base
oils and associated products from collected spent lubricants
through timely commercialization of its ProTerra technology. At
June 30, 2001, the company had a working capital deficit of
almost $9 million.
For more information about Probex, visit the company's Web site
at: http://www.probex.com
SAKS INC: S&P Assigns BB+ to $700 Million Sr. Secured Bank Loan
---------------------------------------------------------------
Standard & Poor's assigned its double-'B'-plus rating to Saks
Inc.'s $700 million senior secured bank credit facility that
expires in November 2006.
At the same time, Standard & Poor's affirmed its double-'B'
corporate credit and senior unsecured debt ratings on Saks. The
preliminary double-'B' senior unsecured and preliminary single-
'B'-plus subordinated ratings on the company's shelf
registration were also affirmed. The outlook is negative.
The rating on the company's senior secured bank credit facility,
which is one notch higher than the corporate credit rating,
indicates that Standard & Poor's is reasonably confident that
the lenders will recover 100% of principal if a payment default
were to occur. This is based on the facility's good collateral
coverage, conservative advance rates, tight structure, and
Standard & Poor's belief that Saks' collateral is of high
quality. The facility, which is guaranteed by Saks' domestic
subsidiaries, is secured by a first priority lien on all of the
company's inventory. Borrowings are limited to an advance rate
of 70% of eligible inventory. Standard & Poor's assessment of
the value of the company's discrete assets considered the
liquidation values using outside appraisals. The security
interest in the collateral, coupled with the borrowing base
limitation for amounts outstanding under the revolving credit
facility, should provide a comfortable margin of collateral
coverage in the event of a liquidation.
For some time, Saks has performed poorly compared with its peers
despite its good presence in the department store sector through
a variety of traditional stores and its upscale Saks Fifth
Avenue chain. Standard & Poor's believes the company's ability
to recover sales and market share may be very difficult to
achieve given the weak economy and an intense competitive
environment.
The company's same-store sales have been disappointing since
March 2000, though they have recovered significantly since the
events of Sept. 11, 2001. Nevertheless, sharp drops in operating
income at its traditional department store group and a loss
versus a profit at its Saks Fifth Avenue business resulted in a
75% slump in operating earnings (before corporate expenses and
certain other items) for the first nine months of 2001. EBITDA
(unadjusted) covered interest only 1.5 times versus an already
depressed 2.6x the year before. As the economy worsened, Saks
began to take some positive steps to bolster its financial
condition, including adjustments in inventory, expense
reductions, and cutbacks in capital expenditures. Excess cash
flow from asset dispositions and from improved working capital
management has been used to reduce debt by more than $300
million since the beginning of 2001. As a result, the company
has no significant refinancing requirements until the revolving
credit facility matures in 2006.
Outlook: Negative
Although management is striving to improve the company's balance
sheet, the ratings could be lowered if Saks is not able to
stabilize its decline in sales, operating income, and credit
protection measures. Stabilization of these metrics could be
hindered by a worsening economic and retailing climate, or if
management's efforts to improve merchandising and marketing
fail to achieve the desired positive results.
SERVICE MERCHANDISE: Wants to Implement Wind-Down Employee Plan
---------------------------------------------------------------
Service Merchandise Company, Inc., and its debtor-affiliates
seek the Court's authority to implement an employee retention
program in connection with its winding-down of their business.
Paul G. Jennings, Esq., at Bass, Berry & Sims PLC, in Nashville,
Tennessee, tells the Court that the Wind-Down Retention Program
is "necessary to provide incentives to retain key employees
during the Debtors' wind-down of operations. According to Mr.
Jennings, the program will ensure an orderly monitization of
assets, motivate key employees to maximize the value of the
estate for the Debtors' creditors, and provide reasonable post-
employment protection.
The Wind-Down Retention Program has three components:
(a) retention compensation for Service Merchandise associates
whose service are deemed essential by senior management;
(b) appropriate performance incentive compensation to motivate
selected associates to achieve recoveries above the
midpoint of the range of dividends expected by creditors
and prompt resolution of claims reconciliation in order to
provide an initial distribution by the end of 2002; and
(C) a discretionary bonus pool payable in the discretion of
the Debtors' CEO.
Mr. Jennings emphasizes that the Wind-Down Retention Program is
separate and distinct from the store level retention program,
which is to be entirely funded as an expense of the Debtors'
going-out-of-business sales.
PricewaterhouseCoopers LLP assisted the Debtors in preparing
this Wind-Down Retention Program. Salient terms of the Wind-
Down Retention Program are:
(A) Retention Payment Plan:
The Debtors propose to provide retention compensation in the
form of enhanced base salary, calculated on a weekly basis,
for Service Merchandise associates whose services are deemed
essential by senior management. The Retention Payment Plan
includes only the Debtors' most valued corporate,
distribution, and sales support associates. These divisions
will be downsized from 1,005 employees to 554 by the end of
January 2002. The Debtors have selected only 188 of these
554 associates to participate in the Retention Payment Plan.
This Plan will cost the Debtors $4,400,000.
(B) Performance Incentive Plan
This replaces the Court-approved Annual Incentive Plan.
Eligibility is limited to 51 associates, who will remain with
the Company after June 28, 2002. The Performance Incentive
Plan is keyed to:
(1) the midpoint of the expected recovery percentage, and
(2) the timing of such distribution.
The performance measurement period is from January 4, 2002
through substantial completion of the Debtors' wind-down
process. The total amount payable under this Plan is keyed
to the timing of Substantial Completion and the Debtors'
performance level relative to the Employee Retention Plan.
The total amount of the target award opportunity at midpoint
Employee Retention Plan is approximately 1,400,000. A pool
amounting to $200,000 for each quarter percentage point
improvement in recoveries above the midpoint Employee
Retention Plan would be created. However, there is no
compensation if the Employee Retention Plan midpoint is not
achieved. An amount from $200,000 for a Substantial
Completion by December 31, 2003 up to $1,000,000 for a
Substantial Completion by June 30, 2002 would be added to the
incentive pool.
(C) CEO's Discretionary Pool:
The Debtors' CEO will be given a wind-down discretionary pool
of $500,000 (inclusive of the $327,000 remaining under
previously approved discretionary retention pools). The
approximate cost of the Discretionary Bonus Pool $173,000.
Mr. Jennings asserts that the cost associated with the adoption
of the Wind-Down Retention Program are more than justified by
the benefits that the Debtors will realize by boosting morale
and discouraging resignations among the employees, as well as by
motivating them to assist in the Debtors' wind-down and value
recovery efforts. "Without these incentives, the employees will
likely leave their current jobs, disturbing the orderly and
efficient wind-down of the Debtors' business," Mr. Jennings
says.
The Court must approve this Retention Program promptly to
maintain the integrity of the Debtors' workforce, Mr. Jennings
asserts. (Service Merchandise Bankruptcy News, Issue No. 25;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SOLECTRON CORP: Weak Operating Results Spur S&P's Low-B Ratings
---------------------------------------------------------------
Standard & Poor's assigned its double-'B-'plus rating to
Solectron Corp.'s $500 million senior unsecured note issue due
2009. At the same time, Standard & Poor's affirmed its
outstanding ratings on the company. The outlook is negative.
The ratings are based on weak operating performance, exposure to
depressed communications equipment end markets, and leveraged
financial profile. These concerns are only partially offset by
Milpitas, Calif.-based Solectron's top-tier position in the
electronic manufacturing services (EMS) industry, well-
established customer relationships with leading original
equipment manufacturers, and favorable long-term growth trends
towards outsourcing for larger EMS providers.
Operating performance deteriorated throughout 2001 as weak end
market demand (exacerbated by an aggressive acquisition strategy
that increased Solectron's manufacturing capacity) resulted in
low capacity utilization and unusually high inventory levels.
Operating margins for the first half of fiscal 2002 are likely
to be less than one-third of those for the same period of fiscal
2001, and profitability measures will be depressed over the
near term. Standard & Poor's believes the communications
equipment end market, which comprises more than half of
Solectron's sales, is likely to remain depressed for much of
2002. However, restructuring actions, to reduce headcount and
manufacturing capacity by more than one-third, are expected to
produce cumulative annualized cost savings exceeding $750
million and aid operating performance in the intermediate term.
Proceeds from the senior note offering and the previously issued
$1.15 billion ACEs Units are expected to repurchase about $615
million of an outstanding LYONs issue, which holders may require
the company to purchase on Jan. 28, 2002, and repay about $341
million of indebtedness assumed in the acquisition of C-MAC
Industries Inc.
Credit measures remain weak for the rating; pro forma for the
issue, debt to EBITDA for the 12 months ended Nov. 30, 2001,
exceeds 5 times. Still, cash flow generation is solid because
the liquidation of working capital and reduced fixed capital
needs resulted in more than $1.2 billion in free operating cash
flow during the three quarters ended Nov. 30, 2001. Pro forma
for the issue, the company's cash balance will exceed $3.5
billion. Continued solid cash flow generation and substantial
cash balances moderate the credit impact of weaker operating
measures over the near term. Standard & Poor's believes the
financing actions provide sufficient financial flexibility to
meet any near-term put on its outstanding LYONs issues.
Outlook: Negative
Difficult industry conditions are likely to challenge
management's efforts to improve operating performance and credit
measures, which are weak for the current rating, over the near
term.
Rating Assigned
Solectron Corp.
$500 mil. senior unsecured notes BB+
Ratings Affirmed
Solectron Corp.
Corporate credit rating BB+
Senior secured bank loan BB+
Senior unsecured debt BB+
SUNRISE ASSISTED: S&P Rates $100M 5.25% Subordinated Notes at B-
----------------------------------------------------------------
Standard & Poor's assigned its single-'B'-minus rating to
Sunrise Assisted Living Inc.'s $100 million 5.25% convertible
subordinated notes due Feb. 1, 2009, (offered under rule 144A
with registration rights and with a purchase option for an
additional $25 million). Proceeds will be used to repay the
existing 5.5% convertible subordinated notes due 2002. The
rating on these notes will be withdrawn when they are redeemed
on February 12, 2002.
At the same time, Standard & Poor's affirmed its single-'B'-plus
corporate credit and single-'B'-minus subordinated debt ratings.
The outlook is positive.
The speculative-grade ratings for Sunrise reflect the company's
success as a leading provider in the assisted-living segment of
the long-term care market, offset by its aggressive-debt usage.
The company now operates 183 residences in the U.S. and the
U.K., with a resident capacity of over 15,000 and a pipeline of
60 properties under construction or in various stages of
development.
Fairfax, Virginia-based Sunrise has grown rapidly as a provider
of services to individuals who require assistance with certain
activities of daily living, but do not require the subacute care
provided by a skilled-nursing facility. Sunrise develops and
constructs special-purpose buildings in upscale communities in
the top metropolitan markets that can afford this service.
Despite rapid expansion, the company continues to post same-
store occupancy rates of more than 90% and new facility fill-up
rates of 40%, contributing to net income.
Attractive site locations and the company's policy of owning and
building, rather than leasing, have provided Sunrise the ability
to sell significantly appreciated assets to fund growth. Still,
startup development expenses and large capital requirements
currently leave Sunrise with a small, but growing, internal
cash-generating ability relative to a heavy debt load. Cash on
hand, bank lines, mortgage financing, and the new notes should
provide funding for future growth and alleviate near-term
maturity concerns.
Outlook: Positive
The continuation of favorable operating performance and the
additional flexibility afforded by expanded asset sales over the
intermediate term could lead to a higher rating.
TRANS WORLD: Court Sets Plan Confirmation Hearing for March 21
--------------------------------------------------------------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11
)
TRANS WORLD AIRLINE, INC., et al., ) Case No. 01-00056 (PJW)
) (Jointly Administered)
)
Debtors. )
NOTICE OF: (A) HEARING TO CONFIRM LIQUIDATING PLAN OF
REORGANIZATION; (B) OBJECTION AND VOTING DEALINES; AND
(C) SOLICATATION AND VOTING PROCEDURES
PLEASE TAKE NOTICE THAT on January 10, 2002 at 10:30 a.m.
prevailing Eastern time, a hearing was held by the United States
Bankruptcy court for the District of Delaware to consider the
motion of the above-captioned debtors and debtors in possession
(collectively, the "Debtors") seeking entry of an Order (A)
Approving Disclosure Statement; (B) Scheduling Hearing to
confirm Liquidating Plan of Reorganization; (C) Establishing
Objection Deadline; (D) Approving Form of Ballots, Voting
Deadline and Solicitation Procedures; and (E) Approving Form of
Notice (the "Solicitation Procedures Order"). In the
Solicitation Procedures Order, which was entered on January
17,2002, the Bankruptcy court scheduled certain hearings and
objection deadlines and approved certain solicitation and voting
procedures with respect to a proposed Liquidating Plan of
Reorganization (the "Plan"), all as set forth below, in the
Solicitation Procedures Order, the Bankruptcy Court also
approved the adequacy of the Disclosure Statement for the Plan
(the "Disclosure Statement").
PLEASE TAKE FURTHER NOTICE THAT on March 21, 2002 at 1:30
p.m. prevailing Eastern time, a hearing (the "Plan confirmation
Hearing") to confirm the Plan will commence before the Honorable
Peter J. Walsh, United States Bankruptcy Court for the district
of Delaware, 844 N. King Street, Wilmington, Delaware 19801 (the
"Bankruptcy Court"). The Plan confirmation Hearing may be
continued from time to time by announcing such continuance in
open court or otherwise, and the Plan may be modified, if
necessary, pursuant to 11 U.S.C. Sec. 1127 before, during or as
a result of the Plan confirmation Hearing, all without further
notice to parties in interest. The Court, in its discretion and
prior to the Plan Confirmation Hearing, may put in place
additional procedures governing the Plan Confirmation Hearing.
PLEASE TAKE FURTHER NOTICE THAT the Court has established
March 1, 2002at 4:00 p.m. prevailing Eastern time, as the last
date and time for filing and serving objections to the
confirmation of the Plan (the "Plan Objection Deadline").
Objections not filed and served by the Plan Objection Deadline
in the manner set forth as follows may not be considered by the
court. In order to be considered by the Court, objections, if
any, to the Plan must be in writing and must be: (a) filed so as
to be actually RECEIVED by the Clerk of the United States
Bankruptcy Court for the District of Delaware, Marine Midland
Plaza, 842 market Street, Wilmington, Delaware 19801 by 4:00
p.m. prevailing Eastern time on or before the Plan Objection
Deadline; and (b) served on the following parties (collectively,
the "Notice Parties") so that they are actually RECEIVED by
Ellis, 200 East Randolph Drive, Chicago, IL 60601, Attn: James
H.M. Sprayregen, Esq. And David R. Seligman, Esq.; (2)
Pachulski, Stang, Ziehl, Young and Jones P.C., 919 North Market
Street, 16th Floor, PO Box 8705, Wilmington, Delaware 19899-8705
(Courier 19801), Attn: Laura Davis Jones, Esq. And Bruce
Grodshall, Esq.; (3) United States Trustee's Office, U.S. Dept.
of Justice, 844 King Street, Suite 2313, Wilmington, Delaware
19801, Attn: Mark Kenney, Esq.; (4) Weil Gotshal & Manges LLP,
767 Fifth Avenue, New York, New York 101053, Attn: Alan B.
Miller, Esq.; (5) Richards Layton & Finger, P.A., One Rodney
Square, P.O. Box 551, Wilmington, Delaware 19899, Attn: mark D.
Collins, Esq.; (6) Blank Rome Comisky & McCauley, LLP, One Logan
Square, Philadelphia, Pennsylvania 19103-6998, Attn: Thomas E.
Biron, Esq.; (7) Blank Rome Comisky & McCauley, LLP, 405
Lexington Avenue, New York, New York 10174, Attn: Michael
Brownstein, Esq.; (8) Blank Rome Comisky & McCauley LLP, Chase
Manhattan Center, 1201 Market Street, Suite 800, Wilmington,
Delaware 19801, Attn: Michael D. DeBaecke, Esq. Further, the
Court will consider only written objections filed and served by
the Plan Objection Deadline. All objections must state with
particularity the grounds for such objection. Objections not
timely filed and served in accordance with the provisions of
this Notice shall be overruled.
PLEASE TAKE FURTHER NOTICE THAT in the Solicitation
Procedures Order, the Court approved of certain procedures with
regard to soliciting acceptances or rejections of the Plan. Any
party in interest wishing to obtain a copy of the Solicitation
Procedures Order or having questions about solicitation
procedures may request such information by writing to Bankruptcy
Management corporation, 1330 East Franklin Avenue, El Segundo,
California 90245 ("the Information Agent") or by telephone at
(888) 909-0100. Pursuant to the Solicitation Procedures Order,
the Debtors have distributed certain materials to among others,
those parties entitled to vote to accept or reject the Plan (the
"Solicitation Package"), which includes; (1) the Disclosure
Statement; (2) the Plan; (3) the appropriate ballot (with voting
instruction); (4) this Notice containing relevant dates and
deadlines; (5) the Solicitation Procedures Order, and (6) a pre
addressed return envelope. Certain holders of claims who are
not entitled to vote on the Plan may receive Solicitation
Packages without a ballot, and certain holders of equity
interest who are not entitled to vote may receive this Notice
and a Notice of Non-Voting Status (Equity Interest). The
Debtors may include additional materials in the Solicitation
Package, such as recommendation letters from various
constituencies. In the voting instructions contained in each
ballot, creditors will be instructed to completed all required
information on the ballot, execute the ballot, and return the
completed ballot to the Information agent such that the ballot
is received by the Information Agent by 4:00 p.m., prevailing
Eastern time, on or before February 25, 2002 (the "Voting
Deadline"). Except to the extent the Debtors so determine, or
as permitted by the Court, ballots received after the Voting
Deadline will not be accepted or counted by the Debtors in
connection with the Debtors' request for confirmation of the
Plan. Any failure to follow the voting instructions included
with the relevant ballot may disqualify that ballot and the
corresponding vote.
PLEASE TAKE FURTHER NOTICE That claims or equity interest
that are subject to an unresolved objection at the time of the
Plan confirmation Hearing, filed in accordance with the
Solicitation Procedures Order, are not entitled to vote on the
Plan. If a holder of a claim or equity interest disagrees with
the Debtors' classification of, or objection to, a claim or
equity interest and believes that such holder should be entitled
to vote on the Plan, then the holder must file with the Court
and serve on the Debtors and the Official Committee of Unsecured
Creditors (the "OCUC") a motion (with all evidence in support
thereof) for an order pursuant to Bankruptcy rule 3018 (a) (a
"Rule 3018(a) Motion") temporarily allowing such claim or equity
interest in a different amount or in a different class for
purposes of voting to accept or reject the Plan, and such motion
must be adjudicated prior to the Plan Confirmation Hearing.
Creditors may contact the Information Agent to receive a ballot
of any claim for which a proof of claim and Rule 3018(a) Motion
has been timely filed. Rule 3018(a) Motions that are not timely
filed and served in the manner as set forth above shall not be
considered.
PLEASE TAKE FURTHER NOTICE THAT any holder of a claim
against the Debtors or their estates of a kind specified in 11
U.S.C. Section 507 who, despite the performance of the
Solicitation Procedures approved in the Solicitation Procedures
Order, does not object to a plan or reorganization confirmed by
the Court that treats such holder's claim other than as provided
in 11 U.S.C. Section 1129(a)(9), shall be deemed to have agreed
to such different treatment, as authorized in 11 U.S.C. Section
1129(a)(9).
PLEASE TAKE FURTHER NOTICE THAT all documents that are
filed with the Bankruptcy Court may be reviewed during regular
business hours (8:30 a.m. to 4:00p.m. weekdays, except legal
holidays) at the United States Bankruptcy Court for the District
of Delaware, Marine Midland Plaza, 824 Market Street,
Wilmington, Delaware 19801. Alternatively, the docket can be
accessed over the Internet at http://www.deb.uscourts.gov If
you have any questions regarding materials relating to the Plan
or the Disclosure Statement, or if you require additional
information concerning the procedures for voting to accept or
reject the Plan, or if you believe you are entitled to receive a
Solicitation Package and are not otherwise listed on the
Debtors' Schedules, please contact the Information Agent.
Wilmington, Delaware
Date: January 17, 2002
The Debtors are the following entities: Trans World Airlines,
Inc., Ambassador fuel Corporations, LAX Holding Company, Inc.,
Mega advertising Inc., Northwest 112th Street Corporation, The
TWA ambassador Club, Inc., Trans World Computer Services, Inc.,
Transcontinental & Western Air, Inc., TWA Aviation, Inc., TWA
Group, Inc., TWA Standards & Controls, Inc., TWA Stock Holding
Company, TWA-D.C. Gate company, Inc., TWA-LAX Gate Company., TWA
Logan Gate Co., Inc., TWA-NY/NJ Gate Company, Inc., TWA Omnibus
Gate Company, Inc., TWA San Francisco Gate Company, Inc., TWA
Hanger (2 Holding Company, Inc., Ozark Group, Inc., TWA Nippon,
Inc., TWA employee Services, Inc. TWA Getaway Vacations, Inc.,
Trans World Express, Inc., International Aviation Security Inc.,
Getaway Management Services, Inc., The Getaway Group (UK) Inc.
USEC INC: S&P Keeps Watch as Sourcing Negotiations Continue
-----------------------------------------------------------
Standard & Poor's placed its ratings on USEC Inc. on CreditWatch
with negative implications.
The CreditWatch listing reflects the still-uncertain outcome of
USEC's protracted efforts to negotiate a new sourcing contract
with its Russian supplier, Techsnabexport Co. Ltd.(Tenex).
Standard & Poor's also has concerns regarding doubts that have
been raised about the company's ability to sell a significant
portion of USEC's natural uranium inventory. In addition,
Standard & Poor's intends to broadly reassess USEC's prospects
amid continuing challenging industry dynamics.
USEC acts as a selling agent of the U.S. government in
purchasing from Tenex enriched uranium derived from dismantled
Russian weapons and reselling it for use as fuel in commercial
nuclear power plants. The existing long-term agreement requires
USEC to purchase material at a cost that sometimes has been
higher than its own incremental enrichment cost, while also
effectively forcing USEC to curtail a significant portion of its
internal enrichment operations. In May 2000 USEC and Tenex
reached an agreement in principle to revise the contract to put
pricing terms on a market basis beginning in the 2002 calendar
year. However, delays in U.S. and Russian government review
and approval, along with other factors, have delayed
finalization of the new contract, although USEC has indicated
that negotiations are continuing.
In addition, USEC disclosed early in 2001 that a significant
portion of its natural uranium inventory--liquidation of which
has been an important source of cash flow--may be unmarketable
due to contamination. If this proves to be the case, USEC
expects the U.S. Department of Energy, which had transferred
the material to USEC, to compensate the company. USEC has
indicated that testing of the inventory and negotiations with
the Department of Energy are continuing.
Higher nuclear reactor operating rates and the effect of
successful trade cases that USEC filed against two European
competitors have helped boost the price of separative work units
(SWU, the standard unit of measure for uranium enrichment) by
approximately 20% since early 2000. Also, USEC has
improved its cost position by consolidating its enrichment
operations into a single production facility, and at the same
time significantly reducing its manpower. Even so, USEC's
profitability has deteriorated to relatively weak levels. USEC's
earnings prospects could be severely affected if the revised
contract with Tenex is not finalized soon, or if the company
does not receive full compensation for any uranium inventory
deemed unfit for sale.
As part of its CreditWatch review, Standard & Poor's will
monitor developments relating to these two matters. Standard &
Poor's will also seek additional input from management regarding
USEC's strategies for coping with excess industry production
capacity, volatile SWU and uranium pricing conditions, and the
company's long-range plans for enhancing its enrichment
technology. Standard & Poor's intends to resolve its review
within three months.
Ratings Placed on CreditWatch
With Negative Implications
USEC Inc. Ratings
Corporate credit rating BB+
Senior unsecured debt BB+
USG CORP: Sustains Net Loss of $9MM on $822MM Sales in Q4 2001
--------------------------------------------------------------
USG Corporation (NYSE: USG) today reported fourth quarter net
sales of $822 million and a net loss of $9 million. Net sales
and net earnings were $3,296 million and $16 million,
respectively, for all of 2001.
The net loss for the fourth quarter included pretax charges of
$42 million related to provisions for impairment associated with
two manufacturing facilities and expenses for plant and line
shutdowns, and a workforce reduction. Excluding those charges,
USG Corporation would have had fourth quarter net earnings of
$26 million.
During 2001, out-of-control asbestos litigation continued,
United States Gypsum Company chose to resolve its asbestos
liability issue in Bankruptcy Court, the U.S. economy fell into
recession and selling prices for gypsum wallboard fell to the
lowest levels in nearly a decade.
"I am proud of our accomplishments during this trying period,"
said USG Corporation Chairman, President and CEO, William C.
Foote. "USG dealt with these challenges by staying focused on
its businesses and executing its strategies and operating plans
to position the company for future profitability and growth. We
served our customers with the industry's best products. We
achieved record shipments in several product lines. We operated
safely and efficiently, enabling us to better control costs. We
also took a big step toward resolving the asbestos liability at
United States Gypsum Company in a fair and equitable manner when
USG Corporation and its principal domestic subsidiaries filed to
reorganize under Chapter 11 of the Bankruptcy Code. This action
should enable us to conclusively resolve our asbestos liability
while protecting the long-term value and leadership of our
businesses."
For 2002, USG is cautious in its outlook because several factors
threaten to weaken the housing market, the largest market for
USG products and services. The economy is in a recession. The
unemployment rate has been rising. Consumer confidence and
spending have shown signs of weakness. Mortgage rates, which
fell during 2001, have stabilized and may begin to rise. Beyond
housing, commercial construction, another important market for
USG, is expected to decline again this year.
"We expect to be tested again in 2002, but we are prepared.
Operationally, our focus is on managing the basics, including
customer service, production costs, overhead and asset
utilization. Regarding our Chapter 11 reorganization, we plan
to continue moving our case forward in an efficient manner,
consistent with our goal of achieving a fair, comprehensive and
final resolution of our asbestos liability," said Foote.
North American Gypsum
USG's North American Gypsum business recorded net sales of $505
million and operating profit of $58 million in the quarter,
increases of 1 percent and 87 percent, respectively, from the
fourth quarter of 2000. The improved results reflect record
fourth quarter shipments of Sheetrockr brand gypsum wallboard
and joint compound and Durockr brand cement board. A decline in
the selling price of gypsum wallboard was the largest factor
detracting from results in the period.
United States Gypsum Company recorded fourth quarter 2001 net
sales of $460 million and operating profit of $46 million,
increases of 1 percent and 171 percent, respectively, versus the
same period in 2000. Increased shipments of Sheetrock brand
gypsum wallboard, lower costs and overhead, and record sales of
joint treatment and cement board products contributed to the
improved results.
U.S. Gypsum's shipments of gypsum wallboard for the quarter
totaled 2.52 billion square feet, the highest level of fourth
quarter shipments ever achieved by the company, and a 6 percent
increase versus fourth quarter 2000 shipments of 2.38 billion
square feet. Each month during the quarter, shipments exceeded
those achieved in the same month last year. The company
attributes most of this strength to a strong new housing market
and mild weather in most of the U.S.
U.S. Gypsum's wallboard plants operated at 92 percent of
capacity in the fourth quarter compared to 87 percent of
capacity in the fourth quarter of 2000. The company estimates
that the industry as a whole operated at 82 percent of capacity
during the quarter.
In November, the company announced plans to permanently close a
wallboard plant in Fremont, Calif. The company is also prepared
to idle a production line in Jacksonville, Fla., and reduce
operating rates at several other facilities if warranted by
market conditions. With the closure of the California plant,
the company will have closed seven old production lines, with a
total capacity of approximately 2 billion square feet, since it
began a strategic modernization and expansion of its wallboard
capacity a few years ago. This program, which includes six new,
low-cost facilities that produce Sheetrock brand gypsum
wallboard, has improved the company's service position and
strengthened its low-cost position at a time when the industry
continues to face excess capacity conditions.
U.S. Gypsum's nationwide average realized price of wallboard was
$96.22 per thousand square feet during the fourth quarter, 3
percent lower than the same period a year ago, but 17 percent
higher than the third quarter of 2001. Pricing, which began
improving after reaching a trough level of about $68 per
thousand square feet in June, reached a peak of $98 in October
following implementation of several price increases over the
summer and early fall. Prices have since softened, in line with
normal seasonal patterns, to an average of $94 in December.
Manufacturing costs for wallboard in the fourth quarter declined
versus the fourth quarter in 2000, primarily due to lower energy
costs. Wallboard costs also benefited from improved operating
efficiencies from the closure of old facilities and the
optimization of new plants. Unit costs were slightly higher in
the fourth quarter compared to the previous quarter largely due
to seasonally lower volume. Fourth quarter volume, while
strong, was 6 percent below the record level achieved in the
third quarter.
The gypsum division of Canada-based CGC Inc. reported fourth
quarter 2001 net sales of $52 million, an increase of 11
percent. Operating profit of $7 million was a decrease of 13
percent compared with last year's fourth quarter results. While
gypsum wallboard shipments were up 13 percent versus last year's
fourth quarter, lower selling prices resulted in a decline in
profitability.
Worldwide Ceilings
USG's Worldwide Ceilings business reported fourth quarter 2001
net sales of $149 million, a decrease of 11 percent from the
fourth quarter of 2000. Operating profit was $5 million compared
with $17 million for last year's fourth quarter, a decline of 71
percent. The lower results are primarily due to a worsening
commercial construction market in the U.S. and reduced
profitability in Europe.
USG Interiors' operating profit for the fourth quarter was $7
million, a decrease of 53 percent from the fourth quarter of
2000. The decline in profitability was primarily due to lower
shipments. Volumes declined an average of 15 percent in every
major product line compared to the same period last year.
Demand for ceiling products has fallen in concert with a
significant slowdown in new commercial construction and
commercial remodeling activity. Contributing to the slowdown
have been white-collar job layoffs and reduced corporate
spending that have caused office vacancy rates to rise in many
markets. Demand for ceiling products is not expected to improve
in 2002 so the company is acting to reduce its costs and excess
capacity. This includes the recent closure of the oldest and
least efficient of the three ceiling tile production lines at
its Greenville, Mississippi plant.
The ceilings division of Canada-based CGC had a $1 million
profit compared to breakeven performance in the fourth quarter
of 2000. USG International had a loss of $3 million compared to
a $2 million profit in the fourth quarter of 2000, primarily due
to reduced volumes and higher costs in Europe. To improve
profitability, the European business was restructured during the
quarter.
Building Products Distribution
L&W Supply, USG's building products distribution business,
reported fourth quarter 2001 net sales of $285 million, down 6
percent from the fourth quarter of 2000. Operating profit of
$11 million in the quarter was 50 percent below the level of the
fourth quarter 2000.
Sales results reflected fourth quarter wallboard shipments that
were stronger than last year's, but at a lower average selling
price. Most of the decline in operating profit was attributable
to lower margins on wallboard, L&W's largest product line. Also
contributing to lower sales and profits in the quarter was
softness in the commercial construction market, where L&W sells
products such as wallboard, ceilings, steel studs and
insulation.
Anticipating a challenging operating environment in 2002, L&W is
focusing on growth opportunities in the most profitable markets,
opportunities to reduce costs and optimizing asset utilization.
As part of this plan, nine locations were closed or consolidated
during the fourth quarter. At year-end, L&W Supply operated 180
locations across the United States.
Fourth quarter 2001 selling and administrative expenses
increased 5 percent, or $4 million year-over-year, principally
due to expenses for a bankruptcy court-approved employee
retention program. For the year 2001, selling and
administrative expenses declined 10 percent versus 2000 because
of cost-reduction initiatives undertaken during the year.
As previously mentioned, the fourth quarter results included
pretax charges of $42 million related to provisions for
impairment and expenses for a restructuring plan. This included
$30 million of impairment charges related to the Aubange,
Belgium, ceiling tile plant and the Port Hawkesbury, Nova
Scotia, gypsum fiber panel plant. In addition, there was a
pretax restructuring charge of $12 million related to costs
involved with a workforce reduction program, reduced operations
at some production facilities and the closure of plants.
In the fourth quarter of 2000, the Corporation recorded a pretax
charge of $50 million related to a restructuring plan that
included a salaried workforce reduction and the shutdown of
gypsum wallboard manufacturing lines at U.S. Gypsum's plants
located at Gypsum, Ohio, Oakfield, N.Y., and Fort Dodge, Iowa.
An additional restructuring-related charge of $4 million was
included in cost of products sold for the writedown of certain
affected inventory.
As of December 31, 2001, USG Corporation had cash and cash
equivalents totaling $493 million on a consolidated basis, and
there were no borrowings under a $350 million debtor-in-
possession financing facility that the Corporation has arranged
with JP Morgan Chase.
USG Corporation is a Fortune 500 company with subsidiaries that
are market leaders in their key product groups: gypsum
wallboard, joint compound, cement board and related gypsum
products; ceiling tile and grid; and building products
distribution. For more information about USG Corporation, visit
the USG home page at http://www.usg0.com
DebtTraders reports that USG Corporation's 8.500% bonds due 2005
(USG1) are trading in the high 90s. For real-time bond pricing,
see http://www.debttraders.com/price.cfm?dt_sec_ticker=USG1
W.R. GRACE: Seeks Approval to Acquire Addiment Inc. for $6.5MM
--------------------------------------------------------------
W. R. Grace & Co., and its debtor-affiliates ask Judge Judith
Fitzgerald's authority and approval for them to acquire
substantially all of the assets of Addiment Incorporated. The
Debtors explain that they engage in specialty chemicals and
materials businesses operating on a worldwide basis. The
Debtors predominantly operate through two business units:
Davison Chemicals and Performance Chemicals.
The Debtors' Masonry Business
The Debtors' Specialty Construction Chemicals division of its
Performance Chemicals unit produces and sells concrete and
masonry admixtures and cement additives on a worldwide basis,
primarily to the nonresidential construction industry. For over
50 years, the Debtors have pioneered the science of cement and
concrete technologies and have developed a line of admixtures to
enhance the production and quality of masonry products, SCC's
masonry admixtures improve the water resistance, freeze-thaw
durability and other qualities of masonry wall systems, concrete
blocks and pavers. The admixtures also improve production
efficiencies for masonry product manufacturers.
The Debtors have experienced significant annual revenue growth
with their masonry admixture sales in North America over the
past 5 years. In fact, masonry admixtures has been the fastest
growing segment of SCC's business, particularly due to the
popularity of new block products such as segmental retaining
walls and pavers. SCC's strategy for future growth in North
America looks to new product introductions and enhancements and
to acquisitions for further penetration into such fast-growing
markets.
Addiment's Business
Addiment Incorporated, a wholly-owned subsidiary of Lehigh
Portland Cement Company, provides a compelling masonry admixture
acquisition opportunity for the Debtors. Addiment is a small,
but significant manufacturer of masonry admixtures in the United
States that began manufacturing in the 1980's. Over the last
five years, Addiment has had an average annual revenue growth
rate of 16%, and in 2001, its net revenues were approximately
$6.1 million. In addition, nearly 50% of Addiment's sales are to
the paver segment, which the Debtors anticipate will grow at a
10% annual average growth rate over the next 5 years. Addiment's
greatest market penetration is in the southern United States,
where the use of architectural concrete is concentrated in this
country.
The Purchase
The Debtors propose to enter into an asset purchase agreement to
acquire the masonry admixture business of Addiment, the
company's only business, and substantially all of Addiment's
assets upon this Court's approval of the Motion. Specifically,
the Debtors intend to purchase the formulations, technology,
know-how, equipment, customer lists, trade accounts receivable,
inventories, trademarks and goodwill of Addiment. Once acquired,
these assets will be relocated to the Debtors' Milwaukee,
Wisconsin plant, and offers of employment will be made to
certain of Addiment's current employees. Addiment, however, will
retain all severance and employee benefit liabilities to its
employees. Further, the Debtors will not acquire any real estate
in the transaction or assume any employee benefit plans or
indebtedness.
The purchase price for the acquisition is $6.5 million in cash,
which would be paid at closing, subject to any adjustments. For
example, there will be a post-closing adjustment for receivables
and inventory, which are currently valued at $1.2 million and
$500,000 respectively, as of June 30,2001. Thus, if the value of
Addiment's inventory or receivables has decreased as of the
closing of the transaction, the purchase price will be credited
accordingly, and conversely, if the value increased, the
purchase price will be increased accordingly.
The Debtors expect that no pre-closing liabilities or
obligations of Addiment will be assumed by the Debtors, and that
Lehigh and Addiment would indemnify the Debtors for pre-closing
liabilities, including those relating to any potential
environmental issues. The Debtors will not conduct any
activities in any former Addiment facilities.
The Debtors' Business Judgment
Section 363 of the Bankruptcy Code provides that a debtor "after
notice and a hearing, may use, sell, or lease, other than in the
ordinary course of business, property of the estate." In this
Circuit, the Court should approve a debtor's use of assets
outside the ordinary course of business if the debtor can
demonstrate a sound business justification for the proposed
transaction. Under this rule, courts look at four factors to
determine whether the proposed transaction should be approved:
1) whether a sound business reason exists for the proposed
transaction; 2) whether fair and reasonable consideration is
provided; 3) whether the transaction has been proposed and
negotiated in good faith, and 4) whether adequate and reasonable
notice is provided. The Debtor's proposed purchase of
Addiment's assets meet each of these requirements.
(1) Sound Business Reasons. Several sound business
reasons exist for the proposed acquisition of Addiment's
business and assets by the Debtors. First, the acquisition fits
well with the Debtors' existing masonry business and provides
immediate sales growth (and sales growth potential) in the fast-
growing paver segment. Indeed, SCC's sales into the paver
segment will more than double immediately after the closing, and
the Debtors will be able to enhance that growth in several
segments of the masonry admixture sector through the synergies
provided by the Debtors' manufacturing, technical service and
research and development capabilities. In particular, SCC's
domestic masonry sales force is comprised of more than 50
people, which the Debtors anticipate will be a key element of,
and critical advantage with, the Addiment acquisition.
(2) Fair and Reasonable Consideration. The proposed
purchase price is economically attractive to the Debtors.
Addiment's technology, know-how and already strong sales,
combined with the Debtors' profitable operations, will allow the
Debtors' revenues, profits and market share to grow. Moreover,
the Debtors expect that the acquisition will be cash accretive
to the Debtors' estates within the first year following the
closing of the transaction, thereby increasing the value of
their estates for the benefit of all stakeholders. The Debtors
expect that the acquisition will triple the pre-tax earnings of
Addiment's business in 2003 through a combination of sales
synergies and consolidation of overheads.
The $6.5 million purchase price is reasonable and fair
consideration for the Addiment masonry admixture business,
whether viewed as a multiple of sales or earnings. The Debtors
expect additional sales (beyond the combined sales of the stand-
alone companies) of $1.7 million per year within 2 years by
leveraging the combined strengths of products and customer
relationships of the companies, and they anticipate immediate
cost savings of $1.0 million per year through the consolidation
of overhead. Accordingly, the Debtors believe that the purchase
price is fair and reasonable considering the economic benefit to
the Debtors' Estates.
(3) Good Faith. The Debtors and Addiment have negotiated
the proposed sale/purchase of Addiment's assets at arm's-length
and in good faith. The Debtors also believe that the terms of
the proposed transaction are fair to the Debtors.
(4) Adequate and Sufficient Notice. In satisfaction of
the requirements of rule 2002 of the Bankruptcy Rules, the
Debtors intend to serve copies of this Motion to all parties.
Summary
The Debtors have years of experience in developing,
manufacturing and selling masonry admixtures, and have over 50
years' experience in the research and development of cement and
concrete technologies. The Debtors will leverage their extensive
R&D, technical service, manufacturing expertise and large sales
force across the line of Addiment's products, and will provide
their state-of-the-art technology to the fast-growing paver
segment. Moreover, the Debtors have a long history of successful
"bolt-on" acquisitions of this type. Since December, 1999, the
Debtors and their non-debtor subsidiaries and affiliates have
completed numerous "bolt-on" acquisitions of various business
sizes. These types of acquisitions axe, and will continue to be,
integral to the Debtors' growth strategy, and give the Debtors
access to technologies and markets that they could not develop
internally.
In light of the foregoing, the Debtors have determined in their
business judgment that the acquisition of Addiment is fair and
reasonable. The Debtors believe that the proposed purchase is in
the best interest of their estates, grounded in sound business
judgment and satisfies the "sound business judgment" test for
the use of assets outside the ordinary course of business under
the Bankruptcy Code. (W.R. Grace Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
WARNACO GROUP: Wants Lease Decision Period Extended to July 31
--------------------------------------------------------------
The Warnaco Group, Inc., and its debtor-affiliates ask Judge
Bohanon to extend, to July 31, 2002, their time to decide
whether to assume, assume and assign, or reject unexpired leases
of non-residential real properties. The unexpired leases
consist of:
* 147 retail store leases; and
* 33 leases for properties used as administrative office,
manufacturing facility, distribution facility or warehouse
and storage facilities.
Kelly A. Cornish, Esq., at Sidley Austin Brown & Wood LLP, in
New York, says that assumption or rejection of the non-
residential property leases is anchored on the Debtors' plan of
reorganization. However, the plan has not been finalized yet,
explains Ms. Cornish. In further support the Debtors' request
for extension, Ms. Cornish relates:
(a) it is still uncertain if the Leases will be needed
ultimately by the Debtors or the purchasers of the
Debtors' business units;
(b) the large number of Leases, which, if disposed in a
inappropriate manner, could have substantial economic
impacts on the Debtors' estates;
(c) that with the rapidly changing real estate market for
the Leases, it is still too early for the Debtors to
make decisions regarding the assumption and assignment
of the Leases; and
(d) the Debtors continue to pay the monthly rentals.
Objections
(1) The Macerich Company, et al.
The Macerich Company, The Forbes Company, and Donahue Schriber
want the Court to shorten the requested extension to May 1,
2002.
The Debtors lease these premises:
The Macerich Company Centers
-- Arden Fair Mall in Sacramento, California (Store 4012)
-- Broadway Plaza in Walnut Creek, California (Store 4079)
-- Santa Monica Place in Santa Monica, California (Store 4070)
-- Village at Corte Madera in California (Store 4080)
The Donahue Schriber Center
-- Glendale Galleria in Glendale, California (Store 4065)
The Forbes Company Centers
-- The Gardens in Palm Beach Gardens, Florida (Store 4178)
(lease termination may be pending)
-- Somerset Collection North in Troy, Michigan (Store 4102)
By May 2002, Brian D. Huben, Esq., at Katten Muchin Zavis, in
New York, notes, the Debtors' cases will be pending for almost
one year -- which is more than adequate time to assess the value
of the Landlords' leases. Mr. Huben's clients ask the Court to
impose these conditions on any extension order:
a. The extension is limited to May 1, 2002;
b. In the event the Debtors default on any obligation under
either the Leases or the order entered on the Lease Extension
Motion, the defaulted lease shall be deemed rejected at
Landlord's option if the default thereunder is not cured
within 10 days after receipt of written notice from the
Landlord or its counsel, to the Debtors or their counsel;
c. If either of the Leases is rejected, the Debtors shall,
within 5 days after the effective rejection date of the
lease, turn over possession of the premises to Landlord;
d. The Debtors shall provide access and keys to the Landlord for
any closed store and allow that Landlord, in its discretion,
to decorate the windows of the closed store or to barricade
the closed store without such action constituting surrender
of the premises or rejection of the lease;
e. The Debtors shall leave any closed store in "broom clean"
condition with all goods, merchandise, trade fixtures and
signs removed, and if in default of said removal, within 15
days after the rejection date of the lease, any
remaining property shall be deemed abandoned to Landlord,
with Landlord having the right to dispose of the personal
property without any liability with regard to disposal; and
f. The Debtors shall be prohibited from advertising or
conducting any auction, liquidation, store closing, going-
out-of-business, or bankruptcy sale of any kind except as
authorized by the Court following a motion and hearing.
(2) BP Prucenter Acquisition LLC
BP Prucenter Acquisition LLC is the landlord for Store #4005 at
Prudential Center, 800 Boylston Street in Boston, Massachusetts.
BP Prucenter complains that the Debtors have not established
"cause" for further extension. Thus, BP Prucenter asserts that
the motion should be denied. If it is granted, BP Prucenter
asks the Court to direct the Debtors to timely pay its post-
petition rent and fulfill the terms and conditions of the Lease.
(3) Taubman Landlords
The Taubman Landlords insist that the Debtors should be required
to make a decision to assume or reject the leases by June 1,
2002. Otherwise, the Taubman Landlords claim, they will be
greatly prejudiced because they cannot properly plan for the
return of the leased premises by marketing these spaces to new
tenants for reletting for the important Christmas 2002 season.
But if the Court grants an extension through June 1, 2002, the
Taubman Landlords ask Judge Bohanon to require the Debtors to
operate the store through December 31, 2002, and to pay rent
through February 6, 2003, irrespective of whether they choose to
reject the lease prior to that time. (Warnaco Bankruptcy News,
Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WINSTAR COMMS: Court Approves Conversion of Case to Chapter 7
-------------------------------------------------------------
Winstar Communications, Inc., and its debtor-affiliates sought
and obtained an order from the Court converting their case to a
Chapter 7 liquidation proceeding.
Scott Christopher Shelley, Esq., at Shearman & Sterling in new
York, notes that the Debtors are presently in default under
their post-petition credit agreement and have no means of
accessing additional funds to pay administrative claims. All of
the Debtors' cash is subject to the liens of their post-petition
lenders and the claims asserted by other alleged secured
creditors. The Debtors have endured continuing losses from
operations and there is no likelihood of rehabilitation. The
Debtors are unable to effectuate a plan of reorganization and
believe that the best interest of their estates will be served
by converting these cases to chapter 7.
The Debtors submit that the entry of this order at this time and
the granting of the relief is necessary to ensure that the
transactions contemplated by the Asset Purchase Agreement, the
Management Agreement and the Sale Order are consummated and that
the maximum value is realized from the assets of the Debtors'
estates.
The Court also announced the appointment of Christine Shubert as
the Interim Trustee for the Debtors. Ms. Shubert is authorized
to operate the business of the estates in accordance with the
Bankruptcy Code. (Winstar Bankruptcy News, Issue No. 22;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
XEIKON INC: Fails to Comply with Nasdaq Listing Requirements
------------------------------------------------------------
Xeikon N.V. (Nasdaq: XEIK) said that the company received a
Nasdaq Staff Determination on January 22, 2002, indicating that
the company has failed to comply with the requirements for
continued listing on The Nasdaq National Market.
Nasdaq has determined to delist the company's securities from
The Nasdaq National Market at the opening of business on January
29, 2002. Nasdaq's determination follows Xeikon's voluntary
filing for creditor protection on November 9, 2001.
Nasdaq halted trading in Xeikon on November 9, 2001, at a last
trading price of $1.09.
Xeikon N.V. develops, produces and markets commercial digital
color printing systems and related consumables specifically
designed to meet the quality, speed, reliability, cost, variable
content and on-demand requirements of the global digital color
printing market.
Xeikon is also a major manufacturer of digital black and white
printers, which use a proprietary "magnetography" technology
best suited for use in heavy-duty printing applications.
Additional information on the Company can be found at
http://www.xeikon.com
ZILOG: Solicits Acceptances for Prepack Plan of Reorganization
--------------------------------------------------------------
ZiLOG,(R) Inc., the Extreme Connectivity Company, announced on
Monday that it began soliciting approvals of a prepackaged plan
of reorganization from the holders of its outstanding notes and
preferred stock.
The solicitation follows an agreement in principle, announced
last November, with certain key holders of its Senior Secured
Notes to support the Company's recapitalization plan. These
bondholders hold approximately 60 percent of the senior debt
outstanding.
"We continue to make significant progress in returning ZiLOG to
full financial health," said Jim Thorburn, ZiLOG's Chief
Executive Officer. "We have a business that generates positive
operating cash flow and, upon approval of this plan, we will
substantially strengthen our balance sheet with the elimination
of our senior notes."
Thorburn, who rejoined ZiLOG in March 2001, is spearheading a
broad-scale restructuring to refocus the business on its core 8-
bit micrologic products, including ZiLOG's market popular Z8
microcontrollers and Z80 microprocessors. In addition, Thorburn
has rationalized manufacturing and reduced overall operating
costs.
Under the plan of reorganization, all existing debt and equity
securities of the Company will be cancelled and the Company's
unsecured creditors, including its trade creditors, will be paid
in full, in the ordinary course of business. The Offering
Memorandum and Disclosure Statement distributed to the
noteholders and holders of the Company's preferred stock
describes the distributions proposed under the plan in detail.
Upon confirmation of the plan of reorganization, a new capital
structure will relieve the Company of significant debt service
requirements and allow it to devote all of the Company's
resources to the growth of its business.
Implementation of the plan of reorganization requires
acceptances from a majority in number of noteholders voting on
the plan, holding at least two-thirds of the outstanding
principal amount of the notes, and from two-thirds in amount of
preferred stock voting on the plan. Certain key holders of the
Company's Senior Secured Notes, which hold approximately 60
percent of the notes outstanding, have agreed to accept the
plan, subject to the terms of a lock-up agreement.
Thorburn indicated that the prepackaged Chapter 11 petition
filing is expected to commence after sufficient acceptances are
received, which is currently anticipated to be on or about
February 28, 2002. The Company expects that the prepackaged plan
of reorganization will be confirmed during the calendar quarter
ending June 30, 2002.
"We have tremendous support for the plan," Thorburn said. "ZiLOG
has a great brand name and the business has demonstrated rapid
performance improvement in a tough business environment."
The Offering Memorandum and Disclosure Statement distributed in
connection with the solicitation, together with the plan of
reorganization, have been filed with the Securities and Exchange
Commission under a Form 8-K and are publicly available on the
Commission's website at http://www.sec.gov
ZiLOG, Inc. designs, manufactures and markets semiconductors for
the communications and embedded control markets. Headquartered
in San Jose, California, ZiLOG employs approximately 800 people
worldwide. ZiLOG maintains design centers in San Jose; Ft.
Worth, Texas; Nampa, Idaho; Seattle, Wash.; and Bangalore,
India; manufacturing in Nampa; and test operations in Manila,
Philippines.
* BOOK REVIEW: The ITT Wars: An Insider's View of Hostile
Takeovers
---------------------------------------------------------
Author: Rand Araskog
Publisher: Beard Books
Soft cover: 236 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
This book was originally published in 1989 when the author was
Chairman and Chief Executive Officer of ITT Corporation, a $25
billion conglomerate with more than 100,000 employees and
operations spanning the globe with an amazing array of
businesses: insurance, hotels, and industrial, automotive, and
forest products. ITT owned Sheraton Hotels, Caesars Gaming, one
half of Madison Square Garden and its cable network, and the New
York Knickerbockers basketball and the New York Rangers hockey
teams. The corporation had rebounded from its troubles of the
previous two decades.
Araskog was made CEO in 1978 to make sense of years of wild
acquisition and growth. Under Harold Geneen, successor to ITT's
founder and champion of "growth as business strategy," ITT's
sales had grown from $930 million in 1961 to $8 billion in 1970
and $22 billion in 1979. It had made more than 250 acquisitions
and had 2,000 working units. (It once acquired some 20
companies in one month).
ITT's troubles began in 1966, when it tried to acquire ABC.
National sentiment against conglomerates had become endemic; the
merger became its target and was eventually abandoned. Next
came a variety of allegations, some true, some false, all well
publicized: funding of Salvador Allende's opponents in Chile's
1970 presidential elections; influence peddling in the Nixon
White House; underwriting the 1972 Republican National
Convention. ITT's poor handling of several antitrust cases was
also making headlines.
Then came recession in 1973. ITT's stock plummeted from 60 in
early 1973 to 12 in late 1974. Geneen found himself under fire
and, in Araskog's words, the "succession wars" among top ITT
officers began. Geneen was forced out in 1977, and Araskog,
head of ITT's Aerospace, Electronics, Components, and Energy
Group, with more than $1 billion in sales, won the CEO prize a
year later.
Araskog inherited a debt-ridden corporation. He instituted a
plan of coherent divesting and reorganization of the company
into more manageable segments, but was cut short by one of the
first hostile bids by outside financial interests of the 1980s,
by businessmen Jay Pritzker and Philip Anschutz. This book is
the insider's story of that bid.
The ITT Wars reads like a "Who's Who" of U.S. corporations in
the 1970s and 1980s. Araskog knew everyone. His writing
reflects his direct, passionate, and focused management style.
He speaks of wars, attacks, enemies within, personal loyalty,
betrayal, and love for his company and colleagues. In the
book's closing sentences, Araskog says, "We fought when the odds
were against us. We won, and ITT remains one of the most
exciting companies of the twentieth century. We hope to keep
the wagon train moving into the twenty-first century and not
have to think about making a circle again. Once is enough."
Araskog wrote a preface and postlogue for the Beard Books
edition, and provides us with ten years of perspective as well
as insights into what came next. In 1994, he orchestrated the
breakup of ITT into five publicly traded companies. Wagon
circling began again in early 1997 when Hilton Hotels made a
hostile takeover offer for ITT Corporation. Araskog eventually
settled for a second-best victory, negotiating a friendly merger
with The Starwood Corporation, in which ITT shareholders became
majority owners of Starwood and Westin Hotels, with the
management of Starwood assuming management of the merged entity.
Today Mr. Araskog continues to serve on the boards of the four
corporations created from ITT, as well as on the boards of Shell
Oil Company and Dow Jones, Inc. He heads up his own investment
company with headquarters on Worth Avenue, in Palm Beach,
Florida.
*********
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Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
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unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
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Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Ronald P. Villavelez and Peter A. Chapman, Editors.
Copyright 2002. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers. Information
contained herein is obtained from sources believed to be
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*** End of Transmission ***