/raid1/www/Hosts/bankrupt/TCR_Public/020214.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, February 14, 2002, Vol. 6, No. 32
Headlines
AAVID THERMAL: Senior Lenders Agree to Forbear Until May 31
ADVANCED SWITCHING: Board Seeking Approval of Liquidation Plan
ARMSTRONG HOLDINGS: UST Balks at Trafelet's Engagement Terms
CLASSIC VACATION: Completes Sale of Allied Tours & Globetrotters
CORECOMM: Recapitalization Plan Exchange Offers Expire March 8
EES COKE BATTERY: S&P Ratchets Ser. B Note Rating to Junk Level
EMERITUS ASSISTED: Closes on $30M 3-Property Mortgage Financing
ENRON CORP: Brings-In Goodin MacBride for Special Legal Services
ENRON CAPITAL: Case Summary & 20 Largest Unsecured Creditors
EXODUS COMMS: Nets $5 Million from Sale of Herendon Data Center
FEDERAL-MOGUL: Taps Gibbons Del Deo as Bankruptcy Co-Counsel
FLEXIINTERNATIONAL: Balance Sheet Upside-Down by $3MM at Dec. 31
FLOUR CITY: Fails to Comply with Nasdaq Listing Requirements
FREMONT GEN.: Fitch Affirms Junk Sr. Debt & Pref. Stock Ratings
G&L INTERNET BANK: Gets Regulatory Okay for Plan of Dissolution
GENSYM CORP: Jeffrey Weber Steps Down as Chief Financial Officer
GLOBAL CROSSING: Will Maintain Workers' Compensation Programs
GRAPHIC PACKAGING: S&P Assigns Low-B's on Weak Business Position
GRAPHIC PACKAGING: Pays Down Debts by $115 Million in FY 2001
HAWK CORPORATION: Defaults on Term & Revolving Credit Facility
HAYES LEMMERZ: Court Okays Uniform Reclamation Claim Procedures
HEXCEL CORP: Facility Amendment Prompts S&P to Affirm Ratings
ICG COMMS: Court Okays Mr. Fortgang as Committee's Co-Counsel
IT GROUP: Asks Court to Enjoin Utility Service Disconnections
IMPERIAL METALS: Seeking Acceptances of CCAA Plan in Canada
INNOVATIVE GAMING: SSP to Convert Shares into Preferred Security
KAISER ALUMINUM: Executes Definitive $300MM DIP Financing Pact
KAISER ALUMINUM: Gets Okay to Use Up to $100MM of DIP Financing
KMART CORP: Court Okays Payment of Prepetition Tax Obligations
KMART CORP: S&P Withdraws Ratings on 5 Related Transactions
LERNOUT & HAUSPIE: Solicitation Period Extended through April 30
LODGENET ENTERTAINMENT: Vanguard Discloses 7.24% Equity Stake
MAXXAM: Says Kaiser's Bankruptcy Has Little Impact on Operations
MCLEODUSA: Court Okays Use of Secured Lenders' Cash Collateral
MERRILL LYNCH: Kmart Concentration Drags Ratings to Junk Level
METALS USA: Joint Committee Signs-Up CIBC for Financial Advice
NII HOLDINGS: Misses $41MM Interest Payment on 12.75% Debt Issue
NABI: Heartland Advisors Disclose 8.1% Equity Stake
NATIONSRENT: Brings-In Ernst & Young as Compensation Consultants
OWENS CORNING: Abandoning Y2K Litigation Claims Against Insurers
PACIFIC GAS: Will Spend $75 Million on Path 15 Upgrade Project
PENNSYLVANIA FASHIONS: Hilco Conducting GOB Sale at 75 Locations
PERSONNEL GROUP: Credit Facility Maturity Extended to Jan. 2003
PIXTECH INC: Nasdaq Delists Shares Effective February 13, 2002
PRINTING ARTS: Court Moves Lease Decision Deadline to March 29
PSINET INC: Intends to Sell GA Property to Coca-Cola for $17MM
RCN CORP: Credit Amendment Places Low-B Ratings on Watch Neg.
REMINGTON PRODUCT: Weak Financial Flexibility Concerns S&P
SALON MEDIA GROUP: Must Raise New Capital to Ease Liquidity
SOUTHWEST AIRLINES: Posts Record Financial Results in FY 2001
STAR TELECOM: Asks Court to Further Extend Co-Exclusive Periods
STOCKWALK GROUP: Case Summary & 20 Largest Unsecured Creditors
SUN HEALTHCARE: Gets Approval to Hire Marla Eskin as Counsel
TELSCAPE INT'L: Trustee Wins Court Nod to Extend Removal Period
UNICCO SERVICE: S&P Anticipates Credit Measures to Remain Flat
WEBB INTERACTIVE: Special Shareholders' Meeting Set for March 5
WIRELESS WEBCONNECT!: Sells Subsidiary as Part of Restructuring
XETEL CORP: Violates Covenants Under Debt & Lease Agreements
* DebtTraders' Real-Time Bond Pricing
*********
AAVID THERMAL: Senior Lenders Agree to Forbear Until May 31
-----------------------------------------------------------
On January 30, 2002, Aavid Thermal Technologies, Inc. received a
$12.0 million equity contribution from Willis Stein & Partners,
made through Heat Holdings Corp. and Heat Holdings II Corp. In
connection with the equity contribution, Aavid entered into a
forbearance agreement with its senior lenders dated as of
January 29, 2002 pursuant to which agreement Aavid's senior
lenders will forbear through May 31, 2002 with respect to
certain covenant noncompliance issues. In addition, Aavid made
its required interest payment due February 1, 2002 on its 12-
3/4% Senior Subordinated Notes due 2007.
Aavid Thermal Technologies, Inc. is a leading provider of
thermal management solutions for dissipating potentially
damaging heat from digital and industrial electronics, and
computational fluid dynamics (CFD) software, which permits
computer modeling and flow analysis of products and processes
that would otherwise require time-consuming and expensive
physical models and the facilities to test them. At September
29, 2001, Aavid's current liabilities exceeded current assets by
$41 million.
ADVANCED SWITCHING: Board Seeking Approval of Liquidation Plan
--------------------------------------------------------------
Advanced Switching Communications, Inc. (Nasdaq: ASCX) announced
that it expects to release its financial results for the fourth
quarter of 2001 on or about February 28, 2002. Last week, the
Company announced the adoption by its board of directors of a
proposed plan of liquidation, subject to stockholder approval.
In connection with its fourth quarter earnings release, the
Company also expects to announce management's preliminary
estimate of the net proceeds to be available for distribution to
stockholders if the liquidation is approved.
The Company also announced that it has received notice from a
major customer purporting to revoke acceptance of equipment
previously purchased by that customer and asserting that the
customer is entitled to a refund of approximately $17 million
due to the alleged failure of the equipment to meet
functionality requirements. The Company does not believe there
is any basis for the customer to seek a refund and intends to
vigorously defend any such claim, assert its rights under the
parties' agreement, and pursue any remedies it may have against
the customer.
As of the end of December 2001, the Company had approximately
$77 million in cash and marketable securities and expects to use
cash of approximately $2.0 million to satisfy liabilities on its
unaudited balance sheet. In addition to converting its
remaining assets to cash, pursuing any claims it may have
against third parties and satisfying the liabilities currently
on its balance sheet, the Company anticipates using cash in the
next several months for a number of items, including but not
limited to: (i) ongoing operating costs of at least $1.3
million, (ii) employee severance and related costs of at least
$4.0 million, (iii) payments to the Company's contract
manufacturer of at least $2.3 million, and (iv) other costs,
including costs incurred to close out existing leases, of at
least $3.2 million. In addition, the Company may incur
additional liabilities arising out of contingent claims, such as
the claim by a major customer described above, that are not
reflected as liabilities on its balance sheet.
With respect to the distribution of liquidation proceeds, the
Company is unable to predict the precise timing or amount of
distributions, due in part to the Company's inability to predict
the net-value of its non-cash assets and the ultimate amount of
its liabilities and future expenses. The Company will attempt
to convert its remaining assets to cash and settle its
liabilities as expeditiously as possible. Assuming stockholder
approval of the plan, the Board of Directors currently
anticipates that an initial distribution of liquidation proceeds
will be made to stockholders within 30 days after the
stockholders' meeting. A portion of the Company's assets will
be held in a contingency reserve, and the Board of Directors
anticipates that stockholders may receive one or more additional
distributions subsequent to the initial distribution.
The proposed plan of liquidation will be presented to the
Company's stockholders for approval at a special meeting. A
proxy statement describing the plan will be mailed to
stockholders prior to the meeting. Stockholders are strongly
advised to read the proxy statement when it becomes available,
because it will contain important information. The proxy
statement will be filed by the Company with the Securities and
Exchange Commission (SEC). Investors may obtain a free copy of
the proxy statement (when available) and other documents filed
by Advanced Switching Communications, Inc. at the SEC's web site
at http://www.sec.gov The proxy statement and related materials
may also be obtained for free by directing such requests to
Advanced Switching Communications, Inc., 8330 Boone Boulevard,
Vienna, 22182, Attention: Investor Relations.
ARMSTRONG HOLDINGS: UST Balks at Trafelet's Engagement Terms
------------------------------------------------------------
Donald F. Walton, the Acting United States Trustee for the
District of Delaware, represented by Frank J. Perch, III, Trial
Attorney with that office, tells Judge Newsome he does not
object to the appointment of a legal representative for future
claims in furtherance of the objectives of section
524(g)(4)(B)(i) of the Code. However, Mr. Walton does object
to certain aspects of the proposed terms of the appointment
order.
Armstrong Worldwide Inc. Debtor proposes that Mr. Trafelet would
act as the representative of "individuals who may have been
exposed to asbestos or asbestos containing products but who,
prior to confirmation of a plan or plans of reorganization for
the Debtors, have not manifested symptoms of asbestos-related
diseases resulting from such exposure, whether such individuals
are determined to have "claims" under section 101(5) of the
Bankruptcy Code or "demands" within the meaning of section
524(g)(5) of the Bankruptcy Code."
This language impermissibly broadens the scope of Mr. Trafelet's
representation. Persons who have "claims" within the meaning of
section 101(5) are by definition not future claimants. One
cannot be both fish and fowl.
Section 524(g) does not contemplate representation by the future
claims representative of persons with section 101(5) present
claims. Indeed, such joint representation would place Mr.
Trafelet in a conflict position. The very reason for creating
the office of future claims representative is in recognition of
the conflicting interests of those who hold claims within the
meaning of the Code and those who were exposed to asbestos
prepetition and do not have claims now but may develop
conditions in the future that would give them claims if such
conditions existed today.
The UST is concerned that the Order as proposed may serve,
whether intentionally or accidentally, to adjudicate issues
about who has a "claim," particularly among those exposed
plaintiffs with medical indicia of exposure and thus a present
right to sue under state law, but little or no impairment of
function. This is not the time or the place to make such an
adjudication.
Signaling his willingness to resolve this, Mr. Walton announces
he would be agreeable to a definition of the scope of Mr.
Trafelet's representation similar to what was approved in the
Federal-Mogul cases, but just in case he reserves the right to
conduct discovery regarding the Motion and reserves the right to
amend this Objection to assert such other grounds as may become
apparent upon further factual discovery. (Armstrong Bankruptcy
News, Issue No. 17; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
CLASSIC VACATION: Completes Sale of Allied Tours & Globetrotters
----------------------------------------------------------------
On January 17, 2002 Classic Vacation Group, Inc., completed the
sale of its Allied Tours subsidiary to Kuoni Holding Delaware,
Inc., a domestic subsidiary of the Switzerland based travel
conglomerate, Kuoni Travel Ltd. for $3.5 million in cash plus
assumption of liabilities related to Allied Tours.
The sale included substantially all of the assets and
liabilities related to the Allied Tours brand headquartered in
New York, NY through the sale all of the membership units of
Allied Tours, LLC and certain assets of Allied Tours, Inc. As
Allied Tours had been operated as a division of the Company,
prior to the sale of Allied Tours certain assets had been
contributed to Allied Tours, Inc. and immediately prior to the
sale the Company contributed substantially all of the Allied
Tours operating assets, net of liabilities to the newly formed
Allied Tours, LLC.
The Company expects to report a gain on the sale of
approximately $3.6 million for financial reporting purposes. The
gain will be reported with results for the three months ending
March 31, 2002.
On January 23, 2002 the Company completed the sale of its
Globetrotters Vacations, Inc. subsidiary to Private Label
Travel, Inc., a company formed by a group consisting of the
subsidiary's management team immediately prior to the sale and a
former executive of the Company. The Globetrotters subsidiary,
based in Downers Grove, Illinois represents the Company's
private label operations. Globetrotters operates Amtrak
Vacations and the fulfillment for several bankcard rewards
programs. Immediately prior to the sale, responsibility for the
subsidiary's Hyatt Vacations products was transferred to the
Company's Classic Custom Vacations subsidiary. Until the
Company's restructuring in the fall of 2000, Globetrotters also
operated the Company's Vacations by Globetrotters and Friendly
Holidays brands. As part of the sale, the buyer paid nominal
cash consideration but has agreed to assume liabilities in
excess of tangible assets totaling approximately $1.8 million
as well as certain lease obligations. Also included in the sale
was an agreement by the buyer to purchase the technology assets
of the Company's GVG Technology, Inc. subsidiary for nominal
consideration. In total the Company realized a gain on the sale
of approximately $1.8 million for financial reporting purposes.
The gain will be reported with the results for the three
months ending March 31, 2002.
Although the Company expects to report gains on the sales of
both Allied Tours and Globetrotters for financial reporting
purposes, as the Company has significant higher tax basis in the
assets sold than for financial accounting purposes, the Company
anticipates generating losses on the sales for income tax
purposes and does not expect to incur income tax liabilities
related to the sales for 2002.
In November 2001 the Company announced that it had sold its
Island Resort Tours and International Travel & Resorts
subsidiaries to the subsidiaries' president and prior owner,
Steven A. Hicks for $500,000 in cash including the settlement of
amounts owed by the subsidiaries to the Company of $240,000. The
transaction was structured as the sale of the stock of both
subsidiaries. In September 2001 the Company recorded an
impairment charge of $6.3 million against goodwill related to
Island. The eventual sale in November resulted in an additional
charge of $186,000 as a loss on the sale of Island.
After given effect to the sale of Allied Tours, Globetrotters
and Island, the Company's sole remaining operating business is
what is known as the brands Classic Custom Vacations and Hyatt
Vacations.
Classic Vacation Group (formerly Global Vacation Group) is
taking a vacation from the vacation business. The company has
been selling off its assets to pay down debt, including budget
travel operator Allied Tours (to Swiss-based Kuoni), Classic
Custom Vacations (to online travel operator Expedia), and Amtrak
vacation operator Globetrotters (to a group that includes
Globetrotters' senior managers). Through its remaining
subsidiary, Island Resort Tours, the company offers customized
vacations mainly to the Caribbean. The company sells vacations
through travel agencies, other distribution channels, and
affinity groups, as well as online. Thayer Equity Investors owns
two-thirds of Classic Vacation. At Sept. 30, 2001, the company
had a working capital deficit of about $48 million, and a total
shareholders' equity deficit of over $4 million.
CORECOMM: Recapitalization Plan Exchange Offers Expire March 8
--------------------------------------------------------------
CoreComm Limited (Nasdaq: COMM), and its formerly wholly-owned
subsidiary CoreComm Holdco, Inc., announced that:
(1) CoreComm Holdco filed registration statements with the
Securities and Exchange Commission,
(2) launched the previously announced registered public
exchange offers and
(3) the Companies made changes in the management roles of
certain of their senior executives.
As previously announced, CoreComm Holdco intends to become the
new, recapitalized company going forward, in place of CoreComm
Limited as the parent company.
The filing with the SEC of the Registration Statements and
launching of the exchange offers represent continued progress
towards the completion of the final phase of the Companies'
previously announced plan of recapitalization. The Companies
closed on substantially all of the recapitalization transactions
with debt and preferred stock holders in December 2001. The
exchange offer prospectus, which is part of the Form S-4 filed
by CoreComm Holdco, describes the final phase, which is the
previously announced exchange offers. In the exchange offers,
the holders of CoreComm Limited securities are being asked to
tender: (1) each share of CoreComm Limited common stock they
hold for 1/116.7 of a share of common stock of CoreComm Holdco
(subject to rounding); and (2) each $1,000 aggregate principal
amount of CoreComm Limited's 6% Convertible Subordinated Notes
they hold, for 3.0349 shares of common stock of CoreComm Holdco
(subject to rounding) and $30 in cash (which is an amount equal
to the October 1, 2001 interest payment). The exchange offers
expire at midnight, March 8, 2002, unless the company terminates
the exchange offers or extend the expiration date.
Pro forma for the recapitalization, assuming 100% of the
outstanding securities are tendered in the exchange offers, the
only remaining debt obligations (not including trade payables)
of CoreComm Holdco are its $156.1 million credit facility, $15.8
million in Senior Convertible Notes, and approximately $11.5
million in capital leases. There is no preferred stock
outstanding.
The Companies also announced that they had named Thomas Gravina
as President and Chief Executive Officer and named Michael A.
Peterson as Executive Vice President, Chief Operating Officer
and Chief Financial Officer. Barclay Knapp has become Chairman
of the Board and George Blumenthal has become Chairman Emeritus.
Gravina and Peterson have also joined CoreComm Holdco's Board of
Directors. In addition, the Board of Directors of CoreComm
Holdco has elected as a director Ralph H. Booth II, who is the
Chairman and Chief Executive Officer of Booth American Company.
Booth American Company made investments in the Companies in 2000
and 2001. Gregg N. Gorelick has been promoted to Senior Vice
President - Controller and Treasurer. Alan Patricof and Warren
Potash will continue to serve on the Board of Directors.
Thomas Gravina said: "The Company is continuing successfully
down the path we set out a year ago. I am pleased to be a part
of a great story and a very talented management team. I am also
very pleased to have Mr. Peterson expand his role and
responsibilities within our organization. I believe the entire
management team will deliver positive results and successfully
execute our business plan.
"The filing of the registration statements and launching of the
exchange offers indicate that we are on track to complete all
remaining phases of the recapitalization over the next several
weeks. Operationally, we have continued to execute successfully
on our plans to increase profitability, improve efficiency,
reduce expenses, and continue revenue growth. We believe that we
remain on track to generate positive EBITDA in early 2002 and
become free cash flow positive in late 2002. The demand for
telecommunications products and services continues to be strong,
and we expect continued acceptance in the market for CoreComm's
voice and data services in all of our divisions.
"We are very pleased that CoreComm has been able to respond
successfully to its challenges, and believe that the Company is
now positioned to challenge the incumbents for market share and
be one of the strong competitive providers in the industry going
forward."
CoreComm wants to take residential and business customers away
from the Baby Bells by providing local and long-distance phone
service and Internet access, bundled at a price comparable to a
Bell's toll for local service. The CLEC (competitive local
exchange carrier) leases local loop lines and operates its own
switches; it operates such facilities in Chicago; Cleveland;
Columbus, Ohio; and Detroit. CoreComm serves up data by offering
DSL (digital subscriber line) service, dedicated lines, and by
operating its nationwide ATM (asynchronous transfer mode)
network. The company has cut jobs and is selling its non-CLEC
assets. As of March 31, 2001, the company recorded a working
capital deficit of approximately $160 million.
EES COKE BATTERY: S&P Ratchets Ser. B Note Rating to Junk Level
---------------------------------------------------------------
Standard & Poor's lowered its rating on EES Coke Battery Co.
Inc.'s series B $75 million senior secured notes to triple-'C'-
plus from single-'B'-minus and placed the rating on CreditWatch
with negative implications. In addition, Standard & Poor's
affirmed its triple-'B'-plus rating on the company's series A
$168 million senior secured notes. The outlook on the series A
notes is stable.
The series A and B notes were used by EES Coke to purchase the
number five coke battery from National Steel Corp. (triple-'C'-
plus/Watch Neg/--). The series B rating change follows the
change of National Steel Corp.'s rating to triple-'C'-plus from
single-'B'-minus, and comes as a result of EES Coke's reliance
on sales of coke to National Steel Corp. under the coke sales
agreement (CSA) after the expiration of its Section 29 tax
credits in 2002. The series B notes mature in 2007.
The series A notes are supported by the tax-sharing agreement
between EES Coke and DTE Energy Co. (triple-'B'-plus/Stable/--).
Under the TSA, the parent makes cash payments to EES Coke based
on the value of tax benefits generated by EES Coke to DTE Energy
on a consolidated basis. The Series A notes mature in April 2002
and benefit from a six-month debt service reserve, and as such
are somewhat insulated from the credit of National Steel.
The rating actions on National Steel reflect Standard & Poor's
heightened concerns regarding National's declining financial
flexibility as a result of very difficult conditions in the U.S.
steel industry. Moreover, in evaluating the recent option
agreement whereby U.S. Steel Corp. (double-'B'/Watch Neg/--)
would acquire NKK Corp. of Japan's (single-'Bpi') majority
interest in National, it appears that NKK may be less willing to
provide additional financial support to National, as it has done
in the past. Although imports have subsided as a result of the
U.S. government's pending section 201 trade investigation (about
8% of capacity has been shuttered), the U.S steel industry
continues to suffer from overcapacity from weak demand and price
levels caused by the recession. Should demand levels remain at
these weak levels and should National be unsuccessful in
preserving its liquidity in the near term, the ratings could be
lowered again.
Standard & Poor's acknowledges that a bankruptcy filing at
National Steel will not necessarily result in nonpayment under
the CSA and default on the series B notes. In the event of a
bankruptcy filing Standard & Poor's will evaluate the situation
with respect to the series B notes at that time.
Outlook (series A): Stable
The stable outlook on the series A notes reflects this issue's
reliance in large part on Section 29 tax credits that are
guaranteed by the parent, DTE Energy Co.
EMERITUS ASSISTED: Closes on $30M 3-Property Mortgage Financing
---------------------------------------------------------------
Emeritus Assisted Living, (AMEX:ESC) Emeritus Corporation, a
national provider of assisted living and related services to
senior citizens, announced that it has closed mortgage financing
on three properties totaling $30.5 million.
The mortgage financing, provided by GE Capital Healthcare
Financial Services is structured as floating rate debt with a
two year term and a one year extension option. This new loan
fulfills the requirement to reduce indebtedness on the
previously announced extension of $73.3 million outstanding
mortgage debt originally due April 29, 2001 and allows Emeritus
to extend the remaining $43.0 million to May 2003. The remainder
of the portfolio can be released as the individual properties
qualify for new debt financing.
Emeritus Assisted Living is a national provider of assisted
living and related services to seniors. The Company is one of
the largest developers and operators of freestanding assisted
living communities throughout the United States. The Company
also participates in a joint venture to develop assisted living
communities in Japan. These communities provide a residential
housing alternative for senior citizens who need help with the
activities of daily living with an emphasis on assistance with
personal care services to provide residents with an opportunity
for support in the aging process. The Company currently holds
interests in 151 communities representing capacity for
approximately 15,900 residents in 30 states and Japan. The
Company's common stock is traded on the American Stock Exchange
under the symbol ESC, and its home page can be found on the
Internet at http://www.emeritus.com
ENRON CORP: Brings-In Goodin MacBride for Special Legal Services
----------------------------------------------------------------
Prior to the Petition Date, Enron Corporation, and its debtor-
affiliates relied on Goodin, MacBride, Squeri, Ritchie & Day,
LLP for various services, including:
(1) work related to state regulatory law issues in California,
where the Debtors conduct a substantial amount of retail
and wholesale energy transactions for both electricity and
natural gas;
(2) legal advice and assistance, including advice and
assistance needed to enter into and to protect energy
trading contracts and positions throughout California, and
for the development of power projects currently under
development in California, which projects now are assets
of Enron North America.
(3) legal advice and assistance, including advice and
assistance needed:
-- to enter into and to protect retail energy contracts
and transactions with customers throughout California,
-- to represent Enron Energy Services in numerous
proceedings before the California Public Utilities
Commission which set rates, terms or conditions having
an impact on said retail transactions, and
-- to assist Debtor in analyzing, revising, and
communicating to legislators the content of legislation
pending before the California Legislature which impacts
these retail transactions.
According to Melanie Gray, Esq., at Weil, Gotshal & Manges LLP,
in New York, the Debtors want to continue employing Goodin
MacBride on these and other matters.
By this application, the Debtors seek the Court's authority to
employ Goodin MacBride as Special Counsel, effective as of the
Petition Date, under a general retainer.
The Debtors contend that Goodin MacBride clearly has the
necessary background and expertise to effectively represent the
Debtors and provide legal work including:
(a) assistance obtaining stays of, or defending, regulatory
proceedings, investigations, and other litigation brought
against Debtors;
(b) assistance in prosecuting legal actions needed to protect
the assets of Debtors;
(c) assistance needed to enter and to unwind Debtors' retail
and wholesale energy and energy derivative transactions;
(d) assistance in complying with the applicable requirements
of law in California in which Goodin MacBride has its
offices;
(e) assistance in protecting the value of energy project
assets under development or completed in California; and
(f) such other necessary legal services needed to protect the
assets of the Debtors and to carry out transactions as
authorized by the court.
The Debtors intend to compensate Goodin MacBride professionals
at the firm's customary hourly rates:
$250 to $400 members and counsel
$180 to $250 associates
$85 paraprofessionals
Ms. Gray informs Judge Gonzalez that the Debtors paid over
$530,000 to Goodin MacBride for fees and expenses within the
year prior to the Petition Date. As of the Petition date, the
Debtors were still indebted to the Firm in the amount of $65,000
for unpaid legal fees and disbursements.
Michael B. Day, a member of Goodin, MacBride, Squeri, Ritchie &
Day, LLP, also discloses that the Debtors provided the Firm with
a payment of $80,000 to be held in trust as a retainer to insure
against non-payment of bankruptcy court approved fees and costs
associated with legal services provided after the Petition Date.
Mr. Day admits that Goodin MacBride has in the past represented,
currently represents, and may in the future represent, entities
that are claimants or interest holders of the Debtors, but only
in matters unrelated to the Debtors' pending chapter 11 cases.
"I know of no conflict of interest that would preclude Goodin
MacBride's joint representation of the Debtors in these cases,"
Mr. Day asserts.
Mr. Day assures the Court that Goodin MacBride will not
represent adverse parties in interest in any matter on which
Goodin, MacBride is engaged by the Debtors. (Enron Bankruptcy
News, Issue No. 12; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
ENRON CAPITAL: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: Enron Capital & Trade Resources International Corp.
aka Enron Risk Management & Trading International Corp.
aka Enron International Finance and Trading Corp.
1400 Smith Street
Houston, TX 77002
Bankruptcy Case No.: 02-10613
Type of Business: Enron Capital & Trade Resources International
Corp. (ECTRIC) is a holding company for a UK
derivatives arranging company and a principal
under derivative transactions in the UK,
Norway, Sweden and Singapore.
Chapter 11 Petition Date: February 11, 2002
Court: Southern District of New York
Debtors' Counsel: Martin J. Bienenstock, Esq.
Brian S. Rosen, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone (212) 310-8000
Fax (212) 310-8007
-and-
Melanie Gray, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone (713) 546-5000
Total Assets: $546,000,000
Total Debts: $828,000,000
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Shell International Trade debt $8,617,120
Trading
Shell Mex House
The Strand, London
WC2R 0ZA
Attn: Julie Wheeler
Tel 0207 5465000
Dynegy Global Liquids, Trade debt $3,743,242
Inc.
1000 Louisiana Suite,
Houston, Texas, 77002-5000,
USA
IPP International Trade debt $3,588,152
Petroleum
Hamntorget 5, Helsingborg,
S25221, Sweden
Attn: Suanna Nielssen
Tel ++46 42 141035
Elf Trading SA Trade debt $3,381,065
World Trade Centre
10 Route
de L'Aeroport, CP276,
Geneva, Switzerland
Attn: Guillaume Compain
Tel ++41 22 7101800
Yorkshire Electricity Trade debt $2,485,416
Group PLC
Wetherby Road, Scarcroft,
Leeds, LS14 3HS
Boreails AB Trade debt $1,785,702
86 Stenungsund, S444,
Sweden
Hess Energy Trading Trade debt $1,589,572
Company
1185 Avenue of the Americas,
38th floor, New York
0036-2601
Attn: Anne O'Kane
Tel: (207) 783-5371
Glencore International AG Trade debt $1,413,795
49, Wigmore Street,
London, W1H, 0LU
Attn: Martin Gramam
Tel: (207) 412-3212
Vitol SA Trade debt $1,412,291
Rue des Bains 33-35
PO Box 162, Geneva
Switzerland
Attn: David Fransen
Tel: ++ 41 22 3221111
Poseidon Schiffahrt GmBH Trade debt $1,402,080
Ballindumm 17, Hamburg,
DE20095, Germany
Attn: Frank Kunkel
Tel: ++ 49 40 3000454
Credit Lyonnais Rouse Trade debt $1,286,917
Derivatives
Broadwalk House, 5 Appold
Street, London EC2A 2DA
Louis Dreyfus LPG Trade debt $1,071,471
Services Ltd
Queensbury House, 3 Old
Burlington Street, London,
W1X 1LA
Attn: Mr Elberg
Tel: 0207 5961450
Barclays Bank Plc Trade debt $931,335
5 The North Colonnade, E14
4BB, London
Veba Oil Supply and Trade debt $931,320
Trading GmBH
Ballindamm 17, Hamburg,
20095 Germany
Hanjin Shipping Co Ltd Trade debt $926,582
Youngdeungpo-Gu
Seoul, Korea
Contigroup Companies Inc Trade debt $901,851
One Selleck Street, Shore
Point, Ste 360, Norwalk,
Conneticut 06855
Associated Bulk Carriers Trade debt $845,467
(London)
London Television Centre
58 - 72 Upper Ground, London,
Morgan Stanley Capital Trade debt $799,091
Group Inc
1585 Broadway Commodities
4th Fl, New York, 10036-8200
Attn: Lyne Cane
Tel: (207) 677-7033
BP Oil International Trade debt $724,039
Limited
1 Broadgate, London
EC2M 2AP
Attn: Ralph Torrance
Tel: (20) 579-6653
Cargill Energy, Trade debt $699,988
a division of Cargill,
Inc
12700 Whitewater Drive,
Minnetonka, Minnesota,
55343-9438
EXODUS COMMS: Nets $5 Million from Sale of Herendon Data Center
---------------------------------------------------------------
Judge Robinson authorizes Exodus Communications to sell,
transfer and convey their interests in a leased internet data
center located at 544 Herndon Parkway, Herndon, Virginia to
Federal Home Loan Mortgage Corporation. As previously reported
in the Troubled Company Reporter (Jan. 8, 2002, edition) Exodus
struck a deal where (a) the Landlord will convey its interest in
the property to Federal Home for $19,500,000; (b) the Debtors
will convey their interest in the Property to Federal Home free
and clear of liens, claims and encumbrances for $5,500,000; and
(c) the Debtors will reject the Lease and the Debtors and the
Landlord will mutually release each other from any and all
claims upon closing of the sale of the property to Federal Home.
FEDERAL-MOGUL: Taps Gibbons Del Deo as Bankruptcy Co-Counsel
------------------------------------------------------------
Federal-Mogul Corporation and its debtor-affiliates request
entry of an order approving their application to employ and
retain Gibbons Del Deo Dolan Griffinger & Vecchione for
representation before the U.S. District Court for the District
of New Jersey, nunc pro tunc to December 14, 2001.
James J. Zamoyski, the Debtors' Senior Vice President and
General Counsel, explains that the Debtors seek to retain
Gibbons as their attorneys because of Gibbons' extensive
experience and knowledge in the field of debtors' and creditors'
rights and business reorganizations under chapter 11 and because
of the firm's proximity to the venue and expertise, experience
and knowledge practicing before the United States District Court
for the District of New Jersey. In preparing for its
representation of the Debtors in these cases, Gibbons has become
familiar with the Debtors' business and affairs and many of the
potential legal issues that may arise in the context of these
cases. The Debtors submits that Gibbon's representation is
essential to their successful reorganization and will provide
substantial benefit to them and thus is well-qualified to
represent the Debtors as their bankruptcy counsel.
Frank J. Vecchione, Esq., a member of the firm of Gibbons Del
Deo Dolan Griffinger & Vecchione, tells the Court that
compensation will be payable to the firm on an hourly basis plus
reimbursement of actual necessary expenses and other charges
incurred by Gibbons. The firm's current hourly rates are:
Partners $ 260-600
Associates 150-240
Paraprofessionals 80-125
The professional duties that Gibbons will render to the Debtors
include:
A. providing legal advice with respect to the Debtors' powers
and duties as debtors-in-possession in the continued
operation of their business and management of their
properties generally and in particular, in connection with
such asbestos-related issues as may be heard before Judge
Wolin in the United States District Court for the District of
New Jersey;
B. preparing and pursuing confirmation of a plan and approval of
a disclosure statement;
C. preparing on behalf of the Debtors necessary applications,
motions, answers, orders, reports and other legal papers as
may be heard before Judge Wolin in the United States
District Court for the District of New Jersey;
D. appearing on behalf of the Debtors in connection with matters
presented to Judge Wolin in the United States District
Court for the District of New Jersey and protecting the
interests of the Debtors in such matters; and
E. performing all other legal services for the Debtors that may
be necessary and proper in these proceedings.
Mr. Vecchione assures the Court that Gibbons has not represented
the Debtors, their creditors, equity holders, or any parties in
interest, or their respective attorneys and accountants in any
matter relating to the Debtors and their estates. Gibbons does
not hold or represent any interest adverse to the Debtors'
estates and is a disinterested person as defined in the
Bankruptcy Code. Gibbons, however, is representing a number of
parties-in-interests in matters unrelated to these cases
including:
A. Asbestos Litigation: Sherwin-Williams Co., Yuba Heating,
Hoffman LaRoche Inc., and Fisher Scientific International
Inc.
B. Institutional lenders - Bank of America, Deutsche Bank,
Dresdner Bank, Bayerisch Hypo und Vereings Bank AG, Chase
Manhattan, Credit Suisse First Boston, First Union National
Bank, Foothill Capital Corporation, and NDB Bank.
C. Major Customers - Mitsubishi Caterpillar Forklift America
Inc., Audi AG, Ford Motor Co., Jaguar Cars Ltd., Volkswagen
AG, and NAPA Auto Parts Center.
D. Major Insurers - American International Group Inc., Chubb &
Son Inc., F&D, and AON Risk Services.
E. Professionals - Pricewaterhouse Coopers LLP and Sidley Austin
Brown & Wood. (Federal-Mogul Bankruptcy News, Issue No. 10;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
FLEXIINTERNATIONAL: Balance Sheet Upside-Down by $3MM at Dec. 31
----------------------------------------------------------------
FlexiInternational Software, Inc. (OTCBB:FLXI.OB), a leading
designer, developer and marketer of Internet-based financial and
accounting software and outsourcing services, announced that for
the fourth quarter 2001 ended December 31, revenues were $2.0
million compared to revenues of $3.1 million for the fourth
quarter 2000 and $1.8 million for the third quarter 2001. Net
income for the fourth quarter 2001 was $85,000 compared to a net
income of $71,307 for the corresponding period of 2000, and a
net loss of $1.7 million for third quarter 2001.
For the year ended December 31, 2001, the Company reported
revenues of $9.3 million compared with revenues of $12.4 million
for fiscal 2000. Net loss for the twelve-month period was $1.5
million, compared to a net income of $157,000 for fiscal 2000.
Comments from Management
Commenting on the results, Stefan R. Bothe, Chairman, President
and Chief Executive Officer, said, "We are pleased to report a
profitable fourth quarter 2001 which is our seventh profitable
quarter in the last eight quarters. While our loss for the year
2001 is disappointing, it is largely caused by the goodwill
write-off in the third quarter and the significant decline in
royalties from our healthcare partner McKesson HBOC. At the same
time our investment in the accounting outsourcing business (APO)
is beginning to pay dividends with signing our first outsourcing
affiliate and our first APO client."
FlexiInternational Software, Inc., with offices in Shelton, CT,
Naples, FL, and London, United Kingdom, is a leading provider of
Internet-enabled financial software and accounting outsourcing
services. Flexi serves clients in banking, healthcare,
utilities, transportation, financial, accounting and management
services. At December 31, 2001, the company reported an upside-
down balance sheet showing a total shareholders' equity deficit
of about $3 million and a working capital deficiency of $3.4
million. Additional information is available at
http://www.flexi.com
FLOUR CITY: Fails to Comply with Nasdaq Listing Requirements
------------------------------------------------------------
Flour City International Inc. (Nasdaq:FCINE), a designer and
fabricator of non-load bearing custom exterior wall systems
(curtainwall), reported that it had received a Nasdaq Staff
Determination, dated Feb. 5, 2002.
The Staff Determination indicates that Flour City has failed to
comply with Marketplace Rule 4310(c)(14), failure to file the
company's Form 10-K for the period ended Oct. 31, 2001. Filing
of the company's Form 10-K is required for continued listing of
the company's securities; failure to do so will subject Flour
City's securities to delisting from The Nasdaq National Market.
Flour City is requesting a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff Determination. The
company's request for a hearing with the panel will stay the
delisting of the company's securities pending the panel's
decision. There can be no assurance the panel will grant the
company's request for continued listing of its securities.
The loss of major contracts over the past several months has
placed restrictions on the company's cash flow and losses
related to those contract cancellations made the timely
completion of the company's year-end audit impracticable.
Management is seeking to raise additional working capital to
resolve the situation and comply with Marketplace Rule
4310(c)(14) as soon as practicable.
Flour City International designs, fabricates and installs custom
exterior wall systems used in the construction of a wide range
of commercial and governmental buildings.
The company works closely with architects, general contractors
and owners/developers in the development and construction of
highly recognizable mid-rise and high-rise office buildings,
public-use buildings, such as courthouses and airport terminals
and other well-known landmark buildings and uniquely designed
structures.
FREMONT GEN.: Fitch Affirms Junk Sr. Debt & Pref. Stock Ratings
---------------------------------------------------------------
Fitch Ratings has affirmed the 'CCC-' senior debt rating of
Fremont General Corporation (Fremont), and the 'CC' rating of
the preferred securities of Fremont subsidiary, Fremont General
Financing I. Also, Fitch withdraws the 'DDD' insurer financial
strength rating of Fremont Indemnity Group. The Rating Outlook
is Evolving.
The ratings continue to reflect the uncertainty related to
problems at Fremont's property/casualty insurance operations,
while also recognizing that cash flow and earnings from the
company's financial services subsidiaries can support debt
service needs. However, given the uncertain status of the
company's property/casualty insurance operations, the potential
for an ultimate default remains material.
For the nine months ending Sept. 30, 2001, Fremont reported GAAP
net income of $45.3 million compared with a loss of $247.7
million for the first nine months of 2000. Fremont's
profitability for the first nine months of 2001 is attributable
to its financial services segment, with the property/casualty
insurance segment reporting breakeven results. Earnings for the
same period in 2000 were marred by a second quarter $450 million
increase in gross property/casualty loss reserves.
Fremont's property/casualty insurance subsidiaries entered into
a regulatory supervision agreement with the California
Department of Insurance (DOI) in December 2000. This agreement
limits the amount of insurance premium Fremont can write, pay
insurance subsidiary dividends and execute other material
transactions. Fremont's insurance subsidiaries continue to write
workers' compensation insurance in California and five other
western states through a fronting agreement with Clarendon
Insurance Group.
It is unclear when the property/casualty organization will move
out of regulatory supervision or whether the company will face
more severe regulatory actions going forward.
Fremont is a California-based holding company with subsidiaries
engaged in financial services that include commercial and
residential real estate lending, and property/casualty insurance
operations that specialize in workers' compensation products.
The company reported assets of approximately $8.0 billion and
shareholders equity of $326.8 million at Sept. 30, 2001.
Revenues totaled $685.8 million in the first nine months of 2001
compared with $1.2 billion for the same period in 2000, and were
split approximately 52% financial services and 48% insurance.
Entity//Issue/Type Action Rating/Outlook
Fremont General Corporation
--Senior debt Affirm 'CCC-'/Stable.
Fremont General Financing I
--Preferred securities Affirm 'CC'/Stable.
Fremont Indemnity Co.
Fremont Compensation Insurance Co.
Fremont Casualty Insurance Co.
Fremont Industrial Indemnity Co.
Fremont Pacific Insurance Co.
--Insurer financial strength Withdrawn 'DDD'
G&L INTERNET BANK: Gets Regulatory Okay for Plan of Dissolution
---------------------------------------------------------------
Emphasizing that the organization is financially sound and
deposits are not at risk, the Board of Directors of G & L Bank,
F.S.B., the nation's only financial institution created
specifically to serve the gay and lesbian community, has
announced plans to dissolve the organization.
Citing recent economic conditions coupled with the challenges of
generating income-producing assets faced by all stand-alone
Internet banks, G & L Bank joins Wingspan Bank, Compubank,
USABancshares, and Security First Network Bank in shutting down,
pulling back, exploring their strategic options, or selling,
which leaves a small number of Internet Banks to develop this
pioneering Internet model.
G & L Bank's dissolution has been approved by the regulatory
agencies and management intends to work closely with customers
to facilitate comfortably the liquidation of customer deposits.
All deposits (up to $100,000 per account) remain insured by the
FDIC's Savings Association Insurance Fund.
Kay Griffith, chairman and CEO of G & L Bank, said: "The support
from shareholders and customers through this difficult time has
been tremendous. I particularly want to recognize the
leadership of the G & L management team in handling the
challenges faced in the uncharted waters of the Internet. I
always will appreciate their unfailing commitment, their
energies, their loyalty and their talents.
"I am grateful, too," said Griffith, "that the G & L Board of
Directors and management have made difficult decisions in order
to ensure a return to investors, something that has not always
happened with the closing of other Internet companies."
GENSYM CORP: Jeffrey Weber Steps Down as Chief Financial Officer
----------------------------------------------------------------
Gensym (OTC Bulletin Board: GNSM), a leading provider of
software and services for expert operations management, reported
revenues of $4.8 million and an operating profit of
approximately $400 thousand for its fourth quarter ended
December 31, 2001. Including a gain of $2.1 million from the
sale of Gensym's NetCure business, the net income for the fourth
quarter of 2001 was $2.3 million. In the fourth quarter of 2000,
Gensym had revenues of $7.7 million and a net loss of $2.5
million.
For the year ended December 31, 2001, Gensym had revenues of
$20.2 million and a net loss of $3.7 million. In 2000, Gensym
had revenues of $27.6 million and a net loss of $12.8 million.
"I am pleased to report the second consecutive quarter of
operating profit since my return to Gensym last August, at which
time we restructured and refocused the company around our
established G2 products and customer base," said Lowell
Hawkinson, Gensym's chairman, president, and CEO. "I am also
pleased to announce that we have completed our financial
turnaround by bringing costs down to a level where we expect to
continue to operate profitably and generate cash. We have
managed this without significant dilution to shareholders or
assumption of any debt.
"Key to our turnaround has been the strong loyalty of our
customer base as well as our ability to win substantial new
business in our traditional markets. For example, we just
announced a deal with Transco, the UK's largest gas pipeline
company, that is expected to total over $2 million in G2
licenses and services. Transco will be deploying applications
based on G2 technology to help maximize the performance and
availability of their pipeline network."
Mr. Hawkinson continued, "In January, Gensym's board approved a
long-term strategy of indirect channel development coupled with
enhancements to our G2 technology in the areas of standards
support, graphical user interfaces, ease of application
development, and unification of reasoning capabilities. The G2
enhancements will help channel partners bring powerful G2-based
applications to market more quickly and efficiently, with
interfaces that take full advantage of the latest Internet and
Microsoft standards. We will also continue to advance our G2-
based products, e-SCOR, Integrity, Optegrity, and NeurOn-Line.
"Including an investment to implement our new long-term
strategy, we anticipate an operating and net profit in the $2
million range for calendar 2002."
The Company's balance of cash and marketable securities as of
December 31, 2001 was approximately $2.0 million, compared to
$1.3 million on September 30, 2001.
Gensym also announced the resignation of Jeffrey A. Weber as
Chief Financial Officer. A search has been initiated to fill the
vacancy.
Gensym Corporation -- http://www.gensym.com-- is a provider of
software products and services that enable organizations to
automate aspects of their operations that have historically
required the direct attention of human experts. Gensym's product
and service offerings are all based on or relate to Gensym's
flagship product G2, which can emulate the reasoning of human
experts as they assess, diagnose, and respond to unusual
operating situations or as they seek to optimize operations.
With G2, organizations in manufacturing, communications,
transportation, aerospace, and government maximize the
performance and availability of their operations. For example,
Fortune 1000 manufacturers such as ExxonMobil, DuPont, LaFarge,
Eli Lilly, and Seagate use G2 to help operators detect problems
early and to provide advice that avoids off-specification
production and unexpected shutdowns. Manufacturers and
government agencies use G2 to optimize their supply chain and
logistics operations. And communications companies such as AT&T,
Ericsson Wireless, and Nokia use G2 to troubleshoot network
faults so that network availability and service levels are
maximized. Gensym has numerous partners who can help meet the
specific needs of customers. Gensym and its partners deliver a
range of services, including training, software support,
application consulting and complete solutions. Through partners
and through its direct sales force, Gensym serves customers
worldwide. At June 30, 2001, the company's upside-down balance
sheet showed a total shareholders' equity deficit of close to $2
million.
GLOBAL CROSSING: Will Maintain Workers' Compensation Programs
-------------------------------------------------------------
Global Crossing Ltd., and its debtor-affiliates sought and
obtained authorization to continue the Workers' Compensation
Programs and maintain the Liability and Property Programs on an
uninterrupted basis, consistent with pre-petition practices, and
pay when due and in the ordinary course, all pre-petition
premiums, administrative fees and other pre-petition obligations
to either the Insurance Brokers or the issuers of the Insurance
Policies to the extent due and payable post-petition.
Michael F. Walsh, Esq., at Weil Gotshal & Manges LLP, tells the
Court that in connection with the operation of their businesses,
the Debtors maintain various workers' compensation programs,
insurance policies, and related programs through several
different insurance carriers. The Insurance Programs include:
A. Workers' Compensation Programs - Under the laws of the
various states in which they operate, the Debtors are
required to maintain workers' compensation policies and
programs to provide their employees with workers'
compensation coverage for claims arising from or related to
their employment with the Debtors. The Debtors currently
maintain separate workers' compensation policies with ACE USA
Insurance Company and its subsidiaries and affiliates which
cover their statutory obligations in each of the states in
which they operate. The aggregate annual premiums with
respect to the Workers' Compensation Programs total
approximately $665,000. Based on an audit of the Debtors'
payroll, the Debtors have been notified that an additional
$600,000 will be charged in 2002 for underpayments on
premiums in calendar year 2001.
Prior to the Debtors' current policies with ACE, the
Debtors maintained policies with Kemper Insurance and
Liberty Mutual. The Debtors have been notified by both
Kemper Insurance and Liberty Mutual that approximately
$550,000 is owed in 2002 for retrospective payments
relating to the former workers' compensation policies and
additional "true-up" premiums may also be owed to Liberty
Mutual until all claims under that insurance policy are
settled. The ACE policies carry a $100,000 to $150,000
deductible for each claim asserted, while the Liberty
Mutual policy carries a $250,000 deductible for each claim
asserted. The Debtors pay approximately $1,300,000 annually
for deductibles relating to filed claims under the Workers'
Compensation Programs. Additionally, to secure their
obligation to pay any deductible amounts under the ACE
policy, the Debtors posted a $4,027,346 letter of credit in
favor of ACE.
In New York, certain of the Debtors formerly operated as
self-insured employers with respect to their workers'
compensation obligations. New York has required the Debtors
to post letters of credit totaling $3,526,000 as security
for the Debtors' obligations to pay claims under the Self-
Insured Programs. The Debtors average monthly expenditure
in 2001 for the Self-Insured Programs was approximately
$15,000.
B. Workers' Compensation Claims - As of the Commencement Date
there were approximately 156 workers' compensation claims
pending against the Debtors arising out of injuries
incurred by employees during the course of their
employment. The Debtors estimate that, as of the
Commencement Date, the aggregate amount that may be payable
with respect to Workers' Compensation Claims is
approximately $7,500,000. Most of this amount is not a
current obligation of the Debtors, rather it will become
payable over the next five years.
C. General Liability and Property Insurance - The Debtors also
maintain various general liability and property insurance
policies, which provide the Debtors with insurance coverage
for claims relating to, commercial general, excess
liability, commercial umbrella liability, automobile
liability, directors' and officers' liability, fiduciary
liability, commercial crime, transit, boiler and machinery,
and property. The aggregate annual premiums for the
Liability and Property Programs is approximately
$9,000,000. The Debtors believe that all of the premiums
for the Liability and Property Programs have been paid to
the Insurance Brokers as of the Commencement Date. Pursuant
to the Liability and Property Programs, the Debtors are
required to pay a $150,000 deductible for each claim, which
reduces the amount that the Insurance Companies are
required to pay for such claim. On average, the Debtors
reimburse approximately $12,000 each month to the Insurance
Companies for such deductibles.
The Court also authorizes the Debtors to continue to pay
retroactive premiums with respect to the Debtors' former
workers' compensation policies with Kemper Insurance and Liberty
Mutual. Although the Debtors' policy with Liberty Mutual has
expired, Mr. Walsh submits that the Debtors have secured their
obligations under such policy through a letter of credit with
the Chase Manhattan Bank in favor of Liberty Mutual in the
amount of $2,721,600. In the event that the Debtors' do not pay
their retroactive premiums, Liberty Mutual is authorized to draw
on its Letter of Credit. If the Debtors ceased to pay any
further premiums due under the former policy with Liberty
Mutual, Liberty Mutual could draw up to the full amount of its
letter of credit, which amount could substantially exceed the
"true up" amount. Moreover, Mr. Walsh adds that if the Debtors
failed to pay further premiums on these former policies, both
Kemper Insurance and Liberty Mutual could cancel the policies,
which would expose the Debtors' to substantial liability in
fines by the Workers' Compensation Board.
Mr. Walsh contends that it is essential to the continued
operation of the Debtors' businesses and their efforts to
reorganize that the Insurance Programs be maintained on an
ongoing and uninterrupted basis. The failure to pay premiums
when due may affect the Debtors' ability to renew the Insurance
Policies. If the Insurance Policies are allowed to lapse, the
Debtors could be exposed to substantial liability for damages
resulting to persons and property of the Debtors and others. Mr.
Walsh maintains that the continued effectiveness of the
directors' and officers' liability policies is necessary to the
retention of qualified and dedicated senior management.
Furthermore, pursuant to the terms of many of their leases, as
well as the guidelines established by the United States Trustee,
the Debtors are obligated to remain current with respect to
certain of their primary insurance policies.
Mr. Walsh asserts that the maintenance of the Workers'
Compensation Programs is indisputably justified, as applicable
state law mandates this coverage. Furthermore, with respect to
the Workers' Compensation Claims, the risk that eligible
claimants will not receive timely payments with respect to
employment-related injuries could have a devastating effect on
the financial well-being and morale of the Debtors, and their
willingness to remain in the Debtors' employ. Mr. Walsh points
out that departures by employees at this critical time may
result in a severe disruption of the Debtors' businesses to the
detriment of all parties in interest. A significant
deterioration in employee morale undoubtedly will have a
substantially adverse impact on the Debtors, the value of their
assets and businesses, and their ability to reorganize.
According to Mr. Walsh, the amounts the Debtors propose to pay
in respect of the Insurance Programs are minimal in light of the
size of the Debtors' estates and the potential exposure of the
Debtors absent insurance coverage. To the extent any Workers'
Compensation Program, Insurance Policy, or related agreement is
deemed an executory contract within the meaning of section 365
of the Bankruptcy Code, the Debtors do not, at this time, seek
to assume the same. Accordingly, the Debtors request if the
Court authorizes the payments described above, such payment
should not be deemed to constitute post-petition assumption or
adoption of said programs, policies, or agreements as executory
contracts pursuant to section 365 of the Bankruptcy Code.
(Global Crossing Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
GRAPHIC PACKAGING: S&P Assigns Low-B's on Weak Business Position
----------------------------------------------------------------
Standard & Poor's assigned its double-'B' corporate credit
rating to Graphic Packaging Corp. At the same time, Standard &
Poor's assigned its double-'B' bank loan rating to the company's
$450 million senior secured credit facility and its single-'B'-
plus rating to the company's $250 million senior subordinated
notes due 2012 to be issued under Rule 144A with registration
rights. The outlook is stable. Transaction proceeds are expected
to be used primarily to refinance existing debt.
The ratings reflect the company's somewhat below-average
business position and an aggressive financial profile.
Graphic Packaging is one of the largest North American folding
carton producers with an estimated 13% market share. Sales are
primarily to leading consumer products manufacturers (many of
whom the company has longstanding relationships with) for use in
product packaging. About 70% of company sales are food-related,
resulting in fairly stable demand. About 60% of sales are to
high-volume buyers, with the remaining 40% sold for value-added
uses such as laminated beverage and microwavable cartons, where
the company has substantial market shares. The company enjoys a
competitive cost position supported by low-cost manufacturing
facilities, highly automated manufacturing processes, and
favorable logistics. Efforts to reduce operating costs have led
to significant cost savings, with modest incremental improvement
expected as a result of ongoing cost and productivity
initiatives. Operating margins are expected to strengthen
slightly from the current 13% area.
Folding carton markets are highly competitive. Excess capacity
has fostered some industry consolidation, with the combined
market shares of the top five producers rising to more than 50%
from about 40% within the past six years. Nevertheless, this
segment remains quite fragmented, resulting in constant pricing
pressure. In addition, boxboard producers face competition from
various paperboard substrates and other packaging materials such
as plastic. Additional risks faced by Graphic Packaging include
its narrow product focus and moderate scope of operations, and
customer concentration (the top 25 clients account for 80% of
sales).
From 1997 to 2000, the company undertook a series of
acquisitions and divestitures to focus its operations on folding
cartons, doubling its size. Debt levels, which peaked at about
$1 billion in 1999, have since declined by nearly half through
the application of asset sale proceeds and free cash flow.
Nevertheless, the company remains highly leveraged with debt to
EBITDA of 3.6 times. However, with modest capital spending
needs, free operating cash flow is expected to be used primarily
for continued debt reduction and bolt-on acquisitions,
permitting the company to reduce leverage to the 3.0x to 3.5x
range. EBITDA interest coverage and funds from operations to
debt should average in the 3x and 20% areas, respectively.
Financial flexibility will be enhanced by significant credit
availability at closing and a light debt maturity schedule
during the next few years.
The bank credit facilities consist of a $300 million revolving
credit facility due 2007 (of which about $215 million is
expected to be available at closing) and a $150 million slightly
amortizing term loan due in 2009. The bank loan rating, which is
based on preliminary terms and conditions, is the same as the
corporate credit rating. The facility is secured by
substantially all of the company's assets, which should provide
a material advantage to lenders. However, based on Standard &
Poor's simulated default scenario, it is not clear that a
distressed enterprise value would be sufficient to cover the
entire loan facility.
Outlook: Stable
The financial profile is expected to continue strengthening
moderately, lifting credit measures to levels appropriate for
the ratings.
GRAPHIC PACKAGING: Pays Down Debts by $115 Million in FY 2001
-------------------------------------------------------------
Graphic Packaging International Corporation (NYSE: GPK) today
announced results for the fourth quarter and year ended December
31, 2001.
In the fourth quarter, the Company reported a net loss
attributable to common shareholders of $5.1 million on net sales
of $270.0 million, compared to a fourth quarter 2000 net loss
attributable to common shareholders of $1.5 million on net sales
of $269.6 million. (Net sales in the fourth quarter 2000
included $3.0 million from a non-core plant sold in October of
that year.) Excluding non-recurring items (1), the net loss for
the fourth quarter 2001 was $1.6 million, compared to a net loss
of $7.0 million for the same prior-year period.
As previously announced, the fourth quarter 2001 included $3.5
million of non-cash asset impairment charges and $2.4 million of
restructuring charges relating to the planned closure of the
Newnan, Georgia plant. The closure is expected to be
accomplished during 2002 and it is estimated that it will result
in savings of up to $5 million annually, some of which will be
realized during 2002.
For the year ended December 31, 2001, the net loss attributable
to common shareholders was $3.6 million on net sales of $1,112.5
million, compared to a net loss in 2000 of $10.8 million on net
sales of $1,102.6 million. (Net sales in 2000 included $30.7
million from a non-core plant sold in October of that year.)
Excluding non-recurring items, the net loss for 2001
attributable to common shareholders was $0.4 million, compared
to a net loss of $18.9 million in the previous year.
Approximately $7 million of this improvement related to
operating performance and the balance was mainly due to lower
interest costs.
Comparable Sales Increased 4%
Adjusting for the sale of a non-core plant in October 2000, net
sales in the fourth quarter 2001 were up 1.3% compared to the
same quarter in 2000, despite a weakening economy. For the year
2001, comparable sales were nearly 4% above 2000, and ahead of
what is estimated to be a flat year for the folding carton
industry. Sales for 2000 and 2001 have grown faster than the
industry, demonstrating the Company's strong customer
relationships and its ability to meet and exceed their
requirements.
Operating Income and Margins Improved
Excluding non-recurring items, the fourth quarter 2001 operating
income and margin was $12.3 million and 4.5%, respectively,
compared to $11.5 million and 4.3% in the fourth quarter 2000.
On the same basis, operating income and margin for the year 2001
was $68.8 million and 6.2%, respectively, compared to $56.8
million and 5.2% in 2000, an improvement in 2001 of 21% in
operating income and 100 basis points in operating margin.
The increase in operating income and margin was due primarily to
cost reductions from plant closures in 2000 and 2001, reductions
in the workforce and savings associated with the implementation
of a company-wide Six Sigma cost and efficiency improvement
process.
Debt Reduced to $526 Million
During 2001, debt was reduced from $640.7 million to $525.8
million. This reduction was attributable to improved cash flow
resulting from increased EBITDA (2), lower interest expense and
improved working capital management. At year end 2001, net
operating working capital (3) was 8.3% of sales versus 12.8% the
year before.
"A major accomplishment this past year has been to demonstrate
the strength of our cash flow," said Jeffrey H. Coors, President
and CEO. "Strategic actions such as plant rationalizations,
effective management of working capital and cost reduction
programs, including Six Sigma, are bringing results.
Consequently, we made significant progress in improving cash
flow and operating margins, and as a result we reduced debt by
$115 million, or 18%, during 2001 and increased operating
margins from 5.2% to 6.2% before non-recurring items. We are
particularly pleased with our fourth quarter cash generation and
the resulting $46 million reduction in debt."
Excluding non-recurring items, EBITDA was $31.6 million in the
fourth quarter of 2001, versus $31.2 million in the fourth
quarter of 2000, and was $148.2 million for the year 2001,
versus $139.9 million for the previous year, a 1.3% and 5.9%
increase respectively. For the year 2001, the ratio of total
debt to EBITDA was 3.5 times versus 4.6 times in 2000, a nearly
25% improvement.
Graphic Packaging is one of two leading North American
manufacturers of folding cartons, and makes cartons for the
food, beverage and other consumer products markets. The Company
has 17 modern plants in North America. Its customers produce
some of the most well recognized brand names in their markets.
Conference Call, February 19
A conference call to discuss the year's results and current
financing events is scheduled to be held on February 19th at
4:00 p.m. ET. All interested persons are invited to
participate. To connect, please call 800 874 9003
(international calls: 706 634 2401) and ask for the Graphic
Packaging conference. A replay will be available through
February 26th. Please call 800 642 1687 (international calls:
706 645 9291) and give passcode 1958630.
HAWK CORPORATION: Defaults on Term & Revolving Credit Facility
--------------------------------------------------------------
Hawk Corporation (NYSE: HWK) reported a loss for the fourth
quarter ended December 31, 2001 of $0.33 per diluted share
compared to net income of $0.02 per diluted share in the fourth
quarter of 2000. For the full year 2001, the Company reported a
net loss per diluted share of $0.52 compared to earnings of
$0.66 per diluted share for the full year 2000. The reported
loss per diluted share of $0.52 gives effect to $1.0 million of
previously announced restructuring costs taken in the second
quarter of 2001, without which, the loss would have been $0.42
per diluted share.
The Company reported net sales of $41.0 million in the fourth
quarter of 2001, a 10 percent decrease from $45.5 million in the
year-ago quarter. Continued weak economic conditions, primarily
in the Company's Friction Products and Precision Components
segments, was the primary cause of the decline. Sales increased
in the Performance Automotive segment, which benefited from the
acquisition of Tex Racing in November 2000. Sales in the Motor
segment increased in the quarter over year earlier levels as the
Company's Mexican facility continued to ramp-up production. For
the full year 2001, net sales were $184.4 million, a decrease of
9 percent, from $202.3 million in 2000.
The Company reported a loss from operations of $1.8 million in
the fourth quarter of 2001. The operating loss in the quarter
resulted in large part from the Company's continuing start-up
operations in Mexico (Motors), China (Friction) and Net Shape
Technologies (Precision Components). As these operations ramp
up production against outstanding orders, they are expected to
play a strategic role in the Company's growth initiatives for
2002 and beyond. The Company continued to benefit from cost
cutting efforts, initiated in June 2001, during the current
quarter. For the full year 2001, income from operations
decreased $15.9 million, to $3.6 million from $19.5 million in
the comparable year-ago period.
Ronald E. Weinberg, Co-Chairman said, "The overall business
decline during 2001 and the September 11 terrorist attacks
overshadowed our efforts at cost cutting and growth initiatives
to maintain our earnings targets. Nevertheless, our cost
controls were rigorous and will stand the Company in good stead
in 2002. Our global expansion program will cease being a drain
on earnings in 2002 and is a positive attraction for our
customers in their own global efforts. This is particularly
true for our motors and motor components business in Mexico and
friction materials in China. Our powder metal group, which we
have renamed the Precision Components Group, is also launching
global production capabilities from the footprints established
by the other divisions."
The Company announced that it is in default under its term and
revolving credit facility. The Company is current on its
payments under the credit facility and does not expect any
payment default to occur in the future. However, as a result of
the financial performance in the fourth quarter of 2001, the
Company failed to meet one of the financial ratios contained in
the covenant section of the credit facility. All other
covenants have been met. The Company is in discussions with the
administrative agent for the credit facility regarding an
amendment that will correct the default. A meeting of the bank
group has tentatively been scheduled for early March. At this
time, the Company believes that it will be able to reach a
satisfactory agreement with its lenders. However, no assurance
can be given that an agreement will be reached.
Segment Results
In the Friction Products segment, fourth-quarter sales decreased
11 percent to $22.7 million from $25.6 million a year ago. The
Company experienced volume declines in most of its markets
during the quarter, especially the aerospace market, which
declined 30% from the year-ago quarter, primarily as a result of
the events of September 11. Income from operations during the
fourth quarter of 2001 was $0.5 million, a decrease of $2.3
million, or 82 percent, from $2.8 million in the comparable
period. Sales for the year ended December 31, 2001 decreased 11
percent to $100.4 million from $112.5 million in the comparable
period. Income from operations for the year ended December 31,
2000 was $8.3 million, a decrease of $3.7 million, or 31
percent, from $12.0 million in the comparable period as a result
of declining market conditions throughout 2001.
In the Precision Components segment, net sales decreased 18
percent to $13.0 million in the fourth quarter from $15.9
million in the year-ago quarter. The decline during the quarter
was due to volume reductions primarily from customers in the
appliance, fluid power, heavy truck and lawn and garden markets.
Sales for the year ended December 31, 2001 decreased 19 percent
to $58.3 million from $72.0 million in the comparable period.
The segment reported a loss from operations in the fourth
quarter of 2001 of $0.2 million compared to income from
operations of $1.2 million during the comparable quarter of
2000. Income from operations for the year ended December 31,
2001 was $0.2 million, a decrease of $8.2 million in the
comparable prior year period. This decrease was primarily the
result of the large volume declines the segment experienced
throughout the year and the restructuring costs taken during the
year to adjust to these conditions.
Net sales in the Company's Performance Automotive segment, which
consists of high performance brakes, racing clutches and drive
train components, increased 30 percent, to $3.0 million, in the
fourth quarter of 2001, from $2.3 million in the year-ago
quarter. This increase was the result of the acquisition of Tex
Racing in November 2000. Sales for the year ended December 31,
2001 increased 78 percent to $16.7 million from $9.4 million in
the comparable period. The Company's Performance Automotive
segment reported a loss from operations for the fourth quarter
of 2001 of $1.1 million compared to loss from operations of $0.5
million in the comparable prior year period. The loss from
operations for the year ended December 31, 2001 was $1.4 million
compared to income of $0.4 million for the comparable prior year
period.
In the Company's Motor segment, fourth quarter 2001 net sales
increased $0.6 million, or 35 percent, to $2.3 million from $1.7
million a year ago. This increase is due to new customers of the
Company's Mexican facility, as well as increased volumes in the
fourth quarter at the Company's U.S. facility. Net sales for
the year ended December 31, 2001 increased $0.6 million, or 7
percent, to $9.0 million from $8.4 million in the comparable
prior year period. Losses from operations during the fourth
quarter of 2001 were $1.0 million compared to a loss of $0.7
million in the comparable quarter of 2000. Losses from
operations for the year ended December 31, 2001 were $3.4
million, an increase of $2.1 million from a loss of $1.3 million
in the comparable period. The continuing start up costs in
Mexico represented the majority of the losses incurred in this
segment for the period.
Business Outlook
The Company expects 2002 to be a challenging year in most of the
markets that it serves, especially aerospace. In spite of these
challenges, the Company expects to see revenue growth in a range
of 5 to 10 percent as a result of new product introductions in
the Friction and Precision Component segments as well as new
customer relationships being established in the Company's Motor
group. The Company expects that the improvements in the economy
will be gradual and will be more pronounced during the second
half of the year.
Hawk Corporation is a leading worldwide supplier of highly
engineered products. Its Friction Products Group is a leading
supplier of friction materials for brakes, clutches and
transmissions used in airplanes, trucks, construction equipment,
farm equipment and recreational vehicles. Through its Precision
Components Group, the Company is a leading supplier of powder
metal components for industrial applications, including pump,
motor and transmission elements, gears, pistons and anti-lock
sensor rings. The Company's Performance Automotive Group
manufactures brakes, clutches and gearboxes for motorsport
applications and performance automotive markets. The Company's
Motor Group designs and manufactures die-cast aluminum rotors
for small electric motors used in appliances, business equipment
and exhaust fans. Headquartered in Cleveland, Ohio, Hawk has
approximately 1,500 employees and 16 manufacturing sites in five
countries.
HAYES LEMMERZ: Court Okays Uniform Reclamation Claim Procedures
---------------------------------------------------------------
In anticipation of receiving the Reclamation Claims, Hayes
Lemmerz International, Inc., and its debtor-affiliates have
obtained Court approval of uniform internal procedures for
processing those claims and for bringing them to the attention
of the Debtors' professionals. The Debtors intend to analyze the
Reclamation Claims according to these criteria:
A. whether the holder of the Reclamation Claim adequately
described the Subject Goods delivered to the Debtors,
B. whether the Reclamation Claim was timely received by the
Debtors,
C. whether the Debtors had already paid for the Subject Goods,
D. whether the Debtors had already consumed or altered the
Subject Goods by the time the applicable Reclamation Claim
was received,
E. the value of the Subject Goods at the time the Reclamation
Claim was made, and
F. whether the amount and value of the Subject Goods as set
forth in the Reclamation Claim conforms to the amount and
value of such Goods as reflected in the Debtors' book and
records.
Specifically, Court authorized the adoption and implementation
of these procedures with respect to the reconciliation and
settlement of the Reclamation Claims and the treatment of such
Reclamation Claim:
A. Absent further order of the Court, the Debtors, within 90
days after the entry of an order approving this Motion,
will file a statement listing those Reclamation Claims
which the Debtors believe to have been timely and properly
asserted according to applicable law, as well as the
amounts of such Reclamation Claims and the parties holding
such Reclamation Claims. The Debtors will file such
statement with the Court and will serve such statement,
along with a copy of the Reclamation Order, upon counsel to
any official committees appointed by the Office of the U.S.
Trustee in these chapter 11 cases, counsel to the agent for
the Debtors' secured post-petition lenders, counsel to the
agent for the Debtors' secured pre-petition lenders, to all
known parties asserting Reclamation Claims, and to the
Office of the United States Trustee. In addition to such
statement, no later than the Service Date the Debtors shall
serve each party asserting a Reclamation Claim with a
package of material relating to that party's Reclamation
Claim, including the Debtors' determination as to the
amount of such Reclamation Claim, if any, and the bases
therefore.
B. Those parties asserting Reclamation Claims shall have 20 days
from the Service Date to advise counsel to the Debtors,
counsel to the Committees, and counsel to the DIP Lenders
and counsel to the agent for the Debtors' secured pre-
petition lenders, in writing, of any dispute regarding the
Debtors' statement in respect of any Reclamation Claim,
including any objection as to the Debtors' exclusion of a
given Reclamation Claim from those they believe are valid.
Such statement shall set forth with specificity the factual
nature and legal basis for the dispute.
C. Upon receipt of a Statement of Dispute from a holder of a
Reclamation Claim, the Debtors shall have 20 days to review
their business records to determine the validity of the
facts and circumstances alleged in the Statement of
Dispute, inform the holder of their findings and use their
discretion to determine whether the amount of the
Reclamation Claim should be revised, either upward or
downward. Notice of any such adjustment shall be provided
to counsel for the Committees, counsel to the DIP Lenders,
counsel to the agent for the Debtors' secured pre-petition
lenders, and to the Office of the U.S. Trustee.
D. If the holder of a Reclamation Claim does not agree to the
Debtors' statement of such Reclamation Claim after taking
into account any adjustments made, such holder shall file
and serve a "Request for Judicial Resolution of Disputed
Reclamation Claim," bearing the caption of the Debtors'
chapter 11 cases, within 15 days after the expiration of
the Reconciliation Period. The Debtors propose that any
such request should be required to allege, with
specificity, that such claim meets all the requirements for
treatment as a valid reclamation claim.
E. In the event that a holder of a Reclamation Claim does not
submit a Statement of Dispute or subsequently serve and
file a request for judicial resolution prior to the end of
the 15 days following the expiration of the Reconciliation
Period, then the holder of a Reclamation Claim shall be
deemed to have waived any objection to the Debtors'
proposed statement of such Reclamation Claim, or exclusion
thereof from the list of those Reclamation Claims the
Debtors state as valid.
F. After the filing of a request, the Court shall establish a
hearing date, which shall be used to establish discovery
procedures and fix trial dates.
G. The failure of a party asserting a Reclamation Claim
materially to comply with these procedures shall constitute
a waiver of such claimant's right to object to the proposed
determination of such Reclamation Claim as set forth in the
Debtors' statement thereof, unless the Court orders
otherwise.
The Debtors will treat such Reclamation Claims in accordance
with applicable law. Accordingly, to the extent of surplus
proceeds in the Subject Goods after satisfaction of any prior
secured claims against such goods, the Debtors will treat such
allowed Reclamation Claims, at their election, as follows:
A. as administrative expense priority claims payable under the
terms of the Debtors' confirmed plan of reorganization or
B. as allowed secured claims, or
C. the Debtors may, upon 5 days advance written notice to
counsel to the Committees and the DIP Lenders, elect to
return the Subject Goods to the holder of the Reclamation
Claim.
If a holder of a Reclamation Claim fails to submit a Statement
of Dispute prior to the expiration of the 20 day period, or
submits a Statement of Dispute but thereafter fails to file and
serve a request within 15 days after expiration of the
Reconciliation Period, such holder shall be bound by the
Debtors' determination of such Reclamation Claim, as set forth
in the Debtors' statement with respect thereto. Should the
Debtors, in their sole and absolute discretion, offer to return
the Subject Goods to a holder of a Reclamation Claim, the
Debtors request that the Court authorize the Debtors to make the
Subject Goods available for pickup by the relevant reclamation
claimant. (Hayes Lemmerz Bankruptcy News, Issue No. 5;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
HEXCEL CORP: Facility Amendment Prompts S&P to Affirm Ratings
-------------------------------------------------------------
Standard & Poor's affirmed its ratings on Hexcel Corp. and
removed them from CreditWatch, where they were placed September
21, 2001. The outlook is negative.
The action stems from successful negotiations with a bank
syndicate that resulted in an amendment to Hexcel's senior
secured credit facility, which has been reduced to $220 million
from $235 million. The amendment includes revised covenants that
accommodate the firm's anticipated business outlook in 2002 and
restructuring plans, and lessens near-term liquidity concerns.
The ratings on Hexcel reflect a very weak financial profile,
stemming from high debt levels and unprofitable operations,
which outweigh the company's substantial positions in
competitive industries and generally favorable long-term
business fundamentals. The firm is the world's largest
manufacturer of advanced structural materials, such as
lightweight, high-performance carbon fibers, structural fabrics,
and composite materials for the commercial aerospace, defense
and space, electronics, recreation, and general industrial
sectors. The markets served are cyclical, but most have growth
potential where the company's materials offer significant
performance and economic advantages over traditional materials.
The current significant downturn in the commercial aircraft
market, accounting for about 50% of Hexcel's revenues, and
continued weakness in the electronic materials business will
overshadow positive trends in some of the firm's smaller
markets, such as military aircraft, wind energy, and soft
body armor. In response to a difficult operating environment,
Hexcel has expanded its restructuring program, which is expected
to lead to a $60 million reduction in cash fixed costs. The
company is also reducing inventory ahead of the anticipated
decline in sales to commercial aerospace customers as they lower
their production rates. Still, lower volumes and restructuring
costs are likely to lead to a loss in 2002, following poor
performance in 2001. As a result, Hexcel's credit protection
measures will be very thin, at least this year.
Outlook: Negative
A substantial decline in the commercial aircraft business, which
could be prolonged, and a heavy debt burden will challenge
management in the intermediate term. Deterioration in
performance or financial flexibility from current expectations
could lead to a downgrade.
Ratings Affirmed and Removed from CreditWatch
Hexcel Corp.
Corporate credit rating B
Senior secured (bank loan) debt B
Subordinated debt CCC+
ICG COMMS: Court Okays Mr. Fortgang as Committee's Co-Counsel
-------------------------------------------------------------
The Official Committee of Unsecured Creditors of ICG
Communications, Inc., et al., obtained Judge Walsh's approval to
employ and retain Chaim J. Fortgang, Esq., as its lead co-
counsel.
Derek C. Abbott, Esq., at Morris, Nichols, Arsht & Tunnell,
which acts as local counsel for the Committee, explained that on
January 12, 2001, the Committee filed its Application to retain
Wachtell, Lipton, Rosen & Katz as its counsel by Order entered
on March 1, 2001, the Court approved the retention of Wachtell
as counsel for the Committee nunc pro tunc to November 29, 2000.
Chaim J. Fortgang and Richard Mason were the principal attorneys
at Wachtell responsible for the representation of the Committee.
As of November 26, 2001, Mr. Fortgang is no longer with the
Wachtell firm and presently practices as a sole practitioner.
The Committee desires to continue the services of both Mr.
Fortgang and Wachtell. Continuation of the services of both Mr.
Fortgang and Wachtell will affect no change in the current
representation of the Committee other than that the fee and
expense applications of Mr. Fortgang and Wachtell, respectively,
will be sent by and eventually paid to the two parties
separately, effective as of November 26, 2001.
Mr. Fortgang's hourly rate for work of this nature is $750 per
hour, which rate is subject to periodic adjustments to reflect
economic and other conditions.
Mr. Fortgang has continued to perform services for the Committee
since he began his solo practice on November 26, 2001.
Accordingly, the Committee requests that Judge Walsh authorize
the retention of Mr. Fortgang as of November 26, 2001, nunc pro
tunc. (ICG Communications Bankruptcy News, Issue No. 17;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
IT GROUP: Asks Court to Enjoin Utility Service Disconnections
-------------------------------------------------------------
The IT Group, Inc., and its debtor-affiliates seek entry of an
order prohibiting Utility Companies from altering, refusing, or
discontinuing services on account of pre-petition claims and
establishing procedures for determining requests for additional
adequate assurance of payment.
Specifically, the Debtors seek entry of an order:
A. providing that Utility Companies are prohibited from
altering, refusing or discontinuing services on account of
unpaid pre-petition invoices or pre-petition claims;
B. establishing a procedure for Utility Companies to request
that the Debtors provide adequate assurance of future
payment;
C. authorizing, but not obligating, payment of prepetition
amounts owing to a Utility Company and, providing that if a
Utility Company accepts such payment, the Utility Company
shall be deemed to be adequately assured of future payment
and to have waived any right to seek additional adequate
assurances in the form of a deposit or otherwise;
D. providing that if a Utility Company timely and properly
requests from the Debtors additional adequate assurance
that the Debtors believe is unreasonable, and the Debtors
are unable to resolve the request consensually with the
Utility Company, then upon the request of the Utility
Company, the Debtors shall file a motion for determination
of adequate assurance of payment and set such motion for
hearing at the next regularly-scheduled omnibus hearing
occurring more than 20 days after the date of such request,
unless another hearing date is agreed to by the parties or
ordered by the Court;
E. providing that any Utility Company having made a request for
additional adequate assurance of payment shall be deemed to
have adequate assurance of payment until the Court enters a
final order in connection with such a request finding that
the Utility Company is not adequately assured of future
payment; and
F. providing that any Utility Company that does not timely and
in writing request additional adequate assurance of payment
shall be deemed to be adequately assured of payment under
section 366(b) of the Bankruptcy Code.
Finally, the Debtors request that Utility Companies be required
to include with any request for additional adequate assurance a
summary of the Debtors' payment history relevant to the affected
account(s). The Debtors' pre-petition obligations to the
Utility Companies is approximately $1,675,000.
According to Gregg M. Galardi, Esq., at Skadden Arps Slate
Meagher & Flom LLP in Wilmington, Delaware, the uninterrupted
utility services are critical to the Debtors' ability to sustain
their operations during the pendency of their chapter 11 cases.
In the normal conduct of their businesses, the Debtors use gas,
water, electric, telephone, fuel and other services provided by
the Utility Companies. The Debtors submit that their
demonstrated ability to pay future utility bills, and the
administrative expense priority together constitute adequate
assurance to each of the Utility Companies of payment for all
future services.
Recognizing the right of each utility company to request
adequate assurance, the Debtors propose that Utility Companies
be afforded 45 days from the date of entry of the order granting
this Motion to make a request, if any, to the Debtors for
additional adequate assurance. The Debtors request that Utility
Companies making such requests be required to include with any
request for additional adequate assurance a summary of the
Debtors' payment history relevant to the affected account(s). If
the Debtors are unable to resolve the request consensually with
the Utility Company, then upon the request of the Utility
Company, Mr. Galardi submits that the Debtors will file a motion
for determination of adequate assurance of payment and set such
Determination Motion for hearing at the next regularly-scheduled
omnibus hearing occurring more than 20 days after the date of
such request, unless another hearing date is agreed to by the
parties or ordered by the Court.
If a Determination Motion is filed or a Determination Hearing
scheduled, the Debtors request that the Utility Company be
deemed to have adequate assurance of payment under section 366
of the Bankruptcy Code until entry of a final order finding that
the Utility Company is not adequately assured of future payment.
The Debtors further request that any Utility Company that does
not timely request additional adequate assurance be deemed to
have adequate assurance under section 366 of the Bankruptcy
Code.
Mr. Galardi informs the Court that the Order provides that the
Debtors will serve notice and a copy of the Order on all Utility
Companies listed and if additional Utility Companies are
subsequently identified, on such Utility Companies. Any Utility
Company not currently listed, but subsequently identified and
served by the Debtors, will be afforded 45 days from the date of
such service to make a request, if any, to the Debtors for
additional adequate assurance. Concurrently with such service,
the Debtors would file with the Court a supplement adding the
name of the Utility Companies so served.
Mr. Galardi contends that the Debtors' ability to pay future
utility bills as they come due from future revenues and their
proposed debtor-in-possession financing, constitute adequate
assurance of payment for future utility services. In any event,
the Debtors seek authority, but not the obligation, to pay any
outstanding pre-petition arrearages in lieu of issuing a
security deposit. Thus, the Utility Companies have adequate
assurance of future payment without the need for the Debtors to
provide additional security deposits, bonds or any other
payments. (IT Group Bankruptcy News, Issue No. 4; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
IMPERIAL METALS: Seeking Acceptances of CCAA Plan in Canada
-----------------------------------------------------------
Imperial Metals Corporation (TSE:IPM.) announces that it has
mailed an Information Circular and Proxy Statement to its
creditors and shareholders in connection with a proposed Plan of
Arrangement under the Company Act of British Columbia and the
Companies' Creditors Arrangement Act. A copy of the information
circular can be downloaded at http://www.sedar.com
Subject to shareholder, creditor, and regulatory approval and
subject also to approval by the Supreme Court of British
Columbia, the Plan will unfold in a series of steps, including
the following:
Imperial will divide its operations into two distinct
businesses, one focused on oil and natural gas and the other
focused on mining. All of the Company's existing oil and natural
gas and investment assets will be retained in Imperial, to be
renamed Imperial Energy Inc., and a new company, "New Imperial"
to be owned by the shareholders of Imperial, will be established
to hold the mining assets. New Imperial will assume all of the
rights and obligations of Imperial in connection with the mining
assets including all environmental obligations.
Each of the issued common shares of Imperial (except those
held by non-residents) will be exchanged for one common share of
Imperial Energy and one class B share of Imperial. Each class B
share of Imperial will be exchanged for one common share of New
Imperial. Each of the issued common shares of Imperial held by a
non-resident will be disposed of for one common share of
Imperial Energy and one common share of New Imperial.
The claims of the unsecured creditors, who are owed
approximately $4,575,000, will be released and discharged in
consideration of $1 million in cash plus approximately
15,886,666 common shares of Imperial.
The claims of the convertible noteholders and a portion of
the claims of the non-convertible noteholders, totalling in the
aggregate $6,124,248, will be released and discharged in
consideration of 61,242,488 common shares of Imperial. Imperial
Energy will assume the remainder of the claims of the non-
convertible noteholders, totalling $3,000,000.
New Imperial will assume the $6,300,000 non-interest
bearing debt owed to Sumitomo Corporation. This debt is secured
by the assets of the Mount Polley mine. Repayment is contingent
on the Mount Polley mine being in operation.
A statutory lien in the amount of $1,150,032 for property
taxes will be assumed by New Imperial and will remain
outstanding against the Mount Polley mine property.
The secured claims of certain trade creditors in the amount
of $251,176 will be assumed and settled by New Imperial.
The common shares of Imperial will be consolidated on the
basis of one common share of Imperial for each 10 common shares
of Imperial including those common shares of Imperial issued to
unsecured creditors, convertible noteholders, and non-
convertible noteholders.
Imperial Energy will apply for continuance as an Alberta
company and will seek to remain listed on the Toronto Stock
Exchange. New Imperial will apply for listing on the Toronto
Stock Exchange.
The Plan will allow Imperial to maximize the value of its
existing assets for the benefit of all stakeholders. The Plan
will also give the Company the means to strengthen its balance
sheet, secure new financing and focus on attracting and
developing new opportunities in both the mining and the oil and
natural gas businesses.
The shareholders and creditors of Imperial will meet on March 7,
2002 to vote on the Plan. The motion for a final order from the
Supreme Court of British Columbia to approve the Plan has been
scheduled for March 8, 2002.
INNOVATIVE GAMING: SSP to Convert Shares into Preferred Security
----------------------------------------------------------------
Innovative Gaming Corporation of America (Nasdaq: IGCA)
announced an agreement with SSP Solutions, Inc. (Nasdaq: SSPX)
to exchange $2,500,000 SSP common stock for a convertible
preferred security in IGCA. The preferred security will convert
into a 9.9% interest in IGCA contemporaneously with the closing
of the proposed merger with GET USA, Inc. SSP has also agreed
to pledge an additional 900,000 shares of its common stock as
collateral to assist IGCA in securing a loan to complete its
restructuring of the Company's existing preferred securities and
to provide working capital.
Under the agreement IGCA will be appointed the exclusive value-
added reseller of SSP Solutions' technology and services for
gaming applications. Management has determined that this
technology complements both IGCA's and GET's casino operating
systems and game library, further enhancing the value of the
previously announced merger.
Laus M. Abdo, President and Chief Financial Officer of IGCA,
said, "The SSP technology provides two key benefits. First, it
will substantially enhance the server based and networked gaming
products that we are currently developing with GET USA, Inc.
Secondly, IGCA will utilize the SSP / EDS Trust Assurance
Network to positively verify the location and identity of
players accessing wide area gaming systems. We expect this to
be particularly applicable to casino operators establishing
remote gaming sites in licensed and regulated jurisdictions that
are concerned with the age, identity and location of players."
Through a ten-year alliance with EDS, SSP will be providing IGCA
use of its Trust Assurance Network, which is a network of
hardware devices enabling Internet security from server to end-
user, providing secure access control, real-time financial
transactions and protected digital content. "The TAN is a
unique, flexible and programmable platform that meets the
demands of both the enterprise and the individual by supporting
a multiplicity of security standards for applications," said
Richard Depew, president and chief operating officer of SSP
Solutions. "Having the core of the SSP Solution Suite operated
by EDS in its Secure Vault brings EDS' capabilities and trusted
reputation to bear on a host of security applications as well as
business and consumer transactions such as client
authentication, access privileges and rights, the clearing and
settlement of micro-payments and the satisfaction of monetary
obligations to content owners." The TAN will also support
applications for related gaming, hospitality and lodging
services including booking, room-key access, loyalty programs,
advertising campaign and program management and pay-per-view in-
room interactive services.
Nevada Gaming Control Board Meeting
The Company also announced that on February 6, 2002, the Nevada
Gaming Control Board approved the application of Tom Foley, the
Company's chairman and chief executive officer for a finding of
suitability. The Company anticipates that the Nevada Gaming
Commission will act on Mr. Foley's application later this month.
In comments to the Gaming Control Board, Mr. Abdo disclosed that
the Company's internal projections, based on a number of
assumptions, call for total revenues from sales and
participation of $17,800,000 in fiscal year 2002. The
underlying assumptions include the Company's ability to obtain
adequate financing on a timely basis, regulatory approvals for
new game titles and functionality, the successful introduction
of new products currently in development, and the placement of
existing games. The Company presently anticipates that a
significant portion of these revenues will be realized during
the second half of 2002 as the new game titles are brought to
the marketplace.
Innovative Gaming Corporation of America, through its wholly-
owned operating subsidiary, Innovative Gaming, Inc., develops,
manufactures and distributes fast playing, high-entertainment
gaming machines. The Company distributes its products both
directly to the gaming market and through licensed distributors.
Further information on IGCA is available at http://www.igca.com
SSP Solutions, Inc., develops and distributes the SSP? Solution
Suite of services, hardware, software, and embedded security
products designed as the Trusted Symbol of the Digital Economy?.
The company's SSP-Litronic Division has a 30-year history of
leading edge technology and data security solutions for
government communications. SSP products embed security and
trust throughout the transaction chain protecting electronic
communications and financial transactions, physical and
electronic access, and the exchange of copyrighted digital
content. By combining its own technology with a range of
partners' technologies and intellectual properties, SSP products
represent the first, open embedded security architecture
simultaneously supporting public key infrastructure (PKI) and
multiple standards of digital rights management. SSP's custom-
made enterprise security solutions address digital rights
management, financial services, government, entertainment,
healthcare, and education -- and form the heart of a ten-year
alliance with EDS, the nation's largest systems integrator and a
global leader in information assurance. Designed as the Trusted
Symbol of the Digital Economy, SSP Solutions brings Core to the
Edge security to ensure the protection of digital rights for
providers and users. For additional company information, visit
http://www.sspsolutions.comor call (949) 851-1085.
* * *
As reported in the January 24, 2002 edition of Troubled Company
Reporter, Innovative Gaming has reached agreement with the
holders of its Series F and Series K Convertible Preferred Stock
to restructure those securities. Upon execution of definitive
documentation, each Series of Convertible Preferred will be
exchanged for a combination of cash, common stock and a new
convertible preferred stock with a minimum $1.00 per share
conversion price.
Also, in the same report, the company announced that it and
Crown Bank have agreed to extend an existing $1 million loan for
six months. Additionally, the Company has negotiated a one year
extension on $700,000 of its notes payable.
KAISER ALUMINUM: Executes Definitive $300MM DIP Financing Pact
--------------------------------------------------------------
Kaiser Aluminum Corporation (NYSE:KLU), which filed for Chapter
11 protection Tuesday, announced that it has executed a
definitive loan agreement with Bank of America for $300 million
in DIP Financing, subject to Bankruptcy Court Approval. The DIP
financing, in combination with the company's current invested
cash, should provide sufficient liquidity to meet its ongoing
operating needs. Kaiser's production and shipment of bauxite,
alumina, primary aluminum products and fabricated aluminum
products will continue without interruption.
For additional information, see the newly established
restructuring section of the company's Web site --
http://www.kaiseral.comor call the newly established
restructuring hotline at 888/829-3340 or 402/220-0856.
Kaiser Aluminum is a leading producer of alumina, primary
aluminum and fabricated aluminum products.
DebtTraders reports that Kaiser Aluminum & Chemicals' 9.875%
bonds due 2002 (KAISER1) are trading between 65 and 68. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=KAISER1for
real-time bond pricing.
KAISER ALUMINUM: Gets Okay to Use Up to $100MM of DIP Financing
---------------------------------------------------------------
Kaiser Aluminum Corporation (NYSE:KLU) said that the company has
received interim approval from the Bankruptcy Court to use up to
$100 million of its $300 million in Debtor-in-Possession (DIP)
financing, together with existing invested cash, to continue
operations, pay employees and purchase goods and services going
forward during its voluntary Chapter 11 case. At yesterday's
hearing, the company received Court approval to, among other
things, pay pre-petition and post-petition wages, salaries and
benefits to its employees, and to honor obligations to its
customers.
Interim approval of a portion of the total DIP commitment is
common in Chapter 11 reorganization cases. A final hearing on
the DIP facility is expected to occur in the next 30 days. The
approval of only a portion of the facility is not an issue for
Kaiser, as usage of the DIP facility in the near-term is
expected to be limited to issuance of letters of credit.
Immediate borrowings under the DIP facility are not anticipated
as Kaiser has adequate invested cash for the foreseeable future
at the petition date.
"We are pleased with the court's prompt approval of the first-
day orders," said Jack Hockema, president and CEO of Kaiser.
"The interim approval of our DIP financing, combined with the
company's invested cash, should provide adequate funding to meet
our employee and supplier obligations as well as build on the
performance improvement initiatives we have recently put in
place. Kaiser's operations, production and delivery schedules
will continue without interruption. We appreciate the support
being shown by our employees, customers and suppliers as we
begin the restructuring process."
For additional information on Kaiser's restructuring, visit the
company's Web site at http://www.kaiseral.comor call the Kaiser
restructuring hotline at 888/829-3340 or 402/220-0856.
Kaiser Aluminum is a leading producer of alumina, primary
aluminum and fabricated aluminum products.
KMART CORP: Court Okays Payment of Prepetition Tax Obligations
--------------------------------------------------------------
Kmart Corporation and its debtor-affiliates sought and obtained
the Court's authority to pay pre-petition sales, use and other
similar "trust fund" taxes.
J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom,
in Chicago, Illinois, relates that the Debtors usually incur
various taxes, including state and local sales and use tax
liabilities, in the ordinary course of their business. Mr.
Ivester explains that sales and use taxes accumulate as the
Debtors sell merchandise. "These taxes are calculated based
upon statutorily mandated percentages of the price at which the
Debtors' merchandise is sold," Mr. Ivester explains.
According to Mr. Ivester, the Debtors sometimes pay sales and
use taxes in arrears once it is collected. The Debtors also
collect similar funds including revenues from liquor sales,
fishing licenses, postage and lottery tickets, Mr. Ivester adds.
However, Mr. Ivester notes that many jurisdictions require the
Debtors to remit estimated sales and use taxes and similar
collections on a periodic basis during the month or quarter in
which sales are made. The taxing authority then "trues up" any
deficiency or surplus on the date on which the taxes are
actually due, Mr. Ivester relates.
Historically, Mr. Ivester says, the Debtors' tax liability has
been approximately $166,000,000 based on a per month average in
light of the Debtors' typical annual Tax obligation. Prior to
Petition Date, Mr. Ivester informs Judge Sonderby that the
Debtors were usually current on their tax obligations. "That
changed when the Debtors filed for bankruptcy," Mr. Ivester
admits. But the Debtors clarify that they are substantially
current with respect to the other types of trust fund taxes.
"Without question, the payment of the Trust Fund Amounts is
necessary to avoid administrative difficulties," Mr. Ivester
asserts. If the Debtors were withhold the payment of the Trust
Fund Amounts, Mr. Ivester says, taxing authorities might take
precipitous action, including a marked increase in state audits,
a flurry of lien filings or lift stay motions, and significant
administrative problems.
Mr. Ivester states that the Court's go signal for the payment of
these Taxes will eliminate the possibility of such time-
consuming and potentially damaging distractions.
Judge Sonderby makes it clear that Debtors retain the right to
contest the amounts of any Taxes on any grounds deemed
appropriate. (Kmart Bankruptcy News, Issue No. 3; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
KMART CORP: S&P Withdraws Ratings on 5 Related Transactions
-----------------------------------------------------------
Standard & Poor's removed its ratings on five Kmart Corp.
related credit lease series. The series were redeemed in full
on Friday, Feb. 8, 2002.
Each series evidenced beneficial ownership interests in the
assets of a pass-through trust, which held mortgage notes
secured by properties leased to former Kmart subsidiaries Office
Max, Borders Inc., and the Sports Authority Inc. Office Max
leased the properties underlying the Mortgage Pass-Through
Certificates Series 1994A-1 and Mortgage Pass-Through
Certificates Series 1994A-2. Borders Inc. leased the properties
underlying the Mortgage Pass-Through Certificates Series 1994A-
3, Mortgage Pass-Through Certificates Series 1994A-4, and
Mortgage Pass-Through Certificates Series 1994A-5. The Sports
Authority, Inc. leased the properties underlying Mortgage Pass-
Through Certificates Series 1994-A-3 and Mortgage Pass-Through
Certificates Series 1994-A-5.
The transactions contained note put agreements, which gave the
right to the collateral trustee (United States Trust Company of
New York (single-'A'-plus), an affiliate of U.S. Trust Corp.),
under certain circumstances, to require the former Kmart
subsidiary, and in the event the subsidiary failed to do so,
Kmart ('D'), to purchase the related mortgage notes in whole.
The circumstances included certain rating declines of Kmart
Corp. ('D') and/or restructuring events at Kmart.
The payoffs are a result of the recent exercise of the note put
agreements, which resulted in the former Kmart subsidiaries
purchasing the related mortgage notes in whole resulting in the
full principal payment of the rated debt.
Ratings Withdrawn
Kmart Corp. Related Credit Lease Transactions
Rating
Transaction To From
----------- -- ----
Mortgage P/T Certs Ser 1994A-1 NR CCC-/Watch Neg
Mortgage P/T Certs Ser 1994A-2 NR CCC-/Watch Neg
Mortgage P/T Certs Ser 1994A-3 NR CCC-/Watch Neg
Mortgage P/T Certs Ser 1994A-4 NR CCC-/Watch Neg
Mortgage P/T Certs Ser 1994A-5 NR CCC-/Watch Neg
DebtTraders reports that KMart Corp.'s 9.875% bonds due 2008
(KMART18) (an issue currently in default) are trading between 46
and 47. For real-time bond pricing, see
http://www.debttraders.com/price.cfm?dt_sec_ticker=KMART18
LERNOUT & HAUSPIE: Solicitation Period Extended through April 30
----------------------------------------------------------------
Judge Wizmur grants Lernout & Hauspie Speech Products N.V. and
Dictaphone Corp. a further extension of their deadline during
which Dictaphone Corporation may solicit acceptances for its
Third Amended Plan to and including March 29, 2002, and the
deadline for L&H NV and Holdings to solicit acceptances of the
L&H Joint Plan to and including April 30, 2002, each without
prejudice to requests for further extensions of the solicitation
periods. (L&H/Dictaphone Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
LODGENET ENTERTAINMENT: Vanguard Discloses 7.24% Equity Stake
-------------------------------------------------------------
Vanguard Explorer Fund beneficially owns 889,100 shares of the
common stock of LodgeNet Entertainment Corporation, which
represents 7.24% of the outstanding common stock of LodgeNet.
Vanguard holds sole power to vote or to direct the voting of,
and shared power to dispose of or direct the disposition of, the
stock.
Enjoy your stay: Watch a movie, play Nintendo, surf the
Internet, use the shampoo, but please don't steal the towels.
LodgeNet Entertainment provides free and fee-based guest
services, including cable TV, on-demand movies, Nintendo video
games, DIRECTV broadcast satellite (DBS) TV programming, and
Internet access, to almost 5,000 hotels with more than 760,000
rooms in North America. To provide its Internet and interactive
services, the company installs broadband LANs (local-area
networks); its interactive services include video checkout and
room service menus. LodgeNet is spreading its system
architecture and technology through licensing partners in Latin
America, Israel, and Japan.
LodgeNet Entertainment provides free and fee-based guest
services, including cable TV, on-demand movies, Nintendo video
games, DIRECTV broadcast satellite (DBS) TV programming, and
Internet access, to almost 5,000 hotels with more than 760,000
rooms in North America. To provide its Internet and interactive
services, the company installs broadband LANs (local-area
networks); its interactive services include video checkout and
room service menus. LodgeNet is spreading its system
architecture and technology through licensing partners in Latin
America, Israel, and Japan. At June 30, 2001, the company
reported a total stockholders' equity deficit of approximately
$41 million.
MAXXAM: Says Kaiser's Bankruptcy Has Little Impact on Operations
----------------------------------------------------------------
Kaiser Aluminum has filed a voluntary petition in U.S.
Bankruptcy Court for the District of Delaware to reorganize
under Chapter 11 of the U.S. Bankruptcy Code.
MAXXAM Inc.,(AMEX:MXM) directly and indirectly owns 62% of
Kaiser Aluminum.
The decision by Kaiser Aluminum to file for Chapter 11
reorganization should have no effect on the employees, vendors,
or customers of MAXXAM's forest products, real estate and racing
operations. In addition, it is MAXXAM's understanding that
Kaiser Aluminum intends to continue its general operations as it
restructures.
* * *
As reported in the Feb. 8, 2002, edition of Troubled Company
Reporter, Standard & Poor's low-B and junk ratings on Maxxam
Inc., remains on CreditWatch with negative implications where
they were placed January 15, 2002. Maxxam Inc. guarantees the
12% senior secured notes due Aug. 1, 2003, at its Maxxam Group
Holdings Inc. (MGHI) subsidiary. The actions on MAXXAM reflect
concerns regarding Kaiser as well as issues affecting the wood
products business. Wood product market conditions are weak, with
oversupply and soft demand resulting in volatile pricing for
lumber and logs. In addition, the company has not always been
able to harvest at desired levels because the governmental
approval process has been slow, although it has reportedly
improved recently. Still, recent cost cutting measures and a
focus on unit cost optimization, should improve cash flow and
earnings coverages.
MCLEODUSA: Court Okays Use of Secured Lenders' Cash Collateral
--------------------------------------------------------------
McLeodUSA Inc. seeks authority to use the Pre-Petition Secured
Lenders' Cash Collateral to fund their on-going working capital
needs and grant those Lenders adequate protection to compensate
them for any potential diminution in value of the Pre-Petition
Collateral.
Randall Rings, McLeodUSA's Group Vice President, Secretary and
General Counsel, says substantially all cash held by the Debtor
in its cash management system is subject to a perfected security
interest in favor of the Pre-Petition Secured Lenders. Mr.
Rings says the Debtor needs continued access to that cash to
fund the Non-Debtor Affiliates' operations.
As of the Petition Date, the Non-Debtor Affiliates had
approximately $40,000,000 in cash in an account in the name of
McLeodUSA Holdings, Inc., a direct non-debtor subsidiary of the
Debtor, held at Firstar Bank. Mr. Rings says this cash is
sufficient to fund the operations of the Non-Debtor Affiliates
for 7 to 10 days following the Petition Date. The cash held by
McLeodUSA Holdings, Inc. is also subject to the Lenders' liens.
Mr. Rings says the Cash Collateral will be used to pay the
ongoing costs of administering the estate and the costs to
obtain critical goods and services necessary to carry on their
respective businesses of Non-Debtor Affiliates in a manner that
will avoid irreparable harm to the Debtor's estate. Use of
Lenders' Cash Collateral, the Debtor says, is vital to the
Debtor's ability to successfully reorganize and in the best
interest of the Debtor's estate.
The Pre-Petition Credit Agreement
On May 31, 2000, the Debtor entered into a $1,300,000,000 of
Senior Secured Credit Facilities with a syndicate of financial
institutions. The Credit Agreement consisted of:
(a) a seven-year senior secured revolving facility with an
aggregate principal amount of $450,000,000;
(b) a seven-year senior secured multi-draw term loan facility
with an aggregate principal amount of $275,000,000; and
(c) a an eight-year single draw senior secured term loan with
an aggregate principal amount of $575 million.
The outstanding balance owed under the Credit Agreement is
approximately $1,000,000,000.
The Debtor's obligations under the Pre-Petition Credit Agreement
are secured by:
(a) a first priority pledge of all the capital stock owed by
Debtor and the Non-Debtor Affiliates; and
(b) a perfected first priority security interest in
substantially all of Debtor's tangible and intangible
assets and, to the extent of $100,000,000, by the
substantially all of the assets of each of the Non-Debtor
Affiliates.
In addition, the Pre-Petition Senior Secured Lenders are secured
by liens on telecommunications assets acquired or constructed
with proceeds or refinanced from the Credit Facilities.
Use of Cash Collateral
The Debtor tells the Court that it inked a consensual agreement
with the Pre-Petition Lenders prior to filing its chapter 11
petition. That agreement says the Debtor is permitted to use
all Cash Collateral of Pre-Petition Secured Lenders other than
Disposition Proceeds, provided that the Pre-Petition Secured
Lenders are granted adequate protection. Until the Termination
Date, upon request of the Debtor for whose account the Cash
Collateral is held, the Pre-Petition Secured Lenders shall
promptly turn over to the Debtor all cash collateral within the
meaning of Bankruptcy Code section 363(a) or held by them.
Disposition Proceeds
All proceeds from any sale or other disposition of the Debtor's
assets (or assets owned by any Guarantor) outside the ordinary
course of business will be segregated and invested, subject to
further order of the Bankruptcy Court or disposition pursuant to
the Plan, provided, however, that any Disposition Proceeds from
the sale of Non-Core Assets received prior to the Termination
Date may be retained or applied in accordance with the terms of
the Credit Agreement.
Adequate Protection
The Debtor agrees to grant the Pre-Petition Agent and Pre-
Petition Secured Lenders adequate protection for any diminution
in value of the Lenders' interests in the Collateral. That
adequate protection package provides the Lenders:
(i) a perfected first priority senior security interest in
and lien upon all cash of the Debtor (whether maintained
with the Agents or otherwise) and any investment of the
funds of the Debtor, whether existing on the Petition
Date or thereafter acquired;
(ii) a perfected first priority security interest in and lien
upon all other pre- and post-petition property of the
Debtor, whether existing on the Petition Date or
thereafter acquired, including, without limitation,
accounts receivable, contracts, documents, equipment,
general intangibles, instruments, inventory, interests,
in leaseholds, real property and the capital stock of the
subsidiaries of the Debtor and the proceeds of all of the
foregoing (but not including the proceeds of causes of
action arising solely under the Bankruptcy Code or
incorporated thereunder pursuant to Bankruptcy Code
section 544(b)(1));
(iii) a superpriority claim as provided for in Bankruptcy Code
section 507 (b) subject to the payment of the Carve-Out;
(iv) cash payments in the amount of all accrued and unpaid
letter of credit fees and interest on the Pre-Petition
Debt at the rate provided for in the Credit Agreement,
and all other accrued and unpaid fees and disbursements
(including, but not limited to fees owed to the
Pre-Petition Agent) incurred prior to the Petition Date
owing under the Credit Agreement; and
(v) current cash payments from the Debtor (x) of all fees and
expenses payable to the Agents and otherwise under the
Credit Agreement, including but not limited to, the
reasonable fees and disbursements of counsel and
financial consultants for the Pre-Petition Agent and (y)
on the first business day of each month, all accrued but
unpaid letter of credit fees, and interest on the Pre-
Petition Debt at a rate per annum equal to the non-
default contractual interest rate under the Pre-Petition
Credit Agreement, in each case subject to (a) valid and
perfected non-avoidable liens in existence on the
Petition Date, (b) valid liens in existence on the
Petition Date that are perfected subsequent to the
Petition Date as permitted by Bankruptcy Code section
546(c), (c) liens, if any, granted pursuant to a
Qualifying DIP Order (as defined in the Pre-Petition
Credit Agreement) entered by this Court prior to the
Termination Date, and (d) applicable provisions of the
Carve-Out.
Without prejudice to the rights of any other party to contest
such assertion, if the Restructuring is not consummated prior to
the Termination Date, the Pre-Petition Secured Lenders reserve
their rights to assert claims for the payment of additional
interest calculated at any other applicable rates of interests
(including, without limitation, default rates), or on any other
basis, provided for in the Credit Agreement.
Maturity
The Cash Collateral Agreement expires on the earliest of:
(A) August 1, 2002;
(B) the substantial consummation of a plan of reorganization
in the Debtor's chapter 11 case; and
(C) an event of default.
The Debtor says it needs immediate authority to use the Cash
Collateral to fund the day-to-day operations of the Debtor and
the Non-Debtor Affiliates. Absent such relief, it says, neither
the Debtor nor the Non-Debtor Affiliates will be able to
continue operating their businesses.
The failure to obtain authorization for the use of the Cash
Collateral will be fatal to the Debtor and the Non-Debtor
Affiliates, and disastrous to all stakeholders, the Debtor tells
the Court.
Finding the Debtor make their case for needing a continued
source of working capital and that the terms and conditions of
the Cash Collateral Agreement and adequate protection package
look fair and reasonable on their face, Judge Erwin Katz grants
the Debtor interim authority to use the Lenders' cash collateral
and grant dollar-for-dollar replacement liens to the Lenders.
The Debtor may continue using the Lenders' Cash Collateral
through February 18, 2002. On that date, Judge Katz will
convene a Final Cash Collateral Hearing to consider entry of a
permanent order granting the Debtor continued access to the
Lenders' Cash Collateral through August 1, 2002. (McLeodUSA
Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
MERRILL LYNCH: Kmart Concentration Drags Ratings to Junk Level
--------------------------------------------------------------
Merrill Lynch Mortgage Investors Inc. (MLMI), commercial
mortgage pass-through certificates, series 1998-C1-CTL $4.8
million class H and $ 1.6 million class J are downgraded to 'CC'
from 'CCC' by Fitch Ratings. In conjunction with the downgrades,
classes H and J are also placed on Rating Watch Negative. $58.1
million class F and $3.2 million class G are affirmed at 'CCC'.
Fitch Ratings does not rate classes A-1, A-2, A-3, A-PO, A-IO,
B, C, D, E and K of the transaction.
The actions reflect the weakening of the transaction due to the
number of loans of concern in the transaction including loans
with Kmart exposure. There are four loans, which have Kmart as a
tenant with a 3.5% exposure by loan balance. Of these loans,
Kmart has not rejected any of these leases, thus far. The
ratings of credit tenant lease transactions are highly sensitive
to the movement of the corporate credit ratings of the
underlying tenants. This transaction has continued to see a
decline in the ratings of the tenants.
In addition to loans with leases guaranteed by Kmart, Fitch
continues to have concerns with loans with leases guaranteed by
Rite Aid (20%), Circuit City (11%) and the former Heilig-Meyers
(5%). GMACCM, as special servicer, continues to work out the
loans, which transferred due to the Heilig-Meyers bankruptcy,
through either re-leasing or disposition strategies. Fitch
expects losses associated with the non-performing Heilig-Meyers
loans. However, those losses are anticipated to be absorbed by
most subordinate class K. Fitch will continue to monitor the
progress of the Kmart bankruptcy for further lease rejections
and the impact on the ratings in this transaction.
METALS USA: Joint Committee Signs-Up CIBC for Financial Advice
--------------------------------------------------------------
The Official Joint Committee of Unsecured Bondholders and
Creditors of Metals USA, Inc., and its debtor-affiliates asks
the Court for permission to retain and employ CIBC World Markets
Corp. as its financial advisor, nunc pro tunc to December 7,
2001.
Henry J. Kaim, Esq., at Akin Gump Strauss Hauer & Feld LLP in
Houston, Texas, states the Committee members chose CIBC, after
interviewing several firms, because of the firm's extensive
experience and knowledge in the fields of bankruptcy and
creditor's rights, corporate acquisitions and expertise in the
metals sector.
Specifically, CIBC will:
A. Assist the Committee in analyzing and reviewing the acts,
conduct, assets and financial condition of the Debtors;
B. Familiarize itself to the extent appropriate with the
operations of the Debtors' businesses;
C. Advise the Committee with respect to any financial
restructuring or recapitalization including analyzing,
negotiating and effecting a plan of reorganization or
recapitalization for the Debtors;
D. To the extent necessary, perform valuation analyses on the
Debtors and their assets; and
E. Perform any other tasks agreed upon by CIBC and the
Committee.
Mr. Kaim states that the Committee will indemnify CIBC, its
agents, employees, officers and directors and any person who
controls the firm from and against any and all losses, claims,
judgments, liabilities and expenses arising from this
engagement.
For rendering services to the Committee:
A. CIBC will be paid a monthly cash fee of $150,000 payable
monthly in advance up to the effective date of the
engagement's termination.
B. Upon the closing of a transaction, CIBC shall be paid a
success fee equal to 1% of the consideration
received by interests represented by the Committee in pre-
petition unsecured claims. The success fee shall be paid
to CIBC in the same kind of consideration received by the
interests received by the Committee. CIBC shall credit 50%
of any monthly fee earned after the sixth month
and 75% of any monthly fee earned after the ninth
month against the success fee.
C. CIBC will also be entitled to reimbursement of out-of-the-
pocket expenses arising from services rendered to the
Committee.
Mr. Kaim submits that CIBC's overall compensation structure is
comparable to the compensation generally charged by investment
banking firms of similar stature to CIBC and for comparable
engagements both in and out of court. It is thus market-based
and reasonable. The fees were also set against the magnitude and
difficulty of CIBC's assignment, given that a substantial
commitment of professional time and effort will be required of
CIBC and its professionals. And it may foreclose other
opportunities for CIBC.
CIBC Managing Director Daniel W. Dienst states that the
engagement of the company is justified since CIBC is one of the
few full service global investment banks with a full-time,
dedicated financial restructuring group. After its selection by
the Committee, CIBC embarked on a fast-paced, intense due
diligence. This required visiting and evaluating the Debtors'
underlying assets and understanding the liquidity and financial
performance of the regional businesses. Mr. Dienst relates that
CIBC has already conducted due diligence in evaluating various
DIP financing alternatives, evaluating numerous emergency by the
Debtors, understanding and evaluating the Debtors' assets sale
efforts, evaluating the management team's capabilities and
reporting on the same to the Committee in written and telephonic
communication.
Mr. Dienst advises that CIBC presently serves as financial
advisor to the Official Committee of Noteholders of LTV Steel
Corp., which is an unsecured creditor of the Debtors. CIBC is
also providing financial services to some of the Debtors'
creditors. These include Airgas Inc., Aramak Services Inc.,
AT&T Canada Inc., AT&T Wireless Services Inc., AT&T Corp., Atlas
Tube Inc., CIT Financial Ltd., General Motors Acceptance Corp.,
GE Capital, Goldman Sachs Canada, IBM Corp and McDonald Douglas
Corporation. Mr. Deinst discloses that he himself, the
principal in charge of this engagement, also serves as director
of Metal Management, a buyer of scrap metal of the Debtors and
their subsidiaries. He, however, maintains that CIBC is a
disinterested person in these cases as that term is used in 11
U.S.C. Sec. 101(14).
In addition, as part of its regular business operations as a
securities brokerage firm, CIBC may trade or sell non-Debtor
securities on behalf of or act as a broker or investment advisor
for some or all of the Debtors' significant noteholders. CIBC
may also trade non-debtor securities on behalf of and act as a
broker for other creditors, equity holders and other parties-in-
interest.
Mr. Deinst notes that the Debtors have been placed on CIBC's
restricted list. Accordingly, proprietary trading by CIBC and
publication of researched reports and recommendations to buy or
sell are prohibited. But the Debtors' placement on the list
does not prohibit CIBC from executing unsolicited agency orders.
(Metals USA Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
NII HOLDINGS: Misses $41MM Interest Payment on 12.75% Debt Issue
----------------------------------------------------------------
NII Holdings, Inc., did not make its $41 million interest
payment due February 7, 2002, on its 12.75% Senior Serial
Redeemable Notes due 2010, of which $650 million in aggregate
principal amount are outstanding.
In addition, the earlier disclosed forbearance agreements that
NII entered into with a majority of the lenders under the
Company' $108 million Argentine bank facility, and with Motorola
Credit Corporation under $382 million of vendor financing
facilities, each expired on January 22, 2002 and have not been
extended. NII does not currently intend to make any additional
payments of principal or interest on these financing facilities.
As a result of the expiration of the forbearance agreements, the
lenders under the Argentine bank facility and MCC are each free
to pursue their respective remedies available as a result of
NII's earlier disclosed default under these facilities, but NII
says it is actively discussing various alternatives with these
lenders.
The decision to not make these payments is part of the cash
reservation initiatives within the financial restructuring
process II has previously announced it had undertaken. In its
latest Form 8-K filing with the Securities and Exchange
Commission, the Company announced it was in discussions with its
creditors, including the lenders under the Argentine bank
facility, MCC, and representatives of holders of its 12.75%
Notes, its 12.125% Senior Serial Redeemable Discount Notes due
2008 and its 12.75% Senior Serial Redeemable Notes due 2010,
regarding the restructuring of its obligations, including a
potential sale of strategic assets, reorganization under chapter
11 of the United States Bankruptcy Code or other measures, which
discussions are continuing, and had retained the investment
banking firm Houlihan Lokey Howard & Zukin Capital to assist it
in exploring strategic alternatives. There is no assurance that
NII will be able to successfully restructure any of its
obligations. As a result of its cash preservation initiatives,
NII has revised its business plan and in accordance with United
States accounting standards expects to record a significant
charge in the quarter ended December 31, 2001.
NABI: Heartland Advisors Disclose 8.1% Equity Stake
---------------------------------------------------
Heartland Advisors, Inc., an investment adviser registered with
the SEC, and William J. Nasgovitz, President and principal
shareholder of Heartland Advisors, Inc. beneficially own
3,065,471 shares of the common stock of Nabi. Heartland
Advisors, Inc. by virtue of its investment discretion and in
some cases voting power over client securities, (which may be
revoked), holds sole voting power over 401,471 shares, and sole
dispositive power over the 3,065,471 shares. William J.
Nasgovitz, as a result of his position with and stock ownership
of Heartland, which could be deemed to confer upon him voting
and/or investment power over the shares Heartland beneficially
owns, holds sole voting power over 2,500,000 shares. These
shares include 3,571 shares of common stock resulting from the
assumed conversion of $50,000 of 6.5% Convertible Bonds due
February 1, 2003. Heartland's holding represents 8.1% of the
outstanding common stock of Nabi, while Mr. Nasgovitz' holding
represents 6.6%.
Nabi makes products to prevent and treat infectious diseases and
autoimmune disorders. The firm sells Nabi-HB, which prevents
hepatitis B; WinRho SDF for immune platelet disorders; AutoPlex
T for the treatment of hemophilia; and Aloprim to treat
chemotherapy-induced hyperuricemia, a condition that can lead to
renal disease. It is developing therapies to combat staph
infections, nicotine addiction, and hepatitis C. To focus on its
drug development programs, Nabi sold to Australia's CSL a unit
that provides plasma and plasma-based products and screens
donors for naturally occurring antibodies that can be
administered as therapeutics to patients suffering particular
diseases. In October 2001, Standard & Poors raised the junk
ratings to the company following the sale of its Antibody
Collection assets.
NATIONSRENT: Brings-In Ernst & Young as Compensation Consultants
----------------------------------------------------------------
NationsRent Inc., and its debtor-affiliates present the Court
with their application to employ and retain Ernst & Young LLP as
strategic compensation consultants in these Chapter 11 cases,
nunc pro tunc to December 17, 2001.
The Debtors' Vice-President, General Counsel and Secretary
Joseph H. Izhakoff, relates that the Debtors desire to retain
Ernst & Young as they believe the firm is well-suited to serve
the Debtors. The firm has provided auditing and related
financial advisory services to numerous Fortune 500 and other
large entities and has substantial experience in chapter 11
proceedings. Also, prior to the Petition Date, Ernst & Young
also provided human resource advisory service and tax and
accounting to the Debtors and as a result are familiar with the
Debtors' financial affairs.
Ernst & Young will be providing the Debtors' these services:
A. Assisting the Debtors develop competitive, cash-based
retention bonus programs utilized to retain key employees
during these Chapter 11 cases;
B. Assisting the Debtors develop enhanced severance protection
for key employees through and beyond the Chapter 11
proceedings;
C. Assisting the Debtors design and develop cash-based
performance incentive compensation programs utilized to
motivate key employees during the Chapter 11 proceedings;
D. Assisting the Debtors to qualify the financial impact of a
retention bonus, severance protection and performance
incentive compensation plans to the Debtors;
E. Advising the Debtors regarding the tax and accounting issues
relative to newly-designed and modified compensation,
benefit and HR programs; and
F. Assisting the Debtors develop summary reports for the
Debtors' creditors and any subsequent meetings or
negotiations regarding the terms of the Debtors'
compensation and severance programs.
Ernst & Young and the Debtors have agreed that any controversy
or claim with respect to, in connection, arising out of, or in
any way related to the firm's services will be brought before
the Bankruptcy Court or the District Court of Delaware. In the
event that the Court does not retain jurisdiction over the
dispute, Mr. Izhakoff states the Debtors and Ernst & Young will
submit to non-binding mediation and if that is not successful,
then to binding arbitration. Either the Debtors and Ernst &
Young may terminate this engagement at any time but the
provisions for the resolution of disputes will survive the
termination.
At different times in November 2001, Mr. Izhakoff informs the
Court that the Debtors paid Ernst & Young from their operating
cash a total of $172,354 for strategic compensation advisory
services and for tax-related services.
Susan H. Marcille, a partner at Ernst & Young, tells the Court
that the Debtors, aside from reimbursing reasonable out-of-
pocket expenses, will also pay for these hourly rates of the
firm's professionals:
Partners and Principals $470 to $600
Senior Managers $470 to $550
Managers $350 to $450
Seniors $225 to $286
Staff $170 to $215
Ernst & Young discloses it has a prior or current relationship
with the Debtors including NationsRent Inc. and Logan Equipment
Corporation as well that of the Debtors' officers including
Pamela KM Beall, Ivan Gorr, David Hill, James L. Kirk and Philip
V. Petrocelli.
The firm currently or previously rendered services to the
Debtors':
A. Largest unsecured creditors including Bil-Jax/Workforce,
CIGNA Health Care, Cintas Corporation #318, Corpdata
Network Inc., JLG Industries, Prudential Health and Soff-
Cut International.
B. Trade names including Logan Equipment Corp., NationsRent AWP
Company, NationsRent AWP Company d/b/a REM Lifts,
NationsRent of Alabama, NationsRent of California,
NationsRent of Florida, NationsRent of Georgia, NationsRent
of Indiana, NationsRent of Kentucky, NationsRent of
Louisiana, NationsRent of Michigan, NationsRent of New
Hampshire, NationsRent Northeast, NationsRent of Ohio,
NationsRent of Tennessee, NationsRent of Texas and
NationsRent of West Virginia.
C. Parties to joint ventures including Lowes Companies Inc. and
Village of Freeport.
D. Attorneys including Birmingham Dana LLP, Jones Day Reaves &
Pogue and Richards Layton & Finger PA.
E. Secured lenders including Bank of America, Citibank NA,
Citizens Bank, Credit Lyonnais, Deutsche bank, Eaton Vance
Floating Rate Portfolio, Erste Bank, Fifth Third Bank,
First Union Bank (NC-0760), GE Capital Corporation,
Huntinton National Bank, Intermarket Corp., Bank of
Montreal, Delaware Management Co., Investcorp, MBIA Inc.,
PPM America Inc. and Seneca Capital Management.
F. Holders of seller notes including Dimeo Construction Co., EMC
Corp., General Electric Capital Corporation, Fleet Capital
Corporation, Ingersoll-Rand Co., Mellon US Leasing, a
division of Mellon Leasing Corp., PACCAR Financial Corp.,
Sanwa Business Credit Corp., Southtrust Bank NA and
Lawrence Smith.
G. Major real property lessors including AutoNation, Barco LLP,
Godfred Berger Jr., Garzarelli Investments Co. LLC, K&T
Associates, Charles Mann, Raymond E. Mason Jr. and
Shamrock holdings.
H. Major equipment lessors and certain licensors including
American Finance Group Inc. dba Guaranty Capital Corp., Aon
Risk Sves, Bombardier Capital Inc., Case Corp., Textron
Financial Corp. and The CIT Group/Equipment Financing Inc.
I. Official statutory committees members including Bank of New
York as Trustees and PM America Inc. (NationsRent
Bankruptcy News, Issue No. 5; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
OWENS CORNING: Abandoning Y2K Litigation Claims Against Insurers
----------------------------------------------------------------
At the Petition Date, Norman L. Pernick, Esq., at Saul Ewing LLP
in Wilmington, Delaware, tells the Court, Owens Corning, and its
debtor-affiliates were party to a "Year 2000" insurance coverage
lawsuit against Factory Mutual Insurance Company, Allendale
Mutual Insurance Company, Continental Casualty Company,
Commonwealth Insurance Company, Winterthur International America
Insurance Company, and General Casualty Company of Wisconsin.
The litigation, which commenced on March 17, 2000 in the
Superior Court of the State of Delaware, sought declaratory
relief as to the Debtor's rights under certain property
insurance policies. More specifically, the Litigation sought a
declaration that the Debtor was entitled to recover, under a
series of insurance policies issued by the Insurers, the costs
and expenses the Debtor had incurred to preserve and to protect
certain of its insured property from loss or damage resulting
from the "Year 2000" problem; that is, the costs and expenses
the Debtor had incurred in ensuring that its electronic data
processing equipment, software, systems and other property
dependent on information technology systems that utilized two-
digit year codes would continue to operate properly subsequent
to December 31, 1999. The amount which the Debtor sought to
recover in the Litigation exceeds $49,000,000.
Mr. Pernick tells the Court that the Insurers have denied that
the foregoing damages are covered by the Debtor's property
insurance and, if the Litigation were to proceed, would likely
challenge the amount of the Debtor's asserted damages. As of the
date of this Motion, the Litigation is entering the discovery
phase, before the Honorable John E. Babiarz, Jr. The Debtor has
given careful consideration to the Litigation and has concluded
that discontinuance of the Litigation would be in the best
interests of its estate, primarily because of the significant
expenses associated with pursuing the case through trial, the
distraction that continuance of the case would pose to the
Debtor's employees needed to assist with the Debtor's
reorganization, and the risks inherent in litigating a
relatively untested legal theory.
Given the anticipated volume of future discovery and other pre-
trial activity in the Litigation, Mr. Pernick submits that the
Debtors would incur significant additional legal expenses if the
Litigation were to proceed to trial. Further, continuance of the
Litigation would take critical personnel away from their work on
the Debtor's reorganization. In addition, that the lack of
direct legal precedent creates risks in proceeding with the
Litigation that the Debtor believes outweigh the likely future
litigation recoveries. Although nearly every major business in
the United States incurred expenses to protect and to preserve
its property from Year 2000-related loss or damage, to the best
of the Debtor's knowledge, since 1999 only 21 corporate insureds
have initiated or pursued Year 2000 coverage litigation. Mr.
Pernick believes that by mid-2001, a number of these parties had
voluntarily dismissed their coverage cases for a variety of
reasons, primarily relating to the ongoing cost of litigation. A
few cases have been dismissed on grounds of late notice or
untimeliness and the Debtor's insurers have advised that they
will not negotiate a settlement of the Litigation. Under these
circumstances, and in light of developments regarding Year 2000
litigation generally, the Debtor believes that further
investment in the Litigation is not warranted.
Mr. Pernick submits that the Debtor has given careful
consideration to the strength of its position in the Litigation,
the anticipated costs of continuing to pursue the Litigation and
the likelihood of a favorable settlement or other resolution
thereof. In light of these factors, the Debtor has determined
that it is in the best interests of the Debtor's estate for the
Debtor to discontinue the Litigation. Accordingly, the Debtor
submits that its proposed discontinuance of the Litigation is an
exercise of the Debtor's sound business judgment.
The Debtor similarly believes that it will benefit under the
circumstances, from discontinuing the Litigation in that:
A. it will no longer need to bear the litigation costs and
expenses inherent in continuing the Litigation; and
B. under the terms of the proposed Stipulation of Dismissal, all
of the parties to the Litigation have agreed to bear their
own attorneys' fees and costs with respect to the
Litigation. (Owens Corning Bankruptcy News, Issue No. 27;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PACIFIC GAS: Will Spend $75 Million on Path 15 Upgrade Project
--------------------------------------------------------------
Pacific Gas and Electric Company seeks Bankruptcy Court approval
for entering into binding agreements and for expenditure of
funds to upgrade substations which involves a new 500kV
transmission line between PG&E's Los Banos and Gates substations
(Path 15 Upgrade Project), and, if necessary, reconductor a 230
KV Transmission Line to support the new 500 KV transmission line
to be constructed by Western Area Power Administration (WAPA).
PG&E estimates that this work, and previously incurred
engineering and permitting costs, will not exceed $75 million.
PG&E contemplates that WAPA will construct the 500 kV line
portion of the Path 15 Upgrade Project with funding from other
project participants.
Path 15 is a series of high-capacity transmission lines that
connect customers in Northern and Southern California and also
forms part of the Pacific AC Intertie linking the Pacific
Northwest and Oregon to Southern California. The Path 15 Upgrade
Project is expected to increase the south-to-north rating of
Path 15 by approximately 1500 megawatts through the addition of
a new 500 kV line.
Path 15 is currently constrained to a lower south-to-north
transfer limit than the rest of the 500 kV system in Northern
California because there are just two lines in this area.
The ISO has found in recent years that Path 15 congestion has
resulted in higher generating costs to Northern California
consumers mainly during off-peak periods.
During such periods, the ISO has found that it has been
necessary to operate higher-cost generation in Northern
California, to import higher-cost power from the Northwest, or
to reroute lower-cost power from Southern California onto the
Pacific DC Intertie to meet demand in Northern California. The
ISO has found that access to additional lower-cost generating
resources in the south has been limited due to the Path 15
transfer limits. Due to limited generation availability in
Northern California during the latter part of 2000, congestion
on Path 15 began to occur much more frequently.
Analyses conducted by the ISO indicated that: (1) Path 15
congestion resulted in increased market costs ranging from $7
million to $220 million over the 16-month period ending December
31, 2000; and (2) Path 15 constraints could contribute to future
rotating outages.
Although these analyses were not conclusive on project need,
PG&E believes that there was sufficient support to begin the
work necessary to undertake the permitting process so that the
potential project could be in operation as soon as possible. The
ISO approved PG&E's request to proceed with the permitting
process on February 5, 2001. Additionally, before applying for
the necessary permits, the PG&E and ISO agreed to perform
additional analyses to ascertain project need under future
generation build-out scenarios.
Thereafter, the development of a Path 15 upgrade project
progressed on two parallel tracks -- PG&E sponsorship and WAPA
sponsorship.
(1) PG&E-Sponsorship Track
Following congestion on Path 15 during various periods in 2000
and before PG&E's Chapter 11 filing, the California Public
Utilities Commission (CPUC) ordered PG&E to submit an
application for a Certificate of Public Convenience and
Necessity (a CPCN) to construct the Path 15 Upgrade Project.
PG&E accordingly submitted a Conditional Application to the
CPUC on April 13.
While that CPCN application was pending, the United States
Department of Energy directed WAPA to solicit expressions of
interest in constructing the Path 15 Upgrade Project, and WAPA
did so through a Federal Register Notice.
On October 16, 2001, PG&E, WAPA and other participants
executed a non-binding Memorandum of Understanding (MOU)
regarding construction of the Path 15 Upgrade Project.
On November 6, 2001, in light of the MOU, PG&E filed a Notice
of Withdrawal of its Conditional Application.
In an order dated November 30, 2001 (the CPUC Order), the CPUC
treated PG&E's notice as a motion for permission to withdraw
the conditional application, denied it, and consolidated the
conditional application with the CPUC's investigation,
pursuant to California Assembly Bill 970, of electric
transmission and distribution constraints, actions to resolve
those constraints, and related matters affecting the
reliability of electric supply.
The CPUC's Administrative Law Judge has scheduled hearings on
the economic benefit of the Path 15 Upgrade Project, required
submission of the MOU implementation agreements and ordered
briefing on whether a CPCN is required for PG&E's
participation in the project.
(2) WAPA-Sponsorship Track
In May 2001, the United States Secretary of Energy, prompted
by a Presidential directive incorporated in the National
Energy Policy report, directed WAPA to complete planning for
an upgrade to Path 15 and to solicit financing and ownership
interest in the project.
In June 2001, WAPA posted a notice in the Federal Register to
solicit financing and ownership interest in the proposed Path
15 Upgrade Project based on that set forth in PG&E's
Conditional Application.
Following its solicitation, WAPA met with a number of public
and private entities to discuss the possibility of
constructing the Path 15 Upgrade Project. These discussions
led to the development of a non-binding MOU executed on
October 16, 2001. The MOU outlines, on a preliminary basis,
the responsibilities, financial contributions, ownership
rights and operational details of the Project and requires the
parties to agree on "an aggressive schedule to define the
Project and the work to be done at each facility" by January
16, 2002.
Under the MOU, PG&E's proposed contributions would include:
(1) environmental and engineering studies and design work
performed to date; and
(2) detailed design and construction work for the 500 kV and
230 kV substation and 230 kV reconductoring work necessary
to accommodate the additional 500 kV transmission lines to
be constructed by WAPA.
The total cost for this work is estimated not to exceed $75
million. Based on the ratio of PG&E's contribution to the
anticipated total project cost of $325 million, PG&E would be
allocated about 345 MW of the 1500 MW incremental transfer
capability.
WAPA, PG&E and the other participants are now in the process
of negotiating binding agreements regarding construction of
the Path 15 Upgrade Project. PG&E intends to participate in
the Path 15 Upgrade Project through its contemplated work in
support of the WAPA-sponsored project rather than pursuing its
Conditional Application to construct the entire project alone.
Although the Office of Ratepayer Advocates (ORA) asserts that
PG&E must have a CPCN to construct its contemplated portion of
the Path 15 Upgrade Project, PG&E believes it does not need a
CPCN to perform such work, based on language in General Order
131-D, it does not need a CPCN. If the CPUC finds otherwise,
PG&E will determine whether it wishes to participate in the
WAPA-sponsored project at that time.
Depending on the outcome, PG&E will determine whether it
wishes to participate in the WAPA-sponsored project at that
time. PG&E requests that the Motion be granted and that PG&E
be authorized to enter into binding agreements to expend up to
$75 million for its work in support of the Path 15 Upgrade
Project.
The cost of PG&E' s work in support of the Path 15 Upgrade
Project is expected to be included in PG&E's base revenue
requirement to be recovered through the FERC Rate Case,
earning the authorized return established in that proceeding.
The Path 15 Upgrade Project participants were advised by FERC
staff that the Path 15 Upgrade Project may be eligible for
pre-construction approval, accelerated depreciation, and a 200
basis points premium on return on equity. PG&E's contribution
of approximately $75 million in work to support the Path 15
Upgrade Project translates to an increase in PG&E's present
value of revenue requirement of $95 million based on standard
depreciation and return on equity.
PG&E believes that the Project has elements of all three
expenditure categories in the ordinary course of business,
namely (1) emergency/safety projects; (2) projects that are
mandated by regulatory or legal orders; and (3) other
projects, such as projects designed to improve the reliability
of PG&E' s distribution or transmission system which may not
be mandated by specific performance requirements.
Because the requested $75 million exceeds the $50 million
project limit authorized for Ordinary Course of Business
pursuant to the Omnibus Cap Ex Motion and Order dated June 29,
2001, PG&E brings this motion seeking authority under Sections
363 and 105 of the Bankruptcy Code.
PG&E tells the Court that the Court plainly can and should
utilize its authority under Section 363 and 105(a) of the
Bankruptcy Code to approve the capital expenditure
authorization for PG&E's work in support of the Path 15
Upgrade Project as requested by the Motion because the
Path 15 Upgrade Project is perceived to be an important one by
PG&E's regulators, and that the proposed maximum $75 million
expenditure for such Project pursuant to the Motion will
attain the implementation and completion of the Project at a
materially reduced overall cost to the Debtor and its
ratepayers.
PG&E advises that the Committee, upon receiving a notice and
description of the Project from PG&E, indicated in writing that
it had no objection to the Debtor proceeding with the Path 15
Upgrade Project. (Pacific Gas Bankruptcy News, Issue No. 22;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
* * *
Pacific Gas and Electric Company announced that it has received
approval from the U.S. Bankruptcy Court to begin electric
transmission construction projects on Path 15 and in the Tri-
Valley area.
The Court, which must approve all PG&E expenditures over $50
million, approved the utility's request to begin these important
multi-year transmission projects.
Path 15, a part of the electric transmission grid near Los
Banos, CA, is being upgraded by a consortium led by the Western
Area Power Administration. On October 18, 2001, Energy Secretary
Spencer Abraham announced a memorandum of understanding among
various public and private parties governing the financing and
co-ownership of the necessary Path 15 system additions, with
participants including PG&E, among others. Pacific Gas and
Electric Company's primary role in the project is to
interconnect the transmission lines being built with the
utility's existing Los Banos and Gates substations.
This Path 15 upgrade will be of substantial benefit not only to
California, but also to the entire western grid. Under the
terms of the decision released by the Court on Friday, PG&E may
enter into binding contracts and spend up to $75 million in
support of the Path 15 project.
The Court also gave approval for PG&E to spend up to $136.9
million to build the Tri-Valley Capacity Upgrade project.
Demand for electricity in the Tri-Valley region -- located just
east of San Francisco -- has reached 98.6% of the system's
capacity. Taking into consideration the Tri-Valley region's
existing residents and businesses, along with the development
that has already been approved by local governments, electrical
demand is projected to exceed the system's capacity.
The Tri-Valley upgrade is designed to ensure continued
reliability of the region's electric power system for the area's
residents and businesses. Communities to be served by this
project include the cities of Dublin, Livermore, Pleasanton, and
San Ramon, as well as neighboring unincorporated parts of
Alameda and Contra Costa counties.
Pacific Gas and Electric Company sought court approval to begin
these two projects last month and the motions were unopposed.
In addition, the utility's request was supported by the Official
Creditors' Committee.
PENNSYLVANIA FASHIONS: Hilco Conducting GOB Sale at 75 Locations
----------------------------------------------------------------
Hilco Merchant Resources LLC is conducting store closing sales
at 75 rue 21 locations located in California, Colorado, Florida,
Georgia, Iowa, Illinois, Indiana, Kansas, Kentucky, Maryland,
Michigan, Minnesota, Missouri, North Carolina, Nebraska, New
Jersey, New York, Ohio, Oklahoma, Pennsylvania, South Carolina,
Tennessee, Texas, Virginia, Vermont, Wisconsin and West
Virginia.
Pennsylvania Fashions, Warrendale, PA, voluntarily filed for
Chapter 11 Reorganization February 4, 2002 to address financial
challenges resulting primarily from a tough retail environment.
The filing was made in the U.S. Bankruptcy Court in New Jersey.
The Company's stores, distribution center and headquarters will
continue to remain open for business as usual and the company is
determined to complete the reorganization process as quickly as
possible.
Pennsylvania Fashions has secured a Senior Secured Debtor-In-
Possession Financing Facility from BNP Paribas, Agent Bank, for
the Company's reorganization requirements.
The Company's majority owner is Saunders Karp & Megrue, one of
the leading private equity investment firms, located in
Stamford, CT, which is participating in the DIP Facility.
The company intends to use the Chapter 11 process to re-evaluate
its real estate portfolios, improve its systems capabilities,
further develop its rue 21 brand and remodel certain stores.
rue 21 will continue to be one of the dominant value specialty
retailers for junior and young men's apparel in the outlet
sector and in regional malls. The Company will continue to focus
and build on the rue 21 brand with an emphasis on fashion,
value, quality and customer loyalty and service. As part of its
reorganization strategy, the company will be closing some of its
store locations in the United States during the next few months.
The Company has entered into an agreement with Keen Realty
Consultants to assist in the selling of the leases of the
closing stores.
An experienced management team, led by the current CEO and
President, has been assembled over the past few months to lead
the necessary turnaround of the business. The management team
will concentrate on developing the rue 21 brand, store
operations, marketing, financial goals and employing experienced
associates.
The Company currently operates 247 stores in outlets and malls
in 39 states.
"We are extremely pleased to have been selected to lend our
expertise in this situation," said Michael Keefe, President and
Chief Executive Officer of Hilco Merchant Resources, LLC, a
subsidiary of Hilco Trading Co., Inc. "Our group is the foremost
specialist in helping retailers and their financial partners
realize value."
Hilco Merchant Resources, LLC, is a leader in store closings and
the liquidation of retail merchandise. Over more than a quarter
century, the principals of Hilco Merchant Resources have closed
thousands of stores and disposed of retail inventories exceeding
$25 billion in value. Headquartered in Chicago, Hilco Merchant
Resources is part of the Hilco Trading Co. organization. Through
its operating units, Hilco provides a broad-spectrum of asset
repositioning services beyond retail liquidations, including
industrial inventory, machinery and equipment appraisals and
dispositions; retail and industrial real estate appraisals and
dispositions; accounts receivable portfolio acquisitions; bulk
acquisitions of wholesale inventory; and, debt and equity
financing. Hilco Trading Co. is also headquartered in Chicago
with offices in Boston, New York, Los Angeles, Miami, Detroit,
Toronto (through affiliate Danbury Sales) and London, England.
For information, visit http://www.hilcotrading.com
PERSONNEL GROUP: Credit Facility Maturity Extended to Jan. 2003
---------------------------------------------------------------
Personnel Group of America, Inc. (NYSE:PGA), a leading
information technology and professional staffing services
company, announced its results for the fourth quarter and year
ended December 30, 2001.
For the fourth quarter, total revenues were $154.8 million
compared to $218.2 million in the fourth quarter last year.
PGA's Information Technology Services practice contributed $90.9
million, or 58.7%, of total revenues during the quarter, and the
Company's Commercial Staffing business added $63.9 million, or
41.3%, of total revenues. Exclusive of intangibles impairment
and restructuring and rationalization charges, the Company
recorded a pro forma operating loss of $0.7 million for the
quarter, versus operating income of $2.4 million last year.
After the intangibles impairment and restructuring and
rationalization charges, PGA reported a net loss of $65.4
million for the fourth quarter.
For the full year, revenues decreased to $732.3 million from
$882.0 million in 2000. Exclusive of intangibles impairment and
restructuring and rationalization charges, pro forma operating
income decreased to $15.1 million from $39.9 million, or $1.59
per share on an equivalent basis, last year. As a result of the
intangibles impairment and restructuring and rationalization
charges, PGA reported a net loss of $66.7 million for the year
2001.
During the fourth quarter, the Company recorded restructuring
and rationalization charges of $11.6 million ($10.0 million
after tax) related primarily to office closures, branch
consolidations, lease space reductions, and the loss on sale of
PGA's Dallas-based Paladin subsidiary. The Company also recorded
an intangibles impairment charge of $56.8 million in the fourth
quarter.
PGA also announced that it has finalized the credit facility
amendments previously announced in December. Under these
amendments, the Company's revolving credit facility maturity has
been extended to January 2003. After January 2003, the Company,
at its option and provided certain conditions are met, can
further extend the maturity of the facility in six-month
increments up through January 2004. The amended facility
commitment was reduced to $136.0 million. Interest payable under
the amended facility will be prime rate plus 200 basis points
through June 2002, with increases during each extension period
through January 2004. The financial covenants in the amended
facility have been adjusted to reflect the current weak economic
conditions and management's expectation as to economic
conditions over the extension period. Management believes the
Company will maintain compliance with these covenants throughout
the extension period if management's assumptions and
expectations are correct, but there can be no assurance that the
economy will perform as expected or that further economic
declines will not adversely impact the Company's ability to
comply with its covenants. As before, the Company will pledge
substantially all of its assets as collateral for the amended
facility.
"The year 2001 was extremely difficult for the staffing
industry," noted Larry L. Enterline, PGA Chief Executive
Officer. "We're pleased to have positive cash flow in the fourth
quarter despite an extremely difficult operating environment.
The extension of our credit facility maturity date, together
with covenants that reflect expectations realigned to the
current weakened economic conditions, provide us the flexibility
and time to focus our efforts on continuing operational
refinements and core infrastructure improvements. Despite the
uncertainty related to the timing of an economic recovery, we
are able to continue refining our business processes and focus,
so as to be able to take advantage of that recovery when it
occurs. Our people in the field have continued to do an
outstanding job of executing their business plans and maximizing
our returns. We are grateful for their continued strong
efforts."
"Continued aggressive cost containment initiatives have allowed
PGA to remain cash flow positive while improving our bank debt
position, net of cash balances, by $17.1 million during a fourth
quarter marked with both seasonal and recessionary decline in
customer demand," remarked James C. Hunt, Chief Financial
Officer. "The restructuring and rationalization charges of $11.6
million continue the realignment of the Company's cost structure
and position the Company for profitable growth in future
periods. The non-cash charge we have taken represents impaired
goodwill based on the accounting principles in force at year-end
2001. Upon the adoption of the new FASB accounting standards in
2002, we believe an additional non-cash intangibles impairment
charge will be required, which we currently estimate will range
between $300.0 million and $350.0 million."
"Cash management continues to be a central focus. Days sales
outstanding (DSO) in a very difficult economic environment have
improved in 2001. DSO at the end of the fourth quarter were 40
days in Commercial Staffing, 62 days in IT and 53 days overall.
DSO at the end of 2000 were 45 days in Commercial Staffing, 60
days in IT and 54 days overall. As previously disclosed, the
Company completed its earn-out obligations with a final $1.5
million payment in October. Additionally, using our cash
balances, we have reduced our bank debt from $119.0 million at
the end of 2001, to $109.0 million as of [Tues]day. We are
appreciative of the efforts put forth by our bank group, as well
as their expression of confidence in our management team with
this favorable extension of the credit facility. Debt repayment
and balance sheet improvements will continue as priorities into
2002."
Information Technology Services
IT Services revenues in the fourth quarter decreased 12.6% from
$103.9 million in the third quarter to $90.9 million, and 31.7%
from the fourth quarter last year. IT gross margins were 25.5%
in the fourth quarter, up from 25.2% in the third quarter this
year and up from 25.1% in the fourth quarter of 2000. Operating
income margins, exclusive of the fourth quarter 2001 intangibles
impairment and restructuring and rationalization charges, were
5.4%, down from 6.6% in the third quarter this year, and down
from 5.9%, exclusive of certain unusual charges, in the fourth
quarter last year.
The Company held its bill rate and pay rate spread relatively
constant during the fourth quarter. Average bill rates were
$77.82 in the fourth quarter and average pay rates were $58.16,
down slightly from $78.63 and $58.93, respectively, in the third
quarter. IT billable headcount declined from the third quarter
levels, with an average of approximately 2,620 IT professionals
on assignment during the quarter and an end of quarter level of
2,500 professionals.
Commercial Staffing
Revenues for PGA's Commercial Staffing unit in the fourth
quarter decreased 8.3% from $69.6 million in the third quarter
to $63.9 million. Gross profits in Commercial Staffing in the
fourth quarter declined 11.8% from $18.0 million in the third
quarter to $15.8 million. Commercial Staffing permanent
placement revenues in the fourth quarter decreased 65.5% from
the fourth quarter last year, declined by 27.1% from the third
quarter and declined as a percentage of total division sales to
4.1% in the fourth quarter from 5.2% in the third quarter. As a
result of the softer permanent placement business, gross margin
percentage for the quarter was 24.8%, down slightly from 25.8%
in the third quarter, and down from 30.6% in the fourth quarter
last year. Operating income margin was 4.7%, down from 5.9% in
the third quarter this year and down from 9.8% in the fourth
quarter last year.
Personnel Group of America, Inc. is a nationwide provider of
information technology consulting and custom software
development services; high-end clerical, accounting and other
specialty professional staffing services; and technology systems
for human capital management. The Company operates through a
network of proprietary brand names in strategic markets
throughout the United States.
PIXTECH INC: Nasdaq Delists Shares Effective February 13, 2002
--------------------------------------------------------------
PixTech, Inc. (Nasdaq:PIXT)(EASDAQ:PIXT), announced that it has
received notice from Nasdaq Stock Market, Inc. 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
February 13, 2002.
The Company meets the eligibility criteria to have its common
stock quoted on the OTC Bulletin Board (OTCBB), and the common
stock may be quoted on the OTCBB following delisting from the
Nasdaq National Market. The OTCBB is a regulated quotation
service that displays real-time quotes, last-sale prices, and
volume information in over-the-counter securities. Information
regarding the OTCBB can be found on the Internet at
http://www.otcbb.com
PixTech, Inc. is an advanced flat-panel display company
dedicated to commercializing its high-quality field emission
display technology. PixTech operates a flat-panel display pilot
manufacturing and a research and development facility in
Montpellier, France, and has offices in Santa Clara, Calif., and
Rousset, France. To manufacture PixTech's FED products, the
company works with a contract manufacturer, AU Optronics. In
addition to various design wins for the 5.2-inch monochrome
display in both the medical and automotive industries, PixTech
recently announced the completion of the first phase of the 7-
inch Color Display FED and is currently focused on volume
production and penetration of new markets for its color
displays. More information is available from the company's Web
site at http://www.pixtech.com
PRINTING ARTS: Court Moves Lease Decision Deadline to March 29
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware grants
Printing Arts America, Inc. and its Debtor-Affiliates more time
to assume, assume and assign, or reject their real property
leases. The Court gives the Debtors until March 29, 2002 to
make those lease-related decisions.
Printing Arts America, Inc. filed for chapter 11 protection on
November 1, 2001. Teresa K.D. Currier, Esq. and William H.
Schorling, Esq. at Klett Rooney Lieber & Schorling represent the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed estimated assets
and debts of more than $100 million.
PSINET INC: Intends to Sell GA Property to Coca-Cola for $17MM
--------------------------------------------------------------
PSINet, Inc., and its debtor-affiliates seek to sell certain
real property located at 40 Perimeter Center East in Atlanta,
Georgia, to Coca-Cola Enterprises Inc. for $17,000,000, subject
to higher and better offers.
The Property consists of a building of approximately 88,105
square feet of rentable space improved with raised flooring,
suppplemental HVAC and redundant fiber network and power to make
it suitable for use as a hosting center, together with
approximately 12.759 acres of land, located at 40 Perimeter
Center East in Fulton County, Georgia.
PSINet has determined, in its business judgment, that the
Purchase Price exceeds the value to be realized if PSINet were
to continue operating this facility as a hosting center.
The Debtors believe that the Sale Price is fair and reasonable.
The Property was marketed by Staubach commencing in September
2001. As part of its marketing efforts, Staubach contacted more
than one hundred local and national real estate development and
investment companies in addition to contacting known active
users and owners both locally and nationally. In December 2001,
PSINet and the Buyer commenced negotiations. The negotiations
with the Buyer were extensive, in good-faith, non-collusive, at
arm's length and were conducted by the companies and their
respective professionals, the Debtors tell the Court.
Response of Sovereign Bank
Sovereign Bank, Network Alliance Capital Division, as successor
in interest to a Master Loan and Security Agreement No. 3963
dated as of September 28, 1998, together with a Loan Schedule
No. 4 dated as of December 29, 1998, by merger to New England
Capital Corp., responds to the motion.
Sovereign Bank notes that the Property that the Debtors seek to
sell includes improvements and fixtures. To the extent that the
Debtors are seeking authority to transfer, sell or convey any of
the Sovereign's Assets, Sovereign objects -- unless Sovereign
gets a cut of the sale proceeds.
Competing Bids
To be certain that they're getting the highest and best price
for the Property, Judge Gerber approves various Sales Procedures
providing for:
* a minimum $17,390,000 cash bid;
* an auction on March 7, 2002 at 10:00 a.m. at the Wilmer,
Cutler & Pickering's Tysons Corner, Virginia, offices;
* further bidding in $50,000 increments;
* payment of a 2% break-up fee to Coca-Cola if its bid is
topped by a competing bidder; and
* a sale hearing on March 13, 2002, to the highest bidder.
(PSINet Bankruptcy News, Issue No. 14; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
RCN CORP: Credit Amendment Places Low-B Ratings on Watch Neg.
-------------------------------------------------------------
Standard & Poor's placed its ratings on RCN Corp. on CreditWatch
with negative implications.
The CreditWatch placement follows the company's announcement
that it is in negotiations with its lenders regarding an
amendment to its credit facility. The amendment seeks to
accommodate a revised business plan, which incorporates a slower
growth trajectory focused on the development of the company's
business in existing markets without expansion into new markets.
If an amendment is not obtained, the company could potentially
violate covenants in 2002. RCN provides telephone, cable
television, and high-speed Internet services in the Eastern U.S.
and California.
Standard & Poor's will resolve the CreditWatch listing when the
discussions between RCN and its lenders conclude, and when it
has completed its evaluation of the company's new business plan.
Ratings Placed on CreditWatch Negative
RCN Corp. RATING
Corporate credit rating B
Senior unsecured debt B-
Senior secured bank loan B+
Senior unsecured shelf registration prelim. B-
REMINGTON PRODUCT: Weak Financial Flexibility Concerns S&P
----------------------------------------------------------
Standard & Poor's lowered its ratings on Remington Products Co.
LLC and Remington Capital Corp. The ratings remain on
CreditWatch with negative implications, where they were placed
December 12, 2001.
The downgrade reflects Remington's reduced financial
flexibility. Difficult industry conditions, including the
general weakness in the U.S. retail environment, intense
competition, and retailers' inventory contraction, contributed
to the company's expected soft 2001 financial results. Standard
& Poor's anticipates that 2002 will remain challenging for
Remington given the continuing difficult economic and retail
environments, combined with the very competitive nature of the
company's product segments. Furthermore, Remington's credit
measures for fiscal 2002 are expected to remain very weak.
Standard & Poor's will continue to monitor developments and meet
with Remington's management to discuss its ongoing liquidity
needs, and business and financial strategies.
Remington is a Bridgeport, Conn.-based developer and marketer of
men's and women's electrical personal care appliances.
Ratings Lowered
Ratings
Remington Products Co. LLC To From
Corporate credit rating B- B
Subordinated debt CCC CCC+
Remington Capital Corp.
Subordinated debt CCC CCC+
DebtTraders reports that Remington Products Company, LLC's 11%
bonds due 2006 (RMGTON) are trading between 98 and 99. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=RMGTONfor
real-time bond pricing.
SALON MEDIA GROUP: Must Raise New Capital to Ease Liquidity
-----------------------------------------------------------
Salon Media Group, Inc. is an Internet media company that
produces a network of ten subject-specific Web sites, of which
one is an audio streaming Web site, and hosts two online
subscription communities, Table Talk and The Well, and features
Salon Premium, a paid subscription service. Salon believes that
its network of Web sites combines the thoughtfulness of print,
the timeliness of television and the interactivity of talk
radio.
Net revenues decreased 50% to $1.1 million for the three months
ended December 31, 2001 from $2.3 million for the three months
ended December 31, 2000, and decreased 57% to $2.7 million for
the nine months ended December 31, 2001 from $6.2 million for
the nine months ended December 31, 2000. Advertising revenues
declined to $0.7 million for the three months ended December 31,
2001 from $2.0 million the prior year while subscription revenue
increased from $0.1 million to $0.3 million in the same period.
Advertising revenues declined to $1.5 million for the nine
months ended December 31, 2001 from $5.5 million the prior year.
Subscription revenues doubled from $0.4 million for the nine
months ended December 31, 2000 to $0.8 million for the nine
months ended December 31, 2001. In addition, Salon recognized
$0.2 million of website management software sales during the
nine months ended December 31, 2001 and no comparable amounts
last year. Salon cannot predict when or if it may generate
additional software sales. The Company indicates that the
decrease in advertising revenue was attributable to an overall
contraction in the United States economy, e-commerce or Internet
businesses reducing advertising without compensating increases
from more established advertisers, most advertisers choosing to
place advertisements in the largest media portal sites, the
September 11, 2001 terrorist acts and advertisers' concern with
Salon's financial viability.
Salon recorded a net loss attributable to common stockholders of
$1.4 million, or $0.10 per share, for the three months ended
December 31, 2001 compared to a net loss of $5.6 million, or
$0.43 per share, for the three months ended December 31, 2000.
In addition, Salon recorded a net loss attributable to common
stockholders of $9.9 million, or $0.73 per share, for the nine
months ended December 31, 2001 compared to a net loss of $13.6
million, or $1.06 per share, for the nine months ended December
31, 2000. Salon does not anticipate any significant changes in
the amount of expenditures in the near future.
As of December 31, 2001 Salon had approximately $2.1 million in
available cash from the issuance of Salon's Series A Redeemable
Convertible Preferred Stock in August and September 2001. Salon
also has $0.7 million of restricted cash held primarily as
deposits for various lease arrangements.
As of December 31, 2001 Salon's available cash resources were
sufficient to meet working capital needs for approximately five
to six months. Salon has eliminated various positions, not
filled positions opened by attrition, implemented a wage
reduction of 15% effective April 1, 2001 and has cut
discretionary spending to minimal amounts, but due to a weak
U.S. economy in general, and limited visibility of advertising
activity, it is unable to predict when it will reach cash-flow
break even.
The Company may continue to raise additional funds, for which
additional stock, such as Series A Preferred Stock, may be
issued to fund its operations. If Salon raises additional funds
by selling equity securities, or securities which convert into
equity securities, the percentage ownership of Salon's
stockholders will be reduced and its stockholders will most
likely experience additional dilution. Given Salon's recent low
stock price, any dilution will likely be very substantial for
existing shareholders. Salon cannot be sure that additional
financing will be available on terms favorable to Salon, or at
all. If adequate funds are not available on acceptable terms, if
at all, Salon's ability to continue operations, react to
competitive pressures, or take advantage of unanticipated
opportunities will be more limited than if additional capital
was available. Liquidity continues to be a constraint on Salon's
business operations.
SOUTHWEST AIRLINES: Posts Record Financial Results in FY 2001
-------------------------------------------------------------
In 2001, Southwest Airlines posted a profit for the 29th
consecutive year in one of the most challenging operating
environments the air travel industry has ever faced. During the
year, Southwest also increased its domestic market share, made
enhancements that will improve Customer Service, and ended the
year with more Employees and aircraft than it had when it began
the year. Despite the onset of a recession early in 2001 and the
September 11, 2001 terrorist attacks against the United States
Southwest was profitable in each quarter of the year, including
the third and fourth quarters after excluding federal grants
recognized in these quarters under the Air Transportation Safety
and System Stabilization Act. Although the Company was unable to
match some of its record-setting performance levels reached in
2000, its business strategy - primarily short haul, high
frequency, low fare, point-to-point, high quality Customer
Service - continued to serve Southwest well during some
difficult times in 2001.
In 2001, the Company continued to maintain its cost advantage
over its industry while the recession and events of September 11
put downward pressure on revenues. In response to uncertainties
following September 11 and the precipitous drop in demand for
air travel, Southwest amended its agreement with The Boeing
Company to defer aircraft deliveries but did not ground
airplanes, reduce service, or furlough Employees. Following the
temporary FAA shutdown of U.S. air space following the terrorist
attacks, load factors have steadily improved to somewhat normal,
average historical levels. However, these load factors have
resulted from significant fare discounting, which continues to
result in year-over-year declines in passenger revenue yields
per RPM (passenger yields) and operating revenue yields per ASM.
As the airline begins 2002, in addition to the difficult revenue
environment for commercial airlines, the Company is faced with
increased war risk insurance and passenger security costs
resulting from continually evolving security laws and
directives. In response to the terrorist attacks, the airline
industry has worked diligently with Congress, the DOT, the FAA,
and law enforcement officials to enhance security. During fourth
quarter 2001, the Company was able to offset these additional
costs because of lower jet fuel prices and through internal cost
reduction initiatives implemented following the terrorist
attacks. However, there can be no assurance the Company will be
able to continue to offset future cost increases resulting from
the changing commercial airline environment.
During 2001, Southwest began service to two new cities, West
Palm Beach, Florida, and Norfolk, Virginia, while also
discontinuing service to San Francisco International Airport due
to airport congestion. The initial results have been pleasing to
the airline in both of the new Southwest cities. Prior to
September 11, the Company also continued to add flights between
cities already served. Southwest ended 2001 serving 58 cities in
30 states. Immediately following the terrorist attacks,
Southwest suspended fleet growth. However, by the end of the
year, Southwest had announced plans for modest growth to resume
in early 2002.
Currently, available seat mile (ASM) capacity is expected to
grow approximately 3.5 percent in 2002 with the planned net
addition of at least 8 aircraft. The Company will place in
service at least 11 new Boeing 737-700s scheduled for delivery
during the year and will retire three of the Company's older
737-200s.
Results Of Operations
The Company's consolidated net income for 2001 was $511.1
million, as compared to 2000 net income, before the cumulative
effect of change in accounting principle, of $625.2 million, a
decrease of 18.2 percent. The prior years' net income per share
amounts have been restated for the 2001 three-for-two stock
split. Consolidated results for 2001 included $235 million in
gains that the Company recognized from grants under the
Act and special pre-tax charges of approximately $48 million
arising from the terrorist attacks. Excluding the grant and
special charges related to the terrorist attacks, net income for
2001 was $412.9 million. The cumulative effect of change in
accounting principle for 2000 was $22.1 million, net of taxes of
$14.0 million.
Net income and net income per share, diluted, after the
cumulative change in accounting principle, for 2000, were $603.1
million and $.76, respectively. Operating income for 2001 was
$631.1 million, a decrease of 38.2 percent compared to 2000.
Following the terrorist attacks, all U.S. commercial flight
operations were suspended for approximately three days. However,
the Company continued to incur nearly all of its normal
operating expenses (with the exception of certain direct trip-
related expenditures such as fuel, landing fees, etc.). The
Company cancelled approximately 9,000 flights before resuming
flight operations on September 14, although it did not resume
its normal pre-September 11 flight schedule until September 18,
2001. Once the Company did resume operations, load factors and
passenger yields were severely impacted, and ticket refund
activity increased. The Company estimates that from September 11
through September 30, it incurred operating losses in excess of
$130 million.
The effects of the terrorist attacks continued to be felt
throughout fourth quarter 2001. The Company's operating income
during fourth quarter 2001 was $37.1 million, a decrease of 85.2
percent compared to fourth quarter 2000. Without consideration
of any federal grant under the Act the Company expects to
recognize in first quarter 2002, it is not yet known whether the
Company will be profitable in first quarter 2002, due to
uncertain economic conditions and the difficult airline
industry revenue environment.
Consolidated operating revenues of Southwest Airlines Company
decreased 1.7 percent due primarily to a 1.6 percent decrease in
passenger revenues. The Company says the decrease in passenger
revenues was a direct result of the terrorist attacks. Because
of the terrorist attacks, fluctuations in passenger revenue can
best be explained by discussing the year in two distinct time
periods: January through August, 2001, and September through
December, 2001.
From January through August, 2001, passenger revenues were
approximately 8.7 percent higher than the same period in 2000
due primarily to an increase in capacity, as measured by ASMs,
of 11.6 percent. The capacity increase was due to the addition
of 14 aircraft during 2001 (all prior to September 11) and was
partially offset by a decrease of 1.9 percent in passenger
yield. Passenger yields decreased as a result of fare
discounting by the Company and the airline industry in general
as the United States economy weakened throughout the year. The
Company's load factor (RPMs divided by ASMs) over this time
period was 71.2 percent, compared to 71.7 percent for the same
period in 2000.
From September through December, 2001, passenger revenues were
approximately 21.7 percent lower than the same period of 2000.
Capacity increased 4.0 percent and the Company's load factor
fell to 62.0 percent, compared to 68.2 percent during the same
period of 2000. Passenger yields were 17.2 percent lower during
this period versus the same period of 2000 due to aggressive
fare sales following the terrorist attacks.
For the full year, the Company experienced a 1.2 percent
increase in revenue passengers carried, a 5.4 percent increase
in revenue passenger miles (RPMs), and a 9.0 percent increase in
ASMs. The Company's load factor for 2001 was off 2.4 points to
68.1 percent and there was a 6.7 percent decrease in 2001
passenger yield.
Load factors in January 2002 continued to trail those
experienced in January 2001. Additionally, passenger yields
remain significantly below prior year levels. As a result, the
Company expects first quarter 2002 revenue per available seat
mile to continue to fall below first quarter 2001 levels.
As a result of weak economic conditions throughout 2001,
consolidated freight revenues decreased 17.6 percent. There were
decreases in both the number of freight shipments and revenue
per shipment. Following the September 11, 2001 terrorist
attacks, the United States Postal Service made the decision to
shift a portion of the mail that commercial carriers had
previously carried to freight carriers. As a result of this
decision, the Company expects to experience a decrease in
freight revenues during at least the first half of 2002 when
compared to 2001. Other revenues increased 20.3 percent due
primarily to an increase in commissions earned from programs the
Company sponsors with certain business partners, such as the
Company sponsored First USA Visa card.
Consolidated operating expenses for 2001 increased 6.4 percent,
compared to the 9.0 percent increase in capacity. Operating
expenses per ASM decreased 2.5 percent to $.0754, compared to
$.0773 in 2000, due primarily to a decrease in average jet fuel
prices. The average fuel cost per gallon in 2001 was $.7086,
10.0 percent lower than the average cost per gallon in 2000 of
$.7869. Excluding fuel expense, operating expenses per ASM
decreased 0.3 percent.
Approximately 59 percent of the increase in Salaries, wages, and
benefits per ASM was due to increases in salaries and wages from
higher average wage rates within certain workgroups and
increased headcount due in part to the increased security
requirements following the September terrorist attacks. The
remaining 41 percent of the increase in Salaries, wages, and
benefits per ASM was due to higher benefits costs, primarily
health care costs.
The Company's Ramp, Operations, and Provisioning Agents are
subject to an agreement with the Transport Workers Union of
America, (TWU), which became amendable in December 2000. The
Company reached an agreement with the TWU, which was ratified by
its membership in June 2001. The new contract becomes amendable
in June 2006.
The Company's Mechanics are subject to an agreement with the
International Brotherhood of Teamsters, which became amendable
in August 2001. Southwest is currently in negotiations with the
Teamsters for a new contract.
The Company's Flight Attendants are subject to an agreement with
the TWU, which becomes amendable in June 2002. The Company's
Customer Service and Reservations Agents are subject to an
agreement with the International Association of Machinists and
Aerospace Workers, which becomes amendable in November 2002.
Employee retirement plans expense per ASM decreased 17.5
percent, due primarily to the decrease in Company earnings
available for profit-sharing. The decrease in earnings more than
offset an increase in expense due to a 4th quarter amendment
made to the Company's profit-sharing plan. This amendment
enabled the Company to take into consideration federal grants
under the Act and special charges resulting from the terrorist
attacks in the calculation of profit-sharing.
Fuel and oil expense per ASM decreased 11.9 percent, due
primarily to a 10.0 percent decrease in the average jet fuel
cost per gallon. The average cost per gallon of jet fuel in 2001
was $.7086 compared to $.7869 in 2000, including the effects of
hedging activities. The Company's 2001 and 2000 average jet fuel
prices are net of approximately $79.9 million and $113.5 million
in gains from hedging activities, respectively. Considering
current market prices and the continued effectiveness of the
Company's fuel hedges, Southwest is forecasting its first
quarter 2002 average fuel cost per gallon to be below first
quarter 2001's average fuel cost per gallon of $.7853. The
majority of the Company's near term hedge positions are in the
form of option contracts, which should enable the Company to
continue to benefit to a large extent from a decline in jet fuel
prices.
Maintenance materials and repairs per ASM decreased 3.2 percent.
This decrease was due primarily to the Company's capacity growth
exceeding the increase in expense. Virtually all of the
Company's 2001 capacity growth versus the prior year was
accomplished with new aircraft, most of which have not yet begun
to incur any meaningful repair costs. The decrease in engine
expense was partially offset by an increase in expense for
airframe inspections and repairs. In addition to an increase in
the number of airframe inspections and repairs, the cost per
event increased compared to 2000. Currently, the Company expects
an increase in maintenance materials and repairs expense per ASM
in first quarter 2002 versus first quarter 2001.
Agency commissions per ASM decreased 40.7 percent, due primarily
to a change in the Company's commission rate policy. Effective
January 1, 2001, the Company reduced the commission rate paid to
travel agents from ten percent to eight percent for Ticketless
bookings, and from ten percent to five percent for paper ticket
bookings. Effective October 15, 2001, the Company reduced the
commission paid to travel agents to five percent (with no cap),
regardless of the type of ticket sold. Due to this most recent
commission policy change in October 2001, Southwest expects
agency commissions to show a year-over-year decrease in first
quarter 2002 on a per-ASM basis.
Aircraft rentals per ASM decreased 12.1 percent due primarily to
a lower percentage of the aircraft fleet being leased.
Approximately 25.9 percent of the Company's aircraft were under
operating lease at December 31, 2001, compared to 27.3 percent
at December 31, 2000. Based on the Company's current new
aircraft delivery schedule and scheduled aircraft retirements
for 2001, the Company expects a decline in aircraft rental
expense per ASM in 2002.
Landing fees and other rentals per ASM increased 9.1 percent
primarily as a result of the Company's expansion of facilities
at several airports, including Baltimore-Washington
International Airport and Chicago Midway Airport. As a result of
the terrorist attacks, most other major airlines have reduced
their flight schedules and/or have retired aircraft early due to
the decrease in demand for air travel. Since Southwest has not
reduced the number of flights it offers, the Company expects
that the airport costs it shares with other airlines on the
basis of relative flights landed or passengers carried, such as
landing fees and common space rentals, will increase on a per-
ASM basis in future periods. In fourth quarter 2001, landing
fees and other rentals per ASM increased 21.4 percent. The
Company currently expects a similar year-over-year increase in
first quarter 2002.
Depreciation expense per ASM increased 4.3 percent due primarily
to the growth in the Company's aircraft fleet prior to the
September 11, 2001 terrorist attacks. The Company had received
delivery of 14 new 737-700 aircraft prior to September 11,
bringing the percentage of owned aircraft in the Company's fleet
to 74.1 percent by the end of 2001 compared to 72.7 percent at
the end of 2000.
Other operating expenses per ASM increased 3.5 percent due
primarily to a significant increase in passenger liability,
aircraft hull, and third party liability insurance costs
following the terrorist attacks. The Company's insurance
carriers cancelled their war risk and terrorism insurance
policies following the terrorist attacks and reinstated such
coverage at significantly higher rates than before. Although the
Company was reimbursed for a portion of the higher rates by the
federal government for one month during fourth quarter 2001,
Southwest assumes there will be no further reimbursements. As a
result, the Company currently expects continued year-over-year
increases in insurance costs for the near term future, including
first quarter 2002.
"Other expenses (income)" included interest expense, capitalized
interest, interest income, and other gains and losses. Interest
expense was flat compared to the prior year. Following the
terrorist attacks, the Company borrowed the full $475 million
available under its revolving credit facility and issued $614.3
million in long-term debt in the form of Pass-Through
Certificates. The increase in expense caused by these borrowings
was offset by a decrease in interest rates on the Company's
floating rate debt and the July 2001 redemption of $100 million
of unsecured notes. Based on the Company's recent borrowings,
Southwest expects interest expense to be higher on a year-over-
year basis in first quarter 2002. Capitalized interest decreased
25.3 percent primarily as a result of lower 2001 progress
payment balances for scheduled future aircraft deliveries
compared to 2000. The lower progress payments were due in part
to the deferral of Boeing 737 aircraft firm orders and options
following the terrorist attacks. Interest income increased 6.2
percent due primarily to higher invested cash balances,
partially offset by lower rates of return. Other gains in 2001
resulted primarily from $235 million received as the Company's
share of government grant funds under the Act provided to offset
the Company's direct and incremental losses following the
terrorist attacks, through the end of 2001. The Company expects
to receive up to an additional $50 million in 2002, but
determined that due to some uncertainties regarding the amount
to be received, accrual of any amounts in 2001 as a receivable
was not proper.
The provision for income taxes, as a percentage of income before
taxes, decreased slightly to 38.24 percent in 2001 from 38.54
percent in 2000. The decrease resulted primarily from lower
effective state tax rates in 2001.
Southwest Airlines has expanded its low-cost, no-frills, no-
reserved-seats approach to air travel throughout the US to serve
about 60 cities in 29 states. To curb maintenance and training
costs, the airline uses only Boeing 737s; it operates about 320.
Southwest offers ticketless travel to trim back-office costs and
operates its own reservation system. The airline boasts a highly
participative corporate culture and only one strike during its
30-year history. It has also enjoyed 28 straight profitable
years. Southwest is expanding service to the eastern US. At
September 30, 2001, the company reported a working capital
deficiency of $175 million.
STAR TELECOM: Asks Court to Further Extend Co-Exclusive Periods
---------------------------------------------------------------
Star Telecommunications, Inc. and the Official Committee of
Unsecured Creditors appointed in the Company's chapter 11 case
request that the U.S. Bankruptcy Court for the District of
Delaware further extend their co-exclusive periods to file a
chapter 11 plan and to solicit acceptances on that plan. The
Debtor and the Committee wish to enlarge their co-exclusive plan
filing period through April 15, 2002 and their co-exclusive
solicitation period through June 14, 2002.
Th Debtor has already provided the Committee with a draft of a
proposed liquidating chapter 11 plan and a draft disclosure
statement. However, the Debtor and the Committee need to wrap-up
negotiations with the MCI Worldcom. The Committee and the
Debtor believe that it is still premature for them to formulate
a chapter 11 plan until negotiations with MCI are completed.
Star Telecommunications, Inc., a leading provider of global
telecommunications services to consumers, long distance
carriers, multinational corporations and Internet service
providers worldwide, filed for chapter 11 protection on March
13, 2001. Laura Davis Jones, Esq. at Pachulski, Stang, Ziehl,
Young & Jones represent the Debtor in its restructuring effort.
When the company filed for protection from its creditors, it
listed $630,065,000 in assets and $284,634,000 in debts.
STOCKWALK GROUP: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: Stockwalk Group, Inc.
5500 Wayzata Boulevard
Suite 800
Golden Valley, MN 55416
Bankruptcy Case No.: 02-40585
Chapter 11 Petition Date: February 11, 2002
Court: District of Minnesota (Minneapolis)
Judge: Robert J. Kressel
Debtor's Counsel: Steven D. DeRuyter, Esq.
Leonard, Street and Deinard
150 South Fifth Street
Suite 2300
Minneapolis, MN 55402
Tel: 612 335 1500
Fax: 612 335 1657
Estimated Assets: $1 million to $10 million
Estimated Debts: $50 million to $100 million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Feltl, Jhon E. Purchase Agreement $3,400,000
7040 Willow Creek Road
Eden Prairie,MN 55344-3224
Mordhorst, Inez G. Estate Commercial Paper $2,223,000
Joanne and Henry Dunigk
Admin
26460 Witte Road SE
Maple Valley, WA 98038
Farley, William M. Employment Agreement $1,600,000
513 River Road
Minneapolis, MN 55401
Wasko, Roberst J. Commercial Paper $1,458,000
Trustee
Olga Hart Trust
1901 Burma Lane
South St. Paul, MN 55075
Cross IRA, John M. Commercial Paper $1,413,000
First Trust NA, Trustee
671 Walnut Street
Winona, MN 5587
James N. Owens Revocable Commecrial Paper $979,000
Trust
Owens, James N., Trustee
3949 Lakepoint
West Bloomfield
MI 48323 1042
Work Connection, Inc Commercial Paper $721,000
1399 Geneva Avenue North
#201 Oakdale, MN 55128
Seamon, Michael D. Commercial Paper $717,000
12905 - 54th Avenue North
Plymouth, MN 55442
CCB Investment Corporation Commercial Paper $500,000
PO Box 39
Brillion, WI 54110-0039
Zabrocki, Jonathan and Commercial Paper $407,000
Katherine, JT
1101 Hesse Farm Road
Chaska, MN 55318
Schaber, Helen A. Estate Commercial Paper $406,000
James J. Schaber
Personal Rep.
1275 St, Clair Avenue
St. Paul, MN 55105
Gaweski, Rick Commercial Paper $400,000
c/o Loton Label, Inc.
6290 Claude Way East
Inver Grove Heights
MN 55076
SWS Securities, Inc. Convertible Notes $370,000
AttnL Felicia Howarf
1201 Elm Street
#3500 Dallas, TX 75270
Bernstein-Sofian, Ellen Commercial Paper $352,000
1885 Shore Drive South
#524 South Pasadena
FL 33707
Poole Jean A. Commercial Paper $348,000
25201 Vado Court
Rio Verde, AZ 85263-7169
Nagel, Barbara Estate Commercial Paper $345,000
Wallace, L. Johnson
Personal Rep.
306 First Avenue SE
Mapleton, MN 56065
Geyen, Donald Commercial Paper $345,000
401 Hickory Street
Chaska, MN 55318
Stifel, Nicolaus & Company Convertible Note $331,000
Attn: Chris Weigand
501 North Broadway, 7th Floor
Stock Record Department
Carroll, John Commercial Paper $283,000
6875 Goose Lake Drive
Waconia, MN 55387
Allovio Limited Partnership Commercial Paper $97,000
SUN HEALTHCARE: Gets Approval to Hire Marla Eskin as Counsel
------------------------------------------------------------
Sun Healthcare Group, Inc., and its debtor-affiliates obtained
the Court's authority to employ and retain the Law Office of
Marla R. Eskin as special counsel to assist in the commencement
and prosecution of certain avoidance actions.
Eskin will seek compensation for legal services from Bloom
Borenstein & Savage payable on an hourly basis, including
reimbursement of actual, necessary expenses and other charges
incurred by Eskin. The rates are set to compensate Eskin for
the work of its attorneys and paralegals and to cover fixed and
routine overhead expenses. Additionally, it is Eskin's policy
to charge its clients for all other expenses incurred in
connection with the case including phone and telecopier bills,
toll and other charges, mail and express mail charges, special
or hand delivery charges, photocopying charges, travel expenses,
expenses for "working meals," computerized research,
transcription costs, as well as secretarial and overtime fees.
Ms. Wolfe lists down the attorney and paralegal designated to
represent the Debtors and their current standard hourly rates
as:
Professional Position Rate
------------ -------- ----
Marla Rosoff Eskin Owner $250
Denise Collett Paralegal $95
Furthermore, the hourly rates are subject to periodic
adjustments to reflect economic and other conditions. Other
attorneys and paralegals may from time to time serve the Debtors
in connection with this case.
According to Marla R. Eskin, owner of the Eskin Law Office, no
attorney at Eskin:
(a) holds or represents an interest adverse to the Debtors'
estates;
(b) is or was a creditor, an equity security holder or an
insider of the Debtors;
(c) is or was an investment banker for any outstanding
security of the Debtors;
(d) is or was, within three years before the Petition Date, an
investment banker for a security of the Debtors, or an
attorney for an investment banker in connection with the
offer, sale or issuance of any security of the Debtors;
(e) is or was, within two years before the Petition Date, a
director, officer or employee of the Debtors or of an
investment banker of the Debtors;
(f) has an interest materially adverse to the interest of the
estates or of any class of creditors or equity security
holders, by reason of any direct or indirect relationship
to, connection with, or interest in the Debtors or an
investment banker specified;
(g) is related to any United States District Judge or
Bankruptcy Judge for the District of Delaware or to the
United States Trustee for such district or to any known
employee in the office thereof;
(h) has received or been promised any compensation for legal
services rendered or to be rendered in any capacity in
connection with the Debtors' Chapter 11 cases, other than
as permitted by the Bankruptcy Code;
(i) has an agreement with any other entity to share any
compensation received, nor will any be made, except as
permitted by the Bankruptcy Code and Rule 2016;
(j) has other proposed agreement with the Debtors for
compensation to be paid in these cases.
Consequently, Ms. Eskin asserts that the members and associates
of Eskin are "disinterested persons" as the term is defined
under the Bankruptcy Code. (Sun Healthcare Bankruptcy News,
Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900)
TELSCAPE INT'L: Trustee Wins Court Nod to Extend Removal Period
---------------------------------------------------------------
The U.S Bankruptcy Court for the District of Delaware grants the
Chapter 11 Trustee appointed in Telscape International, Inc. and
its Debtor-Affiliates' Chapter 11 cases a third extension of
time to file notices of removal of related proceedings to
Delaware for continued litigation. The Chapter 11 Trustee's
decision period runs through April 22, 2002.
Telscape International is a leading integrated communication
providers serving the Hispanic markets in the United States,
Mexico and Central America, offering local and long distance
telephone, internet and pre-paid calling card services. The
Company filed for Chapter 11 petition on April 27, 2001.
Brendan Linehan Shannon, Esq., at Young, Conaway, Stargatt &
Taylor and Victoria Watson Counihan, Esq., at Greenberg Traurig,
LLP represent the Debtors in their restructuring efforts.
UNICCO SERVICE: S&P Anticipates Credit Measures to Remain Flat
--------------------------------------------------------------
Standard & Poor's revised its outlook for UNICCO Service Co. to
stable from positive. In addition, the ratings for the company
were affirmed. About $87 million of total debt was outstanding
as of September 23, 2001.
The outlook revision reflects Standard & Poor's expectation that
credit measures are likely to remain flat in fiscal 2002 versus
fiscal 2001. UNICCO's performance was impacted recently by the
weak U.S. economy and higher payroll costs. As a result, the
company was forced to seek a waiver from its senior lenders for
being out of compliance with financial covenants under its
credit facility.
The ratings on UNICCO reflect the company's leveraged financial
profile and very competitive market conditions. These factors
are offset by the company's good cash flow generation from a
fairly predictable portfolio of diverse services and attractive
growth rates in its fragmented markets.
UNICCO is a leading provider of integrated facility services to
a broad base of industrial and commercial customers throughout
the U.S. and Canada. The outsourcing services industry is
growing, but highly fragmented. Market participants include
larger players than UNICCO, such as ARAMARK Corp., The
ServiceMaster Co., and ABM Industries Inc., along with many
smaller companies. In the segments in which UNICCO operates,
Standard & Poor's expects growth to continue as more companies
focus on their core businesses and choose to outsource support
services.
The company has maintained a high customer retention rate (95%),
resulting in stable revenue streams. Over the past three years,
UNICCO has been able to achieve a mid-single-digit internal
growth rate by expanding the scope of services performed for
existing customers. Offering more value-added services to
customers will continue to be an important part of UNICCO's
growth strategy.
Credit protection measures are somewhat below average for the
rating category. For the 12 months ended Dec. 23, 2001, Standard
& Poor's estimates that EBITDA coverage of interest expense was
about 2.3 times and total debt to EBITDA above 4.75x. UNICCO's
cash flow benefits from minimal capital spending needs, which
have averaged about $3 million per annum for the last three
years. Financial flexibility is provided by the company's $55
million revolving credit facility.
Outlook: Stable
Standard & Poor's does not expect meaningful improvement in
UNICCO's credit measures in fiscal 2002. There is little room in
the rating for debt-financed acquisitions.
Ratings Affirmed; Outlook Revised To Stable
UNICCO Service Co.
Corporate credit rating BB-
Senior secured bank loan rating BB
Subordinated debt B
WEBB INTERACTIVE: Special Shareholders' Meeting Set for March 5
---------------------------------------------------------------
A special meeting of shareholders of Webb Interactive Services,
Inc., a Colorado corporation, will be held on Tuesday, March 5,
2002, at 9:00 a.m., Mountain Time, at the Company executive
offices, 1899 Wynkoop, Suite 600, Denver, Colorado for the
following purposes:
1. To approve issuances of Company securities in connection
with the Securities Purchase Agreement dated January 17, 2002
between the Company and Jona, Inc.
2. To transact such other business as may properly come
before the meeting and any adjournments thereof.
Only holders of record of Webb's common stock at the close of
business on February 1, 2002 will be entitled to notice of, and
to vote at, the special meeting or any adjournment thereof.
Webb Interactive Services' AccelX division helps local
businesses establish an e-commerce presence with a suite of XML-
based applications for Web site building, lead generation, and
customer management. Through its Jabber.com subsidiary, Webb
offers an open source instant messaging application. Unlike most
of its competitors in the instant messaging market, which focus
on consumers, Jabber.com focuses on messaging for businesses and
service providers. Webb's services (nearly half of sales)
include consulting, implementation, and training. The company's
top three customers (VNU Publitec, VetConnect, and Switchboard)
collectively account for 65% of sales. At September 30, 2001,
the company reported a total shareholders' equity of about $3
million.
WIRELESS WEBCONNECT!: Sells Subsidiary as Part of Restructuring
---------------------------------------------------------------
Wireless WebConnect!, Inc. (OTCBB:WWCO), a Delaware corporation,
announced that it has commenced a restructuring plan. Under the
first phase of this restructuring plan, WWC has sold all of the
stock of its wholly-owned subsidiary, Wireless WebConnect!,
Inc., a Florida corporation to E-Home.com, Inc., a Texas
corporation doing business as HomeMark, in exchange for $20,000.
In turn, HomeMark exchanged the stock of Subsidiary with the
former shareholders of Subsidiary for 20,494,959 shares of WWC
common stock held by such persons. Parent also received an
option from HomeMark to purchase the WWC Shares from HomeMark
for $20,000. The option expires August 1, 2002. In addition, all
directors of WWC designated by such former Subsidiary
shareholders have resigned from the WWC Board of Directors,
leaving William O. Hunt, John J. McDonald and Richard F. Dahlson
as the remaining directors.
The above transactions result in an unwinding of the previous
acquisition by WWC of Subsidiary. Since the bankruptcy of
Metricom, Inc. in July 2001, Subsidiary has had virtually no
revenue. Subsidiary currently has a deficit of over $8 million.
The Remaining Directors felt that the Subsidiary was not
financially viable and was in disagreement with the Subsidiary-
designated directors as to the course of action to take with
Subsidiary. Given this situation, the Remaining Directors
believed it was in the best interests of WWC, its creditors and
its stockholders to complete this transaction. This transaction
was unanimously approved by the WWC Board of Directors as well
as over a majority of its stockholders. This transaction was
also approved by WWC's major creditor, Banca Del Gottardo.
WWC currently has no operations. It is the intent of the
Remaining Directors to restructure and/or settle the debt owed
by WWC and to look for an attractive reverse merger candidate.
Banc has indicated that it would be willing to convert all or
some portion of its debt upon the satisfaction of certain
conditions, including a satisfactory reduction and/or
elimination of other debt of WWC and satisfaction with the
merger candidate and the terms and conditions of such reverse
merger.
HomeMark is in the process of acquiring an on-line home auction
company. It is contemplated that HomeMark will be the reverse
merger candidate. However, the terms of any such transaction
have not been finalized.
XETEL CORP: Violates Covenants Under Debt & Lease Agreements
------------------------------------------------------------
XeTel Corporation (Nasdaq:XTEL), a comprehensive electronics,
manufacturing and engineering solution provider, reported
results for its third quarter and first nine months of fiscal
2002 ended December 29, 2001.
Net sales for the third quarter of FY2002 were $12.3 million, a
76% decrease from the $52.1 million reported for the third
quarter of FY2001. Net loss for the third quarter FY2002 was
$9.2 million and included approximately of $4 million of
inventory write-downs from insolvent customers and the
resolution of issues related to disputed inventories and other
items with Ericsson under a recent settlement agreement. This
compares to net income of $2.6 million recorded in the third
quarter of FY2001, which included $1.1 million (net of taxes) of
recovery income.
Gross margin for the quarter was negative 57.3% compared to
positive 10.4% in the third quarter FY2001. The decline in gross
margin was primarily the result of having a substantially
reduced revenue level from the prior year's comparable quarter
coupled with the previously mentioned write-downs. Selling,
general and administrative, or SG&A, expenses were $1.9 million,
or 15.1%, of net sales in the current quarter compared to $2.3
million, or 4.5%, in the prior year. SG&A expense for the
current quarter also included an increase in reserves for bad
debt.
Net sales for the nine months ended December 29, 2001 were $67.8
million, a 52.1% decrease from the $141.5 million reported for
the nine months ended December 30, 2000. Net loss for the nine-
month period was $14.8 million as compared to net income of $5.2
million recorded in the nine months ended December 30, 2000,
which included $1.8 million (net of taxes) of recovery income.
Diluted loss per share for the nine months ended December 29,
2001 was $1.48, compared to diluted net income of $0.52 in the
nine months ended December 30, 2000, which included $.18 per
share of income from recoveries.
"Despite three consecutive tough quarters and continued economic
challenges, we did realize a successful resolution to our
lawsuit with Tellabs and negotiated an agreeable settlement,"
said Angelo DeCaro, President and CEO of XeTel. "We also
announced earlier [Tues]day a satisfactory settlement of the
arbitration filed with Ericsson."
"We are continuing to see reduced demand that has plagued the
overall economy for much of 2001. Despite early indicators of an
economic recovery, we continue to see weakness in the electronic
manufacturing services industry. Our restructuring activities
coupled with aggressive, yet cost-effective marketing activities
and EMS partnerships are in place and we expect to see positive
results from those efforts in upcoming quarters. However, due to
our existing financial condition, we are currently in violation
of various covenants under certain of our debt and operating
lease agreements. We are participating in ongoing discussions
with our creditors under these agreements to address the current
violations. Although we have not received any information
indicating that any of these creditors plan to pursue their
rights and remedies under the agreements with respect to these
violations, there can be no assurance that any or all of the
creditors will not elect to pursue such rights and remedies in
the future."
XeTel continues to focus its efforts on returning to profitable
operations by the end of calendar 2002. As a part of the overall
actions, XeTel will strengthen its balance sheet through
reductions of inventory, collections from accounts receivable
and elimination of the existing debt facility with Tyco Capital.
The company is pursuing other debt and/or equity facilities to
finance its growth in the future.
The company will hold a conference call on Tuesday, February 12,
at 5:00 p.m. EST. XeTel's management team will discuss the
company's third quarter results, the general business outlook
and trends going forward. To participate in the call, dial (800)
540-0559 (reference XeTel).
Investors can listen to the conference call over the Internet at
http://www.xetel.com For those who cannot listen to the live
broadcast, a replay will be available shortly after the call at
www.xetel.com. In addition, a playback of the call will be
available by phone from Tuesday, February 12, 2002 at 8:00 p.m.
EDT until Monday, February 18, 2002 at midnight. The replay can
be accessed by calling (402) 351-0792 (reference XeTel).
Founded in 1984, XeTel Corporation is ranked among the top 50
electronics manufacturing services industry providers in North
America. The company provides highly customized and
comprehensive electronics manufacturing, engineering and supply
chain solutions to Fortune 500 and emerging original equipment
manufacturers primarily in the networking, computer and
telecommunications industries. XeTel provides advanced design
and prototype services, manufactures sophisticated surface mount
assemblies and supplies turnkey solutions to original equipment
manufacturers. Incorporating its design and prototype services,
assembly capabilities, together with materials and supply base
management, advanced testing, systems integration and
order fulfillment services; XeTel provides total solutions for
its customers. XeTel employs over 300 people and is
headquartered in Austin, Texas with manufacturing services
operations in Austin and Dallas, Texas. For more information,
visit XeTel's web site at http://www.xetel.com
* DebtTraders' Real-Time Bond Pricing
-------------------------------------
Issuer Coupon Maturity Bid - Ask Weekly change
------ ------ -------- --------- -------------
Crown Cork & Seal 7.125% due 2002 80 - 82 +1
Federal-Mogul 7.5% due 2004 15 - 17 -1.5
Finova Group 7.5% due 2009 36 - 37 -1
Freeport-McMoran 7.5% due 2006 79 - 82 +1
Global Crossing Hldgs 9.5% due 2009 3 - 4 -1
Globalstar 11.375% due 2004 6 - 8 -2
Lucent Technologies 6.45% due 2029 67 - 69 -0.5
Polaroid Corporation 6.75% due 2002 7 - 9 +1
Terra Industries 10.5% due 2005 83 - 86 0
Westpoint Stevens 7.875% due 2005 34 - 37 +5
Xerox Corporation 8.0% due 2027 58 - 60 0
Bond pricing, appearing in each Thursday's edition of the TCR is
provided by DebtTraders in New York. DebtTraders is a specialist
in global high yield securities, providing clients unparalleled
services in the identification, assessment, and sourcing of
attractive high yield debt investments. For more information on
institutional services, contact Scott Johnson at 1-212-247-5300.
To view our research and find out about private client accounts,
contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing
available at http://www.debttraders.com
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Ronald P. Villavelez and Peter A. Chapman, Editors.
Copyright 2002. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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