/raid1/www/Hosts/bankrupt/TCR_Public/020227.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Wednesday, February 27, 2002, Vol. 6, No. 41
Headlines
360NETWORKS: Gets Extension to May 25 to File Chapter 11 Plan
AMF BOWLING: Brings-In John Smith as COO of U.S. Bowling Centers
ANC RENTAL: Seeks Okay to Assume & Reject Detroit Airport Leases
AT&T CANADA: S&P Lowers Ratings to BB on Price-Cap Review Risks
ADVANTICA RESTAURANT: Extends Sr. Notes Exchange Offer to Friday
AMERICAN BANKNOTE: Argentinian Recession Hurting Transtex Ops.
BALANCED CARE: Dec. 31 Balance Sheet Upside-Down by $26 Million
BETHLEHEM STEEL: Committee Taps McDermott Will as Labor Counsel
CALL-NET: S&P Junks Ratings Following Recapitalization Plan
CELLSTAR CORP: Posts Improved Operating Results for FY 2001
CHIQUITA: Sets Record Date for Distribution of New Securities
CLASSIC VACATION: Sets Special Shareholders' Meeting for March 8
COMDISCO: Bank of Tokyo Gets OK to Setoff Prepetition Amounts
DECOR GRAVURE: Auction for Asset Sale to Commence on March 13
DIRECTRIX: Financing Negotiations Spur Delay in Form-Q Filing
ENRON: Committee Seeks Okay to Examine Off-Balance Sheet Deals
ENRON WIND CONSTRUCTORS: Case Summary & 20 Unsecured Creditors
ENTERCOM COMMS: S&P Ups Low-B Ratings as Improvement Continues
EXODUS COMMS: Changes Name to EXDS Inc. After Sale to C&W Entity
EXODUS: Enters Transition Services Pacts with Digital Island
FEDERAL-MOGUL: JP Morgan Balks at Rothschild's Engagement Fees
GLOBAL CROSSING: Court Approves Simpson Thacher as Tax Counsel
GLOBAL CROSSING: Names Carl Grivner as Chief Operating Officer
IT GROUP: Taps Gibson Dunn for Legal Services on Corp. Matters
INTEGRATED HEALTH: HPLLC Pitches Best Bid for MD Real Property
J.H. WHITNEY MARKET: Fitch Junks Class D Junior Sub. Debt Issue
KAISER ALUMINUM: Pursuing Transactions with Non-Debtor JV Units
KAISER ALUMINUM: Salaried Retirees Gripe About Benefit Decisions
KELLSTROM INDUSTRIES: Seeks Approval to Pay Repair Vendor Claims
KMART CORP: Seeks Okay of Proposed Reclamation Claim Procedures
LASER MORTGAGE: Warren E. Buffett Discloses 9.69% Equity Stake
LEVEL 3 COMMS: Inks Definitive Deal to Acquire CorpSoft's Assets
LODGIAN INC: Committee Taps Debevoise & Plimpton as Counsel
MAXXIM MEDICAL: Weak Results Spur S&P to Cut Credit Rating to B-
MCLEODUSA INC: Court Grants Injunction Against Utility Companies
MPOWER COMMS: Planned Recapitalization Prompts S&P's Junk Rating
NATIONSRENT: Seeks Open-Ended Extension of Lease Decision Period
OPTICAL DATACOM: Court Okays Bayard Firm as Panel's Co-Counsel
OPTICAL DATACOM: Has Until Apr. 15 to Decide on Unexpired Leases
OPTICAL DATACOM: Committee Wants a Chapter 11 Trustee Appointed
PACIFIC GAS: Seeks Court Approval to Hire 6 Consulting Firms
POINT.360: Seeking Waivers of Covenants Under Credit Agreement
POLAROID: Reorganization Plan Might Surface on April 25
PSINET INC: GE Capital Wants Prompt Decisions on Two Contracts
SAFETY-KLEEN: Selling Chemical Services Div. to Harbor Clean
SERVICE MERCHANDISE: Court Okays De Minimis Asset Sale Protocol
SIMON TRANSPORTATION: Files for Chapter 11 Relief in Utah
SIMON TRANSPORTATION: Case Summary & Largest Unsecured Creditor
STARTEC GLOBAL: Wins Court's Nod to Extend Lease Decision Period
STEEL HEDDLE: Court Extends Lease Decision Period Until March 26
SWEET FACTORY: Committee Signing-Up Saul Ewing as Co-Counsel
SWEET FACTORY: Court Approves Robert L. Berger as Claims Agent
TALK AMERICA: S&P Affirms Junk Rating Following Exchange Offer
TANDYCRAFTS: Seeks to Enlarge Lease Decision Period to March 15
TOWER TECH: Emerges from Chapter 11 & New Shares Start to Trade
TRAILMOBILE CANADA: Shareholder Equity Deficit Tops $11.5MM
USG CORP: Wants Until August 30 to Make Lease-Related Decisions
VENTURE CATALYST: Will Delay Financial Results Filing with SEC
W.R. GRACE: Darex Wants to Close Georgia Plant & Move to Chicago
WEIRTON STEEL: Reaches Pact with Noteholders to Restructure Debt
WILLIAMS COMPANIES: What If Williams Comms Files for Bankruptcy?
WILLIAMS COMMS: Continues Fin'l Restructuring Talks with Banks
WILLIAMS COMMS: Fitch Cuts Junk Ratings over Default Concerns
* Meetings, Conferences and Seminars
*********
360NETWORKS: Gets Extension to May 25 to File Chapter 11 Plan
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360networks inc., and its debtor-affiliates sought and obtained
a Court order extending their exclusive periods to file a plan
of reorganization through May 25, 2002 and solicit acceptances
of that plan through July 26, 2002.
Shelley C. Chapman, Esq., at Willkie Farr & Gallagher, in New
York, relates that although the Debtors have made substantial
progress in these cases, they still require additional time to
develop and negotiate a plan of reorganization. "A bar date is
just about to be set and a plan term sheet is just being
developed now upon which extensive plan negotiations will
obviously follow," Ms. Chapman adds.
According to Ms. Chapman, the Debtors continue to focus on
laying the groundwork for formulation of a plan. Under the
circumstances, Ms. Chapman says, the Debtors have yet to
determine how to best maximize value in these cases, let alone
negotiate the distribution of such value in a plan. The
extension of the exclusivity periods should enable the Debtors
to harmonize the diverse and competing interests that exist to
attempt to resolve conflicts in a reasoned and balanced manner,
Ms. Chapman maintains. (360 Bankruptcy News, Issue No. 19;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
AMF BOWLING: Brings-In John Smith as COO of U.S. Bowling Centers
----------------------------------------------------------------
AMF Bowling Worldwide announced that John Smith will be joining
the company on March 4 as Chief Operating Officer of its U.S.
Bowling Centers. Prior to coming to AMF, Smith was Zone Vice
President at the Starbucks Coffee Company, responsible for the
operations of 2600 locations.
"I am very pleased that John has decided to join AMF and lead
our U.S. Bowling Center Operations," said Roland Smith, AMF's
President and Chief Executive Officer. "With our financial
restructuring and Chapter 11 coming to a close, we are now
totally focused on improving our operating results and
consistently providing a great bowling experience. John brings
over 30 years of operating experience from the retail
hospitality industry, and I expect that he will have a positive
impact and accelerate the improvements we've been working on
over the last two years in our U.S. centers."
Before joining Starbucks in 1997, John Smith spent four years as
a Division Vice President at Wendy's where he oversaw financial
and operational functions for 80 company and 249 franchised
restaurants. Prior to that, he was Senior Vice President of
Operations at the Marriott Corporation.
"This is an exciting time to come to AMF," said John Smith. "In
my conversations with Roland and his senior management team,
there has been a constant emphasis on taking the newly
reorganized company to the next level in terms of both
operations and customer satisfaction. That kind of commitment
is infectious, and I look forward to being a part of it."
"I was particularly impressed with AMF's focus on and commitment
to employees," he added. "Coming from the hospitality industry,
I know how critical a company's people are. The customer
experience is really about the interaction between people --
employees and customers -- so I think AMF's recent focus on
training, development and employee satisfaction in the workplace
are key ingredients to future business success."
As the largest bowling company in the world, AMF owns and
operates over 500 bowling centers worldwide and is also a leader
in the manufacturing and marketing of bowling products. In
addition, the company manufactures and sells the PlayMaster,
Highland and Renaissance brands of billiards tables. Additional
information about AMF is available on the Internet at
http://www.amf.com
DebtTraders reports that AMF Bowling Worldwide's 12.250% bonds
due 2006 (AMBW2) are trading between 2.5 and 3.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AMBW2for
real-time bond pricing.
ANC RENTAL: Seeks Okay to Assume & Reject Detroit Airport Leases
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ANC Rental Corporation, and its debtor-affiliates ask the Court
for permission to reject Alamo's Concession and Lease Agreement
and to assume National's Lease and Concession Agreement with
Wayne County, Michigan.
Mark J. Packel, Esq., at Blank Rome Comisky & McCauley in
Wilmington, Delaware, states that the rejection and assumption
is necessary in order for the Debtors to secure significant cost
savings at the Detroit Metropolitan Wayne County Airport while
at the same time improving customer service by allowing ANC to
operate under both National and Alamo in one facility.
In exchange for an increase in National's Minimum Annual
Guarantee payment of $3,090,144 per year to $3,300,000 for the
remaining term of National's Concession Agreement, Wayne County
will waive all pre-petition and post-petition claims related to
the rejection of the Alamo agreements and not to object to the
Debtors' motion to assign the National Concession and Lease
Agreement to ANC.
The Debtors are also seeking to reject a Building Site Lease
between Wayne County and Alamo and seeking to assume a Building
Site Lease between National and Wayne County, for the operation
of a rent-a-car service facility at the Detroit Airport. ANC
will operate both the National and Alamo trade names from
National's current facility. Mr. Packel submits that the
rejection of the Alamo Lease and Concession Agreement, the
assumption of the National Concession and Lease Agreement and
their assignment to ANC is warranted because it will result in
savings of over $3,100,000 per year in fixed facility charges
and other operational cost savings for the Debtors. (ANC Rental
Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
AT&T CANADA: S&P Lowers Ratings to BB on Price-Cap Review Risks
---------------------------------------------------------------
The ratings on AT&T Canada Inc., were lowered to 'BB' and
placed on CreditWatch with developing implications on Feb. 22,
2002. Previously, the ratings on AT&T Canada had benefited from
Standard & Poor's assumption of a very significant degree of
support from AT&T Corp. The downgrade reflects Standard & Poor's
heightened concerns about AT&T Corp.'s economic incentive to
provide support to AT&T Canada debtholders in the long term
should regulatory changes and the continuation of challenging
market conditions not support a competitive telecommunications
market. As the company has previously disclosed, the CRTC price-
cap review has immediate financial implications for AT&T Canada
and could have broader ramifications for the future direction of
competitive telecommunications in Canada.
AT&T Corp., could, subject to compliance with Canadian law,
choose to purchase and, among various options, deposit with a
trustee, the remaining AT&T Canada shares it does not already
own prior to June 30, 2003, in advance of the removal of foreign
ownership restrictions. Acceleration of this structure would
limit AT&T Corp.'s exposure to the fully accreted obligation, as
AT&T Canada's share price began accreting at 4% each quarter
beginning June 30, 2000, from a base of C$37.50. Standard &
Poor's would view the acceleration of the trust formation to be
evidence of greater support of AT&T Canada, unless this strategy
is assessed as simply an opportunity for AT&T Corp. to manage
its financial exposure.
The developing outlook indicates ratings could be raised,
lowered, or affirmed as events unfold, and rating adjustments in
either direction could be very significant. Should regulatory
changes, market conditions, or other factors increase the
likelihood that AT&T Corp. will eventually become the owner of
AT&T Canada, then the ratings on AT&T Canada could be raised to
a level close to or the same as those on AT&T Corp. If events
suggest that AT&T Corp. is not likely to own all of AT&T Canada,
however, or if AT&T Corp. does not commit to providing explicit
support of AT&T Canada debtholders, then the ratings on AT&T
Canada would fall to reflect AT&T Canada's stand-alone credit
quality, which, without knowledge of the price-cap decision, is
expected to be in the single-'B' category.
Operating Position
Standard & Poor's believes AT&T Corp. is considering the pending
regulatory change to be an important indication of AT&T Canada's
probability of success as a self-financing entity in the longer
term. Standard & Poor's also believes the impetus to provide
support to AT&T Canada diminishes as regulatory uncertainty
increases, market conditions remain challenging, and AT&T Corp.
balances the needs of AT&T Canada against AT&T Corp.'s financial
flexibility and other objectives. Consequently, AT&T Corp. may
no longer be inclined to buy and hold AT&T Canada shares in a
trust prior to a change in foreign ownership rules.
Standard & Poor's is concerned with the financial risk
surrounding AT&T Canada's uncertain future ownership. If foreign
ownership rules have not changed before June 30, 2003, and AT&T
Corp. has not otherwise waived the condition, AT&T Canada will
be put up for auction. Acquisition of AT&T Canada by a party
other than AT&T Corp. constitutes a change of control under the
company's various debt agreements, which could accelerate their
maturity. If the maturity of AT&T Canada's indebtedness is
accelerated, it is not clear to Standard & Poor's how this
obligation would be satisfied.
Because resolution of the above issue is beyond AT&T Canada's
control, under GAAP the company could be required to make
financial statement note disclosure that calls into question the
appropriateness of continuing to use the going concern basis of
accounting in preparing financial statements. Although AT&T
Canada is in the process of determining with its auditors the
nature and extent of the required disclosure, the auditor's
report will be issued without qualification. In the event there
is doubt about the appropriateness of continuing to use the
going concern basis of accounting, it is not clear whether
disclosure thereof would be considered an impermissible
qualification of the company's financial statements and,
therefore, an event of default under the AT&T Canada bank
facility. If the disclosure proves to be an event of default, in
the absence of a waiver, AT&T Canada would be required to repay
the facility to avoid cross-default of the public debt.
Resolution of the CreditWatch will depend in part on the
resolution of the credit facility issue.
Although Standard & Poor's continues to believe that AT&T Corp.
will honor its contractual economic commitment to AT&T Canada
shareholders, this commitment does not necessarily translate
into economic support for AT&T Canada's debtholders. Standard &
Poor's believes AT&T Corp.'s commitment to a solid balance sheet
for itself means it will adhere to a prudent approach in
assessing the strength of its commitment to AT&T Canada in
understanding both the financial and business-risk implications
of operating in an increasingly competitive and challenging
environment.
AT&T Canada's stand-alone credit profile is supported by its
position as Canada's largest facilities-based competitive local
exchange carrier (CLEC); the lack of relatively high-quality
national CLECs; a strong and experienced management team; and
adequate financial flexibility with C$967 million of liquidity
at Dec. 31, 2001. These factors are tempered by the company's
high debt leverage, the increasingly competitive environment
dominated by incumbent carriers, and an uncertain regulatory
landscape.
ADVANTICA RESTAURANT: Extends Sr. Notes Exchange Offer to Friday
----------------------------------------------------------------
Advantica Restaurant Group, Inc. (OTCBB: DINE) announced that it
has extended to 5:00 p.m., New York City time, on March 1, 2002,
its offer to exchange up to $204.1 million of registered 12.75%
senior notes due 2007 to be jointly issued by Denny's Holdings,
Inc. and Advantica for up to $265.0 million of Advantica's
11.25% senior notes due 2008, of which $529.6 million aggregate
principal amount is currently outstanding. The exchange offer
was scheduled to expire at 5:00 p.m., New York City time, on
February 22, 2002. Except for the extension of the expiration
date, all other terms and provisions of the exchange offer
remain as set forth in the exchange offer prospectus previously
furnished to the holders of the Old Notes.
To date, an aggregate of approximately $64.8 million Old Notes
have been tendered for exchange.
Advantica Restaurant Group, Inc. is one of the largest
restaurant companies in the United States, operating over 2,300
moderately priced restaurants in the mid-scale dining segment.
Advantica owns and operates the Denny's, Coco's and Carrows
restaurant brands. FRD Acquisition Co., the parent company of
Coco's and Carrows and a wholly owned subsidiary of Advantica,
is classified as a discontinued operation for financial
reporting purposes and is currently under the protection of
Chapter 11 of the United States Bankruptcy Code effective as of
February 14, 2001. For further information on the Company,
including news releases, links to SEC filings and other
financial information, please visit Advantica's Web site at
http://www.advantica-dine.com
DebtTraders reports that Advantica Restaurant Group's 11.250%
bonds due 2008 (DINE08USR1) are trading between 73 and 76. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=DINE08USR1
for real-time bond pricing.
AMERICAN BANKNOTE: Argentinian Recession Hurting Transtex Ops.
--------------------------------------------------------------
American Banknote Corporation is a holding company. The Parent's
principal subsidiaries are: American Bank Note Company, the U.S.
operating subsidiary, American Bank Note Grafica e Servicos,
Ltda., a 77.5% owned Brazilian company, ABN Australasia Limited,
trading as Leigh-Mardon Pty. Ltd., a 92.5% owned (effective June
30, 2001) Australian company with an operating subsidiary in New
Zealand, CPS Technologies, S.A., a French company, and Transtex
S.A., an Argentine company.
Through its subsidiaries, the Company serves its customers in
the regions where it does business through three principal
product lines: Transaction Cards and Systems, Printing Services
and Document Management, and Security Printing Solutions.
Sales by foreign subsidiaries represent approximately 86% of the
Company's consolidated sales for both the six months ended June
30, 2001 and June 30, 2000. Sales by foreign subsidiaries
represent approximately 84% and 86% of the Company's
consolidated sales for the Second Quarter ended June 30, 2001
and June 30, 2000, respectively. The Company's operations in
Brazil, Australia, and France have experienced in 2001, and
continue to experience, significant exchange rate devaluation
against the U.S. Dollar, when compared to 2000. In particular,
Brazil's currency, the Real, continues to demonstrate high
degrees of volatility against the U.S. Dollar, with the Real
devaluing by over 40% against the U.S. Dollar as of September
21, 2001 (R$2.79) when compared to the beginning of
2001(R$1.95). While the Brazilian Real has strengthened as of
January 31, 2002 to R$2.44 to the U.S. Dollar, the currency
continues to experience significant volatility and there can be
no certainty that it will stabilize at any particular level. The
average exchange rate devaluation in the Brazilian, Australian
and French currencies for the first six months of 2001 was
approximately 19%, 17% and 6%, respectively, when compared to
the first six months of 2000 and, in comparing the second
quarter of 2001 to the second quarter of 2000, the average
exchange rate devaluation in these currencies was approximately
28%, 16% and 7% respectively.
Transtex has been, and continues to be, negatively impacted by
Argentina's ongoing economic recession, political instability,
extremely high levels of unemployment and interest rates, and
default on the government debt such that any further
deterioration may impact Transtex's ability to continue as a
going concern.
Comparison Of Results Of The Six Months
Ended June 30, 2001 With The Six
Months Ended June 30, 2000
Sales decreased by $27.0 million, or 19.7%, from 2000. Exchange
rate devaluation accounts for approximately $16.2 million of
this decrease, of which $11.1 million is attributable to Brazil,
$4.9 million to Australia and $0.2 million to France. The
remaining net decrease in sales of $10.8 million in constant
dollars is the result of lower sales of $3.8 million in the
United States, $4.4 million in Australia, $1.0 million in
Argentina and $1.7 million in France. Sales in Brazil increased
slightly by $0.1 million when compared to the prior year. The
net decrease in sales in constant dollars is discussed in detail
by subsidiary below.
The decrease of $3.8 million in sales in the United States was,
principally due to the elimination of $1.7 million in revenues
resulting from the sale of American Banknote Card and Merchant
Services, the Company's former card and merchant processing
business, in September 2000 and $2.1 million in lower SPS sales
at ABN. The decrease in SPS sales at ABN was caused by the
declining demand for stock and bond certificates due to the
continued trend toward next day settlement and the decreasing
overall demand for secure paper-based documents of value that
are used in the public and private sectors, such as traveler's
checks, postal commemorative panels and secure commercial print.
This decline in demand resulted in diminished revenues at ABN of
approximately $4 million and were partly offset by $1.9 million
of new revenue generated from lower margin distribution and
fulfillment programs.
Sales in Australia at LM were $4.4 million lower when compared
to the prior year as sales in all three principal product lines
experienced negative trends when compared to the prior year. SPS
sales were $2.4 million lower mainly due to $3.4 million in
reduced volumes on bank checks resulting from the loss of a
customer to a competitor and an overall downward trend in check
usage. This decrease was partly offset by an increase in
passport orders from the Australian government of $1.0 million.
Sales of PSDM products were $1.4 million lower due mainly to a
one-time increase in sales in 2000 under a contract with the
Australian government in 2000 resulting from the introduction of
its general sales tax program. TCS sales were lower by $0.6
million due to the elimination of $2.0 million in revenues
resulting from LM's sale of its transaction card equipment
business in December 2000, partly offset by an increase in
demand for credit and debit card personalization of $0.8 million
and an increase in driver license issuances of $0.6 million.
In Argentina, the severe and ongoing economic recession
continued to negatively impact Transtex. As a result, the TCS
product line at Transtex experienced a significant decline in
transaction card personalization and transaction card equipment
sales due to an overall weakness in the banking sector as credit
markets continued to tighten. In addition, the mix of production
in base stock cards whereby larger volumes of lower priced bank
debit and phone cards replaced higher margin credit cards
further reduced Transtex's profitability. As a result of these
factors, sales were $1.0 million lower when compared to the
prior year.
In France, the decrease of $1.7 million in TCS sales at CPS was
primarily due to a decline in demand for phone cards of $1.9
million partly offset by an increase in sales of bank cards of
$0.2 million. The decrease in sales of phone cards was
principally a result of the overall weakness experienced in the
French telecommunications sector.
Sales at ABNB in Brazil were $0.1 million higher than in 2000.
The net increase was the result of a $1.9 million increase in
TCS sales due to greater demand for stored value telephone
cards. This increase was almost entirely offset by a decrease in
SPS sales of $1.8 million, as sales of checks and intaglio
security print declined by $3.2 million due to lower customer
usage and a weakening security print market while driver license
issuances increased by $1.4 million.
American Banknote originated in 1795 as a printer of US
currency, has filed for Chapter 11 bankruptcy in the U.S.
Bankruptcy Court for Southern District of New York. No longer
printing US currency, American Banknote makes transaction cards
(ATM, credit, debit cards), prints business forms, offers
electronic printing services, and offers security printing
services for items such as checks and money orders. In 1998 the
company spun off its American Bank Note Holographics unit; the
following year the spinoff restated three years' worth of
financial statements. American Banknote was delisted from the
New York Stock Exchange and filed for bankruptcy protection in
1999.
BALANCED CARE: Dec. 31 Balance Sheet Upside-Down by $26 Million
---------------------------------------------------------------
Balanced Care Corporation reports that at December 31, 2001, the
company's total shareholders' equity deficit nearly doubled to
$26.1 million.
For the three months ended December 31, 2001 the Company's total
revenue decreased by $1,311,000 to $14,214,000 compared to
$15,525,000 for the three months ended December 31, 2000. The
decrease primarily resulted from revenue of $2,778,000 relating
to transferred operations and was partially offset by increased
revenue of $1,484,000 from SPE and other operations acquired
during fiscal year 2002 and 2001. Resident services comprised
81% and 84% of total revenues for the three months ended
December 31, 2001 and 2000, respectively.
Total operating expenses decreased by $2,954,000 to $22,253,000
for the three months ended December 31, 2001 from $25,207,000
for the three months ended December 31, 2000. This decrease was
the result of (i) a decrease of $4,075,000 from transferred
operations, (ii) a decrease in the provision for losses under
shortfall fundings of $1,125,000, (iii) decreased general and
administrative expenses of $452,000, (iv) decreased lease
expense of $476,000, and (v) decreased depreciation and
amortization expense of $315,000. These decreases were partially
offset by (i) an increase of $3,236,000 for SPE facilities
acquired in fiscal year 2002 and 2001 and (ii) a loss on
settlement of contract litigation of $714,000.
Facility operating expenses for the three months ended December
31, 2001 decreased by $1,187,000 to $10,800,000 from $11,987,000
for three months ended December 31, 2000. This decrease was a
primarily the net result of a decrease of $2,534,000 for
transferred operations and was partially offset by an
increase in bad debt expense of $500,000 and an increase of
$1,100,000 from SPE facilities acquired in fiscal year 2002 and
2001.
General and administrative expenses decreased by $452,000 to
$2,201,000 for the three months ended December 31, 2001 from
$2,653,000 for three months ended December 31, 2000. The
decrease was primarily a result of reduction in corporate
staffing.
Lease expense decreased by $476,000 to $2,519,000 for the three
months ended December 31, 2001 from $2,995,000 for the three
months ended December 31, 2000. This decrease was primarily a
result of decreased lease expense from transferred operations
and was partially offset by increased lease expense from SPE
facilities acquired in fiscal year 2002 and 2001.
Depreciation and amortization decreased by $315,000 to
$1,105,000 for the three months ended December 31, 2001 from
$1,420,000 for the three months ended December 31, 2000. This
decrease resulted from transferred operations and assets
impaired in the fourth quarter of fiscal year 2001.
The provision for losses under shortfall funding agreements
decreased by $1,125,000 to $639,000 for the three months ended
December 31, 2001 from $1,764,000 for the three months ended
December 31, 2000. The decrease is primarily the result of (i)
reduction in losses relating to transferred operations, which
were in the ramp-up stage in the prior year comparative quarter;
and (ii) overall improvement in operating performance.
The loss on settlement of contract litigation was $714,000 for
the three months ended December 31, 2001. No loss on settlement
of contract litigation was incurred for the same period in the
prior fiscal year. The loss on financial restructuring, which
includes costs incurred in connection with financing efforts and
rent restructuring, decreased by $113,000 to $4,275,000 for the
three months ended December 31, 2001 from $4,388,000 for the
three months ended December 31, 2000.
Interest and other income for the three months ended December
31, 2001 increased by $25,000 to $159,000 from $134,000 for the
three months ended December 31, 2000. Interest expense for the
three months ended December 31, 2001 increased by $668,000 to
$2,608,000 from $1,940,000 for the three months ended December
31, 2000. The increase was primarily due to the additional
accrued interest for increased borrowings under the VXM Loan.
The Company's net loss of $10,488,000 for the three months ended
December 31, 2001 decreased by $1,000,000 from a net loss of
$11,488,000 for the three months ended December 31, 2000. This
decrease resulted primarily from (i) a decrease in the provision
for losses under shortfall funding agreements of $1,125,000 (ii)
decreased lease expense of $476,000, (iii) decreased general and
administrative expenses of $452,000, and (iv) decreased
depreciation and amortization expense of $315,000. The decrease
was partially offset by an increase in interest expense of
$668,000, and a loss on settlement of contract litigation of
$714,000.
In the six month period ended December 31, 2001 total revenue
decreased by $1,501,000 to $27,989,000 compared to $29,490,000
for the six months ended December 31, 2000. The decrease
resulted primarily from a decrease in revenue of $5,322,000
relating to transferred operations and was partially offset by
increased revenue of $3,801,000 from SPE and other operations
acquired during fiscal year 2002 and 2001. Resident services
comprised 81% and 83% of total revenues for the six months ended
December 31, 2001 and 2000, respectively.
Total operating expenses decreased by $5,381,000 to $39,309,000
for the six months ended December 31, 2001 from $44,690,000 for
the six months ended December 31, 2000. This decrease was the
result of (i) a decrease of $8,073,000 from transferred
operations, (ii) a decrease in the provision for losses under
shortfall fundings of $2,377,000, (iii) decreased general and
administrative expenses of $1,005,000, and (iv) decreased lease
expense of $1,275,000. These decreases were partially offset by
(i) an increase of $6,102,000 for SPE facilities acquired in
fiscal year 2002 and 2001, (ii) a loss on settlement of contract
litigation of $714,000, and (iii) an increase in loss on
financial restructuring of $412,000.
Facility operating expenses for the six months ended December
31, 2001 decreased by $1,612,000 to $20,595,000 from $22,207,000
for the six months ended December 31, 2000. This decrease was
primarily the net result of a decrease of $4,657,000 for
transferred operations, and was partially offset by an increase
in bad debt expense of $500,000 and an increase of $2,900,000
from SPE facilities acquired in fiscal year 2002 and 2001.
General and administrative expenses decreased by $1,005,000 to
$4,278,000 for the six months ended December 31, 2001 from
$5,283,000 for the six months ended December 31, 2000. The
decrease was primarily a result of reduction in corporate
staffing.
Lease expense decreased by $1,275,000 to $4,886,000 for the six
months ended December 31, 2001 from $6,161,000 for the six
months ended December 31, 2000. This decrease was primarily a
result of decreased lease expense from transferred operations
and was partially offset by increased lease expense from SPE
facilities acquired in fiscal year 2002 and 2001.
Depreciation and amortization decreased by $238,000 to
$2,549,000 for the six months ended December 31, 2001 from
$2,787,000 for the six months ended December 31, 2000 as a
result of transferred operations and assets impaired in the
fourth quarter of fiscal year 2001.
The provision for losses under shortfall funding agreements
decreased by $2,377,000 to $1,487,000 for the six months ended
December 31, 2001 from $3,864,000 for the six months ended
December 31, 2000. The decrease is primarily the result of (i)
reduction in losses relating to transferred operations, which
were in the ramp-up stage in the prior year comparative quarter;
and (ii) overall improvement in operating performance.
The loss on settlement of contract litigation was $714,000 for
the six months ended December 31, 2001. No loss on settlement of
contract litigation was included for the same period in the
prior fiscal year. The loss on financial restructuring, which
includes costs incurred in connection with financing efforts and
rent restructuring, increased by $412,000 to $4,800,000 for the
six months ended December 31, 2001 from $4,388,000 for the six
months ended December 31, 2000.
Interest and other income for the six months ended December 31,
2001 decreased by $19,000 to $217,000 from $236,000 for the six
months ended December 31, 2000. Interest expense for the six
months ended December 31, 2001 increased by $1,572,000 to
$5,322,000 from $3,750,000 for the six months ended December 31,
2000. This was primarily due to the additional accrued interest
for increased borrowings under the VXM Loan due to increased
borrowing.
The Company's net loss of $16,425,000 for the six months ended
December 31, 2001 decreased by $2,289,000 from a net loss of
$18,714,000 for the six months ended December 31, 2000. This
decrease resulted primarily from (i) a decrease in the provision
for losses under shortfall funding agreements of $2,377,000,
(ii) decreased lease expense of $1,275,000, and (iii) decreased
general and administrative expenses of $1,005,000. The decrease
was partially offset by an increase in interest expense of
$1,572,000, and a loss on settlement of contract litigation of
$714,000.
Balanced Care Corporation was incorporated in April 1995 and
utilizes assisted living facilities as its primary service
platform to provide an array of healthcare and hospitality
services, including preventive care and wellness, medical
rehabilitation, Alzheimer's/dementia care and, in certain
markets, extended care. The Company has grown primarily by
designing, developing, operating and managing its Outlook
Pointe(R) signature series assisted living facilities and
through acquisitions.
On November 19, 2001, Brad E. Hollinger, Chairman, President and
Chief Executive Officer of the Company, as well as David L.
Goldsmith and Edward R. Stolman, members of the Board of
Directors, resigned their positions with the Company. On
December 22, 2001, Clint Fegan, the Company's Chief Financial
Officer, resigned his position. Gary Goodman was appointed
Chairman of the Board of Directors of the Company. Mr. Goodman
also serves as Executive Vice President of International
Property Corporation and affiliates. Richard D. Richardson,
President of CPL Management LLC, is serving as interim Chief
Executive Officer of the Company. Mr. Richardson served as
Chairman, Chief Executive Officer and President of Renaissance
Healthcare Corporation from 1989 to 1999. Renaissance owned or
managed nursing homes in several states on the East Coast. Prior
to founding Renaissance, Mr. Richardson held various accounting
titles in publicly held companies, including Chief Financial
Officer.
On December 17, 2001, the Board appointed Mr. Richardson along
with two new members, John N. Beall and R. Fredric Zullinger, to
its Board of Directors to fill the vacancies created by the
foregoing resignations. Mr. Beall is Chief Executive Office of
Bell Hearing Aid Center, Inc. and was previously President of
the Miracle-Ear Division of Dahlberg Inc., located in
Minneapolis, Minnesota. He also served as a member of the Board
of Directors of Dahlberg Inc., a hearing aid manufacturing
company, and as a director on the boards of several state and
international hearing aid organizations. Mr. Zullinger is Senior
Vice President and Chief Financial Officer of Consumers
Financial Corporation (CFC). CFC is a publicly traded insurance
holding company based in Camp Hill, Pennsylvania. Mr. Zullinger
has served as CFC's Chief Financial Officer since 1985 and has
held various other accounting and financial positions in his 24
years of employment with CFC. Mr. Zullinger is a Certified
Public Accountant (CPA) and is a member of the Pennsylvania
Institute of CPA's and the American Institute of CPA's.
BETHLEHEM STEEL: Committee Taps McDermott Will as Labor Counsel
---------------------------------------------------------------
The Official Committee of Unsecured Creditors of Bethlehem Steel
Corporation, and its debtor-affiliates seeks the Court's
approval to retain McDermott, Will & Emery as special labor
counsel nunc pro tunc to November 1, 2001.
The Committee chose McDermott because of its considerable
experience in the fields of labor and employment law. The firm
has previously represented the creditors' committee of LTV,
Sharon Steel Corporation, CF&I Steel Corporation, among others.
Thomas Moers Mayer, Esq., at Kramer Levin Naftalis & Frankel,
LLP in New York, New York, explains that McDermott's employment
is necessary because the Committee needs advice on matters
relating to labor and employment -- given the fact that the
Debtors have more than 13,000 employees entitled to benefit from
their pension plan.
Specifically, McDermott will:
(a) provide advice to the Committee on all matters relating to
labor and employment;
(b) represent and advise the Committee with respect to any
actions that may be commenced or contemplated under
Bankruptcy Code Sections 1113 or 1114;
(c) represent and advise the Committee with respect to
negotiations among the United Steelworkers of America and
other labor representatives, the Debtors and the
Committee;
(d) represent and advise the Committee regarding pension and
other post employment benefit issues;
(e) represent and advise the Committee regarding the
Occupational Safety and Health Administration issues;
(f) prepare, on behalf of the Committee, appropriate
applications, motions, complaints, answers, orders,
reports and other pleadings and documents relating to
labor issues;
(g) appear before the Court and other officials and tribunals
and protect the interest of the Committee in other
jurisdictions and other proceedings related to the
proposed representation; and
(h) provide such other services as the Committee may request
relating to the proposed services.
Joseph E. O'Leary, a partner of McDermott, Will & Emery, informs
the Court that the firm will charge these hourly rates:
Joseph E. O'Leary - partner $ 510
Scott A. Faust - partner 445
James A. Paretti - associate 310
In case other attorneys and legal assistants are required, the
standard hourly rate of the firm range from:
Lawyers $165 - 525
Paraprofessionals 100 - 200
McDermott will also bill the Committee for out-of-pocket
expenses like photocopying, witness fees, travel expenses and
other expenses that will be incurred in the performance of the
services.
Mr. O'Leary assures Judge Lifland that McDermott is a
"disinterested person" within the meaning of section 101(14) of
the Bankruptcy Code. Mr. O'Leary further asserts that:
-- neither McDermott nor any of its professionals has any
connection with the Debtors, their creditors or any other
party-in-interest in the Debtors' chapter 11 cases;
-- none of the attorneys of McDermott holds or represents any
interest adverse to the Committee in the matters for which
it is to be retained; and
-- none of the attorneys of McDermott is a relative of any
United States Bankruptcy Judge for the Southern District of
New York, the United States Trustee for the Southern
District of New York or any employee in the office of the
United Sates Trustee. (Bethlehem Bankruptcy News, Issue No.
11; Bankruptcy Creditors' Service, Inc., 609/392-0900)
CALL-NET: S&P Junks Ratings Following Recapitalization Plan
-----------------------------------------------------------
Standard & Poor's lowered its ratings on Call-Net Enterprises
Inc., and placed them on CreditWatch with negative implications
on Feb. 25, 2002.
The ratings actions are based on the announced combination
exchange of US$377.0 million 10.625% senior secured debt due
Dec. 31, 2008; US$81.9 million in cash; and 80% of the equity in
the recapitalized company for C$2.6 billion of senior unsecured
notes carrying coupons ranging from 8.0% to 10.8%, maturing
between 2007 and 2009.
On completion of the offer the corporate credit rating on Call-
Net will be lowered to 'SD' (selective default) and the senior
unsecured debt rating will be lowered to 'D'.
It is Standard & Poor's policy to consider the completion of the
exchange to be tantamount to a default because bondholders will
be receiving less than par as a result of the offer.
The C$2.0 billion recapitalization includes: a commitment by
Sprint Communications Co. L.P. to invest C$25.0 million to
purchase a 5.0% interest; and a new 10-year branding and
technology services agreement between Sprint and Call-Net.
Subsequent to the successful completion of the recapitalization,
Standard & Poor's will reassess the company's future ratings
based on its revised business and financial profile, the latter
of which is expected to improve significantly should the offer
be completed.
Rating Lowered and Placed on CreditWatch Negative
Credit Rating 'CC' Watch Negative
DebtTraders reports that Call-Net Enterprises Inc.'s 9.270%
bonds due 2007 (CN2) are trading between 28 and 32. See
http://www.debttraders.com/price.cfm?DT_SEC_TICKER=cn2for real-
time bond pricing.
CELLSTAR CORP: Posts Improved Operating Results for FY 2001
-----------------------------------------------------------
CellStar Corporation (Nasdaq: CLSTD) announced results for the
fiscal year and fourth quarter ended November 30, 2001. The
earnings per share reported reflect the effect of the one-for-
five reverse stock split that took place on February 22, 2002,
reducing the number of shares outstanding from 60.1 million to
12.0 million. (The Company's Form 10-K, to be filed by February
28, will present calculations of per-share financial data based
on the 12.0 million post-split shares outstanding. For
consistency with the Company's Form 10-K, per-share data in this
earnings release is presented on the basis of 12.0 million post-
split shares outstanding, followed by the comparable pre-split
data in parentheses. As an aid to investors, a separate table
presenting financial data on both a post-split and a pre-split
basis is included with this earnings release.)
Consolidated net income for the fiscal year ended November 30,
2001, was $0.6 million significantly better than the
consolidated net loss of $63.0 million for fiscal 2000.
Revenues for fiscal 2001 were down 1.7 percent to $2,433.8
million from $2,475.7 million for fiscal 2000.
For the fourth quarter of fiscal 2001 the Company reported a
consolidated net loss of $1.4 million an improvement over the
fourth quarter of fiscal 2000 when the Company reported a
consolidated net loss of $16.1 million. Revenues for the fourth
quarter ended November 30, 2001, were $605.3 million, compared
to $694.7 million for the fourth quarter of fiscal 2000.
"We are pleased to report a profit for fiscal 2001, when many in
the wireless communications business suffered losses in the face
of extraordinary economic and industry challenges," said Chief
Executive Officer, Terry Parker. "Restoring profitability was
the first of three key objectives achieved by CellStar's
management team over the past year. The second objective was
continued improvement in the balance sheet, which we
accomplished through tighter management control of receivables
and inventories. We achieved our third key objective,
successfully restructuring our finances, with the closing of a
new credit facility in September and the recent completion of
the exchange offer. With those accomplishments behind us, our
executive team can now focus more fully on operating performance
in 2002."
Gross profit improved for fiscal 2001 to $135.8 million compared
to $111.5 million for the prior year, and gross margin improved
to 5.6 percent from 4.5 percent. Although gross profit of $35.7
million for the fourth quarter was $1.1 million below last
year's fourth quarter, gross margin improved to 5.9 percent from
5.3 percent.
Selling, general and administrative (SG&A) expense for fiscal
2001 was $113.8 million, 4.7 percent of revenues, compared to
$169.2 million, 6.8 percent of revenues, for the prior year.
SG&A expense was $32.9 million, 5.4 percent of revenues, for the
fourth quarter of fiscal 2001 compared to $45.1 million, 6.5
percent of revenues, for the prior-year quarter. The decrease
in SG&A expense was largely the result of a reduction in bad
debt and the elimination of expenses from exited operations.
Consolidated Balance Sheet
As a result of increased purchases in anticipation of the
holiday selling season, cash, cash equivalents, and restricted
cash for the fourth quarter declined to $89.3 million from $97.8
million at the end of the preceding quarter.
Accounts receivable were $216.0 million at the end of the fourth
quarter, compared to $199.4 million at the end of the third
quarter, as receivable days sales slipped a half day for the
quarter from 31.6 days to 32.1, but were still better than the
Company's target range of 35 to 40 days.
Inventory at the close of the fourth quarter was $218.9 million
compared to $195.4 million at the end of the third quarter, as
inventory on hand increased to support year-end seasonal selling
volume. This seasonal build resulted in slowing of turnover
from 12.5 turns to 10.5 turns on an annualized basis, within the
Company's target range of 10 to 12 turns.
For the full year, the Company generated cash flow from
operations of $53.2 million as a result of the improvements in
receivables and inventory, and reduced the cash conversion cycle
from 45.0 days to 34.1 days. In the fourth quarter, cash flow
from operations was negative $10.2 million to support seasonal
selling; however, the cash conversion cycle was reduced from
32.6 to 28.9 days.
"Although fourth quarter sales in the wireless industry did not
materialize as expected, we are pleased with the overall
improvements in operating performance we have achieved in fiscal
2001," said President and Chief Operating Officer, Dale
Allardyce. "Over the course of the year, we implemented tighter
controls on purchasing and inventory management to better match
inventory with demand, which was a major contributor to the
gross margin increase from 4.5 percent to 5.6 percent and to an
increase in average inventory turns from 8.2 in 2000 to 10.7 in
2001. More rigorous credit policies helped reduce SG&A from 6.8
percent of sales in fiscal 2000 to 4.7 percent in fiscal 2001
and improved average days sales outstanding from 44.0 for 2000
to 36.1 for 2001. As a result, we generated $53.2 million in
cash from operations in fiscal 2001."
Liquidity
Revolving credit facility - On September 28, 2001, the Company
closed a new, $60 million, five-year revolving credit facility
with an interest rate equal to the prime rate plus one percent.
On October 12, 2001, the amount of the facility was increased to
$85 million. Borrowing capacity under the new facility is
determined by a borrowing base test, which is applied weekly.
At November 30, 2001, there were no borrowings under the new
facility. At February 22, 2002, there were $36.8 million in
borrowings outstanding under the new facility, the majority of
which was utilized to fund the cash portion of the exchange
offer.
Exchange offer - On February 20, 2002, the Company concluded its
exchange offer, exchanging $47.2 million in cash, $12.4 million
of new Senior Notes, and $39.1 million of new Senior Convertible
Notes for $128.6 million of its outstanding Convertible
Subordinated Notes due October 2002, 85.7 percent of which were
tendered in the exchange. Of the outstanding Convertible
Subordinated Notes due October 2002, $21.4 million were not
exchanged and are now subordinate to the Senior Notes, the
Senior Convertible Notes and the revolving credit facility.
Reverse stock split - On February 22, 2002, the Company
completed a one- for-five reverse split of its common stock, as
approved by stockholders on February 12. The split reduced the
number of shares outstanding from
60.1 million shares to 12.0 million shares. Conversion of the
Senior Convertible Notes between now and the mandatory November
30, 2002, conversion date is expected to increase the number of
shares outstanding by 7.8 million, bringing the total shares
outstanding to approximately 19.8 million.
Ongoing Regional Operations
Revenues from ongoing regional operations, which exclude Poland,
Brazil and Venezuela, increased 1.4 percent to $2,432.6 million
in fiscal 2001. Revenues in the People's Republic of China
(PRC), including Hong Kong, were up $322.1 million, or 44.3
percent, to $1,049.6 million, and revenues in North America
increased $79.4 million, or 15.9 percent, to $578.6 million.
Revenues adjusted for a U.S. account that was converted to
consignment in the first quarter of 2001 increased 4.5 percent
for the Company as a whole and 37.0 percent in the North America
region. The increases in the PRC and North America were
partially offset by declines in Taiwan ($178.5 million), Mexico
($132.9 million), the United Kingdom ($52.4 million) and Sweden
($32.0 million). In the fourth quarter revenues were $605.3
million, 12.1 percent lower than the prior year, as increases of
$14.0 million, or 6.4 percent, in the PRC and $8.4 million, or
5.1 percent, in North America were offset by revenue decreases
in Mexico ($56.4 million), Taiwan ($40.4 million), and Colombia
($16.5 million). Revenues in Mexico reflect an unusually high
volume of product handled for a major manufacturer and
aggressive carrier promotions in 2000, and significantly reduced
handset sales to a major carrier customer in 2001. Revenues in
Taiwan reflect the lack of compelling new products from the
Company's major supplier. Revenues in Colombia for the fourth
quarter of fiscal 2000 included a significant volume of handsets
handled for a major manufacturer in support of significant
carrier promotions.
Revenues for the fourth quarter from sales of handsets were
$534.6 million, compared to $625.0 million for the fourth
quarter of fiscal 2000. Including consigned product, CellStar
handled 5.0 million handsets in the fourth quarter of fiscal
2001, bringing the total for the year to 17.7 million, compared
to 4.2 million and 12.6 million for the fourth quarter and full
year of fiscal 2000, respectively.
Revenues for the fourth quarter from sales of accessories and
other products increased to $42.4 million from $40.6 million for
the fourth quarter of fiscal 2000. Activation, residual,
prepaid, fulfillment and other value- added service revenues
increased to $28.3 million from $23.1 million for the fourth
quarter of fiscal 2000.
The average selling price of handsets in the fourth quarter was
$141.17 compared to $147.39 in the preceding quarter. The
average selling price of a digital handset was $150.02 compared
to $149.42 in the preceding quarter. The decrease in average
selling price was largely due to the disposition of an end-of-
life analog product. Excluding end-of-life product, average
selling price was $144.20.
CellStar Corporation is a leading global provider of
distribution and value-added logistics services to the wireless
communications industry, with operations in Asia-Pacific, North
America, Latin America and Europe. CellStar facilitates the
effective and efficient distribution of handsets, related
accessories and other wireless products from leading
manufacturers to network operators, agents, resellers, dealers
and retailers. In many of its markets, CellStar provides
activation services that generate new subscribers for its
wireless carrier customers. For the year ended November 30,
2001, the Company generated revenues of $2.4 billion.
Additional information about CellStar may be found on its Web
site at http://www.cellstar.com
* * *
As reported in the Feb. 20, 2001, edition of Troubled Company
Reporter, Standard & Poor's lowered its corporate credit
rating on CellStar Corp. to 'SD' (selective default) from 'CCC-'
and removed its ratings from CreditWatch, where they had been
placed with negative implications on Sept. 6, 2001.
According to S&P, the action reflects the recent completion of
the exchange of the Carrollton, Texas, company's convertible
subordinated notes due October 2002 for securities having a
total value that is materially less then the original issue,
said credit analyst Martha Toll-Reed.
At the same time, Standard & Poor's lowered its rating on the
subordinated debt to 'D' for the distributor of wireless
communications products. As of Aug. 31, 2001, total outstanding
debt was about $200 million.
CHIQUITA: Sets Record Date for Distribution of New Securities
-------------------------------------------------------------
Chiquita Brands International, Inc. (NYSE: CQB) announced that
the Record Date for distribution of new securities under its
Pre-Arranged Chapter 11 Plan of Reorganization will be the date
the Plan is confirmed by the Bankruptcy Court. The Court hearing
date for confirmation of the Plan is scheduled for March 8,
2002.
Only holders of record as of the close of business on the Record
Date will be entitled to have their existing Chiquita securities
exchanged for new Chiquita securities when the Plan becomes
effective, which is expected to occur approximately 11 days
after confirmation. Chiquita's existing securities are its
Senior Notes, Subordinated Debentures, Preferred Stock and
Common Stock.
The Plan of Reorganization and the exchange of securities are
subject to approval by certain classes of Chiquita's debt and
equity holders, as well as confirmation by the Bankruptcy Court.
Solicitation of acceptances is underway, but the results of the
vote are not yet known.
Further information concerning the Plan of Reorganization and
the Chapter 11 process can be found on the Company's Web site at
http://www.chiquita.comor at http://www.bmccorp.net
The Plan of Reorganization only involves the publicly held debt
and equity securities of Chiquita Brands International, Inc.,
which is a holding company without any business operations of
its own. The Company's other creditors and its assets, strategy
and ongoing operations are unaffected by the Chapter 11 filing.
The Company's subsidiaries, which are independent legal entities
that generate their own cash flow and have access to their own
credit facilities, have continued to operate normally and
without interruption.
Chiquita is a leading international marketer, producer and
distributor of quality fresh fruits and vegetables and processed
foods.
DebtTraders reports that Chiquita Brands' 10.250% bonds due 2006
(CQB4) are trading in the high 80s. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CQB4for
real-time bond pricing.
CLASSIC VACATION: Sets Special Shareholders' Meeting for March 8
----------------------------------------------------------------
Classic Vacation Group, Inc. (AMEX: CLV), a value-added provider
of customized vacation products, announced that it will hold a
special shareholder meeting on March 8, 2002, to vote on a
proposal to approve the sale of substantially all of the assets
and the liabilities of the company to Expedia, Inc. (Nasdaq:
EXPE) and a plan of complete liquidation and dissolution of CLV,
including the possible merger of the company into a liquidating
trust.
Last week, Expedia purchased all of CLV's $47 million debt from
affiliates of Three Cities Research, Inc., the company's
principal note holder, and Thayer Equity Investors III, L.P.,
the company's principal shareholder.
As a result of the purchase of the debt, TCR and Thayer are
contractually obligated to deliver to the CLV's transfer agent
no later than April 8, 2002, cash payments totaling $0.26 per
share, of which $0.15 per share will be from TCR and $0.11 per
share will be from Thayer, to be paid to CLV's shareholders
other than TCR and Thayer. These shareholders will receive the
payment of $0.26 per share without any requirement that they
tender or otherwise dispose of their shares. The record date for
the payment of $0.26 per share will be established by TCR and
Thayer and announced at a later date. CLV intends to provide
shareholders at least 10 days notice of the intended record date
when it receives this information from TCR and Thayer.
The shareholder meeting will be held at 9 a.m. PST at CLV's
headquarters in San Jose, Calif. TCR and Thayer own
approximately 69 percent of the company's outstanding shares and
are contractually obligated to vote for approval of the Expedia
transaction, thus assuring its approval.
In its definitive proxy statement sent to shareholders, CLV
stated that following the liquidation of the company,
shareholders may receive a liquidating distribution estimated by
management to be between 11 and 25 cents per share. Any such
payment would be in addition to the $0.26 per share payment
being made to the company's public shareholders by TCR and
Thayer. Management noted that the liquidation process may take
six months or more to complete and that there can be no
guarantees that any distribution will be made.
COMDISCO: Bank of Tokyo Gets OK to Setoff Prepetition Amounts
-------------------------------------------------------------
Prior to the Petition Date, Comdisco, Inc., and its debtor-
affiliates obtained $225,000,000 of credit pursuant to a certain
Fifth Amended and Restated Global Credit Agreement dated
December 16, 1996. The parties to this agreement are Comdisco,
its subsidiaries, various banks, financial institutions as
Tranche Agents, Bank of America as Syndication Agent, and
Citibank as Administrative Agent. The Bank of Tokyo-Mitsubishi
Ltd. and the Debtors are signatories to the Global Credit
Agreement.
The Debtors defaulted under the Agreement when they filed for
Chapter 11 protection, which makes all outstanding obligations
immediately due and payable. As of the Petition Date, the
Debtors owe the Bank of Tokyo an approximate amount of
$8,000,000.
In a separate transaction, the Debtors and the Bank of Tokyo
also entered into a Foreign Currency Agreement. On July 19,
2001, the Bank of Tokyo closed-out the Agreement leaving a gain
in favor of the Debtors an amount of $304,257. The Close Out
Gain is still unpaid.
By its motion, Bank of Tokyo sought and obtained relief from the
automatic stay in order to setoff the Close Out Gain against the
$8,000,000 debt due under the Global Credit Agreement.
James R. Daly, Esq., at Jones, Day, Reavis & Pogue, in Chicago
Illinois, asserts that that Bank of Tokyo has a right of setoff,
preserved by section 553 of the Bankruptcy Code, pursuant to the
terms of the Global Credit Agreement.
Mr. Daly points out that the Debtors owe Bank of Tokyo
approximately $8,000,000 under the terms of the Global Credit
Agreement while Bank of Tokyo clearly owes the Debtors $304,357
as the Close Out Gain under the Foreign Exchange Agreement.
"The claim and the debt are mutual, valid and enforceable," Mr.
Daly contends.
Besides, Mr. Daly says, the Debtors have no equity in these
funds since the debt became immediately due and owing as of the
Petition Date. Moreover, Mr. Daly continues, should Bank of
Tokyo pay the Debtors the Close Out Gain without applying a
setoff or receiving adequate protection -- Bank of Tokyo's
interest will be compromised because the funds are currently in
Bank of Tokyo's hands. And since the Debtors have
$1,700,000,000 in cash, Mr. Daly notes, the Debtors' ability to
reorganize effectively will not be compromised by a $304,357
setoff. (Comdisco Bankruptcy News, Issue No. 21; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
DECOR GRAVURE: Auction for Asset Sale to Commence on March 13
-------------------------------------------------------------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
In Re: : Chapter 11
DECOR GRAVURE CORP., et al. : BK Case No. 02-00895-TOM-11
Debtors. : Jointly Administered
NOTICE OF EHARING TO CONSIDER DEBTORS' MOTION TO SELL ALL OR
SUBSTANTIALLY ALL OF THE DEBTORS' ASSETS FREE AND CLEAR OF
ALL LIENS, CLAIMS, ENCUMBRANCES, AND OTHER INTERESTS
PURSUANT TO THE DEBTORS' MOTION SEEKING, AMONG OTHER THINGS,
AUTHORITY TO SELL ALL OR SUBSTANTIALLY ALL OF THE DEBTORS
ASSETS PURSUANT TO SECTIONS 105, 363, 365
AND 1146 OF THE BANKRUPTCY CODE
TO ALL INTERESTED PARIES:
PLEASE TAKE NOTICE that the above-captioned debtors and
debt-in-possession (collectively, the "Debtors"), have filed a
motion with the United States Bankruptcy Court for the Northern
District of Alabama on February 4, 2002 (the "Motion"),
requesting entry of an order (the "Sale Order"), pursuant to
sections 363 and 365 of title 11 of the United States Code (the
"Bankruptcy Code"), authorizing, inter alia, the sale of all or
substantially all of the Debtors' assets (the "Asset Sale").
PLEASE TAKE FURTHER NOTICE that:
A. Pursuant to an Order of the Court entered on February
13, 2002 (the "Bidding Procedures Order"), an auction for the
Asset Sale (the "Auction") shall commence and take place in
courtroom 2, United States Bankruptcy court for the Northern
district of Alabama, 1800 5th Avenue North, Robert S. Vance
Federal Building, Birmingham, Alabama on March 13, 2002 at 9:00
a.m. CST, or as soon thereafter as counsel can be heard to
consider Bids (as defined below) for the proposed Asset Sale.
Parties wishing to appear at the Auction may make such
appearance at; however, ANY PARTY WISHING TO SUBMIT A COPMETING
BID FOR THE PURCHASE OF ALL OR SUBSTANTIALLY ALL OF DGC'S ASSETS
MUST SUBMIT BINDING WRITTEN ORRDERS ("BIDS") TO PURCHASE SUCH
ASSETS NO LATER THAN 12:00 NOON CST ON MARCH 11, 2002 (THE "BID
DATE"), WHICH BIDS SHOULD BE DIRECTED TO: GULF ATLANTIC CAPITAL
CORP. ("GULF ATLANTIC"), 2701 N. ROCKY POINT DRIVE, SUITE 630,
TAMPA, FLORIDA, 33607.
B. DGC has selected Adom, LLC (the "Purchaser") as the
stalking horse bidder pursuant to the terms of an asset purchase
agreement dated February 1, 2002 (the "Asset Purchase
Agreement"). The aggregate consideration offered by the
Purchaser is $11,500,000 (the "Purchase Price").
C. Any entity that wishes to submit a Bid for the purchase
of all or substantially all of DGC's assets and participate in
the Auction must comply in all respects with the terms and
conditions established by the Bidding Procedure Order,
including, but not limited to: (i) the minimum Bid that the
Debtors will consider shall exceed the Purchase Price by not
less than $50,000, plus the Break-Up Fee ($350,00), (ii)
accompanying such Bid must be (a) a deposit (acceptable to the
Debtors in all respects) equal to $750,000, (b) two copies of
the Agreement with any proposed changes clearly indicated, (c) a
statement indicating in detail the existence and anticipated
timing of any further approvals, consents or authorization,
including regulatory matters, that are required to close the
Asset Sale, (d) a statement indicating any specific assets
excluded from the bidder's offer (if not all assets are to be
acquired) and every liability the bidder intends to assume, (e)
a statement fully disclosing the identity of entities, if any,
which shall be acquiring directly or indirectly a portion of
DGC's assets under or in connection with a Bid, and (f)
sufficient information regarding both the bidder and partner(s),
if any, to satisfy DGC with respect to the requirements
enumerated in section 355(f) of the Bankruptcy Code; and (iii)
no conditions regarding financing for the purchase price,
completion of further due diligence investigations ro board of
director approvals will be permitted (collectively, the "Bidding
Procedures"). A detailed description of all bidding Procedures
is contained in the Solicitation.
D. A Sale Hearing shall be held on March 13, 2002 at 1:30
p.m. CST in courtroom 2, United States Bankruptcy court for the
Northern district of Alabama, 1800 5th Avenue North, Robert S.
Vance Federal Building, Birmingham, Alabama before the
Bankruptcy court to (i) consider approval of the Asset sale to
Purchaser or such bidder as shall provide the highest or
otherwise best offer for the acquisition of all or substantially
all of DGC's assets at the Auction (ii) permit the court to
consider any issues or objections that are timely interposed by
any parties, and (iii) grant such other or further relief as the
court may deem just or proper.
E. Copies of the solicitation, the Motion and all Exhibits
thereto and the Bidding Procedures Order may be reviewed during
regular business hours at the office of the Clerk of the
Bankruptcy Court or upon written request together with payment
for all copying and mailing costs to: Jeremy R. Johnson, Esq.,
Morrison Cohen singer & Weinstein, LLP, 750 Lexington Avenue,
New York, New York 10022. Some of the motions and orders are
available on the Court's Web site at
http://www.alnb.uscourts.gov
PLEASE TAKE FURTHER NOTICE that any entity that wishes to submit
a Bid for the acquisition of all substantially all of DGC's
assets is strongly advised to contact Gulf Atlantic, at the
address listed above.
DATED: This 12th Day of February 2002
By: /s/ Thomas R. Califano, Esq.
-------------------------------------
Thomas R. Califano, Esq.
Morrison Cohen Singer & Weinstein LLP
By: /s/ Rita H. Dixon, Esq.
-------------------------------------
Rita H. Dixon, Esq.
Burr & Forman LLP
OF COUNSEL:
MORRISON COHEN SINGER & WEINSTEIN LLP
750 Lexington Avenue
New York, New York 10022
Tele: (212) 735-8600
Fax: (212) 735-8708
BURR & FORMAN LLP
420 North 20th Street Suite 3100
Birmingham, Alabama 35203
Tele: (205) 251-3000
Fax: (205) 458-5100
DIRECTRIX: Financing Negotiations Spur Delay in Form-Q Filing
-------------------------------------------------------------
Directrix, Inc., will not file its most current financial
statements with the prescribed time with the Securities &
Exchange Commission because the Company has had several
subsequent events including negotiations pertaining to the
establishment of the Los Angeles based facility and negotiations
pertaining to new sources of capital and equity financing. Time
spent by management on these transactions and the determination
of the impact of some of these transactions in the financial
statements and disclosures in the report did not permit timely
filing of the financial information for the quarter ended
December 31, 2001 without unreasonable effort and expense.
For the nine months ended December 31, 2001, Directrix reported
a net loss of $4.7 million as compared to a net loss of $7.3
million for the corresponding period in 2000. The decrease in
net loss was primarily attributable to a decrease in tranponder
costs of $4.2 million and selling, general and administrtive
costs of $0.6 million, offset by a decrease in revenue of $1.6
million and an increase in interest expense of $0.5 million.
Also included in the net loss for the nine months ended December
31, 2001 was a transponder penalty of $4.6 million and a gain on
extinguishment of transponder liability of $5.2 million.
For the three months ended December 31, 2001, Directrix reported
a net loss of $1.7 million as compared to a net loss of $2.4
million for the corresponding period in 2000. The decrease in
net loss was primarily attributable to a decrease in tranponder
costs of $1.4 million offset by a decrease in revenue of $0.7
million.
Directrix is a provider of transmission and playback services
for adult entertainment video is hoping that a financial
restructuring and a new deal with its primary customer, Playboy
Enterprises, will help improve its bottom line. Directrix
provides playback and transponder services for adult video
content and can deliver programming by way of cable, satellite,
and the Internet. Directrix was spun off from Spice
Entertainment in 1999, following Spice's merger with Playboy. In
late 2001 the company announced an agreement to provide
commercial space and technical services to Playboy for a term of
15 years. At September 30, 2001, the company recorded a total
shareholders' equity deficit of over $3 million.
ENRON: Committee Seeks Okay to Examine Off-Balance Sheet Deals
--------------------------------------------------------------
The Official Committee of Unsecured Creditors of Enron
Corporation asks Judge Gonzalez for permission to use Rule 2004
of the Federal Rules of Bankruptcy Procedure to undertake a
broad fishing expedition, obtain the production of documents
from key players and secure oral testimony from knowledgeable
individuals from:
(1) PricewaterhouseCoopers, (33) Vinson & Elkins LLP,
(2) Fried, Frank, Harris, (34) Kirkland & Ellis,
Shriver & Jacobson (35) McKinsey & Company,
(3) Rawhide Investors LLC, (36) Ponderosa Assets LP,
(4) Sundance Assets LP, (37) Zephyr,
(5) Choctaw, (38) Hawaii 125-0,
(6) Cerebus, (39) Cornhusker,
(7) Nikita/EOTT, (40) ETOL,
(8) Motown, (41) Riverside Service Company,
(9) Slapshot, (42) Marlin Water Trust,
(10) Atlantic Water Trust, (43) Osprey Trust,
(11) Whitewing Associates LP, (44) Whitewing Associates LLC,
(12) LJM Cayman LP, (45) LJM2 Co-Investment LP,
(13) Condor, (46) Raptor I,
(14) Raptor II, (47) Raptor III,
(15) Rapton IV, (48) Joint Energy Development
(16) Osprey Inc., Investments LP,
(17) Big Doe, (49) Braveheart,
(18) Chewco Investments LP, (50) Firefly,
(19) Yosemite, (51) Big River Funding LLC,
(20) Little River Funding LLC, (52) SONR #1 LLC,
(21) SONR #1 LP, (53) SONR #2 LLC,
(22) LJM Partners LLC, (54) LJM Partners LP,
(23) LJM SwapCo, (55) LJM Swap Sub LP,
(24) Talon LLC, (56) Harrier,
(25) Timberwolf, (57) Proghorn,
(26) Porcupine, (58) Bobcat,
(27) Southampton Place LP, (59) Southampton LP,
(28) LJM2 Capital Management LP (60) LJM2 Capital Management
LLC,
(29) Jeffrey Skilling, (61) Andrew Fastow,
(30) Michael Kopper, (62) Kristina Mordaunt, and
(31) Anne Yeager Patel, (63) Ben Glisan.
(32) Kathy Lynn,
The Committee wants to put its fingers on documents and
testimony concerning:
(i) the property of the Debtors;
(ii) the liabilities and financial condition of the Debtors;
(iii) matters that may affect the administration of the Debtors'
estates; and
(iv) the identification and prosecution of certain potential
claims against third parties by a representative of the
Debtors' estates.
Richard C. Tufaro, Esq., at Milbank, Tweed, Hadley & McCloy LLP,
in New York, tells the Court that the significance of the
Debtors' off-balance sheet assets and liabilities has been
widely reported. Mr. Tufaro notes that many new accounts
attribute to the Debtors' current financial difficulties to
their use of off-balance sheet entities, such as "Special
Purpose Entities", partnerships, joint ventures and membership
corporations, among others. Recently, Mr. Tufaro points out
that Enron Special Committee Report detailed certain findings
with respect to the Debtors' off-balance sheet assets and
liabilities.
In order to assess the Debtors' off-balance sheet assets and
liabilities, Mr. Tufaro explains, the Committee needs discovery
regarding the business purpose, organization and financial
structure, legal obligations, valuations and other critical data
regarding those entities.
Accordingly, the Committee seeks the Court's permission to serve
a subpoena upon the "Special Purpose Entities", partnerships,
management corporations, joint ventures, as well as certain
former Enron officers, directors and employees, and Enron
professionals, seeking documents and testimony.
Mr. Tufaro informs Judge Gonzalez these entities, individuals,
and professionals maintain original data regarding the Debtors'
various off-balance sheet assets and liabilities. Moreover, Mr.
Tufaro continues, these entities and individuals have allegedly
facilitated the Debtors' off-balance sheet treatment of certain
assets and liabilities. On the other hand, Mr. Tufaro notes,
the professionals provided advice to the Debtors that are
directly or indirectly related to the use of off-balance sheet
transactions.
The Committee contends that a thorough examination of the
significant pre-petition transactions of Enron is crucial to
their investigation of the "acts, conduct, assets, liabilities
and financial condition of the debtor". "The discovery
requested will also help the Committee to properly discharge its
duties to the unsecured creditors that it represents," Mr.
Tufaro explains. (Enron Bankruptcy News, Issue No. 14;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
ENRON WIND CONSTRUCTORS: Case Summary & 20 Unsecured Creditors
--------------------------------------------------------------
Lead Debtor: Enron Wind Constructors Corp.
13000 Jameson Road
P.O. Box 1910
Tehachapi, CA 93581
Bankruptcy Case No.: 02-10755
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Enron Wind Corp. 02-10743
Enron Wind Systems, Inc. 02-10747
Enron Wind Energy Systems Corp. 02-10748
Enron Wind Maintenance Corp. 02-10751
EREC Subsidiary I, LLC 02-10757
EREC Subsidiary II, LLC 02-10760
EREC Subsidiary III, LLC 02-10761
EREC Subsidiary IV, LLC 02-10764
EREC Subsidiary V, LLC 02-10766
Type of Business: Debtor is engaged primarily in the business
of constructing wind power projects.
Chapter 11 Petition Date: February 20, 2002
Court: Southern District of New York
Judge: Arthur J. Gonzalez
Debtors' Counsel: Brian S. Rosen, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212)310-8000
Melanie Gray, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone: (713) 546-5000
Total Assets: $35,366,291
Total Debts: $28,179,593
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Dixie Electric Trade Debt $575,415
218 S. Williams Street
Odessa, TX 79763
Tel. 915-580-9000
M.A. Mortensen Company Trade Debt $223,258
Baldwins Industrial Trade Debt $132,142
Tower Enterprises, Inc. Trade Debt $99,312
Crane Services, Inc. Trade Debt $83,423
Mullen Crane & Transport Trade Debt $66,974
Substation Engineering Trade Debt $55,936
MSE Power Systems, Inc. Trade Debt $52,006
AAA Crane Rental, L.P. Trade Debt $37,771
West Texas Water Well Trade Debt $16,325
Hernandez Rentals Trade Debt $13,467
Verizon Select Services Trade Debt $13,010
Alliant Energy Trade Debt $11,347
Accounts Receivable
NRG Systems, Inc. Trade Debt $9,813
Eddins-Walcher Trade Debt $8,057
West Texas Cat Trade Debt $6,778
TCT Inc. Trade Debt $4,077
Crest Precast Inc. Trade Debt $4,000
Wilson Ranch Estate Trade Debt $3,960
Engineered Substation Trade Debt $2,750
ENTERCOM COMMS: S&P Ups Low-B Ratings as Improvement Continues
--------------------------------------------------------------
On Feb. 25, 2002, Standard & Poor's raised its ratings on radio
station owner Entercom Communications Corp., and assigned a
preliminary rating to the company's $250 million subordinated
shelf and also assigned a rating to the proposed $150 million
drawdown of subordinated notes due 2014 of Entercom Radio LLC
and Entercom Capital Inc. Note proceeds and $150 million from a
concurrent common stock offering will be used for radio station
acquisitions. The ratings reflect the assumption of successful
completion of the equity offering.
Rating Outlook
Credit Rating BB Stable
Entercom, based in Bala Cynwyd, Penssylvania, operates 101 radio
stations in 19 markets, including 11 of the top-50 markets,
effective for all acquisitions. Debt outstanding after the
proposed bond and stock offerings will total about $475 million.
The upgrade was based on Entercom's financial profile
improvement, progress boosting performance at acquired radio
stations, and broadening base of operation. Further, despite
declining ad revenue, good discretionary cash flow enabled
Entercom to repay debt and reduce leverage last year. The
upgrade also reflects Standard & Poor's expectation that the
company will continue to use equity to temper the financial risk
of its radio station acquisition strategy.
The ratings reflect Entercom's good market positions as a radio
station operator in large markets, long-term radio advertising
growth prospects, cash flow improvement at acquired stations,
and equity issuance. Offsetting factors include financial risk
from debt-financed radio station acquisitions and the potential
for further purchases that could setback financial measures, and
possible prolonged advertising softness.
Entercom focuses on acquiring radio stations in the 75 largest
markets and is entering the Denver market by acquiring four
stations there for $268 million. These stations enhance the
company's geographic diversity, helping to lessen its heavy
dependence on the Seattle market, which represents over 20% of
cash flow. Like most of the Entercom's acquisitions, the Denver
stations offer cash flow growth opportunities, largely through
ad sales gains. Many of the company's acquired stations have
below average profitability and tend to restrain overall company
margins until their performance improves. A station turnaround
can take up to two years, depending on the competitive and
advertising environments.
Entercom will rank as one of the top three radio groups in
Denver in terms of its revenue share, a position the company has
in almost all of its markets. In a weak ad climate, revenue
share stability and improvement is a particularly important
measure of company performance. Entercom has increased the
revenue share of other acquired stations. These gains should
translate into solid cash flow improvement once advertising
rebounds.
Entercom's 2001 EBITDA margin, pro forma for acquisitions, was
about 37%, down slightly from 2000 due to a 6% revenue decline
caused by advertising softness. EBITDA fell about 10%.
Profitability is below average due to underperforming acquired
stations. However, the margin has improved from the 30% area of
the late 1990's. Pro forma 2001 EBITDA divided by interest is
roughly 4.7 times and debt to EBITDA is about 4x. Including cash
dividends on convertible preferred stock, coverage is about
3.7x. Entercom has minimal capital spending needs and healthy
discretionary cash flow, which should enable it to comfortably
meet moderate debt maturities over the next five years.
Outlook
Ratings stability is enhanced by steady debt reduction from
discretionary cash flow in the current soft ad environment.
Equity financing of acquisitions further bolsters stability.
EXODUS COMMS: Changes Name to EXDS Inc. After Sale to C&W Entity
----------------------------------------------------------------
Effective February 11, 2002, and in connection with the sale of
its assets to Digital Island, a wholly-owned subsidiary of Cable
& Wireless plc, Exodus Communications, Inc. changed its name
from Exodus Communications, Inc. to EXDS, Inc.
Exodus Communications, Inc., and its subsidiaries are the
leading providers of Internet infrastructure outsourcing
services for enterprises with mission-critical internet
operations. The Company offers a complex web hosting and managed
professional services, including internet data services,
networking, storage, content distribution and caching, security,
performance measurement, monitoring and testing, professional
consulting, managed Web hosting and Web application management.
As of June 30, 2001, the Company offered services through a
worldwide network of 44 Internet Date Centers (IDCs) located in
North America, Europe, Asia and Australia. Through these IDCs,
the Company provided service to the following major metropolitan
areas: Amsterdam, Atlanta, Austin, Boston, Chicago, Dallas,
Frankfurt, London, Los Angeles. Exodus filed for Chapter 11
Protection under the U.S. Bankruptcy Code on September 26, 2001,
in the U.S. Bankruptcy Court for the District of Delaware.
EXODUS: Enters Transition Services Pacts with Digital Island
------------------------------------------------------------
On February 1, 2002, EXDS, Inc. f/k/a Exodus Communications,
Inc. and its subsidiaries American Information Systems, Inc.,
Arca Systems, Inc., Cohesive Technology Solutions, Inc.,
GlobalCenter Holding Co., GlobalCenter Inc. and Service Metrics,
Inc. completed the sale of substantially all of their assets in
the United States to Digital Island Inc., a wholly-owned
subsidiary of Cable and Wireless plc, under the terms of an
Asset Purchase Agreement dated November 29, 2001, between the
Company, the Selling Subsidiaries, Cable & Wireless plc and
Digital Island, as modified by a Mutual Limited Waiver, dated
January 5, 2002, and as amended by Amendment #1 to Asset
Purchase Agreement, dated January 10, 2002, and Amendment #2 to
Asset Purchase Agreement, dated January 31, 2002.
The assets sold by the Company and the Selling Subsidiaries
constituted substantially all of the assets used in the business
of providing Internet infrastructure outsourcing services,
including web-hosting and managed and professional services, and
included, among other things, the Company's leasehold interests
in 28 Internet data centers, customer relationships, equipment,
intellectual property (including all rights to the Exodus name),
accounts receivable, the equity ownership interests in certain
financing subsidiaries and other assets required to support the
customer relationships and business operations sold.
The purchase price for the assets was approximately
$568,900,000, consisting of initial cash consideration of
$560,000,000, and approximately $8,900,000 representing the
amount of certain security deposits under assigned real property
leases. The purchase price is subject to adjustment
following the closing for (i) certain changes in the value of
accounts receivable and prepaid accounts and (ii) the release of
additional security deposits. In addition to the cash
consideration, Digital Island assumed certain liabilities and
obligations associated with the purchased assets, including
post-closing obligations under assigned contracts, and agreed to
reimburse the Company and the Selling Subsidiaries for up to
$20,000,000 in accrued vacation payments to former employees of
the Company and the Selling Subsidiaries hired by Digital
Island. Of the cash consideration paid by Digital Island at
closing, (i) approximately $31,200,000 was deposited in escrow
with a title company to cause the release of certain liens and
encumbrances on the transferred properties, (ii) $56,000,000 was
deposited in escrow to cover the post-closing working capital
adjustments, the Company's and the Selling Subsidiaries'
indemnification obligations under the Asset Purchase Agreement,
and certain cure amounts for contracts assigned to Digital
Island, and (iii) $50,000,000 was deposited in a separate escrow
account to reimburse the Company for payments to acquire title
to (by settlement or otherwise) or replace equipment under
leases which the Company believes are financing arrangements
under applicable law. Digital Island also agreed to reimburse
the Company up to an additional $12,000,000 for payments to
acquire title to (by settlement or otherwise) or replace
equipment under true equipment leases.
Concurrently with the closing of the asset sale to Digital
Island, the Company, the Selling Subsidiaries, Digital Island
and Cable & Wireless plc entered into certain transition
services agreements requiring the parties to provide various
rights and services during a period of 120 days (subject to
adjustment) following the closing. Pursuant to the terms of the
Asset Purchase Agreement and the transition services agreement
pursuant to which the Company and the Selling Subsidiaries will
provide equipment, network and other services to Digital Island,
the first $40,000,000 in charges, costs and expenses are deemed
to have been paid by virtue of the consideration paid by Digital
Island for the assets.
In the Asset Purchase Agreement, the parties agreed to use their
commercially reasonable efforts to enter into, or cause their
subsidiaries to enter into, transactions pursuant to which (i)
Exodus Internet Limited, a United Kingdom subsidiary of the
Company, will sell substantially all of the assets of two
Internet data centers in London and related business to a United
Kingdom subsidiary of Cable & Wireless plc for a purchase price
of $8,000,000; (ii) Exodus Communications GmbH, a German
subsidiary of the Company, will sell substantially all of the
assets of its Internet data center in Frankfurt and related
business to a German subsidiary of Cable & Wireless plc for a
purchase price of $8,000,000; and (iii) the Company will sell
its approximately 85% equity interest in, and intercompany debt
of, Exodus Communications K.K. to a Netherlands subsidiary of
Cable & Wireless plc for $2.00. There can be no assurance that
any or all of such transactions will be consummated or with
respect to the timing or final terms of any such transaction.
The purchase price and other terms of the transaction were
determined by arms-length negotiations between the parties after
a process in which offers were solicited from other potential
qualified buyers. Prior to this transaction, except for a
network services contract between the Company and a subsidiary
of Cable & Wireless plc on customary terms and conditions,
neither the Company, the Selling Subsidiaries, their affiliates,
nor any of their directors or officers had any material
relationship with either Cable & Wireless plc or Digital Island.
The Company and the Selling Subsidiaries each filed a voluntary
petition for reorganization relief under Chapter 11 Title 11 of
the United States Bankruptcy Code in the United States District
Court for the District of Delaware on September 26, 2001. The
Court approved the Asset Purchase Agreement and authorized the
sale pursuant to an order entered on January 22, 2002. As
previously disclosed, notwithstanding the transaction with
Digital Island, holders of the Company's common stock are
expected to receive no value for their shares.
In connection with the closing of the Digital Island
transaction, the Company terminated its Senior Secured, Super-
Priority Debtor-in-Possession Credit Agreement dated November
14, 2001 with General Electric Capital Corporation and paid
approximately $2,230,000 in fees relating to such termination.
DebtTraders reports that Exodus Communications Inc.'s 11.625%
bonds due 2010 (EXDS3) are trading between 20.5 and 22.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=EXDS3for
real-time bond pricing.
FEDERAL-MOGUL: JP Morgan Balks at Rothschild's Engagement Fees
--------------------------------------------------------------
JP Morgan Chase Bank, in its capacity as Administrative Agent
for a syndicate of approximately 80 prepetition lenders objects
to Federal-Mogul Corporation and its debtor-affiliates'
application to employ and retain Rothschild as their Financial
Advisor and Investment Banker.
Mark D. Collins, Esq., at Richards Layton & Finger P.A., in
Wilmington, Delaware, states that while the prepetition lenders
recognize the need of the Debtors to retain a qualified
investment banking firm to assist them in these complex chapter
11 cases, the proposed fees, particularly the $10,000,000
completion fee are excessive and do not appear to be tied in any
way to the level of effort expended by Rothschild or the results
ultimately achieved. In addition, retention of Rothschild
pursuant to section 328(a) rather than section 330 would deprive
the Court and all parties in interest of the rights normally
associated with the retention of professionals to review at the
conclusion of these cases the reasonableness of the fees to be
awarded. The Prepetition Lenders also object to the Rothschild
application to the extent that the Debtors are obligated to pay
Rothschild's fees associated with services performed for the
English Debtors or their non-debtor affiliates. Finally the
Prepetition Lenders object to the indemnity provisions contained
in the engagement letter. (Federal-Mogul Bankruptcy News, Issue
No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900)
GLOBAL CROSSING: Court Approves Simpson Thacher as Tax Counsel
--------------------------------------------------------------
Global Crossing Ltd., and its debtor-affiliates seek
authorization, pursuant to section 327(e) of the Bankruptcy
Code, to retain and employ as their general corporate,
litigation and tax counsel in these Chapter 11 cases, the law
firm of Simpson Thacher & Bartlett.
Mitchell C. Sussis, the Debtors' Corporate Secretary, informs
the Court that the Debtors have used Simpson Thacher since their
formation for advice in the fields of litigation, corporate and
securities law and other business and commercial law, tax law
and benefits matters. The professional services that Simpson
Thacher will render to the Debtors include, representation in
commercial transactions, litigation, arbitration, asset
dispositions, securities laws, merger and acquisition matters
and other general corporate work.
Mark Thompson, a member of the firm of Simpson Thacher &
Bartlett submits that the firm has no connection with any of the
Debtors' creditors or any other parties in interest or their
respective attorneys, and does not hold or represent any
interest adverse to the Debtors or to their estates in the
matters with respect to which the firm is to be engaged by the
Debtors as debtors in possession. The firm, however, currently
represents or has recently represented the parties in interest
described below in unrelated matters:
A. Senior Secured Lenders and Agents: J.P. Morgan Chase, Inc.
B. Major Vendors: Accenture, Antalis, Louis Dreyhs, Metro PCS,
Verizon, Internap, Telia Bestel S.A. de C.V., Harcourt
Publishing.
C. Insurers: ACE, AIG, Hartford, Royal Sun, and Travelers.
D. Major Shareholders and Affiliates: Pacific Capital Group
E. Major Litigants: 360 Networks, Inc.
F. Professionals: The Blackstone Croup, L.P., Pricewaterhouse
Coopers, Weil Gotshal & Manges, Willkie Farr & Gallagher,
Appleby, Merrill Lynch and Goldman Sachs, and Paul Weiss
Ritkind Wharton & Garrison and Latham & Watkins, Arthur
Andersen, Milbank Tweed Hadley & McCloy.
In consideration for the services to be rendered to the Debtor
postpetition, Mr. Thompson submits that will seek to be
compensated for services rendered at its regular hourly rates
and will be reimbursed for all reasonable out-of-pocket
expenses. The current hourly rates of the firm's professionals
are:
Partners $570 to $700
Associates' $210 to $470
Paralegals $115 to $145
The list of the attorneys who have recently been active in
representing the Debtors on general corporate, tax and
litigation matters, and the current hourly billing rate for each
named attorney:
Casey I. Cogut $700/hour
D. Rhett Brandon 680/hour
Andrew T. Frankel 645/hour
I. Scott Gottdiener 630/hour
Robert Ho 600/hour
Alan M. Klein 660/hour
Chet A. Kronenberg 570/hour
Gregory A. Weiss 690/hour
Michael Wolfson 645/hour
Mark Thompson 680/hour
Tony Chang 415/hour
Michele David 375/hour
Erwin I. Dweck 210/hour
Bret J. Ganis 210/hour
Jennifer Goldman 395/hour
Michelle N. Jubelirer 375/hour
Joseph H. Kaufman 470/hour
Aaron Kitlowski 395/hour
Timothy J. Malin 525/hour
Nancy L. Mehlman 375/hour
Yong Ren 210/hour
Malik N. Russell 325/hour
Lanier Saperstein 415/hour
Miriam Thomas 395/hour
Andrea K. Wahlquist 425/hour
Andrew L. Wright 375/hour
Mr. Thompson relates that the Debtors have also provided the
firm a retainer of $1,100,000 for professional services to be
rendered and expenses to be charged by ST&B postpetition. The
firm estimates its aggregate charges for services rendered in
connection with the preparation for a chapter 11 filing were
approximately $150,000 which included an estimate of unrecorded
time and disbursements as of the day before these cases were
filed.
* * *
Judge Gerber entered an interim order approving Simpson's
employment, with objections due by February 22, 2002 and a
hearing on March 1, 2002. If no objections are filed, Judge
Gerber orders that this interim order shall be deemed a final
order. (Global Crossing Bankruptcy News, Issue No. 3; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
GLOBAL CROSSING: Names Carl Grivner as Chief Operating Officer
--------------------------------------------------------------
Global Crossing announced the appointment of Carl Grivner as
chief operating officer and Anthony Christie as senior vice
president of product management.
Grivner, who had been serving as executive vice president of
global operations, will oversee sales and marketing for
enterprise and carrier customers, product management and global
operations. He will continue to report directly to John Legere,
chief executive officer of Global Crossing. Christie will be
responsible for the development, deployment and on-going
management of the company's product and services suite,
reporting to Grivner.
"We're putting Carl into position to help us meet our financial
targets while we conserve resources by bringing three key
functions -- sales and marketing, product management and global
operations -- under one leader," Legere said. "Carl will
enhance the day-to-day operations for the company, and Anthony
will concentrate on the products and services offered over our
global fiber optic network, allowing me to drive our overall
strategic restructuring and manage crucial communications."
Grivner has many years of operational experience and expertise.
He has served as president of Global Crossing Europe, Middle
East and Africa and as COO for Global Crossing North America.
Prior to joining Global Crossing, Grivner was president and
chief executive officer of WorldPort Communications. He is a
former chief executive of operations in the Western Hemisphere
for Cable & Wireless, and former president and CEO for Advanced
Fiber Communications (AFC). Earlier in his career he held
various positions with Ameritech and IBM. Grivner has a B.A.
from Lycoming College.
Christie joined Global Crossing as senior vice president of
global strategy and business integration from Asia Global
Crossing after a successful two years during which he supported
the initial public offering (IPO) and shaped and drove strategy
and business development activities as well as spearheading all
of the joint venture, alliance relationships and partner
capacity purchases in Asia.
Christie has a rich background in telecommunications general
management. Before he came to Asia Global Crossing, he spent 16
years at AT&T. He held multiple positions including general
manager and network vice president at AT&T Solutions, sales vice
president of business markets, regional managing director of
international operations for Asia, and numerous other
assignments in product management, marketing and sales. His
education includes a B.S. from Drexel University, M.B.A. from
the University of New Haven and an M.S. from M.I.T.
Global Crossing provides telecommunications solutions over the
world's first integrated global IP-based network, which reaches
27 countries and more than 200 major cities around the globe.
Global Crossing serves many of the world's largest corporations,
providing a full range of managed data and voice products and
services. Global Crossing operates throughout the Americas and
Europe, and provides services in Asia through its subsidiary,
Asia Global Crossing (NYSE: AX).
On January 28, 2002, Global Crossing and certain of its
affiliates (excluding Asia Global Crossing and its subsidiaries)
commenced Chapter 11 cases in the United States Bankruptcy Court
for the Southern District of New York and coordinated
proceedings in the Supreme Court of Bermuda.
Please visit http://www.globalcrossing.comor
http://www.asiaglobalcrossing.comfor more information about
Global Crossing and Asia Global Crossing.
DebtTraders reports that Global Crossing Holdings Ltd's 9.500%
bonds due 2009 (GBLX9) are currently trading between 1.75 and
2.25. For real-time bond pricing, see
http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX9
IT GROUP: Taps Gibson Dunn for Legal Services on Corp. Matters
--------------------------------------------------------------
The IT Group, Inc., and its debtor-affiliates seek to employ and
retain Gibson Dunn & Crutcher LLP as their special counsel
pursuant to Section 327(e) of the Bankruptcy Code.
According to James M. Redwine, the Debtors' Vice President and
General Corporate Counsel, as a major provider of diversified
services in areas such as Government and commercial services,
solid waste, transportation and telecommunication, and Real
Estate restoration, the Debtors are subject to supervision and
regulation by federal and state authorities. The Bankruptcy
filing will require an ongoing review and analyses of the
applicable rules and regulations and the Debtors will need
counsel well suited for the type of representation required by
the debtors.
The Debtors seek to retain Gibson Dunn to:
A. render legal services in connection with general corporate,
finance, securities, mergers and acquisition issues as
needed throughout the course of the [case];
B. provide the Debtors advice in general corporate matters,
securities law, matters concerning financings, strategic
matters, and concerns relating to the sale of the Debtors'
businesses;
Mr. Redwine explains that Gibson Dunn has had substantial
corporate, employee benefits, environmental, finance, labor,
litigation, securities, merger and acquisition and tax
expertise. The firm has had national and international practices
relating to these matters. These makes the firm equally suited
to handle take the position of special counsel for the Debtors.
Significantly, Gibson Dunn has been one of the Debtor's
principal outside law firms for the past 20 years making it
intimately familiar with the Debtor's businesses. During this
time, Mr. Redwine submits that the firm has counseled the Debtor
on a wide variety of matters including general corporate,
finance, securities, mergers and acquisitions, and litigation
matters. Accordingly, the firm has relevant experience and
expertise with the debtor. Thus it is expected to provide
efficient services during the trial of these chapter 11 cases.
In a Letter of Engagement executed by the Debtor and Gibson Dunn
prior to the Petition date, among other things the parties
decided that Gibson Dunn would give general, corporate, finance
securities law disclosures, litigation, ERISA and employee
benefits and merger and acquisition and related services to the
Debtor. This Engagement letter supersedes all agreements between
the two parties prior to this.
Peter Ziegler, a partner of Gibson Dunn, in his sworn statement
said that the firm had served or is currently extending its
services to parties-in-interest but that these matters were
unrelated to these Chapter 11 cases that they have forged with
the Debtor. However, being an international firm with 700
attorneys, and that the debtor is a global enterprise with
thousand of creditors and other relationships the firm cannot
attest to the exactness of that. In this regard, the firm will
forge a supplemental disclosure with the Court if any
information is discovered that pertains to conflicts with a
previous client representation as soon as possible.
Interested parties identified by the firm that have currently or
in the past two years avail the services of the firm for matters
unrelated to the debtors or their chapter 11 cases include:
A. Former Clients: Allstate Insurance Company and Affiliates,
Industrial Bank of Japan, Ltd., Mitsubishi Trust & Banking
Corporation, Reliance Insurance Company, Bank of
California, and Westaff, Inc.;
B. Current Clients: American International Group, Bank of
America Securities, Bank of Nova Scotia, Citibank,
Cititcorp, Hertz Equipment Rental, National Union Fire
Insurance of Pittsburgh, Royal bank of Canada, Samsung
Corp., Societe Generale, Sumitomo Heavy Industries Ltd.,
and Waste Management.
Subject to Court's approval, Mr. Ziegler informs the Court that
the firm will charge its legal services pursuant to section 229
of the Bankruptcy Code in an hourly basis in accordance with its
ordinary and customary hourly rates effective on the dates these
services are rendered plus reimbursements of necessary expenses.
The hourly rates charged by Gibson Dunn's attorneys that are
currently expected to work on this matter are:
Lawyers $205-$695
Paralegals $ 95-$185
The Partners, counsel, associates and staff attorneys currently
expected to work on these matters together with their current
hourly rates are:
Peter F. Ziegler $555/hour
Brian D. Kilb $525/hour
David West $535/hour
Prior to petition date, Mr. Ziegler states that the Debtors had
paid Gibson Dunn a retainer amounting to $75,346.14 for previous
and upcoming services. This retainer has been applied on account
of legal fees and expenses acquired in representing the debtor.
In addition to this, the Debtors made payments regarding fees
and expenses incurred to the firm amounting to approximately
$488,711.49 in the previous year prior to the petition date. (IT
Group Bankruptcy News, Issue No. 5; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
INTEGRATED HEALTH: HPLLC Pitches Best Bid for MD Real Property
--------------------------------------------------------------
Integrated Health Services, Inc., and its debtor-affiliates
received one offer to purchase the Property of 24.5 acres
located in Baltimore South other than the offer of HPLLC. As
a result, an auction was held on February 6, 2002. HPLLC
subsequently increased the bid to $1,775,000.00 and emerged as
the successful bidder and authorized Purchaser.
At the Sales Hearing, the Court granted the motion and
authorized the Debtors to sell the Property to the successful
bidder in accordance with the Purchase Agreement which provides
for a purchase price of $1,775,000.00.
The Court directed that the Closing Date under the Purchase
Agreement shall occur on the 30th business day after February 7,
2002, the date upon which the Order is entered; if the 30th day
is not a business day, the closing shall occur on the 1st
business day thereafter. (Integrated Health Bankruptcy News,
Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900)
J.H. WHITNEY MARKET: Fitch Junks Class D Junior Sub. Debt Issue
---------------------------------------------------------------
Fitch Ratings downgrades the class D junior subordinated
participating secured notes issued by J.H. Whitney Market Value
Fund, L.P., a market value collateralized debt obligation, and
places them on Rating Watch Negative. Fitch also places the
class C second senior subordinated secured notes on Rating Watch
Negative. The following rating action is effective immediately:
-- $25,000,000 Class D Junior Subordinated Participating
Secured Notes from 'B' to 'CCC+'.
This rating action results from a significant decline in the
market value of the fund's assets, which caused J.H. Whitney
Market Value Fund, L.P., to fail its Class D over-
collateralization test. The fund originally failed its Class D
over-collateralization test on January 18, 2002 by a margin of
$15,000,000. As of the most recent valuation report available to
noteholders, February 1, 2002, the fund continued to fail its
Class D over-collateralization test by roughly the same amount.
The failure to cure the Class D over-collateralization test
within ten-days of its initial breach has caused an event of
default within the transaction. Since the event of default
remains unremedied, Whitney Market Value Management Co., the
investment advisor, may be forced to liquidate the portfolio at
the direction of the controlling class. As of the February 1,
2002 valuation date, the fund was passing all of its Class A-1,
Class A-2, Class B and Class C over-collateralization tests.
The continued failure of the Class D over-collateralization test
and the current volatility of the high-yield bond, loan and
equity markets, has decreased the certainty of expected proceeds
in the event of a forced liquidation of the portfolio. There is
also a question as to the investment advisor's ability to sell
portfolio assets, specifically illiquid and semi-liquid assets,
in the current market environment. Approximately 14% and 26% of
the portfolio investments are considered semi-liquid and
illiquid assets, respectively, at this time. The relatively
large percentage of semi-liquid and illiquid assets in the
portfolio is partly due to the delevered capital structure,
which is roughly 60% funded. Due to the uncertainty of the
liquidity and the price volatility of the portfolio, Fitch
believes that the Class C and D Notes may continue to be at
risk, which warrants their Rating Watch Negative classification.
The Class C and D Notes will remain on Rating Watch Negative
while Fitch monitors the portfolio as well as the investment
advisor's options to cure the Class D over-collateralization
test.
Whitney Market Value Management Co., is currently reviewing
alternatives to cure the event of default, including
restructuring the fund, raising additional capital, as well as
other alternatives, in order to avoid potential liquidation of
the portfolio. Fitch originally rated the liabilities of J.H.
Whitney Market Value Fund, L.P. on March 31, 1999.
KAISER ALUMINUM: Pursuing Transactions with Non-Debtor JV Units
---------------------------------------------------------------
Kaiser Aluminum Corporation, and its debtor-affiliates sought
and obtained entry of an interim order authorizing them to
continue ordinary course transactions with, and pay prepetition
claims of their non-debtor joint venture affiliates.
According to Joseph Bonn, the Debtors' Executive Vice President,
in the ordinary course of their businesses, the Debtors, either
directly or through certain non-debtor subsidiaries, engage in
transactions with the Joint Ventures. The Joint Venture
Transactions are governed by constituent documents, which are
different for each Joint Venture but in general, the Joint
Venture Transactions share the same general structure. The
Debtors fund the cash costs of the Joint Ventures for raw
materials, labor and other operational costs, as well as capital
expenditures, taxes, debt service and working capital in order
to continuously source the global production and delivery
requirements. Mr. Bonn states that the obligations of the
Debtors and the Joint Ventures generally are unconditional and
failure to take products or fund costs generally is a default
under the relevant Joint Venture agreements, which, in turn,
could enable the Joint Venture partners to claim forfeiture of
the Debtors' interests.
The Debtors and their nondebtor affiliates maintain detailed
records with respect to all transfers of cash to the Joint
Venture so that all the Joint Venture Transactions and any
transactions with nondebtor affiliates related thereto, may be
readily ascertained, traced and recorded properly. A description
of the Joint Ventures and certain of the Joint Venture
Transactions are as follows:
A. Kaiser Jamaica Bauxite Company (KJBC): Kaiser Bauxite Co.
(KBC) manages KJBC and, through a KJBC bank account, pays
all costs incurred by KJBC in its operations. KBC, in turn
funds these costs plus its own costs through monthly cash
calls to the Debtors, ranging from $5,000,000 to $9,000,000
a month. For fiscal year 2002, the cash calls are
anticipated to be approximately $90,000,000 and will enable
the Debtors to generate revenue of $250,000,000 from
alumina production at Gramercy and bauxite sales to third
patties. Approximately $7,000,000 of cash calls will come
due in the next 30 days, as part of the ongoing ordinary
production cost structure.
B. Alumina Partners of Jamaica (Alpart): The amounts required to
be paid pursuant to the various Alpart agreements, for
their shares of Alpart's operating costs, working capital
requirements, capital expenditure requirements and debt
service are funded by daily cash calls from Alpart to
Kaiser Jamaica Corp. (KJC) and Alpart Jamaica Inc. (AJI).
Although the amount of the cash calls can vary
considerably, the amounts typically range from $13,000,000
to $15,000,000 per month. Production sales and delivery by
Alpart enable the Kaiser Companies to realize $18,000,000 a
month. Approximately $17,000,000 of cash calls will come
due in the next 30 days, as part of the ongoing ordinary
production cost structure.
C. Queensland Alumina Limited (QAL): QAL collects the tolling
charges and other cash requirements through periodic cash
calls on the participants. Kaiser Australia receives cash
calls from QAL five or six times a month in amounts that
typically range from $6,000,000 to $8,000,000 per month.
The cash calls generally aggregate approximately
$90,000,000 to $100,000,000 per year, and through product
sales and delivery enable the Kaiser Companies to realize
approximately $120,000,000 a year. To fund the cash calls,
cash is wired from KACC's Disbursement Account to Kaiser
Australia's operating account and then to QAL. Some of the
tolling charges constitute prepayments for QAL's costs and
some tolling charges are for costs QAL has already
incurred. The Debtors estimate that cash calls of
approximately $8,000,000 will come due in the next 30 days,
attributable to ordinary production costs in the current
cycle.
D. Volta Aluminium Company Limited (Valco): Four or five times
per month, Valco makes cash calls to KACC and Reynolds for
tolling charges. To fund KACC's cash calls, cash is wired
from KACC's Disbursement Account to a Valco trust account
in New York. The amount of tolling charges averages
approximately $10,000,000 million per month while the
annual aggregate cash calls approximate $160,000,000,
generating $230,000,000 in product revenues for the Kaiser
Companies. The Debtors estimate that approximately
$15,000,000 in tolling charges will be due in the next 30
days, attributable to ordinary production costs incurred.
E. Anglesey: Under the metal take-or-pay agreement, KACC
receives invoices from Anglesey for its 49% of Anglesey's
output once a month, which it pays at the end of the
following month. To fund the payment of invoices, cash is
wired from KACC's Disbursement Account to an account of
KAII in the United Kingdom and then wired to Anglesey. In
2001, KACC's share of Anglesey's costs for metal production
totaled $102,000,000. In 2002, KACC'S share of costs is
expected to range from $8,000,000 to $9,000,000 per month
with the Kaiser Companies anticipating in excess of
$110,000,000 in related revenues over the same period. The
Debtors estimate that approximately $8,100,000 will be due
in the next 30 days.
In the ordinary course of business, Daniel J. DeFranceschi,
Esq., at Richards Layton & Finger in Wilmington, Delaware,
believes that the Debtors will be called upon to participate in
Joint Venture Transactions following the Petition Date. Because
the Debtors engaged in the Joint Venture Transactions on a
regular basis prior to the Petition Date and such transactions
are common among enterprises like the Debtors and their
nondebtor affiliates, the Debtors believe that the Joint Venture
Transactions are ordinary course transactions and do not require
the Court's approval. Mr. DeFranceschi relates that the
production, shipping and sales revenues of the Kaiser Companies
is dependent in material part upon a continuation, without
interruption, of the production and shipping of bauxite and
alumina from the Production Ventures to the Kaiser Companies.
Without continued timely delivery of bauxite and alumina, on the
current "as needed" or "just in time" basis, Kaiser's operations
would be impaired. The relief sought maintains the Debtors'
operations as in the ordinary course and, significantly, also
maintains the positive cash flow that the Production Ventures
generate for the Debtors.
Mr. DeFranceschi contends that continuation of the Joint Venture
Transactions is essential for the Joint Ventures to continue
operations in some cases and for certain of Kaiser's operations
to continue and for the Debtors to retain their interests in the
Joint Ventures. Because the Joint Ventures are critical to the
Debtors' ability to reorganize, the Debtors submit that the
continuation of the Joint Venture Transactions is in the best
interests of the Debtors' respective estates. Although the
Debtors have made all payments in respect of Joint Venture
Transactions that came due prior to the Petition Date, Mr.
DeFranceschi submits that a portion of certain Joint Venture
Transaction obligations that will come due after the Petition
Date will have accrued prior to the Petition Date. The Debtors
seek authority to pay all Joint Ventures Claims and estimate
that the aggregate amount required for funding the Joint
Ventures is approximately $64,000,000 over the next 30 days.
Mr. DeFranceschi points out that the Joint Ventures generate
substantial revenues, cash flow and other benefits for the
Debtors and are critical to the preservation and enhancement of
the Debtors' respective values as going concerns. The Debtors
Joint Ventures constitutes an essential component of the
Debtors' global network of production facilities and raw
materials sources. Moreover, the transportation costs for
alternative sources of bauxite would substantially exceed
current costs, and because there is limited worldwide bauxite
mining capacity, alternate suppliers of bauxite could require
the Debtors to advance funds to finance mining expansion costs.
If Kaiser were forced to switch to another bauxite source, Mr.
DeFranceschi maintains that Kaiser's operations would be
curtailed and losses would ensue. The Debtors' operations at
non-debtor joint venture smelter facilities similarly are
dependent upon the low-cost alumina from the Alpart and QAL
refinery operations. These smelters carry only small reserve
stocks of alumina and may not be able to replace the supply of
alumina from Alpart and QAL in time to avoid a costly shutdown.
Furthermore, the Debtors' interests in the Joint Ventures have
significant value even apart from the fact that the output from
the Joint Ventures is integral to certain of the Debtors' other
production facilities. The Debtors sold an 8.3% interest in QAL
in September of last year for approximately $189,000,000 of
aggregate consideration.
Mr. DeFranceschi claims that the Debtors' interests in the Joint
Ventures, however, may be jeopardized if the Debtors are not
permitted to continue in the ordinary course to make payments
for which they are unconditionally obligated. The Debtors
generally are responsible for paying a significant share of the
operating costs, working capital, capital expenditure and debt
services costs for each of the Joint Ventures. If the Joint
Ventures are not able to meet their financial obligations and
creditors seek recourse against their assets, little if anything
would be left to recoup the Debtors' substantial investments in
the Production Ventures.
Mr. DeFranceschi tells the Court that the Debtors' failure to
make payments pursuant to their obligations would also, under
certain of the agreements that govern the rights and obligations
of the parties to the Joint Ventures, potentially allow the
other partners or shareholders of the Joint Ventures to
terminate the Debtors' interests by electing to redeem the
Debtors' partnership or shareholder interest or dissolve the
Joint Venture altogether. Although the automatic stay applies
with respect to any actions taken against the Debtors or their
interests in the Joint Ventures, certain of the Debtors' Joint
Venture partners are foreign entities without significant
operations or assets in the United States. Accordingly, if the
Debtors are in default under the respective Joint Venture
Agreements for failure to pay joint venture claims, certain of
the Debtors' Joint Venture partners, considering themselves
beyond the reach of the United Slates legal system, might seek
remedies against the Debtors in a foreign jurisdiction. Because
it is uncertain whether such foreign jurisdictions would give
effect to the automatic stay imposed under the Bankruptcy Code,
the Debtors' interests in the Joint Ventures would be placed at
risk, which, in turn, would severely undermine the Debtors'
ability to reorganize. (Kaiser Bankruptcy News, Issue No. 2;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
KAISER ALUMINUM: Salaried Retirees Gripe About Benefit Decisions
----------------------------------------------------------------
Kaiser Aluminum Salaried Retirees Association (KASRA) said it is
shocked by and disappointed with the benefits decisions
announced by Kaiser Aluminum & Chemical Corporation in a letter
mailed on February 9, 2002 -- three days before the company
filed for Chapter 11 bankruptcy protection. KASRA said it is in
the process of retaining outside legal counsel to protect the
interests of salaried retirees and their families.
KASRA said that the overall impact of the changes, which Kaiser
Aluminum plans to implement on May 1, is to shift approximately
$10 million of additional annual medical benefits costs to the
salaried retirees -- without any cost-sharing by either the
active salaried employees or active or retired hourly employees.
KASRA believes this plan was hastily developed by Kaiser
Aluminum in order to put it in place just prior to the Chapter
11 filing. KASRA also is disappointed the company did not offer
it an opportunity to participate in a material way in shaping
the changes the company was determined to make.
Having first learned of the impending changes on February 5, the
KASRA Board communicated its concerns to Kaiser in a letter
dated February 10, two days before the company filed its Chapter
11 petition. Topmost among KASRA's concerns is the burden the
medical benefit cost increases will place on those retirees who
retired with very modest pensions. In order to retain the Kaiser
Aluminum-provided medical coverage, most salaried retirees 65
and over now will have to pay $130 a month for themselves, $130
a month for their spouse, and $130 a month for each dependent.
If they are under 65, they will have to pay $175 a month for
themselves, $175 a month for their spouse, and $175 a month for
each dependent.
KASRA said it understands the difficult financial problems
Kaiser Aluminum faces. KASRA's membership consists of
individuals who spent careers with the company and are loyal to
it. However, KASRA said it is committed to protect the interests
of its members and their families.
KASRA was formed in 1988 as a not-for-profit organization to
promote the interests of salaried retirees with respect to their
retirement benefits. KASRA currently has approximately 3,000
retiree and surviving spouse members. There are approximately
4,500 Kaiser Aluminum salaried retirees.
The association's leadership is comprised of unpaid volunteers.
It has an office in Lafayette, California, and its board members
are drawn from the San Francisco Bay Area and from other areas
in which Kaiser Aluminum either has or once had a major
presence.
DebtTraders reports that Kaiser Aluminum & Chemicals' 12.750%
bonds due 2003 (KAISER2) are trading between 23 and 26. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=KAISER2for
real-time bond pricing.
KELLSTROM INDUSTRIES: Seeks Approval to Pay Repair Vendor Claims
----------------------------------------------------------------
Kellstrom Industries, Inc., and its debtor-affiliates ask
permission from the U.S. Bankruptcy Court for the District of
Delaware to pay claims held by repair vendors in order to
satisfy any potential materialmen's, possessory or similar liens
or interests in the ordinary course of business.
The Repair Vendors provide services that are critical to the
preservation of the Debtors' estates and the continued operation
of the Debtors' business. Any disruption of activities may cause
the Debtors to lose sales, customers and goodwill. These losses
would have devastating effects on the Debtors' business, the
Debtors tell the Court.
As of Petition Date, the Debtors estimate they owe $465,000 to
Repair Vendors for work scheduled to be completed within the
next five months on Customer Equipment and approximately $2.2
million of Inventory. If the Repair Vendor Claims are not paid,
the Repair Vendors are likely to assert Liens and Interests on
property of the estate and on the equipment owned by customers
of the Debtors. The mere assertion of possessory or other liens
will delay delivery of inventory and equipment irrespective of
the validity of their liens. This will cause irreparable harm
and unnecessarily damaging the Debtors' businesses. The Debtors
have no doubt that payment of the Repair Vendor Claims is
critical to maintain the enterprise value of the Debtors'
estates and to facilitate the continued operation of their
business.
Kellstrom Industries, Inc., a leader in the aviation inventory
management industry filed for chapter 11 protection on February
20, 2002. Domenic E. Pacitti, Esq. at Saul Ewing LLP represents
the Debtors in their restructuring efforts. When the Company
filed for protection from its creditors, it listed $371,249,106
in total assets and $402,400,477 in total debts.
KMART CORP: Seeks Okay of Proposed Reclamation Claim Procedures
---------------------------------------------------------------
Kmart Corporation, and its debtor-affiliates ask Judge Sonderby
for an order authorizing and approving the Debtors' adoption and
implementation of these procedures for reconciling Reclamation
Claims:
1. Reclamation Demands
(a) All Sellers seeking to reclaim Goods from the Debtors will
be required to submit a demand:
i) before 10 days after receipt of such Goods by the
Debtors; or
ii) if such 10-day period expires after the Petition
Date, before 20 days after receipt of such Goods by
the Debtors.
(b) Such a Reclamation Demand must set forth in specificity
the goods for which reclamation is sought and the basis
for the Reclamation Claim.
(c) Any Seller who fails to timely submit a Reclamation Demand
pursuant to section 546 of the Bankruptcy Code shall be
deemed to have waived its right to payment on any
purported Reclamation Claim.
2. The Statement of Reclamation
(a) Within 60 days after the Petition Date or receipt of a
timely Reclamation Demand, whichever is later, the Debtors
will provide the Seller with a copy of the Reclamation
Order and a statement of reclamation.
(b) The Statement of Reclamation will set forth the extent and
basis, if any, upon which the Debtors believe the
underlying Reclamation Claim is not legally valid. In
addition, the Statement of shall identify any defenses
that the Debtors choose to reserve, not withstanding any
payment of the Reconciled Reclamation Claim.
(c) Sellers who are in agreement with the Reconciled
Reclamation Claim as contained in the Statement of
Reclamation may indicate such assent on the Statement of
Reclamation and return the Statement by 60 days after date
of Statement of Reclamation to the Debtors' representative
as set forth in such statement with copies to Skadden,
Arps, Slate, Meagher & Flom (Illinois), 333 West Wacker
Drive, Suite 2100, Chicago, IL 60606 (Attn: John Wm.
Butler, Jr., Esq., J. Eric Ivester, Esq., and N. Lynn
Hiestand, Esq.).
(d) Sellers who are in disagreement with the Reconciled
Reclamation Claim as contained in the Statement of
Reclamation must indicate such dissent on the Statement of
Reclamation and return the Statement by the Reconciliation
Deadline to the entities and at the addresses identified
in subparagraph (c). A Statement of Reclamation returned
under this subparagraph must be accompanied by:
i) a copy of the Reclamation Demand together with any
evidence of the date such Reclamation Demand was
sent and received;
ii) the identity of the Debtor that ordered the products
and the identity of the Seller firm whom the Goods
were ordered;
iii) any evidence demonstrating when the Goods were
shipped and received;
iv) copies of the respective Debtors and Seller's
purchase orders and invoices, together with a
description of the Goods shipped; and
v) a statement identifying which information on the
Debtors' Statement of Reclamation is incorrect,
specifying the correct information and stating any
legal basis for the objection.
(e) The failure of a Dissenting Seller to materially comply
with subparagraph (d) shall constitute a waiver of such
Dissenting Sellers right to object to the proposed
treatment and allowed amount of such Reclamation Claim
unless the Court orders otherwise.
(f) Any Seller who fails to return the Statement of
Reclamation by the Reconciliation Deadline or who returns
the Statement of Reclamation by the Reconciliation
Deadline but fails to indicate assent or dissent will be
deemed to have assented to the Reconciled Reclamation
Claim.
3. Fixing the Reclamation Claim
(a) The Reclamation Claims of:
i) all Sellers who return the Statement of Reclamation
by the Reconciliation Deadline and indicate their
assent to the Reconciled Reclamation Claim as
contained in the Statement of Reclamation,
ii) all Sellers who fail to return the Statement of
Reclamation by the Reconciliation Deadline, and
iii) all Sellers who return the Statement of Reclamation
by the Reconciliation Deadline but who fail to
indicate either assent or dissent will be deemed an
Allowed Reclamation Claim in the amount of the
Reconciled Reclamation Claim.
(b) The Debtors are authorized to negotiate with all
Dissenting Sellers and to adjust the Reconciled
Reclamation Claim either upward or downward to reach an
agreement regarding the Dissenting Sellers Reclamation
Claim. The Debtors are also authorized to include any
Reserved Defenses as part of any such agreement. In the
event the Debtors and a Dissenting Seller are able to
settle on the amount and/or treatment of the Dissenting
Sellers Reclamation Claim, the Reclamation Claim will be
deemed an Allowed Reclamation Claim in the settled amount.
(c) In the event that no consensual resolution of the
Dissenting Seller's Reclamation Demand is reached within
60 days of the Reconciliation Deadline, the Debtors shall
file a motion for determination of the Dissenting Sellers
Reclamation Claim and set such motion for hearing at the
next regularly scheduled omnibus hearing occurring more
than 20 days after the filing of the motion for
determination, unless another hearing date is agreed to by
the parties or ordered by the Court. The Dissenting
Sellers Reclamation Claim, if any, shall be deemed an
Allowed Reclamation Claim as fixed by the Court in the
Determination Hearing or as agreed to by the Debtors and
the Dissenting Seller prior to a determination by the
Court in the Determination Hearing.
4. Treatment of Allowed Reclamation Claims
(a) The Debtors may at any point in these Reclamation
Procedures satisfy in full any Reclamation Claim or
Allowed Reclamation Claim by making the Goods at issue
available for pick up by the Seller or Dissenting Seller.
(b) All Allowed Reclamation Claims for which the Debtors
choose not to make the Goods available for pick-up will be
paid in full as an administrative expense pursuant to a
confirmed plan of reorganization, or earlier, in whole or
in part, in the Debtors' sole discretion.
The Debtors request that they be permitted to reconcile and pay
Allowed Reclamation Claims pursuant to the Reclamation
Procedures without need for further order of this Court.
Furthermore, the Debtors urge the Court to establish the
Reclamation Procedures as the sole and exclusive method
permitted with respect to the resolution and payment of
Reclamation Claims asserted against the Debtors. Also, the
Debtors request that:
(i) all Sellers be prohibited from seeking any other treatment
for their Reclamation Claims than is permitted by the
Reclamation Procedures, and
(ii) all parties be prohibited from commencing adversary
proceedings against the Debtors in respect of Reclamation
Claims. (Kmart Bankruptcy News, Issue No. 4; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
LASER MORTGAGE: Warren E. Buffett Discloses 9.69% Equity Stake
--------------------------------------------------------------
Warren E. Buffett has reported the beneficial ownership of
1,360,000 shares of the common stock of LASER Mortgage
Management, Inc., representing 9.69% of the outstanding common
stock of that Company. Mr. Buffett holds sole powers over the
stock, both as to voting and disposition of said stock.
LASER Mortgage Management is a real estate investment trust
(REIT) that invests in mortgage-backed securities and mortgage
loans. Its mortgage securities include pass-through certificates
and collateralized mortgage obligations. The company's mortgage
loans are typically secured by first or second liens on
residential, commercial, and other real estate. More than 95% of
LASER Mortgage Management's assets are invested in highly rated
securities, government-backed securities, and mortgage loans
that substantially meet federal guidelines. The REIT has reduced
its investments in higher-risk mortgage loans and non-investment
grade high-yield corporate debt to ease its pending liquidation
and dissolution.
LEVEL 3 COMMS: Inks Definitive Deal to Acquire CorpSoft's Assets
----------------------------------------------------------------
Level 3 Communications, Inc. (Nasdaq: LVLT), announced that it
has signed a definitive agreement to acquire CorpSoft, Inc.,
which conducts business under the name Corporate Software. As a
result of this transaction, the company is updating certain
financial information.
Financial Projections: Level 3 expects to meet or exceed first
quarter 2002 financial projections provided on January 29,
including positive Consolidated EBITDA for the first quarter.
The company plans to provide full year 2002 projections in April
in conjunction with reporting its first quarter 2002 results.
Credit Facility: The company has a $1.775 billion senior
secured credit facility. Currently, $1.125 billion of the
$1.775 billion senior secured credit facility is drawn. The
balance represents the undrawn $650 million revolving credit
facility.
The credit facility has customary covenants, or requirements
that the company and certain of its subsidiaries must meet to
remain in compliance with the contract, including a financial
covenant that measures minimum revenues (Minimum Telecom
Revenue). The subsidiaries of the company that must comply with
the terms and conditions of the credit facility are referred to
as Restricted Subsidiaries.
The Minimum Telecom Revenue covenant generally requires that the
company meets or exceeds specified levels of cash revenue from
communications and information services businesses generated by
the Restricted Subsidiaries. The Minimum Telecom Revenue
covenant is calculated quarterly on a trailing four quarter
basis. The Restricted Subsidiaries currently include those
engaged in the company's communications businesses and certain
subsidiaries of (i)Structure engaged in the company's
information services businesses.
Those subsidiaries of the company that are not subject to the
limitations of the Credit Agreement are referred to as
Unrestricted Subsidiaries. The Unrestricted Subsidiaries
include Level 3's coal mining and toll road properties and its
holdings in RCN Corporation and Commonwealth Telephone
Enterprises, Inc.
On January 29, 2002, the company stated that it was in
compliance with all of the terms, conditions, and covenants
under its credit facility and expected to remain in compliance
through the end of the first quarter based on its publicly
disclosed financial projections. However, the company stated
that if sales, disconnects and cancellations were to continue at
the levels experienced during the second half of 2001, it may
violate the Minimum Telecom Revenue covenant as early as the end
of the second quarter 2002. The company also stated that to the
extent the company's operational performance improves or it
completes acquisitions that generate sufficient incremental
revenue, a potential violation of the covenant could be delayed
beyond the second quarter of 2002 or eliminated entirely.
Level 3 announced earlier that it has signed a definitive
agreement to acquire Corporate Software, Inc., a Norwood,
Massachusetts based marketer, distributor and reseller of
business software. Corporate Software had 2001 revenues of
approximately $1.1 billion. Corporate Software had 2001 EBITDA
of approximately $18 million, excluding stock-based compensation
expense, one-time restructuring charges and other non-recurring
employee costs. The transaction is expected to close by the end
of the first quarter 2002. Upon closing, revenues as measured
by the Minimum Telecom Revenue covenant will include Corporate
Software revenues.
"As a result of this transaction, we believe that the company
will remain in compliance with the terms and conditions of our
credit facility until the second half of 2003," said Sureel
Choksi, CFO of Level 3. "This expectation assumes that we take
no other actions, our sales levels do not improve beyond those
experienced during the second half of 2001, and disconnects and
cancellations trend down during the second half of 2002 in
accordance with the company's previously disclosed customer
credit analysis."
"Additionally, given other actions the company may take, and
based on our longer term expectations for improvements in our
rate of sales, disconnects and cancellations, new product and
service introductions and the potential for additional
acquisitions, we believe we will continue to remain in
compliance with the terms and conditions of our credit facility
over the term of that agreement," added Choksi.
Funding Update: As of the end of fourth quarter 2001, Level 3
had available liquidity of approximately $2.1 billion,
consisting of $1.5 billion in cash and marketable securities and
$650 million under its undrawn and available revolving credit
facility. These amounts exclude any proceeds from the sale of
non-strategic assets, such as the proposed Commonwealth
Telephone transaction described below.
Since the end of 2001, Level 3 has completed a number of
strategic transactions, including the sale of its Asian
operations to Reach Ltd. As a result of this sale, the company
expects to save approximately $300 million through free cash
flow breakeven. Additionally, Level 3 has closed the
acquisition of McLeodUSA's wholesale Internet dial access
business.
Level 3 has also recently announced or completed certain
financial transactions to further strengthen its balance sheet
and funding position. On February 8, 2002, the company
announced its plan to sell approximately 2.75 million shares of
Commonwealth Telephone in an underwritten public offering.
Additionally, during the first quarter, Level 3 has retired
approximately $195 million face amount of debt securities,
approximately half through debt for equity swaps and the balance
using excess cash to repurchase debt. Including these
transactions, Level 3 has retired approximately
$2.1 billion face amount of debt over the past six months on
what the company believes are attractive terms.
"Taking into account all recent transactions and events," said
James Q. Crowe, CEO of Level 3, "we believe that Level 3 remains
fully funded to free cash flow breakeven with a substantial
cushion in accordance with our business plan, even if our
current rate of sales does not improve over time."
Level 3 (Nasdaq: LVLT) is a global communications and
information services company offering a wide selection of
services including IP services, broadband transport, colocation
services and the industry's first Softswitch based services.
Its Web address is http://www.Level3.com
* * *
As reported in the Feb. 1, 2001 edition of Troubled Company
Reporter, Standard & Poor's lowered its ratings of Level 3
Communications Inc., with the ratings remaining on CreditWatch
with negative implications.
Ratings Lowered and Remaining on CreditWatch Negative
Level 3 Communications Inc. TO FROM
Corporate credit rating CCC+ B-
Senior unsecured debt CCC- CCC+
Subordinated debt CCC- CCC
Shelf registration:
Senior unsecured prelim. CCC- prelim. CCC+
Preferred stock prelim. CC prelim. CCC-
The downgrade, according to the international rating agency, is
based on continued weak industry fundamentals, the company's
leveraged balance sheet, potential covenant violations, and the
continued decline in asset values in the long-haul sector. The
deterioration in asset value, in combination with the level of
bank debt in the company's capital structure, warrants a two
notch differential between the corporate credit and senior
unsecured debt ratings.
* * *
DebtTraders reports that Level 3 Communications' 11.250% bonds
due 2010 (LVLT3) are trading between 38 and 39. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=LVLT3for
real-time bond pricing.
LODGIAN INC: Committee Taps Debevoise & Plimpton as Counsel
-----------------------------------------------------------
The Official Committee of Unsecured Creditors asks the Court for
permission to employ and retain Debevoise & Plimpton as its
counsel in the consolidated chapter 11 bankruptcy cases of
Lodgian, Inc., and its debtor-affiliates, nunc pro tunc to
January 11, 2002.
Committee Chairman Marc Porosoff submits that the Committee
seeks to retain Debevoise as its attorneys because of the firm's
extensive experience and expertise in bankruptcy and insolvency
matters, particularly business reorganizations under chapter 11
of the Bankruptcy Code, and Debevoise's expertise in
representing creditors' committees in Chapter 11 cases.
Specifically, the Committee will look to Debevoise to:
A. advise the Committee with respect to its powers and duties
under section 1103 of the Code;
B. take action necessary to preserve, protect and maximize the
value of the Debtors' estates for the benefit of the
Debtors' unsecured creditors including, but not limited to,
investigating the acts, conduct, assets, liabilities, and
financial condition of the Debtors, the operation of the
Debtors' businesses and the desirability of the continuance
of such businesses, and any other matter relevant to the
case or to the formulation and/or evaluation of a plan of
reorganization;
C. prepare on behalf of the Committee motions, applications,
answers, orders, reports, pleadings and papers that may be
necessary to the Committee's interests in these chapter 11
cases;
D. participate in the negotiation, formulation and
implementation of a plan of reorganization as may be in the
bests interests of the Committee and the unsecured
creditors of the Debtors' estates;
E. represent the Committee's interests with respect to the
Debtors' efforts to obtain postpetition financing;
F. advise the Committee in connection with any potential
valuation or sale of assets;
G. appear before this Court, any appellate courts, and the
United States Trustee and protect the interests of the
Committee and the value of the Debtors' estates before such
courts and the United States Trustee;
H. consult with the Debtors' counsel on behalf of the Committee
regarding tax, intellectual property, labor and employment,
real estate, corporate, litigation matters, and general
business operational issues;
I. assist the Committee in evaluating the necessity of seeking
the appointment of a trustee or examiner, and requesting
such appointment, if deemed appropriate; and
J. perform all other necessary legal services and provide all
other necessary legal advice to the Committee in connection
with these chapter 11 cases.
George E.B. Maguire, a Debevoise member, assures the Court that
the firm has no connection with the Debtors, their creditors,
equity security holders, or any other parties in interest or
their respective financial advisor and accountants, the United
States Trustee or any person employed in the office of the
United States Trustee, except that:
A. Debevoise represents the Committee in these cases and has
represented the Bondholder Committee in the restructuring
efforts which led up to the filing of these chapter 11
cases, and
B. Debevoise represents certain of the Debtors' creditors and
other parties in interest in matters unrelated to these
proceedings.
The Committee submits that Debevoise is a "disinterested person"
as that phrase is defined in Section 101(14) of the Bankruptcy
Code and does not hold any adverse interest to the Debtors, and
that Debevoise is qualified to serve as attorneys for the
Committee pursuant to Sections 328 and 1103 of the Bankruptcy
Code and Bankruptcy Rules 2014 and 5002.
The Committee proposes that Debevoise be compensated for the
services described herein at its ordinary billing rates and in
accordance with its customary billing practices regarding other
charges and expenses. Mr. Maguire explains that Debevoise's
hourly rates are set at levels designed to fairly compensate
Debevoise for the work of its attorneys and paralegals and to
cover fixed and routine overhead expenses. Hourly rates vary
with the experience and seniority of the individuals assigned
and are consistent with the rates charged in non-bankruptcy
matters of this type and are subject to periodic adjustments to
reflect economic and other conditions. The current hourly rates
of the partners, associates and legal assistants of Debevoise
who are expected to render services to the Committee in
connection with these chapter 11 cases are as follows:
George E.B. Maguire $650.00
Michael E. Wiles $665.00
Sung Su Pak $400.00
Michael B. Beckman $390.00
James B. Roberts $390.00
Rachel J. Mauceri $240.00
Alexia L. Richmond $170.00
Other attorneys and legal assistants may from time to time
render services to the Committee in connection with these cases
at their then current hourly rates.
Mr. Maguire informs the Court that Debevoise has been paid for
all accrued time and expenses in connection with the prepetition
representation of the Bondholder Committee through December 19,
2001 in the amount of $130,961.45 and applied $43,421.91 of this
amount against the Retainer. The remainder of the Retainer will
be applied against future fees and expenses, subject to this
Court's approval of such fees and expenses pursuant to Sections
330 and 331 of the Bankruptcy Code. (Lodgian Bankruptcy News,
Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900)
MAXXIM MEDICAL: Weak Results Spur S&P to Cut Credit Rating to B-
----------------------------------------------------------------
On February 22, 2002, Standard & Poor's lowered its corporate
credit, bank loan, and senior subordinated notes ratings on
Maxxim Medical Medical Inc., a leading supplier of medical
products.
Credit Rating: 'B-' with Negative Outlook
The rating actions reflect the weaker than expected operating
performance of the medical products supplier, as well as
Standard & Poor's ongoing concern with Maxxim's constrained
financial position.
Waltham, Mass.-based Maxxim Medical is a leading supplier of
custom-procedure trays, nonlatex examination gloves and other
single-use products. However, the company's new management faces
an ongoing challenge to improve the profitability of the
operations that it has acquired over time. At the same time,
cash flow shortfalls have required financial restructuring. Yet,
even though new equity and a revision in the terms of its credit
facilities provide Maxxim Medical with financial flexibility to
meet its principal and interest obligations during 2002, the
company will need to improve operating performance over the next
few years in order to continue to service its debt load bloated
by its 1998 LBO.
Outlook
Maxxim Medical's rating may be lowered again within a year if it
fails to realize meaningful improvement from the restructuring
of its operations and the implementation of a new enterprise
resource and customer relationship management system.
MCLEODUSA INC: Court Grants Injunction Against Utility Companies
----------------------------------------------------------------
McLeodUSA Inc., seeks entry of an order (a) prohibiting Utility
Companies from altering, refusing, or discontinuing services on
account of prepetition claims and (b) establishing procedures
for determining requests for additional adequate assurance of
payment.
Specifically, the Debtor seeks entry of an order:
(a) providing that Utility Companies are prohibited from
altering, refusing or discontinuing services on account of
unpaid prepetition invoices or prepetition claims;
(b) establishing a procedure for Utility Companies to request
that the Debtor provides adequate assurance of future
payment;
(c) providing that if a Utility Company timely requests from
the Debtor additional adequate assurance that the Debtor
believes is unreasonable, and the Debtor is unable to
resolve the request consensually with the Utility Company,
then upon the request of the Utility Company, the Debtor
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 twenty (20) days after the date of such request,
unless another hearing date is agreed to by the parties or
ordered by the Court;
(d) 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
(e) 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 oo
payment under Bankruptcy Code section 366(b).
Finally, the Debtor requests that Utility Companies be required
to include with any request for additional adequate assurance a
summary of the Debtor's payment history relevant to the affected
accounts.
Randall Rings, McLeodUSA's Group Vice President, Secretary and
General Counsel, seeks assurance for uninterrupted utility
services, saying these are critical for Debtor's ability to
continue operations while the Chapter 11 case is in Court.
Determination Procedure
Recognizing the right of Utility Companies to request for
adequate assurance, David Kurtz, Esq., at Skadden, Arps, Slate
Meagher & Flom (Illinois), proposes that Utility Companies be
given 30 days from the date of entry of an Order to request the
Debtor for additional adequate assurance.
Mr. Kurtz says Utility Companies making such request must submit
a summary of the Debtor's payment history. In the event that the
Debtor is unable to resolve the request consensually with the
Utility Company, then upon the request of the Utility Company,
the Debtor will file a Motion for Determination of adequate
assurance of payment.
Such Determination Motion will then be heard 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, Mr. Kurtz
says.
Mr. Kurtz also proposes that while the Determination Motion is
pending, the requesting Utility Company be deemed to have
adequate assurance of payment under Bankruptcy Code section 366.
He also requests that the same provision of adequate assurance
apply to any Utility Company that does not file a timely
request.
Procedure Approved
Judge Erwin Katz grants the Motion without prejudice to the
filing by the utility service providers of request for
additional assurance from the Debtor in the form of deposits or
other security. The filing of such request must conform to the
determination procedure approved by the Court. (McLeodUSA
Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
MPOWER COMMS: Planned Recapitalization Prompts S&P's Junk Rating
----------------------------------------------------------------
The ratings on competitive local exchange carrier (CLEC) MPower
Communications Inc., were lowered on Feb. 25, 2002, following
the company's announced agreement of a recapitalizaion plan with
an informal committee representing about 66% of its senior
notes. The ratings remained on CreditWatch with negative
implications.
If the proposed plan is approved, MPower intends to commence a
voluntary pre-negotiated Chapter 11 proceeding. Once this
occurs, the ratings will be lowered to 'D'. The company had $423
million total debt outstanding as of Dec. 31, 2001.
Credit Rating: 'CC' Watch Negative
MPOWER HOLDING: May File Chapter 11 to Effect Recapitalization
--------------------------------------------------------------
Mpower Holding Corporation (Nasdaq: MPWR), a facilities-based
broadband communications provider, said it has reached agreement
with an informal committee representing approximately 66% of the
outstanding principal amount of its 13% Senior Notes due 2010 on
a comprehensive recapitalization plan that would eliminate a
significant portion of Mpower's long-term debt and all of its
preferred stock.
Under the proposed recapitalization plan, Mpower will use $19
million of its approximately $150 million cash on hand and will
issue common stock to eliminate $583.4 million in debt and
preferred stock, as well as the associated $50 million of annual
interest expense related to the 2010 Senior Notes and the $15
million in annual dividend payments on the preferred stock.
"This agreement offers Mpower an opportunity to get firmly on
track to long-term financial health while continuing to provide
customers with the highest level of service," said Chief
Executive Officer Rolla P. Huff. "We believe this plan
represents the best approach to restructuring the company's debt
in an efficient and timely manner, and are pleased that we can
accomplish it by using equity and only $19 million in cash to
retire 92% of our long-term debt and preferred stock."
Holders of approximately 66% of the approximately $380.5 million
outstanding principal amount of Mpower's 2010 Senior Notes have
entered into a voting agreement with the company in support of
the proposed recapitalization plan, subject to certain terms and
conditions. Mpower will solicit the remaining 2010 Senior
Noteholders to also enter into the voting agreement by March 19,
2002, the date Mpower expects the solicitation period to expire.
Under the agreement reached today, each 2010 Noteholder who
signs a voting agreement in support of the recapitalization plan
by the end of the solicitation period will receive their pro-
rata share of $19 million in cash, which represents 5% of the
outstanding amount of the 2010 Senior Notes.
If, at the end of the solicitation period, holders of at least
two-thirds of the outstanding principal amount of the 2010
Senior Notes have entered into the voting agreement with the
company in support of the proposed recapitalization plan, Mpower
intends to implement its proposed recapitalization plan by
promptly commencing a voluntary pre-negotiated Chapter 11
proceeding. During the Chapter 11 proceeding, Mpower plans to
continue to provide customers with its complete range of
services. Mpower expects no significant impact on its
employees, customers or suppliers. Due to its significant cash
resources, the company does not require debtor-in-possession
financing and expects to complete the recapitalization within
90-120 days of the filing of the Chapter 11 proceeding.
As part of the Chapter 11 proceeding, Mpower will be required to
file a plan of reorganization with the bankruptcy court, and
must receive the requisite votes and be confirmed by the court.
Pursuant to the proposed recapitalization plan, the 2010 Senior
Noteholders would receive 85% of the common stock of the
recapitalized company issued and outstanding on the effective
date of the plan, and would be entitled to nominate four members
to the reorganized company's seven member Board of Directors.
If accepted by holders of at least two-thirds in amount of the
issued and outstanding shares of preferred stock that vote on
the plan, Mpower's recapitalization plan also would provide the
company's preferred and common stockholders with approximately
15% in aggregate of the common stock of the recapitalized
company on the effective date of the plan of reorganization, and
the preferred stockholders would be entitled to nominate one
director to the reorganized company's seven member Board of
Directors.
"We have made a concerted effort to arrange for our current
equity holders to retain some ownership in the reorganized
company," noted Huff. "We hope that our preferred shareholders
vote in favor of this proposed plan so that this is indeed the
case."
The plan of reorganization, if rejected by the preferred
stockholders, would provide that neither the preferred nor the
common stockholders would receive any interest in the
reorganized company and the preferred stockholders would not be
entitled to nominate a seat on the Board of Directors. In this
case, the 2010 Senior Noteholders instead would receive 100% of
the common stock of the reorganized company issued and
outstanding on the effective date of such plan of
reorganization, and would be entitled to nominate five directors
to the reorganized company's seven member Board of Directors.
The proposed recapitalization plan also provides for an employee
stock option plan for up to 10% of the common stock of the
recapitalized company issued and outstanding on the effective
date of the plan (including existing options), which would
dilute the aforementioned ownership percentages.
"This agreement is an important first step in the financial
restructuring of the company. With a greatly strengthened
balance sheet under the proposed recapitalization plan, $200
million in recurring revenue, and more than 117,000 customers,
we believe Mpower would be among the better financially situated
CLECs in the industry and in a better position to secure
additional financing," added Huff. "We are pleased to report
that we are currently engaged in ongoing discussions with
current and new equity holders, as well as lenders, to pursue
additional financing opportunities to support the continued
growth of Mpower."
As previously announced, the company continues to work with the
firms of Rothschild Inc. and Shearman & Sterling to provide
financial and legal counsel, respectively, in connection with
the recapitalization transaction.
Unrelated to the recapitalization plan, Mpower also announced it
is ceasing operations in Charlotte, NC, where it currently
serves approximately 500 customers. The company does not have
any plans to close any additional markets.
Mpower Holding Corporation (Nasdaq: MPWR) is the parent company
of Mpower Communications, a facilities-based broadband
communications provider offering a full range of data,
telephony, Internet access and Web hosting services for small
and medium-size business customers. Further information about
the company can be found at http://www.mpowercom.com
NATIONSRENT: Seeks Open-Ended Extension of Lease Decision Period
----------------------------------------------------------------
NationsRent Inc., and its debtor-affiliates ask the Court to
extend the deadline within which they must elect to assume,
assume and assign, or reject unexpired non-residential property
leases. The Debtors ask that the deadline be extended through
the date on which a chapter 11 plan is confirmed in these cases.
Daniel J. DeFranceschi, Esq., at Richards Layton & Finger, in
Wilmington, Delaware, informs the Court that the Debtors are
tenants under approximately 250 unexpired non-residential
property leases, the majority of which are used in relation to
the Debtors' operation of approximately 230 equipment rental
centers in 27 states. The other leases are used for
administrative office space, storage lots and storage
facilities.
Mr. DeFranceschi states the Debtors are currently finalizing
their business plan and in connection with that, are actively
reviewing the leases. Such review, however, still has to be
completed by the Debtors, who need more time to evaluate how
each of the leases will factor into the implementation of the
business plan once completed. He adds that, as of the filing
date of this motion, the leases remain in effect or terminated
according to their respective terms and thus are unexpired
leases that are subject to assumption, assumption or assignment
or rejection by the Debtors.
According to Mr. DeFranceschi, since the Petition Date, the
Debtors have focused their efforts primarily on completing a
smooth transition to operation in Chapter 11, as well as
fulfilling various obligations arising in connection with the
commencement of these Chapter 11 cases. It would be imprudent
for the Debtors to make a final assumption or rejection decision
on a certain lease divorced from the Reorganization Plan.
Pending any decision, the Debtors will continue to timely
perform all their obligations under the leases, including
payment of post-petition rent due, so that the requested
extension does not prejudice the lessors under the leases.
Judge Walsh will convene a hearing on the Debtors' request at a
hearing on April 2, 2002. By application of Local Bankruptcy
Rule 9006-2, the Debtors' Lease Decision Period is automatically
extended through the conclusion of that hearing. (NationsRent
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
OPTICAL DATACOM: Court Okays Bayard Firm as Panel's Co-Counsel
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approves
the employment and retention of The Bayard Firm as Co-Counsel
for the Official Committee of Unsecured Creditors, nunc pro tunc
to November 29, 2001, to perform services in connection with
Optical Datacomm, LLC's chapter 11 cases.
The Committee selected The Bayard firm because of its attorneys'
experience and knowledge and because of the absence of any
conflict of interest.
The services that The Bayard Firm has rendered and are required
to render to the Committee are:
a) providing legal advice with respect to its powers and
duties as an official committee appointed under the
Bankruptcy Code;
b) assisting in the investigation of the acts, conduct,
assets, liabilities, and financial conditions of the
Debtor, the operation of the Debtors business, and any
other matters relevant to the case or to the formulation
of a plan of reorganization or liquidation;
c) preparing on behalf of the Committee necessary
applications, motions, complaints, answers, orders,
agreements and other legal papers;
d) reviewing, analyzing and responding to all pleadings
filed by the Debtor and appearing in court to present
necessary motions, applications and pleadings and to
otherwise protect the interests of the Committee; and
e) performing all other legal services for the Committee
which may be necessary and proper in these proceedings.
The Bayard Firm will bill for work at its customary hourly
rates:
directors $350 to $440 per hour
associates $190 to $300 per hour
paralegals and $75 to $125 per hour
paralegal assistants
Optical Datacomm, LLC's filed for chapter 11 protection on
November 17, 2001. H. Jeffrey Schwartz, Esq. at Benesch,
Friedlander, Coplan & Aronoff, LLP and Joel A. Waite, Esq. at
Young Conaway Stargatt & Taylor represent the Debtors in their
restructuring efforts. In its petition, the Company listed
estimated assets of $10 million to $50 million and estimated
debts of $50 million to $100 million.
OPTICAL DATACOM: Has Until Apr. 15 to Decide on Unexpired Leases
----------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the District of
Delaware, Optical Datacomm, LLC, has until April 15, 2002 to
decide whether it will assume, assume and assign, or reject
unexpired nonresidential real property leases. The Court also
orders that the Debtors must pay all post-petition obligations
under these leases pending their decision.
Optical Datacomm, LLC's filed for chapter 11 protection on
November 17, 2001. H. Jeffrey Schwartz, Esq. at Benesch,
Friedlander, Coplan & Aronoff, LLP and Joel A. Waite, Esq. at
Young Conaway Stargatt & Taylor represent the Debtors in their
restructuring efforts. In its petition, the Company listed
estimated assets of $10 million to $50 million and estimated
debts of $50 million to $100 million.
OPTICAL DATACOM: Committee Wants a Chapter 11 Trustee Appointed
---------------------------------------------------------------
The Official Committee of Unsecured Creditors organized in
Optical Datacomm LLC's chapter 11 cases presents the U.S.
Bankruptcy Court for the District of Delaware with an emergency
motion seeking appointment of a chapter 11 trustee.
Since the approval of the sale to ODC Acquisition, LLC on
January 4, 2002, the debtors have had no business operations and
no management. Debtors' Counsel, the Committee and the Bank
Group have had discussions over the past weeks about the
management of the Debtor's estate. The Bank Group and the
Committee want current management out and seek appointment of a
Chapter 11 Trustee.
There is a disagreement between the parties as to who should
manage the Debtor's litigation efforts. The Debtor's current
management is not a proper option under any circumstances
because this management will likely to be the target of future
investigations. Management is likely to be called upon
regarding the Debtor's affairs to the extent that they received
more than adequate consideration for services provided, engaging
in fraudulent or other misconduct. Thus the Committee firmly
believes that only an impartial Chapter 11 Trustee can manage
the affairs of the estate from this point forward.
Optical Datacomm, LLC's filed for chapter 11 protection on
November 17, 2001. H. Jeffrey Schwartz, Esq. at Benesch,
Friedlander, Coplan & Aronoff, LLP and Joel A. Waite, Esq. at
Young Conaway Stargatt & Taylor represent the Debtors in their
restructuring efforts. In its petition, the Company listed
estimated assets of $10 million to $50 million and estimated
debts of $50 million to $100 million.
PACIFIC GAS: Seeks Court Approval to Hire 6 Consulting Firms
------------------------------------------------------------
Pacific Gas and Electric Company applied to the Court for
approval to employ and retain as consultants for professional
services to be performed under the direction and supervision of
PG&E's attorneys for the following purposes:
The Brattle Group
- in anticipation and in preparation for litigation and/or
regulatory proceedings relating to the implementation of
PG&E's bankruptcy Plan of Reorganization;
Lexecon, Inc.
- in anticipation and in preparation for litigation and/or
regulatory proceedings relating to the implementation of
PG&E's bankruptcy Plan of Reorganization;
LECG, LLC
- in connection with the reorganization of PG&E in the
pending PG&E bankruptcy proceeding, in connection with
proceedings in various forums, including but not limited to
FERC.
NERA Economic Consulting
- in anticipation and in preparation for litigation and/or
regulatory proceedings relating to the implementation of
PG&E's bankruptcy Plan of Reorganization;
Charles River Associates
- in anticipation and in preparation for litigation and/or
regulatory proceedings relating to the implementation of
PG&E's bankruptcy Plan of Reorganization;
Brown, Williams, Moorhead & Quinn, Inc.
- in anticipation and in preparation for PG&E's application
to the Federal Energy Regulatory Commission (FERC) under
section 7 of the Natural Gas Act (NGA) for a certificate of
public convenience and necessity and under section 4 of the
NGA for rates, terms and conditions of service.
U.S. Trustee's Objection
The United States Trustee tells the Court that the Application
should not be approved because:
(1) At least one of the Applicants, LECG, LLC, appears to have a
conflict of interest because it continued to represent
creditors of the estate in connection with the California
energy crisis. The firm discloses that it represents many of
the major players in the California energy market, including
but not limited to Enron, Dynegy, Calpine, Duke Energy, GWF
Power Systems and Oildale Energy. LECG LLC offers to establish
"appropriate confidentiality walls" to protect PG&E's
confidential information. The UST does not take this as a
safeguard against conflict of interest. A conflict of interest
calls into question whether the professional is prohibited by
ethical obligations arising in existing relationships from
acting in its client's best interest, the UST notes. An
"ethical wall" does nothing to solve this problem but only
seeks to ensure information is safeguarded, the UST opines.
(2) All of the Applicants work for affiliates of the Debtor but
do not describe who that is or what the work consists of.
(3) The Applicants' Conflicts Checks are inadequate; it is
impossible to determine the extent of the conflict checks the
Applicants may have done.
(4) The Applicants failed to provide copies of their retainer
agreements.
(5) Both LECG LLC and Brattle have pre-petition claims against
the estate, LECG LLC's for $567,463 and Brattle's for
$190,778. The Debtors proposes to eliminate this otherwise
disqualifying fact by having its shareholder and parent, PG&E
Corp. pay $758,241 to purchase those claims to eliminate
Siliconix-type problems the Applicants would otherwise face.
By accepting payment of more than three quarters of a million
dollars in claims from PG&E Corp. which a principal
beneficiary of the proposed plan, the two professional firms
are beholden to debtor's parent for these substantial
payments. It is difficult to conceive how the firms would
allow themselves to act in a manner inconsistent with the
interests of PG&E Corp., the UST tells the Court.
(6) The Application proposes a "rolling employment order"
procedure which is not consistent with Sec. 327(a). The
Application suggests the Court approve an employment order
that can be expanded to include further applications of
similar kind filed in the future absent objection. The UST
points out that these Applicants, unlike their counterparts in
the omnibus order for employment, are involved in the
principal bankruptcy work of the estate. The employment of
these Applicants should be made by separate order under Sec.
327(a), the UST contends.
The Court's Tentative Ruling and Order
The Court issued a Tentative Ruling and Order in which the Court
tentatively sustained the Objections and deny the Application
unless the Debtor provides more information as requested by the
United States Trustee in the Objections.
The court agreed with the United States Trustee that the
retainer agreements have to be disclosed. While Debtor contends
that the descriptions of the services to be provided by the
consultants must be generic in order to protect confidentiality,
the court doubts that the Debtor and the consultants, aided by
able counsel, are unable to set forth accurate descriptions of
the work to be performed while at the same time protecting
confidences. "There is no good reason why these retainer
agreements should not be examined just as are engagement letters
with attorneys, accountants and investment advisors," the Court
opined.
The Court also agreed with the United States that the Debtor had
not met the burden of disclosure because the Application is
deficient because it does not provide sufficient information
concerning what entities are also represented by the
consultants, and what work is being or has been done for them.
Although the court does not necessarily agree with the United
States Trustee that LECG, LLC and The Brattle Group, Inc. are
disqualified because of the expectation that their prepetition
unsecured claims will be purchased by PG&E Corporation, the
Court held that the Application will have to be supplemented to
set forth the precise terms of any agreement between those
entities and PG&E Corporation.
The court could not determine whether LECG, has a conflict of
interest as contended by the United States Trustee. "If the
consultant's general counsel does not know what his firm is
doing, and for whom it is doing it, how can the court, the
United States Trustee, or other parties in interest know," the
Court tentatively ruled, "LECG, LLC will have to provide in much
greater detail information about its past or present services
regarding the California energy crisis to parties who are
adverse, to Debtor. Once that information is available, the
court will be able to make a judgment on whether there is an
irreconcilable conflict of interest and, if not, whether the
implementation of confidentiality walls adequately protects
Debtor's data."
Finally, the court was not inclined to give the Debtor an open-
ended procedure for engagement of additional consultants as
professionals under 11 U.S.C. Sec. 327(a). Unless convinced that
there is some particular reason why the specific applications
and proper disclosures cannot be presented for each future
consultant, the court will deny that portion of the Application
that seeks. the "Rolling Employment Order" procedure.
The Court then directed Debtor to file its supplement to the
Application, with any retainer agreements, additional
disclosures, and, in the case of LECG, LLC and The Brattle
Group, Inc., any agreements between those entities and PG&E
Corporation.
PG&E's Supplemental Memorandum
At the Court's direction, the Debtor filed supplemental
declarations of the Consulting Firms each with a copy of the
respective retain agreement attached and a Supplemental
Memorandum in further support of its application to employ and
retain the consulting firms.
The Debtor tells the Court that none of the Consulting Firms are
providing services that clearly are "central to the
administration of the bankruptcy estate and in the bankruptcy
proceedings"; rather, the Consulting Firms have been retained by
the Debtor to act as expert witnesses in connection with
applications that were being filed with the Federal Energy
Regulatory Commission (FERC) for approval of certain
transactions contemplated by the Debtor's Plan of
Reorganization.
The Debtor notes that the Consulting Firms Have Been Retained
Pursuant To Standard Retention Agreements That Do Not Contain
Provisions Inimical To Chapter 11.
PG&E represents that the Consulting Firms conducted significant
conflicts checks, as set forth in the supplemental declarations.
The Debtors submits that the Consulting Firms are
"disinterested" under Section 327(a). The Debtors reminds Judge
Montali that, as numerous courts have recognized, the Consulting
Firms are not prohibited from representing creditors and the
Debtor simultaneously unless there is an actual conflict of
interest. The Debtor points out that because the Consulting
Firms are respected consultants in the energy industry, they are
frequently retained by companies in the energy industry and it
is inevitable that PG&E would be required to retain consulting
firms that perform services for energy companies that happen to
be creditors of PG&E.
The Debtor points out that, as the supplemental declarations
demonstrate, the vast majority of the Consulting Firms'
engagements for creditors and affiliates have terminated and
thus do not raise any conflict problems. Even with respect to
those terminated engagement, the Debtor says, almost all of the
Consulting Firms' work in connection with those engagements did
not relate to PG&E or its bankruptcy case. In the few instances
in which some of the Consulting Firms are currently providing
services to creditors, those matters are unrelated to the expert
testimony that those Consulting Firms will be providing in the
FERC proceeding on the PG&E bankruptcy, the Debtor adds. The
Debtor then draws the Court's attention to a summary of the
Consulting Firms' connections to creditors in support of this
point:
* Lexecon
As set forth in the Declaration of David A. Reishus, Senior
Vice President of Lexecon, Lexecon has in the past provided
and currently provides consulting services to 8 creditors of
the Debtor. With respect to 4 of those matters, Lexecon's
consulting services have terminated.
With respect to the remaining 4 engagements, Lexecon
currently provides consulting services to creditors on issues
that are unrelated to Debtor in connection with this
bankruptcy or the subject matter of Lexecon's expert
testimony before FERC. For example, Lexecon currently
provides services to Calpine Corporation in connection with
facility sitting in Connecticut and New York. Lexecon also
provides services to Chevron Corporation in a class action
suit regarding oil royalty and a contract dispute that are
unrelated to Debtor. Lexecon also provides services to Duke
Energy Corporation in a case before the FERC involving
refunds for the sale of energy into California markets, and
El Paso Corporation in a FERC proceeding concerning the
alleged exercise of market power in California natural gas
markets. "Further, there is no indication that Lexecon is not
providing objective and independent expert opinions to Debtor
in connection with Debtor's FERC application," the Debtor
argues, "Indeed, the particular Lexecon consultants who work
on these matters for the identified creditors of PG&E are not
and will not be involved in any work for or on behalf of the
Debtor." In this regard, Lexecon has implemented
confidentiality walls to ensure Debtor's confidential
information will be protected.
* CR4
As set forth in the Declaration of Michael Tubridy, Vice
President and Chief Financial Officer of CRA, CRA has in the
past provided and currently provides consulting services to
10 creditors of the Debtor. With respect to 5 of those
engagements, CRA's consulting services have terminated, and
thus there is no actual conflict with the Debtor regarding
those past matters.
With respect to the remaining 5 engagements, CRA currently
provides consulting services to creditors on issues that are
unrelated to Debtor in connection with the PG&E bankruptcy or
the subject matter of CRA's expert testimony before the FERC.
For example, CRA currently provides services for the U.S.
Department of Energy regarding the economic impact of climate
change policies and the iron and steel industries' attempts
to reduce carbon dioxide. CRA also currently provides
services for Jefferson Smurfit Corporation with regard to
class action litigation against International Paper and other
manufacturers of containers and liner board. Neuco (a 50%
owned subsidiary of CRA) also provides services to Arizona
Public Service with regard to a utility restructuring in
Arizona. CRA also currently provides services to Duke Energy
Trading and Marketing with regard to multi-pollutant control
strategies, analysis for a FERC application, and a three year
update for its blanket market-rate authority. CRA also
provides services to Enron Energy Services in connection with
legal and regulatory disputes concerning pricing in
California. CRA's representation of Enron Energy Services in
connection with this matter does not create an "actual
conflict" for CRA in this case.
* Brattle
As set forth in the Declaration of Barbara J. Levine, Esq.,
General Counsel of Brattle, Brattle has in the past and
currently provides consulting services to 7 creditors of the
Debtor. With respect to 5 of those engagements, Brattle's
consulting services have terminated, and thus there is no
actual conflict with the Debtor regarding those past matters.
With respect to the remaining 2 engagements, Brattle
currently provides consulting services to creditors on issues
that are unrelated to Debtor in connection with this
bankruptcy or the subject matter of Brattle's expert
testimony before the FERC. Brattle's retention by the
California Independent System Operator (CAISO) does not
create an "actual conflict" for Brattle in the PG&E case. The
CAISO functions as an energy exchange in the California
energy market. Furthermore, as noted in Ms. Levine's
Declaration, Brattle's work for the CAISO consists of
offering technical assistance with the CAISO's allocation of
costs throughout the California market. Accordingly,
Brattle's retention is unrelated to the Debtor's bankruptcy
or the California energy crisis.
Brattle's retention by Calpine Corporation also does not
create an "actual conflict". The matter for which Brattle
currently provides advice to Calpine concerns the terms under
which Calpine may access the Debtor's gas transmission
facilities. As indicated by Ms. Levine, this matter predates
the California energy crisis and Debtor's bankruptcy and has
not required Brattle to advise on a position adverse to the
Debtor in its bankruptcy proceedings. Brattle is providing
expert witness testimony in support of the Debtor's
application under Section 203 of the Federal Power Act. The
witnesses' testimony provide expert opinion regarding
financial matters as they relate to the public interest
standard applied by the FERC. There is no relation between
Brattle's expert testimony before the FERC on behalf of the
Debtor (which relates exclusively to the "public interest"
benefits of the Plan) and the issues in these other matters.
* NERA
As set forth in the declaration of Gene Meehan, Senior Vice
President of NERA, NERA has in the past and currently
provides consulting services to 8 creditors of the Debtor's
estate. With respect to 3 of these engagements, NERA's
consulting services have terminated and thus there is no
actual conflict with NERA's retention by the Debtor in this
case.
With respect to the remaining 5 engagements, NERA currently
provides consulting services to creditors on issues that are
wholly unrelated to Debtor in connection with this
bankruptcy. For example, NERA provides consulting services
for the Arizona Public Service Company unrelated to the
Debtor Company and Duke Energy Corporation in connection with
advising groups of companies on ways to improve their
business through applying specific economic principles. NERA
provides services to Bank of America with respect to an
internal study and a securities litigation in which Debtor is
not a party or otherwise involved. Likewise, NERA consults
CIBC and Enron on respective securities litigations in which
Debtor is not a party or otherwise involved. As indicated in
Mr. Meehan's Declaration, none of the matters for which NERA
provides services to these creditors bears any relation to
the Debtor or its bankruptcy.
* BWMQ
As set forth in the declaration of Adrian L. Moorhead,
President of BWMQ, BWMQ has provided consulting services to
certain creditors of the Debtor's estate. BWMQ's services
with respect to all of these matters have concluded. BWMQ
does not presently represent any of the Debtor's largest
creditors in any matter, and thus has no actual conflict with
providing services in this case.
* LECG
As noted in the Supplemental Declaration of Mary Tenenbaum,
LECG has performed or currently performs services for 4
clients that potentially relate to matters concerning the
California energy crisis. One of these 4 engagements, which
involved consulting with respect to the potential purchase of
energy from the Debtor, has concluded and consequently does
not raise the possibility of a present conflict of interest
for LECG.
The three remaining engagements, detailed in the Declaration,
consist of:
(1) performing consulting services for a generator with
regard to the defense of class action litigation in which
PG&E is not a party against generators of electricity in
the Caiifornia markets;
(2) advising another generator with regard to litigation
involving the conduct of generators of electricity in the
California market in which PG&E is a co-defendant of
LECG's client; and
(3) performing consulting services for a client with regard
to transmission owners contracting for generation and
recovering costs in transmission rates and the Advance
Congestion Cost Mitigation Program of the California ISO.
As noted in the Declaration, confidentiality obligations
presently prohibit LECG from disclosing the names of the
above-mentioned clients absent a court order. Nevertheless,
although services to these creditors may potentially touch
upon matters concerning the California energy crisis, none of
the services LECG has been called upon to perform by these
companies "impact [] the actual bankruptcy estate," and are
thus not disqualifying.
The Debtor also represents that assignment of Brattle's and
LECG's pre-petition claims to PG&E Corporation does not render
those firms "interested". The Debtor cites several reasons.
First, these firms do not receive any consideration from Corp.
with respect to the sale of their claims until distributions are
made to Corp. by the Debtor with respect of such claims. Thus,
from a timing perspective, these firms fare no better -- and,
indeed, no worse -- than other unsecured creditors, the Debtor
points out.
With respect to the Trustee's second objection, the Debtor notes
that Brattle and LECG meet the test under Section 327(a) of the
Bankruptcy Code which requires that professionals be
disinterested and not hold or represent an interest adverse to
the estate. It is well accepted that a professional can agree to
waive its pre-petition claim as a means of making itself
disinterested, the Debtor argues. The rationale underlying these
cases is that because the professional no longer would hold a
pre-petition claim at the time it is retained, the professional
is disinterested and capable of being retained. The Trustee
contends Brattle and LECG somehow would not be independent
because LECG and Brattle will accept payment from Corp. "These
allegations must be considered in context," the Debtor tells the
Court, "Because the Debtor is a solvent corporation, the Plan
provides for all creditors to be paid in full and for equity
holders to receive a distribution. Because all creditors will be
paid in full under the Plan, the fact that LECG and Brattle will
accept payment from Corp. is of no consequence -- whether they
sell their claims or retain them, they will be paid the full
amount of their claims with interest."
For these reasons, the Debtor urges the Court to approve the
retention of BMWQ, Brattle, CRA, LECG, Lexecon, and NERA.
The Court's Final Order
Following PG&E's submission it its Supplemental Memorandum in
further support of earlier application, and Declarations and
Supplemental Declarations supplying further disclosures by the
Consultants in the application, the Court authorizes PG&E to
employ and retain as consultants The Brattle Group, Lexecon,
Inc., NERA Economic Consulting, Charles River Associates, and
Brown, Williams, Moorhead & Quinn, Inc. (Pacific Gas Bankruptcy
News, Issue No. 24; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
POINT.360: Seeking Waivers of Covenants Under Credit Agreement
--------------------------------------------------------------
Point.360 (Nasdaq: PTSX), a leading provider of media asset
management services, announced its results for the fourth
quarter and year ended December 31, 2001.
Revenues
Revenue for the fourth quarter ended December 31, 2001, totaled
$17.2 million, down 10% from $19.2 million in the same quarter
of 2000. Fourth quarter sales increased from $16.9 million and
$16.4 million in the third and second quarters of 2001,
respectively. Most of the Company's revenues are derived from
post production, duplication and distribution services provided
to motion picture studios and advertising agencies. While sales
to the advertising industry increased, sales to studio clients
declined to a greater extent as some work was brought in-house.
Studios have traditionally maintained in-house capacity and
several customers utilized that capacity in the fourth quarter
to a greater extent thereby affecting our sales.
Revenue for the twelve months ended December 31, 2001 was $69.6
million, down 7% from $74.8 million last year.
Gross Margin
Gross margin on sales was 34% in the 2001 fourth quarter
compared to 36% in the prior year's quarter, or a reduction of
$1.0 million in gross profit. The decrease was due principally
to increased depreciation associated with investments in high
definition equipment, higher delivery costs for distribution
services and lower revenue. Incremental depreciation and
delivery costs amounted to $0.4 million or 2% of revenues.
Gross profit for the twelve months ended December 31, 2001 was
33% as compared to 39% in the twelve months ended December 31,
2000. Depreciation principally related to the high definition
television investment charged to cost of sales and delivery
costs increased approximately $1.8 million which amounted to
approximately 3% of 2001 sales. The remaining decline in gross
margin is due to the Company's inability to cover other fixed
costs with lower sales.
Selling, General and Administrative and Other Expenses
For the fourth quarter of 2001, selling, general and
administrative expenses were $4.9 million, or 29% of sales,
compared to $7.0 million, or 36% of sales in the fourth quarter
of 2000. For the year 2001, SG&A expenses were $20.9 million,
or 30% of sales, compared to $22.0 million, or 29% of sales in
the 2000 period. Excluding unusual charges mentioned below,
which occurred in the first nine months of each year, SG&A for
2001 would have been $19.6 million, or 28% of sales, compared to
$21.2 million, or 28% of sales for the same period last year.
In 2001, the Company recorded $1.3 million of unusual SG&A
expenses as follows: (i) severance expenses of $0.3 million,
(ii) a benefits program change of $0.3 million, (iii) bank
restructuring expenses of $0.4 million and (iv) consulting and
other expenses related to the Company's rebranding efforts of
$0.3 million. In Fiscal 2000, net income was reduced by $0.8
million of failed merger expenses.
Interest expense decreased $0.1 million in the fourth quarter
compared to the same period of last year because of lower debt
levels due to principal payments made during 2001. Excluding
the 2% default rate of interest paid during the current fourth
quarter, interest expense would have declined by $0.2 million.
For the year 2001, interest expense increased $0.2 million from
2000 due to a 2% default rate of interest charged during the
second half of the year, partially offset by lower debt levels.
During the quarter and year ended December 31, 2001, the Company
realized non-cash credit and incurred a non-cash charge of $0.1
million and $0.5 million, respectively, for changes in the fair
value of a derivative interest rate hedge contract between the
beginning and end of each period. These amounts were recorded as
required by statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities
("FAS 133"). By the end of the hedge contract in November 2003,
the amounts recognized as expense in 2001 will be taken back
into income as the contract will then have no further
theoretical value, provided that the contract continues to the
end of the term.
During the quarter, the Company's estimated annual effective tax
benefit rate for Fiscal 2001 was lowered to 20% from 31% as a
result of the Company's quarterly assessment of the relationship
of book/tax timing differences to total expected annual pre-tax
results, which reduced the recorded tax benefit in the first
nine months of the year by 7% or $0.2 million. This amount
decreased the reported net income for the fourth quarter by that
amount.
In the year ended December 31, 2000, the Company recorded an
extraordinary item of $0.2 million (after tax benefit) related
to the write off of deferred financing expenses, and a charge of
$0.3 million (after tax benefit) to reflect the cumulative
effect, net of tax, on January 1, 2000 retained earnings, for
the adoption of SEC Staff Accounting Bulletin 101, "Revenue
Recognition in Financial Statements," as if SAB 101 had been
adopted prior to Fiscal 2000.
Operating Results
In the fourth quarter of 2001, the Company achieved operating
income of $0.9 million as compared to a $0.1 million loss in the
same quarter of the previous year. Operating income for the
full year was $1.9 million in 2001 and $7.0 million in 2000.
For the fourth quarter of Fiscal 2001, the Company reported a
net profit of $5,000 compared to a net loss of $635,000 in the
same period last year.
For the year 2001, the Company incurred a net loss of $1.6
million compared to net income of $1.7 million in the 2000
period. Average diluted shares for the current year declined
0.4 million shares (or 5%) from the same period last year.
EBITDA and Free Cash Flow
For the fourth quarter of 2001, the Company achieved EBITDA
(earnings before interest, taxes, depreciation and amortization)
of $2.8 million compared to $1.5 million in the 2000 period.
The current fourth quarter represented the third consecutive
quarter over quarter increase. For the full years 2001 and
2000, EBITDA was $8.3 million and $12.2 million, respectively.
In the 2001 fourth quarter, free cash flow (EBITDA less interest
and capital expenditures) was $1.3 million representing the
fourth consecutive quarterly increase and a $3.2 million
improvement over the $1.9 negative free cash flow in the fourth
quarter of 2000. For the year 2001, free cash flow was $1.8
million compared to a negative $0.8 million in 2000.
In Fiscal 2002, the Company will adopt Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible
Assets". FAS 142 will require that recorded goodwill be tested
annually for impairment and current amortization of goodwill
will cease. The Company is in the process of evaluating the
impact of FAS 142.
The calculation of pro forma net income (loss) below sets forth
pro forma results for the periods shown excluding non-cash
charges for amortization of goodwill, derivative fair value
change, extraordinary item and the cumulative effects of
adopting SAB 101 and FAS 133.
R. Luke Stefanko, the Company's President and Chief Executive
Officer, stated: "During 2001, we took steps to correct
operating inefficiencies and reduce costs and this process is
continuing. We are concentrating on internal systems, cost
control and building revenue levels by adding key sales
personnel and identifying strategic partnerships that will
contribute to long term revenue growth. We are pleased with our
progress so far."
Haig Bagerdjian, Chairman of the Board, said: "We are looking
forward to achieving profitability in 2002. Steps taken and
implemented are showing steady progress in operating income and
cash flow. Even though gross margin has deteriorated somewhat,
we have gained efficiencies in SG&A which we expect to become
greater in the future. We will continue to look to expand
margins and seek opportunities to increase sales thereby
achieving even better free cash flow performance. Point.360's
traditional business is stable and we expect these trends to
continue."
The Company also indicated that it was negotiating with its
banks to obtain waivers to breaches of certain covenants in its
bank line of credit.
Point.360 is one of the largest providers of video and film
asset management services to owners, producers and distributors
of entertainment and advertising content. Point.360 provides
the services necessary to edit, master, reformat, archive and
ultimately distribute its clients' film and video content,
including television programming, spot advertising, feature
films and movie trailers.
The Company delivers commercials, movie trailers, electronic
press kits, infomercials and syndicated programming, by both
physical and electronic means, to hundreds of broadcast outlets
worldwide.
The Company provides worldwide electronic distribution, using
fiber optics, satellites, and the Internet.
Point.360's interconnected facilities in Los Angeles, New York,
Chicago, Dallas and San Francisco provide service coverage in
each of the major U.S. media centers. Clients include major
motion picture studios such as Universal, Disney, Fox, Sony
Pictures, Paramount, MGM, and Warner Bros. and advertising
agencies TBWA Chiat/Day, Saatchi & Saatchi and Young & Rubicam.
POLAROID: Reorganization Plan Might Surface on April 25
-------------------------------------------------------
The Official Committee of Unsecured Creditors in the chapter 11
cases of Polaroid Corporation, and its debtor-affiliates,
demands that the Debtors produce a thorough analysis of
Polaroid's prospects for a stand-alone reorganization.
About two and a half months ago, Robert S. Brady, Esq., at Young
Conaway Stargatt & Taylor, LLP, in Wilmington, Delaware,
relates, the Debtors prepared very "high level" financial
projections which support the Committee's belief that a quick
sale may not the appropriate answer for the creditors of these
estates. "Since the delivery of such information, the Committee
has repeatedly asked the Debtors to provide them with the
details," Mr. Brady says. However, Mr. Brady complains, the
Debtors keep delaying the delivery of that critical information.
Now, Mr. Brady relates, the Debtors have promised:
(a) to provide the Committee with the analysis,
(b) to fully cooperate with the Committee's efforts to obtain
the information necessary to determine whether a stand-
along plan of reorganization is an appropriate course for
these proceedings, and
(c) to cooperate with the Committee's efforts to obtain
financing for such stand-alone plan, including paying the
reasonable expenses associated with a potential lender's
due diligence analysis of reorganized Debtors.
In light of these promises, the Committee does not object to an
extension of the Exclusive Periods, provided that:
(i) the stand-alone plan analysis and the other information
requested are delivered;
(ii) the Debtors provide the Committee and its advisors with
complete cooperation regarding the analysis of a stand-
alone plan; and
(iii) the Debtors support of action necessary to implement a
stand-alone plan if appropriate.
If these three conditions are not met, Mr. Brady says, the
Committee will exercise its right to seek the termination of the
Exclusive Periods. Mr. Brady tells the Court the Committee
intends to conduct a detailed review of the Stand-Alone Analysis
and formulate an appropriate strategy for these cases.
* * *
Judge Walsh noted the Committee's conditional objection and, in
the absence of any objection to the Debtors' request to extend
the Exclusive Period, granted Polaroid an extension of its
exclusive period during which to propose and file a plan through
April 25, 2002, together with an extension of its exclusive
period during which to solicit acceptances of that plan through
June 24, 2002. (Polaroid Bankruptcy News, Issue No. 11;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PSINET INC: GE Capital Wants Prompt Decisions on Two Contracts
--------------------------------------------------------------
General Electric Capital Corporation asks the Court to compel
the chapter 11 trustee of PSINet Consulting Solutions Holdings,
Inc. (the Debtor in the related case 01-14916) to assume or
reject:
(1) the Stock Purchase Agreement dated March 4, 1999 (the SPA);
and
(2) Master Services Agreement dated March 4, 1999 (the MSA).
The Stock Purchase Agreement (SPA)
On March 4, 1999, pursuant to the SPA, GE Capital sold its
wholly owned subsidiary, GE Capital Consulting, Inc. (GECC) to
Metamor, the predecessor of Holdings. GE Capital received as
consideration $50 million and 1,186,364 shares of Metamor common
stock. Metamor also agreed to pay GE Capital in March 2004 a
guarantee amount. As a result of the acquisition of Metamor by
PSINet, Inc., the Guarantee Amount is the difference between
$65.2 million and the market value of PSINet shares then held by
GE Capital (assuming such market value was less than $65.2
million). As a result of PSINet's bankruptcy, those shares are
worthless. In that case, the Guarantee Amount obligation owed by
PCS is $65.2 million. GE tells the Court that PSINet and
Holdings have acknowledged that.
GE tells the Court that the SPA is an executory agreement since
both parties have material, but as yet unfulfilled, obligations
to each other. For its part, GE Capital has the following
executory obligations, among others:
(1) a continuing obligation not to compete with PCS;
(2) a continuing obligation to indemnify PCS for claims
relating to certain employees and employee benefit plans,
environmental claims, and the conduct of the business and
operations of Holdings between the signing and closing of
the SPA.
Holdings has the following as yet performed obligations:
-- to pay GE Capital the Guarantee Amount;
-- remains prohibited from making certain stock sales or
asset transfers without first obtaining an agreement by the
asset purchaser or stock buyer to assume or be primarily liable
for Holdings' Guarantee Amount obligation to GE Capital.
Before the Trustee was appointed, Holdings filed a motion for
rejection of the SPA and subsequently withdrew the motion
without prejudice.
Master Services Agreement
On March 4, 1999, Metamor and GE Capital entered into the MSA,
which obligates GE Capital to purchase and Metamor to provide,
inter alia, certain information technology, consulting, project
development, project management and other services. Among other
things, the MSA obligates GE Capital to purchase information
technology services in order to satisfy revenue commitments of
$34 million, $35 million and $36 million in the contract years
beginning June 15, 1999, June 15, 2000 and June 15, 2001,
respectively. GE Capital is required to make shortfall payments
of 20% of the amount by which revenues in such years do not
equal at least such amounts.
Obligations have yet to be performed by either party to the MSA
for the third contract year.
GE Capital's Argument
GE Capital asks the Court to compel the Trustee to assume or
reject the contracts on the following bases:
(1) Holdings has had sufficient time to appraise its financial
situation and the potential value of its assets, given that it
has decided to wind-up its financial affairs and liquidate its
business as of April 2001 and the company's representatives
have been evaluating its financial condition ever since.
(2) Holdings is liquidating its business and has sold all but a
small portion of its operating assets.
(3) The Committee has had sufficient time to consider whether to
accept or reject the SPA and the MSA, given that it was
appointed on September 26, 2001. Some of its members demanded
concessions at a time when GE Capital's motion was taken off
the calendar for the parties to discuss rejection by
stipulation. GE found the demands unacceptable and placed its
motion back on calendar.
(4) The SPA and MSA are clearly executory contracts because both
sides have substantial unperformed obligations under the
contracts.
(5) Further delay will be prejudicial to GE Capital because the
damages available to GE under the contracts will not
compensate it for the harm it will incur from delay in
accepting or rejecting the Agreements. Under the Non-Compete
and Non-Solicitation provisions of the SPA, GE Capital and its
subsidiaries must refrain from selling consulting services of
a similar nature to the services of Holdings' former
technology consulting business. As to the MSA, until the
Trustee either elects to assume or reject, GE Capital remains
in the dark about whether the Trustee will insist that GE
purchase services pursuant to the mechanism of that agreement.
(6) Neither the SPA nor the MSA are essential to Holdings'
business, given that Holdings is not an ongoing business and
has no plans for reorganization. (PSINet Bankruptcy News,
Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
SAFETY-KLEEN: Selling Chemical Services Div. to Harbor Clean
------------------------------------------------------------
David S. Kurtz, Esq., at Skadden, Arps, Slate, Meagher & Flom,
relates that Safety-Kleen Corporation mounted a significant
effort to identify and contact potential purchasers. Lazard
Freres & Co., LLC, contacted nearly 100 potential strategic and
financial buyers. Of that population, 32 potential buyers
signed confidentiality agreements, received a confidential
offering memorandum, and were given access to other confidential
materials.
Clean Harbors, Inc., after completing substantial due diligence,
presented the Debtors with an offer to acquire the Chemical
Services Division for $311,270,000, consisting of:
$265,000,000 for [to be identified] assumed liabilities; and
$46,270,000 in cash, payable at the Closing.
Under the terms of a Purchase Agreement with Safety-Kleen
Services, Inc., dated February 22, 2002, Clean Harbor will
acquire substantially all of the Chemical Services Division's
assets and assume executory contracts it thinks it needs to.
Specifically, Clean Harbor will acquire:
(a) all equity interests in the Chemical Services Division
subsidiaries;
(b) all real, personal and intangible assets related to the
Chemical Services Division, including all accounts
receivable;
(c) all rights in relevant Customer Service Agreement;
(d) all equipment, computers, furniture, vehicles, etc.;
(e) all letters patent, know-how licenses and other
intellectual property, including trade and service
marks;
(f) all warranty-related rights and claims;
(g) all Owned Real Property;
(h) to the extent transferable, all licenses, permits,
authorizations and approvals from any Governmental
Entity;
(i) all bank accounts;
(j) all prepaid items;
(k) all books and records;
(l) all of the rights, properties or assets that are listed
on a maybe-to-be-filed document labeled Schedule
1.1(b)(xi);
(m) inventory and spare parts;
(n) goodwill related to the Chemical Services Division;
(o) to the extent assignable, rights of indemnification from
all non-affiliated third parties for liabilities and
obligations relating to the Business or the Acquired
Assets; and
(p) the Corporate Seal and Minutes for each Transferred
Subsidiary.
Clean Harbor will not acquire:
(1) cash;
(2) paid or written-off accounts receivable;
(3) terminated agreements;
(4) any agreement not specifically assumed;
(5) claims and causes of action arising under Chapter 5 of
the Bankruptcy Code;
(6) other claims, rights or causes of action other than
those related to the Assumed Liabilities;
(7) the rights of any acquired subsidiary under the
Purchase Agreement;
(8) any asset or capital stock of any direct or indirect
subsidiary of the Seller which owns or operated the
Pinewood Landfill;
(9) Safety-Kleen Services' Corporate Seal and Minutes;
(10) insurance contracts, surety bonds, collateral bonds,
letters of credit, cash trusts, cash deposits or the
proceeds thereof;
(11) any right, property or asset that is listed or
described in a maybe-to-be-filed document labeled
Schedule 1.2(l);
(12) Safety-Kleen's name;
(13) Tax Refunds;
(14) any of Safety-Kleen's assets not specifically included
in the sale;
(15) any amounts owed to the Branch Sales and Services
Division;
(16) specified surety and performance bonds;
(17) specifically excluded Real Property;
(18) a promissory note from Cameron-Cole LLC dated June 15,
2001;
(19) except with respect to Transferred Employees, any
Employee Benefit Plan.
Under the Purchase Agreement, the Debtors agree to a three-year
covenant not to compete with Clean Harbor or steal its employees
or customers.
C. Michael Malm, Esq., at Davis, Malm & D'Agostine, P.C. in
Boston represents Clean Harbor in connection with this
transaction. (Safety-Kleen Bankruptcy News, Issue No. 27;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SERVICE MERCHANDISE: Court Okays De Minimis Asset Sale Protocol
---------------------------------------------------------------
Service Merchandise Company, Inc., and its debtor-affiliates
obtained Court approval for procedures to sell certain assets in
connection with the wind-down of their business operations.
The procedures referred to are for assets that have a value of
less than $250,000 per item or the "De Minimis Assets". The
Debtors believe it is in the best interests of the estates,
creditors and other stakeholders to immediately commence the
winding down of their businesses and dispose of their assets in
an orderly fashion so as to maximize recoveries for their
creditors.
For the sale of De Minimis Assets outside the ordinary course of
business, these procedures have been approved in lieu of a
hearing for each sale:
(i) the Debtors will give notice of each proposed sale to:
(a) the United States Trustee;
(b) counsel to the Committee;
(c) counsel for the post-petition lenders; and,
(d) any known holder of a lien, claim or encumbrance
against the specific property to be sold.
The sale notice shall be served by facsimile, so as to
be received by 4:00 p.m. on the date of service. The
sale notice shall specify:
(a) the assets to be sold;
(b) the identity of the proposed purchaser, including a
statement of any connection between the proposed
purchaser and the Debtors; and,
(c) the proposed sale price.
(ii) the notice parties shall have 5 business days after the
notice is sent to object to, or request additional time
to evaluate the proposed transaction. If counsel to the
Debtors receive no written objection or written request
for additional time prior to the expiration of such
five-day period, the Debtors shall be authorized to
consummate the proposed sale transaction and to take
such actions as are necessary to close the transaction
and obtain the sale proceeds.
(iii) if a notice party timely objects to the proposed
transaction within 5 business days after the notice is
sent, the Debtors and such objecting notice party shall
use good faith efforts to consensually resolved the
objection. If the Debtors and the objecting notice
party are unable to achieve a consensual resolution, the
Debtors will not take any further steps to consummate
the proposed transaction without first obtaining
Bankruptcy Court approval of the proposed transaction
upon notice and a hearing;
(iv) any valid and enforceable liens shall attach to the net
proceeds of the sale, subject to any claims and defenses
the Debtors may possess with respect thereto, and any
amounts in excess of such liens shall be utilized by the
Debtors in accordance with the terms of the Debtors'
post-petition financing agreement; and,
(v) nothing in these procedures shall prevent the Debtors,
in their sole discretion, from seeking Bankruptcy Court
approval at any time of any proposed transaction upon
notice and a hearing.
The proposed procedures provide an efficient process for
disposing of assets of lesser value and at the same time
affording parties with a particular interest in such assets or
the proceeds with an opportunity to object. The expedited
procedure permits the Debtors to be responsive to the needs of
interested purchasers thus preventing lost sales due to delay.
(Service Merchandise Bankruptcy News, Issue No. 26; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
SIMON TRANSPORTATION: Files for Chapter 11 Relief in Utah
---------------------------------------------------------
Simon Transportation Services Inc. (Nasdaq: SIMN) announced that
it and its subsidiary, Dick Simon Trucking, Inc. have filed
voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code.
The filings, in the United States Bankruptcy Court for the
District of Utah, Central Division, in Salt Lake City, indicate
the Company's intent to complete the reorganization through a
sale of assets on an expedited basis. A sale of assets is
considered most appropriate because of a liquidity crunch and
lack of sufficient post-petition, debtor-in-possession (DIP)
financing for a long-term reorganization. The Company continues
to operate its business and serve customers as usual as it
solicits interested bidders.
The Company's decision to seek reorganization was based on a
combination of economic, industry, and Company-specific factors.
As discussed in the Company's prior press releases and SEC
filings, poor revenue production, high insurance costs, and
significant disruption in the new and used equipment markets,
among other factors, have created substantial losses.
Confronted with these conditions the Company continued to
experience negative cash flow and also failed to make adequate
progress on refinancing its debt and lease obligations. With
substantially all assets already pledged as collateral, the
Company lacked the liquidity to continue operating outside of
Chapter 11 protection.
During the reorganization period, the Company plans to reduce
the size of its tractor and trailer fleet by as much as 40%,
beginning immediately. The Company intends to pursue the fleet
reduction in an orderly manner over the next several weeks,
matching available trucks to the most desirable customer
accounts, traffic lanes, and regions. Fully implemented, the
plan would result in a fleet of approximately 1,500 tractors and
2,200 trailers. The Company expects to reduce its employee base
in conjunction with the reduction in fleet size.
Chief Executive Officer, Jon Isaacson, said, "As you can
imagine, this is a difficult and painful decision. We decided
to reorganize only after months of struggling to increase the
cash flow of the business and the infusion of significant
capital by our majority stockholder. Unfortunately, our sources
of liquidity dried up before we could turn around the operations
in the face of challenging industry conditions and an economy in
recession. We very much regret the negative effect the filing
will have on some of our employees, vendors, and other business
partners, as well as on all of our stockholders. We are
convinced, however, that we have a core group of strong business
that will support a leaner and more focused operation going
forward. We are booking loads and delivering the quality
service our customers expect and fully anticipate emerging from
this process with much of the operation intact."
The Company outlined several other aspects of the filing.
Employees are being paid in the usual manner and their health
and other welfare benefits are expected to continue without
disruption. The Company's 401(k) plan, a defined contribution
retirement savings plan, is maintained by a bank independent of
the Company. The employees' accounts are protected by federal
law and are not subject to the bankruptcy filing. The Company
will continue to administer the plan as usual, although the
Company's stock will no longer be an investment option.
During the reorganization process, the Company's vendors,
suppliers, and other business partners will be paid under normal
terms for goods and services provided during the reorganization.
The Company filed a number of motions with the Bankruptcy Court
in support of its employees, customers, and other stakeholders.
These include requests to preserve the Company's insurance
coverage from expiring, obtain interim financing authority, and
retain legal and financial professionals to support the
Company's reorganization cases.
Simon Transportation is a truckload carrier providing
nationwide, predominantly temperature-controlled transportation
services for major shippers. The Company's Class A Common Stock
trades on the Nasdaq National Market under the symbol "SIMN".
SIMON TRANSPORTATION: Case Summary & Largest Unsecured Creditor
---------------------------------------------------------------
Lead Debtor: Simon Transportation Services Inc.
5175 West 2100 South
West Valley City, UT 84120
Bankruptcy Case No.: 02-22906
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Dick Simon Trucking, Inc. 02-22907
Type of Business: Simon Transportation Services, Inc. is a
truckload carrier that specializes in premium
service, primarily through temperature-
controlled transportation, predominately for
major shippers in the U.S. food industry.
Chapter 11 Petition Date: February 25, 2002
Court: District of Utah
Judge: Glen E. Clark
Debtors' Counsel: Scott J. Goldstein, Esq.
Spencer Fane Britt & Browne LLP
1000 Walnut, Suite 1400
Kansas City, MO 64106
816-474-3216
Fax : 816-474-3216
Weston L. Harris, Esq.
Parsons Davies Kinghorn & Peters
185 South State Street
Suite 700
Salt Lake City, UT 84111
(801) 363-4300
Total Assets: $132,242,081
Total Debts: $135,898,793
A. Simon Transportation's Largest Unsecured Creditor:
Entity Claim Amount
------ ------------
Ambest One Check $138,000
B. Dick Simon Trucking, Inc.'s 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Eastman Kodak Company $923,000
Cindy Palmer
1600 Lexington Avenue
Building 605
Rochester, NY 14652
(176) 588-5377
Michelin North America $900,000
Stan Schafeitel
135 S LaSalle Street
Department 1762
Chicago, IL 60674
(801) 244-2008
Imperial Premium Finance $540,000
PO Box 780
Morrisville, NC 27560
CSR
Department 7614
Los Angeles, CA 90084-7614
(800) 791-7901
Tire Distribution Systems $379,000
F608 Space Park South
Nashville, TN 37211
(615) 833-7900
Thermo King SVC Inc $339,000
Jaymie
75 Remittance Drive Street
Chicago, IL 60675
(952) 886-6014
Qualcomm $311,000
Pam
5775 Morehouse Drive
San Diego, CA 92121-1714
(858) 661-5000
Genesis Insurance Company $242,000
Bridgestone USA Inc $200,000
First Insurance Funding $178,000
Ambest One Check $138,000
Glaxo (CO) Fedex Supply Chain $125,000
Security Insurance Company $107,000
Atlanta Freightliner $85,000
Exxon Company USA $75,000
Utah State Tax Commission $73,000
Sierra Freightliner $70,000
Gallagher Basset Service $68,000
Oregon Dept. of Transportation $68,000
Rieskamp Equipment $64,000
Greyhound Lines Inc $60,000
STARTEC GLOBAL: Wins Court's Nod to Extend Lease Decision Period
----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Maryland approves
the extension sought by Startec Global Communications
Corporation, of the time period within which to decide whether
to assume, assume and assign, or reject its unexpired non-
residential real property leases. The Court rules that the time
for the Debtors to make those decisions will run through the
date of entry of a final non-applicable order confirming the
Debtor's plan of reorganization or liquidation.
Startec Global Communications Corporation provides international
phone service to ethnic customers in emerging economies.
Together with two of its affiliates, the Company filed for
chapter 11 protection on December 14, 2001. Philip D. Anker,
Esq., represent the Debtors in their restructuring efforts.
STEEL HEDDLE: Court Extends Lease Decision Period Until March 26
----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware extends
the time within which Steel Heddle Group and its debtor-
affiliates must decide whether to assume, assume and assign, or
reject unexpired nonresidential real property leases. The
Debtors now have until March 26, 2002 to make those decisions.
Steel Heddle Group, Inc., a pioneer and innovator in weaving
machine accessories for 103 years, filed for Chapter 11
protection on August 28, 2001 in the Delaware Bankruptcy Court.
Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young &
Jones, represents the Debtors in their restructuring effort. In
its schedules of assets and liabilities filed last September 25,
2001, the company listed $0 in assets and $126,812,645 in debt.
As of July, Steel Heddle Group and its bankrupt affiliates
reported $64,300,000 in assets and $176,000,000 in debt.
SWEET FACTORY: Committee Signing-Up Saul Ewing as Co-Counsel
------------------------------------------------------------
The Official Committee of Unsecured Creditors appointed in the
Chapter 11 cases involving Sweet Factory Group and debtor-
affiliates applies to the U.S. Bankruptcy Court for the District
of Delaware for authority to employ Saul Ewing LLP as its local
Co-Counsel, nunc pro tunc to November 29, 2001.
The Committee believes it will greatly benefit from Saul Ewing's
experience and knowledge in the field of creditors' rights and
business reorganizations under chapter 11 of the Bankruptcy
Code. Additionally, because of the Firm's proximity to the
Court and its ability to respond quickly to emergency hearings
and other emergency matters in the Court, their retention will
be most efficient and cost-effective.
Saul Ewing will bill the estates at its customary hourly rates:
Mark Minuti (partner) $345
Donald J. Detweiler (special counsel) $260
Tara Lattomus (associate) $245
Jeremy W. Ryan (associate) $235
Pauline M. Zermer (paralegal) I $125
Annmarie Stergakos (paralegal) l $125
Veronica Parker (case management clerk) $ 50
Specifically, Saul Ewing will:
(a) provide legal advice with respect to the Committee's
rights, powers and duties in these cases;
(b) prepare on behalf of the Committee all necessary
applications, answers, responses, objections, forms of
orders, reports and other legal papers;
(c) represent the Committee in any and all matters
involving contests with the Debtors, alleged secured
creditors, and other third parties;
(d) assist the Committee in its investigation and analysis
of the Debtors and the operations of the Debtors'
businesses; and
(e) perform all other legal services for the Committee
which may be necessary and proper in these proceedings.
Sweet Factory Group Inc. filed for chapter 11 protection on
November 15, 2001. Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl Young & Jones represents the Debtors in their
restructuring efforts.
SWEET FACTORY: Court Approves Robert L. Berger as Claims Agent
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approves
the retention of Robert L. Berger & Associates, LLC as noticing,
claims and balloting agent for the Clerk of the Bankruptcy Court
on the chapter 11 cases of Sweet Factory Group, Inc. and its
debtor-affiliates.
Berger is expected to serve as the Court's notice agent to mail
certain notices to the estates' creditors and parties-in-
interest; provide computerized claims, claims objections and
balloting database services; and provide expertise, consultation
and assistance with claim and ballot processing and with other
administrative information related to the Debtors' bankruptcy
cases.
Sweet Factory Group Inc. filed for chapter 11 protection on
November 15, 2001 in the U.S. Bankruptcy Court for the District
of Delaware. Laura Davis Jones, Esq., at Pachulski, Stang,
Ziehl Young & Jones represents the Debtors in their
restructuring efforts.
TALK AMERICA: S&P Affirms Junk Rating Following Exchange Offer
--------------------------------------------------------------
The ratings on competitive local exchange carrier (CLEC) Talk
America Holdings Inc., remained on CreditWatch with negative
implications on Feb. 22, 2002, following the company's offer to
exchange its outstanding 4.5% convertible subordinated notes due
September 2002 and 5.0% convertible subordinated notes due
December 2004 with either new debt or a combination of debt and
cash.
Credit Rating: 'CC' Watch Negative
This would be a distressed exchange and, therefore, considered a
default when executed. Standard & Poor's will lower the
corporate credit rating and the ratings on the two issues to 'D'
when the exchange takes place.
Although holders of the outstanding notes have the option of
exchanging them on a dollar-for-dollar basis for new debt that
pays higher coupon and matures in August 2007, Standard & Poor's
views the exchange, when consummated, as a default because
recovery is deferred beyond the original maturity date.
Talk America had total debt outstanding of $166 million at year-
end 2001. The company provides bundled long distance, local, and
vertical services mainly to consumers. Its network is based
mostly on leased lines from interexchange carriers and unbundled
network element platform (UNE-P) from regional Bell operating
companies.
TANDYCRAFTS: Seeks to Enlarge Lease Decision Period to March 15
---------------------------------------------------------------
Tandycrafts, Inc. and its debtor-affiliates submit their second
motion to extend their lease decision period. The Debtors ask
the U.S. Bankruptcy Court for the District of Delaware to
enlarge the time period within which they must decide to assume,
assume and assign, or reject unexpired non-residential real
property leases through March 15, 2002.
Since the first extension was obtained, the Debtors have devoted
substantial time to stabilizing their day-to-day operations,
obtaining consent to their use of cash collateral, exploring
additional asset divestitures, obtaining a bar date for the
filing of pre-petition proofs of claim, obtaining debtor-in-
possession financing and attending to the multiple other issues
encountered in these Chapter 11 cases. The Debtors have also
developed preliminary and revised long-term business plans,
which they have shared with their pre-petition secured lenders
and the Committee. The time expended in connection with these
efforts and due to the fact that plan negotiations or
alternative transaction proposals are ongoing, the Debtors are
not able to complete their examination of the Leases to
determine which Leases should be assumed or rejected.
Tandycrafts, a leading manufacturer and marketer of picture
frames, mirrors and other wall decor products, filed for chapter
11 protection on May 15, 2001. Mark E. Felger, Esq., at Cozen
and O'Connor, represents the company in its restructuring
efforts. When the Company filed for protection from its
creditors, it listed assets of $64,559,000 and debts of
$56,370,000.
TOWER TECH: Emerges from Chapter 11 & New Shares Start to Trade
---------------------------------------------------------------
Tower Tech, Inc. (OTCBB:TRTC), a national manufacturer and
seller of innovative modular cooling towers, announced its
successful reorganization following confirmation of its plan of
reorganization by the U.S. Bankruptcy Court last November.
On December 19, 2000, Tower Tech had filed a voluntary petition
in bankruptcy in the United States Bankruptcy Court for the
Western District of Oklahoma. The Company's reorganization
became effective February 1, 2002.
Prior to February 1, 2002, there were 4,104,740 shares of the
Company's common stock, par value $.001 per share, issued and
outstanding and held by approximately 70 holders of record. As
of February 1, 2002, the Company was authorized to issue
10,000,000 shares of common stock, par value $.01 per share, of
the newly reorganized Tower Tech. The Company's plan of
reorganization provides that each holder of Tower Tech's old
common stock will receive a warrant certificate entitling each
such owner to purchase approximately 0.02826 of a share of the
Company's new common stock for each share of old common stock
held by such owner. The purchase price for one share of new
common stock under each warrant will be $3.00. The warrants will
expire on January 30, 2007. Holders of old common stock will
receive a transmittal letter from Tower Tech's transfer agent,
UMB Bank, N.A., under which each holder will be required to
tender the certificate representing its shares of old common
stock in exchange for a warrant.
The trading symbol for Tower Tech's old common stock was TTMT.
The old common stock was delisted and ceased trading on The
Nasdaq Small-Cap Market on August 18, 2000, after which time the
old common stock was quoted on the over-the-counter bulletin
board. The old common stock ceased being quoted on February 1,
2002. The symbol for Tower Tech's new common stock will be TRTC
and the symbol for the warrants will be TRTCW when trading in
those securities are quoted on the over-the-counter bulletin
board and trades are permitted to be settled "regular way."
According to Charles D. Whitsitt, the Company's Chief Financial
Officer, "The reorganization plan provides for each of the
approximately 300 persons or entities who is an allowed general
unsecured creditor to receive a pro rata distribution of 900,000
shares of the new common stock, based on the amount of a
creditor's claim compared to the total amount of all such claims
against the Company. For example, if a creditor has an allowed
general unsecured claim of $1,000,000 and there is a total of
$24,000,000 of such claims, that creditor would be entitled to
receive 37,500 shares of new common stock. The total amount of,
and the identities of all the holders of, the allowed general
unsecured claims will not be known until approximately April 1,
2002 because, among other reasons, some claims are disputed.
Tower Tech will hold back approximately 350,000 shares of new
common stock and, once such disputes are resolved, we will
distribute these 350,000 shares among the holders of allowed
general unsecured claims. Also, we have changed our fiscal year
end to January 31 to reflect our 'fresh start' after completing
the reorganization."
In a strategic move aimed to rebuild brand loyalty the Company
has restarted production of its previous line of premium
fiberglass cooling towers. It has also moved to reduce costs by
outsourcing production of most component parts. Said Robert C.
Brink, Chief Executive Officer and member of the reorganized
Company's board of directors, "We are continually seeking ways
to become more competitive and efficient and our recent
implementation of lean enterprise methods and a comprehensive
quality management process is expected to improve customer
satisfaction and reduce warranty expense. With an estimated
current backlog of $4.4 million, it appears that we are already
seeing a resurgence of customer interest in our technology.
Tower Tech received a large order recently from Trigen-Cinergy
for a wood pulp-to-energy plant in Minnesota that was visited
last year by President George W. Bush while promoting
environmental sensitivity. Cinergy, which purchased 60 Tower
Tech cooling tower modules in 2000 for another power generating
station, believes Tower Tech cooling towers meet the stringent
environmental and efficiency requirements for this high profile
project. Our backlog also includes projects for other repeat
customers, including a large order scheduled to be shipped to a
major U.S. university by March."
Tower Tech holds U.S. and international patents on innovative
water cooling tower technologies which it began developing in
1992 for its two product lines: the factory-assembled reinforced
fiberglass TTGE Series modular cooling tower, and the field-
erected reinforced concrete TTCT Series modular cooling tower.
Tower Tech is one of nine companies worldwide that have obtained
the Cooling Technology Institute's thermal certification for
factory-assembled cooling towers. Tower Tech serves the utility,
industrial and air conditioning segments of the cooling tower
market. Management believes the Company's cooling towers cost
less to own than conventional cooling towers because they
improve plant energy efficiency, consume less freshwater,
require less maintenance, and are environmentally friendly. To
date, Tower Tech and its global distribution network have sold
more than two thousand of the Company's cooling tower modules
valued at more than $125 million.
TRAILMOBILE CANADA: Shareholder Equity Deficit Tops $11.5MM
-----------------------------------------------------------
Trailmobile Canada Limited announced its first quarter results
for the three months ended December 31, 2001.
Revenues in the first quarter of fiscal 2002 totaled $16.4
million and represent a $0.9 million increase over the fourth
quarter of fiscal 2001. First quarter revenues declined by $5.0
million when compared to the first quarter of fiscal 2001. The
lowest demand for dry van trailers in ten years continues to put
pressure on both revenues and gross profit margins. A slight
improvement in gross profit margins for the first quarter of
fiscal 2002 was the result of a higher percentage specialty to
fleet production. The Company recorded a net loss for the first
quarter of $2.8 million. The majority of the loss is the result
of the Chapter 11 bankruptcy filing in the USA by Trailmobile
Trailer LLC. A $2.4 million provision was charged in the quarter
relating to monies due from Trailmobile Trailer Canada Ltd, a
subsidiary of Trailmobile Trailer LLC.
The Company expects the industry demand for trailers to remain
weak over the near term with increased order demand in the later
part of fiscal 2002.
On February 1, 2002 the Company's majority shareholder announced
a cash offer to purchase all the outstanding common shares of
the Company. The take-over bid was filed February 1, 2002 and
the offer expires at 4:00pm on March 28, 2002.
Trailmobile Canada Limited manufactures dry-freight trailers for
commercial trucking customers in Canada and the United States.
The company is majority owned by Chicago-based Trailmobile
Corporation. Trailmobile is one of North America's largest
trailer manufacturers, with an extensive sales and distribution
network in both the USA and Canada. Trailmobile Canada Limited's
head office and manufacturing facility are located in
Mississauga, Ontario.
Management's Discussion And Analysis
Revenues in the first quarter of fiscal 2002 were slightly
higher than the fourth quarter of fiscal 2001 but substantially
lower when compared to the first quarter of fiscal 2001. The
lowest demand for dry van trailers in ten years continues to put
pressure on revenue and gross profit margins. A higher
percentage specialty to fleet production, on a quarter to
quarter comparison resulted in a slight improvement in gross
profit margins for the first quarter of fiscal 2002. The Company
expects the industry demand for trailers to remain weak over the
near term with increased order demand in the later part of
fiscal 2002.
Revenue
Revenues for the three months ended December 31, 2001 were $16.4
million. This represents a decrease of $5.0 million or 23.4%
when compared to revenues for the three months ended December
31, 2000. The decrease is largely a result of the economic slow
down which has translated to a decrease in the overall demand
for transport trailers. When compared to the fourth quarter of
fiscal 2001, revenues for the first quarter of fiscal 2002 were
higher by $0.9 million. This is mainly due to the Chapter 11
bankruptcy filing of Trailmobile Trailer LLC in the USA, which
resulted in increased production for the Company as well as a
higher specialty to fleet production mix.
Gross Profit
Gross profit for the three months ended December 31, 2001 was
$0.6 million or 3.9% of revenues. This represents an increase of
$0.1 million when compared to the gross profit for three months
ended December 31, 2000. The slight improvement in gross profit
as a percent of revenues is mainly due to the volume mix. A
larger proportion of specialty trailers were produced in the
first quarter of fiscal 2001 when compared to the first quarter
of fiscal 2000.
General & Administrative Expenses (G&A)
General and administrative expenses totaled $2.7 million or
16.8% of revenues, an increase of $2.0 million when compared to
the three months ended December 31, 2000. The increase in G&A is
the result of a $2.4 million provision charged in the first
quarter of fiscal 2002. The provision is a result of the Chapter
11 bankruptcy filing of Trailmobile Trailer LLC. Ongoing cost
cutting initiatives partially offset the $2.4 million charge in
the quarter.
Amortization
Amortization charges for the three months ended December 31,
2001 totaled $0.3 million or 1.7% of revenues, a marginal
decrease of $53,000 when compared to the three months ended
December 31, 2000. The deferral of capital purchases due to the
slowing economic conditions resulted in a lower amortization
charge for the quarter.
Financing
Financing charges for the three months ended December 31, 2001
were $0.4 million or 2.2% of revenues, a decrease of $0.1
million when compared to the three months ended December 31,
2000. The decrease in financing charges is mainly due to lower
borrowing levels and rates.
Liquidity And Capital Resources
As at December 31, 2001 the company had a working capital
deficiency of $13.8 million. This represents an increase in
working capital deficiency of $3.2 million when compared to
December 31, 2000. The increase in working capital deficiency is
the result of losses in fiscal 2001 of $2.4 million; the $2.4
million provision in the first quarter of fiscal 2001 along with
a partial offset of $1.0 million resulting from the August 2001
rights offering. Subsequent to the Chapter 11 filing by
Trailmobile Trailer LLC and the $2.4 million charge in the first
quarter of fiscal 2002, the Company completed a financing
arrangement with Tyco Capital, whereby the company would be
permitted a temporary over-advance on its line of credit. One of
the conditions for the re-financing arrangement includes equity
financing which is to take place no later than April 2002.
Risk And Uncertainties
Trailmobile Canada Limited faces a number of risks and
uncertainties, including:
Competition
Trailmobile Canada Limited faces competition from numerous truck
trailer manufacturers located in both Canada and the United
States, some of which have greater financial resources and
higher revenues. Certain competitive factors and market
conditions may affect Trailmobile Canada's ability to compete
with these companies.
Business Cycle
The truck trailer manufacturing industry is dependant on the
demand for its products from the trucking industry. Unit sales
of new truck are subject to cyclical variations. Historically,
periods of economic recession in Canada and the United States
have caused declines in the demand for new truck trailers
Distributors
Trailmobile Canada Limited's success depends on the ability of
it channel partners to sell its products.
Financing
Trailmobile Canada Limited is dependant upon Tyco Capital to
finance its inventory and accounts receivable. In addition,
Trailmobile Canada Limited is also dependant on Trailmobile
Corporation in the USA to effectively finance its operations,
which includes Trailmobile Trailer Canada Ltd, a subsidiary of
Trailmobile Trailer LLC. Trailmobile Trailer LLC filed for
Chapter 11 bankruptcy protection on December 12, 2001.
Suppliers
Trailmobile Canada Limited relies on several key suppliers for
materials. Delays in receipt of these materials may affect the
Company's ability to fulfill customer orders. Subsequent to the
Chapter 11 bankruptcy filing by Trailmobile Trailer LLC, vendors
implemented stringent payment terms, which put pressure on the
Company's cash flow.
Currency fluctuations
A portion of Trailmobile Canada Limited's transactions are in US
funds and are therefore subject to exchange rate fluctuations
that may have a positive or negative affect on the Company's
financial statements.
Commodity prices
Certain raw material costs are dependent on worldwide commodity
pricing. Any increase in commodity costs may translate to
increases in raw material input costs, which may or may not be
passed on to customers due to the competitive landscape.
Outlook
The transportation industry continues to be affected by the
prolonged economic down turn, which is now approaching two
years. Overall industry volumes in fiscal 2001 were lower by 50%
when compared to fiscal 2000. This is in addition to the 35%
decrease in industry volumes recorded in the previous fiscal
year. By the end of fiscal 2001, industry backlog and order
activity had fallen to below volume levels recorded during the
1990-1991 recession.
The Chapter 11 filing by Trailmobile Trailer LLC has resulted in
higher production rates and order backlog at Trailmobile Canada
Limited by 50% and five-fold respectively. With the support of
its valued employees, customers and vendors, Trailmobile Canada
Limited remains committed to servicing the North American
marketplace.
As of December 31, 2001, the company's total liabilities
exceeded total assets by about $11.5 million.
USG CORP: Wants Until August 30 to Make Lease-Related Decisions
---------------------------------------------------------------
Paul N. Heath, Esq., at Richards, Layton & Finger, tells Judge
Newsome that USG Corporation needs more time to decide whether
it should assume, assume and assign, or reject its unexpired
nonresidential real property leases. Pursuant to 11 U.S.C. Sec.
365(d)(4), the Debtors ask that the deadline be extended to
August 30, 2002, without prejudice to their right to seek
further extensions.
Mr. Heath relates that the Debtors have approximately 215 Real
Property Leases. Immediately following the Petition Date, the
Debtors focused on completing a smooth transition to operations
in chapter 11, as well as fulfilling various administrative and
reporting obligations arising in connection with the
commencement of these cases. Since then the Debtors have been
busy addressing numerous other issues, such as asset sales,
implementation of a key employee retention plan, and most
importantly, devising a strategy to address the approximately
100,000 pending asbestos claims against Debtor United States
Gypsum Company. He stresses that there just hasn't been much
time to analyze the Real Property Leases, or to discussing such
issues with their relevant creditor constituencies.
He continues that since the Real Property Leases are important
to the Debtors' ongoing operations and given the fact that a
number of the leases are at issue, the Debtors believe they are
at risk of "prematurely and improvidently" assuming or rejecting
leases without necessary evaluations, determinations,
negotiations and discussions with the relevant landlords and
creditor constituencies.
Mr. Heath submits that the Debtors believe that cause exists for
an extension. He offers that, in Judge Newsome's District, such
extensions are uniformly granted to large and complex cases like
the Debtors'. He states that, in some cases, courts have
granted debtors extensions under Section 365(d)(4) of the
Bankruptcy Code through the time of a reorganization plan's
confirmation.
Pending the Debtors' election to assume or reject the Real
Property Leases, Mr. Heath assures Judge Newsome that the
Debtors will perform all of their obligations arising from and
after the Petition Date in a timely fashion, including payment
of post-petition rent due as required by Section 365(d)(3) of
the Bankruptcy Code. He contends that there should be little or
no prejudice to the landlords as a result of the requested
extension, as the aggregate amount of prepetition arrearages
under the Real Property Leases is relatively small. Rent, under
many of the leases, is often paid in advance. As of the
Petition Date there was only a minimal amount of accrued but
unpaid rent under such leases. (USG Bankruptcy News, Issue No.
19; Bankruptcy Creditors' Service, Inc., 609/392-0900)
VENTURE CATALYST: Will Delay Financial Results Filing with SEC
--------------------------------------------------------------
As reported to the SEC, Venture Catalyst, Inc., explains as to
why it will be late in filing its financial information with
that Commission, thus:
"The Company is in the process of discussing with its audit
committee and its outside independent accountants whether to
record an additional loss in connection with its current
consulting agreement with the Barona Group of Capitan Grande
Band of Mission Indians. If a decision is made to record an
additional loss, additional disclosure would be required in the
narrative portions of the Form 10-QSB, our financial statements
and in footnotes to the financial statements. As a result, the
Company is unable to file its Form 10-QSB on the prescribed due
date without unreasonable effort or expense."
Venture Catalyst expects a significant change in its results
from operations for the three and six months ended December 31,
2001 as compared to the same periods ended December 31, 2000.
Set forth below is information relating to the revenues and
certain costs for the applicable periods. The resolution of
whether to include an additional loss in connection with the
Barona consulting agreement may result in a material increase in
costs disclosed.
Results for the Three Months Ended December 31, 2001
Consolidated revenues for the three months ended December 31,
2001 were zero as compared to $2,008,000 during the same period
last year. Revenues for services provided to the Barona Tribe
for the current period were zero as compared with $1,553,000
earned during the same period last year. Although revenues at
the Barona Casino exceeded expenses for the three month period
ended December 31, 2001, the level of revenues were not
sufficient under the formula used to calculate the Company's
consulting fee to offset the effect of the significant capital,
construction, interest and operating expenses incurred at the
Barona Casino. These expenses primarily relate to the completion
of Barona Casino's interim expansion, the expenses associated
with the ongoing development of the Barona Valley Ranch and the
increase of debt by the Barona Tribe for use in the expansion
project. As previously reported, based upon financial
projections provided to Venture Catalyst by the Barona Casino in
August 2001, Venture believes that based upon the current
formula for calculating its compensation under the consulting
agreement, no consulting fees will be paid to it under the
existing agreement through March 2004, the end of the term of
the consulting agreement.
Revenues for services provided to clients other than the Barona
Tribe for the three months ended December 31, 2001 were the
Company's decision to restructure its business and realign its
operations to focus solely on the Native American gaming
industry. Its decision, made in the second quarter of the fiscal
year ended June 30, 2001, was in response to the reduction in
demand for its technology and Internet services.
During the three months ended December 31, 2001, cost of
services decreased 44% to $1,168,000 from $2,103,000 and general
operating and administrative expenses decreased 62% to $859,000
from $2,253,000 during the same period last year. Amortization
of intangible assets and stock-based compensation decreased 98%
to $9,000 from $398,000. Other net losses during the current
period were $58,000, primarily as a result of a loss recorded to
fully reduce the carrying value of the Company's investment in
Watchnet, Inc.
Results for the Six Months Ended December 31, 2001
Consolidated revenues for the six months ended December 31, 2001
were zero as compared to $8,563,000 during the same period last
year. Revenues for services provided to the Barona Tribe in the
current period were zero as compared with $6,869,000 earned
during the same period last year. Although revenues at the
Barona Casino exceeded expenses for the six month period ended
December 31, 2001, the level of revenues were not sufficient
under the formula used to calculate the Company's consulting fee
to offset the effect of the significant capital, construction,
interest and operating expenses incurred at the Barona Casino.
Revenues for services provided to clients other than the Barona
Tribe for the six months ended December 31, 2001 were zero as
compared to $1,694,000 earned during the same period last year,
as a result of the Company's decision to restructure its
business and realign its operations to focus solely on the
Native American gaming industry.
During the six months ended December 31, 2001, cost of services
decreased 45% to $2,288,000 from $4,125,000 and general
operating and administrative expenses decreased 63% to
$1,673,000 from $4,511,000 during the same period last year.
Amortization of intangible assets and stock-based compensation
decreased 98% to $20,000 from $743,000. Other net losses during
the six months ended December 31, 2001 were $118,000, primarily
as a result of a loss recorded to fully reduce the carrying
value of the Company's investment in Watchnet, Inc. and fixed
asset disposals.
Additionally, Venture Catalyst incurred $154,000 in
restructuring expenses during the six months ended December 31,
2001, in connection with the ongoing restructuring and cost
reduction plan.
Venture Catalyst Incorporated is a service provider of gaming
consulting, infrastructure and technology integration in the
California Native American gaming market. At September 30, 2001,
the company's total liabilities exceeded total assets by around
$3 million.
W.R. GRACE: Darex Wants to Close Georgia Plant & Move to Chicago
----------------------------------------------------------------
Darex Puerto Rico, Inc., one of W.R. Grace's Debtor-affiliates,
asks permission from Judge Judith Fitzgerald to close a
manufacturing plant in Atlanta, Georgia, and consolidate the
related manufacturing operation into their Chicago plant. Darex
manufactures sealants and coatings for food, beverage, and other
metal containers, sealants for bottle caps and other closures,
equipment to apply sealants to cans, specialty polymer products
primarily for packaging applications, and carbon dioxide
absorbent materials used in surgical and other applications in
the United States. Darex currently manufactures products or
equipment in five locations in the United States: (1) Atlanta,
Georgia; (2) Cambridge, Massachusetts; (3) Chicago, Illinois;
(4) Owensboro, Kentucky; and (5) San Leandro, California.
In order to achieve cost synergies and improve Darex's
profitability and cash flows, James W. Kapp, III, Esq., at
Kirkland & Ellis, relates, the Debtors' management has
determined that consolidating Darex's main United States
container sealant and carbon dioxide absorbent manufacturing
operations with its Chicago operations is in the best interests
of the Debtors' estates and creditors. Under this plan, the
Darex plant in Atlanta will cease all operations. The
Cambridge, Owensboro and San Leandro plants will continue to
operate.
The Atlanta and Chicago plants both manufacture can sealing
products. Adequate space and facilities are available in
Chicago to install the Atlanta plant's production-related
equipment and to produce can sealing product volumes equal to or
exceeding the current combined production of both plants.
Darex has selected Chicago as the site for product consolidation
because:
(a) the Chicago plant provides more room for future
expansion than does the Atlanta site;
(b) the Chicago plant is more centrally located in relation
to Darex's United States customer base; and
(c) continued Darex manufacturing in Chicago would provide
additional consolidation opportunities with the
Debtors' other businesses in the Chicago area.
The Debtors tell the Court that they anticipate approximately
$2,000,000 in annual cost savings by combining these operations.
Conversely, the Debtors estimate that a cash cost to complete
this project of approximately $4,000,000 over two years. These
costs include employee severance, personnel and equipment
relocation, and the dismantling and clean-up of the Atlanta
plant. These costs will be more than offset by the proceeds of
the sale of the Atlanta plant when made.
The Debtors say that clear business reasons support this
requested consolidation. The site is not essential to the
Debtors' core business operations and the closing of the Atlanta
plant coincides with the Debtors' restructuring efforts and
ongoing business plans. Thus the Debtors' management has
determined in its business judgment that the Atlanta site should
be closed and its operations consolidated in Chicago.
In addition, the consolidation of production currently conducted
in Atlanta into the Chicago plant will save the Debtors an
estimated $2 million a year, so that the Debtors' investment,
without considering any proceeds from the sale of the Atlanta
plant, would be paid back within two years.
Moreover, Mr. Kapp indicates, international consolidation among
Darex's customers make it necessary for Darex to reduce costs of
producing its products and has diminished the need to maintain
plants close to customer locations. The proposed plant
consolidation conforms to Darex's strategy of reducing costs by
increasing the overall efficiency of its manufacturing
operations.
Finally, the Darex consolidation of the Atlanta operations into
the Chicago plant maintains flexibility to create additional
efficiencies with the Debtors' other businesses in the Chicago
area. (W.R. Grace Bankruptcy News, Issue No. 19; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WEIRTON STEEL: Reaches Pact with Noteholders to Restructure Debt
----------------------------------------------------------------
Weirton Steel Corporation (OTC Bulletin Board: WRTL) announced
that the Company has reached an agreement with an informal
committee of noteholders representing a majority of the
Company's outstanding senior notes on the terms of an exchange
offer and consent solicitation to restructure its long-term
publicly held debt as part of its five step strategic plan to
provide the Company with greater overall financial stability and
permit the fundamental repositioning of its business through
strategic acquisitions and targeted investments.
On November 1, 2001, the Company filed a registration statement
regarding a proposed exchange offer and consent solicitation
relating to the Company's outstanding 11-3/8% Senior Notes due
2004 and 10-3/4% Senior Notes due 2005 having an aggregate
principal amount of $244 million.
In late November 2001 an informal committee of senior
noteholders, through its financial and legal advisors, commenced
negotiations with the Company with respect to the terms of the
proposed exchange. As a result of these negotiations, an
agreement has been reached with the noteholders committee under
which the Company will amend the terms of its exchange offer,
under which tendering noteholders would receive up to $134.2
million principal amount of new senior secured notes due 2008
and up to $109.8 million in liquidation preference of a new
series of convertible redeemable preferred stock. This amended
offer represents up to $550 in principal amount of new senior
secured notes and $450 in liquidation preference of new Series C
preferred stock.
The new senior secured notes will be secured by a second
priority lien in the Company's hot strip mill, No. 9 tin tandem
mill and tin mill assets, which are integral facilities in its
downstream processing operations. Interest on the new senior
secured notes will be limited in the first three years and
thereafter will accrue and pay cash interest at the rate of 10%.
The Series C preferred stock will not accrue or pay dividends,
will be nonvoting, will be subject to mandatory redemption in
2013 at $50 per share and to redemption at the option of the
Company on an accreting redemption schedule beginning in 2002,
and may be convertible at the option of the Company in certain
circumstances into registered common stock of the Company.
Under the proposed exchange offer and consent solicitation, the
Company also intends to amend certain covenants in the senior
notes indentures dated 1994 and 1995.
In order to make the proposed exchange offer on the modified
terms, the Company plans to amend its senior credit facility
with the approval of its lenders prior to commencing the
exchange offer and consent solicitation. The Company's senior
lenders will have a first priority lien in the hot strip mill,
No. 9 tin tandem mill and tin assets.
The Company plans to file an amendment to its registration
statement with the Securities and Exchange Commission to reflect
the agreed modifications to the terms of the exchange offer and
to launch the exchange offer and consent solicitation as soon as
practicable after the registration statement has been declared
effective by the Securities and Exchange Commission.
In addition, at the request of the Company, the City of Weirton
has agreed to conduct an exchange offer and consent solicitation
for its outstanding 8-5/8% Pollution Control Revenue Refunding
Bonds (Weirton Steel Corporation Project) Series 1989 due 2014
under which the bondholders would receive up to $33.8 million
aggregate principal amount of new 9% secured pollution control
bonds due 2012. The new bonds would also be secured by a second
priority lien in the Company's hot strip mill, No. 9 tin tandem
mill and tin mill assets.
Lehman Brothers is the Financial Advisor and Dealer Manager for
the concurrent exchange offers. All inquiries and requests for
documents should be directed to Lehman Brothers Inc., 745 7th
Avenue, 3rd Floor, New York, NY 10019, Attn: Hyonwoo Shin, (212)
528-7581 (collect) or (800) 438-3242 (toll free), or to the
Information Agent, D.F. King & Co., Inc., 77 Water Street, 20th
Floor, New York, NY 10005. Banks and brokers should call: (212)
269-5550 (call collect) or (800) 431-9643.
A registration statement relating to the exchange offer has been
filed with the Securities and Exchange Commission and has not
yet become effective. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration
statement becomes effective.
Weirton is a major integrated producer of flat-rolled carbon
steel with principal product lines consisting of tin mill
products and sheet products. The Company is the second largest
United States producer of tin mill products with a 25% market
share of domestic shipments.
DebtTraders reports that Weirton Steel Corporation's 11.375%
bonds due 2004 (WEIRT2) are trading between 9 and 12. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=WEIRT2for
real-time bond pricing.
WILLIAMS COMPANIES: What If Williams Comms Files for Bankruptcy?
----------------------------------------------------------------
The Williams Companies, Inc., has delayed its release of
unaudited 2001 earnings pending an internal assessment of the
Company's contingent obligations related to Williams
Communications Group, Inc. (NYSE:WCG). This assessment, the
Company explained last month, was initiated in light of its
intention to eliminate credit-rating and equity-price triggers
as part of contingent financial commitments associated with the
2001 spin-off of Williams Communications Group, and because of
recent developments within the telecommunications industry.
Williams Companies is on the hook for Williams Communications'
$1.4 billion of debt and a network lease agreement covering
assets that cost $750 million. If Williams Communications files
for bankruptcy protection, Williams Companies may have to cough-
up the cash to satisfy these obligations.
On March 30, 2001, Williams Companies' board of directors
approved a tax-free spinoff of WCG to Williams Companies'
shareholders. Williams distributed 95% of its WCG common stock
to public shareholders.
Williams is providing indirect credit support for $1.4 billion
of WCG's structured notes through a commitment to make available
proceeds of a Williams equity issuance in the event any one of
the following were to occur: (1) a WCG default; (2) downgrading
of Williams' senior unsecured debt to Ba1 or below by Moody's,
BB or below by S&P, or BB+ or below by Fitch, if Williams'
common stock closing price is below $30.22 for ten consecutive
trading days while such downgrade is in effect; or (3) to the
extent proceeds from WCG's refinancing or remarketing of certain
structured notes prior to March 2004 produces proceeds of
less than $1.4 billion. The ability of WCG to make payments on
the notes is dependent on its ability to raise additional
capital and its subsidiaries' ability to dividend cash to WCG.
Williams' current senior unsecured debt ratings are as follows:
Moody's-Baa2, S&P-BBB and Fitch-BBB. WCG is obligated to
reimburse Williams for any payment Williams is required to make
in connection with these notes.
Williams has provided a guarantee of WCG's obligations under a
1998 transaction in which WCG entered into an operating lease
agreement covering a portion of its fiber-optic network. The
total cost of the network assets covered by the lease agreement
is $750 million. The lease terms initially totaled five years
and, if renewed, could extend to seven years. WCG has an option
to purchase the covered network assets during the lease term at
an amount approximating lessor's cost. As a result of an
agreement between Williams and WCG's revolving credit facility
lenders, if Williams gains control of the network assets covered
by the lease, Williams is obligated to return the assets to WCG
and the liability of WCG to compensate Williams for such
property must be subordinated to the interests of WCG's
revolving credit facility lenders and may not mature any earlier
than one year after the maturity of WCG's revolving credit
facility.
In third-quarter 2001, Williams purchased the WCG headquarters
building and other ancillary assets from WCG for $276 million.
Williams then entered into a long-term lease arrangement under
which WCG is the sole lessee of these assets.
WILLIAMS COMMS: Continues Fin'l Restructuring Talks with Banks
--------------------------------------------------------------
Williams Communications (NYSE: WCG), a leading provider of
broadband services for bandwidth-centric customers, announced it
is continuing discussions with its bank group to develop a
restructuring plan as part of ongoing efforts to strengthen
its balance sheet.
"Williams Communications continues to have a productive dialogue
with its banks. We firmly believe that this dialogue will
enable us to meet the current challenges of the
telecommunications marketplace and, ultimately, to thrive," said
Howard Janzen, chairman and CEO for Williams Communications. "As
previously stated, we believe the company has sufficient cash --
over $1 billion as of December 31, 2001 -- to fund our business
plan through 2003. In addition, we are current on all of our
obligations."
The company, along with its bank group, is pursuing a
comprehensive resolution to restructure its balance sheet.
Currently, discussions are being expanded to include multiple
restructuring options. In addition, the company has authorized
its legal and financial advisers to discuss restructuring
options with the holders of certain of its notes. The company
expanded the options being considered after it concluded on
February 22, 2002, that certain institutions other than the
banks are not likely to participate in the restructuring process
on terms that are beneficial to all stakeholders of the company.
As part of evaluating the expanded options, the company is
considering the potential benefits of a negotiated Chapter 11
reorganization process, which would support uninterrupted
continuation of the business and minimize any impact to
customer and vendor relationships. The company may decide to
pursue that alternative if it believes it will allow for a more
orderly process that maximizes enterprise value. The expanded
options now being considered could potentially result in
substantial shareholder dilution. As part of any restructuring
the company undertakes, it plans to reduce its current
controllable cost structure by approximately 25 percent, which
will include workforce reductions.
Continuing world-class service to customers and business growth
are central to all restructuring options being discussed.
Williams Communications recently announced new contracts with
Verizon, Yahoo! and KDDI America, further strengthening its
customer base of substantial industry players. The company also
recently announced it had delivered on 99 percent of its
Customer Firm Order Commitments as of the end of 2001, and on 97
percent of Customer Requested Due Dates. Both statistics
significantly exceed standard industry intervals. As of the
fourth quarter of 2001, the company had achieved 16 consecutive
quarters of sequential network services revenue growth.
"We remain committed to providing best-in-class network services
to our customers as we continue to work toward de-leveraging our
balance sheet," said Janzen. "Our customers have come to depend
on our services because of our unyielding attention to their
needs. We look forward to continuing our long- standing
tradition of customer satisfaction and high standards of
performance."
Based in Tulsa, Oklahoma, Williams Communications Group, Inc.,
is a leading broadband network services provider focused on the
needs of bandwidth-centric customers. Williams Communications
operates the largest, most efficient, next-generation network in
North America. Connecting 125 U.S. cities and reaching five
continents, Williams Communications provides customers with
unparalleled local-to-global connectivity. By leveraging
its infrastructure, best-in-breed technology, connectivity and
network and broadband media expertise, Williams Communications
supports the bandwidth demands of leading communications
companies around the globe. For more information, visit
http://www.williamscommunications.com
WILLIAMS COMMS: Fitch Cuts Junk Ratings over Default Concerns
-------------------------------------------------------------
Fitch Ratings has downgraded Williams Communication Group,
Inc.'s (WCG) senior unsecured rating to 'CC' from 'CCC-' and the
convertible preferred stock to 'C' from 'CC'. The rating of
Williams Communications, Inc.'s senior secured credit facility
has also been downgraded to 'CCC-' from 'CCC+'. All of the
ratings remain on Rating Watch Negative.
The rating action reflects Fitch's concern that one potential
outcome of WCG's ongoing discussions with its bank group
regarding the restructuring of WCG's debt could result in a
default. The company announced that it has expanded the scope of
the restructuring options to include a Chapter 11
reorganization. Resulting from the continued sluggish demand for
broadband services, the company has been hampered by slower than
anticipated revenue ramp-up, EBITDA generation and improvement
in credit protection metrics. The Rating Watch Negative is
likely to be resolved pending the outcome of WCG's ongoing
discussions with its bank group.
The overbuild of broadband capacity combined with business
failures within the broadband transport space have driven down
the value of telecom assets pressuring the loan to value metric
of the senior secured credit facility. The recovery prospects of
unsecured bondholders have been significantly diminished.
Given the need to effectively manage its liquidity during 2002
and the amount of cash required to meet debt service
requirements together with WCG's limited access to public
capital markets, Fitch believes the potential exists for WCG to
restructure its capital structure to reduce interest expense and
leverage. This scenario is magnified especially if industry
conditions do not stabilize.
DebtTraders reports that Williams Communications Group Inc.'s
10.875% bonds due 2009 (WCG2) currently trade between 12 and 14.
See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCG2for
real-time bond pricing.
* Meetings, Conferences and Seminars
------------------------------------
February 27-28, 2002
Information Management Network
The Distressed Real Estate Symposium
Crowne Plaza, New York, New York
Contact: 1-212-768-2800 or dgleyzer@imn.org
February 28-March 1, 2002
ALI-ABA
Corporate Mergers and Acquisitions
Renaissance Stanford Court, San Francisco, CA
Contact: 1-800-CLE-NEWS or http://www.ali-aba.org
March 3-4, 2002
Association of Insolvency and Restructuring Advisors
Business Valuation Conference (Held in conjunction with
The Norton Bankruptcy Litigation Institute I)
Park City Marriott, Park City, UT
Contact: (541) 858-1665 Fax (541) 858-9187 or
aira@airacira.org
March 3-6, 2002
NORTON INSTITUTES ON BANKRUPTCY LAW
Norton Bankruptcy Litigation Institute I
Park City Marriott Hotel, Park City, Utah
Contact: 770-535-7722 or Nortoninst@aol.com
March 7-8, 2002
RENAISSANCE AMERICAN MANAGEMENT, INC. & BEARD GROUP
Third Annual Conference on Healthcare Transactions
The Millennium Knickerbocker Hotel, Chicago
Contact: 1-800-726-2524 or ram@ballistic.com
March 8, 2002
American Bankruptcy Institute
Bankruptcy Battleground West
Century Plaza Hotel, Los Angeles, California
Contact: 1-703-739-0800 or http://www.abiworld.org
March 14-15, 2002
American Conference Institute
Commercial Loan Workouts
The New York Marriott Marquis in New York City
Contact: 1-888-224-2480 or
www.americanconference.com
March 20-23, 2002
TURNAROUND MANAGEMENT ASSOCIATION
Spring Meeting
Sheraton El Conquistador Resort & Country Club
Tucson, Arizona
Contact: 312-822-9700 or info@turnaround.org
April 11-14, 2002
NORTON INSTITUTES ON BANKRUPTCY LAW
Norton Bankruptcy Litigation Institute II
Flamingo Hilton, Las Vegas, Nevada
Contact: 770-535-7722 or Nortoninst@aol.com
April 18-21, 2002
American Bankruptcy Institute
Annual Spring Meeting
J.W. Marriott, Washington, D.C.
Contact: 1-703-739-0800 or http://www.abiworld.org
April 25-27, 2002
ALI-ABA
Fundamentals of Bankruptcy Law
Rittenhouse Hotel, Philadelphia
Contact: 1-800-CLE-NEWS or http://www.ali-aba.org
May 13, 2002 (Tentative)
American Bankruptcy Institute
New York City Bankruptcy Conference
Association of the Bar of the City of New York
New York, New York
Contact: 1-703-739-0800 or http://www.abiworld.org
May 15-18, 2002
Association of Insolvency and Restructuring Advisors
18th Annual Bankruptcy and Restructuring Conference
JW Marriott Hotel Lenox, Atlanta, GA
Contact: (541) 858-1665 Fax (541) 858-9187 or
aira@airacira.org
May 26-28, 2002
International Bar Association
International Insolvency 2002 Conference
Dublin, Ireland
Contact: Tel +44 207 629 1206 or member@int-bar.org
or http://www.ibanet.org
June 6-9, 2002
American Bankruptcy Institute
Central States Bankruptcy Workshop
Grand Traverse Resort, Traverse City, Michigan
Contact: 1-703-739-0800 or http://www.abiworld.org
June 20-21, 2002
RENAISSANCE AMERICAN MANAGEMENT, INC. & BEARD GROUP
Fifth Annual Conference on Corporate Reorganizations
The Millennium Knickerbocker Hotel, Chicago
Contact: 1-800-726-2524 or ram@ballistic.com
June 27-30, 2002
NORTON INSTITUTES ON BANKRUPTCY LAW
Western Mountains, Advanced Bankruptcy Law
Jackson Lake Lodge, Jackson Hole, Wyoming
Contact: 770-535-7722 or Nortoninst@aol.com
July 11-14, 2002
American Bankruptcy Institute
Northeast Bankruptcy Conference
Ocean Edge Resort, Cape Cod, MA
Contact: 1-703-739-0800 or http://www.abiworld.org
July 17-19, 2002
Association of Insolvency and Restructuring Advisors
Bankruptcy Taxation Conference
Snow King Resort, Jackson Hole, WY
Contact: (541) 858-1665 Fax (541) 858-9187 or
aira@airacira.org
August 7-10, 2002
American Bankruptcy Institute
Southeast Bankruptcy Conference
Kiawah Island Resort, Kiawaha Island, SC
Contact: 1-703-739-0800 or http://www.abiworld.org
October 9-11, 2002
INSOL International
Annual Regional Conference
Beijing, China
Contact: tina@insol.ision.co.uk or
http://www.insol.org
October 24-28, 2002
TURNAROUND MANAGEMENT ASSOCIATION
Annual Conference
The Broadmoor, Colorado Springs, Colorado
Contact: 312-822-9700 or info@turnaround.org
December 5-8, 2002
American Bankruptcy Institute
Winter Leadership Conference
The Westin, La Paloma, Tucson, Arizona
Contact: 1-703-739-0800 or http://www.abiworld.org
April 10-13, 2003
American Bankruptcy Institute
Annual Spring Meeting
Grand Hyatt, Washington, D.C.
Contact: 1-703-739-0800 or http://www.abiworld.org
December 3-7, 2003
American Bankruptcy Institute
Winter Leadership Conference
La Quinta, La Quinta, California
Contact: 1-703-739-0800 or http://www.abiworld.org
April 15-18, 2004
American Bankruptcy Institute
Annual Spring Meeting
J.W. Marriott, Washington, D.C.
Contact: 1-703-739-0800 or http://www.abiworld.org
December 2-4, 2004
American Bankruptcy Institute
Winter Leadership Conference
Marriott's Camelback Inn, Scottsdale, AZ
Contact: 1-703-739-0800 or http://www.abiworld.org
The Meetings, Conferences and Seminars column appears in the
Troubled Company Reporter each Wednesday. Submissions via
e-mail to conferences@bankrupt.com are encouraged.
*********
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
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers. Information
contained herein is obtained from sources believed to be
reliable, but is not guaranteed.
The TCR subscription rate is $575 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
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are $25 each. For subscription information, contact Christopher
Beard at 240/629-3300.
*** End of Transmission ***