/raid1/www/Hosts/bankrupt/TCR_Public/020312.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, March 12, 2002, Vol. 6, No. 50
Headlines
ADVA INT'L: May Violate Covenants if Debt Workout Talks Crumble
AMF BOWLING: Emerges from Chapter 11 with $350M Exit Facility
AMF BOWLING: Hearing on Removal Deadline Scheduled for March 29
ANC RENTAL: Seeks Approval of New Key Employee Retention Plan
AT PLASTICS: Q4 EBITDA Slides-Down to $7.5MM due to Lower Sales
ADVANCED ELECTRONIC: Losses May Cause Loan Covenant Violations
ADVANTICA RESTAURANT: Senior Notes Exchange Offer Expires Today
AMERICAN AXLE: S&P Affirms Long-Term Corp. Credit Rating at BB
AMES DEPARTMENT: Wants to Reject PM Trailer Lease to Save $1MM+
APPLIED DIGITAL: Silverman Will Host Conference Call on Friday
ARMSTRONG HOLDINGS: XL and Swiss Re Settle Credit Swap Squabble
ASSET SECURITIZATION: Fitch Downgrades 1997-D5 P-T Certificates
BORDEN CHEMICALS: Formosa to Acquire PVC Plant in IL for $35MM
CMC SECURITIES: Fitch Junks Series 1993-2C Issues On High Losses
CAPITOL COMMUNITIES: Currently Pursuing Debt Restructuring Talks
CARIBBEAN PETROLEUM: Brings-In KPMG as Financial Consultants
CHIQUITA: Fyffes Says It Isn't Eyeing a Post-Emergence Takeover
COMDIAL CORP: Inks Definitive Agreement to Restructure Sr. Debt
COMDIAL CORP: R. Collins Nudges D. Walker Off Board Chairmanship
COUNTRY STYLE: Ontario Court Gives Thumbs-Up Sign for CCAA Plan
EES COKE: Fitch Junks Ser. B Notes After Nat'l Steel Bankruptcy
EDISON INTERNATIONAL: Fitch Ups Junk Debt Ratings to Low-B Level
EXODUS COMMS: Signing-Up Alvarez & Marsal as Wind-Down Advisors
FEDECAFE EXPORT: Fitch Assigns BB+ Rating to $47MM Receivables
FEDERAL-MOGUL: Future Claimants Hire Zolfo Cooper as Consultants
FOSTER WHEELER: Secures Extension of Two Financing Facilities
GALEY & LORD: December Quarter Net Sales Plummet to $136 Million
GLOBAL CROSSING: Sprint Seeks Stay Relief to Terminate Agreement
GUILFORD MILLS: Selling Twin Rivers Textile to H. Greenblatt
HAYES LEMMERZ: Asks Court to Approve Intercompany Asset Transfer
ICH CORP: Engages Sonnenschein Nath as Lead Bankruptcy Counsel
IMPERIAL METALS: Will Begin Implementing CCAA Plan
INTEGRATED HEALTH: Wins OK to Hire Ordinary Course Professionals
INTERACTIVE TELESIS: Files for Chapter 11 Reorganization in CA
INTERACTIVE TELESIS: Case Summary & Largest Unsecured Creditors
INTERNATIONAL FIBERCOM: Hires Bryan Cave as General Counsel
KAISER ALUMINUM: Secures Injunction Against Utility Companies
KMART CORP: Wants Lease Decision Period Stretched Until July 22
KMART CORP: Saybrook Pursuing Appointment of Equity Committee
KMART CORP: Names Chairman James Adamson as Chief Exec. Officer
MCLEODUSA INC: Committee Engages Morris Nichols as Co-Counsel
MIRAVANT MEDICAL: Fails to Meet Nasdaq Listing Requirements
OWENS CORNING: Lays-Out Its Position on Inter-Creditor Issues
PHASE2MEDIA: Court Extends Plan Filing Deadline to March 26
PHYCOR INC: Court Says Yes to Skadden Arps as Bankruptcy Counsel
POLAROID CORPORATION: Asks Court to Fix May 21 Claims Bar Date
PORTLAND BOTTLING: Will Reopen After Investor Group's Takeover
PRIMUS TELECOMMS: S&P Junks Debt Rating over Liquidity Concerns
PSINET INC: Canadian Applicants Propose CCAA Plan of Arrangement
RCN CORP: Increased Business Risk Forces S&P to Junk Ratings
RELIANCE: Judge Carey Issues Removal, Remand & Transfer Opinion
RURAL/METRO CORP: Debt Restructuring Necessary to Stay Afloat
SL INDUSTRIES: Defaults On Revolving Credit Facility
SAFETY-KLEEN: Secures Open-Ended Lease Decision Period Extension
SUNSHINE MINING: Terminating Employees Due to Funding Shortage
TECSTAR INC: Creditors' Meeting Will Convene on March 15, 2002
TRAILMOBILE CANADA: Board Responds to 1314385 Ontario's Offer
U.S. AGGREGATES: Files Chapter 11 to Facilitate Sale of Assets
VECTOUR: Committee Secures Okay to Employ Lowenstein as Counsel
VELOCITY EXPRESS: Sets Special Shareholders' Meeting for Mar. 20
W.R. GRACE: Court Okays Steptoe & Johnson as Special Tax Counsel
WHEELING-PITTSBURGH: Wins Nod to Hire Tatum CFO as Consultants
WILLIAMS COMPANIES: Fitch Bullish About Pending Kern River Sale
XO COMMS: Intends to Pursue Transactions with Forstmann Little
* R. Carter Pate at PwC Sees 200 Public Company Filings in 2002
*********
ADVA INT'L: May Violate Covenants if Debt Workout Talks Crumble
---------------------------------------------------------------
ADVA International Inc. (OTC Pink Sheets: ADII) announced the
filing of its Quarterly Reports on Form 10-QSB for the quarters
ended September 30 and December 31, 2001, with the Securities
and Exchange Commission.
The Company's delayed filing of its unaudited financials for the
second and third quarters of fiscal year 2002 are attributable,
in part, to the Company's inability to close an anticipated deal
for capital after the events of September 11, 2001. The Company
raised an aggregate $85,000 in the form of small loans from
private investors in November 2001. Furthermore, an interest
payment to investors due in August 2001 was not made.
Negotiations to revise the terms of this loan and future
interest payments have been undertaken and are currently
ongoing. There is no assurance the Company will be successful
in these negotiations and failure to do so may result in the
Company's default of the terms of the loan agreements. The
Company is currently engaged in negotiations for a substantial
infusion of operating capital. If the Company is not successful
in securing this transaction, it may be forced to cease
operations.
ADVA, through it's wholly-owned subsidiary GIG, develops and
markets applications software running on the LINUX(R) and UNIX
Operating Systems, currently, a complete 3D solid modeling,
animation and rendering system and CAD visualization products.
The Company anticipates the development or acquisition of other
software products in the future.
AMF BOWLING: Emerges from Chapter 11 with $350M Exit Facility
-------------------------------------------------------------
AMF Bowling Worldwide, Inc., announced that it has emerged from
Chapter 11 after completing its exit financing arrangements with
Deutsche Banc Alex Brown and its affiliate Bankers Trust
Company. AMF Bowling Worldwide, Inc. and its U.S. subsidiaries
filed voluntary petitions for reorganization under Chapter 11 on
July 2, 2001.
"We are emerging from this Chapter 11 process as a healthy
company, and we are grateful to all parties for helping us to
conclude the proceeding," said Roland Smith, the Company's
President and Chief Executive Officer. "We will now be able to
focus our resources on the business of bowling. We are
determined to build value for the Company's stakeholders,
including our employees, whose hard work and dedication were key
factors in the Company's successful reorganization."
The Company closed on its $350 million exit financing. The
agreement consists of a $290 million term loan, as well as a $60
million revolving credit facility. In addition, the Company
issued $150 million in subordinated notes.
In accordance with the previously approved plan of
reorganization, the Company will provide its pre-petition senior
secured lenders with recovery of their approximately $620
million in claims through a combination of equity (equal to 92-
1/2 percent of the common stock of the reorganized company),
$150 million in subordinated notes, and cash. In addition,
unsecured creditors will share proportionately in 7-1/2 percent
of the common stock, as well as warrants for the right to
purchase additional shares. The unsecured creditors' common
stock and warrants will be issued later this year.
The Company's former parent, AMF Bowling, Inc., which conducts
no operations, filed a separate Chapter 11 case and will likely
have no assets to distribute to its common stockholders, and
little, if any, assets to distribute to its creditors. AMF
Bowling Worldwide, Inc. is no longer affiliated with AMF
Bowling, Inc. The shares of AMF Bowling Worldwide's common
stock that were issued under its plan of reorganization are
separate and distinct from the shares of its former parent.
The Company is the largest owner and operator of bowling centers
in the world and is 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 (AMBW06USR2) are trading between 2.5 and 3.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AMBW06USR2
for real-time bond pricing.
AMF BOWLING: Hearing on Removal Deadline Scheduled for March 29
---------------------------------------------------------------
According to Dion W. Hayes, Esq., at McGuire Woods LLP in
Richmond, Virginia, the Removal Period of AMF Bowling Worldwide,
Inc. and its debtor-affiliates was set to expire on the later of
February 28, 2002 or the Effective Date of the Plan. Since the
Court granted the first extension on October 11, 2001, the
Debtors have been stabilizing the business, negotiating exit
financing, successfully prosecuting their Plan to confirmation,
and formulating an alternative dispute resolution procedure to
handle prepetition civil claims. The time and effort expended on
these crucial matters have enabled the Debtors to emerge
expeditiously from these chapter 11 cases.
The Debtors believe that the most prudent and efficient course
of action is to request an extension of their Removal Period
through and including 30 days after the modification of the Plan
Injunction as to any particular claim or cause of action subject
to removal. Unless such extension is granted, Mr. Hayes fears
that the Debtors may be forced to address ADR claims and
proceedings in piecemeal fashion to the detriment of their
creditors.
The vast majority of prepetition claims or causes of action
against the Debtors are stayed pursuant to Sec. 362 and,
therefore, the time to remove such actions will not expire until
30 days after the stay is lifted or terminated with respect to a
particular claim or cause of action. Nevertheless, Mr. Hayes
believes that there may be prepetition claims and causes of
action that are not stayed pursuant to Sec. 362, including,
without limitation, certain prepetition claims and causes of
action asserted by the Debtors against third parties and actions
by third parties against the Debtors which are excepted from the
automatic stay under Sec. 362(b) of the Bankruptcy Code or
otherwise not subject to the automatic stay.
Further, pursuant to Sec. 362 of the Bankruptcy Code and Sec.
11.4 of the Plan, the automatic stay of Sec. 362 of the
Bankruptcy Code terminates on the Effective Date of the Plan.
The Plan provides for a permanent injunction, as of the
Confirmation Date, but subject to the occurrence of the
Effective Date, enjoining all persons who hold Claims against or
Equity Interests in any of the Debtors or their estates from
pursuing any actions against the Reorganized Debtors, which
could affect the Reorganized Debtors or any of their property.
A hearing on the motion is scheduled on March 29, 2002. (AMF
Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ANC RENTAL: Seeks Approval of New Key Employee Retention Plan
-------------------------------------------------------------
ANC Rental Corporation and its debtor-affiliates seek to reject
the existing Change in Control Employee Severance Plan and adopt
a new Key Employee Retention Plan.
According to Bonnie Glantz Fatell, Esq., at Blank Rome Comisky &
McCauley LLP in Wilmington, Delaware, ANC adopted the Change in
Control Employee Severance Plan to retain the services of key
employees in the event of a threat of change in control of the
Debtors. That Plan was also to ensure the continued dedication
and efforts of those key employees during such an event by
ridding them of undue concern for their personal financial and
employments security. That Plan covers 60 current key employees
at a total program cost of $10,600,000.
Ms. Fatell says the Debtors seek to replace this with a new Key
Employee Retention Plan that covers more key employees at a
lower total cost per employee to the Debtors and better serves
the Debtors' current business needs. The purpose of the
Retention Plan is to provide a financial incentive for certain
employees for them to remain in the Debtors' business by
providing them security against unanticipated termination of
employment.
Under the new KERP, Ms. Fatell explains that key employees
designated by ANC's President are eligible to participate in the
Retention Plan. The President intends to designate 100 key
employees who are divided into three tiers, entitling them to
100%, 75% and 50% of their annual base pay. Any key employee
covered under the new Retention Plan will not be covered under
any other incentive bonus or severance plan.
Ms. Fatell informs the Court that the total amount to be
distributed to the key employees is $8,935,000. In addition, a
$1,500,000 reserve has been established to allow the President -
- with the approval of the Official Committee of Unsecured
Creditors -- to add newly hired employees to the Retention Plan,
increase the distribution of those key employees already covered
or provide for distribution to additional employees not
originally covered under the Retention Plan.
Under the KERP, the key employees will be paid if they are still
employed at the time that the benefits are distributable, which
is when:
A. a plan of reorganization under Chapter 11 become effective;
B. sale of substantially all of the operating assets of the
company;
D. involuntary termination not for cause or termination due to
death or permanent disability; or
D. on June 30, 2003.
Ms. Fatell argues that the KERP demonstrated a reasonable
exercise of the Debtors' business judgment. Rejection of the
Change in Control Plan is appropriate and necessary for the
implementation of the Retention Plan. The new KERP increases
the Debtors' likelihood of retaining the services of valuable
key employees -- whose services are critical to the success of
the Debtors' reorganization efforts and beyond -- at a lower
cost per employee.
Ms Fatell notes that the commencement of a Chapter 11 case by
any company creates a level of uncertainty and fear among
employees. Anxiety and apprehension as to job security, together
with materially increased burdens and responsibilities as a
result of the Chapter 11 process, become major factors affecting
the performance levels and continued employment of employees,
particularly the more senior ones. Ms. Fatell asserts that the
risk of wholesale employee departures of the Debtors' business
is real given the uncertainty surrounding the Debtors' future.
Lehman Objects
Lehman Brothers Inc. and Lehman Commercial Paper Inc. object to
the Debtors' motion and ask the Court to adjourn the hearing on
the motion until March 27, 2002, to give them time to assess the
facts and prepare a defense. In the alternative, that the Court
deny the motion because:
A. the Debtors are not entitled to the benefit of the business
judgment rule,
B. the Debtors have failed to establish that their Key
Employment Retention Program is a proper exercise of
business judgment and
C. the proposed Key Employment Retention Program would use the
cash collateral of the secured creditors without providing
adequate protection.
William P. Bowden, Esq., at Ashby & Geddes LLP in Wilmington,
Delaware, states that despite admonitions from the Court, the
Debtors still have not been forthcoming to Lehman and have
refused to comply with Lehman's discovery requests on various
matters. The Debtors' failure to discuss the motion with the
secured creditors prior to its filing is a violation of the
Debtors' fiduciary obligation to provide open, honest and
straightforward disclosure to the creditors and thus warrants
disregarding of the business judgment rule.
Lehman, Mr. Bowden admits, wants to determine whether the ANC
Board of Directors took any action on the Retention Plan before
the motion for it was filed. By preventing Lehman from exploring
whether ANC's directors met their fiduciary duties and limiting
consideration of the Retention Plan, he continues, the Debtors
have waived the benefit of the business judgment. The Retention
Plan motion offers no basis for the Court to conclude that the
Retention Plan is a proper exercise of business judgment by the
ANC Board of directors or that it meets an entire fairness test.
The Debtors, outside of bankruptcy, had an established program
for executive compensation with established standards. The
Board's Compensation Committee, comprised of three independent
directors, reported meeting on at least an annual basis to
ensure that the executive compensation program met the goals of
rewarding, motivating and retaining executive officers and
aligning the interest of executive officers with the interests
of stockholders by linking compensation to performance. The
motion, Mr. Bowden claims, makes no reference to that practice.
The Debtors have reposed in Mr. Ramaekers' absolute discretion
over all judgments. "The Debtors are apparently acting ultra
vires and outside the ordinary course of their business and must
be made to follow proper procedures so that creditors know their
fiduciaries are actually fulfilling their fiduciary duties. The
proposed motion represents an abdication by the Board of its
responsibilities," Mr. Bowden says.
Mr. Bowden also takes issue that Mr. Ramaekers only has the
approval of the Unsecured Creditors' Committee, but not secured
creditors nor ANC's Board of Directors.
The Court must find that a retention plan is based on a real,
not conjectural, need for retentive devices, Mr. Bowden
continues. The proposed retention plan, Lehman charges, does not
properly address any real concerns the Debtors may have and
there is no showing of any looming exodus of significant numbers
of employees or how that would negatively impact a
reorganization.
Mr. Bowden asserts that the Retention Plan motion violates the
fair and equitable rule codified in Section 1129 of the
Bankruptcy Code because it amounts to a distribution to certain
favored stockholders ahead of creditors. He asks the Court to
compel information on how many of the 100 selected insiders who
are to benefit from the Retention Plan have stock options under
any ANC compensation plans.
The Debtors intend to use the secured creditors cash collateral
to fund payments to insiders and employees but have not even
shown adequate protection. "The Debtors have not demonstrated to
Lehman their viability by providing cash flow projections based
on financial analysis, marketing analysis or objective,
verifiable support of any kind," Mr. Bowden reminds Judge
Walrath. (ANC Rental Bankruptcy News, Issue No. 9; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
AT PLASTICS: Q4 EBITDA Slides-Down to $7.5MM due to Lower Sales
---------------------------------------------------------------
AT Plastics (AMEX:ATJ)(TSE:ATP) announced financial results for
the fourth quarter and fiscal year ended December 31, 2001.
Highlights
Fourth Quarter
-- Revenue of $56.0 million and EBITDA* of $7.5 million,
both declined seven percent from last year, reflecting
the economic slowdown and pricing softness.
-- Packaging business and other non-core assets were sold
for proceeds of $44.2 million.
-- Refinancing was completed on January 10, 2002.
Full Year
-- Managed through unprecedented natural gas spike and
petrochemical industry downturn
-- Revenue of $246 million down three percent; EBITDA* of
$31.1 million down 29 percent reflecting high raw
material costs.
-- Restructuring program completed: non-core businesses
sold; new equity raised, net debt reduced by $70 million
and a full refinancing of all bank and note-holder debt
was accomplished.
-- $16.3 million of special charges relate to the
restructuring.
-- Specialty Polymers and Films businesses positioned for
growth.
"The spike in natural gas prices in early 2001 combined with the
downturn in the economy presented one of the most severe
challenges that AT Plastics has faced. Managing through this, as
well as restructuring and positioning the Company for the
future, were the key accomplishments of 2001", said Gary
Connaughty, President and CEO. "We expect business for the
petrochemicals industry to improve in 2002, as an economic
recovery begins. The Company's emphasis on higher margin
business through a customer targeting and servicing program
gives us a head start on the recovery. The Company will also
benefit from lower raw material costs, and from the completed
restructuring program. With this major activity behind us,
management can focus on maximizing returns from the Company's
world class facility in Edmonton."
Fourth Quarter Operations
Revenue from Continuing Operations in the fourth quarter of 2001
was $56 million, down seven percent from the same quarter last
year. Volumes were up two percent primarily in the Specialty
Polymers business, but were offset by lower selling prices.
Specialty Polymers prices were influenced by industry commodity
prices which declined for the ninth consecutive month before
industry announced increases on January 1, 2002.
Earnings before interest, taxes, depreciation, amortization,
special charges and gain on sale of assets (EBITDA) were $7.5
million, compared with $8.1 million in the same quarter a year
ago. The decline reflects the lower sales revenue, more
commodity products in the overall product mix, competitive
pricing pressure during a recession, and higher ethylene costs
still resident in the cost of sales as a result of the Company's
weighted averaging method of accounting for inventory.
The company reported a loss from Continuing Operations, after
restructuring charges, of $11.2 million compared with a loss in
the fourth quarter of 2000 of $4.3 million.
The net loss for the period, including Discontinued Operations,
was $13.3 million, compared with $24.6 million or $0.74 per
share in the fourth quarter of fiscal 2000. Last year's results
were impacted by the large write-down of the Wire & Cable
business assets, which were subsequently sold in 2001.
Full Year 2001
Consolidated revenue for Continuing Operations for 2001 was $246
million, two percent less than the $252 million realized in the
prior year. Consolidated volume was down four percent from the
prior year. EBITDA(1) was $31.1 million, down substantially from
the $43.5 million in the prior year explained almost entirely by
increased ethylene costs.
Net income after Special Charges and Discontinued Operations was
a loss of $30.2 million, compared to a loss of $25.7 million in
2000.
Specialty Polymers Business
Revenues for Specialty Polymers for 2001 were $215 million, down
four percent from the $225 million in the prior year due to
lower volumes partially offset by improved mix. Specialty
Polymers volumes were down five percent from the prior year. The
volume decrease is attributable to the exit from sales of base
resin to the wire & cable end use market and to the economic
slowdown in 2001, compounded by the effects of September 11th.
Despite overall volume reductions the Company increased its
business in the automotive, flexible packaging and molding
markets.
Unprecedented natural gas cost increases in the winter of
2000/2001 resulted in a spike in the cost of ethylene, with a
negative year-over-year impact on earnings of approximately $14
million.
Partially offsetting the high cost of ethylene, were the
benefits of an aggressive expense and cost reduction program,
including reduced delivery and logistics costs, improved
manufacturing efficiencies, reduced administration costs,
reduced overtime and other raw material cost savings. The
Edmonton facility benefited significantly from an Alberta
Government electricity rebate, which positively affected
earnings by $3 million. This rebate is applicable to 2001 only.
Specialty Polymers EBITDA was $30.5 million, down 31 percent
from $44.5 million in the prior year.
Films Business
Revenue for the Films business segment for 2001 was $41.9
million, down three percent from the $43.4 million in the prior
year. Films volumes were flat as compared with the prior year.
Weak export markets, particularly Argentina, and a poor growing
season constrained growth in 2001. Volume was tracking well
ahead of last year until September 11th when the farming market
significantly reduced purchases.
Films EBITDA was $2.5 million in 2001 compared to $4.7 million
in 2000. The large reduction was due to increased raw material
costs in the first half of the year and competitive margin
pressure as demand for product slowed later in the year. Despite
a difficult year, the Films business maintained its market
leadership position. The business also invested in additional
marketing and expanded distribution channels in order to
position for more normal market conditions and build market
share in 2002.
Discontinued Operations
As part of the Company's strategy to focus on its high potential
businesses, the Company undertook and completed a major
divestiture of non-core businesses. These included:
Performance Compounds business. As reported in 2000, this
segment consisted of two divisions, both of which were sold in
2001. The main division, the Wire & Cable business, which was
incurring significant operating losses since startup in 1999,
was sold effective May 31, 2001 for $9,410,000. The remaining
unit, the Flexetr business, continued as part of the Specialty
Polymers business segment until December 24, 2001, when certain
of its assets and technology were sold for $5,698,000.
Packaging business. In 2000, management determined that this
business could be better supported by a major packaging industry
player, and sold the business on December 21, 2001 to such a
company, for $38,500,000.
Special Charges
As a result of the restructuring program, the Company incurred
special charges totaling $26.4 million in 2001 and early 2002.
These charges consist of: lender restructuring exit fee, $5.7
million; lender make-whole fee, $12 million; legal, consulting
and other fees $4.4 million; and other restructuring costs.
Of this total special charge, $16.3 million was recorded in
2001, and $10.1 million will be accounted for in the first
quarter of 2002, following the completed refinancing transaction
on January 10, 2002. The Company does not anticipate any
additional special charges in 2002.
Balance Sheet
The Company strengthened its balance sheet during 2001, reducing
the net debt (net of cash) by $70 million. Cash sources for this
purpose included: net proceeds of $32.3 million from an equity
issue; and proceeds from sale of discontinued operations and
asset sales of $53.6 million.
On January 10, 2002, the Company refinanced the balance of its
debt, with $158 million of new borrowings consisting of
revolving term debt ($33 million), senior term debt ($85
million), and subordinated term debt ($40 million). The maximum
draw available under the revolving facility is $70 million
subject to an available borrowing base of accounts receivable
and inventory. Availability under the Company's revolving
facility averaged $9.6 million in February 2002.
Outlook
The focus of the Company is on those businesses where it has
leading market positions with opportunities for growth, with the
overall goal being to maximize earnings from the significant
plant capacity expansion of previous years. The Specialty
Polymers business, supported by a recently expanded world-class
facility, has many opportunities to grow its share in niche
markets through a renewed focus on customer service and sales in
North America. The Films unit, already dominant in many
greenhouse and silage markets, is expanding to meet the demands
of this fast growing market.
AT Plastics' Continuing Operations have the potential to
significantly increase EBITDA over 2001 levels. A number of
factors will contribute to substantially improved profitability
in 2002, including reduced raw material costs driven by
substantially lower natural gas prices, an increasing proportion
of "specialty" products in the overall product mix, many new
customers and expanded business with existing customers,
continuous operations improvement, and increasing economies of
scale, and generally better economic conditions. Independent
industry sources predict another peak in the industry cycle in
two to four years. AT Plastics is now positioned to take full
advantage of the upturn.
AT Plastics develops and manufactures specialty plastics raw
materials and fabricated films products. The Company operates in
specialized markets where its product development and process
engineering have allowed it to develop proprietary and patented
technologies to meet evolving customer requirements in niche
markets. Products are sold in the United States, Canada and
internationally. AT Plastics' shares are listed on The Toronto
Stock Exchange, under the trading symbol "ATP", and on the
American Stock Exchange, under the trading symbol "ATJ." AT
Plastics may be contacted through its Web site
http://www.atplastics.com
ADVANCED ELECTRONIC: Losses May Cause Loan Covenant Violations
--------------------------------------------------------------
Advanced Electronic Support Products, Inc. (Nasdaq: AESP),
reported its fourth quarter and fiscal year end 2001 results of
operations on a preliminary basis. The Company reported that it
estimates that fourth quarter and fiscal 2001 revenues will be
approximately $9.2 million and $30.3 million, respectively, and
that its estimated net loss for the 2001 fourth quarter and
fiscal year will be approximately $2.0 million and $4.0 million,
respectively. Included in the 2001 fourth quarter and fiscal
year end results are writedowns of goodwill on businesses
previously acquired in the amount of $1.3 million and $1.8
million, respectively, writedowns of inventory value in the
amount of $345,000 and $1.1 million, respectively and a non-cash
charge in the amount of $160,000 relating to a stock option
granted to a consultant during the fourth quarter of 2001.
The Company also reported that as a result of its anticipated
fiscal year 2001 results of operations, it will not be in
compliance with the financial covenants contained in the credit
agreement with its senior lender. The Company will request that
its lender waive covenant compliance as of December 31, 2001.
While the Company expects to receive a waiver of the covenant
default (and has previously obtained similar waivers from its
lender), there can be no assurance that such waiver will be
obtained. If such waiver is not obtained, it could have a
material adverse impact on the Company.
The Company also reported that it expects to report its final
2001 fourth quarter and fiscal year end results of operations by
the end of March 2002.
Advanced Electronic Support Products, Inc. designs,
manufactures, markets and distributes network connectivity
products under the brand name Signamax(TM) Connectivity Systems
as well as customized solutions for original equipment
manufacturers worldwide. The Company offers a complete line of
active networking and premise cabling products for copper and
fiber optic based networks.
ADVANTICA RESTAURANT: Senior Notes Exchange Offer Expires Today
---------------------------------------------------------------
Advantica Restaurant Group, Inc. (OTCBB: DINE), announced that
it has extended to 5:00 p.m., New York City time, on March 12,
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 March 8, 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 $60.2 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 currently quoted at 73. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=DINE08USR1
for real-time bond pricing.
AMERICAN AXLE: S&P Affirms Long-Term Corp. Credit Rating at BB
--------------------------------------------------------------
On March 7, 2002, Standard & Poor's revised its outlook on
American Axle & Manufacturing Holdings Inc., to positive from
stable. At the same time, Standard & Poor's affirmed its 'BB'
long-term corporate credit rating on the Detroit, Michigan-based
company.
The outlook revision reflects the potential for a rating upgrade
if the company can continue to generate solid operating results
during a period of significant industry challenges; win new
business from new and existing customers; and generate free cash
flow.
The ratings on American Axle reflect the company's solid niche
market position, high value-added product portfolio, and good
R&D capabilities, offset by risks associated with a high
dependence on General Motors Corp. sport utility vehicles and
light trucks; exposure to cyclical and competitive end markets;
and an aggressive (albeit moderating) financial risk profile.
American Axle is a Tier I supplier of driveline systems, which
consist of components that transfer power from the transmission
to the drive wheels and include axles and propeller shafts,
chassis components, and forged products. American Axle was a
part of GM until the automaker spun off the operation in 1994.
In January 1999, American Axle completed an IPO. The firm has
gone through dramatic changes since the spin-off. It has made
significant investments in plant, property, and equipment and
workforce training, and implemented lean manufacturing
techniques and process improvements throughout the company.
These efforts have translated into substantial gains in
productivity and product quality.
Although American Axle still derives the majority of its
revenues from GM, its technological expertise, improved
manufacturing efficiency, and product quality are helping it win
business from other automotive manufacturers. Today, GM accounts
for about 87% of the company's revenue base, compared with 93%
in 1998. This figure is expected to continue to fall, however,
the strength of GM's current product offerings relative to those
of competitors will likely skew the impact of non-GM revenues on
the overall business mix at least in the near term.
American Axle has improved its financial profile during the past
several years. Debt to EBITDA, which was close to 6.0 times in
1998, has declined significantly and is now about 2.9x. Debt to
capital is in the mid-60% area and funds from operations to debt
is currently in the mid-20% area. Current ratings are based on
assumption that the debt leverage will continue to moderate and
that funds from operations to debt will average in the mid- to
upper-20% area over the course of the cycle.
Outlook
If American Axle's leverage continues to moderate and the
company continues to make progress with customer and platform
diversification efforts while sustaining operating performance
at or above current levels, the ratings are likely to be raised.
DebtTraders reports that American Axle & Mfg Inc.'s 9.750% bonds
due 2009 (AXL09USR1) were last quoted at 100. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AXL09USR1for
real-time bond pricing.
AMES DEPARTMENT: Wants to Reject PM Trailer Lease to Save $1MM+
---------------------------------------------------------------
Ames Department Stores, Inc., and its debtor-affiliates request
entry of an order approving the Debtors' rejection of the
unexpired personal property lease, dated December 29, 1994, with
State Street Bank and Trust Company and Philip Morris Capital
Corporation.
Martin J. Bienenstock, Esq., at Weil Gotshal & Manges LLP in New
York, explains that State Street provides 400 53-foot trailers
to the Debtors for transportation of goods between retail and
warehouse locations. Because of the reduction of the number of
operational retail locations, as well as operational problems
with trailers of this length, the Debtors no longer require the
use of the Trailers, and therefore have determined in their
business judgment that rejection of the Lease is in the best
interests of their estates and creditors.
Prior to August 20, 2001, Mr. Bienenstock relates that the
Debtors acquired the Trailer Lease. The lease expires on
December 28, 2004 and requires $222 monthly payments per
Trailer. As part of their rehabilitation efforts, the Debtors
have been taking significant cost-cutting initiatives, including
discontinuing the use of Trailers that no longer contribute to
the achievement of the Debtors' business objectives. Since
early 2001, the Debtors have closed, or are in the process of
closing, 151 stores and as a result, the concomitant need for
the Trailers has also declined.
Mr. Bienenstock points out that each Trailer under the Lease is
53 feet in length, which is five feet longer than the standard
48-foot trailers operated by the Debtors pursuant to leases with
other parties. Historically, the 48-foot trailers have proven
more optimal for fulfilling the Debtors' transportation
requirements. Moreover, because of their length, the Trailers
are subject to significant regulatory constraints including,
increased toll charges and restricted travel on local roads once
they leave the highways. For example, several states in which
the Debtors operate stores, including Maine, Vermont, and
Connecticut, will not permit the 53-foot Trailers to operate
more than one mile beyond the interstate freeways, and there are
similar restrictions in other states.
Mr. Bienenstock informs the Court that the Debtors and Philip
Morris have agreed that Philip Morris will not object to this
Motion provided that at least 340 Trailers have been delivered
to State Street in Columbus, Ohio. The Debtors believe that none
of the Trailers are currently being used by the Debtors to
transport goods to the Debtors retail locations. However, the
Trailers are disbursed throughout several states in which the
Debtors operated retail locations, and the process of
identifying the Trailers subject to the Lease and Delivering
them to Columbus, Ohio is time consuming. The Debtors believe
more than 340 Trailers have been delivered to the Columbus, Ohio
location as of the date hereof, and the balance of the Trailers
will be returned no later than March 15, 2002.
The Debtors request that the rejection of the Lease be effective
as of February 26, 2002, conditioned on the Debtors having
returned the requisite number of Trailers to State Street. The
Debtors believe, as of the date of this Motion, that condition
has been met. The Debtors and Philip Morris have agreed the
Debtors will pay State Street for any Remaining Trailers after
the Rejection Date on a per diem basis pursuant to the terms of
the Lease until such Remaining Trailers are returned to State
Street.
Mr. Bienenstock contends that the Debtors no longer need the use
of any of the 400 Trailers under the Lease as a result of the
decline in the overall number of stores currently being
operated. Moreover, rejection of the Lease will result in
substantial savings for the Debtors' estates. As a result of the
timely rejection of the Lease, the Debtors anticipate savings of
over $1,000,000 per year in rental charges on a going forward
basis. For this reason, the Debtors have, in the exercise of
their business judgment, determined, subject to Court approval,
to reject the Lease.
Because the Debtors are responsible for the monthly rental of
each of the Trailers until the Lease is rejected, Mr.
Bienenstock claims that the cost of the Lease far outweighs any
corresponding benefit. Indeed, while not all the Trailers have
been delivered to Columbus, Ohio to date, the Debtors believe no
Trailers are currently being used by the Debtors for the
operation of the Debtors' business and shall return the
Remaining Trailers as set forth above. By eliminating the
ongoing administrative payment obligations, rejection of the
Lease will contribute to the Debtors' prospects for a successful
rehabilitation and reorganization. (AMES Bankruptcy News, Issue
No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900)
APPLIED DIGITAL: Silverman Will Host Conference Call on Friday
--------------------------------------------------------------
Applied Digital Solutions, Inc. (Nasdaq: ADSX) an advanced
technology development company, announced that its newly-named
President, Scott R. Silverman, will be hosting a conference call
on Friday, March 15, 2002 at 10:00 a.m. EST.
"It has been some time since senior management communicated
directly with our shareholders," commented Mr. Silverman. "With
the pending merger of Digital Angel and Medical Advisory
Systems, the restructuring of our credit facilities with IBM
Credit, and the worldwide interest in VeriChip(TM) and
ThermoLife(TM), this is an ideal opportunity to address our
investors. I am eager to share my vision for the future of
Applied Digital Solutions as an advanced technology development
company."
Participants are encouraged to submit specific questions, in
advance, to rjackson@adsx.com.
Digital Angel represents the first-ever combination of advanced
biosensor technology and Web-enabled wireless telecommunications
linked to Global Positioning Systems (GPS). By utilizing
advanced biosensor capabilities, Digital Angel will be able to
monitor key body functions - such as temperature and pulse - and
transmit that data, along with accurate location information, to
a ground station or monitoring facility. Applied Digital
Solutions is exploring a wide range of potential applications
for Digital Angel, including: monitoring the location and
medical condition of at-risk patients; locating lost or missing
individuals; locating missing or stolen household pets;
monitoring the location of certain parolees; managing livestock
and other farm-related animals; pinpointing the location of
valuable stolen property; managing the commodity supply chain;
preventing the unauthorized use of firearms; and providing a
tamper-proof means of identification for enhanced e-commerce
security. Digital Angel Corporation has announced a proposed
merger with Medical Advisory Systems. For more information on
Digital Angel, visit http://www.digitalangel.net.
Medical Advisory Systems, Inc. is a global leader in
telemedicine that has operated a 24/7, physician-staffed call
center in Owings, MD for nearly 20 years. Through a worldwide
telecommunications network, MAS provides health care to ships-
at-sea and other remote locations, one-on-one "chats" with a
physician via the Internet or telephone, as well as medical and
non-medical services for the travel industry. MAS owns a 12%
equity interest in Paris-based CORIS Group, which provides it
with the ability to offer its services in over 30 countries
worldwide. For additional information, visit http://www.mas1.com
Applied Digital Solutions is an advanced digital technology
development company that focuses on a range of early warning
alert, miniaturized power sources and security monitoring
systems combined with the comprehensive data management services
required to support them. Through its Advanced Wireless unit,
the Company specializes in security-related data collection,
value-added data intelligence and complex data delivery systems
for a wide variety of end users including commercial operations,
government agencies and consumers. For more information, visit
the company's Web site at http://www.adsx.com
At September 30, 2001, Applied Digital Solutions reported a
working capital deficit of about $99 million.
ARMSTRONG HOLDINGS: XL and Swiss Re Settle Credit Swap Squabble
---------------------------------------------------------------
XL Insurance (Bermuda) Ltd. reached a settlement with Swiss Re
Financial Products Corp. on a lawsuit filed in London in 2001
related to a contractual disagreement, A.M. Best Co. reports.
XL Capital Ltd., the parent company of XL Insurance, said the
disagreement involved a credit default swap in which Swiss Re
Financial purchased protection in 2000 on a number of "reference
entities" -- companies whose bankruptcy or credit deterioration
can trigger payments by the seller of protection in a credit
default swap.
In a lawsuit filed in the High Court of Justice in London, Swiss
Re Financial accused XL Insurance of refusing to pay on a
credit-default agreement Swiss Re said it bought $20 million of
credit protection through XL on Armstrong Holdings Inc. in June
2000. Swiss Re tried to collect on the agreement when
Armstrong's main subsidiary, Armstrong World Industries, filed
for Chapter 11 bankruptcy in December 2000 after getting hit
with substantial asbestos-related litigation.
The issue in dispute was the name of the entity covered in the
agreement. XL argued the agreement covered the parent company
Armstrong Holdings, not the subsidiary, Armstrong World
Industries.
"Both Swiss Re Financial and XL Insurance stressed that such a
contractual dispute may occasionally arise as the industry fine
tunes processes and definitions associated with credit
derivative contracts," said XL Capital. "At no time was XL
Insurance under any obligation to make payments under the swap
and the suit did not involve such allegations."
XL Capital said the lawsuit related to disagreement over the
validity of a reference entity and the operation of certain
other terms and conditions in the credit default swap between XL
Insurance and Swiss Re Financial.
Credit swaps are similar to credit insurance, which pays the
policyholder if a third party defaults on loans. But credit
swaps, which are sold as derivatives, aren't as regulated as
insurance products, and paperwork isn't standardized.
As part of the settlement, XL Insurance and Swiss Re Financial
will keep the swap in place and amend and restate a written
confirmation. The two companies also are bound to keep all other
details of the agreement confidential, XL Capital said.
(Armstrong Bankruptcy News, Issue No. 18; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ASSET SECURITIZATION: Fitch Downgrades 1997-D5 P-T Certificates
---------------------------------------------------------------
Fitch Ratings downgrades Asset Securitization Corp.'s commercial
mortgage pass-through certificates series 1997-D5 as follows:
$39.5 million class A-5 to 'BBB' from 'BBB+'; $43.9 million
class A-6 to 'BB+' from 'BBB-'; $21.9 million class A-7 to 'BB'
from 'BBB-'; $39.5 million class B-1 to 'B+' from 'BB+'; $39.5
million class B-2 to 'B' from 'BB'; $8.8 million class B-3 to
'CC' from 'BB-'; and $13.2 million class B-4, $13.2 million
class B-5, and $21.9 million class B-6 to 'C' from 'B-', 'CCC',
and 'CCC', respectively. In addition, the following certificates
are affirmed: $63.6 million class A-1A, $172.6 million class A-
1B, $713.0 million class A-1C, $229.8 million class A-1D, $52.6
million class A-1E, and interest-only classes A-CS1 and PS-1 at
'AAA'; $87.7 million class A-2 at 'AA'; $52.6 million class A-3
at 'A+'; and $26.3 million class A-4 at 'A'. Fitch Ratings does
not rate the class B-7, B-7H, and A-8Z certificates.
The downgrades are the result of the further deterioration of
the pool. Fitch Ratings is concerned with eight loans (3.2%)
having exposure to Kmart, the lack of resolution of the Doctor's
Hospital of Hyde Park loan (2.8%), the decline of four credit
tenant lease (CTL) loans (1.1%) guaranteed by Circuit City
Stores, Inc., an REO (0.8%) secured by a medical office pool
being sold at a loss, and a loan in foreclosure (0.2%) secured
by four mobile home parks in Pennsylvania. Realized losses from
a Best Western-Old Hickory Inn in Jackson, TN (0.1% of the
original collateral balance) in December 2001 resulted in a $2.5
million loss to the trust.
The Kmart exposure includes four Builders Square stores, three
of which are dark and whose leases have been rejected by Kmart
(1.5%), and one in Williamstown, NJ (0.5%) that is now tenanted
by Wal-Mart Stores. One Kmart store (0.1%) has also been
rejected, while the remaining three others (1.0%) are not
rejected to date. Another retail center (0.4%) in Midland, Texas
originally leased to Builders Square is now leased to Cingular,
thereby eliminating Kmart's guarantee on the rental payments.
The REO loan is secured by six medical office properties in New
Jersey that were formerly tenanted by Principle Health
Enterprises, LLC, which filed for Chapter 7 in November 1998. To
date, five of the properties have been sold and the sixth is
under contract for sale that should close sometime this month.
According to Lend Lease Asset Management, the special servicer,
the total loss to the trust will be approximately $10.5 million.
Hyde Park transferred to special servicing when the operator
filed for Chapter 11 and terminated operations at the facility
in April 2000. In November 2000, amid claims that the loan was
in breach of the representations and warranties and that the
origination process was improper, the trust filed suit against
both the depositor and mortgage loan seller to have the loan
repurchased. Currently, both sides are deliberating under the
following schedule of deadlines: experts designated by April
15th; depositions completed by June 14th; and all discovery
completed by July 1st.
CapMark Services, L.P., the master servicer, collected year-to-
date or trailing-twelve-month (TTM) 2001 financials for 86% of
the pool that is required to report. According to this
information, the current weighted average debt service coverage
ratio (DSCR) is 1.88 times, compared to the underwritten DSCR
for the same loans of 1.58x. The pool also consists of three
loans (0.6%) that have been defeased with U.S. Treasuries and 20
CTL loans (8.9%), of which 19 (8.3%) have deteriorated since
origination. Fitch Ratings reviewed the exception report and
found one loan (2.3%) with unrecorded mortgage instruments.
Fitch Ratings reviewed the performance and underlying collateral
of the deal's six shadow-rated loans (25.4%), which are all
investment grade. The DSCRs for four of the six loans were
calculated using borrower-reported net operating income adjusted
for required reserves and a stressed debt service: Saul Centers
Retail Portfolio (7.1%) from 1.50x at closing to 1.92x for TTM
September 2001 (9/01); 3 Penn Plaza (6.0%) at 1.29x for year-end
(YE) 2000; Fath Multifamily Pool (5.0%) from 1.16x at closing to
1.52x for TTM 9/01; and Westin Casuarina Resort (2.7%) from 2.10
at closing to 2.08x for TTM 9/01. The DSCR for the Swiss Bank
Tower loan (2.7%) was calculated using actual annual debt
service, and the YE 2000 DSCR increased to 1.08x versus 1.05x at
closing. The sixth loan, Comsat (1.8%), is treated as a CTL,
since the facilities are 100% leased to Comsat's parent company,
Lockheed Martin Corp., which is publicly rated 'BBB' by Fitch
Ratings.
Fitch Ratings applied a hypothetical loss scenario for the
overall transaction whereby 6.8% of the pool would default at
various stress scenarios. Under this analysis, the credit
enhancement provided to classes B-2 through B-6 were
extinguished and the resulting levels for classes A-5 through B-
1 were markedly reduced.
Fitch Ratings will continue to monitor this transaction, as
surveillance is ongoing.
BORDEN CHEMICALS: Formosa to Acquire PVC Plant in IL for $35MM
--------------------------------------------------------------
Borden Chemicals and Plastics Operating Limited Partnership
(BCP) announced that it has executed an asset purchase agreement
through which, subject to bankruptcy court approval, Formosa
Plastics Corporation, Delaware, will acquire the assets and
operations of BCP's polyvinyl chloride plant in Illiopolis,
Illinois for approximately $35 million, subject to adjustments
for working capital and other items.
"This agreement is good news for Illiopolis customers, suppliers
and employees," said Mark J. Schneider, president and chief
executive officer, BCP Management, Inc. (BCPM), the general
partner of BCP. "The BCP plant in Illiopolis is poised to take
advantage of the eventual recovery in the PVC industry, a fact
recognized by this buyer. The people at Illiopolis are to be
commended for their hard work and patience as we worked toward
this outcome."
Under the bid procedures and auction process, other interested
parties may submit competing bids by 4:00 p.m., March 21, 2002,
through BCP's investment banker, Taylor Strategic Divestitures,
Washington DC. If competing bids are determined to be fully
binding commitments that comply with the court-approved
procedures, an auction will be held for qualified bidders on
March 25, 2002. A hearing will follow on March 27, 2002, to
obtain court approval of the highest and best offer.
The Illiopolis plant produces specialty PVC resins for use in
vinyl flooring, coatings and other applications. The plant has
an annual stated capacity of 200 million pounds in these
specialty resins. Comparable capacity of nearly 200 million
pounds in commodity PVC resins has been idle since early 2001 as
a result of weak marketplace demand.
Based in Delaware City, Delaware, Formosa Plastics Corporation,
Delaware, is part of the Dispersion Polyvinyl Chloride business
unit of Formosa Plastics Corporation, U.S.A., a privately held
manufacturer of plastic resins and petrochemicals headquartered
in Livingston, New Jersey. It is part of the Formosa Plastics
Group, a $15-billion global enterprise based in Taiwan with
nearly one-half century of experience in petrochemical
production and processing.
BCP and its subsidiary, BCP Finance Corporation, filed voluntary
petitions for protection under Chapter 11 of the U.S. Bankruptcy
Code in the United States Bankruptcy Court for the District of
Delaware on April 3, 2001. BCPM and Borden Chemicals and
Plastics Limited Partnership (BCPLP), the limited partner of
BCP, were not included in the Chapter 11 filings. (Borden
Chemical, Inc., a separate and distinct entity, is not related
to the filings.)
DebtTraders reports that Borden Chemical & Plastics' 9.5% bonds
due 2005 (BCPU05USR1) were last quoted at 5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BCPU05USR1
for real-time bond pricing.
CMC SECURITIES: Fitch Junks Series 1993-2C Issues On High Losses
----------------------------------------------------------------
Fitch Ratings downgrades CMC Securities Corporation II series
1993-2C class 2C-B5 from 'B' to 'CCC', and places class 2C-B4 on
Rating Watch Negative. Fitch also places CMC Securities
Corporation II series 1993-2G class 2G-B4 on Rating Watch
Negative. In addition, Fitch Ratings downgrades CMC Securities
Corporation IV series 1994-G class B-3 from 'B-' to 'CCC' and is
removed from Rating Watch Negative. Class B-2 is placed on
Rating Watch Negative.
These actions are the result of a review of the level of losses
expected and incurred to date and the current high delinquencies
relative to the applicable credit support levels. As of the
January 25, 2001 distribution:
CMC Securities Corporation II series 1993-2C remittance
information indicates that approximately 1.17% of the pool is
over 90 days delinquent, and cumulative losses are $953,151 or
.46% of the initial pool. The average monthly loss since August
2001 is $28,192. Class 2C-B5 currently has .15% credit support,
and class 2C-B4 currently has 1.04% credit support.
CMC Securities Corporation II series 1993-2G remittance
information indicates that approximately 1.26% of the pool is
over 90 days delinquent, and cumulative losses are $978,429 or
.40% of the initial pool. Class 2G-B4 currently has .38% credit
support.
CMC Securities Corporation IV series 1994-G remittance
information indicates that approximately .94% of the pool is
over 90 days delinquent, and cumulative losses are $1,558,032 or
.61% of the initial pool. The average monthly loss since August
2001 is $46,005. Class B-3 currently has .25% credit support,
and class B-2 currently has 1.52% credit support.
CAPITOL COMMUNITIES: Currently Pursuing Debt Restructuring Talks
----------------------------------------------------------------
Capitol Communities Corporation is currently negotiating to
secure additional debt financing, however, there can be no
assurance that financing can be obtained, or that the Company
will be able to raise the additional capital needed to satisfy
long-term liquidity requirements.
Change in Financial Condition
Since the End of Last Fiscal Year
At December 31, 2001, the Company had total assets of
$7,909,588, a decrease of $72,343 or 0.91% of the Company's
total assets, as of the Company's fiscal year end of September
30, 2001. The Company had cash of $33 December 31, 2001
compared to $134 at September 30, 2001.
The carrying value of the Company's real estate holdings
remained unchanged during the three months at $5,357,510. The
Company's investment in Trade Ark, decreased from $2,616,880 to
$2,545,729 reflecting the Company's portion of the net loss by
Trade Ark, which is accounted for by the equity method.
Total liabilities of the Company at December 31, 2001, were
$15,516,355, a decrease of $139,333 from the September 30, 2001
total of $15,655,688. The current liability for notes payable
decreased by $627 during the three months, from $11,688,993 to
$11,688,366.
Accounts payable and accrued expenses decreased by $143,748. At
September 30, 2001, the liability for accounts payable and
accrued expenses totaled $3,572,403. At December 31, 2001, the
balance was $3,428,655. The major portion of the decrease, or
$558,671, was comprised of accrued officers salaries. Much of
this decrease was offset by the increase of $308,148 of the
Accrued Interest Payable in the three months from $2,876,231 at
September 30, 2001 to $3,184,379 at December 31, 2001 and the
increase of $69,029 of accrued advances in the three months.
Accrued real estate taxes payable increased from the September
30, 2001 balance of $13,042 to a balance of $18,023, an increase
of $4,981 as of December 31, 2001.
Shareholders' Equity increased by $66,990. The increase
resulted from the issuance of 100,000 new shares of the
Company's common stock at $0.05 per share for cash and an
additional $0.10 per share for services, the issuance of
10,000,000 new shares of the Company's common stock at $0.15 per
share as payment of services rendered and in lieu of unpaid cash
compensation and benefits due an employee, and the issuance of
6,000,000 new shares of the Company's common stock at $0.05 per
share to an affiliate for a Note and additional compensation
for service was recognized at the rate of $0.10 per share offset
by the operating loss of $2,048,010 for the three month period
ending December 31, 2001.
Results of Operations
For the three months ended December 31, 2000 the Company
experienced a net loss of $2,048,010 compared with a loss of
$476,486 for the three months ended December 31, 2000. While
there were no sales from continuing operations during both
periods, general and administrative expenses increased by
$1,668,429 from $109,670 to $1,668,429, and interest expense
decreased by $9,592, from $318,023 to $308,431 resulting in the
increase in net loss.
General and administrative expenses increased from $109,670 for
the three months ended December 31, 2000 to $1,668,429 for the
three months ended December 31, 2001. Officers' salary
increased to $941,329 for the three months ended December 31,
2001 from $60,000 for the three months ended December 31, 2000,
an increase of $881,329. Consulting fees of $620,000 for the
three months ended December 31, 2001 increased from zero for
the three months ended December 31, 2000. Legal Fees and Audit
Fees increased by $55,648 to $62,648 for the three months ended
December 31, 2001 from $5,000 for the three months ended
December 31, 200. Management fees totaled $26,719 for the three
months ended December 31, 2000, a decrease of $26,719 to zero
for the three months ended December 31, 2001.
Interest expense decreased by $9,592 from $318.023 for the three
months ended December 31, 2000 to 308,431 for the three months
ended December 31, 2001.
The operating loss recorded for unconsolidated subsidiaries
accounted for under the Equity method totaled $71,150 for the
three months ended December 31, 2001 compared to a loss $49,333,
for the three months ended December 31, 2000.
Liquidity and Capital Resources
Cash and cash equivalents amount to $33 as of December 31,2001,
as compared with $134 at September 30, 2001. The Company's
liquidity position at December 31, 2001, is not adequate to meet
the Company's liquidity requirements. As of December 31, 2001,
the Company was in default on all of its loans in the amount of
$11,888,366. All of the defaulted debts, except for $6,717,740
in short-term promissory notes are pre-petition obligations and
collection is stayed under the Operating Subsidiary's bankruptcy
petition.
As of December 31, 2001, the Operating Subsidiary has been in
default on a note from Resure Inc., in the amount of $3,500,000
plus interest, since July 1, 1998. On April 19, 1999, a
foreclosure action was instituted by the Resure Liquidator
against the Operating Subsidiary in the Chancery Court of
Pulaski County, Arkansas seeking to foreclose on approximately
701 acres of residential land in Maumelle, Arkansas that secures
the Resure Note and Developer's Fees. On March 24, 2000, the
Chancery Court approved a settlement whereas the Operating
Subsidiary would pay a cash payment of $3,987,353.95 for a full
release of all claims by Resure against the Operating
Subsidiary. The settlement payment was due not later than
April 24, 2000. The Operating Subsidiary did not meet this
payment and filed a voluntary petition for bankruptcy under
Chapter 11 of the Bankruptcy Code with the Bankruptcy Court on
July 21, 2000. This pre-petition obligation is stayed under the
Operating Subsidiary's bankruptcy petition. On November 13,
2001, the Liquidator for Resure submitted a Motion for Relief
From Stay with the Bankruptcy Court seeking permission to
continue its foreclosure on the Maumelle Property.
On December 20, 2001, the Operating Subsidiary and Resure
reached a settlement agreement to resolve payment on the
outstanding Resure Note and accordingly the Resure Motions and
Competing Plan of Reorganization currently before the Bankruptcy
Court. The Bankruptcy Court entered an Order approving the 2001
Settlement Agreement on December 20, 2001, and dismissed all
pending motions by Resure, subject to Liquidator for Resure
receiving approval of the agreement by the Cook County Court.
The Cook County Circuit Court entered an Order approving the
2001 Settlement Agreement on January 9, 2002.
On December 20, 2001, the Operating Subsidiary entered into an
agreement with an unaffiliated third party to sell 451 acres of
the Large Residential Tract of the Maumelle Property for a total
purchase price of $4,000,000.
On February 4, 2002, the Operating Subsidiary completed this
all-cash sale, generating $3,850,000 in net proceeds after
closing costs. The net proceeds were paid to Nathaniel S.
Shapo, Director of Insurance of the State of Illinois, as
Liquidator of Resure Inc., in full satisfaction of all Resure
claims against the Operating Subsidiary.
As of December 31, 2001, the Bank of Little Rock line of credit
in the amount of $400,000 and a loan in the amount of $200,000
matures on April 5, 2002 and April 10, 2002, respectively. Both
the line and the loan are in default due to the Company's
failure to meet the required interest payments. Although the
Company did not meet its obligations under these lines of
credit, collection on these debts is stayed under the Operating
Subsidiary's bankruptcy petition.
As of December 31, 2001, the Company has borrowed $6,717,740
from private sources. All of these Bridge Loans have matured
and are in default. The Bridge Loans are unsecured; however the
Company provided a guarantee bond through New England
International Surety Inc. to the Bridge Note holders. However,
management has been notified by the Surety that it has been
served with a class action suit in federal court. As such, even
though the Company has defaulted on the Bridge Notes, the Surety
will not be able to make interest or principal payments to the
noteholders until the action is settled.
As of December 31, 2001, the Company owes $975,000 in principal
and $103,834 interest to the First Arkansas Bank. This line of
credit matured on October 14, 2001. However, collection on this
pre-petition debt is stayed under the Operating Subsidiary's
bankruptcy petition.
The Company's current liquidity problem prevents it from
conducting any meaningful business activities other than selling
assets from the Maumelle Property. Although management
anticipates utilizing all or a portion of the Maumelle Property
to satisfy the financial requirements of the Plan filed with the
Bankruptcy Court, if approved by the court, and/or raise equity,
there can be no assurance that the Bankruptcy Court will
approve the Operating Subsidiary's Plan or that the Company will
be able to raise sufficient capital to meet its financial
requirements and cure the Company's liquidity problems. If the
Company cannot restructure its current debt, the Company's
status as a viable going business concern will be doubtful.
CARIBBEAN PETROLEUM: Brings-In KPMG as Financial Consultants
------------------------------------------------------------
Caribbean Petroleum LP and its affiliated debtors wish to employ
KPMG LLP as their accountants and financial consultants in the
course of their chapter 11 cases, and ask the U.S. Bankruptcy
Court for the District of Delaware to authorize the retention.
The Debtors expect KPMG to provide:
a) assistance in the preparations of reports or filings as
required by the Bankruptcy Court or the Office of the
United States Trustee, including the schedules of assets
and liabilities, statement of financial affairs, mailing
matrix and monthly operating reports;
b) assistance in the preparation of financial information
for distribution to creditors and other parties-in-
interest, including reports required by certain cash
collateral orders entered by this Court, analyses of cash
receipts and disbursements, financial statement items and
proposed transactions for which Bankruptcy Court approval
is sought;
c) assistance with analysis, tracking and reporting
regarding cash collateral and any debtor-in-possession
financing arrangements and budgets;
d) assistance with implementation of bankruptcy accounting
procedures as required by the Bankruptcy Code and
generally accepted accounting principles, including
Statement of Position 90-7;
e) assistance in the development of potential employee
retention and severance plans;
f) assistance with identifying and implementing potential
cost containment opportunities;
g) assistance with identifying and implementing asset
redeployment opportunities;
h) analysis of assumption and rejection issues regarding
executory contracts and leases;
i) assistance in evaluating reorganization strategy and
alternatives available to the Debtors;
k) analysis and critique of the Debtors' financial
projections and assumptions;
l) assistance in the preparation of enterprise, asset
liquidation valuations;
m) assistance in preparing documents necessary for
confirmation, including, but not limited to, financial
and other information contained in the plan of
reorganization and disclosure statement;
n) advice and assistance to the Debtor in negotiations and
meetings with bank lenders, creditors, and any formal or
informal committees;
o) advice and assistance on the tax consequences of proposed
plans of reorganization, including assistance in the
preparation of Internal Revenue Service ruling requests
regarding the future tax consequences of alternative
reorganization structures;
p) assistance with claims resolution procedures, including
analyses of creditors' claims by type and entity and
maintenance of a claims database;
q) litigation consulting services and expert witness
testimony regarding avoidance actions or other matters;
and
r) other such functions as requested by the Debtor or its
counsel to assist the Debtor in its business and
reorganization.
The Debtors agree to compensate KPMG for its services at its
usual hourly rates and reimburse KPMG in full for its cash
disbursements and for such expenses as KPMG customarily bills
its clients. Those rates are not disclosed.
Caribbean Petroleum L.P. distributes petroleum products and
owns/leases real property on which service stations selling
petroleum products are stored and sold to retail customers. The
Company filed for chapter 11 protection on December 17, 2001.
Michael Lastowski, Esq. and William Kevin Harrington, Esq. at
Duane, Morris & Heckscher LLP represent the Debtors in their
restructuring efforts.
CHIQUITA: Fyffes Says It Isn't Eyeing a Post-Emergence Takeover
---------------------------------------------------------------
In a report by Pat Boyle of the Irish Independent dated March 5,
2002, Fyffes dismisses the rumors on its bid of the Chiquita
business although did not discount of the possibility.
Over the years, Fyffes plc has been expanding through
acquisitions throughout Europe. As a company insider said, the
company is on the constant lookout for "acquisition
opportunities" to achieve its goal to be the number one player
in the global fresh produce market.
The Financial Times on March 5, 2002, reports that a group of
investors led by Latin America Finance Group plan to bid
$800,000,000 for a major stake at Chiquita Brands International.
Chiquita is expected to formally emerge from bankruptcy by March
19, 2002. Industry sources say, the take-over could happen by
that time -- that is, if Fyffes decides not to compete.
(Chiquita Bankruptcy News, Issue No. 8; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
COMDIAL CORP: Inks Definitive Agreement to Restructure Sr. Debt
---------------------------------------------------------------
Comdial Corporation (Nasdaq:CMDL), a leading developer and
provider of enterprise telecommunications solutions, announced
that the Company has fully executed a definitive agreement with
Bank of America to restructure its existing senior debt
facility. In February, the Company announced that it executed a
letter of intent with the bank.
Under the agreement, Comdial will have an $8 million working
capital facility and a $4.9 million term note. Both the working
capital facility and term note mature on March 31, 2003. The
term note will start amortizing in September with a 36-month
amortization period.
Bank of America will also convert $10 million of existing debt
into Convertible Preferred Stock. The Convertible Preferred
Stock can convert at any time into a maximum of 1.5 million
common shares. This conversion ratio will be reduced to as low
as 500,000 shares in the event the Company chooses to pay down
the term note by up to $3 million. The Company will have a call
option allowing it to buy out Bank of America's Convertible
Preferred Stock at par. The Convertible Preferred Stock carries
a 5 percent dividend coupon if paid with cash or 10 percent if
paid in Common Shares, at the election of the Company.
Comdial Corporation, headquartered in Sarasota, Florida,
develops and markets sophisticated communications solutions for
small to mid-sized offices, government, and other organizations.
Comdial offers a broad range of solutions to enhance the
productivity of businesses, including voice switching systems,
voice over IP (VoIP), voice processing and computer telephony
integration solutions. For more information about Comdial and
its communications solutions, please visit our Web site at
http://www.comdial.com
COMDIAL CORP: R. Collins Nudges D. Walker Off Board Chairmanship
----------------------------------------------------------------
Comdial Corporation (Nasdaq:CMDL), a leading enterprise
telecommunications provider, announced changes to its board of
directors. Robert P. Collins has been named Comdial's chairman
of the board, replacing Dianne Walker who has resigned from the
board. Nick Branica has been named vice chairman and Stewart
Sutcliffe has been elected to Comdial's board of directors.
These changes were effective February 15, 2002.
Robert P. Collins has contributed his extensive business
expertise to Comdial's board for several years. As the new
chairman, he will further contribute to the revitalization of
the Company and provide guidance to the Company's strategies for
improved penetration of the traditional telecommunications and
converging data communications markets. Mr. Collins worked for
General Electric for 38 years, 13 of those years as a vice
president. He started in GE's Aerospace business and later led
GE's Factory Automation business in the Industrial Systems
division. He was founder, president, and chief executive officer
of the joint venture GEFanuc Automation from 1987 to his
retirement in 1998.
Until May 2001, Mr. Collins served as chairman of the board of
Scott Technologies, the world's leading manufacturer of airborne
oxygen systems and firefighting air breathing systems. He has
served on the board for several other domestic and international
organizations. Currently as chief executive officer of Capstone
Partners Inc., he does consulting for companies requiring
expertise in international business development and operational
efficiency improvement. He also is a director of CSE Systems and
Engineering Ltd., WI Industries of Houston, and chairman of the
advisory board of DataSweep Corporation.
Nick Branica, who was appointed president and chief executive
officer of Comdial Corporation in October of 2000, has now been
elected to vice chairman.
Stewart Sutcliffe, FCA, Comdial's newest Board member, brings a
background of financial and business management experience to
the Board. Mr. Sutcliffe joined Ernst & Young upon graduation
from McGill University and became a partner of Ernst & Young in
Canada in 1968. He served his clients in various industries,
including telecommunications, in providing accounting, audit,
and general business advisory services, while managing several
business units of the firm. From 1991 through 1997, when he
retired from Ernst & Young, he was the firm's chief financial
officer and a member of senior management.
In 1998, Mr. Sutcliffe established S3 Management Services Inc, a
consultancy focused on business and strategic planning,
restructuring, and financial management. He has helped companies
by directing organizational change to achieve improved bottom-
line results.
"With Robert Collins as Comdial's new chairman, I am certain we
will continue to make great progress towards our business
objectives," said Nick Branica. "Also, we're fortunate to have
Stewart Sutcliffe join the board. His value-add in the areas of
corporate finance and strategy will help to round out our board.
The board and management are grateful for Ms. Walker's many
years of service and wish her continued success."
Comdial Corporation, headquartered in Sarasota, Florida,
develops and markets sophisticated communications solutions for
small to mid-sized offices, government, and other organizations.
Comdial offers a broad range of solutions to enhance the
productivity of businesses, including voice switching systems,
voice over IP (VoIP), voice processing and computer telephony
integration solutions. For more information about Comdial and
its communications solutions, please visit our Web site at
http://www.comdial.com
COUNTRY STYLE: Ontario Court Gives Thumbs-Up Sign for CCAA Plan
---------------------------------------------------------------
Country Style Food Services Inc., and its associated companies
announced that the Ontario Superior Court of Justice has
approved and sanctioned Country Style's Plan of Compromise and
Arrangement, which permits Country Style to proceed to Plan
implementation, anticipated to take place in mid-April.
"[Thurs]day's decision removes the last major hurdle to the
financial restructuring of Country Style and re-establishes the
Company on solid ground," said Patrick Gibbons, President. "We
have accomplished this during a period of remarkable change
through the unfailing dedication of our employees and
franchisees."
Country Style filed for CCAA protection on December 13, 2001 in
order to provide for an orderly restructuring of its debts and
liabilities. On February 18, 2002, 93% of Country Style's proven
unsecured creditors and its sole secured creditor approved the
Plan. Country Style intends to complete its restructuring and
officially emerge from CCAA before April 30, 2002.
"With the financial support of our existing shareholders through
their additional investment in Country Style to effect the
financial restructuring, we can now look forward to truly
revitalizing the Country Style brand. We are over 150 locations
strong and are on the road to positioning Country Style for
profitable growth," Mr. Gibbons concluded.
Country Style Food Services Inc. is the third largest coffee and
donut franchiser in the Canadian quick service restaurant
industry. There are over 150 franchised and corporate locations
across Canada operating under the "Country Style" brand name.
Country Style also operates in the retail "fresh bake" industry
through over 60 franchised locations operating under the "Buns
Master" brand name. For more information, visit
http://www.countrystyle.com
EES COKE: Fitch Junks Ser. B Notes After Nat'l Steel Bankruptcy
---------------------------------------------------------------
Fitch Ratings has lowered the rating of EES Coke Battery Company
Inc.'s $75 million senior secured note issue due 2007 (series B)
to 'CCC' from 'B-' as a result of National Steel Corporation's
filing for protection under Chapter 11 of the Bankruptcy Code
earlier this week. National Steel, which is approximately 53%
owned by NKK Corporation of Japan, is the operator of EES Coke
and sole offtaker for the coke produced by the project. Fitch
maintains a 'BBB' on EES Coke's $168.0 million senior secured
note issue due 2002 (series A). The 'BBB' rating on the series A
notes reflects the stability in cash flow provided by tax credit
payments from DTE Energy Company and the short remaining term of
the notes (maturity is April 15, 2002). The series B notes are
placed on Rating Watch Negative. The ratings reflect Fitch's
opinion as to the likelihood of timely debt service payments
(principal and interest) throughout the life of the debt issues.
According to NSC's public statements, the Chapter 11 filing is
intended to 'provide National Steel with the time to develop a
plan of reorganization to return the company to sustained
profitability'. NSC declared it does not expect the bankruptcy
process to have any impact on the company's day-to-day
operations. The company further stated that it had arranged up
to $450 million in debtor-in-possession financing with existing
senior secured bank group, (subject to court approval), which
combined with other actions, the company believes will provide
sufficient liquidity to fund post-petition operating expense.
Fitch views the principal near-term risk to the project to be
whether a delay in payment from NSC could hinder the project's
liquidity position and jeopardize the payment of operating
expenses and scheduled debt service. At the time of NSC's
bankruptcy filing, EES Coke had approximately two months of
outstanding receivables due from NSC. While there will be a
delay in the payment of these pre-petition receivables, the
project's management believes this amount will be paid once the
Coke Sales Agreement is reaffirmed by the bankruptcy court. As
mentioned above, post-petition receivables are expected to be
made on a timely basis going forward. EES Coke's management has
told Fitch that its current liquidity position is sufficient to
cover current expenses and the next debt service payment due
April 15, 2002, without needing to tap into the six-month debt
service reserve. The upcoming debt service payment totals
approximately $23.5 million and is comprised of interest on both
series of notes plus the final principal payment on series A.
The coke produced by EES Coke currently supplies approximately
two-thirds of the coke required for the steel making process at
National Steel's Great Lakes Division (GLD) facility, which is
adjacent to the project. The price paid by National Steel for
coke is adjusted periodically based upon a composite index tied
to the cost of producing coke. This pricing mechanism coupled
with the close proximity of the coke battery, makes the
delivered price quite favorable to NSC compared to other
options. Fitch believes NSC will continue to purchase coke from
the project at least as long as the GLD facility is in
operation. In the event of an uncured payment default by NSC
under the Coke Sales Agreement, EES Coke is allowed to sell the
coke to other buyers. However, it is uncertain under what terms,
pricing and timing, the project would be able to secure buyers
of the coke products.
The series A notes are substantially supported by contractual
tax sharing payments from DTE equal to the tax credits earned by
the project pursuant to Section 29 of the Internal Revenue Code
(Section 29 tax credits) and the tax benefits of certain net
operating losses (NOLs) generated by EES Coke. To earn the
Section 29 tax credits, EES Coke must produce the coke and sell
it to an independent third party. It is estimated the tax
sharing payments for Section 29 tax credits will terminate in
Dec. 31, 2002, which is after the maturity of the series A notes
(April 15, 2002), but well before the maturity of the series B
notes (April 15, 2007). Hence, series B debt service payments
after 2002 are tied substantially to NSC's ability to meet its
obligations under the Coke Sales Agreement.
Despite the weakened state of both the domestic steel and
related coke industries, EES Coke's actual operating and
financial performance has substantially mirrored the original
base case projections assumed at the time of the issuance of the
notes (base case). In 2001, the project charged 1.3 million tons
of coal, and produced and sold approximately 915,000 tons of
coke, both measures meeting base case levels assumed for 2001.
Actual 2001 coke sales revenues were 5.2% lower than projected
in the base case due to a lower unit price for coke. Offsetting
the reduction in revenue was a 6.9% decline in coal expenses.
The actual debt service coverage ratio (cash available for debt
service divided by principal and interest payments) of 1.48
times was slightly below the base case level of 1.54x. The sum
of Section 29 tax credits and NOLs was essentially equal to the
amounts projected in the base case.
EES Coke is an affiliate of DTE Energy Services (DTEES), which
is a wholly owned indirect subsidiary of DTE. Fitch has assigned
a senior unsecured rating of 'BBB+' to DTE. The EES Coke notes
were issued in 1997 to finance the acquisition of NSC's Coke
Battery #5. Payments on the notes are made from revenues
received by EES Coke from sales of coke and coke by-products and
from payments made by DTE pursuant to a tax sharing agreement.
Fitch will continue to closely monitor the situation surrounding
NSC's bankruptcy and the potential impact on EES Coke.
EDISON INTERNATIONAL: Fitch Ups Junk Debt Ratings to Low-B Level
----------------------------------------------------------------
Fitch Ratings has raised Edison International and Southern
California Edison's senior unsecured debt ratings to 'B' and
'BB-', respectively; the senior unsecured notes of EIX and SCE
were previously rated 'CC'. Fitch has withdrawn EIX and SCE's
commercial paper rating because the past-due notes have been
repaid and no commercial paper remains outstanding. EIX and
SCE's securities have been removed from Rating Watch Positive.
The changes to EIX and SCE's ratings are summarized below. The
new ratings reflect actions taken by the California Public
Utilities Commission (CPUC) to implement its settlement
agreement with EIX/SCE, and the payment of roughly $5.5 billion
of SCE's past due obligations on March 1, 2002. The Utility
Reform Network's challenge to the federal court decision
adopting the settlement agreement between the CPUC, EIX, and SCE
remains pending. Future court action overturning the settlement
agreement on appeal is a relatively improbable outcome, in our
view; nonetheless, the current ratings reflect the potential for
further court review. The Rating Outlook is Positive based on
the more likely view that the settlement agreement will remain
in force, strengthening financial ratios at SCE and, to a lesser
degree, EIX. EIX's very high financial leverage and weak
interest coverage measures continue to overshadow the dramatic
recovery projected for SCE.
Cash coverage ratios at the parent, EIX, improve as a result of
the settlement, but debt leverage remains very high through
2003. The slower recovery at EIX reflects asset write-downs
booked in 2001, weak fundamental performance, and high debt
associated with its non-regulated businesses, Edison Mission
Energy, and Edison Capital. At EME earnings have been restrained
by weak energy prices in the UK. In the third quarter of 2001,
EIX booked an estimated $1.154 billion impairment charge related
to the sale of its U.K. power stations, Fiddler's Ferry and
Ferrybridge; the sale was completed in December 2001. EIX
subsidiary, Edison Enterprises, exited most of its business
lines in 2001, resulting in an anticipated $127 million asset
impairment charge. EE closed on those sales by year-end 2001. In
compliance with SFAS 144, operating losses and losses from asset
sales are classified as discontinued operations. In 2001, total
losses from discontinued operations associated with EME and EE
totaled $1.367 billion. Earnings at EC, in 2001, declined 38% to
$84 million, reflecting the run-off of the lease portfolio and
asset sales. Under the settlement agreement with the CPUC, SCE
is barred from paying common dividends to EIX until all
procurement-related obligations are fully recovered. SCE will
continue to remit its separate tax liability to EIX. Based on
Fitch's rating methodology for related corporate entities, SCE's
return to an investment grade rating will require fundamental
improvement at EIX's unregulated-businesses.
SCE's significantly improved fundamental outlook results from
its October 2001 settlement agreement with the CPUC, and the
repayment of all of SCE's past due obligations. In accordance
with the settlement agreement, the CPUC, on Jan. 23, 2002,
approved the creation of the Procurement-Related Obligations
Account (PROACT). The creation of the PROACT and related
accounting mechanisms by the CPUC are designed to facilitate
recovery of $3.6 billion of unrecovered energy procurement
obligations by year-end 2003. If the PROACT balance is not
recovered by the end of 2003, the unrecovered amount will be
proportionally amortized in retail rates by the end of 2005. The
major goals of the settlement include eventual restoration of an
investment grade rating for SCE and resumption of energy
procurement responsibility, currently provided by the state, for
SCE's customers. The pace of recovery of the PROACT balance and
related debt reduction will be a function of the amount of cash
flow provided by SCE's frozen rates (including surcharges)
versus normal cost of service rates as determined by the CPUC.
Cash and earnings collected in excess of cost-of-service rates
will be used to amortize the PROACT balance and repay related
debt. While elements of the company's cost of service rates will
be determined in future proceedings before the CPUC, Fitch
assumes that SCE will recover its entire PROACT balance by the
end of 2003. Financial recovery at SCE will be more rapid than
the pace of improvement at its parent, EIX. Fitch estimates SCE
will realize earnings coverage ratios in line with weak 'BBB'
ratings in 2002, with further improvement anticipated in 2003.
By the end of 2003, Fitch expects SCE's debt-to-total
capitalization ratio to fall to 50%.
Under the terms of the settlement agreement, the CPUC will
maintain rates at current levels through the end of 2003, unless
SCE is able to recover its PROACT balance before that time.
Rates may be adjusted by the CPUC under specific circumstances,
including changes to Department of Water Resources (DWR)
procurement-related revenue requirements and potential cost
savings through securitization of procurement costs. SCE will
apply 100% of any recovery it receives from refund proceedings
at the FERC, along with any proceeds from litigation by the
state to recover alleged over-charges from energy suppliers and
marketers to reduce its PROACT balance and associated debt.
Under the terms of the agreement, SCE will not pay common stock
dividends before Dec. 31, 2003, or until the PROACT balance is
recovered. If the PROACT balance is not repaid by the end of
2003, the CPUC will have discretion to determine whether SCE
will pay a dividend in 2004; SCE may resume dividend payments
January 1, 2005.
Given the volatility of California's political and regulatory
environment, the settlement agreement between the CPUC and SCE
is a very important factor in SCE's financial recovery. The
agreement was entered into in settlement of federal litigation,
and thus the federal court's ruling adopting the settlement
appears to be beyond the reach of state legislative, judicial,
or ballot initiatives. TURN, a group representing consumers, has
alleged in its appeal to a federal court of appeals that it was
denied due process by the CPUC's implementation of the
settlement in violation of a California statutory rate freeze.
While TURN's appeal does not appear to have a strong legal
basis, we cannot entirely rule out the possibility of an adverse
outcome.
On March 1, 2002, SCE closed on a $1.6 billion syndicated senior
credit facility, and issued $195 million of pollution control
revenue bonds. In total, SCE paid down approximately $5.5
billion of debt, including $531 million principal, plus accrued
interest, for outstanding commercial paper balances, and $400
million of principal and accrued interest on its senior
unsecured notes (5-7/8% series due January 2001 and 6-1/2%
series due June 2001). As a result, SCE no longer has any
commercial paper outstanding, and has cured existing payment
defaults under its note indenture.
Southern California Edison
--Senior secured debt to 'BB' from 'CCC';
--Senior unsecured debt to 'BB-' from 'CC';
--Preferred stock to 'B' from 'C';
--Insured pollution control bonds affirmed at 'AAA'.
--Commercial paper rating withdrawn.
Edison International
--Senior unsecured to 'B' from 'CC';
--Trust preferred to 'CCC' from 'C';
--Commercial paper rating withdrawn.
ENRON CORP: Seeks Court Approval of Cooper Employment Agreement
---------------------------------------------------------------
Since the resignation of Kenneth L. Lay as Chief Executive
Officer of Enron Corporation on January 23, 2002, the Board of
Directors has been searching for a replacement to provide
management expertise and restructuring experience to assist the
Debtors in the reorganization process and these chapter 11
cases.
According to Brian Rosen, Esq., at Weil, Gotshal & Manges LLP,
New York, New York, the Board found an ideal candidate in
Stephen Forbes Cooper, LLC. The Board entered into an agreement
with SF Cooper LLC on January 30, 2002. Under the Agreement,
Mr. Rosen relates, SF Cooper LLC shall provide Stephen Cooper
and up to the Full-Time Equivalent -- defined as 160 worked
hours per month -- of fifteen additional individuals as
"Associate Directors of Restructuring" to work for the Debtors.
Stephen Cooper shall be employed as Acting Chief Executive
Officer and Chief Restructuring Officer of Enron, Mr. Rosen
says.
Mr. Rosen informs Judge Gonzalez that Stephen Cooper is well-
qualified to act as the Debtors Acting CEO and Chief
Restructuring Officer because Stephen Cooper has substantial
knowledge and experience serving as a senior officer in large
companies and in assisting troubled companies with:
-- stabilizing their financial condition,
-- analyzing their operations, and
-- developing an appropriate business plan to accomplish
the necessary restructuring of their operations and
finances.
Mr. Rosen notes that Stephen Cooper has served as a senior
officer or an advisor to Federated Department Stores, Sunbeam
Corporation, Laidlaw Inc., Washington Group International Inc.,
Polaroid Corporation, Pegasus Gold, Inc., Nationsrent, and ICG
Communications, Inc.
Furthermore, Mr. Rosen points out, Stephen Cooper is a founding
member of Zolfo Cooper LLC, which has provided crisis management
and restructuring services to troubled companies since 1982.
Stephen Cooper has also served as a turnaround consultant for a
number of companies in a variety of industries, Mr. Rosen adds.
Clearly, the Debtors contend that Mr. Cooper is highly qualified
to serve as Acting Chief Executive Officer and Chief
Restructuring Officer of Enron.
Under the Agreement, SF Cooper LLC will provide these services
to the Debtors:
(a) Stephen Cooper shall serve as the Acting Chief Executive
Officer and Chief Restructuring Officer of Enron;
(b) SF Cooper LLC will assign Associate Directors of
Restructuring to serve in various capacities with the
Debtors;
(c) Stephen Cooper shall be authorized to make decisions with
respect to all aspects of the management and operations of
the Debtors' business, subject to appropriate governance
by the Board and in accordance with the Debtors' Bylaws
and applicable state law. Stephen Cooper and the
Associate Directors of Restructuring shall not have
authority or make decisions other than for activities in
the ordinary course of business or otherwise approved by
the Board or the Executive Committee of the Board and, if
required, the Bankruptcy Court;
(d) All of Stephen Cooper's material decisions shall be
discussed with one or more members of the Executive
Committee, as appropriate, and with the Debtors' Chief
Executive Officer, if a non-interim CEO is appointed by
the Board. Any dispute between the Executive Committee and
Stephen Cooper regarding the implementation of such
decisions shall be resolved definitively by the non-
interim CEO, if any, and in the absence of a non-interim
CEO, by the Board.
(e) SF Cooper LLC shall cause Stephen Cooper to furnish such
hours of service as necessary to perform his duties on
behalf of SF Cooper, LLC; provided, however, that Stephen
Cooper shall provide a minimum of 20 hours of service per
week.
Other principal and salient terms of the Agreement:
Term: Retention shall commence on January 30, 2002 and
shall continue on a month-to-month basis until
terminated by either party upon 10 days' prior
written notice to the other party. In the event of
termination prior to the end of a calendar month,
the Debtors shall pay SF Cooper, LLC for the entire
calendar month.
Compensation: (1) For the services of Stephen Cooper an annual
payment of $1,320,000, payable monthly in the
amount of $110,000.
(2) For the services of each Associate Director
of Restructuring an annual payment of
$1,200,000, payable monthly in the amount of
$100,000.
(3) A fee in an amount to be mutually agreed upon
between the Debtors and SF Cooper, LLC in the
event that Enron succeeds in obtaining:
(i) a consensual non-liquidating
restructuring of a significant portion of
the Debtors' business, or
(ii) a final judicial order approving a plan
of reorganization under chapter 11 of the
Bankruptcy Code (other than a liquidation
plan);
provided, however, that such fee shall be in a
minimum amount of $5,000,000 (any amounts in
excess of $5,000,000 are subject to approval of
the Creditors' Committee). In the event that
the Debtors fail to succeed in obtaining the
results described in clauses (i) or (ii), the
Debtors and SF Cooper, LLC shall mutually agree
on an appropriate fee (subject to approval of
the Creditors' Committee).
(4) SF Cooper LLC shall be reimbursed for its
reasonable out-of-pocket expenses.
Indemnification:
(a) The Debtors shall indemnify and hold harmless
SF Cooper LLC and its principals, employees,
representative or agents (including counsel)
for any indemnifiable loss arising out of or in
connection with this engagement or the services
provided by SF Cooper LLC, unless there is a
final non-appealable order issued by a trial
court finding the SF Cooper LLC Indemnitees
directly liable for gross negligence or willful
misconduct.
(b) If any SF Cooper LLC Indemnitee is required to
testify at any time after the expiration or
termination of the Agreement at any
administrative or judicial proceeding relating
to any services provided by SF Cooper LLC
pursuant to the Agreement, then SF Cooper LLC
shall be entitled to be compensated by the
Debtors for SF Cooper LLC's associated time
charges at the regular hourly rates in effect
at the time and to be reimbursed for reasonable
out-of-pocket expenses.
Independent
Contractor: The parties intend that SF Cooper LLC and each of
its representatives shall render services as an
independent contractor.
Conflicts: SF Cooper LLC confirms that none of the principals
or staff members of SF Cooper LLC or of its
affiliates has any financial or business connection
with the Debtors, and SF Cooper LLC is aware of no
conflicts in connection with the Agreement.
Stephen F. Cooper, a member of the firm Stephen Forbes Cooper
LLC and the firm of Zolfo Cooper LLC, assures the Court that the
Firms are "disinterested" persons as the term is defined in
section 101(14) of the Bankruptcy Code. Mr. Cooper admits that
although the Firm may have in the past or in the future
represent certain parties in interest -- the representations are
totally unrelated to these chapter 11 cases. (Enron Bankruptcy
News, Issue No. 15; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
EXODUS COMMS: Signing-Up Alvarez & Marsal as Wind-Down Advisors
---------------------------------------------------------------
Exodus Communications, Inc., and its debtor-affiliates ask the
Court for permission to employ Alvarez and Marsal as Special
Advisors to wind-down their estates, nunc pro tunc to February
6, 2002.
Adam W. Wegner, the Debtors' Senior Adviser for Legal and
Corporate Affairs, informs the Court Alvarez and Marsal was
chosen because the Firm's professionals have extensive
restructuring experience in the food services,
telecommunications, manufacturing, retailing, distribution,
healthcare and education industries. In particular, Richard
Williamson, an A&M managing director, the primary professional
in this engagement, served as the Chairman and the Chief
Executive Officer of Craig Consumer Electronics during its
bankruptcy. He also served as a financial advisor to Drug
Emporium, Freuhauf Trailer Corporation, Rural/Metro Corporation,
Shamrock Farms and Southwest Supermarkets Inc. Another managing
director, David G. Walsh served as the President and CEO of
Telegroup Inc., Dakota Direct Inc. and others. He also served as
Chief Restructuring Officer of Heartland Steel, as Consummation
Agent of Keating Industries Inc., as Financial Advisor to
Western Union, Core-Mark Industries, Phillips Colleges, Ames
Department Stores and Regina Corporation and as a member of the
team managing Iridium and Mobilemedia.
Specifically, Alvarez and Marsal will be:
A. Analyzing and assisting in the development and the
negotiations of a liquidating plan of reorganization with
the various creditors and other parties-in-interest;
B. Preparing for meetings with and meeting with the Creditors'
Committee and its respective professionals in assisting the
Debtors in the preparation of reports and other information
required by the Court; the United States Trustee, the
Creditors' Committee and appropriate governmental
authorities;
C. Assisting the Debtors with the claims reconciliation process
and the collection of amounts owed to the Debtors;
D. Advising and assisting the Debtors in the assumption and
rejection of executory contracts;
E. Assisting in analyzing potential preference payments,
fraudulent conveyances and other causes of action;
F. Assisting and advising in the formulation of plans for and
the completion of the Debtors' assets to an affiliate of
Cable & Wireless;
G. Assisting in the wind-down or liquidation of foreign
subsidiaries;
H. To the extent a liquidating plan of reorganization is filed
and confirmed for the Debtors, serving as liquidating
trustee, liquidating agent or in some similar capacity;
I. Subject to Court approval, serving as post-confirmation
liquidating trustee or administrator of the Debtors' assets
supervising the review and liquidation of claims and
distributions to claimants; and
J. Subject to the agreement of Alvarez and Marsal, performing
any other service that the Debtors or their counsel deem
necessary or appropriate.
Mr. Wegner states that if the Debtors ask for services other
than those enumerated, the Debtors and A&M will negotiate, in
good faith, an incentive plan for such services.
The professionals that will be primarily involved in this
engagement and their corresponding hourly rates are:
David G. Walsh $475
Richard Williamson $425
Directors $325
Associates $275 to $325
Analyst $145 to $220
The Debtors also agree to indemnify Alvarez & Marsal for any
losses or claims brought against the Firm.
A&M Managing Director David G. Walsh assures the Court that a
conflicts check revealed no relationship between the firm and
parties-in-interest in these cases, except that a managing
director of Alvarez and Marsal is married to a managing director
of The Chase Manhattan Bank, the indentured trustee for Exodus
bondholders. (Exodus Bankruptcy News, Issue No. 15; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
FEDECAFE EXPORT: Fitch Assigns BB+ Rating to $47MM Receivables
--------------------------------------------------------------
Fitch Ratings has assigned a 'BB+' rating to $47 million
Fedecafe Export Receivables Master Trust 2002-1. The Rating
Outlook is Stable. The securitization is a follow up issuance
from the same program as Fedecafe's 1999-1 Certificates. The
securitizations are parri passu and both rated 'BB+'.
The rating is supported by the strong commitment of the
Colombian government to the coffee industry, the National Coffee
Fund and Fedecafe as its administrative agent. The coffee
industry commands tremendous importance to Colombia in terms of
foreign exchange earnings, GDP, employment and social stability.
Fitch expects that Fedecafe will continue to operate and play a
significant role in the industry. Recently, in response to the
international price crisis, the government has shown its
commitment with an aid package to growers intended to support
prices, research and development and other technical assistance.
The rating is constrained by the continued decline of
international coffee prices, which has effected the credit
profile of the Fund. In the past year, world coffee stocks have
continued to increase due to excess supply. The crisis has
impacted the Fund's two main sources of income, sales of coffee
and taxes and contributions paid by Colombian coffee growers.
Financial income has also declined due to a reduction in the
Fund's portfolio of marketable securities.
In response, Fedecafe implemented severe cost cuts, primarily in
support programs to coffee growers and marketing expenses. Most
importantly, in January 2001, Fedecafe eliminated the domestic
floor on coffee prices and now allows its purchase price to
fluctuate according to international prices. Despite these
positive measures, the Fund suffered from an accumulated cash
flow operating deficit for the year. Fedecafe financed roughly
half of this deficit with liquid assets that were previously
held in trust by the Fund for the provision of loans to coffee
growers (the Fund will no longer provide financing to coffee
growers but an agency of the government will). The remaining is
financed primarily with debt and with cash and marketable
securities. Colombian coffee commands over 10% of the world's
total coffee exports and is the premium choice for quality. Over
the past three years, volume exports of Colombian coffee have
ranged between 9 million and 10 million 60 kg. bags, of which
Fedecafe commands a market share of 36%. Production is expected
to increase above 11 million 60 kg. bags over the next few years
as Colombia completes a pruning program initiated on its coffee
plants in 1998. Moreover, Colombian coffee continues to command
a price premium over Arabica, or mild coffee. Because of the
scarcity of premium coffees, such price premium has actually
increased in the last year. Flows from export receivables
continue to generate healthy debt service coverage levels for
the transaction. Designated customers provide approximately six
times coverage and total exports provide almost 20x coverage.
The Stable Rating Outlook on the rating reflects Fitch's
expectations that the austerity measures described above,
coupled with the abandonment of the fixed domestic purchase
price, will help stabilize the Fund's financial profile in 2002
and beyond. It also reflects Fitch's expectations that the
Colombian government will continue to assist coffee growers,
Fedecafe and the Fund under a scenario of further coffee price
declines.
Fedecafe was founded in 1927 as a non-for-profit organization
with the objective of defending and promoting the interests of
Colombian coffee growers. Fedecafe is the administrative agent
for the National Coffee Fund, a parafiscal account of public
earn-marked funds allocated to the protection and development of
the Colombian coffee industry. Fedecafe purchases coffee through
its more than 500 purchase points located throughout the coffee
regions of Colombia.
FEDERAL-MOGUL: Future Claimants Hire Zolfo Cooper as Consultants
----------------------------------------------------------------
Eric D. Green, the Legal Representative for the Future Asbestos-
Related Claimants in the chapter 11 cases of Federal-Mogul
Corporation and its debtor-affiliates, seeks an order from the
Court authorizing his employment and retention of Zolfo Cooper
LLC as bankruptcy consultants and special financial advisors,
nunc pro tunc to February 4, 2002.
Mr. Green tells the Court that selected Zolfo because of its
experience at a national level in matters of this character and
its exemplary qualifications to perform the services required in
this case. Zolfo is well-qualified to serve as bankruptcy
consultants and special financial advisors to the Futures
Representative as it specializes in assisting and advising the
Debtors, creditors, investors and court-appointed officials in
bankruptcy proceedings and out-of-court workouts. Its services
have included assistance in developing/analyzing and evaluating,
negotiating and confirming plans of reorganization and
testifying regarding debt restructuring, feasibility and other
relevant issues.
Mr. Green will look to Zolfo to:
A. monitor the Debtors' cash flow and operating performance,
including:
a. comparing actual financial results to plans;
b. evaluating the adequacy of financial and operating
controls;
c. tracking the status of the Debtors' professionals'
progress relative to developing and implementing
programs such as preparation of a business plan,
identifying and disposing of non-productive assets,
and other such activities;
d. preparing periodic presentations to the Futures
Representative summarizing findings and observations
resulting from Zolfo Cooper's monitoring activities;
B. analyze and comment on operating and cash flow projections,
business plans, operating results, financial statement,
other documents and information provided by the Debtors and
data pursuant to the Future Representative's request;
C. advise the Future Representative in connection with and in
preparation for meetings with Debtors, other constituencies
and their respective professionals;
D. perform an enterprise valuation of the Debtors' estate which
are pertinent to the Futures Asbestos-Related Claimants;
E. prepare for and attend meeting with the Future
Representative;
F. analyze claims and perform investigations of potential
preferential transfers, fraudulent conveyances, related-
party transactions, and such other transactions as may be
requested by the Futures Representative;
G. analyze and advise the Futures Representative about any plan
of reorganization proposed by the Debtors, the underlying
business plan, including relates assumptions and rationale,
and the related disclosure statement;
H. provide such other services as requested by the Futures
Representative.
Zolfo member Steven E. Panagos believes that none of his fellow
members or any Zolfo employee is related to the Debtors, their
creditors, and other parties in interests except that:
A. Zolfo is connected with the Futures Representative by virtue
of this engagement;
B. Zolfo has been retained by the Futures Representative in the
case of Babcock & Wilcox, in the U.S. Bankruptcy Court for
the Eastern District of Louisiana; and
C. Zolfo may have represented certain of the Debtors' creditors
or other parties-in-interests in matters unrelated to these
cases, including:
a. Lenders: ABN Amro, Banco Espirito, Bank of Montreal,
Bank of America/Nations Bank, Bank of Tokyo-
Mitsubishi, Bank of New York, Bank of Nova Scotia,
Bank One, Bayerische Vereinsbank AG, Bear Sterns, BNP,
Citibank/Citicorp, Citizens Bank, Comerica Bank,
Credit Agricole Indosuez, Credit Suisse Asset
Management, Credit Lyonnais, Dai-Ichi Kangyo Bank,
Dresdner Kleinwort Wasserstein, Deutsche Bank, Eaton
Vance, Erste Bank, Foothill Capital, First Union
National Bank, Fleet National Bank, Fuji Bank, Goldman
Sachs, HSBC Bank, IBJ Witehall, Indosuez Capital, JP
Morgan Chase, KBC Bank, Key Bank National, KZH
Sterling LLC, Mellon Bank, National Westminster Bank,
Pilgrim Investments Inc., Royal Bank of Scotland,
Societe Generale, Travelers Insurance Group, and
Wachovia Securities;
b. Insurance Carrier: Aon Risk Service;
c. Indenture Trustee: Bank of New York, and US Bank;
d. Equity Holder: Dimensional Fund Advisors;
e. Professionals: Ernst & Young, PricewaterhouseCoopers,
and Sidley & Austin, Sitrick & Co.;
f. Unsecured Creditor: General Electric Capital Corp., and
National City Bank.
Mr. Panagos informs the Court that Zolfo will bill for services
at its customary hourly rates:
Principals $500-$675
Professional Staff $225-$495
Support Personnel $ 75-$200
Mr. Panagos states that Zolfo traditionally and routinely
receives success or consummation fees for work of the nature
contemplated by this engagement. Both Zolfo and the Futures
Representative recognize, however, that it is difficult to
define success at the inception of an engagement by an entity in
the position of the Futures Representative and that the Court
will not approve any part of an engagement that compels the
award of a consummation fee. Accordingly, in connection with a
plan of reorganization supported by the Futures Representative,
pursuant to which a trust is created, Zolfo will seek upon the
consent of the Futures Representative an order directing the
Debtors to pay Zolfo a $1,000,000 Consummation Fee. (Federal-
Mogul Bankruptcy News, Issue No. 12; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FOSTER WHEELER: Secures Extension of Two Financing Facilities
-------------------------------------------------------------
Foster Wheeler Ltd. (NYSE:FWC) announced that it has obtained an
extension of its $50 million receivables sale arrangement
through April 12, 2002 and has been taking steps to find a
replacement for this facility.
In addition, the company also received a forbearance of the
exercise of any remedies from February 28, 2002 through April
15, 2002 from the required lenders under its $33 million lease
financing facility, which facility matured on February 28, 2002.
The company is actively pursuing the refinancing of its lease
financing facility.
The company's waiver on its revolving credit facility is in
effect until April 15, 2002, subject to the continuing
satisfaction of certain conditions.
"The successful outcome of these negotiations is an important
milestone," said Gilles A. Renaud, the company's senior vice
president and chief financial officer. "It enables us to keep in
place our current bank revolving credit facility until April 15,
2002 while we negotiate and structure new, long-term credit
agreements."
Foster Wheeler Ltd. is a global company offering, through its
subsidiaries, a broad range of design, engineering,
construction, manufacturing, project development and management,
research, plant operation and environmental services. The
corporation is based in Hamilton, Bermuda, and its operational
headquarters are in Clinton, N.J. For more information about
Foster Wheeler, visit our World-Wide Web site at
http://www.fwc/com
FUTURE BEEF: Safeway Expects to Take the Brunt of Bankruptcy
------------------------------------------------------------
Future Beef Operations LLC, a meat processing company based in
Denver, Colo., was placed in Chapter 11 bankruptcy on March 4,
2002. Safeway is a 15% equity investor in Future Beef and has a
supply contract to purchase beef from Future Beef. In addition,
Safeway has a first loss deficiency agreement with Future Beef's
principal lender which provides that under certain circumstances
and in the event of liquidation, Safeway will pay the lender up
to $40 million if proceeds from the sale of collateral do not
fully repay the amount owed by Future Beef to the lender.
With its first plant in Arkansas City, Kansas, Future Beef had
planned to pioneer new practices in integrated beef supply chain
management. The plant began operations in August 2001 and failed
to meet performance expectations. Subsequent to year-end, the
plant continued to underperform and larger-than-expected start-
up losses caused the company to be placed into Chapter 11
proceedings.
Safeway will accrue an after-tax charge of $30.5 million ($0.06
per share) related to the Future Beef bankruptcy in its 2001
financial statements. The charge is primarily for potential
payments under contractual obligations and the first loss
deficiency agreement in the event Future Beef is liquidated.
Because Safeway has not yet filed its 2001 Form 10-K with the
SEC, generally accepted accounting principles require that this
estimated charge be reflected in 2001 financial statements. Net
income for the year 2001 was $1,253.9 million ($2.44 per share)
including the $0.06 per share impact of the Future Beef
bankruptcy.
GALEY & LORD: December Quarter Net Sales Plummet to $136 Million
----------------------------------------------------------------
Galey & Lord Inc.'s net sales for the December quarter 2001
(first quarter of fiscal 2002) were $136.4 million as compared
to $221.7 million for the December quarter 2000 (first quarter
of fiscal 2001).
Galey & Lord Apparel's net sales for the December quarter 2001
were $59.0 million, a $48.6 million decrease as compared to the
December quarter 2000 net sales of $107.6 million. The decrease
in net sales was primarily attributable to a 31% decrease in
fabric sales volume. Approximately $19 million of the decrease
was due to the discontinuation in September 2001 of the
Company's garment making operations announced as part of the
Fiscal 2001 Cost Reduction and Loss Avoidance Initiatives. The
remainder of the decrease was due to the continuing difficult
domestic retail environment and a reduction in average selling
prices. Overall, average selling prices, inclusive of product
mix changes, declined approximately 9.1%.
Swift Denim's net sales for the December quarter 2001 were $44.0
million as compared to $78.6 million in the December quarter
2000. The $34.6 million decrease was primarily attributable to a
43% decrease in volume and a 1.4% decline in selling prices.
Approximately $8.8 million of the volume decrease is due to the
reduction in manufacturing capacity resulting from the closure
of the Erwin, North Carolina Facility in December 2000. The
remainder of the decrease is due to the decline in demand at
retail.
Klopman International's net sales for the December quarter 2001
were $29.7 million, a $2.1 million decline as compared to the
December quarter 2000 net sales of $31.8 million. The decline
was primarily attributable to a 5.7% decline in selling prices,
a 2.7% decrease in sales volume and $0.4 million of foreign
currency transaction exchange losses on sales not denominated in
Euros. These decreases were partially offset by a 3.2% increase
in net sales due to exchange rate changes used in translation.
Net sales for Home Fashion Fabrics for the December quarter 2001
were $3.8 million compared to $3.7 million for the December
quarter 2000. The $0.1 million increase in net sales primarily
resulted from changes in product mix offset by lower selling
prices and volume.
Operating Income
Operating income for the December quarter 2001 was $6.6 million
as compared to $14.4 million for the December quarter 2000.
Excluding the charges related to the Fiscal 2001 Cost Reduction
and Loss Avoidance Initiatives, the December quarter 2001
operating income would have been $7.6 million. Excluding the
charges related to the Fiscal 2000 Strategic Initiatives, the
December quarter 2000 operating income would have been $16.4
million.
Galey & Lord Apparel's operating loss was $2.0 million for the
December quarter 2001 as compared to an operating income of $6.4
million for the December quarter 2000. Excluding the run-out
costs associated with the Fiscal 2001 Cost Reduction and Loss
Avoidance Initiatives, Galey & Lord Apparel's operating loss for
the December quarter 2001 would have been $1.7 million as
compared to an operating income of $8.0 million for the December
quarter 2000 excluding the Fiscal 2000 Strategic Initiatives.
The decrease is principally a result of reduced sales and
manufacturing volume due to a continuing decline in the market
and foreign price competition, lower selling prices and change
in product mix.
December quarter 2001 operating income for Swift Denim was $10.5
million, a $3.1 million increase as compared to the December
quarter 2000 operating income of $7.4 million. Excluding the
run-out costs related to the Fiscal 2000 Strategic Initiatives,
operating income for the December quarter 2000 would have been
$7.8 million. The increase in Swift Denim's operating income
principally reflects positive changes in product mix, lower
utility costs, reduction of lower-of-cost-or-market (LCM)
reserves due to the change in method of accounting for
inventories to the last-in, first-out (LIFO) inventory method
and lower fixed manufacturing costs due to the closure of the
Erwin facility in December 2000. These improvements were
partially offset by the impact of lower sales volume and selling
prices. Swift also recognized a benefit curtailment gain of $3.4
million in the current quarter related to the curtailment of
postretirement benefits for employees not retired as of December
31, 2001 compared to a gain of $2.4 million recognized in
December 2000 quarter related to benefit curtailment at the
Erwin facility.
Klopman International's operating income in the December quarter
2001 decreased $1.3 million to $0.7 million as compared to the
December quarter 2000 operating income of $2.0 million. The
decrease principally reflects the impact of lower selling prices
and volume partially offset by lower cost of raw materials and
greige fabric as well as a cost reduction program implemented in
the first quarter of fiscal 2002 impacting manufacturing
overhead and selling, general and administrative expenses. In
addition, Klopman International's results were negatively
impacted by $0.4 million of foreign currency transaction
exchange losses on sales not denominated in Euros.
Home Fashion Fabrics reported an operating loss of $1.1 million
for both the December quarter 2001 and December quarter 2000.
Excluding the costs associated with the Fiscal 2001 Cost
Reduction and Loss Avoidance Initiatives, Home Fashion Fabrics'
operating loss would have been $0.4 million. The decrease in
operating loss is principally a result of the Fiscal 2001 Cost
Reduction and Loss Avoidance Initiatives.
The corporate segment reported an operating loss for the
December quarter 2001 of $1.5 million as compared to an
operating loss for the December quarter 2000 of $0.3 million.
The increase in the operating loss is primarily due to financial
consultant expenses incurred in the first quarter of fiscal
2002. The corporate segment's operating income (loss) typically
represents the administrative expenses from the Company's
various holding companies.
Net loss for the December quarter 2001 was $5.2 million compared
to a net loss for the December quarter 2000 of $0.1 million.
Excluding the Fiscal 2001 Cost Reduction and Loss Avoidance
Initiatives, the Company's net loss for the December quarter
2001 would have been $4.2 million. Excluding the Fiscal 2000
Strategic Initiatives, the Company's net income for the December
quarter 2000 would have been $1.3 million.
Galey & Lord is a leading global manufacturer of textiles for
sportswear, including cotton casuals, denim, and corduroy, as
well as a major international manufacturer of workwear fabrics.
The company also manufactures print and dyed fabrics for the
home fashion market. The company filed for chapter 11
reorganization under the U.S. Bankruptcy Code on February 19,
2002, in the U.S. Bankruptcy Court for Southern District of New
York.
DebtTraders reports that Galey & Lord Inc.'s 9.125% bonds due
2008 (GNL1) are trading between 19 and 21. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=GNL1for
real-time bond pricing.
GLOBAL CROSSING: Sprint Seeks Stay Relief to Terminate Agreement
----------------------------------------------------------------
Sprint Communications Company L.P. asks the Court for an Order
granting relief from the automatic stay to permit termination of
Agreement with Global Crossing Ltd., and its debtor-affiliates
or in the alternative, directing Debtors to provide adequate
assurance of future performance.
Jennifer L. Scoliard, Esq., at Cozen O'Connor LLP in Wilmington,
Delaware, informs the Court that the Debtors are resellers of
Sprint long distance service and purchase other
telecommunications services from Sprint, pursuant to a Custom
Service Agreement. Pursuant to the terms of the Agreement, the
Debtors were required to pay Sprint for services on a timely
basis and Sprint was permitted to request deposits from Debtors
to assure payment of services. Prior to the Filing Date,
Debtors' average monthly usage of Sprint Services was
approximately $2,450,000.00 and the Debtors was indebted to
Sprint in an amount in excess of $632,258.06 representing unpaid
and past due monthly services provided by Sprint under the
Agreement.
Since the Filing Date, Ms. Scoliard submits that Sprint has
continued to provide the Debtors with long distance service
pursuant to the terms of the Agreement but the Debtors have not
provided or offered adequate assurance of future performance to
Sprint. Based on Sprint's billing and payment practices and
usage, at any given time, Sprint's credit exposure with the
Debtors is for substantially in excess of 75 days of service,
which, in this case, represents credit exposure of at least
approximately $1,580,645.16 at any given time. If the Debtors do
not immediately provide adequate assurance of future
performance, Sprint submits that cause exists to modify the
automatic to permit Sprint to terminate the Agreement
immediately.
Sprint submits that adequate assurance of future performance in
this case is the following:
A. a payment to Sprint in the amount of $1,580.645.16 within 2
business days hereof covering Services provided by Sprint
to Debtor for the period from the Petition Date through
February 16, 2002;
B. payment to Sprint in the amount of $569,767.44 as a
prepayment for Services to be provided for the period
Sunday, February 17, 2002 to Saturday, February 23, 2002;
C. a payment on each Wednesday thereafter each in the amount of
$569,767.44 as prepayments for Services to be provided by
Sprint to Debtor for the week following the date of each of
such payment; and
D. payment within 5 business days of receipt of the weekly
invoice from Sprint equal to the difference between the
Weekly Payments and the actual amount of Services provided
by Sprint to the Debtor for the week that is the subject of
the invoice. In the event a Weekly Payment exceeds the
actual charges incurred by Debtor, Sprint shall apply the
excess sum toward the next Weekly Payment owed by Debtor.
(Global Crossing Bankruptcy News, Issue No. 4; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
GUILFORD MILLS: Selling Twin Rivers Textile to H. Greenblatt
------------------------------------------------------------
Guilford Mills, Inc. (OTC Bulletin Board: GFDM) announced that
it has agreed in principle to sell the business and certain
assets of Twin Rivers Textile Printing and Finishing (located in
Schenectady, New York) to H. Greenblatt and Co., Inc., which
will assume operations at that printing facility. Nightingale &
Associates, LLC, a corporate restructuring firm, acted as
advisor in the transaction. Terms of the agreement were not
disclosed. The transaction is subject to, among other
conditions, execution of definitive documentation.
"I am happy that we were able to successfully reach this
agreement that will result in continuing the operations at the
Twin Rivers facility," said John Emrich, President and CEO of
Guilford Mills, Inc.
H. Greenblatt and Co., Inc. is a leading print fabric converter
primarily servicing the swimwear and intimate apparel markets
with offices in Los Angeles and New York.
Since December 2001, H. Greenblatt and Co., Inc. has been the
exclusive converter of Twin Rivers' library of patterns and
screens. As part of that agreement, H. Greenblatt has been
servicing orders and developing business using Twin Rivers'
screens, artwork and original designs.
Howard Greenblatt said, "We feel privileged to build on the
great work that Guilford and the staff at Twin Rivers have
accomplished. This acquisition provides us with the opportunity
to better serve our customers during these challenging times for
the American textile industry."
HAYES LEMMERZ: Asks Court to Approve Intercompany Asset Transfer
----------------------------------------------------------------
To optimize utilization of their personal property, Hayes
Lemmerz International, Inc., and its debtor-affiliates want the
Court to grant them authority to transfer miscellaneous assets -
- equipment, machinery inventory and other personal property --
between individual Debtor entities during the pendency of the
Debtors Bankruptcy cases.
Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom in
Wilmington, Delaware, propose these uniform procedures that, if
followed, will require no further action by the Court:
A. The lessor and lessee Debtor entities will accrue an
Intercompany Lease obligation on account of the transfer of
assets between individual Debtor entities.
B. For an asset with a net book value of less than or equal to
$50,000, the fair market value shall be determined in the
collective business judgment of the plant manager and plant
controller of the transferring entity.
C. For an asset with a net book value greater than $50,000, fair
market value shall be determined by obtaining written,
third party, arms-length indication of the fair market
value of the asset in question.
D. The amount of the intercompany obligation pursuant to an
Intercompany Lease will be determined collectively by the
plant manager and plant controller of both the lessor and
lessee Debtor entities, provided, however, that the amount
of such lease obligation will be consistent with the
industry standard for similar equipment with a similar fair
market value.
E. The Intercompany Lease will be reflected in the books and
records of both the lessor and lessee Debtor entities.
Mr. Chehi states that the Debtors intends to make sure any
intercompany lease obligation is relevant to the fair market
value of the assets to be transferred between individual Debtor
entities. The lease obligation will be given superpriority over
similar administrative expenses specified in sections 503(b) and
507(b) of the Bankruptcy Code without prejudicing the rights of
any creditor of an individual Debtor entity.
Mr. Chehi tells the Court that all core parties-in-interest will
receive Notice regarding transactions exceeding $50,000, and
those parties will have 5 business days to review the proposal
and, if necessary, timely inform the Debtors of any objection.
(Hayes Lemmerz Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
ICH CORP: Engages Sonnenschein Nath as Lead Bankruptcy Counsel
--------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave its approval to ICH Corporation's application to employ
Sonnenschein Nath & Rosenthal to represent the Debtors in their
Chapter 11 cases.
Sonnenschein is a law firm of national prominence with offices
in New York, California, the District of Columbia, Illinois,
Missouri, and Florida.
As Counsel to the Debtors, Sonnenschein will:
(a) give legal advice with respect to the Debtors' powers
and duties as debtors-in-possession in the continued
operation or liquidation of their businesses and
management or disposition of their properties;
(b) take all necessary action to protect and preserve the
Debtors' estates, including the prosecution of actions
on behalf of the Debtors, the defense of any actions
commenced against the Debtors, negotiations concerning
all litigation in which the Debtors are involved, and
the objection to claims filed against the Debtors'
estates;
(c) prepare on behalf of the Debtors all necessary motions,
answers, orders, reports and other legal papers in
connection with the administration of their estates;
(d) perform any and all other legal services for the
Debtors in connection with these chapter 11 cases and
with the formulation and implementation of the Debtors'
plan of reorganization;
(e) advise and assist the Debtors regarding all aspects of
the plan confirmation process, including, but not
limited to, securing the approval of a disclosure
statement by the Bankruptcy Court and the confirmation
of a plan at the earliest possible date;
(f) give legal advice and perform legal services with
respect to general corporate matters and advice and
representation with respect to obligations of the
Debtors, their Boards of Directors and officers;
(g) give legal advice and perform legal services with
respect to matters involving the negotiation of the
terms of and the issuance of corporate securities,
matters related to corporate governance and the
interpretation, application or amendment of the
Debtors' corporate documents, including its
Certificates of Incorporation, by-laws and material
contracts, and matters involving stockholders and the
Debtors' legal duties toward them;
(h) give legal advice and perform legal services with
respect to real estate, tax and environmental issues
relating to all of the foregoing; and
(i) give such other legal advise as may be necessary.
The Debtors will pay Sonnenschein its customary hourly rates:
Partners between $335 and $630
Associates between $195 and $390
Para-professionals between $115 and $200
Peter D. Wolfson, whose current hourly rate is $595, will serve
as lead counsel to the Debtors.
ICH Corporation, a Delaware holding corporation which, through
two principal operating subsidiaries, Sybra and Sybra Conn.,
currently operates 240 Arby's restaurants located primarily in
Michigan, Texas, Pennsylvania, New Jersey, Florida and
Connecticut. The Company filed for chapter 11 protection on
February 5, 2002. When the Company filed for protection from its
creditors, it listed an estimated debts and assets of $50
million to $100 million.
IMPERIAL METALS: Will Begin Implementing CCAA Plan
--------------------------------------------------
Imperial Metals Corporation (TSE:IPM) is pleased to announce
that it has received a final order approving its Plan of
Arrangement from the Supreme Court of British Columbia.
Imperial will now implement the Plan by paying $1 million and
issuing approximately 77 million shares to its creditors in
satisfaction of the major portion of its debt. This will
increase issued and outstanding common shares to approximately
157,437,000. The issued and outstanding common shares will then
be consolidated on the basis of one common share of Imperial for
each 10 common shares of Imperial. This will reduce total issued
and outstanding common shares to approximately 15,743,700.
Imperial will then divide its operations into two distinct
businesses, one focused on oil and natural gas and the other
focused on mining. All of the Company's existing oil and natural
gas and investment assets will be retained in Imperial, to be
renamed Imperial Energy Inc., and a new company, "New Imperial"
to be owned by the shareholders of Imperial, will be established
to hold the mining assets. New Imperial will assume all of the
rights and obligations of Imperial in connection with the mining
assets including all environmental obligations.
The shareholders of Imperial will receive one common share of
Imperial Energy and one common share of New Imperial for each
common share they hold in Imperial.
The debt which is not settled by the Plan, has been provided for
as follows:
-- Imperial Energy will assume the remainder of the claims
of the non-convertible noteholder, totalling $3,000,000.
-- New Imperial will assume the $6,300,000 contingent, non-
interest bearing debt owed to Sumitomo Corporation. This debt is
secured by the assets of the Mount Polley mine. Repayment is
contingent on the Mount Polley mine being in operation.
-- A statutory lien in the amount of $1,150,032 for
property taxes will remain outstanding against the Mount Polley
mine property.
-- The secured claims of certain trade creditors in the
amount of approximately $101,000 will be assumed and settled by
New Imperial.
Imperial Energy will apply for continuance as an Alberta company
and will apply for listing on the Canadian Venture Exchange. New
Imperial will remain listed on the Toronto Stock Exchange.
Imperial will emerge from its reorganization as two separate
companies focussed on creating shareholder value by attracting
and developing existing and new opportunities in both the mining
and the oil and natural gas businesses.
INTEGRATED HEALTH: Wins OK to Hire Ordinary Course Professionals
----------------------------------------------------------------
At Integrated Health Services, Inc. and its debtor-affiliates'
behest, the Court has authorized the Debtors, pursuant to
sections 327 and 328 of the Bankruptcy Code, to employ Ordinary
Course Professionals to provide services in the ordinary course
of their businesses, for a further extended period through and
including August 2, 2002.
The Debtors are authorized to pay and reimburse each of the
Ordinary Course Professionals in the customary manner 100% of
the fees and disbursements incurred, up to $50,000 per month per
such professional.
The relief requested will save the Debtors the expense of
separately applying for the employment of each professional for
their post-acute care network covering over 1,450 service
locations in 47 states and the District of Columbia.
Furthermore, relieving the Ordinary Course Professionals of the
requirement of preparing and prosecuting fee applications will
save the estates the additional professional fees and expenses
that would be caused by the requirement.
The Debtors reserve their right to supplement the list of the
Ordinary Course Professionals from time to time as necessary and
in accordance with their previous practice. (Integrated Health
Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
INTERACTIVE TELESIS: Files for Chapter 11 Reorganization in CA
--------------------------------------------------------------
Interactive Telesis(TM), Inc. (OTCBB:TSIS), a provider of
customized interactive voice response solutions and speech-
enabled hosting services, announced that, in order to
aggressively address the financial challenges that have impacted
its performance, the Company has filed a voluntary petition for
reorganization under chapter 11 of the U.S. Bankruptcy Code.
The filing was placed with the United States Bankruptcy Court in
the Southern District of California.
The Company also announced that it has arranged debtor-in-
possession financing from JP Morgan Chase. The DIP financing,
which remains subject to Bankruptcy Court approval, will be used
to supplement the Company's existing cash flow during the
reorganization process. During the restructuring process,
Interactive Telesis will continue serving its customers without
interruption.
"We are committed to complete our reorganization as quickly as
possible and regret any adverse effects this filing will have on
our shareholders, creditors and vendors," said Al Staerkel,
president and CEO of Interactive Telesis. "After considering all
of our options, it became increasingly clear that judicial
reorganization was the right decision."
Interactive Telesis specializes in custom interactive voice
response services and deployment of automated speech recognition
technologies. Interactive Telesis presents a very compelling
offering for companies wishing to leverage the benefits of IVR
and speech recognition without the high cost of ownership,
capital outlay and internal IT staff requirements. Clients
include industry leaders such as 3D Systems, Global Crossing,
Lucent, MCI, Nike, Sprint, Wells Fargo, Worldcom and Verizon,
among others. Interactive Telesis is headquartered in San Diego.
For additional information, call 858/523-4000 or visit
http://www.interactivetelesis.com
INTERACTIVE TELESIS: Case Summary & Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: Interactive Telesis, Inc.
12636 High Bluff Drive, Suite 200
San Diego, CA 92130
aka Paragon Voice Systems
aka Voconex (aka Voice Vault, Inc.)
aka ITI Acquisition Corp.
Bankruptcy Case No.: 02-02429
Type of Business: The company is providing specialized
interactive voice response (IVR) services
including development and hosting using
speech recognition technology.
Chapter 11 Petition Date: March 8, 2002
Court: Southern District of California (San Diego)
Judge: Peter W. Bowie
Debtors' Counsel: Diane H. Gibson, Esq.
Ravreby and Gibson
2755 Jefferson Street, Suite 200
Carlsbad, CA 92008
(760) 729-0941
Total Assets: $2,191,803
Total Debts: $3,570,966
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
AT&T Trade Debt/ $1,955,274
P.O. Box 78425 Cancellation Fees
Phoenix, AZ
85062-8425
Exodus Trade Debt $88,720
Communications, Inc.
Corporate Plaza II Rent $55,157
Wells Fargo Card Credit Card Debt $46,560
Svc-Bus. Line
Speech Works Licensed Software $38,447
International
PSINet Trade Debt $36,683
Merril Communications, Trade Debt $35,083
LLC
Pannell, Kerr, Forster Accounting Fees $31,046
U.S. Bancorp Credit Card Debt $27,848
Rushall & McGeever Legal Services $20,371
ADT Security Systems Facility Security $18,320
Hobbs Group D&O Insurance $16,956
Technion Trade Debt $13,826
Communications Group
MCI Worldcom Telephone Services $12,949
Communications
ADP Investor Trade Debt $12,723
Communication Ser.
Advanta Business Credit Card Debt $8,306
Cards
Luce, Forward, Hamilton Legal Services $7,821
& Sc
James L. & Lisa J. Consulting Services $5,000
Redman Trust
BJK Investments, Inc. Trade Debt $4,545
Wyrick, Robbins Legal Services $4,454
Yates & Ponton
INTERNATIONAL FIBERCOM: Hires Bryan Cave as General Counsel
-----------------------------------------------------------
The U.S. Bankruptcy Court for the District of Arizona approves
the application of International Fibercom, Inc., and its debtor-
affiliates to retain and employ Bryan Cave LLP as their general
bankruptcy and restructuring counsel.
The Debtors need Bryan Cave's assistance with:
i) the formulation of a plan of reorganization and
disclosure statement, as well as all agreements
necessary or proper to effectuate and implement such a
plan; and
ii) such other activities as may be reasonable and proper
for the Debtors to undertake in order to protect their
assets, and to administer their cases.
Pursuant to an Engagement Letter, Joseph P. Kealy, Esq.'s
current hourly rate is $275 per hour and Bryan Cave will receive
a $50,000 to $200,000 retainer for its services.
International Fibercom, Inc. resells used, refurbished
communications equipment, including fiber-optic cables. The
Company files for chapter 11 protection on February 13, 2002.
KAISER ALUMINUM: Secures Injunction Against Utility Companies
-------------------------------------------------------------
Kaiser Aluminum Corporation, and its debtor-affiliates sought
and obtained an order from the Court which determines that the
Debtors' prompt payment history to utility companies, the
Debtors' demonstrable ability to pay future utility bills, the
administrative priority status afforded to the utility
companies' postpetition claims and the existing cash security
deposits held by certain of the utility companies, together
constitute adequate assurance for the Debtors' payment for
future utility services.
Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger in
Wilmington, Delaware, tells the Court that currently, the
Debtors obtain gas, water, electric, telephone and other utility
services from approximately 80 utility companies. Because these
companies provide essential services to the Debtors' refining,
production and other facilities, any interruption in the utility
service could prove devastating. The temporary or permanent
discontinuation of the utility services at any of the Debtors'
facility could irreparably disrupt the Debtors' business
operation and fundamentally undermines the Debtor's
reorganization efforts.
Accordingly, Mr. DeFranceschi informs the Court that the Debtors
have an excellent payment history with each of the utility
companies. Except for the utility bills not yet due and owing as
of petition date, which the Debtors are prohibited from paying
as a result of the commencement of these chapter 11 cases, the
Debtors have, historically, paid their prepetition utility bills
in full when due. Mr. DeFranceschi accords that the Debtors
represent that they have sufficient cash reserves, together with
anticipated access to the sufficient DIP financing, to pay all
of the Debtors' obligations to the utility companies for the
postpetition utility service on an ongoing basis and in the
ordinary course of business. In addition, all such claims will
be entitled to administrative priority treatment, giving
additional assurance that the future obligations to these
companies will be met in full. It is, therefore, unnecessary --
and would be an improvident use of available cash -- for the
Debtors to make additional cash security deposits with each of
the utility companies.
Accordingly, subject to the procedures set forth, the Court
orders that:
A. the utility companies are prohibited from altering, refusing,
termination or discontinuing utility services to the
Debtors on account of outstanding prepetition invoices or
requiring adequate payment assurance as condition to
receiving such service;
B. the Debtors are need not required to make any postpetition
deposits or grant other forms of security to these
companies; and
C. the utility companies are prohibited from drawing upon any
existing cash security deposit, surety bond or other form
of security to secure future payment for the utility
services.
Mr. DeFranceschi says that the Debtors propose to protect the
utility companies further by providing a determination procedure
to serve as a mechanism for a utility company to request
additional assurance of future payment from the Debtors. These
procedures are:
A. within 10 business days after the entry of an order granting
this relief, the Debtors will mail a copy of the utility
order to the utility companies on the utility service list;
B. a utility company that intends to seek additional assurance
of future payment must make a written request for such
additional assurance within 30 days after the service of
the utility order to the Debtors and their counsel;
C. without furtherance order of the Court, the Debtors may enter
into deals granting to the utility companies that have
submitted Assurance requests, which the Debtors deem
reasonable;
D. if a utility company timely requests additional assurance
that the Debtors deem as unreasonable, then, upon the
request of the utility company and after negotiations by
both parties, the Debtors promptly will file a
determination motion with respect to the requesting
company, which will be heard by the court on the next
regularly-scheduled omnibus hearing in these cases, at
least 20 days after the filing of such motion;
E. any utility company that does not timely request the
additional assurance set forth will automatically be deemed
to have adequate assurance of the payment for future
utility services;
F. if the determination motion is filed or a determination
hearing is scheduled, any utility company requesting the
additional assurance will be deemed to have adequate
assurance without the Debtors having to pay for additional
deposits or other security until the Court enters into an
order in connection with such;
Mr. DeFranceschi notes that although the Debtors have made every
attempt to identify every utility, some may have been overlooked
and not included in the utility service list. Judge Katz grants
the Debtors authority to provide notice and a copy of the
utility order to any newly discovered utility and directs that
utility company will subject to the terms of the utility order
and the determination procedures. (Kaiser Bankruptcy News, Issue
No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900)
KMART CORP: Wants Lease Decision Period Stretched Until July 22
---------------------------------------------------------------
The 60-day period provided by the Bankruptcy Code for Kmart
Corporation and its debtor-affiliates to make decisions about
whether to assume, assume and assign, or reject its 2,000
unexpired leases of non-residential property is simply too
short.
By this motion, the Debtors ask the Court to extend the deadline
imposed under 11 U.S.C. Sec 365(d)(4) for the disposition of its
leases to the date on which a plan of reorganization is
confirmed, but no later than July 22, 2003.
According to John Wm. Butler, Esq., at Skadden, Arps, Slate,
Meagher & Flom, in Chicago, Illinois, the Debtors are already in
the process of evaluating all owned and leased real estate,
including the unexpired leases. "The Debtors are evaluating a
variety of factors to determine whether it is appropriate to
assume, assume and assign, or reject particular unexpired
leases," Mr. Butler explains.
If the deadline is not extended, Mr. Butler warns that the
Debtors might be compelled to prematurely assume substantial
long-term liabilities under the Unexpired Leases. Or, Mr.
Butler continues, the Debtors might forfeit benefits associates
with some Leases to the detriment of their ability to operate
and preserve the going-concern value of their business for the
benefit of all creditors and other parties in interest.
Mr. Butler reminds the Court that the Debtors have already made
significant progress in assessing the large number of Unexpired
Leases. The Debtors have already obtained the Court's authority
to reject 270 unexpired leases effective as of the Petition Date
and another 70 unexpired leases upon 10 days notice to the
applicable landlord.
The Debtors assert that they need more time to make decisions on
the rest of their unexpired leases. "The measure of whether a
particular Unexpired Lease will be assumed or rejected will
depend, for the most part, on whether the Debtors will continue
operations at such location once the strategic operating plan is
fully implemented," Mr. Butler explains. Mr. Butler tells Judge
Sonderby that the Debtors are underway in formulating the
strategic operating plan, but many locations are still being
evaluated. Furthermore, Mr. Butler adds, the Debtors are also
conducting a market analysis at many of the locations to
determine whether there is value to the Debtors in an assignment
-- rather than a rejection -- of certain Unexpired Leases.
"Such decision cannot be made properly and responsibly without
an extension of the time within which the Unexpired Leases must
either be assumed or rejected," Mr. Butler maintains. (Kmart
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
KMART CORP: Saybrook Pursuing Appointment of Equity Committee
-------------------------------------------------------------
On March 5, representatives of institutional investors in KMart
met with the United States Trustee's Office to pursue
appointment of an equity committee that would represent the
interests of shareholders during KMart's bankruptcy proceedings.
The initial request was made in mid-February by the Chicago law
firm of Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd.
on behalf of Saybrook Capital, LLC, a Santa Monica, California
investment banking firm that represents major institutional
KMart shareholders. Paul Traub, of New York based Traub,
Bonacquist & Fox LLP, has joined them to present their case to
the U.S. Trustee.
It is expected that the U.S. Trustee will meet with
representatives of KMart and the KMart creditors' committees
and, with input from the Securities & Exchange Commission, make
a determination within the next two weeks.
"Equity security holders have a stake in KMart's reorganization,
and as such, should be assured of adequate representation
throughout the KMart case and the plan process in particular,"
says Randall L. Klein, principal with Goldberg, Kohn. "KMart
acknowledged in its first-day pleadings that 'debtors expect to
emerge from Chapter 11 having...rationalized their capital
structure.' This suggests that equity security holders' rights
will be central to any plan."
Shareholders who may wish to serve on a KMart equity committee
should contact Jonathan Rosenthal of Saybrook Capital at
310/656-4282 or Randall Klein of Goldberg, Kohn at 312/201-3974.
Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd. is a 70-
attorney commercial law firm located in Chicago with principal
concentrations in business litigation, commercial finance,
creditors' rights and bankruptcy, corporate, federal and state
taxation, intellectual property, Internet and e-commerce, labor
and employment, and real estate.
Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd. is the
sole Chicago member of Meritas -- the world's largest and most
comprehensive association of locally based, midsized law firms
with member firms in 125 U.S. cities and 70 countries.
DebtTraders reports that KMart Corp.'s 9.875% bonds due 2008
(KMART18) are trading between 44.5 and 45.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=KMART18for
real-time bond pricing.
KMART CORP: Names Chairman James Adamson as Chief Exec. Officer
---------------------------------------------------------------
Kmart Corporation (NYSE: KM) announced the appointment and
promotion of a number of senior officers to guide the Company
through its reorganization and provide reinvigorated and
refocused leadership as Kmart continues its comprehensive
financial and operational restructuring.
The Company announced the following appointments and promotions:
* James B. Adamson, Chairman of the Board of Directors,
has been appointed Chief Executive Officer, effective
immediately. He succeeds Charles C. Conaway, who will be
leaving the Company and the Board. Adamson is the former
Chairman, President and Chief Executive Officer of Advantica
Restaurant Group, Inc., one of the largest restaurant companies
in the United States. Adamson's retail and restaurant experience
spans more than 25 years, including serving as Executive Vice
President of Merchandising at Target Stores, a senior executive
at B. Dalton Bookseller and a merchant and store operations
manager at The Gap. He is also credited with helping turn
around the retail drug store chain Revco, Inc., serving as
Executive Vice President of Marketing during its Chapter 11
reorganization.
* Julian C. Day has been named President and Chief
Operating Officer. Day is the former Executive Vice President
and Chief Operating Officer of Sears, Roebuck and Co. He also
served as Executive Vice President and Chief Financial Officer
of Safeway, Inc. The President and COO position had been
vacant. Day will report to Adamson.
* Albert A. Koch, Chairman of Jay Alix & Associates, a
leading turnaround management firm, has been appointed Chief
Financial Officer. He succeeds John T. McDonald, Jr., formerly
Executive Vice President, Chief Financial Officer, who will be
leaving the Company. Koch's prior assignments include serving
as CFO of Oxford Health Plans and leading the restructurings of
Ryder System, Inc. and Allegheny General Hospital. Koch will
report to Adamson.
* Ted Stenger, a Principal of Jay Alix & Associates, has
been named Treasurer. He has served as a turnaround and
restructuring advisor at Allied Holdings, Fruit of the Loom,
FINOVA Group Inc., and The Leslie Fay Companies. Stenger was
previously interim COO of American Rice Inc. and interim CEO at
Maidenform Worldwide. The Treasurer position had been vacant.
Stenger will report to Koch.
* Janet G. Kelley has been promoted to Executive Vice
President, General Counsel. She had been Senior Vice President,
General Counsel. Kelley will report to Adamson.
* James E. Defebaugh has been promoted to Senior Vice
President, Chief Compliance Officer and Secretary. He will have
overall corporate responsibility for the Company's compliance
programs. He was previously Vice President, Associate General
Counsel and Secretary. He will report to Kelley.
* Lori A. McTavish has been promoted to Senior Vice
President, Communications, with responsibility for all external
and internal communications. She was previously Vice President,
Communications with responsibility for external communications.
McTavish will report to Adamson.
Ronald C. Hutchison will continue to serve as Chief
Restructuring Officer, reporting to Adamson. Hutchison, who
joined Kmart in January 2002, has extensive experience in
turnaround management and corporate restructurings. Among other
assignments, Hutchison has served as Chief Financial Officer at
Advantica Restaurant Group and helped restructure Leaseway
Transportation, a transportation holding company that emerged
from Chapter 11 in the early 1990's.
The other corporate functions reporting to Adamson are
Merchandising, Marketing, and Human Resources. The corporate
functions reporting to Day are Store Operations, Global Systems
Capability and Supply Chain, Strategic Initiatives, Real Estate
Management and Construction and Information Technology.
Commenting on behalf of the Kmart Board, Director Thomas T.
Stallkamp said, "We are very fortunate to be able to draw upon
Jim Adamson's many talents and experiences at this time of
transition at Kmart. Now that the Company has taken the
difficult but necessary actions to stabilize its finances and
operations, he is the right executive to move Kmart forward.
His qualities include strong team-building and leadership
abilities, a unique understanding of Kmart's issues based on his
tenure as a director, and extensive retail experience and
turnaround expertise."
Adamson, 54, has been a member of Kmart's Board of Directors
since 1996. He was named Chairman of the Board in January 2002.
Since then he has served as the principal liaison between the
Board and the Company's senior management and has played an
active role in overseeing the company's Chapter 11
reorganization proceedings.
Adamson said, "I am honored that the Board has asked me to step
in to the CEO role at such a critical time in Kmart's history.
Since assuming a day-to- day role at Kmart in January, I have
become increasingly familiar with Kmart's challenges and
opportunities.
"Kmart has had to take a number of painful actions in recent
weeks, including filing for Chapter 11 protection and announcing
plans to close under-performing stores and reduce staff. Now it
is time for the Company to look forward and begin the process of
developing a new business plan that will define Kmart's role in
a rapidly evolving retail environment. I believe the changes we
are announcing today will help to reinvigorate and refocus the
organization as we begin to tackle the hard work ahead," he
said.
Adamson continued, "The Board and I appreciate Chuck Conaway's
many contributions. Although he was faced with monumental
issues, his efforts have established a basis for us to move
forward in a number of areas. We respect his decision and wish
him well as he moves on to spend more time with his young family
and pursue new opportunities."
Conaway said, "It has truly been a privilege to serve in a
leadership role at Kmart. I am proud of our many
accomplishments and remain convinced that Kmart can and will
compete successfully in the discount retail arena even as it
continues to address the difficulties it has had to fight for
years. I am particularly grateful for the unwavering dedication
of our associates and the support we have received from our
customers and vendors.
"While I have been contemplating this departure for some time
given my family needs and professional goals, it was critical
that the transition go smoothly. Following court and creditor
approval of our new $2 billion credit facility, the Company is
now in a stronger financial position with adequate liquidity.
We have restored associate benefits and implemented a retention
plan for our non-senior executives and store managers. Thanks
to the support of our vendor community and the vendor lien
program, the majority of our suppliers have resumed shipments
and our in-stock position is steadily increasing. With the
announcement of our store closing program and the rejection of
leases for previously closed stores, we are in the process of
achieving significant improvements in asset utilization."
Conaway continued, "I have worked very closely with Jim Adamson
since his appointment as Chairman in January. He is an
exceptional leader and Kmart will benefit from the many insights
he gained at other companies undergoing massive operational and
cultural transformations."
Adamson successfully led a financial restructuring of Advantica
in 1997 that eliminated more than $1 billion in debt that had
burdened the company since 1989. Advantica owns and operates
approximately 2,400 moderately priced restaurants in the mid-
scale dining segment, including the Denny's, CoCo's, and
Carrow's brands. He was recognized nationally for transforming
Advantica's culture into a model of corporate diversity. The
NAACP honored Adamson with its Corporate CEO Achievement Award,
60 Minutes highlighted his leadership of Denny's innovative
diversity training programs, and Fortune ranked Advantica No. 1
in its list of "America's 50 Best Companies for Minorities" in
2000 and 2001.
Adamson joined Advantica from Burger King Corporation, where as
President and CEO his leadership in simplifying the fast-food
chain's menu and refocusing the business on burgers resulted in
increased sales and profits.
Day, 49, joined Sears in March 1999 as Executive Vice President
and CFO and was soon promoted to Chief Operating Officer and a
member of the Office of the Chief Executive. Most recently he
has been acting as an advisor to a range of companies and serves
on the Board of Directors of Petco Inc., which recently became a
publicly traded company. Before joining Sears, Day served as
executive vice president and chief financial officer for
Safeway, Inc., the second largest food and drug retailer in
North America. During his five-year tenure at Safeway, the
Company experienced a radical transformation of its store
operations and achieved a significant increase in shareholder
value.
Day previously served as President and Chief Executive Officer
of Bradley Printing Company and as European Development Manager
for Chase Manhattan Bank. Day also provided management services
to a variety of portfolio companies of Kohlberg, Kravis, and
Roberts.
"I am very pleased that Julian Day has agreed to serve as chief
operating officer of Kmart," Adamson said. "His extensive
experience in retailing, particularly in the general merchandise
and food and drug sectors, will be invaluable as we continue to
take the steps necessary to enhance Kmart's financial and
operational performance."
Koch, 59, was named Chairman of Jay Alix & Associates in
December 2001. The firm is a nationally recognized leader in
providing corporate turnaround and debt restructuring expertise
to under-performing companies. He also serves as a Principal
Member of the General Partner of Questor Partners Funds, private
equity investment funds focused on investing in under-performing
and distressed companies. Koch's previous assignments include
serving as CFO of Oxford Health Plans and leading the
restructurings of Ryder System, Inc. and Allegheny General
Hospital. He previously served as managing partner of the
Detroit office of Ernst & Young.
Stenger, 44, has served as a turnaround and restructuring
advisor at Allied Holdings, Fruit of the Loom, FINOVA Group
Inc., and The Leslie Fay Companies. He also has served as
interim COO of American Rice Inc. and interim CEO at Maidenform
Worldwide. He previously worked in the Corporate Finance Group
of Ernst & Young.
Kelley, 48, joined Kmart in April 2001 from The Limited, Inc.
where she served as Vice President and Senior Counsel. Prior to
joining The Limited she served as Vice President and General
Counsel for Sunbeam Corporation. Previously, Kelley was a
partner at Wyatt, Tarrant & Combs.
Defebaugh, 47, joined Kmart in 1983 as a commercial law
attorney. After a series of promotions, he was named Vice
President, Associate General Counsel and Secretary in May 2001.
He previously served as a partner in the firm Defebaugh & Kantz
and as a research attorney for Oakland County Circuit Court in
Michigan.
McTavish, 41, joined Kmart in May 2001 from DaimlerChrysler,
where she had served as Senior Manager, Corporate Media
Relations, North America. At Chrysler Corporation, prior to its
merger with Daimler Benz, she served as Marketing Programs-PR
Manager for the Jeep/Eagle Division and Manager of Corporate
Media Relations. She began her career with Chrysler Canada,
where she was responsible for employee communication and special
events.
MCLEODUSA INC: Committee Engages Morris Nichols as Co-Counsel
-------------------------------------------------------------
The Official Committee of Unsecured Creditors in the chapter 11
case of McLeodUSA Inc., seeks authority from the Court to retain
Morris, Nichols, Arsht & Tunnell as Co-Counsel effective
February 13, 2002.
The Committee voted to retain Morris, Nichols as its Co-Counsel
at an organizational meeting of the Debtor's creditors on
February 13, Desmund Shirazi, the Committee Chairman, says.
Mr. Shirazi says the selection of Morris, Nichols was based on
its extensive experience and knowledge in bankruptcy and
creditors' rights, especially as it relates to local Delaware
practice.
Disinterestedness
Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell says
the Firm is a disinterested party and neither it nor any of its
member or associate represent any interest adverse to the Debtor
and its estate.
Mr. Dehney says the Firm, its partners, counsel and associates:
(a) Are not creditors, equity security holders or insiders
of the Debtor;
(b) Are not and were not investment bankers for any
outstanding security of the Debtor;
(c) Have not been, within three years before the date of the
filing of the Debtor's Chapter 11 petitions (i)
investment bankers for a security of the Debtor, or (ii)
an attorney for such an investment banker in connection
with the offer, sale, or issuance of a security of
the Debtor;
(d) Are not and were not, within two years before the date
of the filing of the Debtor's Chapter 11 petitions, a
director, officer, or employee of the Debtor or of any
investment banker as specified in subparagraph (b) or
(c) of this paragraph; and
(e) Do not have an interest materially adverse to the
interest of the estate or of any class of creditors or
equity security holders, by reason of any direct or
indirect relationship to, connection with, or interest
in, the Debtor or an investment banker specified in
paragraph (b) or (c) above, or for any other reason.
Mr. Dehney discloses that Morris, Nichols currently represents
these entities in matters unrelated to the Debtor's Chapter 11
case:
1. Ikon Office Solutions
2. The Bank of New York
3. Oaktree Capital Management, LLC
4. Citibank N.A.
5. Credit Suisse First Boston
6. Goldman Sachs & Co.
7. JP Morgan Chase Bank
8. Merrill Lynch Pierce Fenner Smith
9. Morgan Stanley Dean Witter Inc.
10. Neuberger & Berman LLC
11. PNC Bank NA
12. Prudential Securities Inc.
13. State Street Bank & Trust Co.
14. Verizon Wireless
Mr. Dehney says Morris, Nichols has represented in the past
these parties in matters unrelated to the Debtor's Chapter 11
case:
1. Allied Van Lines, Inc.
2. Bank of Nova Scotia
3. Bankers Trust Company
4. CIBC World Markets Corp.
5. Donaldson Lufkin & Jenrette
6. Deutsche Bank AG, New York Branch
7. First Union National Bank
8. Lehman Brothers Inc.
9. Northern Trust Company
10. Salomon Smith Barney Inc.
11. Sumitomo Trust & Banking Co. USA
12. Union Bank of California NA
13. United States Trust Company of NY
14. Wells Fargo Corp./Wells Fargo Bank
15. Xerox Corporation
Compensation
Morris, Nichols' professionals will bill for services at its
customary hourly rates:
Professional Compensation
------------ ------------
Robert J. Dehney (Partner) $425 per hour
Gregory W. Werkheiser (Associate) $305 per hour
Donna L. Harris (Associate) $250 per hour
Angela R. Conway (Paralegal) $155 per hour
(McLeodUSA Bankruptcy News, Issue No. 5; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
MIRAVANT MEDICAL: Fails to Meet Nasdaq Listing Requirements
-----------------------------------------------------------
Miravant Medical Technologies (Nasdaq:MRVT) chairman and chief
executive officer, Gary S. Kledzik, Ph.D., released a statement
regarding Miravant's receipt of a Nasdaq notification that the
company has not met certain requirements for continued listing.
The company has requested a hearing with Nasdaq, and the stock
will remain listed on the Nasdaq until at least the date of the
hearing, which has not yet been determined.
Miravant is currently listed on the Nasdaq National Market,
which has certain minimum requirements for continued listing.
These include stockholders' equity of $10.0 million or net
tangible assets of $4.0 million, and a $1.00 minimum bid price;
or alternatively, a common stock market capitalization of at
least $50.0 million and a minimum bid price of $3.00.
Optionally, The Nasdaq Small Cap Market requires at least a
$35.0 million market capitalization, with a $1.00 minimum bid
price.
Dr. Kledzik stated, "With approximately 18.9 million shares
outstanding, Miravant is making every effort to increase
shareholder value and thus meet the minimum Nasdaq requirements.
I want to reassure our shareholders that we have asked the
Nasdaq Listing Qualifications Panel for a hearing to review our
continued listing, and that our stock will continue trading on
the Nasdaq National Market through the conclusion of the hearing
process.
"Miravant's stock dropped precipitously in January after the
company received the surprising news that its lead drug,
PhotoPoint SnET2 for treating wet age-related macular
degeneration, did not meet its primary endpoint based on top
line data in phase III clinical trials. We have seen a positive
trend in the market for our securities following this week's
announcement that we regained ownership to SnET2, our most
significant drug asset, combined with the reduction in long-term
debt from approximately $27.0 million to $10.0 million.
"Now that we have regained the rights to SnET2, we can conduct a
full analysis of the phase III data and direct the course of
development for this drug in ophthalmology and other disease
indications. Beyond our core SnET2 technology, we are actively
pursuing a number of other avenues to increase shareholder value
and bring additional funds into our development programs. These
include high-level discussions with leading healthcare companies
for co-development and licensing of new PhotoPoint drugs in
ophthalmology, dermatology and cardiovascular disease.
"In our oncology program, exciting preclinical data on the
ability of PhotoPoint drugs to specifically target blood vessels
that nurture tumor growth, will be presented at the American
Association for Cancer Research Annual Meeting, April 6-10, San
Francisco.
"We continue to make progress in pursuing our objectives for
PhotoPoint technology. Our management is making every effort to
increase investor confidence and thereby increase the company's
market capitalization," concluded Dr. Kledzik.
Nasdaq Staff Determination dated March 4, 2002 notified the
company that it did not meet the market value of publicly held
shares requirement (minimum common stock market capitalization
of $50,000,000) for continued listing on the Nasdaq National
Market as set forth in Marketplace Rule 4450(b)(1)(A). The
company also does not comply with the minimum bid price
continued inclusion requirement set forth in Marketplace Rule
4450(b)(4). The company's securities are therefore subject to
delisting from the Nasdaq National Market. Miravant has
requested a hearing before a Nasdaq Listing Qualifications Panel
to review the Staff Determination notice. There can be no
assurance the Panel will grant the company's request for
continued listing after the hearing.
Miravant Medical Technologies specializes in both
pharmaceuticals and devices for photoselective medicine. The
company is developing its proprietary PhotoPoint photodynamic
therapy (PDT) in ophthalmology, dermatology, cardiovascular
disease and oncology. Miravant Cardiovascular, Inc. is
investigating intravascular PhotoPoint PDT for the treatment of
angioplasty-related restenosis and atherosclerosis.
OWENS CORNING: Lays-Out Its Position on Inter-Creditor Issues
-------------------------------------------------------------
Norman L. Pernick, Esq., at Saul Ewing LLP in Wilmington,
Delaware, relates that shortly after these cases were filed,
Owens Corning and its debtor-affiliates' counsel began to focus
on certain "inter-creditor issues," principally involving
guaranties granted by a number of Owens Corning debtor and non-
debtor subsidiaries under the June 26, 1997 Credit Agreement.
Debtors' counsel informed the various creditor constituencies
that these issues could materially impact their recoveries. The
inter-creditor issues are complicated by the fact that OC
operates a global business with scores of separate entities that
have complex financial interrelationships. Accordingly, the
Debtors proposed a process by which the corporate and financial
interrelationships among these debtor and non-debtor entities
could be investigated efficiently. Mr. Pernick explains that
the Debtors' goal was and remains to inform the creditor
constituencies regarding these matters so that meaningful plan
negotiations can occur. Depending upon both the viability of the
OC corporate structure and the validity and amount of the
creditor constituencies' claims, a litigated resolution of these
complex legal and factual issues is likely to consume large
quantities of judicial resources, dissipate substantial assets
from the Debtors' estates, and take many years to resolve.
To facilitate a consensual resolution of these cases, in the
spring of 2001 the Debtors voluntarily agreed to produce a
documentary record that would aid in this investigation. The
Debtors undertook a neutral and thorough factual investigation,
gathering information about each of the entities and then, as
explained below, fully disclosing this information in an
organized and consistent manner.
On July 2, 2001, Mr. Pernick tells the Court that the Debtors
produced 77 boxes of documents and 30 document binders
reflecting key documents for certain significant guarantor
subsidiaries. This production related to the following
subsidiaries and subject matter: Falcon Foam Corporation; Faloc
Holdings, Inc.; Integrex; Integrex Ventures LLC; HOMExperts LLC;
Integrex Professional Services LLC; Integrex Supply Chain
Solutions LLC; Integrex Testing Systems LLC; Owens-Corning
Fiberglas Technology Inc.; IPM, Inc.; and the June 26, 1997
Credit Agreement. Two additional binder productions occurred in
September and October 2001, encompassing 58 additional document
binders. The entities and subject matters covered by these
productions are: Fibreboard Corporation; AmeriMark Building
Products, Inc.; Cultured Stone Corporation; Exterior Systems,
Inc.; Fabwel, Inc.; Vytec Corporation; Vytec Sales Corporation;
Palmetto Products, Inc.; Engineered Yarns America, Inc.;
Jefferson Holdings, Inc.; CDC Corporation, d/b/a/ Conwed; Owens
Corning Canada, Inc.; Owens Corning Composites SPRL; Owens
Corning HT, Inc.; Owens-Corning Overseas Holdings, Inc.; Owens
Corning Remodeling Systems, LLC; Owens-Corning (Sweden) AB;
Soltech, Inc.; Crown Manufacturing Inc.; 1995 Monthly Income
Preferred Securities Transaction; 1995 through 1999 OC and
Subsidiaries Supplemental Balance Sheets and Income Statements;
and 1995 through 1999 Management Financial Reports. Since the
initial production, Debtors have supplemented and updated these
binders of key documents on a regular basis.
Mr. Pernick explains that these binders were designed to be a
compilation of relevant documents that would be useful in
investigating each Debtor or guarantor entity's corporate
history, major creditor relationships, and significant cash and
value transfers. Accordingly, each binder has a table of
contents identifying the documents collected under the following
headings: Corporate Formation and Documentation; Nature of
Business; Corporate Minutes; Management Organizational
Chart/Employee Rosters; Financials; Intellectual Property;
Corporate Transfers, Partnerships and Franchises; Material
Financial Agreements and Compliance Reports; Material Agreements
Concerning Current Operations; and Miscellaneous.
Mr. Pernick adds that the Debtors also established and currently
maintain an information and document depository at the offices
of Skadden Arps Slate Meagher & Flom in New York City. The
Debtors have provided access to the information in the
Depository to all creditor constituencies who signed a
confidentiality agreement. To date, Debtors have produced
approximately 350,000 document pages to the Depository. The
Debtors have also created a secure, web-enabled database by
which the Participating Parties may access the same documents
and materials located in the Depository. As of January 22, 2002,
there were approximately 250,000 pages on the electronic
database.
Mr. Pernick states that there are an additional 100,000 pages to
be added to the electronic database, which Debtors' counsel
anticipates will be completed by the end of March 2002. The
Debtors have recently provided the Participating Parties with
access to this electronic database, and provided training in its
use.
After the initial production of the Debtors' records, Mr.
Pernick contends that the parties recognized the need to
formalize the process. The Debtors proposed a Stipulation and
Order which the Court adopted after hearing from the various
creditor constituencies on September 24, 2001. The Stipulation
and Order delineated an aggressive schedule for additional
discovery. However, as the Court is aware, despite the
cooperation of the Participating Parties, the schedule has
proven to be too aggressive, principally because of the enormity
of the project. Nevertheless, as the Statement from the Agent
for the Bank Group acknowledges, the Participating Parties have
made significant progress and have worked diligently to educate
themselves on the myriad of factual and legal issues.
Pursuant to the Stipulation and Order, Mr. Pernick informs the
Court that on October 20, 2001, the Participating Parties
exchanged discovery requests. Debtors' counsel has answered
nearly every request for documents, and will continue to do so.
To date, counsel has searched for documents potentially relevant
to the inter-creditor issues at OC's headquarters; at its
off-site storage facility in Toledo, Ohio; at its off-site
storage facility in Granville, Ohio; and at the offices of three
of the Debtors' outside professionals. In total, counsel has
searched (directly or by indices) well over 120,000 boxes of
archived documents.
Mr. Pernick assures the Court that the Participating Parties
have continued to review documents and investigate relevant
facts and issues. This has led to additional requests for more
information. Absent any more requests, Debtors believe that all
document discovery from the Debtors and their affiliates can be
completed by April 1, 2002. At the December, 2001 meeting, the
Participating Parties assigned a subcommittee to investigate the
issues raised by the motion for appointment of examiner filed by
Plant Insulation Company. That subcommittee has held several
meetings and in response to the requests of its members the
Debtors have produced relevant documents for review and
investigation. Although the Court clearly gave him the
opportunity to do so, Counsel for Plant Insulation has not made
contact with the Participating Parties, not met with the
Participating Parties, and not sought access to any of the
documents produced to date. The Legal Representative to Future
Claimants will make a report for the subcommittee at the
hearing.
In addition to the Debtors' production, in December, 2001 and
January, 2002, the creditors commenced document production in
response to the requests received from the Participating
Parties. The Bank Group produced approximately 15,000 document
pages. The Bondholders produced approximately 4,200 pages, while
two bond-related entities produced an additional 4,800 pages.
Debtors' counsel has not had an opportunity to review all of the
documents produced.
As Debtors' counsel explained to the Court when proposing the
Inter-Creditor Stipulation and Order, the initial discovery
schedule was proposed to bring the factual investigation to a
conclusion at approximately the same time as the estimate of the
value of future asbestos claims became known to the parties.
According to Mr. Pernick, it was generally acknowledged that the
future claims value estimate, together with the information
regarding inter-creditor relationships, was essential to any
substantive plan negotiation. In addition, in September, 2001,
the Debtors believed that the parties would be ready to discuss
plan terms as early as September, 2002. However, the parties'
work in developing an estimate of the Debtors' future asbestos
liabilities has taken longer than originally expected. At the
present time, Debtors expect that Judge Wolin could set an
estimation hearing on future asbestos liabilities as early as
the end of the third quarter of this year. Moreover, third party
discovery has taken longer than anticipated. The Debtors'
accounting firms have taken longer to gather their records than
estimated, and Debtors have recently issued them subpoenas. The
firms have just responded to Debtors' subpoenas, and it is
unclear whether they will provide meaningful production before
April 1. The underwriters of the $1.2 billion of bond debt have
also resisted discovery due to the pendency of the securities
class action litigation in Boston. However, it appears that an
agreement can be reached to gain sufficient access to their
documents to determine whether the underwriters possess material
information.
In keeping with the Court's admonition at the January Omnibus
Hearing, the Debtors have indicated to third parties that all
document discovery must be concluded by April 1. Mr. Pernick
tells the Court that the Participating Parties will seek the
Court's intervention if by that deadline they are unable to
obtain from third parties documents deemed material to the
inter-creditor investigation. In January, 2002, the
Participating Parties had their first serious discussion of the
results of their analyses and began to share their views
regarding issues about which each participant had concern. That
discussion continued in earnest at the February 15, 2002
meeting. As of this date, the Debtors and other Participating
Parties have identified the following major issues and entities
for further investigation and resolution:
A. Bank Guaranties:
a. What law is applicable to the interpretation and
enforcement of the bank guaranties?
b. Are the bank guaranties valid?
c. Is any guaranty unenforceable as a fraudulent conveyance
or for any other reason?
d. How should the guaranty "savings" clause of the Bank
Credit Agreement be interpreted?
B. Owens-Corning Fiberglas Technology Inc.:
a. How is the License Agreement between OC and OCFT to be
interpreted?
b. Have prior valuations of the intellectual property owned
by OCFT properly taken into consideration R&D expense,
allocable taxes, and other administrative and overhead
expenses?
c. Were royalties calculated properly pursuant to the
License Agreement?
d. If royalties were paid in excess of the contractual
obligation, what is the amount of the overpayment and
what impact would the overpayment have on the value of
OCFT? Can any overpayment be recovered from OCFT?
e. What other issues arise from the terms of the License
Agreement between OC and OCFT?
f. What is the priority of the $710 million in loans made
by OCFT to OC under the Revolving Credit Agreement?
g. Was the $501 million dividend note issued by OCFT to OC
and subsequently assigned to Integrex validly
declared?
h. Can the asbestos claimants assert product liability
claims against OCFT?
C. IPM, Inc.:
a. Was the $501 million dividend note issued by IPM to OC
and subsequently assigned to Integrex validly issued?
b. What is the priority of the loans made by IPM to OC
under the Revolving Credit Agreement?
c. Can the asbestos claimants assert product liability
claims against IPM or its subsidiaries and affiliates?
D. Integrex:
a. Is the Contribution Agreement between OC and Integrex
enforceable?
b. Is the Put Agreement between OC and Integrex pertaining
to the dividend notes enforceable?
c. Is there any reason Integrex cannot set off the value of
the dividend notes against its obligation to OC under
the Contribution Agreement? Does the Contribution
Agreement compel payments by Integrex to OC to be used
solely to pay asbestos claims?
d. What, if any, third party beneficiary or successor
liability claims exist as a consequence of the
Contribution Agreement or the assumption of OC
asbestos liabilities by Integrex?
e. Can asbestos claimants impose a constructive trust upon
the Integrex assets?
E. Fibreboard Corporation:
a. Is Fibreboard's asbestos liability limited to Fibreboard
or does it vest in any of its subsidiaries or any
other Debtor?
b. Are the Fibreboard trust funds property of the
Fibreboard estate?
c. Can asbestos claimants impose a constructive trust upon
the Fibreboard trust funds?
d. Were the dividend notes issued to Fibreboard by its
subsidiaries validly declared?
F. Exterior Systems, Inc.:
a. What is the inter-company obligation owed by Exterior
Systems to OC?
b. Was the accounting for the swap of AmeriMark stock for
Cultured Stone assets properly booked?
G. General Insolvency Issues:
a. Was any Debtor insolvent at any time prior to the filing
date?
b. Was any transfer of funds a constructive fraudulent
conveyance as to creditors of the transferor?
c. Was Fibreboard insolvent at the time of its acquisition
by OC? Did the acquisition of Fibreboard render OC
insolvent? If so, do the Banks that financed the
acquisition share responsibility for OC's insolvency?
H. Substantive Consolidation:
a. Which, if any, Debtors should be substantively
consolidated?
b. What reliance, if any, did the Banks place upon the
guaranties?
c. If the purpose of the guaranties was to avoid so-called
"structural subordination," would it work an undue
hardship upon the Banks to substantively consolidate
any guarantor?
The Debtors believe that tire process now being employed is
working and should continue. Now that a consensus is beginning
to emerge regarding the major issues that must be resolved, the
Participating Parties should narrow the factual disputes
underpinning these issues by developing factual stipulations.
The Debtors suggest that, in keeping with the frank discussions
being held by the Participating Parties, proffering factual
stipulations will be the logical next step and most practical
way of defining the scope of the parties' disputes regarding
their claims against any particular entity. As the parties
respond to those proposed stipulations the significant contested
issues will emerge. Upon the completion of both this process and
determination of the future asbestos claims value estimation,
the Debtors and some or all of the other Participating Parties
should be in a position to propose a consensual and/or a
confirmable plan.
Mr. Pernick argues that the view set forth by the Banks that a
valuation process would be quick and simple is not correct.
Because of the complex interrelationships between Debtors and
non-debtors it is impossible to litigate the value of individual
entities seriatim. Any attempt to value one entity will require
a full examination of many of the inter-creditor issues
identified above, as the resolution of these issues will
materially affect the numerous valuation decisions and
ultimately the recoveries of the creditor constituencies.
Furthermore, issues that the parties through negotiation might
otherwise be able to set aside will be contested if litigation
ensues, as the parties will have no choice but to devote their
time more to litigation than to investigation, discussion and
resolution. Last, piecemeal litigation, while presumably
strategically in the best interests of the Banks, will
inappropriately restrict or remove the Debtors' ability and
right to resolve these matters through the plan process,
including via partial or total substantive consolidation in a
comprehensive and consolidated approach to these cases and the
Debtors' business enterprise. Rather than facilitating a quick
emergence from Chapter 11, the litigation strategy proposed by
the Banks will polarize the positions of the creditors and
substantially decrease the likelihood of a consensual plan
resolution or the presentation of a confirmable plan.
Accordingly, the Debtors suggest that the Inter-Creditor Project
proceed. The monthly meetings of the Participating Parties and
status reports to the Court should continue. The Debtors should
develop proposed factual stipulations and proffer them to the
other Participating Parties on the following schedule.
A. May 15 - OCFT: Corporate history; overall management and
financial operations; royalty calculation, including, inter
alia, sublicense royalty treatment, R&D expense treatment,
income tax treatment, sales discount reconciliation,
product sales audit; bank due diligence and compliance
review; and identity and use of assets, if any, traceable
to asbestos containing products.
B. June 14 - IPM: Corporate history; overall management and
financial operations; income tax treatment; bank due
diligence and compliance review; and identity and use of
assets, if any, traceable to asbestos containing products.
C. July 15 - Integrex: Corporate history; overall management and
financial operations; bank due diligence and compliance
review; identity and use of assets, if any, traceable to
asbestos containing products; and purpose and intended
limitations of Contribution Agreement.
D. August 15 - Fibreboard/Exterior Systems; Corporate histories;
overall management and financial operations; bank due
diligence and compliance review; identity and use of
assets, if any, traceable to asbestos containing products;
and treatment of the swap of AmeriMark and Cultured Stone.
Thereafter, the Participating Parties should negotiate the terms
of a consensual plan and/or the Debtors should be provided an
adequate opportunity to develop a confirmable plan. Debtors will
report the status of these negotiations to the Court during this
period, together with any proposed future actions to be taken.
Mr. Pernick tells the Court that this case hinges on the
resolution of two major issues that must be resolved before a
plan of reorganization can be proposed. The Debtors,
recognizing that plan negotiations cannot realistically proceed
until the parties have a clearer understanding of both of these
issues, are proposing a schedule that encourages a consensual
resolution while at the same time insuring that substantial
progress continues to take place.
The "Statement" proffered by the Agent Bank suggests a selfishly
strategic approach, the Debtors charge. The Banks perceive a
tactical advantage to early and isolated litigation. The
Debtors suggest that the Banks' approach understates the
complexities of the litigation they would force the Debtors to
initiate and will serve to prolong -- not advance -- the
emergence of these Debtors from bankruptcy. The Debtors urge
Judge Fitzgerald to reject the Banks' recommendation and enter
an order that keeps the parties on a negotiation track. (Owens
Corning Bankruptcy News, Issue No. 28; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
PHASE2MEDIA: Court Extends Plan Filing Deadline to March 26
-----------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gives Phase2Media, Inc. until March 26, 2002 to file its plan of
reorganization and until May 28, 2002 to solicit acceptances of
that plan. During these exclusive period, other parties-in-
interest are blocked from proposing competing plans to get the
company out of bankruptcy.
The Debtor tells the Court that it met with the Creditor's
Committee to discuss the progress of this case and decided that
a confirmation of a plan will maximize the value of the assets
for the creditors. The Debtor illustrates that it has been
actively involved in collecting its accounts receivables and is
promptly filing its schedules of assets and liabilities.
PHYCOR INC: Court Says Yes to Skadden Arps as Bankruptcy Counsel
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
approves Phycor, Inc., and its affiliated debtors' request to
retain and employ Skadden, Arps, Slate, Meagher & Flom LLP as
their attorneys in the Company's chapter 11 cases.
As the Debtors' counsel, Skadden, Arps are expected to:
(a) advise the Debtors with respect to its powers and
duties as debtors-inpossession in the continued
management of its business and properties;
(b) attend meetings and negotiate with representatives of
creditors and other parties in interest and advise and
consult on the conduct of the cases, including all of
the legal and administrative requirements of operating
in Chapter 11;
(c) take all necessary action to protect and preserve the
Debtors' estates, including the prosecution of actions
on their behalf, the defense of any actions commenced
against them, negotiations concerning all litigation
involving the Debtors, and objections to claims filed
against the Debtors' estates, if any;
(d) prepare on the Debtors' behalf all motions,
applications, answers, orders, reports, and papers
necessary to the administration of the estates;
(e) take any necessary action on the Debtors' behalf to
(1) obtain approval of the Disclosure Statement and
confirmation of the plan,
(2) negotiate any alternative plan of reorganization,
disclosure statement, and related agreements and/or
documents,
(3) implement all related transactions, and
(4) prosecute any modifications, revisions, or appeals
thereto;
(f) advise the Debtors in connection with any sale of
assets;
(g) appear before this Court, any appellate courts, and the
United States Trustee, and protect the interests of the
Debtors' estates;
(h) provide supplemental advice regarding corporate and
Securities and Exchange Commission matters, if
necessary;
(i) provide limited real estate, tax, and financing advice
to the Debtors, if necessary; and
(j) perform all other necessary legal services and provide
all other necessary legal advice to the Debtors in
connection with these Chapter 11 cases.
Skadden, Arps received an initial retainer of $250,000 for
professional services to be rendered. The Debtors' books and
records show that during the period from February 8, 2001
through January 30, 2002, Skadden, Arps received $2,153,902.64
(including the Retainer) from PhyCor. The Debtors agree to pay
Skadden by the hour for services performed in their chapter 11
cases, under the Firm's bundled rate structure:
Partners $480 to $695
Counsel and Special Counsel $470
Associates $230 to $470
Legal Assistants and Support Staff $80 to $160
POLAROID CORPORATION: Asks Court to Fix May 21 Claims Bar Date
--------------------------------------------------------------
Polaroid Corporation, and its debtor-affiliates ask the Court to
approve:
(a) May 21, 2002 as the general bar date by which certain
creditors must file proofs of claim;
(b) uniform claim filing procedures; and
(c) broad noticing procedures to flush-out unknown claims.
Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom,
in Wilmington, Delaware, says that the Debtors have engaged in a
considerable effort to determine the number and amount of
potential claims against the Debtors' estate. On December 17,
2001, Mr. Galardi recounts that the Debtors filed their
Schedules with the Court as necessity to the establishment of
Bar Date.
To assist in identifying claimants and estimating claim amounts,
the Debtors request that all creditors be required to file
proofs of claim on account of any Claim against the Debtors or
be forever barred from asserting that claim.
The Debtors propose that some claims be excluded from the Bar
Date:
-- claims listed in Schedules or any amendments that are
not listed as "contingent" "unliquidated" or
"disputed" and that are not disputed by the holders
as to:
(1) amount,
(2) classification, or
(3) the identity of the Debtor against whom such claim
is scheduled;
-- claims on account of which a proof of claim has already
been properly filed with the Court against the correct
Debtor;
-- claims previously allowed or paid pursuant to an order
of the Court;
-- claims allowable under Bankruptcy Code section 503(b)
and 507(a)(1) as administrative expense;
-- claims of Debtors against Debtors;
-- claims of current officers or directors of a Debtor for
indemnification and/or contribution arising as a result
of such officer's or director's post-petition service
to a Debtor; and
-- claims held by any current employee of a Debtor for
unpaid wages, salaries, commissions, severance or
benefits;
For Claims arising from rejection of an unexpired lease or
executory contract, those claims will be due by the latest of:
-- 30 days after the date of any order authorizing the
Debtors to reject the Agreement,
-- any date set by another order of this Court, and
-- the General Bar Date;
Any holder of any interest based exclusively upon the ownership
of common or preferred stock of any of the Debtors is not
required to file a proof of Interest based solely on ownership
interest in such stock; provided, that Interest Holders who wish
to assert a Claim against any of the Debtors based on
transactions in the Debtors' securities including Claims for
damages of purchase or sale must file a proof of claim on or
prior to the General Bar Date;
For the Lenders that are signatory to an Amended and Restated
Credit Agreement dated December 11, 1998, the Debtors request
that J.P. Morgan Chase Bank, as agent of the Pre-Petition
Secured Lenders be authorized, but not directed, to file a proof
of claim on behalf of all of such lenders and in respect of all
claims arising under or in connection with the Debtors' pre-
petition credit facility. Moreover, the Agent need not attach
to its proof of claim the copies of all of the documents
relevant to its proof of claim, provided that counsel to the
Agent shall allow any party in interest to inspect such
documents upon reasonable request;
With respect to the indenture trustee for:
-- the 11 1/2% Notes issued by Polaroid due on 2006,
-- the 7 1/4% Notes issued by Polaroid due on 2007, and
-- the 6 3/4% Notes issued by Polaroid due on 2002,
the Debtors request that State Street Bank and Trust
Company, or such other entity as my then be acting as
Indenture Trustee be authorized, but not directed, to file
a proof of claim on behalf of all of such Holders and in
respect of all claims arising under or in connection with
the Bonds. Moreover, the Indenture Trustee need not
attach to its proof of claim the copies of all of the
documents relevant to its proof of claim, provided that
the Indenture Trustee shall allow any party in interest to
inspect such documents upon reasonable request.
Furthermore, the Debtors propose that they shall retain the
right to:
(a) dispute, or assert offenses or defenses against, any filed
Claim or any Claim listed or reflected in the Schedules
as to nature, amount, liability, classification or
otherwise; or
(b) subsequently designate any Claim as disputed, contingent
or unliquidated;
-- provided that if the Debtors amend the Schedules to reduce
the disputed, non-contingent and liquidated amount or to change
the nature or classification of a Claim against a Debtor, then
the affected Claimant shall have until the later of:
(a) the General Bar Date, or
(b) thirty days after the date that said Claimant is served
with notice of the amendment to file a proof of claim or
to amend any previously filed proof of claim in respect of
such amended scheduled Claim.
Nothing shall preclude the Debtors from objecting to any claim,
whether scheduled or filed, on any grounds, Mr. Galardi
emphasizes.
Mr. Galardi explains that in order to preserve estate assets,
the Bar Date Notice shall include the notice of the General Bar
Date and Rejection Bar Date for all 21 of the Debtors' cases.
Accordingly, the Debtors request the Claimants to each file a
separate Proof of Claim Form for each Debtor. Mr. Galardi notes
that the filing of individual claim for each Debtor will:
-- expedite the Debtor's review of proofs of claim, and
-- a Debtor can effectively object to a particular claim.
Mr. Galardi adds that the Debtors intend to give notice of the
Bar Date by March 22, 2002 via mail and notice publication in
"The Boston Globe" and "The New York Times" or "The Wall Street
Journal". Such Notices will give the Claimants 60 days to file
their claims against the Debtors, which is beyond the required
20 days minimum notice established by Bankruptcy Rule 2002(a)(7)
and in accordance with Local Rule 2002-1(e).
Mr. Galardi assures Judge Walsh that the proof of claim form to
be served is substantially similar to the Official Proof of
Claim Form of the Court.
Lastly, the Debtors request the Claimants to deliver to their
claims and noticing agent, Donlin, Recano & Co., the signed
original and completed Proof of Claim Form and its documentation
by 5:00 p.m., Eastern Time, on the applicable Bar Date. Mr.
Galardi warns that submission by facsimile or other electronic
means shall not be allowed.
Mr. Galardi argues that the date set by the Debtors warrants the
Court's approval because:
(a) pursuant to Bankruptcy Rule 3003(c)(3), the Debtors has
established adequate cause to fix the Bar Date;
(b) guidelines set by the Bankruptcy Rule 2002-1(e) of the
Local Rules for the Bankruptcy Court for the District of
Delaware are met, which provides that a request for the
establishment of a bar date may be granted without
hearing if such request is:
-- given 10 days notice to the US Trustee and creditors'
committee,
-- filed after the Schedules and Statements of Financial
Affairs are filed, and
-- the meeting of creditors under Bankruptcy Code section
341 has been held and request a bar date that is at
least 60 days from the date that the notice of the bar
date is served;
(c) Bankruptcy Code section 105 and 502 and Bankruptcy Rule
9007 permit the Court to approve the proposed claim filing
procedures and to approve the form, manner and sufficiency
of notice of the Bar Date and the procedures for filing
claims. (Polaroid Bankruptcy News, Issue No. 12;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PORTLAND BOTTLING: Will Reopen After Investor Group's Takeover
--------------------------------------------------------------
A consortium of private investors announced they won the right
at public auction to reopen and operate the Portland Bottling
Company's landmark plant at 1321 NE Couch St., in Portland.
Production will begin as soon as the production line is ready.
The new company, Portland Bottling Company LLC will initially
resume operations as a manufacturer of private label soda pop
for unnamed West Coast retailers. Portland Bottling Company LLC
is also in discussion to acquire the manufacturing of other
brands as their manufacturing contracts become available.
The group of investors includes John Rouches, grandson of
Portland Bottling company founder, Andrew D. Hrestu, and other
members of the Rouches and Hrestu families. Other investors
include, Sam Allen, Randy Wright, and other local business
people.
Long-time plant manager, Ed Frey, a thirty-year veteran of the
original Portland Bottling Company, has agreed to come out of
retirement to restart the production line and to teach workers
the intricacies of operating the complex production line. Seven
former Portland Bottling Company employees have been rehired to
run the line. Portland Bottling will begin with 20 to 25
employees eventually growing to 100 to 110 people when it
reaches full capacity. Employees will be given an equity
position in the new company.
Portland Bottling Company, LLC will operate strictly as a
bottler. The previous entity, purchased the original Portland
Bottling Company from the Rouches family in 1990, operated as
both the bottler and distributor until it filed for Chapter 7
liquidation in mid-December. Portland Bottling Company employed
over 250 production, sales, distribution, and clerical employees
when it ceased operation. After Portland Bottling Company
ceased operations, Columbia Distributing Company assumed the
distribution of all brands bottled at Portland Bottling Company.
Norm Myhr, a spokesperson for the group, stated that Portland
Bottling Company has been an icon of Portland business since
1924. "The group's objective is to continue to produce the same
high quality products for which the Portland Bottling Company
has always been known. The investors believe there is an
opportunity to build a solid business, which will allow it to
grow, provide employment, and support the community."
"The commitment of the Rouches and Hrestu families and the
investment group helped save a great company that has served
Portland for 78 years, otherwise it would have been sold at
auction piece, by piece, by piece until it was no more," Myhr
said.
"There have been lots of questions about the landmark 7-UP sign
at the top of the tower facing Sandy Boulevard, the plans are to
keep it lit and operating," Myhr added.
Over 200 bidders began the auction, which was conducted by Mr.
David Ordon of HILCO Industrial, LLC of Northbrook, Il. The
auction took place Thursday February 28, 2002 at the bottling
plant at 1321 NE Couch.
PRIMUS TELECOMMS: S&P Junks Debt Rating over Liquidity Concerns
---------------------------------------------------------------
The senior unsecured debt rating on international long-distance
carrier Primus Telecommunications Group Inc., was lowered on
March 6, 2002 to 'CCC+'. The other ratings on company were
affirmed at that time, and all ratings were removed from
CreditWatch, where they had been placed on May 8, 2001, due to
heightened liquidity concerns.
The downgrade of the unsecured debt did not reflect a diminution
of the company's overall credit quality. Rather, it was based on
the fact that additional funding for the company is expected to
be largely secured in nature, which would cause the ratio of
priority obligations relative to a reasonable total asset value
to exceed 30%. Under Standard & Poor's criteria, this metric is
the threshold for rating debt two notches below the corporate
credit rating.
The affirmation of the company's corporate credit rating was
based on the fact that near-term concerns about Primus's
liquidity have been alleviated by its opportunistic buyback of a
portion of its debt, the equity conversion of some of its
subordinated convertible debt, and cost containment efforts.
Largely as a result of these factors, the company is most likely
funded through 2002.
Primus's business has been adversely affected over the past year
by weakening global economies and reduced business from many
carriers that have either gone bankrupt or severely curtailed
their network spending. The company has actively pursued the
enterprise market, but this sector has been subject to a high
degree of competition and significant pricing pressures. Primus
faces the challenge of aggressively growing its business base in
2002 in the face of ongoing uncertain economic conditions, and
continuing to contain expense levels. However, achievement of
the company's targeted operating cash flows for 2002 of a
minimum of $75 million, from $12 million in 2001, represents a
growth target that may prove difficult to achieve in the current
economic environment.
Outlook
If Primus is able to continue to actively control expenses and
preserve capital during the current economic slowdown, it is
likely to be funded through 2002. However, the company is still
expected to require additional external funding beyond 2002.
Absent receipt of additional funding for such needs, ratings
could be lowered.
DebtTraders reports that Primus Telecommunications Group's
12.750% bonds due 2009 (PRTL4) are quoted at 31. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=PRTL4for
real-time bond pricing.
PSINET INC: Canadian Applicants Propose CCAA Plan of Arrangement
----------------------------------------------------------------
The Canadian PSINet Applicants delivered their Consolidated Plan
of Compromise or Arrangement to the Ontario Superior Court of
Justice in Toronto, Canada. Overall, the Plan:
(a) provides for the allocation as between PSI US Affiliates
(i.e. PSI US and PSINetworks US) and the PSI Companies
(refers to PSINet, Realty, PSI Networks and THCL or any one
of them) of the proceeds of the Sale in conjunction with the
harmonization and coordination of the US Proceedings and
CCAA Proceedings as contemplated by the Protocol;
(b) provides for an orderly disposition of the net cash proceeds
of the Sale and the Remaining Assets for the benefit of
Creditors; and
(c) provides for compromise, settlement and payment of the
Claims of the Unsecured Creditors as finally determined for
distribution purposes in accordance with the Claims
Procedure and the CCAA Plan.
For the purposes of the Plan only, PSI US has agreed with PSINet
to value its Charge against the assets, property and undertaking
of PSINet to an amount set at $55,000,000 (Canadian Dollars).
The Plan provides for Intercompany Releases. On the Plan
Implementation Date, the PSI Companies shall be released and
discharged from any and all demands, claims, actions, causes of
action, counterclaims, suits, debts, sums of money, accounts,
covenants, damages, judgments, expenses, executions, liens and
other recoveries on account of any liability, obligation, demand
or cause of action of whatever nature which any other PSI
Company may be entitled to assert, (PSINet Bankruptcy News,
Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900)
RCN CORP: Increased Business Risk Forces S&P to Junk Ratings
------------------------------------------------------------
The ratings on RCN Corp., were lowered to 'CCC+' on March 6,
2002. The ratings remained on CreditWatch with negative
implications. RCN provides telephone, cable, and high-speed
Internet services in the eastern U.S., Chicago, and California.
The downgrade was based on RCN's increased business risk due to
higher competitive pressures from DSL and cable modem incumbent
providers, which in the past year have been more aggressive in
their offerings of high-speed data services, the growth driver
under RCN's competitive business model. Moreover, although RCN
demonstrated sound execution in 2001 with overall improvement in
operating and financial metrics, the acquisition of new
subscribers or the sale of additional services to customers will
become progressively more challenging as penetration increases.
Yet despite RCN's high degree of execution risk, Standard &
Poor's views the high-density residential market overbuild model
as among the few competitive business strategies that could
potentially succeed against incumbent telephony and cable
companies.
The CreditWatch listing reflects heightened liquidity concerns
due to RCN's ongoing negotiations with its lending group
regarding an amendment to its credit facility. The amendment
seeks to accommodate a revised business plan, which incorporates
a slower growth trajectory focused on the development of the
company's business in existing markets without expansion into
new markets. At present, it is uncertain whether an agreement
will be reached, the absence of which can lead to a covenant
violation in 2002.
The ratings will be lowered in the near term if RCN is not able
to negotiate successfully with its lending group and covenant
violation or debt restructuring become more likely. However, the
corporate credit rating would likely be affirmed if RCN is able
to reach a bank agreement on favorable terms, based on a
business plan that enables it to achieve positive EBITDA in 2003
and free cash flow in 2004. The company derives financial
flexibility from a cash position of $838 million as of December
31, 2001, and from assets that could be monetized if market
conditions permit.
On March 6, 2002, the senior unsecured debt was lowered an
additional notch below the corporate credit rating. This two-
notch differential reflects the decline in Standard & Poor's
assessment of the company's realistic, realizable asset value in
relation to priority obligations (principally the bank debt), in
light of value declines in the telecommunications sector over
the past year. Similarly, the bank loan rating, formerly one
notch above the corporate credit rating, is now rated the same
as the corporate credit rating because, based on stricter asset
valuation, in a simulated default scenario, it is not certain
that a distressed enterprise value would be sufficient to cover
the entire loan facility.
Standard & Poor's will resolve the CreditWatch listing when the
discussions between RCN and its lenders conclude.
RELIANCE: Judge Carey Issues Removal, Remand & Transfer Opinion
---------------------------------------------------------------
The Honorable Kevin J. Carey, sitting in the United States
Bankruptcy Court for the Eastern District of Pennsylvania, in
relation to the bankruptcy cases of Reliance Group Holdings,
Inc., and its debtor-affiliates, issued an Opinion and Orders
directing that:
(A) The Commissioner's request that the Bankruptcy Court
abstain from considering the merits of her Constructive
Trust Action and remand that suit back to the
Commonwealth Court is granted in part. The Commonwealth
Court will decide:
(1) whether the Tax Allocation Agreement and/or the
Debtor's actions under the Tax Allocation Agreement
violate Pennsylvania statutes regulating insurers and
affiliated holding companies;
(2) whether under Pennsylvania law the disputed cash
should be subject to a constructive or resulting
trust; and
(3) whether interim injunctive relief regarding the
disputed cash should be granted; and
(B) All other issues raised in the Commissioner's
Constructive Trust Action are transferred to the U.S.
Bankruptcy Court for the Southern District of New York.
The Emergency Petition
On June 4, 2001, the Commissioner filed an action entitled
"Emergency Petition for Preservation of Insurance Policy Assets"
in the Commonwealth Court. In the Emergency Petition, the
Commissioner sought a declaration that RIC's assets include
Lloyds Insurance Policies that provide comprehensive coverage up
to $125,000,000 to RGH, its subsidiaries and controlled
entities, and their respective directors and officers. In the
Emergency Petition, the Commissioner alleges that RGH and its
officers and directors were planning to use proceeds from the
Lloyds Policies, in the approximate amount of $17 million, to
settle class action litigation initiated by former and current
shareholders that claim RGH executives made false and misleading
statements about the company's stock. The Commissioner also
alleges that use of the Lloyds Policies' proceeds for the
proposed settlement violates the terms of the RIC Liquidation
Orders. If determined to be assets of RIC, the Lloyds Policies
would be the property of RIC. Meanwhile, RGH asked for the
action to be removed to the Bankruptcy Court in New York.
The first issue for Judge Carey to decide is whether Debtor is a
"party" to the Emergency Petition. Second, he must rule on
whether the Commissioner is acting in its capacity as a
governmental unit.
The Commissioner strongly asserts that the Debtor is not a
"party" to the Emergency Petition, since the only named
defendant in the class action litigation was RIC, and Section
1452 permits only "a party" to remove a claim or cause of
action. As a result, the Commissioner seeks an order "ordering
and directing that Reliance Parent (the Debtor and Reliance
Financial), its officers, directors, attorneys and agents, as
well as Lloyds Underwriters, . . . cease any further action to
effectuate or consummate any settlement of the class actions
that involves the Policies, or any other asset that is, or may
be, an asset of RIC."
Dealing the Commissioner a setback, Judge Carey rules that the
Debtor is a necessary party pursuant to Fed.R.Civ.P. 19(a)(2)(i)
and its joinder is required because it claims an interest in the
subject of the Emergency Petition (i.e., the Lloyds Policies).
The outcome of the Emergency Petition will have an immediate and
direct effect upon the Debtor. The failure to include the Debtor
as a party would impair its ability to protect that interest.
Cf. Steel Valley Auth. v. Union Switch and Signal Div., 809 F.2d
1006, 1013-14 (3d Cir. 1987), Spring-Ford Area School Dist. v.
Genesis Ins. Co., 158 F.Supp.2d 476, 483 (E.D. Pa. 2001).
Accordingly, Judge Carey concludes that the Debtor is a "party."
Second, the Commissioner also argues that the Debtor cannot
remove the Emergency Petition under Section 1452 because this
action falls within the exception to removal for "a civil action
by a governmental unit to enforce such governmental unit's
police or regulatory power." In other words, the Commissioner is
simply using her enforcement powers as a state regulator.
The Commissioner relies upon Herman v. Brown, 160 B.R. 780
(E.D. La. 1993), in which the district court found that the
Louisiana Commissioner of Insurance was acting as a
"governmental unit" in an action against an individual debtor
for violations of the Racketeer Influenced and Corrupt
Organizations Act, federal securities law and state law
provisions arising out of transactions involving the business of
insurance. Neither the caption nor the facts of Herman reveal
whether the commissioner was acting in his role as an insurance
company liquidator in bringing the action, but it appears that
fact was not necessary to the Herman court's decision, which
said:
"There is no way to separate the actions of the Commissioner
as liquidator with the actions of Commissioner as
Commissioner, nor has debtor pointed to any order requiring
the Commissioner to act in the name of the insurer. The
Commissioner is therefore acting as a governmental unit under
Section 362(b)(4), rather than as a private party." Herman,
160B.R. at 784.
The Debtor responds by arguing that the Commissioner is not
acting as a "governmental unit" in bringing the Emergency
Petition and that the Emergency Petition is not an enforcement
of any "police or regulatory power." The Debtor makes this
argument because when pursuing the Emergency Petition in her
role as rehabilitator (now liquidator), the Commissioner claims
that she stands in the shoes of RIC and has rights that are
". . . not superior to nor 'more extensive than' those of the
carrier whose affairs [she] is liquidating." Commonwealth v.
Commonwealth Mutual Ins. Co., 450 Pa. 177, 181, 299 A.2d 604,
606 (1973).
In deciding the matter, Judge Carey invokes the Third Circuit
Court of Appeals, which has considered the meaning of the phrase
"governmental unit's police or regulatory power" in the context
of Bankruptcy Code Section 362(b)(4). It contains similar
language, excepting from the automatic stay "the commencement or
continuation of an action or proceeding by a governmental
unit...to enforce such governmental unit's or organization's
police and regulatory power." In Penn Terra Ltd. v. Dep't. of
Envtl. Res., 733 F.2d 267 (3d Cir. 1984), the court held that
the "police or regulatory power" exception should be construed
broadly, and reasoned as follows:
Given the general rule that preemption is not favored, and
the fact that, in restoring power to the States, Congress
intentionally used such a broad term as "police and
regulatory powers," we find that the exception to the
automatic stay provision contained in subsections 362(b)(4)-
(5) should itself be construed broadly, and no unnatural
efforts be made to limit its scope.... Where important state
law or general equitable principles protect some public
interest, they should not be overridden by federal
legislation unless they are inconsistent with explicit
congressional intent such that the supremacy clause mandates
their supersession.
Judge Carey concludes that applying the Third Circuit's test,
the Emergency Petition does not involve enforcement of a police
or regulatory power. Although the overall purpose of the Article
V of Pennsylvania's Insurance Act is to protect the interests of
insureds, creditors and the public generally (40 P.S. Section
221.1(c)), the underlying purpose of the Emergency Petition is
to declare the Lloyds Policies to be assets of RIC, subject to
the Commissioner's control. The relief requested in the
Emergency Petition seeks to take assets already within the
control of the bankruptcy court and enable the Commissioner, and
ultimately the policyholders and creditors of RIC, to gain a
pecuniary advantage over other creditors of the Debtor's estate.
Accordingly, the Emergency Petition is not an enforcement of a
police or regulatory power.
Next, Judge Carey feels it is appropriate to determine whether
the Commissioner is acting as a "governmental unit." The
definition of the term "governmental unit" as set forth in 11
U.S.C. Section 101(27), includes a State or Commonwealth, as
well as a "department, agency, or instrumentality of the . . .
State [or] . . . Commonwealth." The plain language of the
definition of "governmental unit" in section 101(27) does not
include expressly an officer or commissioner of a state
department or agency.
Judge Carey tells the litigants that at least two courts have
decided that an insurance commissioner is not acting on behalf
of the state's interest when pursuing a lawsuit in his or her
role as liquidator. General Railway Signal Co. v. Corcoran, 748
F.Supp. 639, 643-44 (N.D. Ill. 1990), rev'd on other grounds,
921 F.2d 700 (7th Cir. 1991); 20 Skandia American Reinsurance
Corp., 441 F.Supp. 715, 722 (S.D.N.Y. 1977).
Once again, siding with the Debtors, Judge Carey states that the
Emergency Petition was filed by the Commissioner, not on behalf
of the Commonwealth, but in her role as liquidator for the
benefit of creditors, members, policyholders or shareholders of
RIC. The outcome does not affect the state treasury. See General
Railway, 921 F.2d at 705, n.3. The Commonwealth's interest in
the Emergency Petition is confined to the general governmental
interest in protecting the welfare of its citizens by
enforcement of its laws regarding the orderly liquidation of
insurance companies. This general interest, coupled with the
autonomy given to the Commissioner under the relevant statutory
law, leads Judge Carey to conclude that the Commonwealth is not
the real party in interest in the Emergency Petition. Therefore,
the Commissioner is not acting as a "governmental unit" in
pursuing the relief requested in the Emergency Petition. The
Emergency Petition, therefore, was properly removed to this
court.
The Trust Action
On June 11, 2001, the Commissioner filed a Complaint in Equity
in the Commonwealth Court asking the court to impose a
constructive trust or resulting trust upon $95,651,000 in cash
held by the Debtor. The Commissioner argued that the cash is an
asset of RIC that was transferred improperly to the Debtor under
the "pretext" of payments due pursuant to the terms of a Tax
Allocation Agreement between the Debtor (then known as "Leasco
Data Processing Equipment") and RIC dated October 1, 1968. The
Commissioner argued also that the Debtor cannot remove the Trust
Action under Section 1452, because it falls within the exception
for a governmental unit's enforcement of a police or regulatory
power.
The Debtor, on the other hand, argued that it properly possesses
the cash under the Tax Allocation Agreement and any claims RIC
has against the Debtor under that same agreement must be treated
in accordance with the priorities established by the federal
Bankruptcy Code.
Judge Carey rules that he Trust Action, like the Emergency
Petition, seeks to move assets out of the control of the
bankruptcy court and into the control of the Commissioner for
the benefit of creditors, members, policyholders or shareholders
of RIC. As in the Emergency Petition ruling, Judge Carey
concludes that the Commissioner is not enforcing a police or
regulatory power and is not acting as a governmental unit in the
Trust Action. Therefore, the Trust Action was removed properly
under Section 1452.
Discretionary Abstention is Appropriate
for the Constructive Trust Action
Judge Carey now turns to the issue of discretionary abstention
and the Trust Action. He states that although the Debtor has
argued that the Trust Action involves nothing more than ordinary
contract law issues (based upon interpretation of the Tax
Allocation Agreement) and constructive trust issues that
bankruptcy courts routinely decide, the Debtor's argument fails
to recognize that the Trust Action also requires consideration
and interpretation of the Pennsylvania Insurance Holding Company
Act, 40 P.S. Section 991.1401 et seq., when analyzing the Tax
Allocation Agreement.
The Insurance Holding Company Act is part of the overall state
regulatory scheme regarding insurance companies, which is
recognized to be an important state interest by Congress, as
embodied in the McCarran-Ferguson Act, 15 U.S.C. Section 1011 et
seq.40 See also Lac D'Amiante Du Quebec, LTEE v. American Home
Assurance Co., 864 F.2d 1033 (3d Cir.1988). Through the
Insurance Holding Company Act, Pennsylvania regulates domestic
insurers and the affiliates that control them. Therefore,
"ordinary" contract disputes between RIC and the Debtor
regarding the Tax Allocation Agreement must be viewed in light
of the regulatory scheme set forth in the Pennsylvania's
Insurance Holding Company Act.
There appears to be no case law interpreting that portion of the
Insurance Holding Company Act (particularly 40 P.S. Section
991.1405 - "Standards and management of an insurer within a
holding company system"), which the Commissioner contends must
be reviewed to determine the relief requested in the Trust
Action. Among other things, Section 991.1405 requires all
transactions within a holding company system to be "fair and
reasonable," which terms are not specifically defined. In this
situation, Judge Carey leans towards deference to allow the
state courts to interpret the state's regulatory statutes,
especially with respect to the statutory scheme established by
the state's insurance act.
The Commissioner also argues that the Burford abstention
doctrine is applicable to the Trust Action. The standard for the
Burford abstention doctrine is as follows: Where timely and
adequate state-court review is available, a federal court
sitting in equity must decline to interfere with the proceedings
or orders of state administrative agencies: (1) when there are
"difficult questions of state law bearing on policy problems of
substantial public import whose importance transcends the result
in the case then at bar"; or (2) where the "exercise of federal
review of the question in a case and similar cases would be
disruptive of state efforts to establish a coherent policy with
respect to a matter of substantial public concern." Feige v.
Sechrest, 90 F.3d 846, 847 (3d Cir. 1996).
With respect to the Trust Action, timely and adequate state
court review of the issues is available in the Commonwealth
Court. The first prong of the Burford test is applicable to this
matter because the lack of state law to guide a federal court
working to interpret the statutory scheme makes resolution of
the Trust Action's issues more difficult. Because regulation of
state insurers is recognized to be an important state interest,
the remainder of the first prong is also met, because it is
preferable for state courts to interpret the Insurance Holding
Company Act. Likewise, the second prong of the Burford
abstention test is met, because this part of state law
regulating insurance holding companies in Pennsylvania is
undeveloped, and the state court should have the first
opportunity to interpret the law and establish a coherent policy
with respect to an area of "substantial public concern," such as
the state regulation of insurance holding companies.
As a result, Judge Carey concludes that it is appropriate to
exercise discretionary abstention under both 28 U.S.C. Section
1334(c)(1) and the Burford abstention doctrine because the
issues in the Trust Action involve an undeveloped area of
Pennsylvania law which impacts the state's interest in the
regulation of the insurance industry. Under principles of
comity, it is appropriate to abstain and allow the Commonwealth
Court to decide the Trust Action's state law issues. Therefore,
the Trust Action will be remanded, in part, to the Commonwealth
Court.
Discretionary Abstention is
Inappropriate for the Emergency Petition
Judge Carey declares that the Emergency Petition presents a
different situation, since it does not require the
interpretation of any part of the state's statutory scheme for
regulating insurance companies or present any novel or unsettled
issues of state law. The Commissioner asserts that the Emergency
Petition requires interpretation of the terms of the RIC Orders
or 40 P.S. Section 221.15(c). Although both require the
Commissioner to take possession of an insurer's "assets,"
neither raises unsettled or novel issues requiring state court
guidance.
Resolution of the Emergency Petition involves more ordinary
issues of contract interpretation based upon the coverage, named
assureds, and other provisions of the Lloyds Policies. These are
not novel or unsettled issues of state law; the primary concern
that led Judge Carey to conclude that discretionary abstention
is appropriate in the Trust Action, is not present here.
The Burford abstention doctrine, discussed supra, is not
applicable to the Emergency Petition. Although timely and
adequate state court review of the Emergency Petition is
available, this action does not meet either prong of the Burford
abstention test. While the outcome of this matter may affect the
amount of assets in the RIC liquidation proceeding (and in the
Debtor's bankruptcy cases), it will not directly impact the
state's regulation of insurers or the state's ability to
establish rules for the orderly rehabilitation or liquidation of
insolvent insurers. The Emergency Petition does not raise
"difficult questions of state law bearing on policy problems of
substantial public import whose importance transcends the result
in the case then at bar." Nor would allowing the bankruptcy
court to decide this matter "be disruptive of state efforts to
establish a coherent policy with respect to a matter of
substantial public concern."
The Commissioner argues that the reverse preemption provision of
the McCarran-Ferguson Act, 15 U.S.C. Section 1012(b), provides a
basis for discretionary abstention. Judge Carey disagrees. The
Third Circuit has determined the following test for considering
whether the reverse preemption provision of the McCarran-
Ferguson Act applies to a particular matter: Under Section 1012,
state laws reverse preempt federal laws if (1) the state statute
was enacted for the purpose of regulating the business of
insurance, (2) the federal statute does not specifically relate
to the business of insurance, and (3) the federal statute would
invalidate, impair, or supersede the state statute. Munich
Reinsurance, 223 F.3d at 160.
The federal Bankruptcy Code is not directly related to the
business of insurance. Although the first two prongs of the
McCarran-Ferguson reverse preemption test are met in this
matter, allowing the bankruptcy court to determine the extent to
which the insurance proceeds are property of the Debtor's
bankruptcy estates will not "invalidate, impair or supersede"
the state's regulatory scheme for the liquidation of insolvent
insurers. As discussed previously, determination of the
competing claims to the Lloyds Policies will not be determined
by interpreting or considering a statute that is part of the
state's regulatory scheme for insurance companies.
Although the record in this case is limited, it appears the
Debtor is the actual owner of the Lloyds Policies. When the
state law regarding the parties' property rights is not
unsettled or difficult, the bankruptcy court is usually the most
appropriate forum to determine competing claims to property of
the bankruptcy estate. Celotex, 152 B.R. at 677. Although the
Commissioner argues that the Commonwealth Court has exclusive
jurisdiction of these matters, the same argument was rejected by
the district court in Cologne Reinsurance. Cologne Reinsurance,
34 F.Supp. at 253. Accordingly, Judge Carey concludes that
discretionary abstention is not warranted with respect to the
Emergency Petition.
Judicial Economy
Judge Carey holds that resolution of the Emergency Petition may
impact both the federal bankruptcy estate and RIC's state
liquidation proceeding, but he does not find sufficient reason
to defer to the state court to resolve this matter. This is
partly due to judicial economy factors. Although it has been
concluded that the Trust Action should be returned to the
Commonwealth Court, both State Court Actions need not be heard
in the same forum simply because both involve the Debtor and the
Commissioner. The issues arising in the Emergency Petition are
quite different from those arising in the Trust Action.
Therefore, judicial economy is not better served by remanding
the Emergency Petition to the Commonwealth Court. Accordingly,
the Emergency Petition will not be remanded pursuant to 28
U.S.C. Section 1452(b).
RGH's Venue Motions
The Debtor has asked that the removed adversary proceedings be
transferred to the home bankruptcy court pursuant to 28 U.S.C.
Section 1412. Judge Carey says that the language of Section
1412 is permissive, not mandatory, and the decision to transfer
is subject to the broad discretion of the court. The Debtor's
principal place of business is in the home bankruptcy court's
district and, therefore, it would be more convenient for
witnesses and for access to documents to try the residual
matters there.
The inconvenience to the Commissioner between attending hearings
in New York or Philadelphia is not significant. Indeed, the
Commissioner has already participated in the home court.
Although the Emergency Petition involves application of state
law (as discussed above), there are no novel or unsettled issues
requiring the action to be heard in Pennsylvania.
The most important factor, however, is whether the transfer
would promote the economic and efficient administration of the
estate. Because the New York Bankruptcy Court is familiar with
the Debtor's entire chapter 11 efforts, it is more efficient for
any residual Trust Action issues and the Emergency Petition to
be resolved there, rather than here. For this court to retain
any residual Trust Action issues or the Emergency Petition for
resolution would keep open yet a third forum (battleground),
potentially and unnecessarily depleting assets of both the
Debtor and RIC. Therefore, the Trust Action issues and Emergency
Petition will be transferred to the New York Bankruptcy Court.
Commissioner's Motion for Relief
from the Automatic Stay
In her Remand Motion, the Commissioner did not specifically
request relief from the automatic stay, but asked that this
court abstain and remand the State Court Actions to the
Commonwealth Court and requested that this court grant "such
other and further relief as this Court deems necessary and
just." Other courts have found that a request for relief from
the stay to allow resolution of issues in state court is
implicit in an abstention motion. Pursifull v. Eakin, 814 F.2d
1501, 1505 (10th Cir. 1987).
Judge Carey holds that implicit in the Commissioner's Remand
Motions is a request for relief from the automatic stay of
Bankruptcy Code Section 362. He decides to grant such relief in
the Trust Action for determination by the Commonwealth Court of:
(1) whether the Tax Allocation Agreement and/or the
Debtor's actions under the Tax Allocation Agreement
violate Pennsylvania statutes regulating insurers and
affiliated holding companies;
(2) whether under Pennsylvania law the disputed cash
should be subject to a constructive or resulting
trust; and
(3) whether interim injunctive relief regarding the
disputed cash should be granted.
The Commonwealth Court is able to address these matters through
the time of disposition. However, Judge Carey cannot predict the
state of the Debtor's chapter 11 case at the time of the
ultimate disposition of the Trust Action by the Commonwealth
Court. Therefore, it is appropriate to require that the parties
return, as their respective needs and interests may dictate, to
the New York Bankruptcy Court for relief in connection with the
enforcement of the disposition of the Trust Action by the
Commonwealth Court.
Judge Carey rules that the Debtor's Venue Motion for the Trust
Action will be granted, in part. Adversary No. 01-558 will be
transferred to the New York Bankruptcy Court for consideration
of any residual Trust Action issues, including but not limited
to issues such as whether the debtor's interest, once defined by
the state court, is Section 541 property of the estate, the
Commissioner's request for permanent injunctive relief, or
enforcement of any state court order obtained by the
Commissioner with respect to the remanded issues.
Therefore, the Commissioner's Remand Motion for Adversary
Proceeding No. 01-559 (regarding the Emergency Petition) will be
denied. The Debtor's Venue Motion in that adversary proceeding
will be granted. An appropriate order will be entered in each
Adversary Proceeding. (Reliance Bankruptcy News, Issue No. 20;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
RURAL/METRO CORP: Debt Restructuring Necessary to Stay Afloat
-------------------------------------------------------------
Rural/Metro Corporation derives its revenue primarily from fees
charged for ambulance and fire protection services. It provides
ambulance services in response to emergency medical calls (911
emergency ambulance services) and non-emergency transport
services (general transport services) to patients on a fee-for-
service basis, on a non-refundable subscription fee basis, and
through capitated contracts. Per transport revenue depends on
various factors, including the mix of rates between existing
service areas and new service areas and the mix of activity
between 911 emergency ambulance services and general medical
transport services as well as other competitive factors. Fire
protection services are provided either under contracts with
municipalities, fire districts, or other agencies or on a non-
refundable subscription fee basis to individual homeowners or
commercial property owners.
Although the Company generated net income of approximately $2.0
million for the six months ended December 31, 2001, it incurred
net losses of approximately $226.7 million and $101.3 million
for the fiscal years ended June 30, 2001 and 2000, respectively.
Additionally, at December 31, 2001, it had a net working capital
deficit of $261.6 million (primarily as a result of the
classification as current liabilities of amounts outstanding
under its revolving credit facility and 7 7/8% Senior Notes due
2008) as well as a stockholders' deficit of $124.2 million. The
Company has been operating under a waiver of financial covenant
compliance relating to its revolving credit facility since
December 31, 1999.
Despite the significant losses experienced in fiscal 2001 and
2000, Rural/Metro has been able to fund its operating and
capital needs internally since March 2000. The Company believes
that its current business model will generate sufficient cash
flows to provide a basis for a new long-term financing
agreement with its lenders or to restructure its debt. A new
long-term agreement would likely have terms different from
those contained in its existing debt agreements, including
potentially higher interest rates, which could materially affect
results of operations and cash flows. Further, any new long-
term agreement may involve the conversion of all or a portion
of Company debt to equity or similar transactions that could
result in material and substantial dilution to existing
stockholders.
Rural/Metro's ability to continue as a going concern depends on
the continued success of its current business model as well as
its ability to restructure debt. Although there is no assurance,
management believes that the Company will be successful in
achieving profitable operations and restructuring debt.
The audit report relating to Rural/Metro's fiscal 2001 financial
statements was qualified as to its ability to continue as a
going concern. Management anticipates that the audit report on
its fiscal 2002 financial statements will contain a similar
qualification unless the Company is able to successfully
restructure its debt.
SL INDUSTRIES: Defaults On Revolving Credit Facility
----------------------------------------------------
SL Industries, Inc. (NYSE:SL)(PHLX:SL) announced that it has
received a notice of default from its lenders.
The notice states that the Company has defaulted under its
revolving credit facility due to the Company's failure to meet
the scheduled debt reduction to $25,500,000. The Company's
outstanding debt under the revolving credit facility was
approximately $26.2 million as of March 6, 2002.
The Company is currently in discussions with its lenders in an
attempt to extend the period for the scheduled debt reduction
and to resolve other issues. As these discussions are still
ongoing, there can be no assurance that the parties will be able
to extend the scheduled debt reduction or that the Company will
otherwise obtain a waiver of the default from its lenders.
SL Industries, Inc. designs, manufactures and markets Power and
Data Quality (PDQ) equipment and systems for industrial,
medical, aerospace, telecommunications and consumer
applications. For more information about SL Industries, Inc. and
its products, please visit the Company's Web site at
http://www.slpdq.com
SAFETY-KLEEN: Secures Open-Ended Lease Decision Period Extension
----------------------------------------------------------------
Judge Walsh enters his Order granting the requested extension of
time during which Safety-Kleen Corp., and its debtor-affiliates
may assume, assume and assign, or reject unexpired leases,
except that the lease between A. P. Dawson Realty Trust and
Safety-Kleen Corporation of certain nonresidential property
located at 50 Brigham Street, Marlborough, Massachusetts is
extended until the Effective Date. Judge Walsh expressly
provides that his Order is without prejudice to (i) a lessor's
right to seek an Order shortening this time period as to a
specific lease, and (ii) the Debtors' right to oppose any such
request. (Safety-Kleen Bankruptcy News, Issue No. 28; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
SUNSHINE MINING: Terminating Employees Due to Funding Shortage
--------------------------------------------------------------
Sunshine Mining and Refining Company (OTCBB:SSMR) announced that
four of its five directors have resigned effective March 6,
2002.
Due to continued depressed silver prices, the Company is going
into a period of limited activity. John Simko has resigned as
president and has been succeeded in that role by the Company's
sole remaining director, Keith McCandlish. Mr. McCandlish will
not devote a substantial amount of his time to the Company's
affairs. The Company's remaining officers and employees are
being terminated during the month of March due to insufficient
funding. Certain former employees are expected to provide the
Company limited services on a consulting basis following their
termination of employment.
During 2001, affiliates of Elliott Associates, L.P. and
Stonehill Capital Management LLC entered into a secured credit
facility with Sunshine Argentina, Inc. that has been the
Company's only source of working capital, other than asset
disposals, for more than the last 12 months. As of October 3,
2001, the Company had borrowed the full $6.5 million commitment
under the secured credit facility. Subsequently, the Lenders
agreed to advance approximately $900 thousand of an optional
$1.5 million credit facility amount. The Company is in default
under the secured credit facility. The future activity of the
Company and its remaining subsidiaries likely will be limited to
preservation and realization of any remaining assets. No
proceeds will be available to the Company or its subsidiaries
outside of the Lenders' discretion until they have been paid in
full. The Company does not expect the Lenders to recover the
full amount due under the loan. The Lenders have advised the
Company that they do not plan to make additional funds available
to the Company except with regard to certain payments in
connection with the protection or realization of their
collateral and certain wind down activities.
Elliott International, L.P., The Liverpool Limited Partnership,
Stonehill Institutional Partners, L.P. and Stonehill Offshore
Partners Limited each have exercised their Call Options under
the Call Option Agreement entered into as of February 5, 2001 in
connection with the Company's emergence from bankruptcy.
Pursuant to the Call Options, the Holders purchased 100% of the
stock of Sunshine Argentina, Inc. (which owns the Pirquitas
silver mine in Argentina subject to a mortgage under the secured
credit facility) by tendering shares of the Company's common
stock having a value of $1,000,000 based on the last quoted bid
price on the day preceding the date of the purchase. The
Pirquitas mine was one of the Company's principal assets.
The Company does not have the resources to prepare its financial
statements and make filings with the Securities and Exchange
Commission and, therefore, will not make such filings unless its
financial circumstances improve, which the Company believes is
unlikely.
TECSTAR INC: Creditors' Meeting Will Convene on March 15, 2002
--------------------------------------------------------------
The United States Trustee will convene a meeting of creditors of
Tecstar, Inc. on March 15, 2002 at 10:00 a.m. The meeting will
be held in Room 2112 at the J. Caleb Boggs Federal Building in
Wilmington, Delaware. The is the first meeting of the Debtor's
creditors, as required under 11 U.S.C. Sec. 341(a).
All creditors are invited, but not required, to attend. This
Meeting of Creditors offers the one opportunity in a bankruptcy
proceeding for creditors to question a responsible office of the
Debtor under oath about the company's financial affairs and
operations that are of interest to the general body of
creditors.
Tecstar, Inc. manufactures high-efficiency solar cells that are
primarily used in the construction of spacecraft and satellite.
The Company filed for chapter 11 protection on February 07, 2002
in the U.S. Bankruptcy Court for the District of Delaware. Tobey
M. Daluz, Esq. at Reed Smith LLP and Jeffrey M. Reisner at Irell
& Manella LLP represent the Debtors in their restructuring
efforts. When the company filed for protection from its
creditors, it listed estimated assets of $10 million to $50
million and estimated debts of $50 million to $100 million.
TRAILMOBILE CANADA: Board Responds to 1314385 Ontario's Offer
-------------------------------------------------------------
The board of directors of Trailmobile Canada Limited has issued
a directors' circular responding to the offer by 1314385 Ontario
Limited for all of the common shares of the Corporation not
owned by the Offeror at $0.10 per share.
Prior to announcing the offer, the Offeror entered into lock-up
agreements with three large shareholders, Covington Fund I Inc.,
Howson Tattersall Investment Counsel Limited and DiLillo
Investments Inc. and Pat DiLillo covering 10,403,468 common
shares or 18.5% of the issued and outstanding shares and 48.4%
of the shares not owned by the Offeror. As a result of the lock-
up agreements, the offer is exempt from the independent
valuation requirement of Ontario Securities Commission Rule 61-
501. The board did constitute an independent committee
consisting of Gary Barnes and Jim Hacking to review the terms of
the offer and report to the board.
For reasons set out in detail in the circular, the board of
directors, based on the recommendation of the independent
committee and with all directors other than Gary Barnes and Jim
Hacking declaring their interest in the Offeror and abstaining
from voting, is making no recommendation to shareholders with
respect to the offer. However, given the deteriorating financial
condition of the Corporation, the Board of Directors recommends
that Shareholders give serious consideration to the Offer, as
without the continued financial assistance of Trailmobile
Corporation, the Corporation may not be able to continue
operating. The independent committee and the board considered
and recommends that shareholders carefully weigh the following
factors, which are described in greater detail in the circular:
1. The independent committee did not receive financial
advice, as the Offeror, which has provided financial support to
the Corporation by way of back-stopping a Rights Offering and
collateralizing a temporary debt financing from Tyco Capital,
would not proceed if there would be delays, additional costs and
uncertainties.
2. The Corporation continues to experience poor financial
results as a result of the downturn in the trailer industry,
even with the additional business it is inheriting as a result
of the insolvency of its U.S. affiliate.
3. With the locked up shares, the Offeror will own
approximately 80% of the Corporation, leaving a small, illiquid
float.
4. All members of the board, including members of the
independent committee, are tendering their shares to the offer.
5. Because of the Corporation's deteriorating financial
condition and the lack of liquidity in the public float, the
Toronto Stock Exchange has advised the Corporation that it is
reviewing the continued listing of the common shares.
6. The price of the offer is at a 25% premium to the
closing price of $0.08 of the common shares on February 1, 2002,
the last complete trading day prior to the announcement of the
offer, a 119.3% premium to the weighted average trading price of
$0.0456 of the common shares for the 20 trading days immediately
preceding and including February 1, 2002, and an 82.5% premium
to the weighted average trading price of $0.0548 of the common
shares for the 40 trading days immediately preceding and
including February 1, 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.
U.S. AGGREGATES: Files Chapter 11 to Facilitate Sale of Assets
--------------------------------------------------------------
U.S. Aggregates, Inc., (OTC Bulletin Board: AGAT) announced that
it has signed an agreement, subject to bankruptcy court approval
and the results of the auction process (referred to below), to
sell substantially all of the assets of U.S. Aggregates and its
subsidiaries to Oldcastle Materials Inc. Oldcastle Materials is
a subsidiary of CRH plc (Nasdaq: CRHCY), one of the largest
producers of aggregates, asphalt and ready mix concrete in the
U.S. U.S. Aggregates values the transaction at approximately
$140 million. The Company also announced the establishment of a
debtor-in-possession (DIP) facility provided by certain of its
pre-petition lenders which, subject to bankruptcy court
approval, provides for the availability of $17.5 million of
funds for working capital and letters of credit. The facility
is intended to enable the company to operate its business in the
ordinary course for one year, or until the sale is consummated
whichever is earlier.
As an initial step in the sale process, U.S. Aggregates and its
subsidiaries filed voluntary petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. The sale transaction is
subject to certain closing conditions, including approval of the
bankruptcy court and expiration of the Hart-Scott-Rodino waiting
period. The transaction will be consummated as soon as all
conditions are satisfied.
The Company also announced that in an effort to maximize value
for all its creditor constituencies, it would seek permission of
the court to conduct the sale to Oldcastle Materials under
section 363 of the U.S. Bankruptcy Code. A key element of this
process will be a competitive bidding auction at which all
qualified parties can, and are encouraged to, bid for the assets
of the entire company or those of the Western or Southeastern
business.
Founded in 1994, U.S. Aggregates, Inc., is a producer of
aggregates. Aggregates consist of crushed stone, sand and
gravel. The Company's products are used primarily for
construction and maintenance of highways and other
infrastructure projects as well as for commercial and
residential construction. USAI serves local markets in nine
states in two regions of the United States, the Mountain states
and the Southeast.
VECTOUR: Committee Secures Okay to Employ Lowenstein as Counsel
---------------------------------------------------------------
The Official Committee of Unsecured Creditors appointed in the
chapter 11 cases involving VecTour, Inc. and its debtor-
affiliates, obtained approval from the U.S. Bankruptcy Court for
the District of Delaware to retain and employ Lowenstein Sandler
PC as its Counsel.
The Committee will look to Lowenstein to:
a) advise in respect of the Committee's duties and powers;
b) assist the Committee in investigating the acts, conduct,
assets, liabilities, and financial condition of the
Debtors, the operation of the Debtors' business,
potential claims, and any other matters relevant to the
case or to the formulation of a plan of reorganization;
c) participate in the formulation of the Plan;
d) assist the Committee in requesting the appointment of a
Trustee or Examiner, should such action be necessary;
and
e) perform such other legal services as may be required and
be in the interest of the Committee and creditors.
Lowenstein will charge for services at its customary hourly
rates:
Partners $275 to $475
Of Counsel $230 to $325
Associates $135 to $275
Legal Assistants $70 to $125
VecTour, Inc. is a leading nationwide provider of ground
transportation for sightseeing, tour, transit, specialized
transportation, entertainers on tour, airport transportation and
charter services. The Company filed for chapter 11 protection on
October 16, 2001. David B. Stratton, Esq. and David M. Fournier,
Esq. at Pepper Hamilton LLP represent the Debtors in their
restructuring effort.
VELOCITY EXPRESS: Sets Special Shareholders' Meeting for Mar. 20
----------------------------------------------------------------
A special meeting of the stockholders of Velocity Express
Corporation, a Delaware corporation formerly known as United
Shipping & Technology, Inc. will held in the Aspen Room at the
Ramada Inn Airport, 2500 East 79th Street, Bloomington,
Minnesota, on Wednesday, March 20, 2002, at 3:00 p.m. local
time.
At the special meeting shareholders will be asked to consider
and approve amendments to the Company's Certificate of
Incorporation to:
- effect a reverse stock split of the Company's outstanding
common stock, whereby the Company will issue one new share of
common stock in exchange for between two and five shares of the
outstanding common stock;
- eliminate the features of the Company's preferred stock
providing for cash redemption of the preferred stock at a
specified date and redemption at the election of the holder upon
a change of control of the Company, and give to holders of the
preferred stock approval rights with respect to changes of
control of the Company;
- reflect reductions to the conversion prices of the
Company's Series B, Series C and Series D Preferred Stock
required as a result of prior dilutive events; and
- further reduce the conversion prices of the Company's
Series B and Series C Preferred Stock.
Please note that the Company has moved its executive offices to
Four Paramount Plaza, 7803 Glenroy Road, Suite 200, Bloomington,
Minnesota 55439. The new phone number is (612) 492-2400.
United Shipping and Technology, formerly U-Ship, offers same-
day, on-demand delivery service through its main operating
subsidiary, Velocity Express. In addition to time-sensitive
deliveries, the company provides support services for customers,
including logistics, warehousing, on-site services, fleet
replacement, and international air courier services. United
Shipping and Technology serves the financial, healthcare, and
retail industries through 210 locations in the US and Canada
using a fleet of some 9,000 vehicles. Investment firm TH Lee
Putnam Ventures controls about 33% of United Shipping and
Technology. At Sept. 29, 2001, the company had a total
shareholders' deficit of about $35 million.
W.R. GRACE: Court Okays Steptoe & Johnson as Special Tax Counsel
----------------------------------------------------------------
Steptoe & Johnson's employment as W. R. Grace & Co. and its
debtor-affiliates' special tax counsel is approved nunc pro tunc
to July 1, 2001. However, Judge Fitzgerald cautions the Debtors
and Steptoe that Steptoe is not to be paid under any order
permitting payments to professionals in the ordinary course of
the Debtors' business, but must make application and obtain her
separate order prior to being paid.
Specifically, the Debtors retains Steptoe to:
(a) Advise the Debtors, their counsel and their board of
directors with respect to tax issues involved in the retention
and use of the Debtors' corporate-owned life insurance policies,
particularly in light of the IRS's nationwide audit of such
insurance products, and the likelihood that litigation with
respect to the taxation of these corporate assets will ensue;
(b) Act as counsel for the Debtors and any related
parties in litigation involving the Debtors' tax strategy and
deductions in connection with corporate-owned life insurance;
and
(c) Such other related services as the Debtors may deem
necessary or desirable. (W.R. Grace Bankruptcy News, Issue No.
19; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WHEELING-PITTSBURGH: Wins Nod to Hire Tatum CFO as Consultants
--------------------------------------------------------------
Judge William T. Bodoh enters his Order overruling the Trustee's
objection and granting Wheeling-Pittsburgh Steel Corp.'s
requested employment of Tatum CFL Partners LLP to provide short-
term financial consulting services to the Debtors Wheeling-
Pittsburgh Corporation with respect to WPC's 50% equity
investment in OCC and to Wheeling-Pittsburgh Steel Corporation
with respect to that entity's supply agreement with OCC,
effective January 17, 2002, in accordance with the terms of the
retention agreement, which Judge Bodoh expressly approves.
However, notwithstanding the terms of the approved Retention
Agreement, Judge Bodoh holds that if the Debtors wish to have
Tatum perform additional services not otherwise described in the
Retention Agreement, the Debtors must first apply to Judge Bodoh
for permission to employ Tatum to perform such services, and for
approval of any fees to be paid in compensation for such
additional services, with appropriate notice to parties in
interest.
Specifically, Mr. Duncan and Tatum will be:
(a) assisting WPC with respect to enhancing the value of
WPC's equity interest in OCC;
(b) assisting WPC with respect to enhancing the value of
WPC's equity interest in OCC;
(c) assisting WPC in the development of a strategy for
the disposition of some or a part of WPC's equity interest in
OCC;
(d) assisting WPC and the Debtors with any negotiations
involving Dong Yank Tin Plate of Korea, the remaining fifty
percent shareholder of OCC, relating to the foregoing;
(e) assisting the Debtors in considering the OCC banking
relationships and acting as a liaison for the Debtors with OCC's
current lenders in responding to any information requests by the
Debtors from OCC's lenders;
(f) assisting WPSC in maintaining its favorable supply
agreement with OCC relating to the sale of tin plate; and
(g) providing such other necessary services as requested
by the Debtors with respect to the foregoing.
The Debtors anticipate Mr. Duncan and Tatum will complete their
work no later than the end of April, 2002, and probably sooner.
(Wheeling-Pittsburgh Bankruptcy News, Issue No. 18; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WILLIAMS COMPANIES: Fitch Bullish About Pending Kern River Sale
---------------------------------------------------------------
The Williams Companies, Inc. (WMB) announced that it reached a
definitive agreement to sell its 100% ownership interest in Kern
River Gas Transmission Co. to Mid American Energy Holdings Co.
(MEHC; 'BBB' senior unsecured debt rating by Fitch) in a
transaction valued at approximately $960 million, which includes
the assumption of $510 million outstanding senior notes. In
addition, WMB announced fiscal year-end 2001 financial results
which included a $1.3 billion after-tax charge related to
Williams Communications Group (WCG; 'CC' senior unsecured debt
rating, Rating Watch Negative). Fitch currently rates WMB's
outstanding senior notes and debentures 'BBB' and its commercial
paper 'F2'. The Rating Outlook is Negative.
Fitch believes that the pending sale of KRGT, on balance, has
positive credit implications for WMB. In addition, to receiving
approximately $450 million of cash proceeds (subject to certain
adjustments) at closing, MEHC will separately purchase $275
million of WMB mandatorily convertible preferred stock thus
providing WMB with $725 million of additional cash, further
bolstering WMB's near term liquidity position. Although the sale
will remove both a valuable asset and stable cash flow source
from WMB's credit profile, the expected drop in consolidated
EBITDA contribution from regulated pipelines should be offset by
the associated reduction in debt and capital spending
requirements. As a result, targeted year-end 2002 debt to
capitalization and interest coverage ratios are expected to
improve moderately over prior estimates.
Although the WCG related charge will result in a deterioration
of WMB's 2001 equity base, the company has taken appropriate
measures to mitigate the impact on consolidated debt leverage,
including the $1.1 billion Feline PACs issuance in January 2001
and the pending issuance of mandatorily convertible preferred to
MEHC. An additional positive development is WMB's recent
announcement that it has successfully restructured the $1.4
billion WCG Note Trust in a manner which removes triggers
related to WMB's rating and/or the business condition of
Williams Communications (WCG; 'CC' senior unsecured debt rating,
Rating Watch Negative) and extends ultimate payment of principal
to March 2004 even in the event of a WCG bankruptcy.
Fitch believes that WMB's credit profile and ratings will
continue to stabilize over the next six to nine months pending
the favorable resolution of other outstanding credit issues
including WMB's exposure to WCG under a $750 million synthetic
lease, the potential sale of Williams Pipe Line to WMB's master
limited partnership affiliate, and the successful renewal of
WMB's $2.2 billion 364 day revolver/CP back-up line which
matures in July 2002.
XO COMMS: Intends to Pursue Transactions with Forstmann Little
--------------------------------------------------------------
XO Communications, Inc. (OTCBB:XOXO) issued the following
statement concerning a press release issued by Carl Icahn on
March 7, 2002:
"XO has reviewed the press release issued by Mr. Icahn
announcing his opposition to XO's proposed debt restructuring in
connection with the investment by Forstmann Little & Co. and
Telefonos de Mexico S.A. de C.V. As previously announced, XO
has reached a definitive agreement under which Forstmann Little
and TELMEX would invest $800 million in the company subject to
the satisfaction of specified conditions including the
completion of a balance sheet restructuring.
"To date, XO has not received any alternative funding or
restructuring proposals from any other party, despite the
aggressive marketing of the investment opportunity to a wide
variety of financial and strategic investors during the last
several months by Houlihan Lokey Howard & Zukin, the investment
banking firm hired to assist XO in its efforts to secure
necessary funding.
"In these circumstances, XO will continue to pursue the
transactions under the definitive agreement with Forstmann
Little and TELMEX to complete its financial restructuring and
raise the funding needed to secure the company's financial
future."
* R. Carter Pate at PwC Sees 200 Public Company Filings in 2002
---------------------------------------------------------------
Two hundred public companies will file for bankruptcy in 2002,
according to PricewaterhouseCoopers' Phoenix Forecast:
Bankruptcies and Restructurings 2002. This makes 2002 the second
year that public company bankruptcy filings will reach record
levels.
"In 2001, 257 public companies filed for bankruptcy," PwC
tabulates. "This is more than twice the number filed during the
last recession, when there were 125 public filings in 1991 and
91 public filings in 1992. The reason we are seeing such huge
numbers this time around is less because the economy has grown
since 90/91 and more because of the four-fold increase in
corporate debt over the past 10 years
"This period of restructuring differs vastly from the last
recession, in terms of both the record number of bankruptcy
filings and the factors driving companies to restructure. The
four-fold increase in corporate debt in the last decade, along
with the surge in new issues in the 1997 to 1999 period has led
to an unprecedented amount of over-leveraged companies," said
Carter Pate, managing partner Financial Advisory Services,
PricewaterhouseCoopers, and author of the report.
Between 1986 and 2000, an average of 113 public companies filed
for bankruptcy protection each year. The record number of
bankruptcies in 2001 and forecast for 2002 represent a 127% and
77% increase over this average, respectively.
Private company bankruptcy filings are also expected to show
record increases in 2002:
* In 2002, 10,800 private companies will file for
bankruptcy, the highest since 1995
* In 2001, 9,928 private companies filed for Chapter 11
protection
Industries with increased bankruptcies in 2002 include
telecommunications, auto, steel, computer hardware industries,
chemical, and retail.
Carter Pate, managing partner of PricewaterhouseCoopers
Financial Advisory Services is author of The Pheonix Effect:
Nine Revitalizing Strategies No Business Can Do Without (Wiley,
March 2002) as well as a co-author of Workouts and Turnarounds
II (1999).
PricewaterhouseCoopers -- http://www.pwcglobal.com-- helps its
clients develop and execute integrated solutions to build value,
manage risk and improve their performance. Drawing on the
knowledge and skills of 155,000 people in 150 countries, we
provide a full range of business advisory and consulting
services to leading global, national and local companies and to
public institutions.
*********
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, Donnabel C. Salcedo, 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 $625 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Christopher
Beard at 240/629-3300.
*** End of Transmission ***