/raid1/www/Hosts/bankrupt/TCR_Public/020426.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, April 26, 2002, Vol. 6, No. 82
Headlines
360NETWORKS: Has Until June 24 to Make Lease-Related Decisions
AK STEEL HOLDING: S&P Revises Outlook on BB Rating to Stable
APPLIEDTHEORY: Signs-Up Daniels & Assoc. as Investment Bankers
ATLANTIC COAST: Re-Evaluating Fleet & Aircraft Delivery Plans
BETHLEHEM STEEL: Court Declares Utilities Adequately Assured
BREAKAWAY SOLUTIONS: Get Approval to Hire Altman for Noticing
BUCKEYE TECHNOLOGIES: Posts Net Loss of $3.4MM for March Quarter
CALPINE: Increases Offering of Common Stock to 66 Million Shares
CAPTEC FRANCHISE: S&P Drops Classes B to F Notes' Ratings to D
CHESAPEAKE: Strategic Restructuring Yields Improved 2001 Results
CONE MILLS: Working Capital Deficit Tops $25MM at March 31, 2002
CORRECTIONS CORP: S&P Expects to Up Ratings after Refinancing
CORTS TRUST: S&P Places B-Rated Securities on Watch Negative
COVANTA ENERGY: Bringing-In LeBoeuf Lamb as Special Counsel
DELTA MILLS: S&P Junks Corp. Credit Rating on Weak Performance
DIGEX INC: EBITDA Loss Tops $8 Million in January-March Quarter
E.SPIRE COMMS: Wants More Time to Make Lease-Related Decisions
EOTT ENERGY: Firms-Up Standard Chartered Term Credit Facilities
ENRON CORP: Asks Court to Okay SII Espana Shares Sale Agreement
ENRON CORP: Employees' Panel Taps Crossroads as Fin'l Advisor
EPICOR SOFTWARE: $17MM Working Capital Deficit at March 31, 2002
ETOYS: Judge Walrath Grants Last Exclusivity Extension to May 17
EXIDE TECH: Intends to Honor Prepetition Customer Obligations
EXODUS COMMS: Seeks Approval to Collateralize Letters of Credit
FARMLAND INDUSTRIES: S&P Cuts Rating to B- Over Liquidity Issues
FEDERAL-MOGUL: Proposes to Reject Computer Lease Schedules
FLAG TELECOM: UST to Set Organization Meeting to Form Committees
FORMICA CORP: US Trustee Appoints Official Creditors' Committee
FRUIT OF THE LOOM: Judge Walsh Confirms 3rd Amended Joint Plan
GT U.K.: Case Summary & 15 Largest Unsecured Creditors
GATEWAY INC: Lower Market Share Spurs S&P's B+ Credit Rating
GENERAL DATACOMM: Wants to Extend Exclusivity through August 1
GLOBAL CROSSING: Taps Debevoise & Plimpton as Special Counsel
GRAPES COMMS: Schedules Unnecessary if Plan Confirmed by June 12
GREKA ENERGY: Receives Competing Bids for Potash Field Assets
INTEGRATED HEALTH: Premiere Panel Gets Okay to Hire Bayard Firm
JDN Realty: Fitch Affirms Low-B Senior Debt & Preferred Ratings
KAISER ALUMINUM: Committee Looks to Houlihan Lokey for Advice
KMART CORP: Wins Okay to Assume James Adamson's Employment Pact
METALS USA: Obtains Approval to Assume Wortham Insurance Pacts
METROLOGIC INSTRUMENTS: Fails to Meet Nasdaq Listing Requirement
NTL INCORPORATED: Bullish About Ongoing Recapitalization Talks
NATIONSRENT INC: Gets Open-Ended Lease Decision Period Extension
NETZEE INC: Richard Eiswirth Steps Down as Chief Fin'l Officer
ONSITE ACCESS: Cogent Communications Acquires Select Assets
OWOSSO CORP: Falls Below Nasdaq Continued Listing Standards
PACIFIC GAS: Signs-Up Dr. Shanker as Expert Witness & Consultant
PETROSURANCE CASUALTY: S&P Revises Fin'l Strength Rating to R
PSINET INC: Hearing on Disclosure Statement Set for May 9, 2002
REPUBLIC TECH: Inks Pact to Sell All Assets to KPS & Pegasus
SAFETY-KLEEN: McKinsey & Co. Continues Yellow Business Polishing
SIMPLIFIED EMPLOYMENT: Judge Shapero Confirms Chapter 11 Plan
SPALDING HOLDINGS: Consummates Debt & Equity Structure Workout
TECH LABORATORIES: Obtains Waiver of Default Under 6.5% Notes
TECSTAR: Committee Signing-Up Young Conaway for Legal Services
TELEGLOBE INC: BCE Inc. Cuts-Off Long-Term Funding
TELEGLOBE INC: Exploring Various Financial Restructuring Options
VINTAGE PETROLEUM: S&P Rates Proposed $250MM Debt Issue at BB-
WARNACO: Court Okays Sale of Murfreesboro Property to Swatson
XEROX CORP: Moving Forward with Debt Restructuring Negotiations
* DrKW Restructuring Group Spinning-Off as Miller Buckfire Lewis
* Florida Firms Atlas Pearlman and Adorno & Zeder Combining
* BOOK REVIEW: George Eastman: Founder of Kodak and the
Photography Business
*********
360NETWORKS: Has Until June 24 to Make Lease-Related Decisions
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Judge Gropper granted 360networks inc., and its debtor-
affiliates an extension of their time to decide whether to
assume, assume and assign, or reject their unexpired
nonresidential real property leases to and including June 24,
2002. (360 Bankruptcy News, Issue No. 22; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
AK STEEL HOLDING: S&P Revises Outlook on BB Rating to Stable
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On April 23, 2002, Standard & Poor's revised its outlook on AK
Steel Holding Corp.'s and its subsidiary, AK Steel Corp.'s 'BB'
credit rating to stable from negative. The outlook revision
reflected the expectation of increased auto production schedules
and pricing improvement in its spot cold-rolled product line
following the implementation of section 201. The displacement of
imports and increased auto demand should improve AK Steel's
operating rates and financial performance from current weak
levels. The outlook revision also reflects anticipation of
improved financial measures due to AK Steel locking in low slab
costs for 2002.
The ratings on Middletown, Ohio-based AK Steel Holding Corp.
reflect its fair business position as a midsize, value-added,
integrated steelmaker, with high exposure to the automotive
market, its low sensitivity to spot prices and its burdensome
legacy costs. AK Steel competes in cyclical, capital-intensive
markets with a focus on the manufacture of flat-rolled carbon,
stainless, and electrical steel. AK Steel benefits from a higher
value-added product mix than many of its peers, and has only
minimal exposure to commodity steel markets. AK sells the
majority of its product line to automakers and appliance
customers who demand high quality and specification for its
product mix. This focus on high quality, high margin steel,
somewhat insulates AK from the threat of low cost minimills who
have saturated the commodity steel spectrum and have trouble
meeting the quality demanded by this customer base.
Approximately 75% of AK's steel shipments are under contractual
obligations that are fixed priced but quantity is still subject
to cyclical demand. As a result of these contracts and its
enhanced product mix, AK's financial performance is less
volatile than its peers. To that point, recent tariffs
implemented by the U.S. government's section 201 investigation
have led to lower supply levels, which has enabled the industry
to implement needed price increases. Because only 25% of its
sales (mostly cold-rolled) are tied to the spot market, AK is
expected to only modestly benefit from these price increases.
AK has benefited from very strong automotive sales the last few
years. Although the U.S. economy slowed significantly in 2001,
automotive sales reached their second-highest level, about 17.0
million units. Currently, auto sales are tracking in excess of
16 million units for 2002, which is still relatively strong and
is above 15.5 million that had been forecast. In addition, AK
increased its share with some automotive manufacturers following
the bankruptcy filing of other suppliers. Although AK's 2002
contract prices are at lower levels, this should be more than
offset by benefits from increased production levels and lower
unit fixed costs. However, a high degree of uncertainty exists
over what the impact will be from the anticipated restart of
LTV's idled capacity and its attempt to recapture market share.
AK's first quarter ended March 31, 2002, was weaker than
expected because of higher than expected maintenance costs, as
the company opted to accelerate maintenance projects scheduled
for later in the year in order to position itself to meet
increasing demand for its products. AK purchases a portion of
its slab requirements from other steel producers and has
obtained commitments for its 2002 slab requirements at lower
than prevailing market rates. These actions, together with
higher production levels, rising spot market prices and lower
input costs (natural gas, raw materials, and slabs), are
expected to bolster AK's profitability. AK also recently
received $50 million in proceeds from the sale of its Sawhill
Tubular division and is expected to receive a $35 million tax
refund in the second quarter of 2002. Capital spending needs are
expected to remain well below prior peak levels (2002 capital
expenditures are targeted at about $125 million). As a result,
AK is expected to use excess cash flows to meet its December
2002 debt maturity payment of $78 million, increase its cash
balances ($99 million at March 31, 2001) and possibly acquire
some steel coating assets. As a result, AK's funds from
operations to debt and EBITDA interest coverage should improve
to more appropriate levels of 20% and 3x. Still, as with other
U.S.-based integrated steel producers, AK has a large unionized
workforce and significant post-retirement liabilities totaling
$1.4 billion at March 31, 2002.
Outlook
Expected improvements in demand and profitability should restore
AK's financial performance to more appropriate levels within the
year. Still, concerns over restarted steel capacity remain.
AK Steel Corp.'s 9.125% bonds due 2006 (AKS06USA1), DebtTraders
says, are quoted at above par price of 103.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AKS06USA1for
real-time bond pricing.
APPLIEDTHEORY: Signs-Up Daniels & Assoc. as Investment Bankers
--------------------------------------------------------------
AppliedTheory Corporation, and its debtor-affiliates ask for
authority from the U.S. Bankruptcy Court to retain Daniels &
Associates, LP, as their investment bankers.
As a result of prior engagements, Daniels is already thoroughly
familiar with the Debtors' businesses. The Debtors believe that
Daniels is in a position to immediately provide necessary
services to the Debtors.
As investment bankers, Daniels will:
a) identify, contact, and elicit interest from Prospective
Purchasers;
b) assist the Debtors in negotiations and completion of due
diligence with any Prospective Purchaser;
c) communicate with Prospective Purchasers regarding the
status of a proposed transaction and the possibility of
the Debtors considering additional offers, until the
closing of a Transaction;
d) assist the Debtors as needed in preparing and executing
the closing of the Transaction;
e) Assist the Debtors in preparation for court or other
proceedings related to any proposed sale, including, but
not limited to, offering testimony, making
recommendations for bidding procedures, providing
information and written materials to potential competing
bidders, communicating with the creditors' committee, if
one is appointed, and other activities necessary to
obtaining Court approval of a sale.
The Debtors agree to pay Daniels upon consummation of any
Transaction with a Prospective Purchaser:
-- 5.0% of the first $3,000,000 of the Gross Purchase
Price, plus
-- 4.0% of the second $3,000,000 of the Gross Purchase
Price, plus
-- 3.0% of the third $3,000,000 of the Gross Purchase
Price, plus
-- 2.0% of the fourth $3,000,000 of the Gross Purchase
Price, plus
-- 1.0% of any amount of the Gross Sales Price in excess of
$12,000,000
The Agreement also provides that for services rendered in
preparation for court or other proceedings related to any
proposed sale, the Debtors will pay Daniels $5,000 per person
per day for appearances at court or other proceedings and $3,000
per person per day for all time spent preparing for court or
other proceedings.
AppliedTheory Corporation provides internet service for business
and government, including direct internet connectivity, internet
integration, web hosting and management service. The Company
filed for chapter 11 protection on April 17, 2002. Joshua Joseph
Angel, Esq. and Leonard H. Gerson, Esq. at Angel & Frankel,
P.C., represent the Debtors in their restructuring efforts. When
the Company filed for protection from its creditors, it listed
$81,866,000 in total assets and $84,128,000 in total debts.
ATLANTIC COAST: Re-Evaluating Fleet & Aircraft Delivery Plans
-------------------------------------------------------------
Atlantic Coast Airlines Holdings, Inc. (Nasdaq: ACAI), parent of
Atlantic Coast Airlines (ACA), which operates in the Eastern and
Midwestern United States as United Express, and as part of the
Delta Connection program in the Eastern U.S. and Canada,
reported first quarter net income of $14.3 million compared to
$9.6 million during the same period in 2001.
During the first quarter of 2002, ACA generated approximately
1.1 billion available seat miles (ASMs), an increase of 53.3
percent over the same period last year, and carried 1,450,201
passengers, an increase of 54.7 percent over the same period
last year. Load factor improved 7.6 points to 56.9% for the
first quarter compared to 49.3% in the first quarter of 2001.
ACA confirmed that it is re-evaluating its fleet plan and
aircraft delivery plans as a result of the bankruptcy filing of
German manufacturer Fairchild Dornier GmbH, which was announced
on April 2, 2002. ACA said that it is in discussions with
Fairchild Dornier regarding the status of the remaining regional
jets on firm order. At present, it remains uncertain whether
Fairchild Dornier will fulfill the order and if so, the terms on
which it would perform. As a result, ACA is evaluating its
alternatives including options for replacing the remaining firm-
ordered 328JETs with aircraft from other regional jet
manufacturers. Previously, ACA had announced firm orders with
Fairchild Dornier for a total of 65 328JETs. Of the remaining
32 aircraft not yet delivered by Fairchild Dornier, 30 had been
scheduled for operation in the United Express program and two
were expected to become part of the company's ACA Private
Shuttle fleet.
ACA reported the following developments during the first
quarter:
* The integration of the Fairchild Dornier 328JET into the
United Express program. To date, the company operates two of
the 32-passenger regional jets for United (with service from
Washington Dulles International Airport to Newark and
Knoxville), and a total of 33 companywide-30 for Delta
Connection, and one aircraft dedicated to ACA Private Shuttle.
* New United Express/ACA service was announced from Chicago
O'Hare International Airport to Birmingham, AL and Fort Wayne,
IN. In addition, it was announced that the ground handling
stations at Fort Wayne (FWA) and Lexington, KY (LEX) would
transition to ACA personnel. Both had previously been operated
by United Express partner Air Wisconsin.
* Delta Connection/ACA service expanded to include the
following routes: Cincinnati to Toledo, OH, South Bend, IN and
Albany, NY and Boston to Halifax, Nova Scotia. Additional
flights were added from both New York LaGuardia and Boston to
Raleigh/Durham, NC.
Atlantic Coast Airlines has a fleet of 124 aircraft -- including
93 regional jets-and offers approximately 800 daily departures,
serving 67 destinations. ACA employs over 4,200 aviation
professionals.
* * *
As reported in the November 1, 2001 edition of Troubled Company
Reporter, Standard & Poor's affirmed its ratings on Atlantic
Coast Airlines Holdings Inc. and removed them from CreditWatch,
where they were placed Sept. 13, 2001. The ratings were
subsequently lowered to current levels on Sept. 20, 2001.
The outlook is negative.
Ratings Affirmed
Rating
Atlantic Coast Airlines Holdings Inc.
Corporate credit rating B-
Equipment trust certificates
$24.734 mil 7.35% pass-thru ser 1997-1B due 2011 BB
$57.714 mil 7.2% pass-thru ser 1997-A due 2014 BBB+
$23.333 mil 8.75% pass-thru ser 1997-1C due 2007 B+
The rating action, S&P said, was based on the company's
continuing relatively strong performance, despite a very adverse
airline industry environment. Atlantic Coast operates two
regional airlines that offer feeder service for both United Air
Lines Inc. and Delta Air Lines Inc., primarily along the East
Coast and in the Midwest and Canada, under fee-per-departure
agreements.
BETHLEHEM STEEL: Court Declares Utilities Adequately Assured
------------------------------------------------------------
Northern Indiana Public Service Company, Columbia Gas
Transmission, Columbia Gas of Pennsylvania and Columbia Gulf
Transmission are not satisfied with Bethlehem Steel Corporation
and its debtor-affiliates' assurances. As such, the Utilities
ask the Court to:
(a) require the Debtors to post a security deposit equal to
two months of the Debtors' average monthly bills for each
of the Utilities, or as an alternative, pay for the
services in advance on a weekly basis; and
(b) authorize the Utilities to terminate utility service to
the Debtors on three days' notice in the event of a post-
petition default.
Rosanne Thomas Matzat, Esq., at Hahn & Hessen, LLP, in New York,
argues that the injunctive relief contained in the Utility Order
should be vacated, or at least, reconsidered. Ms. Matzat points
out that the Debtors' motion did not ask for such relief. The
Injunctive Relief embedded in the Utility Order also deprived
the Utilities of their rights under applicable federal and state
law of terminating the services for the Debtors due to non-
payment of post-petition bills without the need to obtain court
approval.
Ms. Matzat contends that the safeguards incorporated in the
tariffs, rules and statutes governing the normal billing cycles
of the Utilities provide the Debtors with more than sufficient
protections. Under the Utilities' billing cycles, Mr. Matzat
explains, the Debtors have approximately one month of utility
service before a Utility issues a bill for services. Once the
bill is issued, the Debtors have about 10 to 17 days to pay the
applicable bill. If the bill is not paid, the Debtors could have
up to 45 days to cure the arrearage before disconnection.
Therefore, Ms. Matzat concludes that the Debtors must be
severely delinquent in paying before the service is
disconnected.
In contrast, the injunctive relief provides the Debtors
approximately two and a half months of unpaid services before
the Utility could begin terminating the services. Such prolonged
period could bring hurtful losses for the Utilities, Ms. Matzat
asserts.
Section 366(b) of the Bankruptcy Code provides that a utility
may terminate service to a debtor 20 days after the petition
date unless the debtor "furnishes adequate assurance of payment,
in the form of a deposit or other security, for service after
the date." Accordingly, Ms. Matzat maintains that, aside from
the two-month deposit requested, the Utilities would only
consider an adequate assurance from the Debtors if these
measures are imposed:
(a) weekly payments in advance based on a weekly estimated
usage with the monthly "true-up" based on a monthly
invoice rendered five business days after the end of the
month;
(b) the weekly estimate would be adjusted upward or downward
after notice to the Debtors if actual weekly usage varied
from the weekly estimate by 10% or more;
(c) the Debtors have one business day to cure a payment
default or pay a deposit equal to two weeks' usage;
(d) if, except for bank errors, the Debtors pay late more
than two times during any six-month period, it must pay
the Deposit; and
(e) if the Debtors fail to cure the payment default before
the Cure Date, the Utilities may send a default notice
allowing the Debtors to cure within the following two
business days after which the Utility may terminate the
services without further order of the Court.
Concerning the Debtors' argument of enough liquidity, Ms. Matzat
argues that the Debtors may have the available cash now but may
not have the cash in the future. Ms. Matzat cites the Debtors'
loss in year 2001 at $2,000,000,000 and the Debtors continue to
lose millions of dollars each month. In addition, Ms. Matzat
continues, the Debtors' assets are encumbered by pre-petition
and post-petition liens -- so any funds advanced under the DIP
Financing are entitled to a superpriority over the Utilities.
Thus, the Utilities cannot take comfort of the Debtors' current
liquidity.
Also, Ms. Matzat tells Judge Lifland that opportunity cost of
posting the Deposit would be largely offset by the fact that the
Indiana law required the Utilities to pay 6% interest on the
deposit. The opportunity cost to the Debtors of weekly advance
payment is also small in comparison to the risk created by the
Debtors' utility usage.
If cash is not possible, Ms. Matzat proposes that the Debtors
may make the Deposit in the form of an Irrevocable Standby
Letter of Credit in the amount of $4,450,000. The Letter of
Credit could be funded for a modest fee under the DIP Financing
Arrangement.
Overall, Ms. Matzat says, the Debtors should also consider the
discounted contract rate it is getting from the Utilities in
balancing the cost of a deposit or prepayment arrangement.
* * *
Judge Lifland overrules the objection and declares that the
Utilities are adequately assured of payment for future Utility
Services in accordance with Section 366(b) of the Bankruptcy
Code. Furthermore, Judge Lifland orders that:
(a) pursuant to Sections 105(a) and 366(b) of the Bankruptcy
Code, the Utility Companies may not require the payment
of a deposit or other security absent a Court order;
(b) the Debtors must file a monthly operating statement
with the Court and to provide a weekly liquidity report
to certain Requesting Utility Companies after the
execution of an appropriate Confidentiality Agreement;
(c) the Debtors must provide the Requesting Utility
Companies a copy of any document or Lender Notice from
any pre-petition or post-petition lender that refers to
any act or omission which would entitle the lender to
terminate any of the Debtors' use of its cash
collateral, terminate advances to any of the Debtors or
allow such lender to move to modify the stay or
otherwise exercise its rights as a secured party under
applicable non-bankruptcy law;
(d) the rights of the Utility Company is not prejudiced to
request the Court to enter an order finding that it no
longer has adequate assurance of payment for post-
petition services after:
-- the giving of a Lender Notice;
-- the occurrence of a material adverse change to any of
the Debtors' business operations, liquidity or
financial condition;
-- the inability of the Debtors and the Utility Company
to negotiate mutually agreeable provisions for
assurance of performance by such Debtor during any
renewal or extension term of a capacity or service
agreement on or before the 60th day preceding the
commencement of such term; or
-- the filing of a motion to convert any Debtor's
chapter 11 case to a case under Chapter 7 of the
Bankruptcy Code,
with the Debtors reserving all of their rights to object
to any such request for additional relief;
(e) with respect to the Requesting Utilities,
notwithstanding any longer time authorized under
applicable tariffs, the Debtors' time to pay their
monthly bills in respect of Utility Services will be
fixed at the number of days allowed under each such
Requesting Utility's ordinary course billing cycle in
effect prior to the Commencement Date, with any disputes
as to such cycle to be resolved by this Court;
(f) in the event of a payment default by the Debtors to a
Requesting Utility, the Requesting Utility may fax a
notice to the Debtors demanding payment, and if the
Debtors fail to make such payment by wire transfer or
other method within five business days of the receipt of
such notice, the Requesting Utility may move this Court
for an expedited hearing for leave to terminate Utility
Services to the extent required;
(g) if National Fuel Gas Distribution Corporation receives
notice that the Debtors have been or will be cancelled
or terminated from a customer balancing and aggregation
group, National Fuel will have the right to file a
motion and schedule a hearing on no less than five
business days written notice to the Debtors and their
counsel seeking additional relief, with the Debtors
reserving all of their rights to object to any such
request for additional relief. (Bethlehem Bankruptcy
News, Issue No. 14; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
BREAKAWAY SOLUTIONS: Get Approval to Hire Altman for Noticing
-------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approves
the application of Breakaway Solutions, Inc., to employ The
Altman Group, Inc. as its notice and claims Agent and as
solicitation and balloting agent and claims administrator.
The Altman Group is expected to:
a) prepare and serve required notices in this chapter 11
case;
b) within 5 business days after the mailing of a particular
notice, file with the Clerk's Office a declaration of
service that includes a copy of the notice involved, an
alphabetical list of persons to whom the notice was
serves and the date and manner of service;
c) maintain copies of all proofs of claim and proofs of
interest filed;
d) maintain an official claims register by docketing all
proofs of claim and proofs of interest on claims
registers;
e) implement necessary security measures to ensure the
completeness and integrity of the claims register;
f) transmit to the Clerk's Office a copy of the claims
register on a monthly basis, unless requested by the
Clerk's Office on a more or less frequent basis;
g) maintain an up-to-date mailing list for all entities
that have filed a proof of claim or proof of interest,
which list shall be available free of charge upon
request of a party in interest on the Limited Service
List or the Clerk's Office and at the expense of any
other party in interest upon the request of such party,
and comply with all requests under the Local Rules for
mailing labels duplicated from the mailing list;
h) provide access to the public for examination of copies
of the proofs of claim or interest without charge during
regular business hours;
i) record all transfers of claim and provide notice of such
transfers as required;
j) comply with applicable federal, state, municipal and
local statutes, ordinances, rules, regulations, orders
and other requirements;
k) promptly comply with such further conditions and
requirements as the Clerk's Office or the Court may at
any time prescribe; and
l) provide such other claims processing, noticing, and
related administrative services as may be required from
time to time by the Debtor.
The Debtors agree to compensate Altman Group with its
corresponding services:
Claims docketing $100 to $150 per hour
Voting and tabulation $100 per hour
Consulting charges
- Claims docketing $100 to $200 per hour
- Programming/Technical $125 to $175 per hour
Reconciliation of Claims $100 to $200 per hour
Breakaway Solutions, Inc., which provides collaborative business
solutions to its clients, filed for Chapter 11 petition on
September 05, 2001 in the U.S. Bankruptcy Court for the District
of Delaware. Gary M. Schildhorn, Esq. and Leon R. Barson, Esq.
at Adelman Lavine Gold and Levin and Neil B. Glassman, Esq. and
Steven M. Yoder, Esq. at The Bayard Firm represent the Debtor in
its restructuring efforts. When the company filed for protection
from its creditors, it listed $45,319,579 in assets and
$25,877,720 in debt.
BUCKEYE TECHNOLOGIES: Posts Net Loss of $3.4MM for March Quarter
----------------------------------------------------------------
Buckeye Technologies Inc. (NYSE:BKI) said that its net sales in
the quarter ended March 31, 2002, were $164.2 million, 5.5%
above the immediately preceding quarter, but 9.7% below the
comparable quarter of the prior year.
During the January-March quarter, the Company incurred a net
loss of $3.4 million, excluding a restructuring charge. The
restructuring charge of $965,000 pre-tax relates to the
elimination of engineering and manufacturing positions,
primarily in Europe. The Company's results are in line with its
March 19, 2002, earnings warning.
As previously disclosed, the Company has recorded a goodwill
impairment of $11.5 million as of July 1, 2001. This charge
relates to the small, single-site converting operation which was
part of our purchase of the Merfin nonwovens business.
Buckeye Chairman Robert E. Cannon commented that, "Improving
unit shipments led to a $14 million inventory reduction during
the quarter just ended. Our cash and cash equivalents totaled
approximately $49 million at March 31. We are confident that we
have adequate liquidity."
Mr. Cannon added, "We said on March 19 that there were some
signs that the pulp market may be turning around. This has been
confirmed by a number of price increases in commodity grades
announced during April. Nevertheless, the pulp and paper
industry has a long way to go before its profitability is back
to an acceptable level."
Buckeye, a leading manufacturer and marketer of specialty
cellulose and absorbent products, is headquartered in Memphis,
Tennessee, USA. The Company has facilities in the United States,
Germany, Canada, Ireland, and Brazil. Its products are sold
worldwide to makers of consumer and industrial goods.
* * *
As previously reported, Standard & Poor's lowered its ratings on
Buckeye Technologies Inc, with negative outlook.
Ratings Lowered
Ratings
Buckeye Technologies Inc. To From
Corporate credit rating BB BB+
Subordinated debt rating B+ BB-
The downgrade reflects Standard & Poor's expectation that debt
will remain elevated over the intermediate term, which will
likely prevent Buckeye from restoring financial flexibility to a
level appropriate for the previous rating. Capital expenditures
should decline substantially now that construction of the
company's new $100 million airlaid nonwovens machine is
complete. However, weak markets, machine ramp-up costs, and
heightened competitive pressures, are likely to dampen near-term
earnings and impede free cash flow generation.
The ratings reflect Buckeye's below-average business profile,
with leading positions in niche pulp markets, and its aggressive
financial profile.
CALPINE: Increases Offering of Common Stock to 66 Million Shares
----------------------------------------------------------------
Calpine Corporation (NYSE: CPN) has increased its public
offering of common stock to 66 million shares and has priced the
offering at $11.50 per share. Calpine has granted the
underwriters an over-allotment option for an additional 9.9
million shares of its common stock, which may be exercised for
up to 30 days.
Proceeds from the common stock offering are expected to be used
to repay debt and for general corporate purposes. The offering
is scheduled to close on April 30, 2002.
The joint bookrunning managers are Credit Suisse First Boston
Corporation and Goldman, Sachs & Co. Bank of America Securities
LLC and Deutsche Bank Alex. Brown are co-managers.
Copies of the final prospectus supplement can be obtained from
either Credit Suisse First Boston, Eleven Madison Avenue, New
York, New York 10010 or Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004.
Based in San Jose, California, Calpine Corporation is an
independent power company that is dedicated to providing
customers with clean, efficient, natural gas-fired power
generation. It generates and markets power, through plants it
develops, owns and operates, in 29 states in the United States,
three provinces in Canada and the United Kingdom. Calpine is
the world's largest producer of renewable geothermal energy, and
it owns and markets 1.3 trillion cubic feet of proved natural
gas reserves in Canada and the United States. The company was
founded in 1984 and is publicly traded on the New York Stock
Exchange under the symbol CPN. For more information about
Calpine, visit the company's Web site at http://www.calpine.com
* * *
As previously reported, Standard & Poor's lowered its corporate
credit rating on Calpine Corp. to double-'B' from double-'B'-
plus. The outlook is stable. At the same time, Standard & Poor's
lowered its rating on Calpine's senior unsecured debt to single-
'B'-plus from double-'B'-plus, two notches below the corporate
credit rating; its rating on the "SLOBS" (Tiverton/Rumford and
Southpoint/Broad River/Rockgen) to double-'B' from double-'B'-
plus; and its rating on the convertible preferred stock to
single-'B' from single-'B'-plus.
In addition, all of the above ratings were removed from
CreditWatch, where they were placed on March 12.
The actions follow Calpine's decision to secure approximately $2
billion ahead of Calpine's unsecured bondholders. "Calpine plans
to pledge all of its 2.0 trillion cubic feet of U.S. and
Canadian gas assets, as well as its Saltend power plant in the
U.K. and its equity investment in nine U.S. power plants to
three groups of secured debt holders," said Standard & Poor's
analyst Jeffrey Wolinsky. Calpine has secured a $1 billion
revolver and the existing $400 million corporate revolver that
expires in May 2003, and plans to finalize a $600 million, two-
year term loan shortly. This security adds to the existing
secured asset base under the $3.5 billion construction revolver,
which includes power plants under construction and about $1
billion of secured assets under the SLOBS.
To shore up its liquidity position, Calpine has added about $1.5
billion of debt beyond its forecast in October 2001, which
brings adjusted minimum and average funds from operations to
interest coverage ratios to about 1.9 times and 2.4x,
respectively, from 2002-2005. This deviates substantially from
the previous forecast ratios of 2.3x and 2.8x, respectively.
This change in coverage ratios comes with little alteration to
the forecast portfolio of assets since October 2001. While the
$2 billion in secured debt may improve Calpine's short-term
liquidity position, the additional debt will increase interest
expense, refinancing risk, and interest-rate risk.
In line with Standard & Poor's notching criteria, the amount of
secured debt on a sub-investment grade corporation relative to
Calpine's capitalization warrants a two-notch differential
between the corporate credit rating and the unsecured debt
rating. Moreover, Standard & Poor's believes that the magnitude
of the secured debt financing will likely prevent Calpine from
obtaining unsecured debt financing in the future. Therefore, the
expectation is that future debt issuances would also be secured,
further subordinating the unsecured bonds.
DebtTraders says that Calpine Corp.'s 8.50% bonds due 2011
(CPN11USR1) are quoted at a price of 87. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CPN11USR1for
real-time bond pricing.
CAPTEC FRANCHISE: S&P Drops Classes B to F Notes' Ratings to D
--------------------------------------------------------------
Standard & Poor's lowered its single-'A'-plus rating on the
class C, triple-'B' rating on the class D, double-'B' rating on
the class E, and single-'B' rating on the class F notes of the
Captec Franchise Trust 1999-1 transaction to 'D'. Concurrently,
the rating on the class B notes of this ABS franchise loan
transaction are lowered and placed on CreditWatch with negative
implications.
The rating actions reflect the deteriorating performance of the
underlying pool of franchise loan obligors and the subsequent
reduction in cash flow available to pay monthly expenses of the
trust. Specifically, the defaults of the class C, D, E, and F
notes reflect the failure to cure the significant ongoing
cumulative monthly interest shortfalls which total $82,214,
$149,624, $109,457, and $109,457, respectively. Additionally,
the rating on the class B notes have been lowered and placed on
CreditWatch as a result of a recent interest shortfall of
$27,226, which occurred in February 2002 and was subsequently
cured in March 2002. Standard & Poor's is in contact with
Captec, the issuer and subservicer, and BNY Asset Solutions, the
servicer, in order to gauge the likelihood of future interest
shortfalls and to discuss the future outlook on pool
performance.
As of the March 27, 2002 payment date, delinquencies total $26.2
million, or 22.7% of the total outstanding pool balance of
$115.2 million (the current pool factor is 79.8%). The reduced
liquidity level currently being experienced by the transaction
is a product of this increasing delinquency level within the
pool and the subsequent decrease in monthly collections from
loan payments not received, which has resulted in interest
shortfalls to subordinated classes. It should be noted that the
servicer continues to make principal and interest advances;
however these advances are made subject to a recoverability
determination.
Standard & Poor's will be reviewing its loss assumptions, under
certain stress scenarios, relative to remaining credit support
in order to assure that the ratings assigned continue to
accurately reflect the risks associated with this transaction.
Ratings Lowered
Captec Franchise Trust 1999-1
Class Rating
To From Balance ($ Mil)
C D A+ $7.212
D D BBB $7.212
E D BB $2.885
F D B $2.885
Ratings Lowered And Placed On Creditwatch Negative
Captec Franchise Trust 1999-1
Class Rating
To From Balance ($ mil)
B A/WatchNeg AA $4.327
CHESAPEAKE: Strategic Restructuring Yields Improved 2001 Results
----------------------------------------------------------------
Chesapeake Corporation's (NYSE: CSK) strategic transformation
into a specialty packaging company and its solid 2001 financial
results were the focus of the company's annual meeting held
Wednesday.
"Chesapeake was able to deliver improved earnings in a year of
economic downturn because of the recent steps we've taken to
become a streamlined, pure-play specialty packaging company,"
said Thomas H. Johnson, Chesapeake's chairman, president & chief
executive officer. "Our focus on specific niche markets -- ones
that are stable, growing and in which we hold defensible
positions -- contributed to our solid results."
Chesapeake reported 2001 net income from continuing operations
before a restructuring charge of $19.8 million, a 25 percent
increase over 2000 net income of $15.9 million. The company
reported net sales of $790.5 million in 2001, an increase over
the $654.7 million reported the prior year.
"Wall Street recognized our results and rewarded us with a
higher stock price during 2001," Johnson said. "In fact,
Chesapeake's share price increased 39 percent last year,
outperforming both the S&P 500 index and our peer index."
Regarding the outlook for 2002, Johnson told the audience that
he expects revenues from continuing operations to be in the
$780-820 million range. He anticipates net income from
continuing operations, before restructuring activities, in the
$1.60-1.80 per share range.
"As I look back on 2001, I view it as a year that further
solidified our transformation into one of the world's premier
specialty packaging companies," said Johnson. "We will continue
to focus on gaining further synergies through integration,
including cost reduction opportunities and consolidation. We
made great strides on a number of strategic fronts while still
achieving our operational and financial targets."
In other business at the annual meeting, shareholders elected
four directors to Class I to hold office for a term of three
years. Current directors elected Wednesday to Class I include:
* Sir David Fell, 59, chairman and director, Northern Bank
Limited
* John W. Rosenblum, 58, management consultant
* Richard G. Tilghman, 61, retired vice chairman, SunTrust
Banks, Inc.
In addition, Keith Gilchrist, 53, executive vice president and
chief operating officer of Chesapeake, was elected to his first
term as a Class I director.
Chesapeake Corporation is a leading international supplier of
value-added specialty paperboard and plastic packaging with
headquarters in Richmond, Va. The company is one of Europe's
premier suppliers of folding cartons, leaflets and labels, as
well as plastic packaging for niche markets. Chesapeake has 50
locations in Europe, North America, Africa and Asia and employs
approximately 5,800 people worldwide. The company's website
address is http://www.cskcorp.com .
* * *
As reported in the Troubled Company Reporter on Nov. 29, 2001,
Standard & Poor's affirmed its low-B ratings on Chesapeake Corp.
and removed the 'double-B' corporate credit and senior unsecured
debt ratings from CreditWatch, were they were placed on
November 1, 2001. The current outlook is stable.
According to the report, the ratings reflect Chesapeake Corp.'s
slightly below-average business position within specialty
packaging, a growth by debt-financed acquisition strategy, and
aggressive financial policies.
CONE MILLS: Working Capital Deficit Tops $25MM at March 31, 2002
----------------------------------------------------------------
Cone Mills Corporation (NYSE: COE) announced a net profit of
$1.4 million after preferred dividends in the first quarter of
2002. This compares to a loss of $2.9 million after preferred
dividends in the first quarter of 2001, which included
approximately $.02 per share of run-out expenses related to the
Raytex plant closing. The last time Cone posted a first quarter
net profit was in 1998.
Net sales for the first quarter of 2002 were $105.8 million, as
compared with $132.7 million for the first quarter of 2001,
reflecting a 20.2% decrease. Sales for the quarter were
negatively impacted by lower volume early in the quarter in all
operations and lower pricing, primarily in denim, as compared
with the first quarter of 2001.
Gross profit for the first quarter of 2002 was 13.5% compared to
9.5% for the 2001 period, reflecting a more efficient cost
structure as a result of the 2001 Reinvention Plan.
Denim sales for the first quarter were $82.1 million, a decrease
of 22.6% as compared with the first quarter of 2001. Sales were
negatively impacted by lower denim volume during January and
lower prices. Outside sales of both the commission finishing
and decorative fabrics segments were also lower, off 12.7% and
7.3%, respectively, as compared with the first quarter of 2001.
Outside sales for the commission finishing segment were
marginally up 1.4% after eliminating Raytex sales in the first
quarter of 2001. Sales for these units were impacted by
continued weakness in the home furnishings market. All three
businesses experienced significant improvement in operating
income as a result of improved manufacturing efficiencies,
quality and cost control.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) was $11.7 million for the first quarter of 2002.
Including Cone's pro rata share of Parras Cone's results, EBITDA
for the first quarter of 2002 was $13.0 million. For the first
quarter of 2001, the comparable EBITDA was $8.7 million and
$10.3 million, respectively.
Cone Mills' March 31, 2002 balance sheet shows a working capital
deficit of about $25 million.
Commenting on first quarter 2002 performance, John L. Bakane,
president and CEO said, "We are pleased to report a profitable
first quarter -- the first since 1998. We are very proud of the
working men and women at Cone because they exceeded everyone's
expectations, including mine. Quality, efficiency and cost
control exceeded plan at all operations. Additionally, denim
sales were much better than plan as a result of recovering
demand for our customers' product. Our customers, in turn,
placed more of their business with us because of Cone's
performance in new product development, quality and service.
All operations were profitable, all operations exceeded last
year's results and all operations exceeded expectations."
In regard to the outlook for the remainder of the year, Mr.
Bakane added, "During the past three years we have cleaned up
both our balance sheet and our unprofitable operations. In
February of this year, Cone's denim plants returned to operating
at full capacity. We are off to a good start and we expect an
upward progression in earnings improvement as we move through
the second and third quarters of the year. However, we must
improve long-term profitability. To do this, we must reduce our
overall cost structure by expanding denim capacity in Mexico.
This expansion will require substantial capital investment as
well as the successful restructuring of our balance sheet."
Founded in 1891, Cone Mills Corporation, headquartered in
Greensboro, NC, is the world's largest producer of denim fabrics
and the largest commission printer of home furnishings fabrics
in North America. Manufacturing facilities are located in North
Carolina and South Carolina, with a joint venture plant in
Coahuila, Mexico.
CORRECTIONS CORP: S&P Expects to Up Ratings after Refinancing
-------------------------------------------------------------
Corrections Corp. of America's (CCA) ratings remain on
CreditWatch with positive implications, where they were placed
March 4, 2002, after CCA said it would refinance substantially
all of its existing indebtedness. The transaction would relieve
the company of onerous near-term debt maturities.
Upon the closing of the debt refinancing, Standard & Poor's
expects to raise CCA's corporate credit rating one notch to 'B+'
from its current 'B'. The company's existing senior unsecured
debt rating, as well as its senior secured debt rating, will be
withdrawn.
The rating on the company's proposed bank facilities would be
the same as the expected corporate credit rating ('B+'). The
secured bank facility comprises a $125 million term A loan due
2006, a $495 million term B loan due 2008, and $75 million
revolving credit facility due 2006.
The credit facilities derive strength from their secured
position. However, according to Standard & Poor's simulated
default scenario, which incorporates the possibility of severely
distressed cash flows that would trigger a default on payment,
it is not clear whether the distressed enterprise value would be
sufficient to cover the entire loan balance when fully drawn.
The 'B-' ratings on the proposed senior unsecured notes are two
notches below the expected corporate credit rating, reflecting
its secondary position relative to the firm's relatively high
level of secured bank debt.
The ratings on CCA reflect the company's high debt leverage,
somewhat mitigated by CCA's leading position in the correctional
facility management business.
CCA, based in Nashville, Tennessee, is the nation's largest
private provider of detention and corrections services to
government agencies, with more than 61,000 beds in service,
representing more than 50% of the private-bed market.
CORTS TRUST: S&P Places B-Rated Securities on Watch Negative
------------------------------------------------------------
Standard & Poor's placed its single-'B' rating on CorTS Trust
for Xerox Capital Trust I's fixed-rate corporate-backed trust
securities on CreditWatch with negative implications.
The CreditWatch placement reflects Standard & Poor's April 18,
2002 CreditWatch with negative implications placement on Xerox
Corp.'s corporate credit and preferred stock ratings.
CorTS Trust for Xerox Capital Trust I is a swap-independent
synthetic transaction that is weak-linked to the underlying
collateral, Xerox Capital Trust I's preferred stock. The
CreditWatch placement on the structured transaction reflects the
credit quality of the underlying securities issued by Xerox
Capital Trust I.
COVANTA ENERGY: Bringing-In LeBoeuf Lamb as Special Counsel
-----------------------------------------------------------
Covanta Energy Corporation and its debtor-affiliates applied to
the Court for authorization to employ and retain LeBoeuf, Lamb,
Greene & MacRae LLP, as special counsel in their Chapter 11
cases.
The Debtors propose to retain and employ LeBoeuf, pursuant to
Section 327(e) of the Bankruptcy Code, as their special counsel
to consult on federal and state regulatory and corporate matters
that may arise during these proceedings.
Jeffrey R. Horowitz, Senior Vice President-Legal Affairs at
Covanta, tells Judge Blackshear that LeBoeuf is a law firm which
employs more than 700 attorneys. The firm maintains offices for
the practice of law, among others, in New York, New York. He
explains that the Debtors have selected LeBoeuf as special
counsel because of the firm's knowledge of certain of the
Debtors' operating businesses, which LeBoeuf acquired
through its previous and extensive representation of the
Debtors.
LeBoeuf's previous representation of the Debtors has included
providing advice and representing them on such matters as
federal and state energy regulatory matters, financing, asset
sales, employee benefits, intellectual property, general
business and transactional matters, as well as other
miscellaneous matters. LeBoeuf's proposed retention pursuant to
Section 327(e) of the Bankruptcy Code is for the purpose of
continuing its representation of the Debtors. Mr. Horowitz adds
that the Debtors firmly believe that LeBoeuf has the necessary
background to provide these legal services and is well qualified
to represent their interests and the interests of their estates.
"If the Debtors are not permitted to retain LeBoeuf as their
special counsel, the Debtors, their estates and all parties in
interest would be unduly prejudiced by the time and expense
necessarily required by Debtors' Section 327(a) bankruptcy
counsel or any other counsel to familiarize themselves with the
intricacies of the Debtors' regulatory requirements and business
operations." says Mr. Horowitz.
The Debtors have been informed that any of the LeBoeuf lawyers
working on this retention who are not already members of the bar
to this Court will seek, through a separate motion, admission
pro hac vice to this Court, to the extent this retention
involves LeBoeuf in court appearances on behalf of the Debtors.
Mr. Horowitz relates that in addition to its representation of
the Debtors, LeBoeuf has previously represented other creditors
and parties in interest herein, but has not represented any of
these entities in connection with matters relating to the
Debtors or their estates.
Retention is sought under Section 327(e) of the Bankruptcy Code,
which provides that:
The trustee, with the court's approval,
may employ, for a specified special purpose,
other than to represent the trustee in conducting
the case, an attorney that has represented the debtor,
if in the best interest of the estate, and if such
attorney does not represent or hold any interest adverse
to the debtor or to the estate with respect to the
matter on which such attorney is to be employed.
--11 U.S.C. Section 327(e).
Joseph A. Tato, a member of LeBoeuf, is a director of Covanta
and a member of its governance and finance committees. In
addition, Mr. Tato owns 2,857 shares of common stock of Covanta
and has options to acquire 27,500 additional shares of such
stock. Accordingly, LeBoeuf does not qualify as "disinterested
person" under Section 101(14) of the Bankruptcy Code. However,
Mr. Horowitz clarifies, Section 327(e) special counsel need not
be "disinterested" provided that the attorney represents or
holds no interest adverse to the debtor or to the estate in
respect of the matter upon which the attorney is to be engaged.
See, e.g., In re G & H Steel Service, Inc., 76 B.R. 508, 510
("Collier specifically states that 'special counsel' 'need not
be "disinterested," as is otherwise required by section
327(a). . .'") (citations omitted). LeBoeuf clearly meets this
standard.
The Debtors understand that LeBoeuf intends to apply to the
Court for allowance of compensation and reimbursement of
expenses in accordance with applicable costs incurred by the
firm. LeBoeuf's hourly rates, subject to periodic adjustments to
reflect economic and other conditions, are:
Partners $275 -$690
Of Counsel $345 -$730
Counsel/Associates $220 -$450
Law Clerks $150 -$250
Paralegals $125 - 260
In connection with the reimbursement of actual, necessary
expenses, the Debtors have been informed that the firm will
charge for expenses incurred in connection with the clients'
cases. The expenses charged to LeBoeuf's clients include, among
other things, telephone and copier charges, mail and express
mail charges, special or hand delivery charges, document
processing charges, photocopying charges, travel expenses,
expenses for "working meals," computerized research,
transcription costs, as well as non-ordinary overhead expenses
such as secretarial overtime.
Mr. Horowitz tells Judge Blackshear that LeBoeuf holds pre-
petition claims against the Debtors' estate for legal services
rendered prior the Petition Date in the approximate amount of
$30,000. He assures the Court that the Debtors do not request
authorization in this Application to pay such pre-petition
claims owed to LeBoeuf. The Debtors submit that such claims do
not serve to disqualify LeBoeuf from representing the Debtors on
a post-petition basis, given that LeBoeuf does not represent or
hold any interest adverse to either the Debtors or their estates
with respect to the matters upon which LeBoeuf is to be
employed. He assures Judge Blackshear that no promises have been
received by the firm or any member, counsel, associate or other
employee thereof as to compensation or payment in connection
with this case other than in accordance with the provisions of
the Bankruptcy Code. LeBoeuf has no agreement with any other
entity to share with such entity any compensation received by
the Firm in connection with this Chapter 11 case.
The Debtors' seek approval of the Application on an interim
basis in order to provide parties an opportunity to object to
the relief requested herein.
Mr. Horowitz tells Judge Blackshear that if he approves the
Application, and no objections are timely filed, the Debtors'
request that the Application be deemed granted on a final basis
without further notice or hearing. (Covanta Bankruptcy News,
Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900)
DELTA MILLS: S&P Junks Corp. Credit Rating on Weak Performance
--------------------------------------------------------------
On April 24, 2002, Standard & Poor's lowered its corporate
credit rating on Delta Mills Inc. (a wholly owned subsidiary of
Delta Woodside Inc.) to 'CCC'. The downgrade reflected Delta
Mills' continued weak operating performance and related credit
measures for the first nine months of its 2002 fiscal year, and
the expectation that such measures will continue to be very weak
in the near term.
Significant volume and unit declines, which continued during the
March 2002 quarter, led to margin pressures because of
unabsorbed fixed costs, and resulted in an operating loss for
the quarter. On a trailing 12-month basis, EBITDA was
insufficient to cover interest expenses. Although Delta Mills
expects the fourth quarter ended June 2002, to be a profitable
period, Standard & Poor's expects credit protection measures
will continue to be very weak in the near term. Some financial
flexibility is provided by the company's $50 million secured
bank facility. Nevertheless, about $23 million from the bank
facility is expected to fund the company's tender offer for its
outstanding bonds.
The ratings on Delta Mills reflect the company's leveraged
financial profile, narrow business focus, some customer
concentration risk, and very competitive and cyclical apparel
market conditions. The ratings also reflect the fashion risk
inherent in apparel textiles. These factors are offset, in part,
by Delta Mills' dominant position in its niche woven textile
markets, modest capital expenditures, and experienced management
team.
Greenville, South Carolina-based Delta Mills is a leading
domestic manufacturer and marketer of woven cotton fabrics
(about 80% of total volume) and synthetic fabrics (about 20% of
total volume). The company produces fabric for casual dress
slacks, such as Levi Strauss & Co.'s Dockers and Haggar Corp.'s
Wrinkle Free slacks, womenswear, and government and career
apparel.
Outlook: Negative
Inability to improve operating results and credit protection
measures over the near term could prompt a review for a
downgrade.
Delta Mills Inc.'s 9.625% bonds due 2007 (DELT07USR1) are quoted
at a price of 47, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=DELT07USR1
for real-time bond pricing.
DIGEX INC: EBITDA Loss Tops $8 Million in January-March Quarter
---------------------------------------------------------------
Digex, Incorporated (Nasdaq: DIGX), the leading managed hosting
provider for business on the Internet, announced revenue of
$51.8 million for the quarter-ended March 31, 2002, compared
with $53.1 million a year ago. Managed servers totaled 3,420
with average monthly revenue per server of $4,638. EBITDA*
losses totaled $7.8 million in the quarter with net loss
available to common stockholders totaled $51.4 million.
"We continue to add high-quality enterprise customers through a
tough business environment," said Mark Shull, president and CEO
of Digex. "As previously announced, we were pleased to gain
WorldCom's formal approval of Digex's 2002 business plan, as it
relates to WorldCom's funding commitment to Digex."
"Year-over-year we had another solid quarter for new customer
additions, as Digex and WorldCom added 56 new customers in the
quarter," said John Callari, senior vice president of sales.
New customers include: Benjamin Moore & Co., Bureau of National
Archives and Records Administration, Centridge Payment Systems,
Charles Schwab & Co., Chemicon International, Docent, Henry Ford
Museum, Lateral Payments, Mexican Tourism Board, NOPI, Nestle
Ice Cream Company LLC, Owens Corning, Reptron, U.S. State
Department and U.S. Venture Exchange. A number of customers
also upgraded or renewed their services with Digex including:
Blue Shield of California, Elogex, John Hancock Life Insurance
Company, Kraft Foods, Miller Brewing Company, netCOMPONENTS,
Inc., Novartis Pharma AG, PBHG Funds and Persimmon Research
Partners.
"One of Digex's first quarter achievements includes being listed
in the Leaders quadrant in Gartner, Inc.'s latest North American
Web Hosting Magic Quadrant#," said Rebecca Ward, president of
marketing, product management and engineering at Digex. "To be
placed in the Leaders quadrant, a Web hosting provider must
demonstrate strength in both vision and execution. Digex has
been placed in the Leaders quadrant for the second year in a
row. More importantly, however, we believe that our strong
vision and offerings translate to successful delivery of quality
solutions to our customers year after year."
Additional quarterly highlights for Digex include:
* Achieved SysTrust Certification after completing a
rigorous assessment of its production environment for supporting
customer Web operations. Developed and administered by the
American Institute of Certified Public Accountants (AICPA), the
SysTrust examination is designed to encompass four key
principles (integrity, security, availability, and
maintainability) and criteria for system reliability. Of these
principles, security, availability and maintainability are
applicable to the services Digex provides. Ernst & Young LLP
conducted Digex's SysTrust examination.
* Launched Customer Furnished Equipment (CFE) program,
which enables clients to gain the benefits of a managed solution
and obtain high value with equipment they already own. The
program allows clients to take advantage of the full range of
Digex's managed hosting using their previous investments.
* Continued its industry leading ROI program in Q1, working
with over 40 clients or prospects throughout the quarter, and
adding new functionality to help customers model and understand
the economics of hosting. New functionalities include an
international model, the ability to include client-furnished
equipment, and a more precise in-house headcount model.
* Engineered the Digex Managed Linux solution using Red Hat
Linux 7.2. As Linux rapidly becomes a mainstream operating
system in all sizes of organizations, Digex is now fully able to
provide its core suite of SmartServices and value-added services
on a Linux platform to meet the growing demand.
Financial highlights for Digex include:
* SG&A expense, including provision for doubtful accounts,
as a percentage of total revenue was 58.3%, down 1,176 basis
points from the year-ago level, and declined in absolute dollars
by approximately $7.0 million or 18.8%
* Capital investments for the quarter totaled $15.2
million, down 48% from the year-ago level
* Quota-carrying salespeople totaled 161 for the quarter up
from 128 in the year-ago quarter
* Total employees ending March 31, 2002 was 1,293, compared
with 1,455 in the year-ago period
Digex is the leading managed hosting provider for business on
the Internet. Digex customers, from mainstream enterprise
corporations to Internet-based businesses, leverage Digex's
services to deploy secure, scaleable, high performance business
solutions, including electronic retailing, online financial
services, online procurement and customer self- service
applications. Digex also offers value-added enterprise and
professional services, including performance and security
testing, monitoring, reporting and networking services.
Additional information on Digex is available at
http://www.digex.com.
The WorldCom-Digex affiliation strategically combines the custom
managed Web and application hosting expertise of Digex with the
shared, dedicated and colocation hosting technologies of
WorldCom to offer businesses of all sizes the full continuum of
secure, dependable hosting services. Powered by the reach and
reliability of the facilities-based WorldCom global network, the
WorldCom-Digex affiliation rapidly delivers scalable, high-
availability outsourced solutions that enable companies
throughout North America, Europe and Asia to better focus on
their core business.
At March 31, 2002, Digex, Inc.'s total current liabilities
exceeded its total current assets by over $6 million.
E.SPIRE COMMS: Wants More Time to Make Lease-Related Decisions
--------------------------------------------------------------
For the fifth time, e.spire Communications, Inc. and its debtor-
affiliates ask the U.S. Bankruptcy Court for the District of
Delaware to further extend the time within which they must move
to assume, assume and assign or reject their unexpired leases of
nonresidential real property, until July 1, 2002.
The Debtors relate that they are lessees under approximately 75
unexpired leases of nonresidential real property. Most of the
Leases are for space the Debtors used for conducting the
operation and monitoring of their switch equipment, addressing
customer issues and conducting administrative, corporate sales
functions that comprise their businesses, and are assets of the
estates.
The Debtors point out that given the number of Leases, the scope
and complexity of the Debtors' chapter 11 cases, and the size of
the task of evaluating the Leases, they have not yet been able
to assess the Leases to determine whether they must be assumed
or rejected. The Debtors add that the management had been
focused on the sale of certain of their assets, which recently
were completed. The management has now turned its attention to
the negotiations of a plan of reorganization.
e.spire Communications, Inc. is a facilities-based integrated
communications provider, offering traditional local and long
distance internet access throughout the United States. The
Company filed for chapter 11 protection on March 22, 2001.
Domenic E. Pacitti, Esq., Maria Aprile Sawczuk, Esq., and Mark
Minuti, Esq., at Saul Ewing LLP represent the Debtors.
EOTT ENERGY: Firms-Up Standard Chartered Term Credit Facilities
---------------------------------------------------------------
EOTT Energy Partners, L.P. (NYSE: EOT) announced the
finalization of its amended working capital and letter of credit
facilities with Standard Chartered Bank. The credit facilities
are available through the end of February 2003 for working
capital loans and letters of credit of up to $500 million.
"The completion of the Standard Chartered credit facility, the
recent resumption of full production at our MTBE plant, and the
election of our three new independent Board members, including
our new Chairman, strengthens our ability to enhance future
value for EOTT's unitholders and customers," said EOTT President
and Chief Executive Officer, Dana Gibbs. "We are confident that
retaining our excess operating cash flows will increase EOTT's
long-term financial stability and strengthen its ability to
build future value for EOTT's unitholders."
The facilities include provisions restricting payment of future
distributions to unitholders, subject to certain financial
covenants and the resolution of uncertainties related to the
Enron bankruptcy. Additionally, the facilities include minimum
cash flow thresholds and limitations on expansion capital
expenditures. EOTT does not expect that under current
circumstances any distributions will be made prior to the fourth
quarter of 2002.
EOTT Energy Partners, L.P. is a major independent marketer and
transporter of crude oil in North America. EOTT transports most
of the lease crude oil it purchases via pipeline, which includes
8,000 miles of active intrastate and interstate pipeline and
gathering systems. In addition, EOTT owns and operates a
hydrocarbon processing plant and a natural gas liquids storage
and pipeline grid system. EOTT Energy Corp. is the general
partner of EOTT with headquarters in Houston. EOTT's Internet
address is http://www.eott.com The Partnership's Common Units
are traded on the New York Stock Exchange under the ticker
symbol "EOT".
At September 30, 2001, EOTT Energy's total current liabilities
eclipsed its total current assets by about $178 million.
ENRON CORP: Asks Court to Okay SII Espana Shares Sale Agreement
---------------------------------------------------------------
Enron Corporation and its debtor-affiliates seek the Court's
approval to these terms and conditions of the SII Espana Sale:
Sale & Purchase: SII Espana agrees to sell to Iberdrola, and
Iberdrola agrees to purchase from SII Espana,
the Shares and the Rights and Claims.
Consideration: Although Iberdrola bid on the Transaction as a
whole, for the transfer of the Shares and the
assignment of the Rights and Claims, Iberdrola
agrees to pay SII Espana:
(a) $105,000,000; and
(b) an amount equivalent to any debts up to,
but not in excess of $1,000,000 in the
aggregate (unless the Purchaser consents to
an increase of this amount, such consent
not to be unreasonably withheld) advanced
by any of the Enron Lenders following March
26, 2002 and pending closing for the
purpose of funding the business of the
Project Company, provided that such debts
are incurred in the ordinary course of
business and an invoice in the agreed form
in respect of each such debt has been
provided to Iberdrola.
Deposit: Upon exchange of the Purchase Agreement,
Iberdrola agrees to pay $10,500,000 to Weil,
Gotshal & Manges LLP, as stakeholder for SII
Espana pursuant to an escrow agreement to be
entered into among Weil Gotshal and the parties
to the Purchase Agreement. If either Iberdrola
or SII Espana does not comply with its
obligations under Clause 6 of the Purchase
Agreement (containing conditions precedent to
the SII Espana Sale), the non-defaulting party
may terminate the Purchase Agreement. If this
occurs and Iberdrola is the defaulting party
(and SII Espana is not in default), Weil Gotshal
must pay the Deposit to SII Espana. However, if
the SII Espana Sale does not occur and the
Purchase Agreement is terminated other than as a
result of a default by Iberdrola pursuant to the
foregoing, Weil Gotshal must pay the deposit to
Iberdrola. (Enron Bankruptcy News, Issue No. 21;
Bankruptcy Creditors' Service, Inc., 609/392-
0900)
ENRON CORP: Employees' Panel Taps Crossroads as Fin'l Advisor
-------------------------------------------------------------
Crossroads, LLC announced that the Employee Related Issues
Committee in the Enron bankruptcy case has selected the New York
and Irvine, California-based workout and restructuring
consultant as the financial advisor to the E.R.I.C.
The E.R.I.C. was formed to ensure that the employees would have
a voice in the bankruptcy. Crossroads' responsibilities will be
to analyze the claims that are uniquely those of the employees
to assist them in maximizing their recovery.
The case will be staffed by Ruth E. Ford, Lawrence D. Morriss,
Jr., Dennis Simon and Joel M. Simon.
"We are very pleased that we were selected to represent the
Enron employees in this case and to ensure that their interests
are taken into consideration and fairly reflected in whatever
resolution emerges," said Dennis Simon, the Principal of
Crossroads who is heading the team. "This committee needs its
own financial champion and we are committed to filling that
role."
The E.R.I.C. had earlier named New York-based Kronish Lieb
Weiner & Hellman LLP as their legal advisor as well as the
Houston firm of McClain & Siegel, P.C. The Kronish Lieb team is
headed up by James A. Beldner, Cathy Hershcopf and Ronald R.
Sussman. The McClain & Siegel team is piloted by David P.
McClain and Michael Leppert.
Crossroads, LLC is an international consulting firm that
provides interim management, financial restructuring, corporate
finance, litigation support and operations improvement services
to stakeholders of undervalued companies, across a wide variety
of industries.
Enron Corp.'s 9.125% bonds due 2003 (ENRON2), DebtTraders
reports, are trading at about 12. For real-time bond pricing,
see http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRON2
EPICOR SOFTWARE: $17MM Working Capital Deficit at March 31, 2002
----------------------------------------------------------------
Epicor Software Corporation (Nasdaq: EPIC), a leading provider
of integrated enterprise and eBusiness software solutions for
the midmarket, reported its financial results for the first
quarter ended March 31, 2002. Total revenues for the first
quarter were $36.0 million compared with $47.9 million for the
first quarter 2001. Software license revenues totaled $8.4
million compared to $12.3 million for the same period last year.
Services and maintenance revenues totaled $26.9 million compared
to $34.8 million in the same quarter last year. The decrease in
revenues year over year is primarily related to the delayed
recovery in IT spending. For year over year comparison
purposes, the first quarter 2001 included revenues from two
product lines that were divested in the second quarter of last
year.
Net loss for the first quarter was $2.7 million, compared with a
net loss for the same period last year of $22.1 million. The
restructuring actions taken in the second and fourth quarters of
2001 have allowed the company to reduce its recurring quarterly
cost and expenses by approximately $10 million compared with the
first quarter of 2001.
The company's balance sheet as of March 31, 2002 showed cash and
cash equivalents of $23.6 million, net accounts receivable of
$24.7 million and deferred revenue of $35.1 million. Days sales
outstanding decreased to 62 from 71 at December 31, 2001. The
company was able to minimize anticipated cash usage through
continued expense controls and strong collection efforts.
Also, at March 31, 2002, the company's balance sheet shows that
total current liabilities exceed total current assets by about
$17 million. Shareholder equity has dwindled to $4.7 million.
Debt on the company's balance sheet is now 14 times shareholder
equity.
"Despite the difficult economic conditions, I am proud that we
continue to execute against our plan to control costs and
expenses and manage cash flow. At this time, we are maintaining
our previously issued guidance to achieve profitability in the
second quarter 2002 and to meet our overall profitability
objectives for the year," said George Klaus, chairman, CEO and
president. "As a midmarket leader, we remain focused on
providing our customers with integrated, customizable and cost-
effective software solutions, as well as service and support
that will help them reduce costs, remain competitive and plan
for growth."
Klaus continued, "During the second half of the year, as the
economy recovers, we are well positioned with the scheduled
delivery of several new products and upgrade releases, which we
expect to drive long term software license revenues from both
new customers and our installed base of over 15,000 customers."
The company is scheduled to deliver mid-year, one of the
market's first Web services applications in the area of customer
support, designed exclusively using the Microsoft .NET platform.
The first Web services applications will expose customer and
supplier facing functionality from existing Epicor CRM and ERP
systems through secure Web services.
Among the company's accomplishments this quarter, was the
achievement of Microsoft's elite Global Gold Certified Partner
accreditation for Software Products. The Global Gold
certification demonstrates Epicor's commitment to quality and
innovation, and allows the company to more rapidly provide its
customers worldwide the ability to maximize their software
investment by taking advantage of the most advanced
technologies, including applications designed for Microsoft.NET.
Epicor is a leading provider of integrated enterprise and
eBusiness software solutions for midmarket companies around the
world. Founded in 1984, Epicor has over 15,000 customers and
continues to deliver end-to-end, industry-specific solutions
that enable companies to immediately improve business operations
and build competitive advantage in today's Internet economy.
Epicor's comprehensive suite of integrated software solutions
for Customer Relationship Management, Financials, Manufacturing,
Supply Chain Management, Professional Services Automation and
Collaborative Commerce provide the scalability and flexibility
to support long-term growth. Epicor's solutions are
complemented by a full range of services, providing single point
of accountability to promote rapid return on investment and low
total cost of ownership, now and in the future. Epicor is
headquartered in Irvine, California and has offices and
affiliates around the world. For more information, visit the
company's Web site at http://www.epicor.com
ETOYS: Judge Walrath Grants Last Exclusivity Extension to May 17
----------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the District of
Delaware, eToys Inc. and its debtor-affiliates obtained an
extension of their exclusive periods. The Court gives the
Debtors until May 17, 2002 the exclusive right to file their
plan of reorganization and until July 15, 2002 to solicit
acceptances of that Plan.
Judge Mary F. Walrath makes it clear that this extension is with
prejudice to the Debtors' right to seek further extensions of
their exclusive periods -- no more extensions!
eToys, Inc., now known as EBC I Inc, operated a web-based toy
retailer based in Los Angeles, California. The Company filed a
Chapter 11 Petition on March 7, 2001 in the U.S. Bankruptcy
Court for the District of Delaware. When the company filed for
protection from its creditors, it listed $416,932,000 in assets
and $285,018,000 in debt. eToys sold its assets and name to toy
retailer KB Toys. Robert J. Dehney, Esq., at Morris, Nichols,
Arsht & Tunnell and Howard Steinberg, Esq., at Irell & Manella
represent the Debtors as they wind-up their financial affairs.
EXIDE TECH: Intends to Honor Prepetition Customer Obligations
-------------------------------------------------------------
According to Laura Davis Jones, Esq., at Pachulski Stang Ziehl
Young & Jones P.C. in Wilmington, Delaware, prior to the
Petition Date and in the ordinary course of their businesses,
Exide Technologies and its debtor-affiliates engaged in certain
practices to develop and sustain a positive reputation in the
marketplace for their services. Such practices include, but are
not limited to, the Customer Rebate Programs, the Dealer
Incentive Programs, the Warranty Program, the Transportation
Customer Rebate Programs, the Transportation Standardization
Program and the Transportation Warranty Program. The common
goals of the Customer Programs have been to meet competitive
pressures, ensure customer satisfaction, and generate goodwill
for the Debtors, thereby retaining current customers, attracting
new ones, and ultimately enhancing net revenue.
The Debtors request the Court to order pursuant to Sections
105(a), 363(c), 1107(a) and 1108 of the Bankruptcy Code
authorizing, but not directing, the Debtors, in their business
judgment, to perform and honor such of their pre-petition
obligations related to the Customer Programs as they see fit,
and to continue, renew, replace, implement new, and/or terminate
such of the Customer Programs without further application to the
Court.
Ms. Jones tells the Court that the Debtors desire to continue
during the post-petition period those Customer Programs that
were beneficial to their businesses and cost-effective during
the pre-petition period. The Debtors believe that such relief is
necessary to preserve, during the post-petition period, their
critical business relationships and goodwill for the benefit of
their estates.
The Debtors are seeking to continue the Customer Programs
because these programs have been successful business strategies
in the past and have generated valuable goodwill, repeat
business and net revenue increases. Ms. Jones believes that
maintaining these benefits throughout the Chapter 11 Cases is
essential to the continued vitality of the Debtors' businesses,
and ultimately to their prospects for a successful
reorganization. The Debtors believe, however, that the
bankruptcy filing itself could negatively influence customers'
attitude and behavior toward their services, unless the Debtors
can take the measures requested by this Motion to alleviate
customer concerns. In particular, the Debtors' goodwill and
ongoing business relationships may erode if their customers
perceive that the Debtors are unable or unwilling to fulfill the
pre-petition promises they have made through the Customer
Programs. The same would be true if customers perceived that the
Debtors will no longer be offering the full package of services
or quality of services preferred by their customers. The
Debtors, therefore, request the authority to honor all such
obligations related to the Customer Programs.
GNB Customer Rebate Programs
The Debtors seek the authority to honor the customer sales
volume rebate programs they instituted for the GNB business by
providing the agreed upon rebates to participating customers.
The GNB Customer Rebate Programs provide rebates to customers
after a certain number of purchases are achieved, with the
greater the number of purchases, the larger the rebate to the
customer. Therefore, customers are encouraged to purchase more
goods from the Debtors to obtain a greater rebate, which results
in larger net revenue for the Debtors.
Ms. Jones claims that customer confidence and goodwill, as well
as revenues, will be severely harmed if the Debtors are
prevented from honoring pre-petition GNB Customer Rebate Program
rebates. On the Petition Date, many participating customers had
accumulated several million dollars in purchases from the
Debtors. Of this number, many customers are approaching the
level of purchases that would trigger a rebate. If the Court
does not grant the relief requested, participating customers
would lose any rebate credit for their pre-petition purchases of
the Debtors' goods. This would likely result in these customers
refusing to purchase future goods from the Debtors, while
initiating a business relationship with the Debtors'
competitors.
The Debtors believe that maintaining the rebates for goods
purchased pre-petition will demonstrate management's confidence
in the Debtors and, therefore, enhance the public's confidence
in the continued reliability and operations of the Debtors. In
that regard, the Debtors believe that any extra rebates
occasioned by the Chapter 11 Cases will be more than offset by
the revenue from sales made because the GNB Customer Rebate
Programs remain in place. To the extent the Debtors are unable
to continue the GNB Customer Rebate Programs, the Debtors risk
isolating certain constituencies of customers and possibly
encouraging customers to select competing manufacturers, all to
the detriment of the Debtors, their creditors and their estates.
GNB Dealer Incentive Programs
Ms. Jones informs the Court that the Debtors instituted a dealer
incentive program for their GNB business over 16 years ago,
which allow enrolled salesmen and dealers to accumulate points
based upon dollar purchases of certain Debtors' products. Points
earned while participating in the GNB Dealer Incentive Programs
may be redeemed for group travel, retail merchandise
certificates, individual travel or business building awards. The
more points earned by an enrolled salesman or dealer, the
greater the awards.
The Debtors seek authorization to honor points under the GNB
Dealer Incentive Programs post-petition to those salesmen and/or
dealers who attempt to redeem GNB Dealer Incentive Programs
points earned pre-petition. As is the case with the GNB Customer
Rebate Programs, several, if not all, of the enrolled salesmen
and dealers have accrued points under the GNB Dealer Incentive
Programs pre-petition. If the Court does not grant the relief
requested, Ms. Jones submits that enrolled salesmen and dealers
would lose any credit for their pre-petition purchases of the
Debtors' goods. This would likely result in these salesmen and
dealers refusing to purchase future goods from the Debtors,
while initiating a business relationship with the Debtors'
competitors. The Debtors simply cannot compete successfully
against other manufacturers unless they are able to maintain the
integrity of GNB Dealer Incentive Programs. Failure to honor the
obligations of the Dealer Incentive Programs will severely harm
the Debtors' competitive position and their reorganization
efforts. To the extent the Debtors are unable to continue the
GNB Dealer Incentive Programs, the Debtors risk isolating a
proven customer base.
GNB Warranty Program
Pursuant to the Debtors' pre-petition customer practices, Ms.
Jones relates that the Debtors' GNB business provided limited
warranties that were based on product and application. These
warranties for the Debtors' products could extend for periods up
to 20 years (on a pro-rata basis) from the date of a consumer
purchase of a particular product. As a general matter, such
warranties protect against manufacturing defects in workmanship
and materials contained in the products. Generally, the benefit
of the warranty is limited to the original purchasing consumer.
The Debtors may, at their option, either repair or replace
defective product, credit the customer based upon an approved
claim or, in some circumstances, refund the purchase price. In
most circumstances, honoring warranty claims involves non-cash
items such as repairing or replacing the defective goods. The
benefits of each GNB Warranty Program is specific to that
customer based upon its agreement with the Debtors.
The GNB Warranty Program is an integral part of the Debtors'
business strategy and is designed to ensure customer confidence
in the Debtors' products. If the Debtors are not allowed to
honor warranty claims for goods purchased pre-petition (or going
forward), Ms. Jones fears that the Debtors' customers would
likely lose confidence in the Debtors' product and begin
purchasing from the Debtors' competitors. If the Debtors are not
allowed to honor their products' warranties, the Debtors would
not stand on equal footing with their competitors. Therefore,
the Debtors are required to maintain the GNB Warranty Program to
operate in such a competitive market and to entice customers to
purchase their products. For this and for the other reasons set
forth herein, it is in the best interests of the Debtors, their
estates and their creditors to honor prepetition obligations of
the GNB Warranty Program and to continue the GNB Warranty
Program as they see fit in the ordinary course of business.
Transportation Customer Rebate Programs
Ms. Jones states that the Debtors' transportation business
offers rebate programs to its customers, which are related to
the Debtors' customer commitments for advertising and
promotional funding, marketing support, co-op advertising, and
volume incentives. Rebates are calculated from the net sale
price paid by the customer and are accrued on a monthly basis.
The amounts earned by the customers are paid in the form of a
check or credit memorandum on the customer's account.
The Debtors seek authority to honor pre-petition obligations
related to the Transportation Customer Rebate Programs and to
continue to honor these Transportation Customer Rebate Programs.
As is the case with the GNB Customer Rebate Programs and the GNB
Dealer Incentive Program, many customers have acquired credits
under the Transportation Customer Rebate Programs pre-petition.
If the relief was not granted, these customers would lose their
credits, which would likely cause them to purchase from the
Debtors' competitors.
The Debtors believe that maintaining the rebates for goods
purchased pre-petition will demonstrate management's confidence
in the Debtors and, therefore, enhance the public's confidence
in the continued reliability and operations of the Debtors. In
that regard, the Debtors believe that the rebates offered in the
Chapter 11 Cases will be more than offset by the revenue from
sales made because the Transportation Customer Rebate Programs
are in place.
Ms. Jones claims that the Transportation Customer Rebate
Programs are an integral component of the Debtors' operations.
To the extent that the Debtors are unable to continue the
Transportation Customer Rebate Programs, the Debtors risk
isolating certain constituencies of customers and possibly
encouraging customers to select competing manufacturers, all to
the detriment of the Debtors, their creditors and their estates.
Transportation Standardization Program
Ms. Jones explains that the Debtors' transportation business
provides a standardization program for its customers. Under the
Transportation Standardization Program, a customer is placed
into one of a number of specific customer channels. Within each
customer channel, certain programs are available, including, but
not limited to, discounts, rebates, warranties and customer
commitments for advertising and promotional funding, marketing
support, co-op advertising and volume incentives.
Ms. Jones notes that the Transportation Standardization Program
provides a more centralized and understandable structure for the
Debtors and its customers. It also provides for a more focused
sales effort on strategic channels, resulting in increased
revenue for the Debtors. Since its inception, the Transportation
Standardization Program has been an integral part of the
Debtors' transportation business.
Transportation Warranty Program
Pursuant to the Debtors' pre-petition customer practices, Ms.
Jones relates that the Debtors' transportation business provided
limited product warranties for periods extending up to two years
from the date of a consumer purchase of a particular product.
Such warranties protect against manufacturing defects in
workmanship and materials contained in the products.
Generally, Ms. Jones states that the benefit of the warranty is
limited to the original purchasing consumer and the Debtors may,
at their option, either repair or replace defective product,
credit the customer based upon an approved claim or, in some
circumstances, refund the purchase price. In most circumstances,
honoring warranty claims involves non-cash items such as
repairing or replacing the defective goods. The benefits of each
Transportation Warranty Program is specific to that customer
based upon its agreement with the Debtors.
The Debtors seek authority to honor pre-petition obligations
related to the Transportation Warranty Programs and to continue
to honor these Transportation Warranty Programs as they are an
integral part of the Debtors' business strategy and bases for
customer confidences. If the Debtors are not allowed to honor
warranty claims for goods purchased pre-petition (or going
forward), the Debtors' customers would likely lose confidence in
the Debtors' product and begin purchasing from the Debtors'
competitors. (Exide Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
EXODUS COMMS: Seeks Approval to Collateralize Letters of Credit
---------------------------------------------------------------
Exodus Communications, Inc., and its debtor-affiliates ask the
Court for authority to obtain certain letters of credit secured
by cash deposits in aggregate face amount not exceeding
$4,000,000 subject to the approval of the Creditors' Committee.
In addition, the Debtors propose that the Court allow the banks
issuing the letters of credit to liquidate certain collateral
and to repay obligations under the facility they are drawn on,
without further Order.
David R. Hurst, Esq., at Skadden Arps Slate Meagher & Flom LLP
in Wilmington, Delaware, tells the Court the Debtors are
currently negotiating with various utilities and contracting
parties in an effort to resolve their objections to the Debtors'
previously filed motions. This includes the motion establishing
procedures for utilities to request additional adequate
assurance and the Debtors' motion to sell substantially all of
their assets to Digital Island. In order to resolve the
objections, the Debtors have agreed to provide certain utilities
and contracting parties with letters of credit to guarantee the
Debtors' payment or performance. The Debtors, however, have been
unable to obtain unsecured letters of credit and thus are
required to deposit cash funds with the banks issuing the
letters of credit. They are also required to sign a collateral
agreement providing that the issuing banks may liquidate such
cash collateral and repay obligations under the letters of
credit when they are drawn upon.
Mr. Hurst tells the Court that by providing this relief in
advance of any letter of credit, obligations to the issuing
banks, including accrued interest and attorney's fees and costs
incurred in filing a motion for relief from stay, will be
minimized. The Debtors will be providing the Committee five
business days' written notice before obtaining any letter of
credit. If the Committee registers an objection during the five-
day review period, the Debtors will not proceed with obtaining
such letter of credit sans further Order from the Court. (Exodus
Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FARMLAND INDUSTRIES: S&P Cuts Rating to B- Over Liquidity Issues
----------------------------------------------------------------
On April 24, 2002, Standard & Poor's lowered its rating on
agricultural cooperative Farmland Industries Inc. to 'B-' and
placed the rating on CreditWatch with developing implications.
The downgrade was based on concerns about the company's
disclosure that it doesn't expect to be in compliance with its
financial covenant requirements of its credit facility on May
31, 2002, which could raise significant liquidity concerns. The
CreditWatch developing listing means the ratings could be
raised, lowered or affirmed depending upon the outcome of
Farmland's negotiations with lenders and Standard & Poor's
expectations for future operating performance.
While Standard & Poor's recognizes the recent improvement in
business conditions, we are concerned about the cooperative's
ability to fund its working capital and debt service
requirements over the intermediate term.
Farmland Industries is one of the largest agricultural
cooperatives in North America with about 600,000 members. The
firm operates in three principal business segments: fertilizer
production; pork processing, packing, and marketing; and beef
processing, packing, and marketing. The company also engages in
petroleum refining, feed manufacturing, and grain origination
and merchandising through its joint venture with Archer Daniels
Midland Co.
Standard & Poor's will continue to monitor developments and
discuss with management ongoing financial and business
strategies.
FEDERAL-MOGUL: Proposes to Reject Computer Lease Schedules
----------------------------------------------------------
Federal-Mogul Corporation and its debtor-affiliates propose to
replace virtually all of their leased computer equipment in
their North American operations. To this end, the Debtors urge
the Court to grant them authority to reject the majority of the
remaining Master Lease Schedules currently in place. The
Debtors ask to reject the lease schedules between the Debtors
and IBM and other Computer Equipment Lessors, particularly,
Computer Sales International (CSI), CIT/Newcourt, Toshiba/GE,
and Comdisco. The Debtors intend to reject the governing
agreements effective as of the date that the Debtors and IBM
return or make available to the Computer Equipment Lessor the
equipment being replaced. Specifically, the Debtors want to
reject 20 Master Lease Schedules with Comdisco, 31 with CSI, 3
with CIT, 4 with IBM and 2 schedules with Toshiba.
Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young &
Jones, P.C., in Wilmington, Delaware, submits that since the
Debtors no longer need the equipment subject to the Rejected
Master Lease Schedules, rejecting the Rejected Master Lease
Schedules is an appropriate measure that will transform roughly
$4,000,000, that would have been payable on an administrative
basis, into some amount of general unsecured claims. Although
the amount that the Debtors could owe pursuant to the Rejected
Master Lease Schedules might be as much as $4,000,000, the
Debtors do not anticipate that the Computer Equipment Lessors
will file $4,000,000 in general unsecured claims for the
rejected schedules. The equipment lessors have the duty to
mitigate their damages and lease the equipment subject to the
rejected lease schedule to the extent possible. Nevertheless,
even if the Debtors were to pay general unsecured claims in
full, they would still have at least $1,500,000 over the course
of the next three years by entering into the IBM agreement and
rejecting the said schedules.
Ms. Jones proposes that in order to facilitate an orderly
replacement of the equipment currently in place, and in order to
minimize the cost to the Debtors and their estates, the Debtors
anticipate giving up the computer equipment on a schedule-by-
schedule basis. That is, the Debtors will make the Computer
Equipment Lessors' equipment available to them once IBM has
replaced and repackaged all of the equipment contained on a
particular rejected Master Lease Schedule. Once the Debtors
either ship or make the equipment on a Rejected Master Lease
Schedule available to the respective lessors, or otherwise
indicated that a particular equipment has been lost or
destroyed, the Debtors or IBM will inform the Computer Equipment
Lessors that the particular schedule has been rejected as of
that date, and the Debtors will cease paying rent on an
administrative basis for the equipment.
Ms. Jones assures the Court that the Debtors do not seek to
sever provisions contained within a single agreement, or even
reject individual pieces of equipment on a given Master Lease
Schedule. In fact, the Debtors believe that they would be
entitled, as a matter of law, to sever each individual piece of
equipment from the applicable schedule and reject equipment
piece-by-piece because the Debtors and the Computer Equipment
Lessors specifically attribute separate consideration for each
individual piece of equipment contained in a Master Lease
Schedule. Rather than risking litigation over severing each
Master Equipment Lease Schedules piece-by-piece, thereby
delaying the implementation of the IBM agreement, the Debtors
are taking the more conservative approach of rejecting on a
schedule-by-schedule basis. The Debtors are not aware of any
reported decision that prevented a debtor from rejecting
equipment lease schedules individually. (Federal-Mogul
Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FLAG TELECOM: UST to Set Organization Meeting to Form Committees
----------------------------------------------------------------
The United States Trustee for Region II is close to scheduling
an organizational meeting for the purpose of forming one or more
official committees of FLAG Telecom Holdings Limited's
creditors. The date, time, and place of the meeting have yet to
be determined. Tracy Hope Davis, Esq. is the attorney for the
U.S. Trustee in charge of FLAG Telecom's Chapter 11 cases.
Contact the Office of the U.S. Trustee at 212-510-0500 for
additional details. (Flag Telecom Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
FORMICA CORP: US Trustee Appoints Official Creditors' Committee
---------------------------------------------------------------
Ms. Carolyn Schwartz, the United States Trustee appoints these
creditors to serve the Official Committee of Unsecured Creditors
on the chapter 11 cases of Formica Corporation and its debtor-
affiliates:
1) The Bank of New York as Indenture Trustee
5 Penn Plaza, 13th Floor
New York, New York 10001
Attn: Corey Barbarovich
Tel. No.: (212) 896-7258
2) Oaktree Capital Management, LLC
33 S. Grand Avenue, 28th Floor
Los Angeles, CA 90071
Attn: Desmond Shirazi, Managing Director
Tel. No.: (213) 830-6461
3) PPM America, Inc.
225 West Wacker, Suite 1200
Chicago, IL 60606
Attn: Joel Klein, Senior Managing Director
Tel. No.: (312) 634-2559
4) Norse CBO, Ltd.
c/o Regiment Capital Advisors
70 Federal Street
Boston, MA 02110
Attn: Timothy Peterson, President
Tel. No.: (617) 488-1600
5) International Paper Corp.
Corp Credit Dept.
6775 Lenox Centre Court
Memphis, TN 38115
Attn: Stephen Kite-Powell, Esq.
General Counsel, Packaging Division
Tel. No.: (901) 419-6148
Karen Rosen, Esq.
Lowenstein Sandler, PC
65 Livingston Avenue
Roseland, NJ 07068
6) Toppan Interamerica, Inc.
1131 Highway 155 South
McDonough, GA 30253
Attn: Taka Kurobe
Tel. No.: (770) 957-5060
7) DSM Melamine Americas, Inc.
9263 Louisiana Highway One South
Post Office Box 327
Addis, Louisiana 70710
Attn: Lloyd J. Tabary, General Counsel
Tel. No.: (224) 267-3466
Formica, together with its debtor and non-debtor-affiliates is a
preeminent worldwide manufacturer and marketer of decorative
surfacing materials. The company filed for chapter 11 protection
on March 5, 2002. Alan B. Miller, Esq., and Stephen Karotkin,
Esq., at Weil, Gotshal & Manges LLP represent the Debtors in
their restructuring efforts. As of September 30, 2001, the
Company reported a consolidated assets of $858.8 million and
liabilities of $816.5 million.
DebtTraders reports that Formica Corp.'s 10.875% bonds due 2009
(FORMICA1) are quoted at a price of 17. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=FORMICA1for
real-time bond pricing.
FRUIT OF THE LOOM: Judge Walsh Confirms 3rd Amended Joint Plan
--------------------------------------------------------------
At the conclusion of the Confirmation hearing on April 19, 2002,
Judge Walsh placed his stamp of approval on Fruit of the Loom's
Third Amended Joint Plan of Reorganization. There were no major
changes made to the Plan. To the extent not withdrawn or
resolved by stipulation or immaterial modification to the Plan,
Judge Walsh overruled all objections to Confirmation.
* * *
The Court-confirmed Plan embodies a series of interconnected and
interdependent settlements among the creditor constituencies,
Fruit of the Loom and its creditors, including the Dissident
Bondholders. The Amended Plan is premised upon the sale of
Debtors' reorganized Apparel Business, as a going concern, to
Berkshire Hathaway. It is also premised upon the liquidation of
the remaining Non-Core Assets of Fruit of the Loom for the
benefit of holders of Allowed Claims. NWI Land Management will
be separately liquidated.
The Amended Plan modifies distributions to Class 2 and former
Class 4A creditors. In addition, Class 4A is divided into two
Classes: Class 4C, which contains the claims of the Dissident
Bondholders, and a new Class 4A, which contains all other former
Class 4A Claims.
The distributions to Class 2 are reduced by $9,350,000, plus an
additional contingent reduction of $1,100,000. The Amended Plan
increases the distribution to former Class 4A (now Class 4A and
4C) in the aggregate amount of $17,000,000. Approximately
$7,650,000 is derived from an upward purchase price adjustment
for Berkshire. The balance comes from a reduction in the
distribution to Class 2 creditors. The distribution to the new
Class 4A is increased by $2,000,000. The distribution to the
new Class 4C is increased by $15,000,000.
Approximately $1,551,000 is reserved by the FOL Liquidation
Trust from the distributions otherwise made to holders of
Allowed Class 2 Claims, to fund the Farley Gross-up Reserve.
This reserve provides for payment to the Unsecured Creditors
Trust in case any disputed claim held by Mr. Farley is allowed
as a Class 4A Claim.
Additionally, the Plan resolves the dispute about the Allowed
Amount of the 7% Debentures. The new Plan provides for an
allowance of $90,750,629, which is the midpoint between the
amount sought by the Indenture Trustee and the amount calculated
by Fruit of the Loom. (Fruit of the Loom Bankruptcy News, Issue
No. 55; Bankruptcy Creditors' Service, Inc., 609/392-0900)
GT U.K.: Case Summary & 15 Largest Unsecured Creditors
------------------------------------------------------
Debtor: GT U.K. Ltd.
Centennium House
100 Lower Thames Street
London EC3R 6DL England, United Kingdom
fka Cheltrading 147 Limited
Bankruptcy Case No.: 02-11982
Type of Business: The Debtor is a Global Crossing Ltd.
affiliate.
Chapter 11 Petition Date: April 24, 2002
Court: Southern District of New York (Manhattan)
Judge: Robert E. Gerber
Debtors' Counsel: Harvey R. Miller, Esq.
Michael F. Walsh, Esq.
Paul M. Basta, Esq.
Weil Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
(212) 310-8772
Fax : (212) 310-8007
Estimated Assets: More than $100 Million
Estimated Debts: More than $100 Million
Debtor's 15 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
J.P. Morgan Chase Bank Bank Debt $2,250,000,000
Edmond DeForest (subject to
36th Floor adjustment in
New York, NY 10017 accordance with
(212) 270-9627 the guaranty
agreement)
Cable & Wireless Trade Debt $5,106,407
Sue Collins
Buckingham Road,
Betchley
Milton Keynes, MK3 5JL
United Kingdom
(+44) 01908 833262
TYCOM US, Inc. Trade Debt $2,142,204
Megan Donnelly
10 Park Avenue
Morristown, New Jersey 07960
(+1) 973-753-7658
Lucent Technologies Trade Debt $1,941,545
Accounts Department
P.O. Box 1168
1200 BD Hilversum,
Netherlands
(+31) 35 687 3111
Nortel Networks Trade Debt $439,221
UK Limited
Mark Savage
Oakleigh Road South,
New Southgate
London N11 1HB
United Kingdom
(+44) 020 8945 3087
Future Security Trade Debt $12,101
Services
RS Components Trade Debt $10,684
Limited
ADT Fire and Trade Debt $8,674
Security PLC
Duchy Of Cornwall Trade Debt $6,402
BT International Trade Debt $274
Federal Express Trade Debt $205
Biffa Wastes Services Ltd. Trade Debt $187
ANC Limited Cath Rowe Trade Debt $31
Cascade Springs Trade Debt $30
Water Company
Level 3 Communications Trade Debt -
Ltd.
GATEWAY INC: Lower Market Share Spurs S&P's B+ Credit Rating
------------------------------------------------------------
On April 24, 2002, Standard & Poor's lowered its corporate
credit rating on Gateway Inc. to 'B+' and removed it from
CreditWatch where it had been placed on March 1, 2002. Outlook
is stable.
Ratings on the San Diego, California-based Gateway reflect
extremely competitive industry conditions, diminished market
share, and operating losses, offset by a good financial profile
for the rating.
Gateway is one of the leading direct marketers of PCs and
related products and services. It has a good position in the
U.S. consumer market, but it has less geographic and product
line diversity than other major PC manufacturers. Gateway has
reduced its cost base and accelerated its strategic shift to
providing personalized technology solutions.
However, the company recently adopted a more aggressive pricing
and marketing strategy aimed at improving sales volumes and
market share. The current rating is based on Standard & Poor's
expectation that the company will restore operating
profitability in fiscal 2003. Gateway reported a net loss,
excluding special charges, of $132 million in 2001.
Gateway's good financial profile and the expectation of improved
cash flow levels in 2002 provide some cushion for weak near-term
financial performance. Minimal debt levels, including
capitalized operating leases, and cash and marketable securities
of more than $1 billion contribute to Gateway's strong financial
profile for the rating. Additional financial flexibility is
provided by a $300 million credit facility.
Outlook
The outlook reflects Standard & Poor's expectation that Gateway
will maintain adequate financial flexibility, including cash
balances of approximately $1 billion.
GENERAL DATACOMM: Wants to Extend Exclusivity through August 1
--------------------------------------------------------------
General DataComm Industries, Inc., along with its affiliated
debtors seek approval from the U.S. Bankruptcy Court for the
District of Delaware to further extend their exclusive periods
during which to propose and file a plan of reorganization and
solicit acceptance of that plan. The Debtors want to extend
their exclusive plan filing period through August 1, 2002 and
ask that their time to solicit acceptances of that plan run
through October 1, 2002.
The Debtors tell the Court that they have spent a significant
amount of time negotiating with and providing diligence to the
Committee and the Lenders. The Debtors have devoted substantial
amounts of time to facilitate their smooth transition into these
chapter 11 cases, stabilizing operation and taking several steps
specifically designed to maximize value for their estates and
creditors, the Debtors explain.
The Debtors believe that termination of their exclusivity at
this point would create an uncertain, chaotic environment, which
would disrupt their business. "The threat of a competing plan
would distract the attention of management and would also
undermine the Debtors' credibility with customers and vendors,"
the Debtors add.
General DataComm Industries, Inc., is a worldwide provider of
wide area networking and telecommunications products and
services. The Company filed for Chapter 11 protection on
November 2, 2001. James L. Patton, Esq., Joel A. Waite, Esq.
and Michael R. Nestor, Esq., at Young, Conaway, Stargatt &
Taylor, represent the Debtors in their restructuring effort.
When the Company filed for protection from its creditors, it
listed $64,000,000 in assets and $94,000,000 in debts.
GLOBAL CROSSING: Taps Debevoise & Plimpton as Special Counsel
-------------------------------------------------------------
Betty Sampsell, Janey Mahoney, Ken Bitter and Sarah Forrest, on
behalf of themselves and of all participants and beneficiaries
of the Global Crossing Employees Retirement Savings Plan, ask
the Court for limited relief from the Court's order granting
application to employ Debevoise & Plimpton as special counsel to
Global Crossing Ltd., and its debtor-affiliates.
Glen M. Connor, Esq., at Whatley Drake LLC in Birmingham,
Alabama, points out that the Court's order of March 25, 2002,
states that no objection to the application has been filed but
in fact, the applicants had timely filed an objection. The
objection was apparently not brought to the attention of the
Court at the time of presentment of the Debtors' application to
the Court.
Mr. Connor relates that the applicants do not object to the
retention of Debevoise but rather, object to the method of or
manner in which Debevoise will be paid. Specifically, the
applicants object to the apparently unlimited authority granted
to Debevoise to seek and obtain payment of fees and costs from
carriers of the Debtors' fiduciary insurance policies.
At the time of the filing of the applications and objection, Mr.
Connor informs the Court that the applicants had not had the
opportunity to review the Debtors' fiduciary and Directors and
Officers insurance policies. Since the filing of the
application, the applicants' attorneys have had the opportunity
to review the relevant portion of these policies, pursuant to an
agreement with counsel for the debtor. Based in part on that
review, the applicants believe that there are serious questions
as to whether the officers and directors who have been sued for
breach of their ERISA-imposed fiduciary duties should be
permitted, without limitations or oversight, to have their
defense costs paid via the fiduciary policies in the manner
contemplated in the application. The applicants seek the
opportunity to flush out these issues via placement of this
matter on the contested docket. In that context, that applicants
would file their briefing under the terms of a protective order
to be worked out with the Debtors. (Global Crossing Bankruptcy
News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
GRAPES COMMS: Schedules Unnecessary if Plan Confirmed by June 12
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
approves the request of Grapes Communications N.V./S.A. to
extend their time period to file its schedules and statements
until June 12, 2002. The Court also rules that in the event that
the Debtor's Plan is confirmed before June 12, 2002, the
requirement that the Debtor file its Schedules and Statement
shall be waived permanently.
Grapes Communications N.V./S.A. is a holding company with
subsidiaries that are alternative providers of telecommunication
services, primarily targeting small- and mediumsized businesses
in Italy and Greece. The Debtor filed for chapter 11 protection
on April 16, 2002. James L. Garrity, Jr., Esq. at Shearman &
Sterling represents the Debtor in its restructuring efforts.
When the Company filed for protection from its creditors, it
listed EUR251,097,012 in total assets and EUR308,102,397 in
total debts.
GREKA ENERGY: Receives Competing Bids for Potash Field Assets
-------------------------------------------------------------
Greka Energy Corporation (Nasdaq: GRKAE) announced that the
Company received on April 22, 2002 as scheduled numerous
competing bids from interested purchasers to acquire the
Company's interests in the Potash Field (Louisiana) for a price
within the Company's expectations. The Company will be
negotiating with the top qualified bidders over the next two
weeks in order to conclude a definitive sale. The Company
likewise expected bids from prospective purchasers to acquire
the Company's interests in the Richfield East Dome Unit
(California).
The Company has entered into a term sheet for up to $30 million
in secured financing to close by late May. This funding is the
first of a two-phase debt restructuring plan to be concluded
concurrently with the oil and gas asset sales resulting in a
significant improvement in the Company's liquidity and
operations.
The Company further explained that Nasdaq rules automatically
appended the fifth character "E" to Greka's trading symbol due
to the delay of the Form 10-K filing for the year-ended December
31, 2001. The "E" character will be removed upon the Company
filing its Form 10-K which is expected within ten business days.
The Company received notice that Nasdaq's minimum listing
requirements provided in Marketplace Rule 4310(C)(14) require
the Company to file its Form 10-K timely or its securities are
subject to delisting. The Company has filed the necessary
documents that automatically stay any potential delisting of the
Company's securities.
Mr. Randeep S. Grewal, Chairman, CEO & President, stated, "In
early March, management decided to implement a significant,
focused restructuring plan for conclusion in the second quarter
and further challenged the Company's resources to accomplish
this proactive plan in a very tight time frame. Within 45 days
of such announcement, we are well on our way toward achieving
material milestones that fulfill this important strategy, as
exemplified by the Potash bids received and the financing term
sheet executed. The Company is able to attain these aggressive
milestones in addition to their day-to-day operations because of
its invaluable employee work force that is committed to the
plan. Even with these extraordinary tasks, the Company is
operating at new levels, such as its all time high throughput
rate at its refinery of 3,600 barrels per day.
"With the 10-K expected to be filed within two weeks, the
temporary 'E' appendage to our stock symbol will be removed in
the short-term. Management anticipates that Nasdaq will take
into consideration factors that have contributed to the filing
delay of our Form 10-K such as the required participation of the
Company's former auditors and the Company's significant
restructuring first announced on March 4th resulting in material
changes to its ongoing operations."
Greka is a vertically-integrated energy company with primary
areas of activities in California and long-term in China. The
Company is principally focused on exploiting the high cash
margin created from the relatively stable natural hedge by its
crude production and the asphalt market in Central California.
INTEGRATED HEALTH: Premiere Panel Gets Okay to Hire Bayard Firm
---------------------------------------------------------------
The Premiere Committee in the chapter 11 cases of Integrated
Health Services, Inc., obtained Court approval to employ and
retain The Bayard Firm as its co-counsel in these cases.
The Court's order specifies that The Bayard Firm, as co-counsel
of the Premiere Committee, is authorized to provide legal advice
to the Premiere Committee and assist in the investigation of the
Premiere Committee, and the Firm's services are limited to:
1. Reviewing the business and legal relationships between
Debtors and the Premiere Group Debtors and their bankruptcy
estates for the purpose of determining:
* the advisability of substantive consolidation;
* the potential for, and cost/benefits of an action to avoid
the Premiere Group's guaranty of the IHS' Credit
Agreement and the stock pledge agreements entered in 1997
(the Bank Guaranty);
* commencement of an action to avoid the Bank Guaranty (the
Avoidance Actions) upon authorization by the Court;
* assisting the Premiere Committee in analyzing the
cost/benefits and probable success of actions against the
Directors and Officers of the Premiere Group; and
* commencement/prosecution of actions on behalf of the
Premiere Group Debtors and their bankruptcy estates
against the Directors and Officers of the Premiere Group
upon the authorization of the Court;
2. Valuation of the Premiere Group Debtors' businesses for
purposes of the Avoidance Actions, the Directors and
Officers Actions, and substantive consolidation of the
Debtors' cases;
3. Review of claims filed or asserted against the Premiere
Group Debtors and their bankruptcy estates, with the
exception of claims filed or asserted against the Premiere
Group Debtors by former clients of The Bayard Firm with The
Bayard Firm's assistance, and upon further authorization of
the Court, objections to the Claims;
4. Review of any and all debtor-in-possession financing or exit
financing solely as it relates to the Premiere Group Debtors
and their bankruptcy estates, including objections thereto;
5. Participate in the formulation of a plan or plans of
reorganization or liquidation relating to the Premiere Group
Debtors (but not to file any such plans without further
authorization of the Court);
6. Prepare on behalf of the Premiere Committee necessary
applications, motions, answers, orders, complaints,
objections, reports, and other legal papers relating to the
foregoing;
7. Review, analyze and respond to pleadings to determine
whether such pleadings pertain to the Premiere Group
Debtors, and appear in court to present necessary motions,
applications, objections, and pleadings and otherwise
represent the interests of the Premiere Committee to the
extent such pleadings pertain to the Premiere Group Debtors;
and
8. Engage in meetings, negotiations, discussions, and
communications with Debtors, any Official Committee
appointed in Debtors' cases, the Bank Group and other
parties in interest, relating solely to the foregoing.
The Debtors and the IHS Committee reserve the right to seek the
Court's permission, upon application after notice to The Bayard
Firm and other parties in interest, to allocate the charges of
The Bayard Firm among Debtors and the Premiere Group Debtors.
* * *
As previously reported, The Bayard Firm will be compensated on
an hourly basis, plus reimbursement of the actual and necessary
expenses that The Bayard Firm incurs, in accordance with the
ordinary and customary rates that are in effect on the date the
services are rendered.
The Bayard Firm's hourly rates range from $350 to $440 per hour
for directors, from $190 to $300 per hour for associates and
from $75 to $125 per hour for paralegals and paralegal
assistants. (Integrated Health Bankruptcy News, Issue No. 34;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
INT'L FIBERCOM: Court Okays Gerard Klauer as Financial Advisor
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Arizona gives its
authority to International Fibercom, Inc., and its debtor-
affiliates to employ the investment banking firm of Gerard
Klauer Mattison & Co., Inc. as their exclusive financial
advisor.
As financial advisor, Gerard Klauer intends to advise the
Debtors on:
a) alternatives with regard to the sale of the entire
company;
b) select assets or operating divisions or other
transactions that could cause change of control of the
Debtors;
c) assist the Debtors in valuation analysis of assets to be
sold;
d) assist prospective purchasers in conducting due
diligence investigations of the Debtors;
e) counsel the Debtors as to strategy and tactics for
discussions and negotiations with potential purchasers
and, if requested by the company, participate in such
discussions and negotiations;
f) advise the Debtors as to the structure and form of
proposed transactions;
g) assist the Debtors in evaluating bids and negotiating
final terms;
h) prepare pro forma financial projections and valuation
analyses related to combining the Debtors;
i) select assets or operating divisions with other entities
in the context of business combinations;
j) provide fairness opinions;
k) if necessary, assist the IFCI Entities in negotiating
and executing definitive agreements and filing
regulatory documents; and
l) assist the IFCI Entities in its negotiations with
creditors.
The Debtors agree to pay Gerard Klauer a transaction fee upon
any closing of any business combination and a portion of the
purchase price, based upon the purchase price, subject to a
minimum $750,000 transaction fee:
x) 2% on the first $50 million of the purchase price; plus
y) 1.5% on the next $100 million of the purchase price;
plus
z) 1% on any additional amounts of the purchase price in
excess of $150 million.
International Fibercom, Inc. resells used, refurbished
communications equipment, including fiber-optic cables. The
Company filed for chapter 11 protection on February 13, 2002.
Robert J. Miller, Esq. at Bryan Cave, LLP represents the Debtors
in their restructuring efforts.
JDN Realty: Fitch Affirms Low-B Senior Debt & Preferred Ratings
---------------------------------------------------------------
Fitch Ratings has affirmed its 'BB' rating for JDN Realty
Corporation's outstanding $235 million of senior unsecured debt,
its 'B+' rating for $50 million of outstanding preferred stock,
and has removed the ratings from Rating Watch Negative. The
Rating Outlook is Stable.
Fitch's ratings reflect the quality of JDN Realty's (NYSE: JDN)
core portfolio of discount and grocery anchored shopping
centers, financial strength of its anchor tenants, long
remaining lease terms, geographic diversification and solid
property fundamentals. The ratings are balanced by JDN's
sizeable development pipeline, near-term refinancing risk, and a
secured financing strategy, that limits the company's overall
financial flexibility.
Removal of the Rating Watch Negative status reflects the
settlement of JDN's class action lawsuit and recent resolution
to the SEC's investigation of prior management's undisclosed
compensation and financial restatement. The new management team
can now focus on its strategy of incorporating more grocery
anchored centers.
JDN's secured financing strategy is viewed as a rating
constraint, with a heavy reliance on its bank borrowings
comprised of a $150 term loan and a $150 million revolver ($80
million outstanding as of Dec. 31, 2001) that are collateralized
with approximately $500 million of stabilized JDN assets (market
value). The conversion of its bank debt to a secured facility
has reduced the quality and quantity of unencumbered assets. As
of year-end 2001, JDN exhibited a modest 1.1 times coverage of
unencumbered assets to total unsecured debt obligations.
While Fitch remains concerned with JDN's ability to meet its
near term debt maturities, specifically the $300 million secured
term loan and revolver, both due December 2002, and $75 million
of unsecured notes, subject to mandatory redemption in March
2003, a review of JDN's development pipeline and realization of
expected cash flow will provide additional financial
flexibility. Fitch believes JDN should be able to renew or
refinance its secured credit facility at expiration, potentially
with more favorable terms or lower collateral requirements.
However, the attainment of longer-term financial flexibility is
conditioned upon obtaining an unsecured line of credit, and
expanding its unencumbered asset base relative to unsecured debt
obligations.
JDN's development pipeline (total cost $265 million as of
December 31, 2001) is approximately 70% pre-leased and consists
of 21 projects, including 17 unencumbered projects. Based on
leases signed and projected completions as of year-end 2001,
Fitch estimates JDN's development pipeline should generate an
annualized $9 million of unencumbered net operating income (NOI)
by March 2003. In total, management projects its pipeline will
generate an additional $20 million of unencumbered NOI upon
stabilization.
JDN has a diversified tenant base, and its largest tenant
concentrations are Lowe's Companies (rated 'A', Rating Outlook
Stable by Fitch) representing 16% of total annualized base rents
and Wal-Mart (rated 'AA', Rating Outlook Stable) at 5% of total
annualized base rents. Operating performance has been solid in a
recessionary environment with relatively flat NOI growth and
stable occupancy at 95%, as of year-end 2001. The company's
lease maturity schedule is considered a credit strength with no
more than 7% (annualized base rents) of its leases maturing in
any one year over the next five years.
JDN's debt plus preferred to un-depreciated book capital is 55%,
and its interest and fixed charge coverage (including capital
expenditures and capitalized interest) are 1.9x and 1.7x,
respectively, and considered satisfactory for its ratings
category. Fitch continues to monitor the execution of JDN's
development pipeline, the seasoning of its new management team,
ability to incorporate more grocery anchor centers into its
portfolio, asset sales, and the use of mortgage and construction
financing.
JDN Realty Corporation specializes in the development and asset
management of retail shopping centers anchored by value-oriented
retailers (necessity item retailers). JDN owns and operates 100
shopping center properties containing approximately 11 million
square feet of gross leasable area (GLA) located within 20
states, as of February 2002. JDN had a total market
capitalization of $1.1 billion, as of year-end 2001.
KAISER ALUMINUM: Committee Looks to Houlihan Lokey for Advice
-------------------------------------------------------------
The Official Committee of Unsecured Creditors of Kaiser Aluminum
Corporation seeks the Court's approval to employ and retain
Houlihan Lokey Howard & Zukin Financial Advisors, Inc. as its
financial advisors in the Debtors' Chapter 11 cases, nunc pro
tunc to February 28, 2002. The Committee needs a financial
advisor to assist it in the critical tasks assigned with
analyzing and implementing critical restructuring alternatives
and to help guide the Committee through their restructuring
efforts.
William P. Bowden, Esq., at Ashby & Geddes in Wilmington,
Delaware, tells the Court that Houlihan Lokey is a nationally
recognized investment banking/financial advisory firm. Houlihan
Lokey provides investment banking and financial advisory
services and execution capabilities in a variety of areas,
including financial restructuring. The firm is one of the
leading investment bankers and advisors to debtors, bondholder
groups, secured and unsecured creditors, and other parties-in-
interest involved in financially distressed companies, both in
and outside of bankruptcy. The firms' financial restructuring
group will be providing the agreed-upon financial advisory
services to the Committee.
Mr. Bowden enumerates the services expected of Houlihan Lokey:
A. Evaluating the assets and liabilities of the Debtors;
B. Analyzing and reviewing the financial and operating
statements of the Debtors;
C. Analyzing the business plans and forecasts of the Debtors;
D. Evaluating all aspects of any DIP financing, cash collateral
usage and adequate protection, and any exit financing in
connection with any plan of reorganization and any related
budget;
E. Providing such specific valuation or other financial analysis
as the Committee may require in connection with the case;
F. Helping with the claim resolution process and related
distributions;
G. Assessing the financial issues and options concerning the
sale of any assets of the Debtors, either in whole or in
part, and the Debtors' plan of reorganization or any other
plan of reorganization;
H. Preparation, analysis and explanation of the reorganization
plan to various constituencies; and,
I. Providing testimony in court on behalf of the Committee, if
necessary.
Mr. Bowden informs the Court that both parties have agreed to
the following remuneration terms:
A. Monthly fee of $150,000 a month; provided, however, that,
during sustained periods of reduced activity, the Committee
has the right to cause Houlihan Lokey to temporarily reduce
its efforts on the Committee's behalf, and during such
period, charge a lower monthly fee at $75,000 a month;
B. Transaction fee equal to 2% of the Gross Recoveries if the
Gross Recoveries is between $500,000,000 and $600,000,000,
and 2.5% of the Gross Recoveries if it is above 600,000,000.
There will not be a Transaction Fee if the Gross Recoveries
are less than $500,000,000; and,
C. the reimbursement of all reasonable out-of-pocket expenses.
The Committee also agreed to indemnify and hold the firm
harmless against any and all losses, claims, damages or
liabilities in connection with the engagement, except to the
extent they arise as a result of any gross negligence, willful
misconduct, bad faith or self-dealing on the part of Houlihan
Lokey in the performance of its services.
According to Amit Patel, Vice President of Houlihan Lokey Howard
& Zukin Financial Advisors, Inc., the firm stands as a
disinterested person within the meaning of Section 101(14) of
the Bankruptcy Code. He does admit that, upon conducting a
conflict search in its client database, his firm has determined
that they have had previous relationships or have served
interested parties in the Debtors' Chapter 11 cases in unrelated
matters. These representations include:
A. The Debtors' Professionals Identified For Employment: Akin,
Gump, Strauss & Feld, LLP, Arthur Andersen, Heller Ehrman
White & McAuliffe LLP, Jones, Day, Reavis & Pogue, Lazard
Freres & Co., Logan Manufacturing;
B. Parties Significant Contracts With The Debtors: Nalco
Chemical Co.;
C. Other Parties in Interest (Including Joint Ventures): Enron
Corp.;
D. The Debtors and Their Non-Debtor Affiliates: Kaiser
Aerospace, Kaiser Resources, Kaiser Steel, Sequoia
Corporation;
E. Proposed Post-petition Lenders and Their Professionals:
Latham & Watkins;
F. Material Holders of the Debtors' Debentures and Their
Professionals: Aetna Life Insurance Annuity Company; Catholic
Health Initiative; CIGNA Corp., CIGNA Health Plans; Excelsior
Management; Mechanics Bank; Merrill Lynch, Oppenheimer,
Putnam Lovell, Spinnaker Industries, TCW Realty;
G. Parties to Material Litigation with the Debtors: AXA
Corporate Solutions (U.K.) Ltd., The Boeing Company. U.S.
Department of Justice; and,
H. The Debtors' Largest Unsecured Creditors, as Identified in
their Chapter 11 Petitions, and Other Material Trade
Creditors: Southern California Edison, Environ, Glencore
Nickel Pty., Ltd., Morgan Lewis & Bockius. (Kaiser Bankruptcy
News, Issue No. 6; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
KMART CORP: Wins Okay to Assume James Adamson's Employment Pact
---------------------------------------------------------------
Judge Sonderby grants Kmart Corporation the authority to assume
James B. Adamson's Services Agreement on an interim basis. The
provisions dealing with Sign-On Payment and Letter of Credit are
deemed final.
In a supplemental motion, J. Eric Ivester, Esq., at Skadden,
Arps, Slate, Meagher & Flom, in Chicago, Illinois, recounts that
Kmart previously named Mr. Adamson as Chief Executive Officer.
"Given his extensive business and restructuring experience,
including his knowledge of the Debtors' affairs as a Board
member since 1996, Mr. Adamson is particularly well qualified to
lead the Debtors through their restructuring efforts, and is the
best candidate at this time to serve as Kmart's Chief Executive
Officer," Mr. Ivester observes. Accordingly, the Debtors ask
the Court to approve Mr. Adamson's employment as Chief Executive
Officer effective as of March 11, 2002.
With his appointment as Chief Executive Officer, Mr. Adamson and
Kmart entered into an Employment Agreement. The principal
economic terms of the Employment Agreement are:
Term and
Duties: Mr. Adamson will provide services to Kmart for a
term that begins March 11, 2002 and
ends on April 30, 2004; provided, however, that the
term will be automatically extended for an
additional year on each anniversary of the
Effective Date, unless written notice of
non-extension is provided by either party at least
30 days prior to any such anniversary. As Chairman
of the Board and Chief Executive Officer of Kmart,
Mr. Adamson will have overall responsibility for
the general management of the affairs of Kmart.
Base Salary: Mr. Adamson is to be paid an annualized Base Salary
of $1,000,000. The Base Salary will be reviewed no
less frequently than annually for increases in the
discretion of the Board and the Board Compensation
Committee. The Base Salary, including any increase,
will not be decreased during the Term.
Incentive
Awards: Mr. Adamson is eligible for an annual bonus
under the annual incentive portion of the Debtors'
key employee retention plan. Mr. Adamson's Target
Bonus will be 125% of his then-current Base
Salary. He may be paid greater or less than the
Target Bonus depending upon the level of
achievement of performance goals. Following Kmart's
emergence from Chapter 11, Mr. Adamson will
participate in such annual and long-term cash and
equity-based incentive programs as the senior
executives of Kmart may participate in from time to
time.
Success
Payment: Upon the Restructuring Date, Mr. Adamson will
become entitled to a success payment. If the
Restructuring Date occurs on or prior to July 31,
2003, the Success Payment will equal $4,000,000;
thereafter, the amount of the Success Payment will
decrease daily by $7,299. If the Restructuring Date
occurs after April 30, 2004, no Success Payment
will be made. If, however, the Key Employee
Retention Plan, as finally adopted and approved,
contains target dates for payment of bonuses
related to emergence that are later than July 31,
2003 and April 30, 2004, then Kmart shall revise
the dates used for determining the actual amount of
the Success Payment in an equitable fashion to
reflect the terms and conditions of the Key
Employee Retention Plan; provided, however, such
dates will not reduce the amount of the Success
Payment to which Mr. Adamson would otherwise be
entitled.
Other
Employee
Benefit
Programs: Mr. Adamson will be entitled to participate in all
employee pension and welfare benefit plans and
programs made available to Kmart's senior-level
executives or to its employees generally.
Reimbursement
for Expenses,
Legal Fees: Kmart will reimburse Mr. Adamson for reasonable
expenses incurred by him in carrying out his duties
and responsibilities, for reasonable living
expenses while residing in the Detroit, Michigan
area, and for tax and financial advice during his
term of employment. Mr. Adamson will be entitled
to participate in all of Kmart's executive fringe
benefits. The inducement Payment will no longer be
subject to the repayment provisions contained in
the second sentence of Section 9(b) of the Initial
Adamson Services Agreement. The second sentence
required Mr. Adamson to repay Kmart a pro-rated
portion of the inducement Payment if, prior to
January 31, 2003, Kmart terminated Mr. Adamson for
cause or Mr. Adamson voluntarily resigned for a
reason other than a material breach of the Initial
Adamson Services Agreement by Kmart. For the period
March 11, 2002 to December 31, 2003, Kmart will
reimburse Mr. Adamson in cash for Mr. Adamson's
(and his spouse's) out-of-pocket health expenses
not covered by the benefits provided by his former
employer. Mr. Adamson will be entitled to six
weeks' paid vacation per year.
Gross Up
Payments: Kmart will provide additional payments to Mr.
Adamson to cover all applicable federal, state and
local income taxes and excise taxes when and to the
extent they become payable by Mr. Adamson with
respect to his use of Kmart or other private
aircraft, Kmart's provision of automobile
transportation and temporary housing, the reim-
bursement of his financial and tax counseling, and
the reimbursement of his living expenses. In
addition, if Mr. Adamson is assessed excise taxes
under Section 4999 of the Internal Revenue Code of
1986, as amended, with respect to any payment or
benefit, Kmart will pay to Mr. Adamson an
additional payment to cover such excise taxes and
any taxes payable on such additional payment.
Termination
of Services: If Mr. Adamson's services under the Employment
Agreement are terminated for any reason, Mr.
Adamson is entitled to receive a cash lump sum
payment equal to:
-- any accrued and unpaid Base Salary as of the
effective date of the termination,
-- any accrued vacation pay,
-- any unpaid annual bonus For the fiscal year
ending prior to the fiscal year in which the
termination occurs that would otherwise be
payable to Mr. Adamson if he remained employed
by Kmart,
-- all vested benefits accrued under any benefit
plans, programs or arrangements in which Mr.
Adamson participated, and
-- an amount equal to such reasonable and necessary
business expenses incurred by Mr. Adamson prior
to the effective date of the termination which
had not previously been reimbursed.
If Mr. Adamson's services under the Employment
Agreement are terminated:
-- by Kmart other than for disability or cause, or
-- by Mr. Adamson for good reason,
Mr. Adamson will be entitled to:
a) a cash lump sum payment for Base Salary and
Target Bonuses at their then-current amounts for
the remainder of the Term of the Employment
Agreement,
b) a cash lump sum payment of the prorated Target
Bonus for the then-current fiscal year,
c) if the Restructuring Date occurs following the
termination of his services and on or prior to
April 30, 2004 (or such later date if the terms
of the Success Payment are revised), a pro-rated
portion of the Success Payment he would have
been entitled to had he been performing services
under the Employment Agreement on the
Restructuring Date,
d) continued participation to the extent provided
in medical, dental, hospitalization and life
insurance coverage and in all other employee
welfare plans and programs in which he was
participating on the date of termination for a
period of two years following the effective date
of his termination; provided, that for any
portion of the two-year period which precedes
January 1, 2004, Kmart's obligation with respect
to medical, dental and hospitalization insurance
will be limited to reimbursing Mr. Adamson in
cash for Mr. Adamson's (and his spouse's)
out-of-pocket health expenses not covered by the
benefits provided by his former employer, and
e) any equity awards then held by and deferred
compensation or pension benefits accrued by Mr.
Adamson that are not vested and exercisable
will become fully vested and exercisable as of
the effective date of such termination.
If Mr. Adamson's services under the Employment
Agreement are terminated by Kmart for disability,
then Mr. Adamson will be entitled to:
-- payment of the Base Salary through the end of
the Term, and
-- payment of the pro-rated Target Bonus for the
then-current fiscal year.
If Mr. Adamson's services under the Employment
Agreement are terminated by Kmart for cause or by
Mr. Adamson without good reason, Mr. Adamson will
be entitled to the Base Salary through the end of
the month during which the effective date of
termination occurs.
Letter of
Credit: Promptly following this Court's approval of the
Employment Agreement, Kmart will revise the letter
of credit in the amount of $10,000,000 that was
previously established with respect to the Initial
Adamson Services Agreement so that it will be for
the purpose of satisfying Kmart's obligations under
the Employment Agreement. Kmart will cause the
letter of credit to be maintained in full force and
effect until emergence or such other date on which
Kmart's monetary obligations to Mr. Adamson will
have been satisfied in full.
Mr. Ivester tells the Court that the Employment Agreement is the
result of arms-length negotiations between Kmart and Mr.
Adamson, over the course of several weeks. "Kmart believes
that the terms of the Employment Agreement are reasonable and
appropriate under the circumstances, and are necessary to induce
Mr. Adamson, a highly-qualified business man, to serve as Chief
Executive Officer throughout these reorganization proceedings,"
Mr. Ivester says. (Kmart Bankruptcy News, Issue No. 15;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
METALS USA: Obtains Approval to Assume Wortham Insurance Pacts
--------------------------------------------------------------
Metals USA, Inc., and its debtor-affiliates obtained permission
from the Court to assume executory insurance contracts with John
L. Wortham & Son LLP, providing the Debtors insurance coverage
for their business operations and properties.
As Zack A. Clement, Esq., at Fulbright & Jaworski LLP in
Houston, Texas, informed the Court, as of January 14, 2002, the
pre-petition insurance premiums and fees that are due to Wortham
in connection with the contract were $258,166.14. Meanwhile,
the post-petition insurance premiums and commissions which will
become due under the Wortham contract through the conclusion of
the present two-year program on September 30, 2002 totals
$1,037,394.
Mr. Clement admitted that the Debtors defaulted for the sum of
$258,166 in their obligations to pay Wortham for pre-petition
insurance premiums and commissions. Thus, it was the Debtors'
intention to cure the prepetition default upon assumption of the
Insurance Agreements. (Metals USA Bankruptcy News, Issue No. 11;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
METROLOGIC INSTRUMENTS: Fails to Meet Nasdaq Listing Requirement
----------------------------------------------------------------
Metrologic Instruments, Inc. (NASDAQ: MTLGE, formerly MTLG), a
leading manufacturer of sophisticated imaging systems using
laser, holographic, camera and vision-based technologies, high-
speed automated data capture solutions and bar code scanners,
has received a Nasdaq Staff Determination letter, indicating
that the financial statements in its Annual Report on Form 10-K
for the year ended December 31, 2001 filed with the Securities
and Exchange Commission did not comply with Marketplace Rule
4310(C)(14) because it did not contain an audit opinion from its
independent auditor.
Accordingly, subject to a review of the Staff Determination,
Metrologic's securities are subject to delisting from the Nasdaq
Stock Market.
As permitted by the Nasdaq rules, Metrologic has requested a
hearing before a Nasdaq Listing Qualification Panel to review
the Staff Determination. As a result of this request, the
delisting has been stayed pending the Panel's determination. In
addition, Metrologic's ticker symbol on Nasdaq's National Market
has been changed to "MTLGE".
Since September 30, Metrologic has been in discussion with its
banks with respect to modifying its current credit facility.
Metrologic has at all times made all principal and interest
payments when due. In addition, Metrologic has maintained
positive cash flow from operations for five consecutive
quarters. Metrologic has reduced the bank debt under its credit
facility from approximately $37 million in January 2001 to
approximately $26.4 million at March 31, 2002. The current
situation results from a default of the technical provisions in
the bank credit agreements of certain financial covenants
involving the financial results of 2001. Metrologic and its
banks are in continuing negotiations with respect to the terms
of a new credit agreement or forbearance agreement.
Metrologic expects to report positive earnings for the first
quarter of 2002 ended March 31, 2002 on May 9, 2002. In
addition, Metrologic has recently reduced overhead, selling,
general and administrative expenses by more than $3 million on
an annualized basis that should further enhance earnings in
future quarters.
Metrologic expects to either enter into an agreement with the
banks for an asset-based arrangement or to enter into a
forbearance agreement, which will allow for sufficient time for
Metrologic to find more competitive credit financing. If
Metrologic is able to enter into a new credit agreement or
forbearance agreement, it expects to file an amendment to the
Form 10-K together with an unqualified audit opinion from its
auditors, and a reclassification of certain of its bank debt
from short-term liabilities to long-term liabilities.
Metrologic's Chairman and CEO, C. Harry Knowles stated, "We are
confident in the financial viability of Metrologic and are
working conscientiously and carefully towards a mutually agreed
upon solution with the existing bank group."
Metrologic designs, manufactures and markets bar code scanning
and high-speed automated data capture systems solutions using
laser, holographic, camera and vision-based technologies.
Metrologic offers expertise in 1D and 2D bar code reading,
portable data collection, optical character recognition, image
lift, and parcel dimensioning and singulation detection for
customers in retail, commercial, manufacturing, transportation
and logistics, and postal and parcel delivery industries. In
addition to its extensive line of bar code scanning and vision
system equipment, the company also provides laser beam delivery
and control systems to semi-conductor and fiber optic
manufacturers, as well as a variety of highly sophisticated
optical systems. Metrologic products are sold in more than 100
countries worldwide through Metrologic's sales, service and
distribution offices located in North and South America, Europe
and Asia.
NTL INCORPORATED: Bullish About Ongoing Recapitalization Talks
--------------------------------------------------------------
NTL Incorporated (OTC BB: NTLD) announced that contrary to press
reports published Wednesday regarding its recapitalization
process, it does not intend to file for Chapter 11 protection on
or ahead of April 29.
NTL stated that it believes that ongoing discussions with its
creditors continue to be both constructive and positive toward
reaching a successful agreement with all parties on a consensual
basis. Consistent with its previously announced agreement in
principle, the plan will allow NTL to reorganize and emerge
stronger and healthier, without affecting its operations.
The Company Tuesday filed with the Securities and Exchange
Commission a Form 8-K that included further details of its
agreement in principle with bondholders. The agreement in
principle contained various calculations that were based on the
working assumption of an April 29 filing, but do not require a
filing to occur at that time.
The Company will provide an update on the progress of its
negotiations as soon as material developments have been made.
More on NTL:
-- The company announced on April 16 that it had reached
an agreement in principle with an unofficial committee of a
majority of its public bondholders, to convert approximately
$10.6 billion in debt and receive $500 million in new financing.
-- NTL offers a wide range of communications services to
homes and business customers throughout the UK, Ireland,
Switzerland, France, Germany and Sweden.
-- In the UK, over 11 million homes are located within
NTL's fibre-optic broadband network, which covers nearly 50% of
the UK including, London, Manchester, Nottingham, Oxford,
Cambridge, Cardiff, Glasgow and Belfast. NTL Home now serves
around 3 million residential customers.
-- NTL Business is a (pound)600 million operation and
customers include Royal Bank of Scotland, Tesco, Comet, AT&T and
Orange. NTL offers a broad range of technologies and resources
to provide complete multi-service solutions for businesses from
large corporations to local companies.
-- NTL Broadcast has a 47-year history in broadcast TV and
radio transmission and helped pioneer the technologies of the
digital age. 22 million homes watch ITV, C4 and C5 thanks to
NTL's broadcast transmitters. With over 2300 towers and other
radio sites across the UK, NTL also provides a full range of
wireless solutions for the mobile communications industry.
NTL Incorporated Inc.'s 11.875% bonds due 2010 (NLI4),
DebtTraders reports, are quoted at a price of 42. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NLI4for
real-time bond pricing.
NATIONSRENT INC: Gets Open-Ended Lease Decision Period Extension
----------------------------------------------------------------
Rick S. Miller, Esq., at Ferry, Joseph & Pearce, P.A. in
Wilmington, Delaware, accords that VAC Enterprises, Inc. is the
owner of certain real property located at 3050-70 S.W. 46th
Avenue in Davie, Florida. By lease agreement dated September 14,
1998, VAC's predecessor-in-interest Villella Assets Corp.,
leased the property to NationsRent Inc.'s predecessor-in-
interest, Gold Coast Aerial Lift, Inc. for a 5-year term, with
three 5-year renewal options. The Debtors are obligated under
the terms of the lease to pay all taxes levied on the property.
On January 1, 2001, Mr. Miller relates that the Debtors sublet
the property to M&F Properties of Florida, LLC, under which the
sub-lessee paying the exact amount of rent for which the Debtors
were liable to VAC. In December of 2001, the sub-lessee remitted
to the Debtors a sum of money to pay the 2001 tax bill for the
property. It is not known what the exact sum remitted was
because the taxing authorities permit a reduction in payment
depending on how soon it is tendered. However, the final bill,
which is due on March 31, 2002, is $37,551.16 plus 6% sales tax.
To date, the Debtors have not paid the tax bill even though the
Debtors received the money from the sub-lessee to do so.
According to Mr. Miller, the sub-lessee also paid the January
2002 rent to the Debtors, in the amount of $14,133.33 including
sales tax but the Debtors have not paid the January 2002 rent to
VAC. Beginning with the February 2002 rent, with the Debtors'
consent, the sub-lessee began paying rent directly to VAC.
However, the sub-lessee has recently indicated that it may
vacate the premises.
VAC has contacted the Debtors and demanded that the Debtors turn
over the tax payment and the January 2002 rent but to date the
Debtors have failed or refused to do so. Mr. Miller submits that
VAC does not object to the rejection of the lease and sublease.
However, such rejection should be contingent upon the VAC's
disgorgement of the January 2002 rent and the tax payment which
were received by the Debtors from the sub-lessee.
The result of the rejection of this lease is a windfall to the
Debtors, to the detriment of VAC. Mr. Miller contends that the
Debtors would be unjustly enriched if permitted to retain the
benefits of the tax payment and the January 2002 rent payment.
The tax payment and the June 2002 rent do not constitute estate
property but instead, are impressed with a constructive trust in
favor of VAC.
Mr. Miller submits that the Debtors have decided to reject the
lease which is understandable given the fact there was a pass
through sublease and the Debtors derived no economic benefit
from the lease. If permitted to retain the funds at issue, the
Debtors would reap a benefit to which they otherwise would not
be entitled, and for which they have provided no consideration.
Equity and good conscience cannot countenance such a result
especially where the windfall is achieved at the expense of the
Landlord which is deprived of one month's rent and is faced with
a substantial tax bill which, if not paid, would result in a tax
lien.
Mr. Miller explains that a traditional maxim of equity is one
who seeks equity must do equity. Here, the Debtors seek to avail
themselves of the benefits of the Bankruptcy Code by rejecting
the lease, but have not agreed to turn over funds, which are not
rightfully theirs. The Court should decline to enter the relief
the Debtors seek unless and until they disgorge the tax payment
and the January 2002 rent received from the sub-lessee.
Cypress Objects
The Cypress Landlords, consisting of Cypress/NR I LP, Cypress/NR
Lakeworth I LP, and Cypress/NR Lewisville I LP, are lessors of 3
certain nonresidential real properties currently occupied by the
Debtors as tenants.
Tara L. Lattomus, Esq., at Saul Ewing LLP in Wilmington,
Delaware, request that the Court modify the Debtors' proposed
procedures and require the Debtors to assume or reject the
Cypress Landlord's respective Leases within a limited time frame
so as to avoid undue prejudice to the Cypress Landlords. An
open-ended extension of time for the Debtors to decide whether
to assume or reject the Leases is particularly burdensome to the
Cypress Landlords because each of the Cypress Landlords has
financing obligations regarding the properties at issue in the
Leases that are due to mature in the near future. The Cypress
Landlords ability to refinance the properties is directly
dependent on whether the Debtors or their assignees will remain
in place by assumption of the lease or will vacate the premise
upon rejection.
Ms. Lattomus suggests that each Debtor-Tenant issue its decision
to assume or reject the lease at issue, and if rejecting the
lease, vacate the respective location by the proposed rejection
date as follows:
Lease Location Maturity Date Rejection and Vacate
Deadline
--------------- -------------- --------------------
Round Rock, TX June 15, 2002 April 15, 2002
Lake Worth, FL Jul 11, 2002 May 15, 2002
Lewisville, TX Nov 14, 2002 Sept 15, 2002
In sum, Ms. Lattomus requests approximately sixty days notice of
the respective Debtor's decision prior to the maturity date of
each Cypress Landlord's own financial obligation. She maintains
this is a reasonable and fair accommodation to the Debtor.
Lloyd Wells Entities Object
According to John D. McLaughlin, Jr., Esq., at Young, Conaway,
Straight & Taylor, LLP, in Wilmington, Delaware, it is
unreasonable to extend the deadline to assume or reject for
unspecified duration because it is materially adverse to the
landlords, including the objectors to manage their properties.
To the extent that the court will entertain such motion, the
timeframe ought to be limited.
2700 Properties Objects
John D. McLaughlin, Jr., Esq., at Young, Conaway, Straight &
Taylor, LLP, in Wilmington, Delaware, claims that the extension
of the deadline is materially adverse to 2700 Properties in that
it is incapable of any advanced business planning so long as the
Debtors' election remains an open issue. However, 2700
Properties agrees to the requested extension so long as the
Debtors would agree to provide six months notice of its intent
to reject the lease such that they could take steps to mitigate
their losses, he says.
Loomers Object
Stephen P. Doughty, Esq., at Lyons, Doughty & Veldhuis, P.C. in
Wilmington, Delaware, avers that the extension deadline for an
unlimited duration would prejudice W.G. Loomer, Jr. and Daisy G.
Loomer's ability to properly manage their property and engage in
advance business planning.
* * *
Judge Walsh convened a hearing on April 2, 2002 to consider the
Debtors' motion to extend the deadline within which they must
elect to assume, assume and assign, or reject unexpired non-
residential property leases. The Debtors had previously asked
that the deadline be extended through the date on which the
Chapter 11 plan is confirmed.
The Court granted the Debtors a 90-day extension -- to May 16,
2002 -- to make decisions about those leases that are currently
the subject of a Landlord's objection.
The Court granted the Debtors an open-ended extension to the
confirmation date of the Chapter 11 plan for the other property
leases. (NationsRent Bankruptcy News, Issue No. 9; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
NETZEE INC: Richard Eiswirth Steps Down as Chief Fin'l Officer
--------------------------------------------------------------
Netzee, Inc. (Nasdaq: NETZ), a leading provider of integrated
Internet banking products and services and Internet commerce
solutions, said that Richard S. Eiswirth has decided to leave
the company to pursue other interests. His departure is
effective April 30. Jarett Janik, Vice President of Finance and
Controller, will assume Eiswirth's responsibilities.
"Rick has played an integral role in helping to restructure our
company and put it on sound financial footing," said Donny R.
Jackson, chief executive officer. "Thanks in large part to his
financial guidance, our company last week reported its second
consecutive quarter of positive EBITDA and, excluding the
settlement of a lawsuit, our first quarter of positive cash
earnings. As a result, we are well positioned to focus on
customer service and product innovation in the months ahead. We
understand Rick's desire to pursue new challenges and we wish
him well in his endeavors."
"My tenure as CFO of Netzee has been both challenging and
rewarding," Eiswirth said. "Now that Netzee is realizing the
benefits of our restructuring plan, the timing is right for me
focus on new horizons. I leave knowing the company is moving
solidly in the right direction."
Jarett Janik has been Vice President of Finance and Controller
at Netzee since its inception in August of 1999. Previously,
Janik played key roles in the completion of the Company's
initial public offering, the construction of its Finance and
Accounting department, and the recent restructuring efforts.
From 1992 to 1999, prior to joining Netzee, Janik held various
financial and operational positions with Atlanta based Crawford
& Co., a multi-national independent risk management and
insurance services firm, as Assistant Vice President. Janik
graduated from the University of Denver and holds an MBA degree.
"Jarett is a financial and managerial professional who has
excelled here at Netzee," Jackson said. "We are confident of
his ability to continue to provide quality financial guidance
for our company in his expanded role."
Netzee provides financial institutions with a suite of Internet-
based products and services, including full-service Internet
banking, bill payment, cash management, Internet commerce
services, custom web design and hosting, branded portal design,
access to brokerage services, targeted marketing and
implementation and marketing services. Netzee was formed in
1999 as a subsidiary of The InterCept Group, Inc., and as the
successor to a company founded in 1996. Netzee became a public
company in November 1999. The company's stock is traded on the
Nasdaq National Market under the symbol NETZ. Further
information about Netzee is available at http://www.netzee.com
* * *
As previously reported, Netzee has reached agreements that
extend the termination date of its credit facility and the
required repurchase date of its preferred stock into 2003.
The company reached an agreement to amend its credit facility
with InterCept, Inc. and John H. Harland Company to extend the
maturity date to April 10, 2003. In exchange for this
extension, the amount available under the credit line was
reduced to $18 million from $19.6 million, and Netzee agreed to
pay a fee of $100,000 to InterCept and a $20,000 fee to Harland.
The facility originally was due to mature in November 2002.
At the same time, the company also reached an agreement with the
holders of its Series B preferred stock to defer until April 10,
2003, their option to require the company to repurchase the
preferred stock. The option will become exercisable immediately
if the indebtedness under Netzee's credit facility is
accelerated. The option previously was exercisable on June 15,
2002. In connection with this agreement, Netzee agreed to pay
the preferred shareholders an extension fee of $501,000.
ONSITE ACCESS: Cogent Communications Acquires Select Assets
-----------------------------------------------------------
Cogent Communications Group, Inc., (Amex: COI) a Tier One,
optical ISP announced that it acquired a significant portion of
the portfolio of real estate access agreements from OnSite
Access, Inc., a BLEC communications provider that filed Chapter
11 in May, 2001 in the United States Bankruptcy Court for the
Southern District of New York.
An overwhelming majority of the access agreements selected by
Cogent pertain to buildings located in New York City. Also
included are select buildings located in Dallas, Philadelphia,
San Francisco, and Chicago.
"Having the ability to individually select building access
agreements to perfectly complement our existing portfolio really
adds value to this deal," said Dave Schaeffer, Chief Executive
Officer, Cogent Communications. "Acquisitions such as this one
really help to accelerate our business plan and shorten the
length of time between initiating contact with the building
owner and actually providing service to the owner's tenants."
The deal will add an additional 16 Million square feet to
Cogent's portfolio of over 3,400 building access agreements
totaling close to one billion square feet of space. The
buildings selected from OnSite Access were all previously
qualified as Cogent targets for high speed Internet access. Many
of the buildings already have tenants that have placed orders
with Cogent, but access agreements had yet to be negotiated with
the owners.
Cogent Communications (Amex: COI) is a next generation optical
ISP focused on delivering ultra-high speed Internet access and
transport services to businesses in the multi-tenant marketplace
and to service providers located in major metropolitan areas
across the United States. Cogent's signature service offered to
commercial end-users of 100 Mbps for $1,000 per month, offers
100 times the observed bandwidth of a T-1 connection at
approximately two-thirds of the cost. The Cogent solution makes
ultra-high speed Internet access an affordable reality for small
and medium-sized businesses, as well as large enterprises and
service providers. Cogent's facilities-based, all-optical end-
to-end IP network enables non-oversubscribed 100 Mbps and 1000
Mbps connectivity for radically low, unmetered pricing levels.
Cogent's network consists of a dedicated nationwide multiple OC-
192 fiber backbone, multiple intra-city OC-48 fiber rings, and
optically-interfaced high-speed routers. Cogent has been
recognized as the first IP+Optical Cisco Powered Network (CPN).
Cogent acquired the U.S. operations of PSINet and is now
servicing 33 metropolitan markets with services ranging from T1
and T3, to 100 Mbps and 1,000 Mbps Internet connectivity. Cogent
Communications is headquartered at 1015 31st Street, NW,
Washington, D.C. 20007. For more information, visit
http://www.cogentco.com Cogent Communications can be reached at
(202) 295-4200 or via email at info@cogentco.com
OWOSSO CORP: Falls Below Nasdaq Continued Listing Standards
-----------------------------------------------------------
Owosso Corporation (Nasdaq: OWOS) announced that The Nasdaq
Stock Market has determined to delist the company's common stock
from The Nasdaq SmallCap Market because the company did not meet
either the minimum $2,000,000 net tangible assets requirement or
the minimum $2,500,000 stockholders' equity requirement for
continued listing set forth in Marketplace Rule 4310(C)(2)(B).
In addition, the company's common stock has not met the
continued listing requirement that the bid price be a minimum of
$1 per share pursuant to Marketplace Rule 4310(C)(4). Owosso
has requested a hearing before a Nasdaq Listing Qualifications
Panel to review the Staff Determination. The hearing request
will defer the delisting of the company's securities pending the
Panel's decision. There can be no assurance the Panel will
grant the company's request for continued listing.
In the event the company's common stock is delisted from Nasdaq,
such securities would become subject to certain rules of the SEC
relating to "penny stocks." Such rules require broker-dealers
to make a suitability determination for purchasers and to
receive the purchaser's prior written consent for a purchase
transaction, thus restricting the ability to purchase or sell
the securities in the open market. In addition, trading, if
any, would be conducted in the over-the-counter market on the
OTC Bulletin Board, which was established for securities that do
not meet Nasdaq listing requirements, or in the so-called "pink
sheets." Consequently, purchasing and selling the company's
common stock would be more difficult because smaller quantities
of securities could be bought and sold, transactions could be
delayed, and the initiation or continuation of security analyst
coverage and news media coverage of Owosso may be reduced.
These factors could result in lower prices and larger spreads in
the bid and ask prices for the company's common stock.
The company also announced that as a result of the Job Creation
and Worker Assistance Act of 2002, the company has been able to
recover federal tax refunds by carrying back recent net
operating losses to earlier years in which the company paid
federal income taxes. The total federal tax refund is expected
to amount to approximately $5.0 million, of which $4.6 million
has already been received. The tax refunds are being used to
reduce the Company's outstanding bank debt, having the effect of
increasing stockholders' equity by approximately $4.3 million.
Owosso is a manufacturer of engineered component motor products.
Owosso has manufacturing facilities in three states and its
products are sold nationwide.
To receive additional information on Owosso Corporation visit
Owosso's Web site at http://www.owosso.com
PACIFIC GAS: Signs-Up Dr. Shanker as Expert Witness & Consultant
----------------------------------------------------------------
Pursuant to sections 327(a) and 328 of the Bankruptcy Code,
Pacific Gas and Electric Company seeks the Court's authorization
to employ Roy J. Shanker, Ph.D., as an expert witness and
consultant, nunc pro tunc to January 1, 2002, in connection with
a 12-year Power Sales Agreement to be entered by Gen and
Reorganized PG&E pursuant to the Debtor's Plan of
Reorganization.
Specifically, PG&E seeks to employ Dr. Shanker to provide
consulting services regarding the justness and reasonableness of
the PSA in accordance with Section 205 of the Federal Power Act.
In their efforts to restructure PG&E as provided in the Plan,
the Plan Proponents have filed an application with the Federal
Energy Regulatory Commission for acceptance of the PSA as just
and reasonable under Section 205 of the FPA.
The Proponents expect that Dr. Shanker will provide consulting
services regarding the justness and reasonableness of the terms
of the PSA in accordance with Section 205 of the FPA.
Dr. Shanker is a widely recognized, well-established consultant
with an excellent track record in PG&E's industry. Dr. Shanker
has expertise in the area of large scale power sales contracts
and has been involved in the negotiation, analysis, review and
litigation of hundreds of power sales agreements. PG&E seeks to
have Dr. Shanker provide the services contemplated because of
his general experience and qualifications and, in particular,
his extensive knowledge of the electric utility industry
restructuring and his familiarity with PG&E's business and
operations.
Dr. Shanker has provided testimony before the FERC in connection
with the Proponents' regulatory filings of November 30, 2001.
Specifically, Dr. Shanker submitted written testimony to the
FERC in support the Proponents' application under Section 205 of
the FPA seeking approval of the PSA.
However, having retained Dr. Shanker only several weeks prior to
the November 30 hearing, after the date on which the initial
application to employ consultants had been filed, the Proponents
inadvertently did not include Dr. Shanker among the consultants
whose employment had been sought in the various applications
that PG&E filed and previously and approved after a hearing on
November 30, 2001, namely The Brattle Group, NERA Economic
Consulting, Lexecon Inc., Charles River Associates and Brown,
Williams, Moorhead & Quinn, Inc. (See prior entry [00283].) As
the Court indicated that PG&E would need the Court's approval to
retain further consultants, PG&E now seeks a separate
application for the retention of Dr. Shanker. PG&E anticipates
that it may be necessary to employ and retain certain additional
Consulting Firms to perform additional discrete tasks in
connection with PG&E's regulatory obligations and/or in aid of
PG&E's efforts to confirm the Plan.
Compensation
In order to assure that Dr. Shanker would be reimbursed for
services rendered prior to January 1, 2002 in connection with
the FERC matters, PG&E Corporation has assumed liability for
those services. The total amount incurred by Dr. Shanker for
such services does not exceed $40,000.
Dr. Shanker will receive professional fees at his normal hourly
rates, as adjusted from time to time, and be reimbursed for
costs on the same terms as generally apply to work Dr. Shanker
performs for other (nonbankruptcy) clients, subject to the
Court's Guidelines regarding compensation and reimbursement of
professionals. In 2001, Dr. Shanker charged an hourly rate of
$400 per hour, and in 2002, he charges an hourly rate of $425
per hour.
Dr. Shanker's Connections
Dr. Shanker declares he is not an equity security holder of the
Debtor or of any affiliate of the Debtor, including without
limitation PG&E Corp. Dr. Shanker also declares that, to the
best of his knowledge, he has not provided and is not providing
services to any officer or director of Debtor, its parent, or
its affiliates, and he does not hold any financial interests in
the Debtor, its parent, or its affiliates.
Dr. Shanker reveals that, in addition to providing services to
the Debtor for which the approval of the Court is being sought
in the current application, he has performed or am performing
the following services to the Debtor or the following affiliates
of the Debtor:
* PG&E National Energy Groun (NEG):
In the past he has provided consulting services to NEG on
litigation matters concerning its East Coast operations and with
respect to an arbitration several years ago concerning a
California facility that was never built. These matters, now
concluded, did not involve services related to the California
energy crisis. Currently, Dr. Shanker is providing NEG with
consulting services with regard to the restructuring of
wholesale power markets of the New York Independent System
Operator (NYISO) and the Pennsylvania, New Jersey and Maryland
Office of Interconnection (PJM) as well as with regard to an
arbitration matter in Texas. Dr. Shanker these consulting
services do not involve services related to the California
energy crisis and he will not provide services to NEG in
connection with the PG&E bankruptcy case.
* PG&E Energy Trading Company (PGET):
Dr. Shanker was retained several months ago to consult PGET with
respect to an overcharge litigation filed by a residential
consumer against PGET and several other defendants. This
litigation remains active. However, Dr. Shanker has not been
asked to provide any services in the matter for several months.
Moreover, PG&E is not a participant in this litigation. Also,
Dr. Shanker's services with respect to this litigation do not
relate to the Debtor's bankruptcy or the Plan. Dr. Shanker
covenants he will not provide services to PGET in connection
with the PG&E case.
In addition, Dr. Shanker discloses that he previously provided
consulting services to Enron with respect to the technical
modeling of the physical operation of the electric utility
system in the Northeast. These consulting services, now
concluded, did not involve services related to the California
energy crisis. Dr. Shanker covenants he will not provide
services to Enron in connection with this case.
Dr. Shanker also discloses that he has provided and currently
provide consulting services to Duke Energy North America and
Duke Energy Trading with regard to the restructuring of
wholesale power markets of the NYISO and the PJM. These
consulting services do not involve services related to the
California energy crisis. Again, Dr. Shanker covenants he will
not provide services to Duke in connection with the PG&E
bankruptcy case.
With respect to connections with professionals, Dr. Shanker
tells the Court he has provided or currently provide services
for clients that use certain law firms representing parties in
the PG&E case, including Latham & Watkins, Milbank, Tweed,
Hadley & McCoy and Skadden, Arps, Slate, Meagher & Flom. Dr.
Shanker believes that these relationships do not have any
relevance to his contemplated role in the PG&E case.
Notwithstanding the connections identified in the Declarations,
PG&E believes that Dr. Shanker should be considered
disinterested and should not be deemed to hold or represent any
interest adverse to the estate. (Pacific Gas Bankruptcy News,
Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PETROSURANCE CASUALTY: S&P Revises Fin'l Strength Rating to R
-------------------------------------------------------------
Standard & Poor's revised its financial strength rating on
Petrosurance Casualty Corp. to 'R' after learning that the
Oklahoma County District Court granted Insurance Commissioner
Carroll Fisher's petition to place the company into
receivership.
The ruling was based upon finding that Petrosurance is insolvent
by $5.2 million.
Petrosurance is an Arlington, Texas-based insurer that writes
primarily workers' compensation insurance for contractors that
service the oil and gas industry in West Texas, Oklahoma,
Louisiana, and Kansas. The company commenced operations in 1975.
When Standard & Poor's affirmed its double-'Bpi' financial
strength rating on Petrosurance on March 3, 2000, Standard &
Poor's cited the company's marginal operating performance and
earnings and its vulnerable liquidity.
An insurer rated 'R' is under regulatory supervision owing to
its financial condition. During the pendency of the regulatory
supervision, the regulators may have the power to favor one
class of obligations over others or pay some obligations and not
others. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
PSINET INC: Hearing on Disclosure Statement Set for May 9, 2002
---------------------------------------------------------------
On May 9, 2002 at 2:00 p.m. prevailing Eastern Time, or as soon
thereafter as counsel may be heard, Judge Gerber will convene a
hearing to consider approval of the proposed Disclosure
Statement filed by PSINet, Inc. and its debtor-affiliates with
respect to the their Joint Liquidating Plan of Reorganization.
Objections to the Disclosure Statement, if any, must be filed by
May 3, 2002 and served on:
(1) Wilmer, Cutler & Pickering, 2445 M Street, N.W., Washington,
D.C. 20037-1420, Attention: Craig Goldblatt, Esq., and
Wilmer, Cutler & Pickering, 520 Madison Avenue, New York,
New York 10022, Attention: Andrew N. Goldman, Esq., counsel
to the Debtors;
(2) Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New
York, New York 10019, Attention: Scott K. Charles, Esq.,
counsel to the Official Committee of Unsecured Creditors and
(3) the Office of the United States Trustee, 33 Whitehall
Street, New York, New York 10004, Attention: Paul K.
Schwartzberg, Esq.,
Only those objections that are timely filed and served will be
considered at the hearing.
Prior to filing the Disclosure Statement, the Debtors sought and
obtained the Court's approval of the notice procedures for the
hearing to consider approval of their proposed disclosure
statement with respect to their proposed joint liquidating plan
of reorganization.
The Court has waived the requirement under Rule 2002(d) of the
Bankruptcy Rules that the Equity Holders be served with the
Disclosure Statement Notice by the Debtors. The Debtors have
convinced the Court that attempting to notify all Equity Holders
would be impracticable and wasteful, given the proposed
treatment of the Equity Holders under the Plan and the sheer
size of the Equity Holders class.
PSINet Inc. is a public company whose common and Series C
preferred stock were traded on the NASDAQ national markets
system prior to their suspension of trading, the Debtors
explain. As of April 3, 2001, PSINet Inc. had in excess of 190
million shares of common stock outstanding, with the number of
Equity Holders believed to number in the tens of thousands, most
of them currently unknown to the Debtors. The remaining Debtors
are either directly or indirectly owned by PSINet Inc. However,
these remaining Debtors are not public companies. Under the
Plan, the Equity Holders are to receive no distribution and will
be deemed to have rejected the Plan.
Pursuant to section 1125(b) of the Bankruptcy Code, Bankruptcy
Rules 2002 and 3017, the Court ordered that on at least twenty-
five days' notice (plus three days for mailing pursuant to Rule
9006(f) of the Bankruptcy Rules), notice of the Disclosure
Statement Hearing in substantially the form of the proposed
"Disclosure Statement Notice" shall be filed and served by first
class mail, in accordance with Bankruptcy Rule 3017(a), upon
(i) all creditors that have either filed proofs of claim in
these Chapter 11 cases or that are scheduled in the Debtors'
Schedules of Assets and Liabilities,
(ii) all persons who have filed notices of appearance and
requests for service of pleadings in these Chapter 11 cases
pursuant to Bankruptcy Rule 2002,
(iii)the Official Committee of Unsecured Creditors,
(iv) the Office of the United States Trustee,
(v) the Internal Revenue Service and
(vi) the Securities and Exchange Commission.
If a claim has been transferred, the Debtors shall mail the
Disclosure Statement Notice only to the entity which is listed
on the Claims Register maintained by the Claims Agent for the
Clerk of the Bankruptcy Court as the current holder of such
Claim as of the date of mailing of such Notice. (PSINet
Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
REPUBLIC TECH: Inks Pact to Sell All Assets to KPS & Pegasus
------------------------------------------------------------
Republic Technologies International LLC, the nation's leading
supplier of special bar quality steel, said that it has signed a
non-binding letter of intent to sell substantially all its
assets to RTI Acquisition Corporation, a new company formed by
KPS Special Situations Fund L.P. and Pegasus Partners II L.P. to
acquire Republic.
The letter of intent is subject to higher and better offers, and
Republic intends to file a motion in the U.S. Bankruptcy Court
in Akron to formalize a procedure for reviewing this and other
purchase offers. Republic is working toward a May 31 target
date to obtain court approval of the sale and close its
transaction.
"We are pleased that we were able to use the time provided to us
by the United Steelworkers of America and our lenders to develop
a restructuring solution and preserve the business," said Joseph
F. Lapinsky, president and chief executive officer of Republic.
Terms of the transaction will be included in filings to be made
with the bankruptcy court. In accordance with Section 363 of the
Bankruptcy Code, other companies will have an opportunity to
submit bids through a court-supervised bidding process.
Republic intends to ask the bankruptcy court to assign a near-
term deadline for the submission of other bids, as well as dates
for an auction and a hearing at which the successful bid would
be approved. The estimated value of the KPS/Pegasus transaction,
including cash and the assumption of liabilities, is
approximately $450 million.
As part of the letter of intent, KPS and Pegasus have reached a
successor labor agreement with the USWA based in substantial
part on the agreement that was part of the Republic contract
ratified by Steelworker employees in January. This successor
labor agreement will result in reduced hourly employment costs.
"Our letter of intent with KPS and Pegasus demonstrates the
improving value of Republic's business," said Lapinsky. "We are
generating positive cash flow as a result of lower costs,
improving pricing and improving demand. We have also secured
cost reductions from our hourly and salaried workforce and from
our suppliers. Meanwhile, President Bush's decision to
implement tariffs on foreign steel has helped us in the
marketplace. All of these contributions together have made
Republic a much more attractive business today than we were a
year ago.
"We are committed to the course that will enable us to best
serve our creditors and customers, save jobs, protect our
suppliers and benefit the communities where Republic operates."
Any sale of assets would need to have the approval of the
bankruptcy court.
KPS Special Situations Fund, L.P. -- http://www.kpsfund.com--
is a $210 million private equity fund focused on constructive
investing in turnarounds, restructurings, bankruptcies and other
special situations. Based in New York, KPS seeks to realize
significant capital appreciation by making controlling equity
investments in companies engaged in manufacturing,
transportation and service industries challenged by the need to
effect immediate change. This transaction would be the fourth
bankruptcy-related acquisition completed by KPS in two years.
Pegasus Partners II, L.P. is managed by Pegasus Capital
Advisors, L.P., a Greenwich, Conn.-based private equity
investment firm that manages approximately $800 million of
capital. To date, Pegasus has invested in 26 companies in a
broad array of industries. The firm primarily looks to invest
in companies that are (i) undergoing or likely to undergo
restructurings, reorganizations or liquidations, including those
under federal bankruptcy laws, (ii) in financial distress or
(iii) adversely impacted due to other discrete events.
Republic Technologies International, based in Fairlawn, Ohio, is
the nation's largest producer of high-quality steel bars. With
nearly 4,000 employees and 2001 sales of approximately $1
billion, Republic was included in Forbes magazine's 2001 and
2000 lists of the largest U.S. private companies. Republic has
plants in Canton, Massillon, and Lorain, Ohio; Beaver Falls,
Pa.; Chicago and Harvey, Ill.; Gary, Ind.; Lackawanna, N.Y.;
Cartersville, Ga.; and Hamilton, Ont. The company's products are
used in demanding applications in the automotive, agricultural,
aerospace, off-highway, industrial machinery and energy
industries.
SAFETY-KLEEN: McKinsey & Co. Continues Yellow Business Polishing
----------------------------------------------------------------
Safety-Kleen Corporation asks Judge Walsh to approve a Letter
Agreement and an Indemnity Agreement with McKinsey & Company,
Inc.
Since October 22, 2001, a McKinsey team led by Mohan
Giridharadas in Dallas, Texas, has been assisting the Debtors
with the development and implementation of a restructuring plan
for the Yellow Business. The Yellow Business includes parts
cleaner services and other specialized services to automotive
repair, commercial and manufacturing customers. The focus of
McKinsey's work has been assisting that division by:
(i) improving sales force productivity,
(ii) reducing selling, general and administrative costs,
(iii) optimizing the logistics function, and
(iv) identifying growth opportunities.
As part of their overall plan to restructure their operations,
the Debtors have focused on, among other things, improving the
revenue generated by the Yellow Business while simultaneously
implementing a plan to significantly reduce expenses and improve
operational effectiveness. To that end, the Debtors analyzed
the Yellow Business' management system, SG&A performance,
personnel training, logistics efficiency, and overall
performance.
After identifying the possibility of restructuring the Yellow
Business to improve revenue flow while decreasing operational
expenses and analyzing their options in those regards, the
Debtors concluded that the best option was to facilitate
achieving such goals was to hire McKinsey to assist the Debtors
with developing and implementing a formal restructuring plan.
McKinsey is a management consulting firm which has a worldwide
clientele and extensive experience in helping clients tackle
challenging and complex management issues. McKinsey began
providing services to the Debtors on October 22, 2001, in the
ordinary course of business. The original engagement, which
expired on January 11, 2002, focused on identifying significant
opportunities in the Yellow Business and developing a plan for
resolving certain critical deficiencies. At the conclusion of
the initial engagement, however, it became clear that further
progress and improvements could be made in several additional
operational activities, which developments would substantially
aid the Debtors in their concentrated effort to successfully
emerge from bankruptcy. Thus, another proposal was solicited
from McKinsey to expand and intensify the breadth and depth of
the assistance they would provide in connection with the
development and implementation of a more global restructuring
plan. However, due to the escalating amount of aggregate fees,
and out of an abundance of caution, the Debtors now seek
authority from Judge Walsh to enter into the Agreements with
McKinsey.
The Agreements
The salient terms of the Agreements are:
(a) Services. Under the Agreements, McKinsey will provide
certain services to the Debtors to accelerate improvement in
economic performance, including, but not limited to:
(1) improving sales force productivity,
(2) reducing SG&A costs,
(3) optimizing the logistics functions, and
(4) identifying growth opportunities.
(b) Improving Sales Force Productivity. The effort will
involve both identifying target accounts in each market to be
assigned to individual account representatives and utilizing
sales force specific tools to track the progress of accounts
through the sales process. Performance management tools also
will be implemented to track the efficiency and the
effectiveness of such progress.
(c) Reducing SG&A Costs. To accelerate the reduction of
SG&A costs, McKinsey will analyze the organizational structure
of major functions within the company. As part of the analysis,
McKinsey will generate options to eliminate redundant or low-
value activities; identify alternatives; and define the skills
required for pivotal jobs within each function.
(d) Optimizing the Logistics Function. McKinsey will
create a baseline of the current transportation costs by
movement and geography. This will provide the foundation for
improving the utilization of the fleet while identifying
opportunities to rationalize the network facilities.
(e) Identifying Growth Opportunities. McKinsey will
explore growth options outside of the current product and
service line by assessing the market potential for new products
and services that can leverage the Debtors' core strengths of a
nationwide network and strong customer relationships. As part of
the evaluation, the team will prioritize growth opportunities
based on the size of the opportunity and the level of resources
required to capture the opportunity.
(f) Indefinite Date. The Indemnity Agreement is
effective as of October 22, 2001, the date the services
commenced, and is for an indefinite term.
(g) Term. Either party, however, may terminate the
services to be provided pursuant to the Agreements upon prior
written notice to the other. In the event of any termination,
the Debtors' sole responsibility shall be to pay the
professional fees and related expenses that McKinsey earned or
incurred through the effective date of termination.
(h) Pricing. The professional fees for the engagement are
$575,000 per month. Expenses for items such as lodging, meals
and report production are estimated at 15% of fees and are
reconciled with actual expenses on a periodic basis.
(i) Indemnification. The Debtors will indemnify and hold
harmless McKinsey (including its affiliates) and the directors,
officers, stockholders, agents and employees of McKinsey (and
such affiliates) from and against all claims, liabilities,
losses, damages, and expenses as incurred, joint or several,
relating to or arising out of the services. The Debtors,
however, shall not be liable to the extent that any loss is
determined by an arbitration or otherwise to have resulted
primarily from the gross negligence, willful misconduct, or bad
faith of any Indemnified Persons toward the Debtors in the
performance of the services.
The Debtors' Arguments
Section 363(c)(1) of the Bankruptcy Code provides that a debtor-
in-possession may enter into a transaction "in the ordinary
course of business, without notice or a hearing, and may use
property of the estate in the ordinary course of business
without notice or a hearing." Additionally, section 105(a) of
the Bankruptcy Code permits this Court to "issue any order,
process, or judgment that is necessary or appropriate to carry
out the provisions of [the Bankruptcy Code.]" The Debtors tell
Judge Walsh they believe that the entry into, and performance
under, the Agreements constitute transactions in the ordinary
course of business, within the meaning of section 363(c)(1),
that do not require prior Court approval. Nevertheless, out of
an abundance of caution and because the nature and extent of the
Agreements are clearly of tremendous importance to the Debtors,
their creditors, and other parties-in-interest in these chapter
11 cases, the Debtors determined it appropriate to file and
provide notice of this Motion.
J. Gregory St. Clair, Esq., at Skadden, Arps, Slate, Meagher &
Flom, says that in this case there is more than adequate
business reason to enter into the Agreements. The Debtors
identified numerous areas for improvement, such as SG&A
performance, management systems, training processes and
logistics network, which areas the Debtors believe will enable
the Yellow Business to become more profitable and, ultimately,
successfully emerge from bankruptcy.
After significant analysis, the Debtors realized that the
revenue generated by the Yellow Business could be enhanced if
the Debtors were able to improve areas constrained by certain
internal deficiencies. Thus the Debtors focused on the need to
(i) transform the revenue creation engine through realigning
resources with opportunities, installing performance management
systems, and implementing high-quality personnel evaluation and
training processes; (ii) use cost reduction tools to improve the
SG&A performance; (iii) strengthen the logistics organization by
developing low-cost options for transportation and third-party
waste disposal; and (iv) identifying new revenue opportunities
to accelerate the growth of the Yellow Business.
The Debtors investigated the best approach to develop and
implement a restructuring plan for the Yellow Business to make
the operations of that division more economically and
competitively viable. Toward that end, the Debtors sought a
consulting firm that had familiarity with the operations and
financial situation of the Debtors and had extensive experience
in implementing successful restructuring plans. The Debtors
concluded that the best approach would be to expand McKinsey's
role.
The Debtors additionally determined that it would be cost-
effective to hire McKinsey. Due to the Debtors' continuing
focus on streamlining their operations and updating their
operating and financial systems and controls, the Debtors are
faced with restraints on the availability of internal manpower.
Furthermore, implementation of the restructuring plan for the
Yellow Business requires highly skilled professionals able
solely to focus on promptly and efficiently identifying
operational weaknesses and effectuating improvements. The
Debtors believe that McKinsey is the best choice.
In sum, the Debtors have determined, in the exercise of their
business judgment, that the Debtors' entry into the Agreements
is both necessary to restructure the Yellow Business and in the
best interests of the Debtors, their estates, their creditors
and other parties in interest in these cases. Accordingly, the
Debtors request that Judge Walsh authorize the Debtors entry
into the Agreements with McKinsey. (Safety-Kleen Bankruptcy
News, Issue No. 34; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
SIMPLIFIED EMPLOYMENT: Judge Shapero Confirms Chapter 11 Plan
-------------------------------------------------------------
United States Bankruptcy Judge Walter Shapero cleared the way
for Auburn Hills, Michigan-based Simplified Employment Services,
Inc. to emerge from Chapter 11 bankruptcy protection, by
approving a reorganization plan. Simplified Employment filed
for bankruptcy protection on July 9, 2001 and has been operating
under court supervision since then. At the time of filing, the
company was hours away from shutting down.
"This is a new beginning and an opportunity for this company to
once again become an industry leader," said court-appointed CEO
Joseph J. Whall, a forensic accounting specialist and fraud
investigator who has guided the company through bankruptcy.
"Starting immediately, we will work to create a new, stronger
company. That company will be committed to being a good
corporate citizen, serving all clients with the highest level of
quality and integrity."
Whall's plan, approved by Judge Shapero, enables Simplified
Employment, once the nation's largest privately held
Professional Employer Organization (PEO), to settle claims with
its creditors. Simplified Employment entered into bankruptcy
after several federal agencies raided the company's headquarters
in connection with the investigation of alleged criminal
activity by the company's former owners.
"It gives me much satisfaction to see that, after 10 months of
developing a plan and seeking approval from all parties, we will
be able to pay the 6,000 hard working middle-class Americans who
are owed payroll checks, insurance claims and 401(k)
contributions," said Whall. "We also look forward to welcoming
back tens of millions of dollars in business from customers who
have vowed to me that they will return to us, as a new company,
once we emerge from Chapter 11."
In recent weeks, Simplified Employment reached an agreement with
the Internal Revenue Service on a payment schedule for back
taxes and penalties. That agreement removed the most significant
hurdle in the effort to propel Simplified Employment from
bankruptcy. Since filing for Chapter 11, Simplified Employment
has remained a viable business, paying all of its taxes.
"I want to thank our employees, who are the best in the PEO
business, and our customers who have remained with us through
this often challenging time," Whall emphasized.
SPALDING HOLDINGS: Consummates Debt & Equity Structure Workout
--------------------------------------------------------------
Spalding Holdings Corporation, the parent company of Spalding
Sports Worldwide, Inc., consummated a transaction with holders
of approximately 95% of its outstanding 10-3/8% senior
subordinated notes and its principal stockholders, resulting in
a recapitalization of its debt and equity structure. The
bondholders exchanged their existing notes for a substantial
portion of the shares of common stock of the company and new
senior subordinated notes issued by a subsidiary of the company
in a principal amount equal to 50% of the principal amount of
the 10-3/8% notes. At the same time, the company's name was
changed to "SHC, Inc.," and its senior credit facilities were
amended.
"We are delighted that the restructuring transaction has
closed," said Jim Craigie, Spalding's President and Chief
Executive Officer. "While we will be offering our remaining
bondholders the opportunity to participate in our new capital
structure in the near future, the transaction with 95% of our
bondholders is now complete. The recapitalization has positive
effects on both our balance sheet and cash flow, and will
enhance our ability to compete in the golf and sporting goods
businesses. Our bondholders, banks and owners who appreciate the
value associated with our terrific brands, joined forces to help
Spalding restructure. This is tremendous news for Spalding."
"Spalding has great franchises in the golf and sporting goods
industries, and we are pleased to be on board," stated Matt
Barrett, Managing Director of Oaktree Capital Management, LLC,
the Los Angeles-based firm that now controls a majority equity
interest in Spalding. "The changes made to Spalding's capital
structure, together with the continuity of its management team,
will strengthen Spalding's ability to succeed in an increasingly
competitive business environment."
Spalding Sports Worldwide is the nation's first full-line
sporting goods company. Its leadership and innovative products
have led to revolutionary breakthroughs in virtually every major
sporting goods category. Under the Spalding umbrella are the
STRATA, TOP-FLITE, ETONIC, BEN HOGAN, and DUDLEY brands. To find
more information on Spalding, visit our Web site at
http://www.spalding.comor call the Consumer Relations
Department at 800-SPALDING (772-5346).
TECH LABORATORIES: Obtains Waiver of Default Under 6.5% Notes
-------------------------------------------------------------
Tech Laboratories, Inc. (OTC Bulletin Board: TCHL) has entered
into an amendment to its Redemption and Conversion Agreement,
dated January 11, 2002, pursuant to which it obtained a waiver
and thereby cured the existing Event of Default under its
outstanding 6.5% convertible promissory notes.
In consideration for the waiver and cure of the Event of Default
existing under the notes, the company paid the noteholders an
aggregate of $110,000. The company and the noteholders agreed
that the payment would reduce the outstanding balances under the
notes provided the registration statement filed by the company
on April 5, 2002, covering the shares underlying the notes was
declared effective on or before June 29, 2002. Although the
company is otherwise required under its agreement with the
noteholders to have an effective registration statement covering
the shares underlying the notes, the noteholders allowed the
company, through June 29, 2002, to have the new registration
statement declared effective.
Bernard M. Ciongoli, President of the company, stated, "We are
pleased to have cured the Event of Default and, now, to have the
opportunity to have our registration statement declared
effective." The outstanding balance presently due under the
notes is $1,090,665.
The noteholders further agreed that the company could redeem the
notes in three installments provided no future Event of Default
exists at the time of the redemption and provided the company
pays the first installment, on or before July 1, 2002, of an
aggregate of $325,000 plus an additional $90,000 either in cash
or shares of common stock at the then market price. The company
would make each of the second and third equal installments of
half of the remaining balance due under the notes on or before
September 30 and December 30, 2002, respectively, together with
an additional amount equal to 25% of each installment in cash or
stock, at the company's option. The noteholders agreed to
extend the maturity dates of the notes to December 30, 2002,
provided such payments are timely made. With payment of the
first installment, and continuing so long as the second and
third payments are made, the noteholders would have no further
right to convert their notes into shares of common stock, unless
the shares of the company's common stock trade for any 5 out of
10 trading days at $1.25 per share or more.
While the company is under no obligation to redeem the notes
commencing with the July 1 payment, TechLabs president Bernard
M. Ciongoli further stated, "We are pleased that a mutually
satisfactory agreement has been reached that will allow us to
focus on our business and give us some ability to seek the
necessary financing."
Tech Laboratories, Inc. is the owner of the DynaTraX(TM) Digital
Matrix Switch Technology which is a protocol independent digital
network management tool. It resides between the equipment side
and distribution side of a network and allows for the simple
management of entire network structures and multiple remote
networks, all from a single desktop workstation.
Tech Laboratories, Inc., through its subsidiary, Tech Logistics,
Inc., also manufactures and sells an infrared perimeter
intrusion detection system for security and anti-terrorist
activities.
For more information on Tech Laboratories, please visit the
company's Web site at http://www.techlabsinc.com
TECSTAR: Committee Signing-Up Young Conaway for Legal Services
--------------------------------------------------------------
The Statutory Committee of Unsecured Creditors appointed in the
chapter 11 cases involving Tecstar, Inc. and Tecstar Power
Systems, Inc., seeks permission from the U.S. Bankruptcy Court
for the District of Delaware to employ Young Conaway Stargatt &
Taylor, LLP as its counsel, nunc pro tunc to February 19, 2002.
The Committee will look to Young Conaway:
a) to consult with the Committee, the Debtors, and the U.S.
trustee concerning the administration of these chapter
11 cases;
b) to review, analyze and respond to pleadings filed with
this Court by the Debtors and to participate in hearings
on such pleadings;
c) to investigate the acts, conduct, assets, liabilities,
and financial condition of the Debtors, the operation of
the Debtors' businesses, and any matters relevant to
these chapter 11 cases in the event, and to the extent,
required by the Committee;
d) to take all necessary actions to protect the rights and
interests of the Committee, including negotiations and
preparation of documents relating to any plan of
reorganization and disclosure statement;
e) to represent the Committee in connection with the with
the exercise of its powers and duties under the
Bankruptcy Code and in connection with these chapter 11
cases;
f) to perform all other necessary legal services in
connection with these chapter 11 cases.
Young Conaway will charge its customary hourly rates for legal
services:
a) Robert Brady $400 per hour
b) Brendan Linehan Shannon $380 per hour
c) Maribeth L. Minella $220 per hour
d) David M. Saxman $120 per hour
(paralegal)
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. 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 assets of over $10 million and
debts of over $50 million.
TELEGLOBE INC: BCE Inc. Cuts-Off Long-Term Funding
--------------------------------------------------
BCE Inc. will cease further long-term funding to Teleglobe Inc.
This decision is based on a number of factors, including:
Teleglobe's revised business plan and outlook with associated
funding requirements; a pragmatic assessment of Teleglobe's
prospects; and, a comprehensive analysis of the state of the
industry. BCE will provide only short-term periodic funding to
Teleglobe, on terms and conditions satisfactory to BCE, up to a
maximum aggregate amount of between US$100 million and US$125
million so that Teleglobe can provide continuing customer
service and fund other operations-related needs while it reviews
its options for the future, including possible business
combinations and restructuring.
Jean C. Monty, Chairman and Chief Executive Officer of BCE said,
"Given the dramatic and continuing slide in the data and long
haul marketplace, it was incumbent on management to conduct a
pragmatic assessment of Teleglobe's operations and future
prospects. Faced with a difficult situation, we have taken
action in the best interests of our shareholders and customers.
We believe the steps we have announced [Wednes]day will assist
Teleglobe in ensuring customer service, in the short term, while
seeking strategic alternatives."
The revised outlook provided by Teleglobe's management no longer
meets the objectives of break-even free cash flow by 2003 and
the prospect for "value recovery" of this investment, and the
market prospects for data are not expected to improve in the
foreseeable future. BCE provided C$550 million (US$350 million)
of funding since December 2001 and will now provide only short-
term periodic funding, on terms and conditions satisfactory to
BCE, up to a maximum aggregate amount of between US$100 million
and US$125 million.
It is expected that Teleglobe Inc. will explore possibilities
for a business combination and will enter into negotiations with
its debt holders to restructure its debt. There can be no
guarantee that Teleglobe will be successful in any of these
efforts, and it might have to consider a court- supervised
proceeding.
It is likely that in the event of a business combination or a
restructuring, BCE's position in Teleglobe would eventually be
materially diluted.
Consistent with BCE's ongoing review of the carrying value of
its assets, the Company expects to take an impairment charge, in
the second quarter of 2002. The total aggregate amount is
expected to be between $7.5 billion-$8.5 billion, relating
principally to Teleglobe.
BCE is Canada's largest communications company. It has 23
million customer connections through the wireline, wireless,
data/Internet and satellite services it provides, largely under
the Bell brand. BCE leverages those connections with extensive
content creation capabilities through Bell Globemedia which
features some of the strongest brands in the industry - CTV,
Canada's leading private broadcaster, The Globe and Mail,
Canada's National Newspaper and Sympatico-Lycos, the leading
Canadian Internet portal. As well, BCE has extensive e-commerce
capabilities provided under the BCE Emergis brand. BCE shares
are listed in Canada, the United States and Europe.
TELEGLOBE INC: Exploring Various Financial Restructuring Options
----------------------------------------------------------------
Teleglobe Inc. said that in light of the decision by BCE Inc.
(TSE/NYSE: BCE) to cease long-term funding to Teleglobe, the
Company is now pursuing a range of financial restructuring
alternatives, potential partnerships and business combinations.
"Like many others in our industry, we are affected by the
structural over-capacity and continuing price collapse," stated
Charles Childers, Teleglobe's President. "We are facing these
issues head on, and pursuing all viable options. During this
period we expect to continue to satisfy our customers," he
added.
To reach a rapid resolution of its situation the company has
taken the following steps:
- In response to a request by Teleglobe, BCE stated it is
prepared to provide short-term funding on terms and conditions
satisfactory to BCE, of up to a maximum aggregate amount of
between US $100 million and US $125 million so that Teleglobe
can provide continuing customer service and fund other
operations-related needs while Teleglobe reviews its
alternatives;
- Teleglobe has retained an investment banking firm to
assist in the evaluation and pursuit of all viable options;
- Teleglobe has accepted the resignation of all BCE-
affiliated board members and appointed Paul Farrar and J. Bruce
Terry, to join H. Arnold Steinberg as independent members of its
board;
- Teleglobe intends to retain Crossroads, LLC, an
international consulting firm, to advise the Company as it
evaluates restructuring initiatives. John G. McGregor,
Principal, will be the lead consultant.
Teleglobe also said that it anticipates discussions with its
banks and bondholders to keep them apprised of the process.
Teleglobe Reports First Quarter Financial Results
Teleglobe Inc.'s total revenue was US $317 million in the first
quarter, compared with US $334 million for the three months
ended March 31, 2001. Voice revenue was US $218 million in the
first quarter of 2002 compared with US $233 million in the first
quarter of 2001. Pricing pressures continued to affect voice
revenues, partially offset by an increase in voice traffic
carried through Teleglobe Inc.'s network. Data revenues in the
first quarter of 2002 were US $85 million versus US $101 million
for the same period in 2001. The US $16 million decrease in data
revenues was mainly the result of continued price
commoditization. Additionally, Teleglobe Inc. had
US $14 million of capacity sales, which were recognized on a
one-time basis in the first quarter of 2002.
EBITDA for the quarter was US $17.3 million, down from US $19.1
million for the comparable three-month period in 2001. The net
loss from continuing operations for the three months ended March
31, 2002 totaled US $34 million. The net loss from continuing
operations for the three months ended March 31, 2001 was US $78
million, excluding a US $1.3 billion write-down from
discontinued operations recorded in the first quarter of 2001.
On
April 8, 2002 the Company closed the sale of the North American
operations of Excel to an affiliate of VarTec Telecom, Inc. for
US $227.5 million in the form of five-year interest-bearing
promissory notes. Excel's U.K. operations, which were not a part
of the sale transaction, were shut down in 2001.
Teleglobe Inc. provides advanced connectivity services to
Internet service and content providers, business customers and
carriers around the world. It provides these services through
digital, ATM, IP, satellite and fibre networks around the globe.
VINTAGE PETROLEUM: S&P Rates Proposed $250MM Debt Issue at BB-
--------------------------------------------------------------
Standard & Poor's assigns its 'BB-' rating to Vintage Petroleum
Inc.'s $250 million Note Issue.
Ratings on Vintage Petroleum Inc. reflect the company's
participation in the volatile independent oil and gas
exploration and production (E&P) industry, an aggressive
financial profile, and significant political risk associated
with Argentina, which accounts for about 35% of Vintage's
production. These risks are partially offset by operating
flexibility provided by Vintage's long-lived reserve base.
Vintage's reserve base (535 million barrels of oil equivalent
(boe) at year-end 2001; 62% oil; 63% proved developed; 36% North
American) is large and geographically diverse, relative to those
of its peers. While Vintage has historically realized prices in
excess of $3.00 per boe below the benchmark West Texas
Intermediate (WTI) crude, the company has offset this discount
by operating rather cheaply, with five-year average pretax cash
costs less than $8.50 per boe.
Before the May 2001 acquisition of Genesis Exploration Ltd.,
Vintage had historically been a thrifty purchaser of reserves,
acquiring a substantial South American position in Argentina,
Bolivia, and Ecuador at less than $2.00 per proved boe. In the
near term, Standard & Poor's expects the company to curtail
acquisition activity unless funded primarily by equity until
significant deleveraging has occurred. Although Vintage does
have a significant inventory of relatively low-risk infill
drilling opportunities, the company has slashed its capital
budget for 2002 to keep spending within projected cash flow and
will likely be unable to replace 2002 production through the
drillbit. As a result, production is expected to decrease from
2001 levels by about by 3% to 4% in 2002 and will likely
decrease further in 2003 due to the budgetary constraints of
2002. Capital spending in 2002 will be focused in the U.S. and
Canada.
Vintage's leverage ballooned following its $617 million debt-
financed Genesis acquisition. The company has identified asset
sales in Ecuador and Trinidad, which require significant
additional investment and which Vintage does not currently
produce meaningful volumes to generate cash for debt reduction.
Primarily through these asset sales, management expects to reach
its target total debt to total capitalization of 50% by year-end
2002. However, if the sales do not occur or occur at prices well
below current expectations, Standard & Poor's expects that
leverage would remain well above this level through 2003 as a
result of the impact of the company's considerably reduced
capital budget on future production over the near term.
If asset sales do not happen and commodity prices retreat to
historical norms, total debt to earnings before interest, taxes,
depreciation, amortization, and exploration (EBITDAX) will
likely be more than 5 times (x). Profitability measures will
also be challenged, with expected 2002 EBIT interest coverage
struggling to reach 1.5x, and funds from operations to total
debt likely to range between 15% and 20% assuming $19 per barrel
WTI crude oil prices and $2.25 per mcf NYMEX Henry Hub-traded
natural gas prices. Financial flexibility is rather limited,
given Vintage's availability of about $120 million senior
secured bank credit facility.
Outlook
The negative outlook reflects continued uncertainty regarding
the fiscal regime in Argentina, limited internal financial
flexibility, and a likely continued decline in production
through 2003 due to a starkly reduced 2002 capital budget.
Significant further deterioration in any of these conditions
could lead to a downgrade of Vintage's ratings. Conversely,
management's ability to deliver on its rather aggressive plan to
apply proceeds from asset sales and cash flow generated by
stronger than currently expected oil and natural gas prices
could restore ratings stability.
WARNACO: Court Okays Sale of Murfreesboro Property to Swatson
-------------------------------------------------------------
Judge Bohanon approves The Warnaco Group, Inc.'s sale of its
Murfreesboro property to Swatson Development, LP for $3,025,000,
it being the best and highest offer received by the Debtors
during the Auction.
Furthermore, Judge Bohanon authorizes the Debtors to:
(a) apply the net proceeds of the sale of the Property in
accordance with the provisions of the Order (I)
Authorizing Debtors to Obtain Post-Petition Financing,
including Execution of Credit Agreement and Grant Liens
and Priority Administrative Expense Status, (II) Approving
Use of Cash Collateral and Granting Adequate Protection,
and (III) Scheduling Final Hearing on Post-Petition
Financing and Approving Form and Manner of Notice;
(b) pay Tennessee Industrial Properties, LLC the Termination
Fee of $60,000 from the proceeds of the sale of the
Property upon the Closing or in a manner consistent with
the Sale Agreement;
(c) return the deposit amount of $215,000 for the Property to
Tennessee Industrial Properties in the manner consistent
with the Stalking Horse Sale Agreement;
(d) pay Keen Realty, LLC a commission of $90,750 from the
proceeds of the sale;
(e) pay Colliers Martin Turley Tucker Company a commission of
$90,750 from the proceeds of the sale; and
(f) pay Swatson Realty, LLC, as a third party broker, a
commission of $90,750 from the proceeds of the sale.
The Order became effective on April 18, 2002. (Warnaco
Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
XEROX CORP: Moving Forward with Debt Restructuring Negotiations
---------------------------------------------------------------
Xerox Corporation (NYSE: XRX) reported on first-quarter
performance that reflects continued improvements in the
company's operations.
The company cannot provide at this time the full detail on its
first-quarter results primarily due to the application of a new
bundled lease accounting methodology that will be used to
restate the years 1997-2000, adjust 2001 results and report
final first-quarter 2002 results. This change in methodology is
part of Xerox's previously announced settlement agreement with
the Securities and Exchange Commission. However, Xerox reported
Wednesday certain other metrics that would not be impacted by
these changes and that represent the company's continued
progress in strengthening its financial position and core
operations.
"During a quarter when Xerox was faced with tough issues and a
continuing weakened economy, we remained focused on building
back value by improving the core business and investing in
future growth. Our strong performance reflects the determination
of Xerox people worldwide to restore Xerox to good health," said
Anne M. Mulcahy, Xerox chairman and chief executive officer. "I
am encouraged by our first-quarter progress and believe that we
have clearly set the stage for a return to full-year operational
profitability."
Xerox had about $4.7 billion in worldwide cash at the end of
March following the repayment of $550 million of first-quarter
maturing debt. The company's cash balance in the first quarter
increased by approximately $700 million from last quarter. Cash
generated from operations due to working capital and other
improvements was about $320 million, prior to a $350 million tax
payment resulting from the gain on last year's sale of half of
the company's interest in Fuji Xerox. Debt net of cash was $12.3
billion, a 17-percent reduction from the first quarter of 2001.
"Our relentless drive to fortify Xerox's financial position
accelerated in the first quarter as we closed on key finance-
receivable securitizations and made substantial progress in our
negotiations to refinance a portion of the company's revolver
and to extend its maturity," added Mulcahy.
In related news, the company announced that Xerox Capital
Services, its joint venture with GE Capital Vendor Financial
Services, is expected to close and become operational on May 1.
XCS will manage Xerox's customer administration and leasing
activities in the U.S., including various financing programs,
credit approval, order processing, billing and collections.
Xerox and GE Capital have also agreed to extend their U.S.
finance-receivable monetization arrangement. This agreement will
provide Xerox with additional funding, expected to be
approximately $1 billion this year secured by portions of
Xerox's lease receivables in the U.S., while the two companies
finalize the agreement for GE Capital to become the primary
provider of equipment financing for Xerox customers in the U.S.
The company's intense focus on managing inventory resulted in a
$490 million or 28 percent decrease from first-quarter 2001,
including an approximately $60 million reduction from last
quarter.
Xerox also continued to reduce its cost base in the first
quarter by taking actions that will result in additional
annualized savings in excess of $100 million. Worldwide
employment declined 4,300 in the first quarter to 74,600.
Research and development spending of $230 million in the
company's core business areas was essentially flat from first-
quarter 2001.
In North America and Europe, Xerox delivered year-over-year
improvement in key segments of its core business. DocuTech
equipment placements grew 4 percent in the quarter. Office color
printing installs grew 6 percent driven by the success of the
company's Phaser 860 and 7700. The weakened economy continued to
delay capital spending that, along with competition, resulted in
a 22 percent decline in production color equipment placements.
Activity declines in the company's developing markets will
continue for the near term as the company restructures the
business to capture profitable growth opportunities versus sales
that weaken the bottom line. However, for the first quarter,
this strategy along with cost reductions led to continued
improvements in the company's developing markets operations.
Commenting on future activity in the company's core production,
office and services business, Mulcahy cited Xerox's initiatives
to strengthen its competitive position through five new product
platform launches this year supported by aggressive marketing
and expanded sales coverage.
"These investments are designed to achieve one objective: drive
future, sustainable, profitable growth," she said.
Xerox began reservation order taking two weeks ago on one of the
first of its new product platforms, the DocuColor iGen3. The
company has since received 100 reservation orders for this
breakthrough digital color production press, which has list
prices starting at $510,000 and is scheduled to begin shipping
later this year. Xerox also recently marked the 5,000th
installation of its DocuColor 2000 Series of digital color
presses, the most successful product of its kind with one-and-a-
half times more placements than all comparable competitors
combined.
Restatement
Under the terms of a settlement agreement with the Securities
and Exchange Commission, the restatement of 1997-2000 financial
statements as well as the adjustment to 2001 results will
primarily reflect changes in the timing and allocation of lease
revenue, which will be reallocated among equipment, service,
supplies and finance revenue streams as appropriate by applying
a methodology different than the one the company had used during
those years. The resulting timing and allocation adjustments
cannot be estimated until the restatement process has been
completed. In any event, there will be no impact on the cash
that has been received or is contractually due to be received
from these leases. Furthermore, the monetary value of the leases
does not change. The restatement will also include adjustments
that could be in excess of $300 million due to the establishment
and release of certain reserves prior to 2001 and the timing of
recognition of interest income on tax refunds.
Xerox filed an 8-K Wednesday to provide further detail on its
first-quarter performance, including summary financial
information that is unaudited, subject to the restatement and
based on the company's previous accounting methodology for
bundled leases, which the SEC believes does not comply with
GAAP.
As previously announced, the Securities and Exchange Commission
has granted to Xerox as part of its settlement agreement with
the company an extension for the filing of its 2001 10-K and
first-quarter 2002 10-Q until June 30, 2002.
For more information about Xerox, visit
http://www.xerox.com/news
Performance Review
Introduction
"On April 11, 2002, we announced that we had concluded our
settlement with the Securities and Exchange Commission (SEC) on
the previously disclosed matters that have been under
investigation since June 2000. As a result, the company has
agreed to restate its financial statements for the years 1997
through 2000 as well as adjust the previously announced 2001
results. This is in addition to a previous restatement included
in our 2000 Form 10-K. The new restatement will primarily
reflect adjustments in the timing and allocation of lease
revenue, which will be reallocated among equipment, service,
supplies and finance revenue streams as appropriate by applying
a methodology different than the one the company had used during
those years. The resulting timing and allocation adjustments
cannot be estimated until the restatement process has been
completed. In any event, there will be no impact on the cash
that has been received or is contractually due to be received
from these leases. Furthermore, the monetary value of the leases
does not change. The restatement will also include adjustments
that could be in excess of $300 million due to the establishment
and release of certain reserves prior to 2001 and the timing of
recognition of interest income on tax refunds. To allow for the
additional time required to prepare the restatement and to make
these adjustments, the SEC issued an Order granting an extension
until June 30, 2002 for the filing of the Xerox Corporation and
Xerox Credit Corporation 2001 Forms 10-K and first quarter 2002
Forms 10-Q. The Order provides that a filing made on or before
June 30, 2002 will be deemed to have been filed on the
prescribed due date. For further information regarding the
Consent Order see the "SEC Settlement" section that follows.
"These preliminary results are unaudited, are presented using
the company's historical methodology for allocating lease
revenue from its bundled arrangements, which the SEC believes is
not in accordance with Generally Accepted Accounting Principles
(GAAP), and do not reflect the restatement or the effects
thereof for 1997 through 2000 or adjustments to previously
reported 2001 results. The company is currently in the process
of implementing a new methodology for allocating lease revenue,
which will be used in preparing the restatement, making the
adjustments to 2001 and reallocating lease revenues generated in
the first quarter of 2002 and thereafter. The impact of the new
methodology is currently not determinable. Accordingly, the
financial information presented here is subject to adjustment
upon the completion of such process and should not be relied
upon as reflecting the company's financial results. Moreover,
while the presentation of the preliminary first quarter results
according to the historical methodology would appear to provide
comparability to the previously announced 2001 first quarter
results, the year-over-year comparison may not be reliable
because of the possibility that the restatement and 2001
adjustments may impact those periods differently. For these
reasons, we have limited our discussion of financial
information. We have provided trend information in key areas,
although even trends may be subject to change. Our detailed
financial results will be reported in our 2001 Form 10-K filing
and first quarter 2002 Form 10-Q filing following completion of
the restatement process.
"As noted above, it is the SEC's view that the methodology
historically applied by the Company to allocate lease revenue
from its bundled arrangements is not in accordance with GAAP.
The contracts typically include equipment, service, supplies and
financing components for which the customer pays a negotiated
price on a monthly basis as well as a variable service component
for page volumes in excess of stated minimums. Xerox is in the
process of changing its revenue allocation methodology to
estimate "normal selling prices" (fair value) of equipment using
an approach based on verifiable objective evidence of value,
including prices achieved in its cash sales and other market
based information. The full implementation of this methodology
requires application at detailed levels of the business and is
inextricably linked to the restatement process and to the
adjustment of previously reported 2001 results.
Summary
"A summary of our performance for the first quarter of 2002
follows:
- Our worldwide cash balance increased by approximately
$0.7 billion to $4.7 billion at March 31, 2002 compared to $4.0
billion at December 31, 2001 and increased by $1.9 billion from
$2.8 billion at March 31, 2001. The increases from December 31,
2001 primarily reflect the following:
- The receipt of $746 million from the January 2002
Senior Note Offering
- The receipt of $510 million, net of escrow and fees,
from GE Capital loans secured by certain of our finance
receivables in the U.S. and Canada
- Debt payments of approximately $550 million for
maturing debt
- Cash generated by operations of about $320 million,
prior to a tax payment of approximately $350 million related to
the gain on the 2001 Fuji Xerox sale and included:
- Reduced receivables
- Modest improvements in inventory levels
- Modest increases in payables and other accruals
"These positive items were partially offset by restructuring
payments of approximately $100 million.
- As of March 31, 2002, we had approximately $9.4 billion
and $2.9 billion of debt obligations maturing in 2002 and 2003,
as summarized below (in billions):
2002 2003
---- ----
First Quarter $ - $0.3
Second Quarter 1.3 1.1
Third Quarter 0.3 0.2
Fourth Quarter 7.8 1.3
------------------
Full Year $9.4 $2.9
"Debt obligations due throughout the remainder of 2002 total
approximately $9.4 billion and include the $7 billion Revolving
Credit Agreement (Revolver), which matures in October. The
principal terms and conditions for refinancing a portion of the
Revolver and extending its maturity beyond October 2002 have
been distributed to the 57 lenders in the Revolver. Following
approval from these lenders as well as the negotiation and
execution of the definitive agreements, the refinancing is
expected to be finalized no later than June 30, 2002.
- Worldwide employment declined by 4,300 to 74,600 in the
2002 first quarter as a result of 2,700 employees leaving the
company, largely under our restructuring programs, and the
transfer of 1,600 employees to Flextronics.
- In the first quarter 2002 we took additional
restructuring actions related to our Turnaround Program which
are expected to further reduce annualized costs in excess of
$100 million. As part of these cost-cutting measures, we
continue to record additional charges for initiatives under the
Turnaround Program. As a result of these actions and changes in
estimates related to previously established restructuring
reserves, in the first quarter 2002 we provided an incremental
$148 million related to initiatives under the Turnaround
Program, March 2000 and SOHO restructuring plans.
"As discussed above, the financial information included in the
following discussion will change upon completion of the
restatement:
- Post currency revenue of $3.7 billion declined 11
percent in the first quarter 2002 compared to $4.2 billion in
the first quarter 2001. The key messages are as follows:
- Over one third of the decline was due to the exit from
our Small Office / Home Office (SOHO) business, reductions in
our Developing Markets Operations (DMO) and unfavorable
currency.
- Stabilization of our DocuTech family, with increased
equipment installs, was more than offset by declines in
production printing and production light lens copiers.
- Production color declined as we continued to experience
a challenging competitive environment, including pricing
pressures. Further, the economy remained weak, which
particularly impacted demand in the graphic arts market.
- Growth in Document Centre multifunction devices,
including the recent introduction of the Document Centre 490,
was more than offset by substantial declines in office light
lens copiers reflecting the trends in recent years.
- The Phaser line of networked laser and solid ink
printers drove good growth in office color.
- Gross margin was 39.0 percent, an improvement of 5.4
percentage points in the first quarter 2002 compared to 33.6
percent in the first quarter 2001. Approximately half of the
increase was due to the exit from SOHO and improvements in DMO.
Improved productivity and pricing discipline combined with our
continued focus on profitable transactions drove gross margin
improvements in most businesses.
- Selling, administrative and general (SAG) expenses of
$1.1 billion improved approximately 6 percent in the 2002 first
quarter compared to the 2001 first quarter reflecting continued
benefits from our Turnaround Program, partially offset by
increased spending related to our Olympic sponsorship and
advertising campaign.
- Research and development (R&D) expense of $230 million
was $16 million lower in the 2002 first quarter compared to the
2001 first quarter primarily reflecting our exit from SOHO.
- Other expenses, net were $64 million in the first
quarter 2002 versus $90 million in the first quarter 2001. The
more significant items included in other expenses, net are as
follows:
- Significantly lower non-financing interest
expense, reflecting lower debt levels and reduced cost of
borrowing, was partially offset by SFAS 133 losses on the mark
to market of our remaining interest rate swaps.
- Exchange losses of $26 million primarily
reflecting the devaluation of the Argentine Peso. This loss
compares to exchange gains of $63 million last year primarily
related to gains on Yen denominated debt.
- Prior year includes approximately $16 million of
goodwill amortization. Amortization of goodwill was discontinued
in 2002 under SFAS 142.
- A gain of $19 million on the sale of stock
resulting from the Prudential Insurance Company demutualization.
- The accrual of a $10 million civil penalty
associated with the SEC settlement.
- The effective tax rate for the first quarter 2002
was 25.4 percent, before restructuring. The estimated annual
effective tax rate for 2002, before restructuring, is expected
to be 55 percent reflecting losses in certain jurisdictions
where we are no longer providing tax benefits. The first quarter
tax rate reflects differences between calculating the effective
tax rate on an annual basis versus on an interim basis. Due to
the fact that we are no longer providing tax benefits on losses
in certain jurisdictions, we have excluded such losses in
determining the quarterly tax provision. Accordingly, the mix of
these losses on an interim basis will alter the quarterly
effective tax rate from the estimated annual effective tax rate,
as reflected above. In addition, approximately $16 million of
previously unrecorded tax benefits associated with certain tax
credit carryforwards were recognized as a discrete item in the
first quarter based on our realization assessments.
- Minorities interest increased by $18 million to
$25 million in the first quarter 2002 primarily due to the
quarterly distribution on the Convertible Trust Preferred
Securities issued in November 2001.
- The first quarter 2002 net loss was $64 million or
9 cents per share.
- Excluding net after tax restructuring charges of
$105 million and net after tax losses from unhedged foreign
currency exposures of $12 million, the first quarter 2002 net
income, as adjusted, would have been $53 million or earnings of
7 cents per share.
- The 2001 first quarter net income was $202 million
or $0.25 cents per share. Excluding the following net after-tax
items: Fuji Xerox sale gain of $300 million, restructuring
charges of $62 million, unhedged foreign currency gains of $47
million, goodwill amortization of $15 million and a $15 million
extraordinary gain and cumulative change in accounting
principle, the 2001 first quarter net loss, as adjusted, would
have been $83 million or a loss of 11 cents per share.
Recent Events
Adoption of SFAS 142
"In the 2002 first quarter, we adopted SFAS 142. As a result, we
reclassified approximately $60 million of previously identified
intangible assets to goodwill. We will no longer record
approximately $60 million of annual amortization expense
relating to our existing goodwill, as adjusted, for the
reclassifications previously mentioned. Additionally,
approximately $5 million of annual amortization expense of
goodwill related to equity method investments will no longer be
recorded.
SEC Settlement
"On April 11, 2002 we concluded our settlement with the SEC on
the previously disclosed matters that have been under
investigation since June 2000. As a result, the Commission filed
a complaint and a consent order in federal district court for
injunctive relief and a civil penalty of $10 million. Xerox
neither admits nor denies the allegations of the complaint.
"Under the terms of the settlement, we will restate our
financial statements for the years 1997 through 2000 as well as
adjust previously announced 2001 results. The restatement will
primarily reflect adjustments in the timing and allocation of
lease revenue, which will be reallocated among equipment,
service, supplies and finance revenue streams as appropriate by
applying a methodology different than the one the company had
used during those years. The resulting timing and allocation
adjustments cannot be estimated until the restatement process
has been completed. In any event, there will be no impact on the
cash that has been received or is contractually due to be
received from these leases. Furthermore, the monetary value of
the leases does not change. The restatement will also include
adjustments that could be in excess of $300 million due to the
establishment and release of certain reserves prior to 2001 and
the timing of recognition of interest income on tax refunds.
"As part of the settlement, and to allow for the additional time
required to prepare the restatement and to make these
adjustments, the SEC issued an Order permitting us an extension
until June 30, 2002 for the filing of the Xerox Corporation and
Xerox Credit Corporation 2001 Forms 10-K and first quarter 2002
Forms 10-Q. The Order provides that a filing made on or before
June 30, 2002 will be deemed to have been filed on the
prescribed due date.
"We have also agreed that a special committee of our Board of
Directors will retain an independent consultant to review our
material accounting controls and policies. The Board will share
the outcome of this review with the SEC.
Vendor Financing Progress
"Substantial progress in transitioning equipment financing to
third party vendors has been made in 2002. Our 2002 progress
includes:
- In April 2002, we signed an agreement with GE Capital Vendor
Financial Services (GE Capital) for the establishment of Xerox
Capital Services (XCS), a joint venture between Xerox and GE
Capital, which is expected to close and become operational on
May 1, 2002. XCS will be a consolidated entity and will provide
Xerox's customer administration and leasing activities in the
U.S., including various financing programs, credit approval,
order processing, billing and collections.
DebtTraders reports that Xerox Corporation's 8.00% bonds due
2007 (XEROX25X) are quoted at a price of 55. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=XEROX25Xfor
real-time bond pricing.
* DrKW Restructuring Group Spinning-Off as Miller Buckfire Lewis
----------------------------------------------------------------
Dresdner Kleinwort Wasserstein has agreed in principle with the
senior executives of its New York-based financial restructuring
group, Henry S. Miller, Kenneth A. Buckfire and Martin F. Lewis,
to form an independent firm to provide strategic and financial
advisory services in large-scale corporate restructuring
transactions. The new firm, to be called Miller Buckfire Lewis
& Co., LLC, will be owned and controlled by Messrs. Miller,
Buckfire and Lewis and its employees.
Miller Buckfire Lewis & Co. will assume all of DrKW's existing
restructuring engagements. Upon commencement of operations,
Miller Buckfire Lewis & Co. will have approximately 40 employees
and over 20 active client assignments, making it one of the
world's leading independent investment banks for restructuring
transactions. The new firm will provide a full range of
restructuring advisory services, including valuation and debt
capacity analysis, business plan development, capital structure
design, plan formulation and negotiation and private equity and
debt placement. Currently, the financial restructuring group is
involved in several high profile restructuring assignments
including Kmart Corporation, Polaroid Corporation, Sunbeam
Corporation, ICG Communications, Polymer Group, Laidlaw, Inc.
and PSINet.
The new structure will enable Miller Buckfire Lewis & Co., as an
independent company, to overcome potential conflicts between the
current restructuring group's provision of its restructuring
advisory services and the financial holdings of Dresdner Bank AG
and its parent, Allianz AG, which comprise one of the world's
largest financial services companies. The new company will
thereby be able to serve a broader range of clients more
effectively. In connection with the spin-off, Miller Buckfire
Lewis & Co. and DrKW will enter into a strategic alliance under
which DrKW will assist Miller Buckfire Lewis & Co. in providing
mergers and acquisitions advisory services as well as private
equity and high yield debt placement services in troubled-
company situations.
DrKW's financial restructuring group was founded by Mr. Miller
in 1995 and has become one of Wall Street's largest and most
active financial advisory groups for restructuring transactions.
Since its inception, the financial restructuring group has
advised on more than 60 restructuring transactions involving
over $70 billion in debt. Some of the financial restructuring
group's past clients have included ICO Global Communications,
The Loewen Group, Pathmark Stores, PennCorp Financial Group, US
Office Products, Bruno's, Carmike Cinemas and the independent
power producers for Niagara Mohawk.
"We're very happy with this new arrangement," said Michael J.
Biondi, Chairman and Co-CEO of DrKW, Americas. "Both parties
recognize that the financial restructuring group as an
independent entity will have greater flexibility to attract and
serve a wide variety of clients. We intend to continue to work
with Miller Buckfire Lewis & Co. going forward, building on a
successful seven-year track record with Henry and his
colleagues."
"We are creating Miller Buckfire Lewis & Co. to build on the
strong leadership position of our group," said Mr. Miller. "As
an autonomous firm, our primary focus will continue to be
assisting financially troubled companies and their key
constituencies in successfully reorganizing. Although we will
be independent of Dresdner Kleinwort Wasserstein, we will still
be able to offer our clients access to DrKW's M&A and high yield
and other financing capabilities, and will now be able to advise
companies for which Dresdner Kleinwort Wasserstein, Dresdner
Bank, or their affiliates is a creditor, free of conflicts."
The transaction, which is subject to regulatory approval and
final documentation, is expected to be completed in May 2002.
Dresdner Kleinwort Wasserstein is the marketing name for the
investment bank within the Corporates and Markets Division of
Dresdner Bank AG, a member of the Allianz Group since July 2001.
Headquartered in London, Frankfurt and New York and with an
international network of offices, DrKW provides a wide range of
investment bank products and services to U.S., European and
international clients through its Global Investment Banking,
Global Equities and Global Debt business lines.
Miller Buckfire Lewis & Co., upon commencement of operations,
will be one of the world's leading independent financial
advisors for complex out-of-court restructurings and in-court
chapter 11 cases. To be headquartered in New York, Miller
Buckfire Lewis & Co. will provide valuation and debt capacity
analysis, business plan development, capital structure design,
plan formulation and negotiation and private equity and debt
placement services to distressed companies and their key
constituencies.
* Florida Firms Atlas Pearlman and Adorno & Zeder Combining
-----------------------------------------------------------
Adorno & Zeder, P.A. and Atlas Pearlman, P.A., two of South
Florida's top law firms, announce that they have agreed to merge
their practices effective May 2002, continuing as Adorno &
Zeder, P.A. Atlas Pearlman, P.A. is a full-service firm
primarily providing legal services in Corporate Securities,
Finance, Securities and Commercial Litigation, Broker-Dealer
Representation, Regulatory and White Collar Defense, Real
Estate, and Tax & Business Planning.
"This is a fantastic combination of talent, geographical
coverage and client base for both of our firms," said Henry
N.(Hank) Adorno, Chairman of Adorno & Zeder. Jan Douglas Atlas,
President of Atlas Pearlman, P.A. added, "We are extremely
excited about the merger because both firms share the same
commitments and objectives (a) quality (b) service and c
results."
Atlas Pearlman was founded in 1975 and its growth has been
dependent on a handful of attorneys dedicated to building
superior law practice in a collegial atmosphere. They have
offices in Fort Lauderdale, Miami, Boca Raton and Naples.
"As a result of this merger, our Miami, Fort Lauderdale and Boca
Raton office will be substantially enhanced and we will gain a
very important office in Naples, which will be used to anchor
our Florida West Coast expansion," said George T. Yoss, managing
shareholder of Adorno & Zeder.
Adorno & Zeder is one of Florida's premier full service law
firms. As a result of this merger, the firm will have offices in
Miami, Fort Lauderdale, Boca Raton, West Palm Beach and Naples,
and a professional staff of over 135 attorneys. The Firm's
practice areas include litigation, insurance defense,
transactions, venture and technology, real estate, land use and
environment, tax, sports and entertainment, trusts and estates,
bankruptcy and insolvency, international and immigration. The
Firm represents a variety of clients, including Fortune 500
companies, major insurance organizations, domestic and foreign
governments, municipalities, and individuals. Please visit our
Web site at http://www.adorno.comfor more information.
Adorno & Zeder is a member firm of Law Firm of the Americas, an
alliance of law firms providing legal services of the highest
quality to individuals and corporations doing business in the
hemisphere and Spain. For more information about LFA see
http://www.lfalaw.orgor contact Francisco J. Gonzalez at
fjg@adorno.com.
* BOOK REVIEW: George Eastman: Founder of Kodak and the
Photography Business
-------------------------------------------------------
Author: Carl W. Ackerman
Publisher: Beard Books
Softcover: 522 Pages
List Price: $34.95
Review by Gail Owens Hoelscher
Buy a copy for yourself and one for a colleague on-line at
http://amazon.com/exec/obidos/ASIN/1893122832/internetbankrupt
George Eastman was a Bill Gates of his time. This biography of
Eastman (1854-1932) provides a fascinating look at the
inventions, management style, interests, causes, and
philanthropies of one of America's finest scientist-
entrepreneurs. Eastman's inventions transformed photography into
a relatively inexpensive and enormously popular leisure
activity. His company, Eastman Kodak, was one of the first U.S.
firms to mass-produce a standardized product. Along with Thomas
Edison, he ushered in the age of cinematography.
Eastman was born in Waterville, New York. At the age of 23,
while working as a bank clerk, Eastman bought a camera and set
in motion a revolution in photography. At the time,
photographers themselves mixed chemicals to make light-sensitive
emulsions and covered glass plates (called "wet plates") with
the emulsions, taking photographs before the emulsions dried. It
was an awkward, messy and time-sensitive undertaking. Eastman
developed a process using dry plates and in 1884 patented a
machine to produce coated dry plates. He began selling
photographic plates made using his machines, as well as leasing
his patent to foreign manufacturers.
With the goal of reducing the size and weight of photographic
equipment, Eastman then began investigating possibilities for a
flexible firm. He and William E. Walker developed the first such
film, cut in narrow strips and wound on a roller device patented
by Eastman. The Eastman Dry Plate and Film Co. began producing
the film commercially in 1885. In 1888, Eastman patented the
hand-held Kodak camera, designed specifically for roll film and
initially priced at $25. (He made up the word "Kodak" using the
first letter of his mother's maiden name, Kilbourne.)
In 1889, Eastman began working with Thomas Edison, inventor of
the motion picture camera. Edison's increasingly sophisticated
models required a stronger, more flexible transparent film,
which Eastman was able to deliver. He founded Eastman Kodak Co.,
in 1892 and began mass-producing a range of photographic
equipment.
Eastman was an astute businessman. He dealt shrewdly with
competitors and sometimes fell out with former collaborators.
Indeed, some of them filed and won patent infringement lawsuits
against him. He was tireless in his inventing and
entrepreneurial endeavors. In the early days, he often slept in
a hammock at the factory and cooked his own food there. His
mother regularly showed up and insisted that he go home for a
good meal and full night's sleep! Eastman demanded much of his
employees, but no more than de demanded of himself. "An
organization," he said, "cannot be sound unless its spirit is.
That is the lesson the man on top must learn. He must be a man
of vision and progress who can understand that one can muddle
along on a basis in which the human factor takes no part, but
eventually there comes a fall."
This book draws on the contents of 100,000 letters to and from
Eastman's friends, family, investors, competitors, employees,
and fellow inventors, along with Eastman's records and notes on
his various inventions. The result is a meticulously detailed
account of Eastman's myriad interests and hands-on management
style, as well as the evolution of photography and a major 20th-
century corporation.
*********
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-
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firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Christopher
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*** End of Transmission ***