/raid1/www/Hosts/bankrupt/TCR_Public/020509.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, May 9, 2002, Vol. 6, No. 91
Headlines
ANC RENTAL: Court Okays Jay Alix as Debtors' Financial Advisor
ANC RENTAL: Wins Nod to Consolidate at Airports in 4 More Cities
ADELPHIA BUSINESS: Informal Panel Discloses Confidential Info.
ADELPHIA COMM: Soliciting Formal Offers for Certain Cable Assets
ADVANCED TELCOM: Files Chapter 11 Petition in Santa Rosa, Calif.
AMERIGAS PARTNERS: Fitch Rates $40M Senior Notes due 2011 at BB+
ARCH WIRELESS: First Quarter Results: Insolvent by $1.6 Billion
ARTHUR ANDERSEN: Sells Michigan & Ohio Offices to Ernst & Young
BROADLEAF CAPITAL: Completes Share Capital Restructuring
C 3D DIGITAL: Auditors Express Going Concern Doubts
CALPINE CORP: Cogeneration Facility Enters Commercial Operations
CANADIAN IMPERIAL: Wins Approval to Proceed with Debt Workout
CHROMATICS COLOR: Expects Losses to Continue Despite New Plan
COVANTA ENERGY: Seeks Approval to Reject Nevada Water Contract
DIVERSIFIED CORPORATE: Weaver & Tidwell Airs Going Concern Doubt
DUANE READE: Commences Tender Offer to Purchase $80M 9.25% Notes
EASYLINK SERVICES: Posts Improved Operating Results in Q1 2002
ENRON CORP: State Street Now Serving as ESOP Fiduciary
EXIDE TECHNOLOGIES: Brings-In Gavin Anderson as PR Consultants
FEDERAL-MOGUL: Northern Insurance Intends to Prosecute Claims
FLAG TELECOM: Look for Statements and Schedules by June 11, 2002
FLEMING: Plans to Close 2 Facilities to Cut Down Operating Costs
GENERAL PUBLISHING: Lays-Off 23 Employees as Part of Reorg. Plan
GLOBAL CROSSING: Obtains Open-Ended Removal Period Extension
GLOBAL CROSSING: Gets Above-Average Marks in Atlantic ACM Survey
GLOBAL CROSSING: Q1 Voice Traffic Exceeds 4BB Minutes Per Month
GOLDMAN INDUSTRIAL: Seeks OK to Retain SSG as Investment Banker
IT GROUP: Court Okays Bayard Firm as Committee's Co-Counsel
INTEGRATED HEALTH: Rotech Wants to Reject Subcontract with HHI
INTERNET CABLE: PwC Doubts Company's Ability to Continue
JUPITER MEDIA: Reports $17MM Working Capital Deficit at March 31
KAISER ALUMINUM: Obtains Okay to Hire Andersen as Tax Advisors
KMART CORP: SunTrust Bank Seeks Approval of $4.7 Million Setoff
KMART CORP: Suspends Severance Payments to Former Executives
LTV CORP: Bringing-In Marsh USA to Settle Insurance Squabble
LANDSTAR: Ability to Continue as a Going Concern Questioned
LODGIAN INC: Proposes Uniform Contract Rejection Procedures
MEMC ELECTRONIC: Negative Operating Cash Flow Tops $6.6 Million
MERISTAR HOTELS: First Quarter Revenues Plunge 16.6% to $66.5MM
NTL INCORPORATED: Files Prepackaged Chapter 11 Reorg. Plan in NY
NTL INCORPORATED: Case Summary & Largest Unsecured Creditors
NATIONAL STEEL: Ad Hoc Panel Seeks DIP Financing Order Revision
NATIONSRENT: Wins Nod to Hire Korn/Ferry as Search Consultants
OPTICARE HEALTH: Sets Annual Shareholders' Meeting for May 21
PACIFIC AEROSPACE: Shoos-Away Andersen as Independent Accountant
PHOENIX INT'L: Dramatic Drop in Q3 Net Loss Credited to EPICUS
PILLOWTEX CORP: Modifications to 2nd Amended Reorganization Plan
PRIMUS CANADA: March 2002 Quarter EBITDA Climbs to C$15 Million
PRINTING ARTS: Has Until June 27 to Decide on Unexpired Leases
PRINTWARE INC: Board Approves Initial Liquidating Distribution
PROVANT INC: March 31 Working Capital Deficit Tops $17 Million
PSINET INC: Computer Associates Demands Prompt License Decision
RELIANCE: Wants Plan Filing Exclusivity Stretched to August 6
SMTC CORP: Posts Improved Operating Results March 2002 Quarter
SAMSONITE CORPORATION: Fiscal 2002 Net Loss Tops $33.6 Million
SIMON WORLDWIDE: PricewaterhouseCoopers Bows Out as Accountants
SWAN TRANSPORTATION: Wants Delaware Court to Fix Claims Bar Date
TANDYCRAFTS: Court Stretches Lease Decision Period to June 14
TIME WARNER: Revenues Drop 3% to $169MM in First Quarter 2002
TRADED CUSTODY: Fitch Rates 2002-4 Bond Fund Rating at BB+/V5
TRICON GLOBAL: Wooing Lenders to Replace Facility with New Deal
USI INC: Maryland Court Confirms Chapter 11 Reorganization Plan
VIATEL INC: Court Stretches Lease Decision Period to June 30
WARNACO GROUP: Seeks Court's Nod to Conduct Store Closing Sales
WEINER'S STORES: Plan Confirmation Hearing Set for May 16, 2002
WILLIAMS COMMS: Pushing for Injunction Against Utility Companies
XO COMMUNICATIONS: Continuing Talks to Restructure Balance Sheet
* DebtTraders' Real-Time Bond Pricing
*********
ANC RENTAL: Court Okays Jay Alix as Debtors' Financial Advisor
--------------------------------------------------------------
ANC Rental Corporation, and its debtor-affiliates obtained
permission from the court to employ Jay Alix & Associates as
their financial advisor, nunc pro tunc to December 20, 2001.
The services expected of Jay Alix & Associates include:
A. Assistance in developing one or more financial models that
will enable the Debtors to better predict their future cash
flows as well as to model the impact of a number of
restructuring alternatives under consideration, including
operational changes that will alter the Debtors' operating
model;
B. Assistance to the Debtors in managing their bankruptcy
process including working with and coordinating the efforts
of other professionals representing the Debtors' various
stakeholders;
C. Assistance in obtaining and presenting information required
by parties-in-interest in the Debtors' bankruptcy process
including official committees appointed by the Court;
D. Assistance in overseeing the implementation of an operational
restructuring plan designed to streamline the Debtors'
court base and efficiency of operation while preserving
customer base;
E. Assistance in reviewing and implementing changes to the
Debtors' information technology platform to reduce cost,
improve service levels and support the operational
restructuring that is to be implemented;
F. Assist as requested in tasks such as reconciling, managing
and negotiating claims, determining preferences and
collection of the same and the like;
G. Assist the Debtors and any investment banker the Debtor may
retain in obtaining and compiling information that is
needed to present the Debtors to prospective purchasers or
investors and to further support those efforts by due
diligence and obtaining or preparing supplemental
information that may be needed to obtain maximum value to
the Debtors' stakeholders;
H. Per request, assist in managing any litigation that may be
brought in the bankruptcy court against the Debtors; and
I. Provide such other assistance as may be requested and is
within Jay Alix & Associates expertise to support.
Ted Stenger, a principal of Jay Alix & Associates, submits that
pursuant to the engagement, the professionals at Jay Alix &
Associates will be compensated based on their prevailing hourly
rates plus reimbursement of all reasonable out-of-the-pocket
expenses incurred in connection with this engagement. The
current hourly rates of Jay Alix's professionals are:
Principals $325 to $640
Senior Associates $275 to $495
Associates $235 to $385
Accountants $195 to $290
Consultants $195 to $290
Analysts $135-$160
Jay Alix & Associates will also be paid a one-time success fee
of $2,250,000 if the Debtors confirm a Chapter 11 Plan of
Reorganization that becomes effective, or complete one or more
transactions that substantially transfers more than two-thirds
of the pro forma revenues or operating assets of the Debtors'
business to another entity. (ANC Rental Bankruptcy News, Issue
No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ANC RENTAL: Wins Nod to Consolidate at Airports in 4 More Cities
----------------------------------------------------------------
A Federal Bankruptcy Judge ruled in ANC Rental Corporation's
favor on Friday, May 3, approving the company's motion to
combine the operations of its Alamo and National car rental
brands at airports in four additional cities: Las Vegas, Nev.,
Memphis, Tenn., Houston, Tex., and Melbourne Fla. Judge Mary
Walrath rejected a motion from Hertz and Avis to block
consolidation, and precluded both companies from making similar
attempts in the future.
The decision brings the number of airports to eleven where ANC
can now operate its Alamo and National brands under a single
concession agreement. The Cincinnati/Northern Kentucky
International Airport has allowed the Alamo and National brands
to operate out of a single location since January 10, and ANC
has operated dual brands at the Detroit, Hartford, Jacksonville,
Pittsburgh, Springfield, MO and Huntsville Ala. airports since
late March.
"This decision is a substantial step forward for ANC," said
Lawrence Ramaekers, President and Chief Executive Officer ANC
Rental. "Our leading competitors have stalled the process of
consolidation for several months; now with this ruling, we will
be in a position to quickly win court approval for the
additional 34 dual-branding motions currently filed."
Consolidation at the four most recently approved airports will
save ANC $4.5 million dollars annually in operating costs. The
company has added over a hundred thousand new cars to its fleet,
giving customers a wider variety of cars from which to choose.
Customers are seeing service improvements through the
consolidation, including more frequent buses, ensuring quick,
hassle-free rental experiences. ANC has also extended its hours
of operation at many dual-branded locations to meet the needs of
leisure and business travelers.
ANC Rental Corporation, headquartered in Fort Lauderdale, is one
of the world's largest car rental companies with annual revenue
of approximately $3.2 billion in 2001. ANC Rental Corporation,
the parent company of Alamo and National, has more than 3,000
locations in 69 countries. Its more than 17,000 associates serve
customers worldwide with an average daily fleet of more than
275,000 automobiles.
ADELPHIA BUSINESS: Informal Panel Discloses Confidential Info.
--------------------------------------------------------------
In connection with discussions occurring in February and March
2002 concerning a potential restructuring of certain obligations
of Adelphia Business Solutions, Inc. (OTC: ABIZQ), the Company,
pursuant to written confidentiality agreements, has provided
during that time period confidential information to certain
members of an informal committee of unaffiliated holders of the
Company's 12-1/4% Senior Secured Notes due 2004. The
confidentiality agreements obligated the Company to file on or
before April 30, 2002 an appropriate summary of the confidential
information provided to the Noteholders on Form 8-K or other
periodic report filed with the Securities and Exchange
Commission. The Company failed to file such summary or report
and, thus, pursuant to the confidentiality agreements the
Noteholders were given the right to make the confidential
information available to the public generally.
The Noteholders express no view as to the validity or accuracy
of the information provided to them by the Company. Accordingly,
the Noteholders cannot verify and do not represent whether the
information herein is current, correct, relevant or may have
been superceded by events or otherwise. The Noteholders have
provided earlier drafts of this press release to the Company and
its counsel. Their response is set forth below.
The Noteholders acknowledge that the Committee's attorneys and
financial advisors may have confidential information they cannot
share with the Noteholders because of their own confidentiality
agreements with the Company and such information may be material
and may have an effect on the information herein, but the
Noteholders have no knowledge of such information. Set forth
below is a summary of the confidential information provided to
the Noteholders by the Company:
-- October 2001 Asset Sales -- The Noteholders have
received information from or through the Company regarding the
fact that substantially all of the assets in the Company's
Buffalo, New York market were sold for approximately $80 million
of cash proceeds to Adelphia Communications Corporation (Nasdaq:
ADLAE) in October 2001. These assets were part of a group of
assets owned by certain subsidiaries whose stock was pledged as
collateral for the Notes. The Noteholders have been informed by
the Company that $60 million of the proceeds were used to
purchase telecommunications assets, the vast majority of which
are physically located in markets other than the Collateral
Subsidiaries and that the remaining $20 million was sent to
ABIZQ. The following chart summarizes the information on the
telecommunication assets (location and book value) purchased
with the proceeds as provided to the Noteholders by the Company:
Location and Book Value of Assets Purchased With Proceeds
Atlanta, GA $2,042,464
Austin, TX 1,377,486
Baltimore, OH 2,072,704
Baton Rouge, LA 453,336
Birmingham, AL 168,948
Boston, MA 2,839,967
Charlotte, NC 2,316,534
Chattanooga, TN 222,081
Chicago, IL 2,551,310
Cincinnati, OH 1,475,498
Columbia and Greenville, SC 1,481,799
Columbus, OH 783,458
Dallas, TX 1,255,977
Detroit, MI 4,254,661
Fresno, CA 291,532
Ft. Wayne, IN 748,783
Hagerstown, MD 196,964
Houston, TX 1,836,788
Indianapolis, IN 1,844,936
Jackson, MS 364,338
Jacksonville, FL 1,059,689
Kansas City, KS 692,819
Knoxville, TN 104,385
Lexington, KY 808,106
Little Rock, AR 349,920
Long Island, NY 27,778
Louisville, KY 987,956
Memphis, TN 501,923
Mobile, AL 365,520
Nashville, TN 2,250,105
New Orleans, LA 379,188
New York, NY 529,843
Newark NJ 247,625
Norfolk, VA 1,102,529
Oklahoma City, OK 199,615
Orlando, FL 1,208,760
Phoenix, AZ 3,693,853
Pittsburgh, PA 1,903,938
Raleigh, NC 942,950
San Francisco, CA 2,501,244
Scranton, PA 652,909
Seattle, WA 3,285,874
South Florida 3,251,509
Springfield, IL 220,322
St. College, PA 311,292
Tampa, FL 990,323
TriCity, TN 805,616
Utica-Rome, NY 148,186
Vermont 571,589
Washington D.C. 397,872
Wilmington, DE 675,830
Total $59,748,632
-- Proposed Restructuring Terms -- In connection with the
potential restructuring, the Noteholders received a proposal
from the Company pursuant to which certain members of the Rigas
family and/or ADLAE or certain of its affiliates would invest
"new money" of up to $300 million of cash and/or marketable
securities in connection with a proposed restructuring. The
proposal also indicated the allocation of this proposal among
the various creditor constituencies. One aspect of this proposal
was the payment of $75 million in cash to the holders of the
Notes. The terms of any proposal were not finalized or agreed
upon and did not result in definitive agreements. The Company
and various subsidiaries filed for chapter 11 relief on March
27, 2002, before any agreement could be reached or agreed upon.
-- Collateral Subsidiaries Financial Information -- In
connection with the potential restructuring, the Noteholders
received financial information from the Company regarding the
Collateral Subsidiaries.
-- In connection with the potential restructuring, the
Noteholders received information from the Company regarding
management's perspective on the prospects for the Collateral
Subsidiaries if operated on a stand-alone basis (detached from
the remainder of ABIZQ). Such information provided to the
Noteholders by the Company included (i) identification of
certain national customers of the Collateral Subsidiaries who
could be at risk of switching service providers in such a
scenario, and (ii) an estimate of the incremental selling,
general and administrative costs ($23.9 million in 2002)
which would be necessary for the Collateral Subsidiaries to be
operable on a stand-alone basis.
-- ABIZQ Corporate Structure -- The Company also provided
to the Noteholders a corporate organizational chart, which can
be accessed at http://www.hlhz.com/mediarelations/159.asp
-- Company Response -- In response to an earlier draft of
the press release dated May 3, 2002, the Company's counsel in a
letter dated May 3, 2002 states:
"For the sake of avoiding any misunderstanding, we (Weil,
Gotshal & Manges LLP, the Company's counsel) reiterate that the
information in the most recent draft of the press release
received (May 3, 2002), in many respects, is stale, incorrect or
incomplete and therefore materially misleading. By way of
illustration only, under the caption "Proposed Restructuring
Terms," you describe a tentative proposal that was posited by
the Company's former financial advisor in the context of a
proposed restructuring that was available for discussion only in
a pre-filing context. After the Company filed for Chapter 11
relief, that approach was no longer viable or pursued by the
Company. As such, that discussion appears irrelevant and no
longer material.
"We believe that the press release is replete with similarly
misleading or inaccurate statements. The Company further
disclaims any responsibility for the completeness or accuracy of
such information."
Other than as set forth above, the Company and its counsel did
not identify which of the information herein is stale,
incorrect, incomplete, misleading or inaccurate.
ADELPHIA COMM: Soliciting Formal Offers for Certain Cable Assets
----------------------------------------------------------------
Adelphia Communications Corporation (Nasdaq: ADLAE) said that
its Board of Directors has authorized the Company's financial
advisors - Salomon Smith Barney, Credit Suisse First Boston and
Banc of America Securities - to proceed with the solicitation of
formal offers for certain of the Company's cable systems. The
systems that may be sold include: Southern California (over 1.2
million basic cable subscribers), Florida (approximately 750,000
basic cable subscribers), Virginia (approximately 575,000 basic
cable subscribers), and Southeast (approximately 225,000 basic
cable subscribers). Offering memoranda providing operational,
financial and other details of these systems are expected to be
available to potential buyers early next week.
John J. Rigas, Chairman and CEO of Adelphia, said: "Now that the
Board, with the assistance of our financial advisors, has
carefully reviewed and determined which of our cable assets
should be considered for possible sale, we are ready to solicit
formal bids. Based on the many informal expressions of interest
we have received in recent weeks, as well as the high quality of
our cable operations, I am confident that the steps we are
taking will enable us to achieve our objectives of reducing
debt, deleveraging our balance sheet, and creating a stronger
Adelphia better positioned to build the Company's value for all
of our shareholders and other constituents."
Adelphia said that there can be no assurance that the above-
mentioned solicitation of offers will result in the negotiation
and consummation of any cable sale transactions.
Adelphia Communications Corporation, with headquarters in
Coudersport, Pennsylvania, is the sixth-largest cable television
company in the country.
DebtTraders reports that Adelphia Communications' 10.875% bonds
due 2010 (ADEL10USR1) are trading at a price of 86.75. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL10USR1
for real-time bond pricing.
ADVANCED TELCOM: Files Chapter 11 Petition in Santa Rosa, Calif.
----------------------------------------------------------------
Advanced TelCom Group, Inc., a provider of local, long distance
and Internet communications, has filed for bankruptcy under
Chapter 11 of the United States Bankruptcy Code in the Santa
Rosa Division of the U.S. Bankruptcy Court for the Northern
District of California.
The Company has also announced that it is in the process of
closing several of its operations, which include offices in New
York, Connecticut, Virginia and Maryland. ATG personnel are
currently working with local regulatory agencies and other
carriers to affect an orderly migration of these customers to
alternative providers with no interruption of service.
On the company operations, Gary Cuccio, Executive Chairman of
ATG said, "Service to ATG customers in our California, Nevada,
Oregon and Washington markets will remain business as usual. We
will continue to provide the same quality products and services
to our valued customers that they have come to expect."
Regarding this announcement, Cuccio continued, "The filing will
permit ATG to realign the company's liabilities to better fit
its long-term profit potential. After weighing all the options,
we believe this is the best way to protect our current cash
reserves while we continue negotiations with several groups to
merge or acquire the company as an ongoing entity."
Advanced TelCom Group, Inc. is an integrated communications
provider offering local, long distance, data and Internet
services to businesses in California, Nevada, Oregon and
Washington. ATG news and information are available at
http://www.callatg.com
Adelphia Communications' 10.875% bonds due 2010 (ADEL10USR1),
DebtTraders reports, are quoted at a price of 86.75. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL10USR1
for real-time bond pricing.
AMERIGAS PARTNERS: Fitch Rates $40M Senior Notes due 2011 at BB+
----------------------------------------------------------------
AmeriGas Partners, L.P.'s $40 million senior notes due 2011,
issued jointly and severally with its special purpose financing
subsidiary AP Eagle Finance Corp., are rated 'BB+' by Fitch
Ratings. In addition, AmeriGas' outstanding $345 million senior
notes are affirmed at 'BB+'. The Rating Outlook is Stable. An
indirect subsidiary of UGI Corp. is the general partner and a
51% limited partner for AmeriGas. AmeriGas in turn is a master
limited partnership for AmeriGas Propane, L.P., an operating
limited partnership. Proceeds from the new senior notes will be
utilized to make a capital contribution to the OLP, which in
turn will use the funds primarily to reduce bank borrowings.
AmeriGas' rating reflects the subordination of its debt
obligations to approximately $608 million secured debt of the
OLP including the OLP's privately placed 'BBB'-rated first
mortgage notes. In addition, Fitch's assessment incorporates the
underlying strength of AmeriGas' retail propane distribution
network. AmeriGas is viewed as one of the premier retail propane
distributors evidenced by its efficient operations, favorable
acquisition track record, and proven ability to sustain gross
profit margins under various operating conditions. As a result
of the 2001 acquisition of Columbia Propane, AmeriGas now ranks
as the nation's largest retail propane distributor with retail
sales volumes of approximately 1 billion gallons annually and a
geographically diverse base of more than 1.3 million customers
in 46 states. Primary industry concerns are the negative impact
of warm heating-season weather on profits and volumes sold and
the potential adverse impact of supply price volatility where
rapid increases in the wholesale price of propane may not be
immediately passed through to customers.
Fitch's credit analysis for propane MLPs emphasizes cash flow
analysis on both a historic and prospective basis. Although the
recent financial performance of AmeriGas has suffered due to
significantly warmer than normal weather during the 2001-2002
heating season, credit measures have remained within
expectations for the 'BB+' rating category. Consolidated company
ratios for earnings before interest, taxes, depreciation, and
amortization (EBITDA) coverage of interest and total debt to
EBITDA for the 12-month period ended December 31, 2002 were 2.3
times and 5.1x, respectively. This compares with EBITDA to
interest of 2.6x and total debt to EBITDA of 4.8x for the fiscal
year ended September 30, 2001. In addition, cash distributions
to AmeriGas, which can be generally defined as EBITDA generated
by the OLP minus OLP interest expense and maintenance capital
expenditures, covered interest expense on AmeriGas' outstanding
senior notes by approximately 4.4x during the 12 month period
ended December 31, 2002.
Fitch believes that conditions and/or events that would disrupt
debt service at AmeriGas remain highly unlikely. Specifically,
Fitch estimates that EBITDA at the OLP would have to drop by an
additional 35% under an already severe warm weather stress case
scenario in 2002 before the OLP could potentially be restricted
from distributing cash to AmeriGas. The likelihood of this level
of EBITDA erosion is remote given AmeriGas' strong track record
of customer retention and demonstrated ability to maintain unit
margins even during periods of extreme product price volatility.
ARCH WIRELESS: First Quarter Results: Insolvent by $1.6 Billion
---------------------------------------------------------------
Arch Wireless, Inc. (OTC Bulletin Board: ARCHQ), one of the
leading two-way wireless messaging and mobile information
providers in the United States, announced consolidated Earnings
Before Interest, Taxes, Depreciation and Amortization (EBITDA)
of $62,218,000 for the first quarter ended March 31, 2002,
compared to $56,794,000 for the fourth quarter of 2001.
First quarter EBITDA of $62,218,000 included $56,311,000 from
one-way messaging and $5,907,000 from two-way messaging. EBITDA
is a commonly used measure of financial performance in the
wireless industry. Consolidated net revenues for the quarter
totaled $228,135,000, compared to $241,302,000 in the fourth
quarter of 2001.
Net income to common stockholders for the first quarter was
$4,546,000 compared to a loss of $186,623,000 in the year-
earlier quarter. First quarter 2002 net income reflects lower
depreciation and amortization expense that resulted from a
writedown of $976 million in the carrying value of certain one-
way paging assets during the quarter ended June 30, 2001.
Net additions from two-way messaging totaled 37,000 units during
the quarter, bringing total two-way units in service at March 31
to 371,000. Arch reported a net decline of 796,000 one-way units
for the quarter. Arch had 7,741,000 total units in service at
March 31, 2002.
"As expected, first quarter operating results again reflected
declining demand for one-way messaging services," said C. Edward
Baker, Jr., chairman and chief executive officer. "Nonetheless,
the decline was consistent with our expectations and was
partially offset by an increase in demand for two-way wireless
data services, including our wireless e-mail and mobile office
solutions." Baker added, "We continue to reduce operating
expenses to offset declining revenues from traditional one-way
messaging."
As previously announced, Arch Wireless, Inc. and its
subsidiaries filed Chapter 11 petitions with the U. S.
Bankruptcy Court for the District of Massachusetts (Western
Division) on December 6, 2001. Under the filing, the company and
its domestic subsidiaries continue to operate their business in
the ordinary course as debtors in possession. Arch and its
domestic subsidiaries filed a First Amended Joint Plan of
Reorganization and a related Disclosure Statement with the court
on March 11, 2002. The court has scheduled a hearing for May 8,
2002 to consider confirmation of the Plan.
Other company highlights:
In March, Arch Wireless:
-- Reported operating results for the fourth quarter and
year 2001.
-- Announced that the Disclosure Statement concerning its
First Amended Joint Plan of Reorganization was approved by the
bankruptcy court.
In February, Arch Wireless:
-- Demonstrated the Arch Wireless(TM) Enterprise Solution
product at the Internet World Wireless East trade show in New
York. AWES connects the mobile professional to mission critical
data, providing real-time access to firewall-protected files, e-
mail, calendar functions and enterprise applications regardless
of the device used. For the corporation, AWES offers high
security, quick and simple installation and enhanced
productivity.
In January, Arch Wireless:
-- Launched its wireless information server, AWES, to
corporate customers nationwide.
-- Filed its Joint Plan of Reorganization and related
Disclosure Statement with the bankruptcy court.
Arch Wireless, Inc., headquartered in Westborough, Mass., is a
leading two-way wireless messaging and mobile information
company with operations throughout the United States. The
company offers a full range of wireless messaging and wireless
e-mail services, including mobile data solutions for the
enterprise, to business and retail customers nationwide. Arch
provides wireless services to customers in all 50 states, the
District of Columbia, Puerto Rico, Canada, Mexico and in the
Caribbean principally through its nationwide sales force, as
well as through resellers, retailers and other strategic
partners. Additional information on Arch Wireless is available
on the Internet at http://www.arch.com
At March 31, 2002, Arch Wireless, Inc. has a total shareholders'
equity deficit of about $1.6 billion.
ARTHUR ANDERSEN: Sells Michigan & Ohio Offices to Ernst & Young
---------------------------------------------------------------
Accounting firm Arthur Andersen LLP, under fire for its role in
the Enron Corp. bankruptcy, has sold a group of offices in
Michigan and Ohio to Ernst & Young LLP, according to the
Associated Press. Under the deal, about 159 Andersen employees
from Detroit, Grand Rapids, and Ann Arbor, Michigan, as well as
Toledo, Ohio, will join Ernst & Young. They include 14 partners
and principals in Andersen, Ernst & Young announced. Terms of
the deal were not disclosed. (ABI World, May 7, 2002)
BROADLEAF CAPITAL: Completes Share Capital Restructuring
--------------------------------------------------------
Broadleaf Capital Partners, Inc. (OTCBB:BDLF) (OTCBB:BDLFE)
filed its Form 10-K Annual Report for the 2001 fiscal year on
Friday, May 3, 2002, with the SEC.
This was consistent with a press release April 26, 2002,
indicating the filing could be anticipated by such a date. It is
expected the stock's trading symbol will be restored to "BDLF"
within the next 24 hours. It can be accessed on the Securities
and Exchange Commission Web site or at http://www.freeedgar.com
Broadleaf Capital Partners' Interim President, Robert Braner,
stated, "With the completion and filing of this 10-K Annual
Report, we believe the Company has now created a more level
playing field. Having achieved the restructuring of the
Company's share capital, and a new Board of Directors as a
result of the overwhelming shareholder support at our recent
Annual Meeting, we are aggressively moving forward with our Plan
for Success. The implementation of our strategy to rebuild the
company and restore shareholder value is well underway."
Donald Johnson, Interim CFO, stated, "For the fiscal year ended
Dec. 31, 2001, the Company reported a net loss of $3,655,086 and
revenues of $15,125, as compared to a net loss of $8,616,328 and
revenues of $764,814 for the fiscal year ended Dec. 31, 2000."
It is important to recognize the current 2001 filing reflects
judgment payable liabilities outstanding as of fiscal year 2001
in the amount of $2,083,300, allowances taken for bad debt plus
bad debt write-offs represent another $500,541. Adjustments for
unrealized loss on investments were $394,289.
These adjustments and write-offs on original liabilities,
however, do not reflect any final settlements negotiated in good
faith and currently underway which would reduce significantly
these liabilities. It is management's expectation that these
reductions and adjustments should be noted and more visible in
the Company's upcoming and future SEC filings.
The entire 2001 operating year has been dedicated to the final
elements of debt and liability negotiation, and the clean up and
restructuring of the Company. The re-alignment of all
liabilities to something less than a 10-cent-on-the-dollar
amount has been an important target in the turnaround of the
Company's operations. Management believes it can now begin to
focus on improving the Company's currency and execution of its
plan.
C 3D DIGITAL: Auditors Express Going Concern Doubts
---------------------------------------------------
C 3D Digital Inc. has incurred losses from its inception through
December 31, 2001. The Company does not have an established
source of revenues sufficient to cover its operating costs and,
accordingly, there is substantial doubt about its ability to
continue as a going concern.
In order to develop an established source of revenues, and
achieve a profitable level of operations, the Company will need,
among other things, additional capital resources. Management has
formulated a plan to raise additional funding though stock
issuances and increase in debt. In addition, management believes
the Company's projected revenues from the establishment of its
VisionComm subsidiary and its hotel activities along with
$3,500,000 in funding received through a private placement of
its common stock will provide sufficient capital for operations.
However, management cannot provide any assurances that the
Company will be successful in accomplishing any if its plans.
The Company or Chequemate International, Inc. doing business as
C-3D Digital, Inc. includes; C-3D Digital - a division selling
and marketing 3D products developed by Another World, Inc.
including 3D technology for converting 2D content to 3D content
for film, television and computer applications; VisionComm, Inc.
- a wholly owned cable subsidiary; and Hotel Movie Network - a
division of Chequemate International, Inc. that delivers direct
digital television services to hotel rooms.
Hotel Movie Network (HMN) accounted for $591,750, or
approximately 27%, of Company revenues for the nine months ended
December 31, 2001. VisionComm's revenues were $1,445,229, or
67%, and the remaining $128,781, or 6%, of revenues were
generated by miscellaneous sales of C-3D Digital. During the
next twelve months the Company expects a major shift in the
amount and percentage that C-3D Digital will contribute to
revenues as C 3D Digital begins selling the 3D products
developed by Another World, Inc. In March 2002 it will be
modifying its website to handle direct sales to consumers of the
3D products. It was anticipated that consumer sales of its 3D
products would begin in April, 2002 and gradually ramp up
throughout the year. The Company expects its gross margin on
sales will be approximately 60% and therefore it anticipates
that needs for outside capital financing will diminish as sales
increase. The gross margin will be used to cover overhead costs
of operations as well as general and administrative functions
that are currently being paid for with outside investment
capital. The actual amount of future outside capital needs
cannot be accurately predicted at this time due to uncertainties
in the market place, actual costs of sales and marketing,
unknown return rates and the cost of technical customer service
support staff.
The Company's auditors have issued a going concern opinion in
regard to the audited consolidated financial statements as of
March 31, 2001. C 3D continues to be dependent on investment
capital to fund operations. The Company says it plans to
significantly reduce debt by continuing to negotiate stock
settlements with its creditors to satisfy outstanding
obligations. On August 10, 2001, C 3D Digital raised $3,500,000
through the issuance of common stock to the shareholders of
Another World, Inc. Currently, the operation of VisionComm and
the Hotel Movie Network is barely at break-even point.
Management is making efforts in terms of cost reduction,
including the merger of two VisionComm offices into one, a
reduction of staff and a re-negotiation of outstanding debt into
more favorable terms. While the cost reductions are vital to
continuing as a going concern, nevertheless new capital
investment is required for C 3D to continue operations.
Sales for the nine months ended December 31, 2001 were
$2,165,760 compared to $3,153,503 for the same period in 2000, a
decrease of $987,743, or 31 percent. Cost of goods sold
decreased by $724,965, or 36 percent, to $1,276,334 for the nine
months ended December 31, 2001 compared to $2,001,299 for the
nine months ended December 31, 2000. Gross Profit Margin was
$889,425, or 41 percent, and $1,152,204, or 37 percent, for the
nine months ended December 31, 2001 and 2000, respectively.
Net loss for the nine months ended December 31, 2001, was
$4,266,079 as compared to the net loss for the same nine months
of 2000 of $10,011,457.
CALPINE CORP: Cogeneration Facility Enters Commercial Operations
----------------------------------------------------------------
Calpine Corporation (NYSE: CPN) announced that its wholly owned
subsidiary Calpine Canada has placed the 230-megawatt Island
Cogeneration facility into commercial operations. The facility
is delivering its full output to the British Columbia Hydro &
Power Authority. Fueled by clean natural gas and incorporating
advanced combined-cycle technology, Island Cogeneration
interconnects directly to the British Columbia transmission grid
and is helping meet the growing demand for electricity on
Vancouver Island.
The facility is located near Campbell River, B.C. on Vancouver
Island. Designed with a combined-cycle process, Island
Cogeneration generates electricity 40 percent more fuel
efficiently than older technology gas-fired plants -- conserving
natural resources and reducing emissions. The facility delivers
electricity to BC Hydro under a 20-year agreement. As a
cogeneration facility, it also will provide, on average,
approximately 90 tons of steam per hour to the adjacent Norske
Canada pulp and paper mill for industrial processing under a 20-
year contract. Calpine acquired Island Cogeneration from
Westcoast Energy Inc. in September 2001.
"This is an important milestone for Calpine Canada's power
generation business," said Daniel Allard, senior vice president,
Calpine Canada. "Island Cogeneration reflects our commitment to
providing clean, cost-competitive generation for the Canadian
power market and is a strong complement to our existing natural
gas operations in Western Canada."
Based in Calgary, Alberta, Calpine Canada is an integrated
energy company focused on power generation and oil and gas
production, and is a wholly owned subsidiary of Calpine
Corporation. Calpine entered the Canadian power market in 2000
with the announcement of its 250-megawatt Calgary Energy Centre,
currently under construction in Calgary, Alberta. Calpine also
has a 50 percent interest in, and operates, the 50-megawatt
Whitby Cogeneration facility in Whitby, Ontario, which provides
electricity to the Ontario Energy Financial Corporation
(formerly Ontario Hydro) and steam to Atlantic Packaging.
Calpine Canada has approximately 680 billion cubic feet of
equivalent proven natural gas reserves in British Columbia and
Alberta to serve its natural-gas fired power generation base.
Based in San Jose, California, Calpine Corporation is an
independent power company that is dedicated to providing
customers with clean, efficient, natural gas-fired and
geothermal 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 in the United
Kingdom. 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 its 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 reports that Calpine Corp.'s 8.25% bonds due 2005
(CPN05USR1) are trading at a price of 83.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CPN05USR1for
real-time bond pricing.
CANADIAN IMPERIAL: Wins Approval to Proceed with Debt Workout
-------------------------------------------------------------
Canadian Imperial Venture Corp. announces that the Minister of
Mines and Energy has issued a Lease for Garden Hill Oil and Gas
Development on the Port au Port Peninsula, Western Newfoundland
(The Lease is the first ever awarded under the Petroleum
Regulations of Newfoundland and Labrador).
The Lease covers an area of approximately 33,000 acres along a
prospective fault-bounded inversion fairway on the Port au Port
Peninsula and includes the Port au Port No. 1 discovery well and
development lands.
The Company is also pleased to report that the 70% threshold
required for approval of the debt restructure plan as announced
April 18, 2002 has been reached, therefore the agreement has
been ratified by the creditors.
Canadian Imperial Venture Corp. (CDNX:CQV) is an independent
Newfoundland-based energy company with interests in petroleum
exploration and production in Western Newfoundland and Labrador.
* * *
Canadian Imperial Venture Corp. says that the response by its
creditors to its debt restructuring agreement has been positive.
On this, the first day of distribution of the agreement to
individual creditors for their consideration, creditors
representing 68% of the dollar amount outstanding have ratified
the agreement. In order for the agreement to become effective
creditors that are owed at least 70% by dollar amount of the
eligible claims must sign on as participating creditors. The
Company has until the closing date of the agreement to obtain
the remaining 2%. The proposed closing date under the
Agreement has been scheduled for April 30, 2002 unless extended
to no later than May 15, 2002. Upon reaching the necessary
threshold amount of 70% the Company will issue a further press
release.
CHROMATICS COLOR: Expects Losses to Continue Despite New Plan
-------------------------------------------------------------
Chromatics Color Sciences International, Inc. was formed in 1984
to research, develop and commercialize certain intellectual
property rights, proprietary technology and instrumentation in
the field of color science. The Intellectual Properties provide
color measurement to a laboratory standard of accuracy, analysis
and classification of human skin, tissue, fluid, hair, teeth or
biological subject which facilitates the detection and
monitoring of conditions affecting their coloration and the
classification and organization by color of various consumer-
sensitive products such as cosmetics, tooth enamel, hair color,
hosiery, clothing fashion accessories and textiles. The Company
has incorporated certain of the Intellectual Properties into a
proprietary color measurement system and software marketed for
various commercial applications as the "ColorMate(R) System."
The Company has developed a ColorMate(R) device to measure the
incremental change of the yellow content of the skin color in
newborns to monitor newborn bilirubinemia (infant jaundice)
(defined as bilirubin levels or infant jaundice in a range above
that which would be considered average in a newborn). On July
30, 1997 the Company received U.S. Food and Drug Administration
clearance for commercial marketing of the ColorMate(R) device
for non-invasive monitoring of newborn bilirubinemia (infant
jaundice) in infants by healthcare professionals in the
hospital, institutional, pediatricians' office or home setting.
In September 2001, the Company received further clearances from
the U.S. Food and Drug Administration for upgrades to the
ColorMate(R) TLc-BiliTest(R) System.
The Company incurred net losses of $7,918,000 and $19,496,000
for the fiscal years ended December 31, 2001 and 2000,
respectively. The reduction in net loss is primarily a result of
the Company pairing back its expenses to preserve cash and the
completion of the developmental stage of its medical product,
and a reduced impact from continued operations.
Revenues for the fiscal year ended December 31, 2001 were $8,000
compared to $80,000 in the prior fiscal year. The lack of
significant revenue is primarily attributable to the Company's
inability to successfully market and distribute its medical
product. A combination of factors contributed to disappointing
sales results during 2000 and 2001. There were many upgrades to
the instrument requested by the end user including ease of use
features such as rechargeable batteries, shortened length of
test and accelerated modem transfer of test results to a central
server for tracking patient tests after hospital discharge.
These and numerous other upgrades required additional FDA
applications and FDA clearances which were not obtained until
the third quarter of 2001. Additionally, the length of the
hospital evaluation period was much longer than expected,
including multi-site studies, which were completed in the years
2000 and 2001. These post market studies were submitted in the
Company's FDA application in 2001 which received FDA clearances
in the third quarter of 2001. These clearances allow the Company
to upgrade the medical instruments to accommodate the end users
requirements. However, further funding of the Company is
required to perform these upgrades on the Company's medical
distributor's inventory.
Although the Company has substantially reduced personnel and
ongoing operating expenses, the Company expects that it will
continue to incur costs in connection with the required research
and development on its new LED instrument and technology,
complete filings, administration and maintenance for certain
intellectual properties and regulatory requirements; supply
updated products and sales support to its medical distributor;
complete FDA filings for upgrades to its medical products, and
explore the possibility of either renegotiating its current
distribution agreement for its medical products or selling the
exclusive rights to its medical products and technology.
The Company anticipates that it will continue to incur new
losses for the foreseeable future as expenses are incurred in
implementing its long-term business plan.
At December 31, 2001, Chromatics Color's balance sheet shows
that the company has a total shareholders' equity deficit of
about $3.2 million.
COVANTA ENERGY: Seeks Approval to Reject Nevada Water Contract
--------------------------------------------------------------
Covanta Energy Corporation and its debtor-affiliates ask the
Court to reject an executory construction contract with the
Southern Nevada Water Authority which calls for the addition of
an ozone facility and two affiliated subcontracts.
The Nevada Construction Contract
The Nevada Construction Contract calls for the addition of ozone
facilities to the Authority's existing Alfred Merritt Smith
Water Treatment Facility (the AMSWTF). The Nevada Construction
Contract requires the Contractor to (1) relocate utilities and
connections to existing facilities, (2) construct the ozone
contactor and appurtenant yard structures, (3) construct the
ozone building and install equipment, valves and instruments
provided by the Authority. This construction is to enhance the
water treatment system, explains Deborah M. Buell, Esq. at
Cleary Gottlieb.
While the Nevada Construction Contract called for the
construction to be completed in a timely and efficient manner,
there have been numerous delays, resulting in higher
construction costs for the Contractor. The Contractor has been
unable to recoup these costs and, therefore, stands to lose
approximately $4-5 million if the Nevada Construction Contract
is continued. Such a financial drain on the Debtors' current
cash flow negatively impacts the Debtors' ability to effectuate
a successful reorganization.
The Nevada Construction Contract is insured by Travelers
Insurance Company. Although Travelers may assert a claim against
the estate, the Contractor expects that Travelers will continue
performance of the Nevada Construction Contract. While rejection
of the Nevada Construction Contract will result in rejection
claims, the Debtors believe that the benefit of rejection
outweighs the burden of continuing to perform the Nevada
Construction Contract.
So, she continues, the Contractor has determined to reject the
Nevada Construction Contract because participation in this
contract has resulted in losses to the Contractor, with no
corresponding benefit received by the Contractor.
The Subcontracts
The Debtors further ask the Court for authorization to reject
two subcontracts affiliated with the Nevada Construction
Contract effective as of the date of this Motion. The Debtors
have determined that rejection of the Subcontracts is necessary
in light of the rejection of the Nevada Construction Contract.
The Debtors want to reject a subcontract between the Contractor
and Scott Company of California, dated March 5, 1999. The Scott
Subcontract calls for the Scott Subcontractor to furnish and
install mechanical equipment and piping at the AMSWTF.
The second subcontract subject to rejection is between the
Contractor and Shasta Electric, Inc., dated March 16, 1999. The
Shasta Subcontract calls for the Shasta Subcontractor to furnish
and install all materials required to complete electrical and
instrumentation work at the AMSWTF.
While both subcontracts called for the required installation to
be completed by specific dates, there have been numerous delays,
resulting in higher construction costs for the Contractor. Such
a financial drain on the Debtors' current cash flow negatively
impacts the Debtors' ability to effectuate a successful
reorganization.
Rejection of the Nevada Construction Contract, Ms. Buell
explains, renders continued performance under the Scott
Subcontract and Shasta Subcontract unduly burdensome, given that
these three contracts are so closely intertwined. The Scott
Subcontract is insured by United States Fidelity Guaranty
Company. The Shasta Subcontract is insured by American Home
Assurance Company. Although both Fidelity and American Home may
assert claims against the estate, the Contractor expects that
they will continue performance of the Scott Subcontract and the
Shasta Subcontract, respectively.
Ms. Buell contends that Section 365(a) of the Bankruptcy Code
provides, in pertinent part, that a Debtor-In-Possession,
"subject to the court's approval, may assume or reject any
executory contract or unexpired lease of the debtor." 11 U.S.C.
Section 365(a). "[T]he purpose behind allowing the assumption or
rejection of executory contracts is to permit the trustee or
Debtor-In-Possession to use valuable property of the estate and
to 'renounce title to and abandon burdensome property."
The standard applied by a court in determining whether the
rejection of an executory contract should be authorized, she
continues, is the debtor's "business judgment" that rejection is
in the estate's economic best interests. Generally, a court will
give great deference to a debtor's decision to assume or reject
the contract. A debtor need only show that its decision to
assume or reject a contract is an exercise of sound business
judgment - a standard which we have concluded many times is not
difficult to meet.
Ms. Buell asserts that, upon finding that the Debtors have
exercised their sound business judgment in determining that the
rejection of the Nevada Construction Contract and the
Subcontracts is in the best interest of the estates, the Court
should authorize the rejection under Section 365(a) of the
Bankruptcy Code. In an effort to maximize the value of their
estates, the Debtors have reviewed their overall operations and
determined, in their best business judgment, the rejection of
the Nevada Construction Contract and the Subcontracts as of the
date of this Motion is in the estates' best economic interests.
As such, the Debtors request authority to reject the Nevada
Construction Contract and the Subcontracts.
The Debtors respectfully request that Judge Blackshear authorize
the Debtors to reject the Nevada Construction Contract, the
4Scott Subcontract, and the Shasta Subcontract pursuant to
Section 365(a) of the Bankruptcy Code, effective immediately.
(Covanta Bankruptcy News, Issue No. 4; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
DIVERSIFIED CORPORATE: Weaver & Tidwell Airs Going Concern Doubt
----------------------------------------------------------------
According to Weaver and Tidwell, L.L.P., of Dallas, Texas,
Diversified Corporate Resources, Inc. ". . . incurred a net loss
of $3,978,000 during the year ended December 31, 2001, and, as
of that date, had a working capital deficiency of $2,519,000.
[This] working capital deficiency is the result of the Company
being in default on its revolving credit agreement and the
acceleration of certain other payment obligations. Those
conditions raise substantial doubt about the Company's ability
to continue as a going concern." These statements were in
Weaver and Tidwell's Auditors Report of April 22, 2002.
Diversified Corporate Resources, Inc. is an employment services
firm focused on providing recruited staffing solutions for
clients requiring personnel with skills in
engineering/technical, information technology, and other
professional disciplines. It delivers these services by
providing clients with solutions in permanent/specialty
placement and/or contract placement.
For the year ended December 31, 2001, net service revenue
decreased $9.4 million, or 12%, to $71.6 million as compared to
$81.0 million for the previous year. Revenue derived from
contract and specialty placements increased $3.9 million.
Approximately $2.2 million of the increase in revenue derived
from contract and specialty placements was attributable to the
inclusion of the results of Datatek, which was acquired in March
2000. The balance of the growth in revenue from contract and
specialty placements of $1.7 million, or 3%, was attributable to
increased contract placements with existing customers and the
addition of new customers. Permanent placement revenue decreased
$13.3 million, or 42%, as a result of the continuing effect of
hiring freezes and staff reductions implemented by the Company's
customers due to the softening of the economy. Contract
placement and specialty services revenue accounted for 75% of
revenue for the year ended December 31, 2001, up from 61% for
the previous year.
For the year ended December 31, 2001, gross margin decreased by
$13.1 million, or 31%, to $29.0 million as compared to $42.1
million in the previous year. All of the absolute decrease in
gross margin dollars is due to the decline in permanent
placement revenues. As a percentage of contract and specialty
placement revenue, the gross margin derived from contract and
specialty placements for the year ended December 31, 2001, was
20%, down one percentage point as compared to the previous year.
The Company experienced a $4.0 million net loss for the year
ended December 31, 2001 as compared to net income of $1.7
million for the previous year.
DUANE READE: Commences Tender Offer to Purchase $80M 9.25% Notes
----------------------------------------------------------------
Duane Reade has commenced a tender offer to purchase all of its
$80.0 million outstanding 9.25% Senior Subordinated Notes due
2008 for $1,070 per $1,000 principal amount at maturity, F&D
Reports says.
The consent payment deadline is 5:00 PM EST on May 17, 2002,
while the offer is scheduled to expire at 12:00 AM EST on May
31, 2002. Goldman, Sachs & Co. will act as dealer manager for
the offer.
Duane Reade is one of the largest drug chains in the New York
City metropolitan area. The company had $247.1 million debt
outstanding as of December 29, 2001. More than half of its 200
stores are located in Manhattan. Duane Reade is the market
leader in the New York metropolitan area with a 30% share; CVS
Corp. is its closest competitor with a 22% market share.
Convenience is a significant competitive factor in drug store
retailing.
As previously reported, a 'BB-' rating was assigned on April 10,
2002, to drug store operator Duane Reade's proposed $110 million
senior unsecured convertible notes due in 2022. The other
ratings on Duane Reade were also affirmed at that time. Proceeds
from the debt issuance will be used to repay amounts outstanding
under the company's credit facility and a portion of the 9.25%
senior subordinated notes. Rating outlook is stable.
EASYLINK SERVICES: Posts Improved Operating Results in Q1 2002
--------------------------------------------------------------
EasyLink Services Corporation (NASDAQ: EASY), a leading global
provider of services that power the exchange of information
between enterprises, their trading communities and their
customers, reported financial results for the first quarter
ended March 31, 2002.
Revenues for the first quarter of 2002 increased 54% to $30.3
million from $19.7 million in the comparable quarter a year ago.
Gross margin increased to 48% in the first quarter of 2002 from
8% in the first quarter of 2001 resulting from increased
revenues in higher margin products, reductions in costs and the
divestiture of the advertising business. Importantly, the
Company achieved its third consecutive quarter of positive pro-
forma EBITDA during the first quarter of 2002 of $3.1 million as
compared to a negative $13.9 million in the first quarter of
2001. Pro-forma EBITDA is equal to the loss from continuing
operations reduced by interest, taxes, depreciation expense,
amortization of goodwill and other intangibles, impairment and
restructuring charges, loss on sale of business and impairment
on investments.
For the quarter ended March 31, 2002, the Company's pro-forma
loss from continuing operations improved to $0.6 million
compared to a pro-forma loss from continuing operations of $21.9
million for the quarter ended March 31, 2001. The pro-forma loss
for the first quarter of 2002 excludes amortization of
intangibles. The pro-forma loss from continuing operations for
the first quarter of 2001 excludes amortization of goodwill and
other intangibles, restructuring and impairment charges, loss on
sale of business and impairment on investments. All per share
amounts are based on the weighted average number of basic and
diluted shares outstanding, which were 16,166,200 and 7,052,837
for the 2002 and 2001 first quarters, respectively.
Under Generally Accepted Accounting Principles, the Company
reported a net loss for the first quarter of 2002 of $2.7
million compared to a loss from continuing operations of $53.9
million and a net loss of $68.6 million for the first quarter of
2001. On January 1, 2002, the Company adopted Financial
Accounting Standards Board Statement No. 142 - Goodwill and
Other Intangible Assets. Statement No. 142 requires that
companies no longer amortize goodwill, but instead test goodwill
for impairment on an annual basis. The Company will have up to
six months from the date of adoption to complete its initial
impairment assessment. Given the extensive effort needed to
comply with adopting Statement No. 142, it is not practicable at
this time to reasonably estimate the impact of adopting this
pronouncement on the Company's financial statements. It is
possible that this assessment could result in an impairment
charge next quarter. Amortization of goodwill and other
intangibles for the three months ended March 31, 2001 includes
$11.0 million of goodwill amortization in continuing operations
and $3.4 million in discontinued operations, which is not
included in the comparable period of 2002.
Financial Metrics
In January, EasyLink outlined its 2002 business strategy, which
will build upon the substantial customer base, technology and
servicing assets it brought together during 2001. Consistent
with this strategy, EasyLink began reorganizing itself around
the following service lines which provide our customers with a
range of options for the electronic delivery of transaction
documents such as purchase orders, invoices, shipping notices,
insurance claims and funds transfers, among many others:
-- Electronic data interchange services or EDI: EasyLink
EDI service is a transaction delivery service that allows our
customers to manage the electronic exchange of transaction
documents using standard EDI formats;
-- Production messaging services: EasyLink Production
Messaging Service is a transaction delivery service that allows
our customers to deliver transaction documents from virtually
any enterprise environment to any other, using formats other
than EDI;
-- Integrated desktop messaging services are transaction
delivery services that allow our customers to send and receive
transaction documents as faxes directly from their desktop
workstations.
EasyLink also provides Boundary (virus and content scanning)
services, and managed e-mail services as well as legacy real
time fax services to customers in certain markets.
Thomas Murawski, Chief Executive Officer of EasyLink, said,
"EasyLink's revenues are directly affected by the volume of
transactions occurring across the entire value chain of our
customers' businesses. When our customers' businesses slow down,
EasyLink can be affected because existing customers generate
fewer transactions for us to deliver, and new customers take
longer to install the applications we sell. While our customer
base is sufficiently diversified to mitigate the effects from
downturns in individual industry sectors, what we have seen over
the past two quarters has been much more broad-based.
"Right now, we are focusing on the aspects of our business we
can control, such as lowering our costs, enhancing our service
portfolio, executing our quality program, and attracting new
customers. We continued to execute well during the first quarter
in all of these areas, with accomplishments that include
continuing our positive EBITDA trend, introducing EDIINT
Services, and winning new transaction delivery business at
companies such as General Motors, Alcoa, Farmers Insurance and
the Bank of New York. These and other companies understand that
EasyLink can help them become more competitive through the
reduced costs and increased efficiency of doing business
electronically. We believe this is a strong value proposition
for companies riding out or moving past the downturn in their
businesses. We expect our transaction delivery volumes to
increase as these new applications are installed."
Customer Relationships
During the first quarter, EasyLink continued to broaden and
deepen its customer relationships primarily due to strong
customer interest in EasyLink's high-volume, transaction-
delivery services. In North America, 187 companies either
established or expanded deployment of EasyLink's services during
the quarter including Airborne Express, Alcoa, American Electric
Power, Avis, Bank of America, Bank of New York, Chevron-Texaco,
Farmers Insurance, Federal Express, Fleet Bank, FTD, General
Motors, Honeywell, Hooper Holmes, Merrill Lynch, Met Life,
Merck-Medco, Mohawk Industries, Nationwide Insurance, PacifiCare
Health Systems, Reliant Energy, Standard Chartered Bank, and
Wegman's. In Europe, Garban International, Land Rover, Leman
Commodities, Mitsui and Stratos joined EasyLink's customer list.
In the Asia Pacific region, new or expanded existing customers
include Bank of Tokyo, Elmira, Fuji Bank, Grace Sales and Nomura
International. For our Latin America, Middle East and Africa
regions, International Tanker, Sogecor and Errants were added.
In India, Kentetsu Express India, Pharma Lab, Real Prints and
Supari Sales are new additions. And in the Singapore/Malaysia
region, Exel Singapore, FedEx and Winstar Shipping either signed
on or expanded their EasyLink relationship.
Strategic Partnerships and Alliances
Through an alliance with IPNet announced during the first
quarter, customers using IPNet eBiznessT Transact software, a
business-to-business connectivity solution, will be able to
seamlessly connect to the EasyLink IP EDI Network through
EasyLink's EDIINT Gateway Service in order to exchange critical
business transactions. The service offering is an easy and cost-
effective means for enterprises to grow the size of their
electronic trading communities.
Also during the quarter, EasyLink partnered with STR Software to
provide a joint solution offering STR's newly released AventX
UNIX 3.2 with integrated access to the EasyLink Transaction
Delivery Network. The solution is targeted toward Global 2000
companies using Oracle, SAP, or PeopleSoft, the enterprise
software environments of choice among large corporations. The
transaction focus includes mission-critical modules such as
purchasing, shipping, inventory control, a wide range of
financial applications, and customer relationship management
(CRM).
Additionally, in the quarter, EasyLink partnered with Z-Firm LLC
to connect companies using existing leading customer
relationship management (CRM) and SQL database platforms to the
EasyLink Transaction Delivery Network. Z-Firm's OmniRush, which
was named "Product of the Year" for 2001 in the outbound
communications server category by Communications Solutions
magazine, connects to leading CRM applications, such as Goldmine
and SalesLogix, to enable external communications directly from
the CRM application. OmniRush also connects directly to custom
applications based on Microsoft SQL Server and Oracle database
servers. By adding OmniRush, enterprises gain the ability to
automatically distribute communications to their customers,
vendors and suppliers using EasyLink Production Messaging
Service.
International Expansion
The Company has committed to a 2002 international roll out plan
to better serve its global customer base and strengthen its
overall position as a global provider of transaction delivery
solutions. EasyLink expanded its international presence during
the first quarter by establishing sales offices in Thailand and
Brazil. Future expansion plans call for the establishment of
sales offices in United Arab Emirates, France and Italy and six
cities throughout India.
Services
During the first quarter, EasyLink launched its EDIINT Gateway
Service, bringing increased levels of security and accessibility
to its Internet EDI offering, and expanding EasyLink's role as a
trusted third-party transaction delivery network. This service
provides a bridge between large-scale, established EDI
installations and the growing Internet-enabled trading
community. This announcement marked the first in a series of new
transaction delivery and management services the Company expects
to offer, as outlined in EasyLink's January 15th 2002 Strategy
announcement.
Business Outlook
With the economic outlook still uncertain, EasyLink is revising
its future guidance. The following statements are forward
looking and actual results may differ materially due to factors
noted at the end of this release, among others.
EasyLink expects the second quarter of 2002 to be similar to the
first quarter:
-- Revenues are expected to be in the range of $30 to $32
million.
-- Gross margin is expected to remain at approximately
48%.
-- Pro-forma EBITDA is expected to be in the range of $2
to $4 million.
-- Pro-forma net loss from continuing operations is
expected to be in the range of $2 million to $0 (zero)
million.
EasyLink now expects the following for the full year 2002:
-- Revenues are expected to be in the range of $125 to
$130 million.
-- Gross margin is expected to be approximately 49%.
-- Pro-forma EBITDA is expected to be in the range of $12
to $15 million.
-- The Company expects to achieve positive pro-forma
income from continuing operations in the fourth quarter
of 2002 and expects the full year 2002 pro-forma net
loss from continuing operations to be less than $4
million.
"Despite the challenges posed by the current economic
environment, we believe we will be able to manage the Company to
pro-forma profitability by the fourth quarter of this year. With
a solid foundation in place, EasyLink is executing its strategy
and believes it is positioned to lead one of the fastest growing
segments in the e-commerce industry - transaction delivery and
management services," concluded Murawski.
EasyLink Services Corporation (NASDAQ: EASY), headquartered in
Edison, New Jersey, is a leading global provider of services
that power the exchange of information between enterprises,
their trading communities, and their customers. EasyLink's
network facilitates transactions that are integral to the
movement of money, materials, products, and people in the global
economy, such as insurance claims, trade and travel
confirmations, purchase orders, invoices, shipping notices and
funds transfers, among many others. EasyLink helps more than
20,000 companies, including over 400 of the Global 500, become
more competitive by providing the most secure, efficient,
reliable, and flexible means of conducting business
electronically. For more information, please visit
http://www.EasyLink.com
As previously reported (Troubled Company Reporter Feb. 5, 2002
edition), the Company transferred 14,239,798 shares of its Class
A common stock to AT&T and gave AT&T immediately exercisable
warrants to purchase an additional 10,000,000 shares at a price
of $0.61 per share, in connection with the restructuring of
approximately $35,000,000 of indebtedness owed by EasyLink
Services, Inc., to AT&T, including the retirement of portions of
the Indebtedness and an extension of the maturity date with
respect to the remaining indebtedness. The Indebtedness was
created by the Company's default under the terms of a promissory
note made by EasyLink in favor of AT&T. The promissory note
evidenced the Company's obligation to pay AT&T for certain
services under a Transition Services Agreement between EasyLink
and AT&T, dated January 31, 2001.
As a result of the debt restructuring of EasyLink, AT&T
acquired the Class A Common Stock. AT&T intends to treat the
common stock of EasyLink as a passive investment and will
realize a gain or loss, if any, on the sale of the shares.
ENRON CORP: State Street Now Serving as ESOP Fiduciary
------------------------------------------------------
Judge Gonzalez approves State Street Bank and Trust Company's
appointment as fiduciary for the Enron Corp. Employee Stock
Ownership Plan, the Enron Corp. Savings Plan and the Enron Corp.
Cash Balance Plan.
However, the Court denies the Debtors' request for authorization
to pay, as a matter of contract law, the fees, expenses,
reimbursements, indemnity and other obligations -- "provided,
however, that such denial is without prejudice to the rights of
the Plans or State Street to file one or more motions from time
to time seeking entry of an order, pursuant to Section 503 of
the Bankruptcy Code, directing reimbursement or direct payment
of such items as administrative expenses of Enron pursuant to
Section 507 of the Bankruptcy Code; and, provided, further, that
nothing contained in the Order prevents any party in interest
from opposing the motion or motions on any grounds."
Judge Gonzalez makes it clear that the existing administrative
committees for the Plans will not be liable for any actions
taken by State Street in connection with the Plans.
The parties have agreed to modify the Fiduciary Services
Agreement. Among the amendments include:
(1) Except as otherwise provided in this Section 2.7,
notwithstanding any other provision of the Agreement, unless
and until the Bankruptcy Court approves the payment by the
Company of the fees, expenses, reimbursements and indemnity
obligations as set forth in the Agreement as in effect prior
to this Amendment No. 1, relating to Fiduciary's service as
a fiduciary of the Plans, the Company will cause the Plans
to pay such amounts from time to time as directed by
Fiduciary except where such direction would be a violation
of the Company's fiduciary responsibility under ERISA. In
addition, unless and until the Bankruptcy Court approves the
payment by the Company of the indemnity obligations as set
forth in the Agreement, the provisions of Section 7 of the
Agreement are not applicable.
(2) The Company acknowledges and agrees that Fiduciary may, in
its discretion, from time to time file, on behalf of itself
and any of the Plans, a motion in the Bankruptcy Case
pursuant to Section 503 of the Bankruptcy Code, seeking
payment or reimbursement from the Company as an
administrative expense pursuant to Section 507(a)(1) of the
Bankruptcy Code, for any or all fees, expenses, expense
reimbursements, and other amounts due and payable by the
Plans or the Company under this Agreement. This includes
any costs, expenses, or damages or any claims incurred in
connection with the defense and settlement of any claims
made by any persons, entities or other organizations against
Fiduciary with regard to its engagement under this
Agreement. The Company also acknowledges and agrees that the
DOL and any other party in interest reserves the right to
seek reconsideration of or to appeal the Bankruptcy Court's
denial of that portion of the Motion that sought
authorization for the Company to pay as a matter of contract
law, the fees, expenses, reimbursements, and indemnity
obligations and other obligations set forth in the
Agreement.
(3) Fiduciary agrees that, from the Commencement Date through
the termination date of this Agreement, it will make a
reasonable effort to obtain from reputable and financially
sound insurance carriers acceptable to Fiduciary and pay any
and all premiums for an insurance policy including "tail
insurance" with per claim and "aggregate coverage limits up
to U.S. $85,000,000" -- instead of $50,000,000. (Enron
Bankruptcy News, Issue No. 24; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
EXIDE TECHNOLOGIES: Brings-In Gavin Anderson as PR Consultants
--------------------------------------------------------------
Exide Technologies and its debtor-affiliates ask the Court to
retain Gavin Anderson & Company, pursuant to Sections 327(a) and
328(a) of the Bankruptcy Code as their public relations
consultants in the Chapter 11 Cases.
According to Craig H. Muhlhauser, the Debtors' President and
Chief Executive Officer, Gavin Anderson is a communications firm
that has extensive experience in crisis communications involving
matters such as corporate transactions, bankruptcies,
reorganizations and restructurings, and corporate
communications. Gavin Anderson has extensive experience in
assisting financially troubled companies with public relations,
including companies that have been in bankruptcy.
Mr. Muhlhauser submits that many persons and entities, including
employees, trading partners, counter-parties to executory
contracts and leases, equity holders, financial markets,
potential investors, governmental entities, trade and other
creditors, the media, and the general public will be interested
in Debtors' bankruptcy. The cooperative participation of many of
these persons and entities will be necessary for the Debtors to
successfully reorganize. Gavin Anderson will be able to assist
Debtors in protecting, retaining and developing the goodwill and
confidence of these constituencies. Gavin Anderson will provide
such public relations services as Gavin Anderson and the Debtors
shall deem appropriate and feasible in order to advise the
Debtors in the course of these Chapter 11 Cases, including:
A. preparing materials to be distributed to Debtors' employees
explaining the impact of the Chapter 11 Cases;
B. drafting correspondence to creditors, vendors, employees and
other interested parties regarding the Chapter 11 Cases;
C. preparing written guidelines for head office and location
managers to assist them in addressing employee and customer
concerns;
D. preparing news releases for dissemination to the media for
distribution;
E. interfacing and coordinating media reports to contain the
correct facts and the Debtors' perspective as an ongoing
business;
F. assisting the Debtors in maintaining their public image as a
viable business and going concern during the Chapter 11
reorganization process;
G. assisting the Debtors in handling inquiries, e&,
shareholders, employees, vendors, customers, retirees, etc.,
and developing internal systems for handling such matters;
H. coordinating public relations services with a third party
making an investment in the Debtors; and
I. performing other strategic communications consulting services
as may be required by the Debtors in the Chapter 11 Cases.
In addition, by having a public relations consultant provide
these services in these Chapter 11 Cases, Mr. Muhlhauser states
that other professionals in the cases and officers who might
otherwise handle public relations matters will be able to focus
better on their respective competencies and jobs in the
management and reorganization of the Debtors. Gavin Anderson, at
the request of the Debtors, may provide additional public
relations services deemed appropriate and necessary to the
benefits of the Debtors' estates.
Robert Mead, President and Head of Americas of Gavin Anderson &
Company, submits that the firm has a wealth of experience in
providing public relations services to financially troubled
organizations. For more than 20 years, Gavin Anderson has
provided public relations services to companies experiencing
financial and operating difficulties. Gavin Anderson has
recently provided such services in a number of large and mid-
size bankruptcy restructurings, including: In re Leiner Health
Products, Inc., Case No. 02-10617 (Bankr. D. Del. February 28,
2002); Bridge Information Systems, Inc., Case No. 01-41599
(Bankr. E.D. Mo. February 15, 2001); In re The Babcock & Wilcox
Company, Case No. 0010992 (Bankr. E.D. La. February 22, 2000);
and Zenith Electronics Com., Case No. 99-02911 (Bankr. D. Del.
August 23, 1999).
In addition, Mr. Mead has worked as a public relations
consultant more than 13 years, having been employed by Gavin
Anderson since 1998. During his years as a public relations
professional, he has worked in many bankruptcy reorganizations,
including: In re MobileMedia Communications, Inc., Case No. 97-
00174 (Bankr. D. Del. January 30, 1997); In re Trans World
Airlines, Inc., Case No. 95-43748 (Bankr. E.D. Mo. June 30,
1995); In re Charter Medical Corp., Case No. 92-00709 (Bankr. D.
Del. June 6, 1992); and In re The Southland Corp., Case No.
37199 (Bankr. N.D. Tex. October 24, 1990).
Since November 5, 2001, Mr. Mead relates that Gavin Anderson has
rendered public relations and communications services to the
Debtors in connection with their restructuring efforts. Gavin
Anderson has become thoroughly familiar with the Debtors'
operations and is well qualified to represent the Debtors as
public relations consultants in connection with such matters in
a cost-effective and efficient manner.
For services and outlays on the Debtor' behalf, Mr. Mead informs
the Court that the Debtors have agreed that Gavin Anderson will
be compensated with a non-refundable fee of $30,000 due upon the
signing of the agreement, which will be applied to the final
monthly invoice when the relationship is terminated. Gavin
Anderson has agreed to represent the Debtors for compensation at
the hourly rates agreed upon between the parties pursuant to the
Retention Agreement plus reimbursement of actual out-of-pocket
expenses. The current hourly rates of the firm's professionals
are:
President $430
Chief Financial Officer 350
Managing Director 350
Director 275
Associate Director 225
Senior Executive 185
Executive 150
Administrative Assistant 60
Should Gavin Anderson be responsible for the production and
placement of any advertising that may be developed in relation
to the restructuring, Mr. Mead adds that the Debtors will
reimburse the firm for production-related expenditures. These
will be charged cost plus 17.65%. Also included in the firm's
invoices will be a research charge equal to 3.5% of the firm's
professional fees to offset a potion of the firm's client
servicing research costs, which cannot be economically monitored
and billed for on a client-by-client basis.
Mr. Mead assures the Court that Gavin Anderson is a
"disinterested person" within the meaning of 11 U.S.C. Section
101(14). He holds no interest adverse to the Debtors and their
estates for matters for which Gavin Anderson is to be employed.
In addition, Gavin Anderson has no connection with the Debtors,
their creditors or their related parties herein. Gavin Anderson
will conduct an ongoing review of its files to ensure that no
conflicts or other disqualifying circumstances exist or arise.
If any new facts or relationships are discovered, Gavin Anderson
will supplement its disclosure to the Court.
Mr. Mead also requests that these indemnification provisions of
the Retention Agreement be approved:
A. subject to the provisions of subparagraph (c), infra, the
Debtors are authorized to indemnify, and will indemnify Gavin
Anderson, in accordance with the Retention Agreement, for any
claim arising from, related to, or in connection with Gavin
Anderson's engagement, but not for any claim arising from,
related to, or in connection with Gavin Anderson's
post-petition performance of any services other than the
Communications Services unless such post-petition services
and indemnification therefor are approved by the Court;
B. notwithstanding any provision of the Retention Agreement to
the contrary, the Debtors will have no obligation to
indemnify Gavin Anderson, or to provide contribution or
reimbursement to Gavin Anderson, for any claim or expense
that is either judicially determined by a court of competent
jurisdiction to have primarily resulted from the bad faith,
gross negligence or willful misconduct of Gavin Anderson, or
settled prior to a judicial determination as to Gavin
Anderson's bad faith, negligence, or willful misconduct, but
determined by the Court, after notice and a hearing, to be a
claim or expense for which Gavin Anderson is not entitled to
receive indemnity, contribution or reimbursement under the
terms of the Retention Agreement as modified by the Order
approving this Application;
C. if, before the earlier of the entry of an order confirming a
Chapter 11 Plan in the Chapter 11 Cases, and the entry of an
order closing the Chapter 11 Cases, Gavin Anderson believes
that it is entitled to the payment of any amounts by the
Debtors on account of the Debtors' indemnification,
contribution and/or reimbursement obligations under the
Retention Agreement, including, without limitation, the
advancement of defense costs, Gavin Anderson must file an
application therefor in this Court, and the Debtors may not
pay any such amounts to Gavin Anderson before the entry of an
order by this Court approving payment. This subparagraph (c)
is intended only to specify the period of time under which
the Court shall have jurisdiction over any request for fees
and expenses by Gavin Anderson for indemnification,
contribution or reimbursement and not to limit the duration
of the Debtors' obligation to indemnify Gavin Anderson; and
D. a claim under the Retention Agreement for indemnification,
contribution and/or reimbursement arising from Gavin
Anderson's pre-petition performance of the services described
in the Retention Agreement or otherwise shall not be entitled
to administrative expense priority. (Exide Bankruptcy News,
Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
FEDERAL-MOGUL: Northern Insurance Intends to Prosecute Claims
-------------------------------------------------------------
Northern Insurance Company of New York, as Subrogee of Harlan
Bakeries Inc. and Harlan Bakeries Inc., urges the Court for
entry of an order modifying the automatic stay in these Chapter
11 cases to permit them to proceed with their claims against
Federal-Mogul World Wide, Inc.
Karen V. Sullivan, Esq., at Oberly, Jennings & Rhodunda, P.A. in
Wilmington, Delaware, assures the Court that neither the
bankruptcy estate nor the Debtor will suffer any prejudice if
Northern Insurance is permitted to pursue their claims. Northern
Insurance is not attempting to gain any unfair advantage over
other creditors of the Debtor. Northern Insurance is merely
attempting to resolve their claims to the extent of the Debtor's
applicable insurance coverage, without interfering with Debtors
reorganization efforts.
Ms. Sullivan informs the Court that, prior to the Petition Date,
on July 6, 2001, Northern Insurance filed a complaint in the
United States District Court, Southern District of Indiana,
Indianapolis Division, for damages against, among others,
Federal-Mogul as a result of a fire caused by a truck tail light
manufactured by Federal-Mogul. The complaint gives a products
liability claim against Federal-Mogul. According to the Debtors,
Winterthur International America Insurance Company insured the
Debtors under a commercial general liability policy with a
$500,000 per occurrence and $2,500,000 in the aggregate
deductible. After erosion of the aggregate by $2,500,000, there
is only a $10,000 maintenance deductible per occurrence.
Ms. Sullivan states that the hardship to Northern Insurance
caused by maintenance of the automatic stay considerably
outweighs any possible harm that the Debtor will suffer. If
Northern Insurance is forced to litigate their claims in
Delaware, they would be forced to incur a great financial
burden. A majority of the parties' attorneys, the witnesses and
relevant documents are located in Indiana. (Federal-Mogul
Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FLAG TELECOM: Look for Statements and Schedules by June 11, 2002
----------------------------------------------------------------
Judge Gropper extends the deadline by which FLAG Telecom
Holdings Limited and most of its debtor-affiliates must file
their Schedules of Assets and Liabilities and Statements of
Financial Affairs to June 11, 2002. (Flag Telecom Bankruptcy
News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
FLEMING: Plans to Close 2 Facilities to Cut Down Operating Costs
----------------------------------------------------------------
Fleming Companies, Inc. (NYSE: FLM) reported net income of $24.6
million for the first quarter of 2002 on target with the range
of guidance earlier provided by Fleming. The 2002 first quarter
results represent a 59.1 percent increase over the first quarter
of 2001, which totaled $15.5 million (before an extraordinary
charge from the early retirement of debt in 2001). Total company
net sales for the 16-week first quarter were $4.69 billion, a
13.3 percent increase compared to $4.14 billion in the prior
year. Based on the strength of current operations and recent
significant events, Fleming is increasing guidance for its 2003
fiscal year to $3.55 to $3.65 per share, up $0.15 per share from
its prior range of guidance.
"Fleming has an outstanding start to 2002," said Mark Hansen,
chairman of the board and chief executive officer. "Our
strategies are keenly focused on efficient, high volume
operations in growing sectors, supported by state-of- the-art
technologies to lower costs, drive sales, and increase earnings.
We believe it is a strategy that resonates with customers,
vendors, associates, and shareholders alike."
Major Accomplishments
Distribution Segment Accomplishments:
Fleming is creating a unique national multi-tier distribution
network capable of serving any retailer of consumer package
goods in the United States, regardless of size, format or
location. This strategy has resulted in a diversified customer
base that Fleming believes will grow to a projected $22 billion
in sales in 2003. Since the beginning of 2002, Fleming:
-- Announced the pending acquisition of Core-Mark
International, Inc. and completed the acquisition of Head
Distributing, two of the nation's foremost convenience-store
distributors. The acquisitions complete Fleming's national
footprint for piece-pick operations.
-- Announced an agreement with Albertson's, Inc. to provide
procurement and distribution services to Albertson's stores in
two states. This $250 million annual agreement represents an
expanding market opportunity for supplying supermarket chains
that historically have been self-distributors. As part of the
companies' agreement, and subject to customary closing
conditions, Fleming will acquire Albertson's low-cost, state-of-
the-art distribution center in Tulsa.
-- Achieved higher sequential service levels despite the
interruptions caused by Kmart's shutdown and start-up of
business in January. Fleming's projected annual run rate of
sales to Kmart is on track with earlier guidance of $3.6 billion
in 2002, up from $3.1 billion in 2001.
-- Achieved record distribution segment EBITDA. With $166.1
million of distribution segment EBITDA, Fleming surpassed the
company's all-time record for distribution segment EBITDA in a
single quarter.
Support Services Accomplishments:
Fleming's support services leverage the company's size and
scale. Two critical areas for support services are the
development of Fleming's F1 technology and the centralization of
procurement. Since the beginning of 2002, Fleming:
-- Achieved steady progress in the rollout of its F1
technology, which includes, among other things, transportation,
warehouse management, and procurement software applications. The
transportation and procurement application rollouts will be
complete in 2002 and the warehouse management application
rollout will be complete in 2003.
-- Installed the new transportation management software and
processes in eight divisions. This software together with new
business processes effectively manages all freight movement
thereby reducing fleet costs and transportation expense.
-- Made substantial progress on inventory reduction through
consolidation of slow-moving products, elimination of redundant
stock keeping units, and initial benefits of the new procurement
software and business process that are currently being rolled
out in Fleming's centralized procurement operations.
-- Continued the drive toward lower overall product costs
and higher margin opportunities with the addition of important
new categories to the company's award-winning BestYet private
brand. Introductions of BestYet meat and a completely re-
formatted BestYet health and beauty care line have been well
received.
-- Rolled out the second phase of the company's Comida
Sabrosa private label line of Hispanic products. An additional
75 items were included in the line, bringing the total to 178
items.
-- Lowered the expense rate of centralized support services
operations. For the 2002 first quarter, EBITDA expenses for
support services were 1.31 percent of sales compared to 1.73
percent in the first quarter of 2001. Fleming's EBITDA expense
for support services is tracking in-line with its previously
announced guidance of 1.4 percent of sales for the year.
Retail Segment Accomplishments:
Fleming's retail operations have a single focus -- value retail
that offers customers a discernible price difference and,
importantly, leverages Fleming's high-volume, low-cost
distribution network. Since the beginning of 2002, Fleming:
-- Cycled the disposition of most of its conventional
retail operations. A total of 66 conventional retail stores were
sold in the first quarter of 2001 and the remaining 31
conventional stores were disposed in the second quarter of 2001.
-- Continued an aggressive program to remodel the company's
existing price impact store base. Over the last two quarters,
nearly 15 percent of the company's price impact store space was
under remodel. Fleming will continue to bring its price impact
stores up to desired operating standards through the addition of
departments and categories that drive sales and margins without
the addition of service or labor. Examples include updating
bakeries and delis to accommodate more self-serve fresh
offerings, adding linear feet to the higher-margin frozen foods
section, expanding offerings of organic produce, and expanding
the beer, wine, and liquor departments.
-- Refined the merchandising and operations of the
company's extreme value retail format, known as yes!less.
Excellent progress has been made toward the desired objective of
rolling out this format.
As previously announced, Fleming's first quarter 2002 was
impacted by $0.05 per share, incorporating costs associated with
the shutdown and start-up of sales to Kmart that occurred in
January 2002 concurrent with their bankruptcy reorganization
filing. Likewise, the 2001 result was impacted by $0.04 per
share for Fleming's strategic plan and other unusual charges.
Additionally, the 2001 result included the amortization of
goodwill, which reduced earnings by $0.13 per share. The diluted
share count increased by 19.8 percent to 50.6 million shares in
the 2002 first quarter from 42.2 million shares in 2001.
EBITDA for continuing operations rose 24.5 percent to $137.1
million from $110.1 million in the prior year (see Table 3,
attached). EBITDA in the 2002 first quarter was negatively
impacted by approximately $5 million due to the effects of the
Kmart bankruptcy filing. EBITDA in the 2001 first quarter was
negatively impacted by $12.2 million, representing Fleming's
strategic plan and other unusual items.
Capital expenditures totaled $61.3 million for the quarter.
Fleming intends to spend a total of approximately $200 million
on capital programs in 2002, with $150 million for distribution
and $50 million for retail. A significant portion of the
distribution capital spending is devoted to technology.
Net debt at the end of the first quarter of 2002 was $1.89
billion, an increase of $100 million from the end of the year
2001 due to the normal, seasonal trends in cash flow that occur
in the first quarter. Fleming's EBITDA to interest expense ratio
improved to 3.02 compared to 2.92 at the 2001 year end and 2.63
at the end of the first quarter 2001. Inventory turns continued
their improving trends. Turns improved to 15.4x for the 2002
first quarter compared to 15.2x at year-end 2001.
Commenting on the company's credit and asset efficiency
measures, Hansen said, "Improvement in many of these measures
was particularly satisfying. We overcame the disruption created
by the Kmart business interruption and still remained on-track
with our goals and expectations to improve key credit and asset
efficiency measures."
Fleming's anticipated changes to its capital structure and
refinancing of its senior credit facility will eliminate all
debt securities maturing before 2007 and result in an improved
leverage position, including reducing its debt to total capital
and debt to EBITDA ratios.
Earnings Guidance
Due to the pending acquisition of Albertson's Tulsa distribution
center, Fleming plans to realign its distribution network and
close two existing facilities, a full-line distribution center
in Oklahoma City and a general merchandise distribution center
in Dallas. The consolidations will allow Fleming to further
reduce operating costs, improve productivity, and increase
earnings in 2003. Additionally, to obtain operating synergies
from the Core-Mark and Head Distributing acquisitions, the
company expects to incur certain merger and integration costs
associated with those previously announced transactions.
Accordingly, Fleming expects to incur approximately $25 million
(after tax) of restructuring, impairment, merger, and
integration costs in the second quarter of 2002, of which
approximately one-half are non-cash related costs.
Based on the second quarter charges, the projected income and
synergies from the Core-Mark and Head acquisitions, the
efficiencies expected from the facility consolidations, and the
assumed debt and equity issuances, Fleming is revising its
earnings guidance for 2002 and 2003. New earnings guidance for
2002 is $2.20 to $2.30 per share. This guidance reflects a
weighted average share count for 2002 of approximately 57
million shares. It also reflects operating results that are
precisely in-line with earlier guidance offset by the $0.45
charge related to the Albertson's, Core-Mark and Head
transactions. Earnings guidance for the second, third, and
fourth quarters of 2002 is $.20 to $.25, $.65 to $.70, and $.80
to $.85 per share, respectively. The range of guidance for 2003
is shifted up $.15 per share to $3.55 to $3.65 per share. The
2003 guidance assumes a weighted average share count of
approximately 62 million shares.
With its national, multi-tier supply chain network, Fleming is
the #1 supplier of consumer package goods to retailers of all
sizes and formats in the United States. Pro forma for the
completion of the pending Core-Mark acquisition, Fleming will
serve nearly 50,000 retail locations, including supermarkets,
convenience stores, supercenters, discount stores, concessions,
limited assortment, drug, specialty, casinos, gift shops,
military exchanges and more. In addition, Fleming is the
nation's leading distributor to Hispanic markets. Fleming also
has a growing presence in value retailing, operating 109 stores
under the Food4Less and Rainbow Foods banners and 17 stores
under its extreme value banner, yes!less. To learn more about
Fleming, visit its Web site at http://www.fleming.com
As previosuly reported, Fitch Ratings affirms Fleming Companies,
Inc.'s 'BB+' rated secured bank credit facilities, 'BB' rated
senior unsecured notes and 'B+' rated senior subordinated notes.
The affirmations follow the company's announcement of its
acquisition of two convenience store distribution companies for
total cash consideration of approximately $430 million
(including assumed debt), to be financed with a combination of
debt and equity. The Rating Outlook remains Negative, reflecting
the uncertainty as to the achievement of Kmart's sales levels,
the ultimate nature of Fleming's agreement with Kmart, as
Fleming's contract with Kmart has not yet been confirmed in the
bankruptcy process and the inherent integration risks associated
with the acquisitions. Also of concern is the possibility for
additional Kmart store closures, beyond those already announced.
The two acquisitions will significantly enhance Fleming's
distribution business and solidify its position as the largest
food wholesaler in the U.S. The larger acquisition, Core-Mark
International, Inc. distributes products to over 30,000
convenience stores throughout the Western U.S. and generated
about $3.4 billion in revenues and $54 million in EBITDA
(excluding LIFO) in 2001. Head Distributing, the second
acquisition, also distributes to the convenience store industry,
with its key territory being the Southeast. Head generated about
$350 million in 2001 revenues. Fleming's business with
convenience stores, which represented about 11.7% of 2001
revenues, will more than double as a result of these
transactions.
The affirmations reflect the significant equity component of the
funding of these transactions. While the pace of improvement in
bondholder protection measures in 2002 will slow slightly from
previously anticipated levels, leverage (total debt plus eight
times rents to EBITDAR) and coverage (EBITDAR to interest and
rents) at year-end 2002 are still expected to strengthen from
the 4.4x and 2.4x respectively, at year-end 2001. Of ongoing
concern is the company's appetite for acquisitions, which has
resulted in incremental borrowings. However, Fitch Ratings
favorably views the equity component of the financing of these
transactions and to the extent Fleming continue to pursue
opportunistic acquisitions, we expect that they will be continue
to be financed in a way that would not compromise the company's
ability to meet its financial targets.
GENERAL PUBLISHING: Lays-Off 23 Employees as Part of Reorg. Plan
----------------------------------------------------------------
General Publishing Co. Ltd. announced staff changes as part of
its plan to reorganize under the Companies' Creditors
Arrangements Act. At the time of the Court Order, the company
indicated staff reductions would be an unfortunate but necessary
step in the restructuring process. On May 7, a reduction of
twenty-three of 219 employees took place throughout the company.
Management believes no further staff changes will be necessary.
"All parts of the business continue to operate. General
Distribution Services is receiving orders from bookstores across
the country and they are being filled. Stoddart's Spring authors
are being promoted and the Fall list is being developed," said
David Murray, Chief Restructuring Officer, General Publishing.
"In addition, there have been many positive inquiries about
investment in each part of the business, and these inquiries are
being pursued."
General Publishing Co. Ltd. sought and received court protection
from its creditors last week, and is in the process of
restructuring its Stoddart Publishing, General Publishing/Musson
Books and General Distribution Services divisions.
GLOBAL CROSSING: Obtains Open-Ended Removal Period Extension
------------------------------------------------------------
Global Crossing Ltd. and its debtor-affiliates sought and
obtained entry of an order, pursuant to Rule 9006(b) of the
Federal Rules of Bankruptcy Procedure, extending the Debtors'
time to file notices of removal of the civil actions and
proceedings to which the they are parties. The extension is
granted until the date an order is entered confirming a Chapter
11 plan.
Harvey R. Miller, Esq., at Weil Gotshal & Manges LLP in New
York, New York, tells the Court that the Debtors' Chapter 11
cases are large and complex, involving 55 Debtors located
throughout the world, approximately 35,000 creditors, and
approximately $15,000,000,000 of invested capital. The global
nature of the Debtors' businesses adds an additional layer of
complexity, as does the overlay of coincident extraterritorial
proceedings involving the Bermuda Group and the appointment of
the JPLs.
Since the Commencement Date, Mr. Miller submits that the
Debtors' management has expended substantial efforts responding
to the many exigencies and other matters that are incident to
the commencement of any Chapter 11 case, but which are
compounded by the sheer size and complexity of these cases. The
Debtors have had to stabilize their businesses, negotiate with
potential investors, respond to approximately 400 requests for
adequate assurance pursuant to Section 366 of the Bankruptcy
Code, identify and commence the sale of assets that are no
longer economically beneficial to the estates, maintain current
services necessary to the operation of their businesses, conduct
meetings with numerous vendors with respect to continuing pre-
petition business relationships, and attend to pressing matters
involving certain individual creditors. For these reasons, the
Debtors have not had the opportunity to examine each individual
Civil Action to determine the feasibility or benefit of removal.
Moreover, the Debtors' ability to confront the various
exigencies incidental to their Chapter 11 cases has been
affected by a workforce reduction of nearly 2,000 personnel
since the Commencement Date.
Mr. Miller states that the time within which the Debtors must
file motions to remove the Civil Actions was set to expire on
April 29, 2002. The Debtors are continuing to review their
records to determine whether they should remove any claims or
civil causes of action pending in state or federal court to
which they might be a party. Because the Debtors are parties to
approximately 100 lawsuits, and because the Debtors' key
personnel are assessing these lawsuits while being actively
involved in the Debtors' reorganization, the Debtors require
additional time to consider filing notices of removal in the
Civil Actions.
The Debtors believe the proposed time extension will provide
sufficient additional time to allow them to consider, and make
decisions concerning, the removal of the Civil Actions. Unless
the extension is granted, the Debtors believe they will not have
sufficient time to consider the removal of the Civil Actions.
(Global Crossing Bankruptcy News, Issue No. 9; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
GLOBAL CROSSING: Gets Above-Average Marks in Atlantic ACM Survey
----------------------------------------------------------------
Global Crossing received high scores across the board in
Atlantic ACM's 2002 Wholesale Carrier Report Card. The
telecommunication analyst firm's annual survey asked six hundred
wholesale customers to rate carriers on billing, provisioning,
network, customer service, products, and pricing for 2001.
Global Crossing's scores displayed a dramatic, 31% year over
year improvement in network availability, a category that
includes both geographic reach and available capacity. With the
completion of its 101,000-route-mile, IP-based network in June
2001, Global Crossing offers its customers connectivity to over
200 cities in 27 countries.
Provisioning improved 19% over the previous year, underscoring
Global Crossing's strong commitment to streamlining the process.
Two provisioning subcategories, automated support systems, which
improved by 21%, and customer interface systems, which improved
by 24%, demonstrate Global Crossing's continued focus on ease of
use for customers.
The survey noted that customers are increasingly establishing
longer relationships with emerging carriers as they move away
from the traditional set of providers. On average, customers'
relationships with Global Crossing were well over two and a half
years.
"Our wholesale customers require top-of-the-line offerings from
network to billing, and we are committed to continuously
improving," said John Legere, Global Crossing's chief executive
officer. "We're proud that customers have noticed the
initiatives we've taken in the past year, and that our
relationships are enduring. We look forward to seeing next
year's results."
Survey respondents identified pricing as an increasingly
important decision factor for resellers, as a result of the
industry-wide decline in margins. Global Crossing was rated as a
leader in the pricing category, due in part to cost efficiencies
resulting from network design.
Customers surveyed gave Global Crossing high marks in customer
service, which is defined as the aggregation of marketing
support, professionalism, responsiveness, technical expertise,
and proactive consultative selling.
Global Crossing allows customers to create their own cost
categories for billing rather than imposing its own. This
flexibility, combined with well- regarded customer interface
systems, gave Global Crossing strong survey scores in the
billing category.
Global Crossing's IP-based products received high improvement
scores. The survey notes that IP-based products are expected to
be one of the most popular wholesale offerings in the next 12 to
18 months. Global Crossing offers a suite of voice and data
services, including IP-origination, which provides wholesale
customers with an IP-to-IP interface for voice services via
access to Global Crossing's Voice over IP (VoIP) network, and
two IP-VPN services, ExpressRoute(TM) and SmartRoute(TM).
ATLANTIC-ACM, founded in the early 1980's, is an international
strategy, consulting and research firm serving emerging and
converging networked communications industries worldwide. We
offer authoritative reports on the telecommunications industry
and proprietary consulting to companies in telecommunications
information industries worldwide, as well as merger and
acquisition counsel. For more information, please visit
http://www.atlantic-acm.com
Global Crossing provides telecommunications solutions over the
world's first integrated global IP-based network, which reaches
27 countries and more than 200 major cities around the globe.
Global Crossing serves many of the world's largest corporations,
providing a full range of managed data and voice products and
services. Global Crossing operates throughout the Americas and
Europe, and provides services in Asia through its subsidiary,
Asia Global Crossing.
On January 28, 2002, certain companies in the Global Crossing
Group (excluding Asia Global Crossing and its subsidiaries)
commenced Chapter 11 cases in the United States Bankruptcy Court
for the Southern District of New York and coordinated
proceedings in the Supreme Court of Bermuda.
Please visit http://www.globalcrossing.comor
http://www.asiaglobalcrossing.comfor more information about
Global Crossing and Asia Global Crossing.
GLOBAL CROSSING: Q1 Voice Traffic Exceeds 4BB Minutes Per Month
---------------------------------------------------------------
Global Crossing said that its voice network attained several new
milestones during the first quarter of 2002. Global Crossing's
seamless voice network began carrying more than four billion
minutes per month in worldwide voice traffic during the first
quarter, with 900 million minutes of that traffic utilizing
Voice over Internet Protocol technology -- classifying Global
Crossing's voice network as one of the largest VoIP private
platforms in the world.
"We have built a private network that spans 101,000 route miles
and four continents and offers a full range of data and voice
communications services to carrier and enterprise customers,"
said John Legere, chief executive officer of Global Crossing.
"We continue to see some of the many valuable returns we expect
from our voice business -- most importantly our VoIP traffic
volumes have shown dramatic growth month over month."
In the first quarter of 2002, Global Crossing's VoIP platform
experienced a forty percent growth in traffic compared to the
previous quarter and carried over 900 million minutes.
Global Crossing's voice network offers seamless global reach and
unsurpassed quality of service with network availability at
99.999%. Voice traffic is carried over Global Crossing's
worldwide fiber optic network, utilizing both conventional time
division multiplexing and voice over Internet protocol
technology. Global Crossing's VoIP platform differs from most
popular packet technologies in that it does not utilize the
public Internet or require a customer to purchase customer
premise equipment.
Traffic is managed over Global Crossing's worldwide private
voice network, ensuring safe, fast, reliable connection at all
times -- a connection that is not subject to public Internet
delays. It is proactively monitored and managed 24x7 through
Global Crossing's end-to-end comprehensive network management
system.
Margaret Hopkins, VoIP specialist at Analysys Ltd in the UK,
commented that "VoIP is an increasingly important technology for
global voice networks, notably in countries where the voice
infrastructure has had to grow rapidly in recent years, and is
being used by most major carriers. Where the underlying IP
transport provides good quality of service it can perform just
as well as a traditional voice network and bring significant
cost savings, particularly where large numbers of relatively
small scale POPs are required."
Global Crossing has long been one of the premier providers of
voice services to the world's largest phone companies. Global
Crossing recently added to its voice offerings by launching
flagship global products for carrier and enterprise customers
that take advantage of its VoIP platform. Carrier Outbound
Service, which is available in 200 cities throughout the
Americas, Europe and Asia, provides complete global termination
capabilities for facilities-based carriers to more than 450
destinations worldwide. Direct Dial Services, available to
businesses in 13 countries throughout Asia, Europe, and North
America, offers high-quality international long distance voice
services to 240 countries, as well as national voice services in
the United States and United Kingdom. Additionally, the VoIP
platform enables new IP applications such as IP Origination,
which enables a packet-to-packet hand off from customers to
Global Crossing versus a traditional circuit handoff. Plus, the
VoIP platform supports the future needs of Global Crossing's key
customers and new applications, which take advantage of
converged technologies.
Global Crossing provides telecommunications solutions over the
world's first integrated global IP-based network, which reaches
27 countries and more than 200 major cities around the globe.
Global Crossing serves many of the world's largest corporations,
providing a full range of managed data and voice products and
services. Global Crossing operates throughout the Americas and
Europe, and provides services in Asia through its subsidiary,
Asia Global Crossing.
On January 28, 2002, Global Crossing and certain of its
affiliates (excluding Asia Global Crossing and its subsidiaries)
commenced Chapter 11 cases in the United States Bankruptcy Court
for the Southern District of New York and coordinated
proceedings in the Supreme Court of Bermuda.
DebtTraders reports that Global Crossing Holdings Ltd's 9.625%
bonds due 2008 (GBLX3) are quoted at a price of 2. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX3for
real-time bond pricing.
GOLDMAN INDUSTRIAL: Seeks OK to Retain SSG as Investment Banker
---------------------------------------------------------------
Goldman Industrial Group, Inc. and its affiliated debtors ask
the U.S. Bankruptcy Court for the District of Delaware to retain
and employ SSG Capital Advisors, LP as their investment banker.
The Debtors anticipate that SSG will act effectively to provide
investment banking services to the Debtors as needed throughout
the course of these Cases. The Debtors tell the Court that as a
leading provider of investment banking services, SSG has
substantial expertise in providing these services to the
Debtors:
a) prepare an Offering Memorandum describing the Debtors,
their historical performance and prospects, including
existing contracts, marketing and sales labor force, and
management and anticipated financial results of the
Debtors;
b) work with the Debtors in developing a list of suitable
potential buyers for the Companies who will be contacted
on a discreet and confidential basis after approval by
the Debtors;
c) coordinate the execution of confidentiality agreements
for potential buyers wishing to review the Offering
Memorandum;
d) help coordinate site visits for interested buyers and
work with the management team to develop appropriate
presentations for such visits;
e) solicit competitive offers from potential buyers;
f) advise and assist Debtors in structuring any transaction
and negotiating of the transaction agreements;
g) upon execution of a letter of intent or similar
documents for any of the assets, assist in negotiating
any transaction and assist the Debtors' attorneys and
accountants, as necessary, through closing;
h) advise Debtors, and their attorneys and accountants, as
required, regarding documentation; and
i) on a best efforts basis, participate in closing any
sale.
SSG tells the Debtors that, to the best of its knowledge, it
does not hold or represent any interest adverse to the Debtors'
estates.
The Debtors propose to pay SSG:
a) a Monthly Fee of $20,000 on the first of each month;
b) in the event that the Debtors complete a transaction,
Advisory Fee equal to the greater of 1.75% of Total
Consideration or $650,000
c) in the event that the existing stakeholders agree to
restructure their claims, a Restructuring Fee equal to
$650,000, as a condition to the closing of the Financial
Restructuring;
Goldman Industrial Group, Inc., with its affiliates, provide
metalworking machinery to manufacturers; marketing and selling
original equipment primarily to the aerospace, automotive,
computer, defense, medical, farm, construction, energy,
transportation and appliance industries. The Company filed for
chapter 11 protection on February 14, 2002. Victoria W. Counihan
at Greenberg Traurig, LLP represents the Debtors in their
restructuring efforts.
IT GROUP: Court Okays Bayard Firm as Committee's Co-Counsel
-----------------------------------------------------------
The Official Committee of Unsecured Creditors, in the chapter 11
cases of The IT Group, Inc., and its debtor-affiliates, obtained
Court's nod to appoint and retain The Bayard Firm, P.A. as its
co-counsel.
The Committee expects Bayard to:
A. provide legal advice with respect to the Committee's powers
and duties;
B. assist in the investigation of the Debtors' acts, conduct,
assets, liabilities, and financial condition, the operation
of the Debtors' businesses, and any other maters relevant
to the case or to the formulation of a plan of
reorganization or liquidation;
C. prepare, on behalf of the Committee, necessary applications,
motions, complaints, answers, orders, agreements and other
legal papers;
D. review, analyze, and respond to all pleadings filed by the
Debtors and appear in the court to represent necessary
motions, applications and pleadings and to otherwise
protect the interest of the Committee; and,
E. perform all other legal services for the Committee that may
be necessary and proper in these cases.
The primary attorneys and paralegals expected to represent the
Committee and their corresponding rates are:
Professional Rate
-------------------- ------------
Jeffrey M. Schlerf $350/hr
Eric M. Sutty $225/hr
Anthony M. Saccullo $190/hr
Pamela Polack (paralegal) $125/hr
(IT Group Bankruptcy News, Issue No. 9; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
INTEGRATED HEALTH: Rotech Wants to Reject Subcontract with HHI
--------------------------------------------------------------
As previously reported, Rotech and Hawaii Home Infusion, Inc.,
dispute a subcontracting relationship in which Rotech
subcontracted to HHI the provision of services for patients of
the United States Veterans Administration in the State of
Hawaii. Rotech was to receive compensation from the VA pursuant
to an agreement between Rotech and VA and, in turn, compensate
HHI for its services pursuant to a Durable Equipment Subcontract
Agreement between Rotech and HHI.
A Durable Equipment Subcontract Agreement, dated as of January
1, 2000, between Rotech and HHI, provides for HHI to furnish
home oxygen equipment and related services on a nonexclusive
basis to certain designated VA patients in Hawaii in exchange
for fees set forth in a schedule. In brief terms, Rotech stopped
using HHI by the end of 2000 because both Rotech and VA were not
satisfied with HHI's services to patients. Rotch used the
predecessor local service provider Apria instead. However,
differences over the Durable Equipment Subcontract Agreement
could not be resolved. In March 2001 HHI sued Rotech and one of
its employees, Carlos Moral, in federal district court in
Hawaii, seeking an award of consequential and punitive damages,
and counsel fees. Rotech counterclaimed for the additional
expenses incurred due to HHI's failure to meet its obligations
under the Agreement.
Rotech subsequently filed a motion in the Bankruptcy Court
seeking to reject its Durable Equipment Subcontract Agreement
with HHI.
HHI objected to Rotech's motion, arguing that the contract is a
postpetition contract rather than a pre-petition executory
contract. Therefore, relief under 365 of the Bankruptcy Code is
inapplicable, HHI argues. HHI tells the Court that the
Subcontract was entered into in the last days of January 2000,
just days before Rotech and the other Debtors commenced their
chapter 11 cases on February 2, 2000.
In response to Rotech's criticism over HHI's services to
patients, HHI alleges that Rotech made it impossible for HHI to
perform under the Subcontract because Rotech did not provide
information on patients, did not notify patients of the change
in service provider to HHI and later even prohibited HHI from
contacting patients.
As a result of negotiations, the parties agreed to a "drop dead"
date for commencing services to patients by HHI and deadlines
for Rotech to provide HHI with the patient information and other
documents necessary for HHI to commence such services. In
September, 2000, Rotech and HHI entered into an Amended
Subcontract.
HHI alleges that this is new agreement. Because this new
agreement contained the same terms as the original Subcontract
in addition to the new deadlines, it was styled as an amendment
of the previous agreement.
HHI tells the Court that Rotech also failed to perform under the
Amended Subcontract, causing HHI to incur significant damages,
and Rotech's representative Carlos Moral informed HHI in October
2000 that Rotech had changed its mind and no longer desired to
use HHI as a subcontractor.
HHI tells the Court that Rotech made many promises, in its role
as a debtor in possession, to induce HHI to forbear from
terminating its subcontractor relationship with Rotech and
offered to enter into the postpetition Amended Subcontract.
That postpetition inducement, HHI says, is a hallmark of a
postpetition contract. In addition, HHI submits that Rotech's
behavior during the course of its bankruptcy case is consistent
with a belief by Rotech that the Amended Subcontract constitutes
a postpetition transaction with the estate, because Rotech
participated fully in the Hawaii District Court litigation
commenced by HHI and did not attempt to halt the lawsuit by
asserting that it was subject to the automatic stay until more
than eight months after the lawsuit commenced.
In addition, HHI submits that the Amended Subcontract was
beneficial to Rotech's estate, because it contributed to
Rotech's satisfaction of a need under its primary contract with
the VA to award a certain percentage of the subcontracts under
the VA Contract to woman-owned businesses and to small
businesses such as HHI.
HHI therefore argues that Rotech's motion for rejection of the
Subcontract should be denied because the Amended Subcontract
constitutes a postpetition transaction with Rotech's estate that
is ineligible for rejection under section 365 of the Bankruptcy
Code.
HHI's $1,282,767.88 Administrative Claim
HHI subsequently filed a request for allowance and payment of
Administrative Expenses by Rotech in the amount of
$1,282,767.88, pursuant to section 503(b)(1)(A) of the
Bankruptcy Code. HHI alleges that because the Subcontract
constitutes a postpetition contract, all expenses and damages
related to it comprise administrative expenses of Rotech's
estate. HHI argues that, as a result of actions by Rotech after
the petition date, Rotech breached the Subcontract, causing
damage to HHI. These damages continue to accrue and has exceeded
$1.28 million.
Discovery By Rotech
Meanwhile, Rotech has served HHI with a Notice of Request for
Production of Documents. (Integrated Health Bankruptcy News,
Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTERNET CABLE: PwC Doubts Company's Ability to Continue
--------------------------------------------------------
"In the United States, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion
paragraph) when the financial statements are affected by
conditions and events that cast substantial doubt on the
Company's ability to continue as a going concern, such as those
described in Note 1 to the financial statements. Our report to
the Board of Directors and Shareholders dated February 20, 2002
is expressed in accordance with Canadian reporting standards
which do not permit a reference to such events and conditions in
the auditor's report when these are adequately disclosed in the
financial statements." These are the addendum statements of BDO
Dunwoody LLP, Chartered Accountants of Toronto, Canada, in its
February 20, 2002, Auditors Report to the Board of Directors of
Internet Cable Corporation.
PricewaterhouseCoopers LLP's February 16, 2001, Auditors Report
concerning Internet Cable Corporation stated: "... [T]he Company
has incurred losses from operations, including the termination
in revenues under several contracts with its largest customer,
is in technical default under the terms of its line of credit
and is subject to certain litigation. These factors raise
substantial doubt about the Company's ability to continue as a
going concern."
Internet Cable Corporation's primary business is to provide
infrastructure engineering services to the North American
broadband markets. Services provided by broadband operators
include high-speed Internet access, broadband-phone (telephony),
digital video, digital audio, video on demand (VOD),
narrowcasting and web-enabled services of all types. Internet
Cable Corporation provides major broadband cable operators with
services to upgrade, maintain, and expand their network
infrastructure to facilitate the delivery of new broadband
services.
The results of operations for the year 2001 produced a net loss
of $3,368,851 and an accumulated deficit in the amount of
$17,440,949. The Company has been subject to cut backs in
spending by some of its major customers, which resulted in the
loss of potential revenues. Until such time as the Company's
revenue increases significantly, or additional funding becomes
available allowing it to increase revenue through the
acquisition of additional operations, the Company's projected
expenses are expected to continue to exceed revenues.
The Company has limited cash resources and has been unable to
obtain additional credit or financing. Internet Cable estimates
it has the resources to continue for the next four months from
April 25, 2002. If the Company does not obtain additional
funding it may run out of cash to meet ongoing operating
requirements.
Internet Cable Corporation has historically financed its
operations primarily through a combination of private sales of
equity securities and loans from the Company's executive
officers and private investors. In order to satisfy existing
obligations and support the future growth strategy, the Company
will require additional capital immediately. Such additional
capital may not be available or, if available, such capital may
not be on satisfactory terms. Any additional equity financing
will be dilutive to stockholders, and debt financing may impose
substantial restrictions on the Company's ability to operate and
raise additional funds.
Revenues decreased $4,612,979, or 44.5%, to $5,764,629 in 2001
from $10,377,608 in 2000. The decrease in revenue is principally
due to reductions in capital spending by customers. In addition,
the closure of CAD resulted in a reduction in revenue of
$831,048. The revenue from CAD was $390,990 in 2001 compared to
$1,222,038 in 2000, or a reduction of 68%.
On a quarter-by-quarter basis, 2001 revenues were $1,346,989,
$1,926,827, $1,342,965, $1,147,848 for the first, second, third
and fourth quarters respectively. The increase in revenue in the
second quarter was attributable to a short-term contract with
IBM to support their systems integration work for broadband
cable systems being deployed in shopping malls throughout the
United States. The drop off in revenue through the final two
quarters of the year was due to the reduction in demand in the
United States cable industry for cable systems upgrades,
combined with the completion of contracts from the first two
quarters.
In the fourth quarter, the Company entered into a contract to
provide ongoing monthly maintenance services for WideOpenWest,
an MSO operating in the Columbus, Cleveland, Detroit and Chicago
markets. The revenues from this contract began in December 2001
and are expected to provide recurring revenue
for 2002 estimated at $3.9 million for the year.
Net loss before extraordinary items decreased $3,107,607, or
48.0%, to $3,368,851 in 2001 from $6,476,458 in 2000. The
reduction in net loss is attributable to management's efforts to
contain costs in a year of reduced revenues, the reduction in
amortization of intangibles as well as the provision for
impairment of goodwill expense in 2000.
At December 31, 2001 the Company had cash of $534,763. Current
liabilities of $3,007,463 exceeded total current assets,
including cash, of $1,288,664 by $1,718,799 providing a current
ratio of 0.43 to 1.0.
JUPITER MEDIA: Reports $17MM Working Capital Deficit at March 31
----------------------------------------------------------------
Jupiter Media Metrix, Inc. (Nasdaq: JMXI), a leader in Internet
and new technology measurement and analysis, announced results
for the first quarter 2002.
Revenues for the first quarter were $10.8 million, compared to
$29.6 million for the first quarter in 2001. Contract value,
defined as the annualized value of all subscriptions at the end
of each period, was $40.8 million on March 31, 2002, compared to
$105.0 million on March 31, 2001.
Net loss for the first quarter of 2002, excluding amortization
and the cumulative effect of a change in accounting principle,
was $11.0 million compared with a net loss of $10.8 million for
the same period in 2001.
At March 31, 2002, the company's balance sheet shows that its
total current liabilities eclipsed its total current assets by
about $17 million.
During the quarter, Jupiter Media Metrix adopted the new
accounting standard on amortization of goodwill and other
intangibles, FAS 142, which requires the company to test its
goodwill and intangible assets for impairment. The adoption
resulted in a one-time, non-cash charge of $35.9 million, or
$1.00 per share, and is recorded as a cumulative effect of a
change in accounting principle. Net loss for the first quarter,
including amortization and the cumulative effect of FAS 142, was
$48.4 million or $1.35 per share, compared to a loss of $54.2
million or $1.53 per share for the first quarter in 2001.
Jupiter Media Metrix also announced that it has eliminated a
$67.6 million real estate commitment by terminating the lease
for its Astor Place facility in New York City. In connection
with the termination, the company transferred the security for
the lease commitment to the landlord, and made a one-time rent
payment of $1.5 million. The company will occupy the facility
through Aug. 15, 2002 with no additional obligations.
Separately, Jupiter Media Metrix jointly announced with
NetRatings, Inc. (Nasdaq: NTRT) that the companies have settled
Jupiter Media Metrix' pending patent infringement case against
NetRatings. The settlement provides for the dismissal with
prejudice of the litigation and a $15 million payment by
NetRatings to Jupiter Media Metrix. Under the terms of the
settlement, NetRatings has acquired the patent for computer use
tracking (United States Patent No. 6,115,680), and granted
Jupiter Media Metrix a non-exclusive assignable license to use
the patented technology in its domestic Internet audience
measurement business until June 30, 2005. In a separate
transaction today, Jupiter Media Metrix sold its European
Internet audience measurement assets to NetRatings for $2
million.
"Throughout the quarter, we focused on pursuing strategies to
benefit our shareholders, employees and customers," said Mr.
Robert Becker, chief executive officer of Jupiter Media Metrix.
"The sale of our advertising measurement and European Internet
audience measurement division, coupled with today's patent
litigation settlement, were significant steps in improving our
cash position. And, the recent termination of a significant real
estate obligation will decrease our future operating expenses."
Mr. Becker continued: "While we continue to consider options
that will further secure Jupiter Media Metrix' financial
position, our commitment to customers and the marketplace has
never been stronger. We enhanced the Media Metrix product line
with the introduction of AiM (Audience insite Measures), the
industry's only product to integrate real-time Internet usage
with qualitative, offline consumer information. We introduced an
innovative reach-and-frequency planning model and are well
underway with several charter clients. Jupiter Research rolled
out the CORE (Composite Rating of Online Effectiveness) Index,
the financial services industry's first index based entirely on
online consumer behavior and performance metrics. During the
quarter, we were pleased to sign or renew subscriptions with
leading companies including AOL Time Warner, BBC, CareerBuilder,
France Telecom, L'Oreal, Macromedia, Cablevision, Viacom and
Verizon."
Jupiter Media Metrix is a global leader in Internet and new
technology analysis and measurement. The Company delivers
innovative and comprehensive Internet measurement, analysis and
events to provide businesses with unmatched global resources for
understanding and profiting from the Internet. Jupiter Media
Metrix brings together world-class, innovative and market-
leading products, services, research methodologies and people.
The Company is headquartered in New York City. Visit
http://www.jmm.comfor more information.
KAISER ALUMINUM: Obtains Okay to Hire Andersen as Tax Advisors
--------------------------------------------------------------
Judge Fitzgerald approves Kaiser Aluminum Corporation and its
debtor-affiliates' application to employ Arthur Andersen as
auditors, accountants, restructuring and tax advisors and
overrules all objections otherwise. Judge Fitzgerald also
directs that, notwithstanding the scope of services to be
rendered by Andersen, Andersen will not perform any services
that would constitute or be associated with processes considered
to be "internal auditing" or "implementation of accounting or
other information services."
Judge Fitzgerald also decrees that, notwithstanding anything to
the contrary in the application or the engagement letter, the
Court will not approve indemnification provisions in the
engagement letter at this time, with the U.S. Trustee and
Andersen reserving all rights on this issue without prejudice.
* * *
As previously reported, Andersen will provide these services to
Kaiser:
A. Restructuring and Reorganization Services:
a. provide assistance in the development of cash receipts
and disbursement schedules to be used for business
management, planning, cash collateral, DIP financing
and reorganization purposes;
b. advise and assist the Debtors' management in preparing
information that may be required by creditors and a
Bankruptcy Court, including monthly operating reports,
schedules of assets and liabilities, statement of
financial affairs and other bankruptcy schedules;
c. provide advice and assistance in creating and
maintaining databases for scheduled debts, creditors
claims, analyzing claims by type and entity and
preparing required periodic reports;
d. analyze, if appropriate, the books and records of the
Debtors for potential voidable transactions and
unenforceable claims pursuant to the bankruptcy Code;
and,
e. perform such other services as may be requested by the
Debtors to provide consulting assistance in the
operation and reorganization of the Debtors' business,
including but not limited to, disclosure statements,
transactional assistance, and assistance in developing
and confirming plans of reorganization, subject to
Andersen's approval;
B. Accounting and Auditing:
a. assistance with reports and filings required by the
Bankruptcy Court and the U.S. Trustee;
b. assistance with the presentation of financial statements
in compliance with the American Institute of Certified
Public Accountants Statement of Position 90-7, if
applicable;
c. perform an audit of the Debtors' Annual Financial
Statements and perform other related auditing,
accounting, financial reporting and tax services as
required by the Debtors and SEC;
d. consult with the Debtors' management and counsel in
connection with operational, financial and other
business matters relating to accounting and auditing
matters as the same pertain to the ongoing activities
of the Debtors;
e. consult with and advise the Debtors regarding financial
reporting controls and procedures; and,
f. performance of other accounting and auditing services as
requested by the Debtors;
C. Tax Consulting:
a. provide general tax planning and consulting services
relative to restructuring related matters;
b. provide consultation with respect to a variety of tax
compliance issues and year end tax planning;
c. assist with tax matters in connection with potential
acquisitions, dispositions or similar transactions;
d. prepare any amended tax returns or applications for tax
refunds;
e. render other reorganization related tax advice and
assistance including, but not limited to, the tax
consequences of any plans of reorganization and
assisting in the preparation of any Internal Revenue
Services ruling requests regarding future tax
consequences or the Debtors reorganization; and
f. provide any such other tax services as may be requested
by the Debtors.
Andersen will bill for services at its customary hourly rates:
Position Hourly Rate
------------------- ---------------
Partners/Directors $500 - 575
Managers $310 - 400
Associates $200 - 250
Analysts $150 - 175
(Kaiser Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
KMART CORP: SunTrust Bank Seeks Approval of $4.7 Million Setoff
---------------------------------------------------------------
As of March 28, 2002, SunTrust Bank holds approximately
$45,963,952 of Kmart's funds in certain deposit accounts:
Account Number Location Account Balance
-------------- -------- ---------------
46151 Tennessee $1,787,478
1067966 Virginia 1,574,594
8801853956 Georgia 42,601,880
The balances of such Deposit Accounts were only $4,775,492 as of
the Petition Date.
Prior to the Petition Date, SunTrust entered into factoring
agreements with some of Kmart's vendors, wherein the vendors
assigned to SunTrust various debts owing by Kmart to the
vendors. As of the Petition Date, the total amount of debt owed
to SunTrust by Kmart is $25,553,571.
SunTrust asks the Court for relief from the automatic stay and
to authorize them to setoff the Deposit Accounts against the
$25,553,571 debt owed to SunTrust by Kmart pursuant to the
Factoring Agreements.
David H. Conaway, Esq., at Shumaker, Loop & Kendrick LLP, in
Charlotte, North Carolina, argues that SunTrust holds a valid
pre-petition "claim" against Kmart.
Mr. Conaway points out that Section 101(12) of the Bankruptcy
Code simply defines a debt as "liability on claim". Mr. Conaway
notes that Kmart has a "claim" against SunTrust for the funds
held in the Deposit Accounts.
Since the debts and claims are mutual, Mr. Conaway asserts that
the claims assigned pre-petition to SunTrust may be set off
against the pre-petition debt owed to Kmart in the form of the
funds in the Deposit Accounts as of the Petition Date.
Mr. Conaway further asserts that the Debtors lacks equity in the
funds held in the Deposit Accounts. "The pre-petition debts due
and owing SunTrust pursuant to the Factoring Agreements equal or
exceed the amounts held in the Deposit Accounts as of the
Petition Date," Mr. Conaway says. In addition, SunTrust
contends that such funds are not necessary to an effective
reorganization as the Debtors will have sufficient cash to fund
post-petition operations even if SunTrust is allowed to set off
the funds against the Debtors' debt. Thus, Mr. Conaway insists,
relief from stay should be granted pursuant to Section 362(d)(2)
of the Bankruptcy Code.
Moreover, Mr. Conaway points out that the Debtors are unable to
adequately protect SunTrust's interests in the funds in the
Deposit Accounts. Therefore, Mr. Conaway says, it is another
reason to grant SunTrust relief from stay under Section
362(d)(1) of the Bankruptcy Code. (Kmart Bankruptcy News, Issue
No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900)
KMART CORP: Suspends Severance Payments to Former Executives
------------------------------------------------------------
Kmart Corporation has suspended severance payments to several
former executives. This is with the exception of ex-CEO Charles
Conaway who walked away with $4,000,000 in March, the Associated
Press reports.
The suspension is viewed as an effect of Kmart's investigation
into the activities of the former management team.
Rachel Katz of Bloomberg also reports that Kmart may ask Mr.
Conaway, as well as other executives who have left the company,
to repay millions of dollars in loans.
Kmart had disclosed it made more than $30,000,000 in loans to 63
executives in the year before the Petition Date.
During the first meeting of creditors on May 2, 2002, Kmart
counsel Jack Butler relates that the company is investigating
the executives' contracts to see if the circumstances of their
departures make the loans forgivable. Naturally, the
development delighted creditors who are eagerly awaiting the
payment of Kmart's debts. (Kmart Bankruptcy News, Issue No. 20;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
LTV CORP: Bringing-In Marsh USA to Settle Insurance Squabble
------------------------------------------------------------
The LTV Corporation asks for Judge Bodoh's authority to sign a
letter agreement with Marsh USA Inc., to negotiate the final
closeout of LTV's insurance deductible programs with American
International Group, Inc., and to amortize LTV's performance,
including the payment of certain fees and expenses to Marsh.
Subsequent to the commencement of LTV's Asset Protection Plan
process, AIG drew down letters of credit totaling $34.5 million
that had been provided as financial assurance for LTV's
deductibles for their workers' compensation, automobile
liability, general liability and products liability insurance
policies. Shortly after learning of AIG's intent to make the
draw, LTV contacted Marsh, its insurance broker for these
policies, concerning the determination of the amounts that LTV
might be able to recover from AIG in connection with a fair,
reasonable, controlled and orderly financial closeout of the
deductible program. In the absence of a closeout settlement,
the final determination of the appropriate letter of credit
recovery would be delayed for several years pending the filing
and satisfaction of individual claims under the policies, and
the likelihood of obtaining any letter of credit recovery would
diminish over time.
After reviewing the facts and circumstances, including a cursory
review of the Debtors' loss history, Marsh advised LTV that the
letter of credit recovery could be substantial and that the
negotiation of the closeout settlement would involve several
months of review and negotiation with AIG. In particular, based
on its preliminary review, Marsh concluded that the closeout
settlement may reasonably be priced in the range of $22 to $28
million, which represented a potential gross letter of credit
recover of approximately $6,500,000 to $12,500,000.
In order to maximize the letter of credit recovery in the most
expeditious manner, LTV concluded that, given Marsh's experience
and knowledge of the policies, Marsh was the most logical and
appropriate choice to represent LTV's interest in the
determination of the closeout settlement with AIG. Accordingly,
LTV and Marsh entered into a letter agreement whereby Marsh will
represent LTV in the determination and negotiation of the
closeout settlement.
The Letter Agreement
Marsh will on LTV's behalf engage in negotiations with AIG to
obtain the closeout settlement in a timely manner. In
particular, it is contemplated that Marsh will verify and
negotiate the calculations and assumptions made by AIG in
connection with the administration of the policies and the
determination of the appropriate letter of credit recovery.
This process will necessarily entail an extensive, complex
actuarial analysis of the applicable historical loss data and
the impact of the APP on the projected liabilities under the
policies.
LTV will retain final authority to approve the closeout
settlement and will review any such settlement with its
statutory committees and postpetition lenders prior to
finalizing any such settlement.
In exchange for the services to be provided by Marsh, LTV has
agreed to pay Marsh a base fee of $300,000. In addition, in the
event the closeout settlement amount is less than $30,000,000,
Marsh would be entitled to receive an incentive fee of 3% of the
difference between the closeout settlement amount and
$30,000,000. For example, if the closeout settlement is
$29,000,000, Marsh will be entitled to an incentive fee of
$30,000, and is the closeout settlement is $25,000,000, Marsh
will be entitled to an incentive fee of $150,000. The incentive
fee is capped at $300,000. The fees will be deducted from any
letter of credit recovery obtained from AIG. (LTV Bankruptcy
News, Issue No. 29; Bankruptcy Creditors' Service, Inc.,
609/392-00900)
LANDSTAR: Ability to Continue as a Going Concern Questioned
-----------------------------------------------------------
LandStar, Inc. has incurred significant losses since inception
and will require additional funding to fully implement its
business plan. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The ability
of the Company to continue as a going concern and carry out its
business plan is dependent on the Company raising capital and
achieving projections of sales and earnings reflected in the
business plan. The Company intends to raise capital through
debt and equity financing, but there is no assurance that the
Company will be successful in raising additional capital by
these means.
LandStar, Inc. was incorporated as a Nevada corporation on May
4, 1998, for the purpose of purchasing, developing and reselling
real property, with its principal focus on the development of
raw land. From incorporation through December 31, 1998,
LandStar had no business operations and was a development-stage
company. LandStar did not purchase or develop any properties
and decided to change its business plan and operations. On March
31, 1999, the Company acquired approximately 98.5% of the common
stock of Rebound Rubber Corp. pursuant to a share exchange
agreement with Rebound Rubber Corp. and substantially all of
Rebound Rubber's shareholders. The acquisition was effected by
issuing 14,500,100 shares of common stock, which constituted
14.5% of the 100,000,000 authorized shares of LandStar and 50.6%
of the 28,622,100 issued and outstanding shares on completion of
the acquisition. The acquisition was treated for accounting
purposes as a continuation of Rebound Rubber under the LandStar
capital structure. LandStar originally issued 1,000,000
founders shares and sold 1,600,000 shares to initial subscribers
for a total of 2,600,000 shares. If viewed from a non-
consolidated perspective, on March 31, 1999 LandStar issued
14,500,100 shares for the acquisition of the outstanding shares
of Rebound Rubber. At the same time LandStar issued 8,500,000
shares for the acquisition of the joint venture interest of
United Trans-Western, Inc., issued 2,762,000 shares for cash and
issued 260,000 shares for finders fees. The cumulative effect
of the four issues increased the shares outstanding in LandStar
from 2,600,000 to 28,622,100. Rebound Rubber Corp. owns an
exclusive North American license granted by the Guangzhou
Research Institute for the Utilization of Reusable Resources,
P.R. of China (hereinafter the Guangzhou Research Institute),
pursuant to a technology for the reclamation and de-vulcanizing
of recycled rubber.
Rebound Rubber Corp. was originally formed on December 13, 1996
in the Province of Alberta, Canada under the name 721097 Alberta
Ltd. as a private limited liability corporation, and
subsequently changed its name to Rebound Rubber Corp. on May 20,
1997. Rebound Rubber was initially formed as a corporate
vehicle to acquire certain rubber recycling technology from the
Guangzhou Research Institute. The Guangzhou Research Institute
is a research institute owned by the Government of the P.R.
China. The P.R. of China central government mandated the
Guangzhou Research Institute to research recycling of waste
rubber products. In early 1996, the principal officers and
directors of Rebound Rubber met with members of the Guangzhou
Research Institute. The proponents conducted a thorough
technology review and due diligence examination of the rubber
recycling technology throughout 1996 and early 1997. This
review included but was not limited to the following: (1) de-
vulcanizing test procedures and test results; (2) observing the
complete processing of used tires to "crumb" (the granular
material produced by the shredding and grinding of recycled
rubber is called crumb rubber), the activation of the crumb and
the processing of the activated modified rubber powder ("AMR")
in substantial ratios with new rubber back into new tires; (3)
visiting a number of manufacturing operations and observing AMR
being used in a variety of new rubber products; (4) research
into other claims of de-vulcanizing technologies to determine
whether there were any other true de-vulcanizing processes in
commercial production anywhere in the world; (5) review of
proprietary rights, Chinese patents/registrations pursuant to
the technology; (6) review of chemicals used in the activation
process pursuant to environmental and workplace hazards; and (7)
review of availability and pricing of reactivation chemicals and
crumb rubber supplies.
Following the due diligence process, Rebound Rubber entered into
three contracts with the Guangzhou Research Institute. The
three agreements were signed on March 12, 1997 with a series of
payments being made in 1997 and 1998. The payment schedules
provided for in the agreements were altered by verbal agreements
without amendments in writing to the contracts being affected.
The final payment and official declaration of completion of the
technology acquisition was announced in a public news conference
in Guangzhou, P.R. China on May 12, 1998 and was reported in
local and official media in China.
In May 1997, United Trans-Western, Inc., a Delaware corporation,
acquired 100% of the shares of Rebound Rubber Corp. from D.
Elroy Fimrite for a purchase price of $1,000 and assumed
responsibility for market development. United Trans-Western
also conducted extensive research into tire collection,
shredding and crumb production operations, product quality,
crumbing methods and profitability. In conjunction with the
acquisition of Rebound Rubber by United Trans-Western, D. Elroy
Fimrite and Michael C. Pinch were appointed to the board of
directors of United Trans-Western, and assumed the positions of
president and chief financial officer, respectively. During the
period that United Trans-Western, Inc. owned the shares of
Rebound Rubber Corp., Kentucky Financial Inc. (a company related
to D. Elroy Fimrite) provided debt financing to Rebound Rubber
Corp. in the amount of $750,000. In March 1998 United Trans-
Western, Inc. sold all of its shares of Rebound Rubber Corp. to
Kentucky Financial Inc. for $1,000 with a requirement that
Kentucky Financial Inc. convert its loans to Rebound Rubber
Corp. into shares of Rebound Rubber Corp. United Trans-Western
retained an interest in a joint venture agreement with Rebound
Rubber, for the development, implementation and exploitation of
the rubber recycling technology in the United States market. On
December 31, 1998, in connection with the share exchange
agreement between Rebound Rubber and LandStar, LandStar entered
into a purchase agreement with United Trans-Western to acquire
all of United Trans-Western's interest in the joint venture.
The acquisition was effective March 31, 1999 and LandStar issued
8,500,000 shares of its common stock and paid $100,000 cash to
United Trans-Western in the transaction.
The share exchange with Rebound Rubber and the joint venture
acquisition from United Trans-Western were effective on March
31, 1999 and resulted in a change of control of LandStar and the
appointment of new officers and directors of the Company. These
transactions also redefined the focus of the Company on the
development and exploitation of the technology to de-vulcanize
and reactivate recycled rubber for resale as a raw material in
the production of new rubber products. The Company's business
strategy was to demonstrate to potential customers that
activated modified rubber powder (AMR) and RU rubber can be
produced in substantial quantities on a consistent basis and
that AMR and RU chemical and physical properties confirm AMR and
RU materials as viable rubber substitutes. The Company intends
to develop operational facilities that will apply the AMR and RU
technologies to vulcanized crumb rubber and sell the resulting
de-vulcanized material (and compounds using the materials) to
manufacturers of rubber products. The Company constructed and
operates a production prototype demonstration plant in Dayton,
Ohio for the purpose of producing commercial quantities of de-
vulcanized materials and demonstrating the process to potential
customers. The Company has not completed a sale to any
potential customer, as the Company has not produced sufficient
volume in the pilot plant to provide goods for sale. In
addition, the Dayton facility contains a lab, which will be used
in the future for the development of rubber compounds using
substantial quantities of AMR and RU materials in combination
with various plastics, natural rubber and synthetic rubbers. The
Company is currently analyzing where to locate a full production
facility for the de-vulcanized products.
LandStar relocated its executive offices to 15825 N. 71st
Street, Suite 205, Scottsdale, Arizona 85254 in January 2001 in
conjunction with the agreement to manage Polytek Rubber &
Recycling, Inc. The Company also maintains a Web site at
http://www.landstarinc.com
The Company had revenues of $1,320,000 for the year 2001,
whereas they had none in 2000. The Company was still classified
as a development stage company in the year 2000. The revenues
for the year were management fees relating to the management
agreement entered into with the sole shareholder of PolyTek
Rubber & Recycling, Inc. The Company managed, evaluated,
restructured and made significant changes in the operation of
the four plants PolyTek operated at the time of the agreement.
This included closing the plant in Michigan due to a high cost
structure, low valued sales contracts and a very seasonal
operation that made it impossible to operate the facility in a
profitable manner. The results for PolyTek are not included in
the Company's results since they were not owned in 2001.
Therefore the revenues shown are management fees and are not due
to actual sales of crumb rubber products.
Research and development costs were only $84,201 for the 2001
year compared to $247,309 in the year 2000. The management of
the Company deemed it prudent to solidify the source of raw
material needed for the de-vulcanization process, namely the
crumb rubber, and specifically PolyTek since it was identified
as the source for the Company's crumb rubber. Therefore the
research and development for the de-vulcanization division was
slowed as LandStar tackled the many issues in the crumb rubber
division. The Company has restarted its efforts in the de-
vulcanization division at the end of the first quarter 2002.
Personnel were shifted from de-vulcanization to managing the
crumb operation in 2001. The expenses in research and
development were basically rent and one person. In 2000 there
were five people at the Ohio plant running a multitude of tests
on the AMR and RU products.
General and administrative expenses increased from $1,911,521 in
2000 to $5,062,974 in 2001, or 2.65 times the 2000 level. Wages
were $700,000 in 2000 compared to almost $2,000,000 in 2001. In
2000 there were only four employees through August of that year.
Two senior management employees were added in September and an
additional senior management member was hired in October 2000.
However, in 2001, additional employees, mainly mid to senior
management were added early in the year. Some were added to aid
in the management of PolyTek, others were hired to bring in
management fields the Company was deficient in and others were
to add expertise to other areas the company is looking to expand
into. With the acquisition of Modified Asphalt Technologies in
January 2001, three senior management members were hired to move
the Company into the asphalt rubber arena. Unfortunately the
Company has not been able to procure funding for this division
and therefore no revenue was generated in 2001. With zero
revenue, the Company absorbed $400,000 in expenses relating to
this division. Travel expenses increased 41% for the Company as
a whole. There was increased travel relating to potential
acquisitions and also foreign opportunities in Brazil, Austria
and Saudi Arabia. Travel also increased due to the continuing
search for funding. The declining financing markets made this
much more difficult and increased the volume of traveling
required to try and secure a financing source. The Company also
expensed $300,000 relating to the acquisition of Modified
Asphalt Technologies and Rubber Recovery, Ltd., $127,500
relating to the stock grants issued to officers and directors
and $78,725 relating to stocks and warrants issued in
conjunction with a financing agreement. The Company also
expensed $360,000 in security deposits given to potential
acquisition targets since the acquisition agreements had
expired. Those targets are still on the Company's list, but not
in an as urgent status. The Company also used funds in public
relations matters and other consulting and professional
assistance that were not expended in prior years.
The Company's net loss was $4,014,396 in 2001 compared to
$2,434,396 in 2000. Much of the increased employee associated
expenses and travel costs were recouped through the management
fee. Therefore most of the increased loss came about due to the
write-off of the acquisition deposits ($360,000), stock grant
and warrant valuations ($206,225), acquisition values of the two
completed acquisitions ($300,000) and carrying costs of the
asphalt division with no offsetting revenues ($400,000).
As is evident from these figures, the Company will have to add
operations that can absorb part of this overhead or the costs
will need to be reduced. Costs cannot continue at this level
without defined revenue sources. The Company also must secure
financing to complete certain acquisitions and afford the
Company the needed working capital to continue in its endeavors.
The Company cannot guarantee that this will occur at this time.
LODGIAN INC: Proposes Uniform Contract Rejection Procedures
-----------------------------------------------------------
Lodgian, Inc. and its debtor-affiliates request permission of
the Court to establish procedures for the orderly rejection,
from time to time, of certain executory contracts and unexpired
leases. The Debtors will determine what contracts and leases
are no longer necessary to their on-going business operations
and Chapter 11 cases. These procedures will streamline the
Debtors' reorganization efforts and avoid administrative
expenses to the estates.
Gregory M. Petrick, Esq., at Cadwalader Wickersham & Taft in New
York, New York, tells the Court that the Debtors will identify,
from time to time, certain executory contracts and un-expired
leases that are no longer necessary for the Debtors' business
operations. These Contracts may relate to, inter alia, various
services provided to the Debtors or property (including personal
property, such as equipment) leased by the Debtors. As a result,
such Contracts will be burdensome to the Debtors' estates. The
Debtors have determined, in the sound exercise of their business
judgment, that the rejection of certain Contracts from time to
time, in accordance with the Rejection Procedures, will
eliminate the ongoing payment obligations under these Contracts
and, therefore, is in the best interests of the Debtors' estates
and their creditors.
Mr. Petrick assures the Court that the non-debtor parties to the
Contracts to be rejected will not be prejudiced by the Court
granting the relief requested in the Motion, and the subsequent
rejection by the Debtors, from time to time, of burdensome
Contracts. By serving the Notice of Rejection, a lessor or
contracting party will have received sufficient and specific
advance notice of the Debtors' intent to reject the underlying
contract and the pre-approved subsequent effective date of the
rejection.
In the exercise of their business judgment, the Debtors propose
the implementation of the following procedures for the rejection
of certain Contracts from time to time:
A. Any Contract that is deemed unnecessary and burdensome to the
Debtors based upon the sound business judgment of the Debtors
may be rejected by the Debtors giving five business-days
advance written notice to:
a. the respective counter-party to such Contract and
b. the Creditors' Committee.
B. If an objection to a Notice of Rejection is filed by the
Counter-party to the Contract or the Creditors' Committee,
and served upon, and actually received by, Debtors' counsel
prior to the expiration of the five business-days period, the
Debtors will schedule a hearing on the objection at the
Court's earliest convenience. If no objection is timely
received, the applicable Contract will be deemed rejected as
of the expiration of the five business-days notice period.
C. If a timely objection to a Notice of Rejection is received,
and the Court ultimately upholds the Debtors' determination
to reject the applicable Contract, then the applicable
Contract will be deemed rejected as of the expiration of the
initial 5 business-days notice period.
Mr. Petrick submits that the rejection of Contracts that the
Debtors determine to be of little or no value to themselves or
to third parties is entirely appropriate. As such, the Debtors
submit that these proposed procedures are fair and appropriate.
They balance the need for an expeditious reduction of burdensome
costs to the Debtors' estates while providing creditors with
advance notice of the proposed rejection and an opportunity to
object. These rejection procedures will eliminate the necessity
of the Debtors to obtain Court approval of each individual
Contract the Debtors determine to reject and the attendant costs
to the Debtors' estates for seeking such relief. This will also
reduce the administrative burden on the Court. (Lodgian
Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
MEMC ELECTRONIC: Negative Operating Cash Flow Tops $6.6 Million
---------------------------------------------------------------
MEMC Electronic Materials, Inc. (NYSE: WFR) released financial
results for the first quarter ended March 31, 2002.
MEMC reported net sales of $136.7 million for the 2002 first
quarter compared to net sales of $120.4 million in the 2001
fourth quarter. The 14% sequential increase in net sales is
primarily the result of a significant increase in product
volumes, especially in Europe and the U.S.
Following the acquisition by an investor group led by Texas
Pacific Group of E.ON's equity and debt interests in MEMC, the
Company's assets and liabilities were adjusted to reflect a new
basis resulting from push down accounting as of November 13,
2001. The financial statements for the quarter ended March 31,
2001 were prepared using the Company's historical basis of
accounting. The comparability of the Company's operating results
for the quarter ended March 31, 2002 with the quarter ended
March 31, 2001 is affected by the push down accounting
adjustments.
The Company reported gross margin in the 2002 first quarter of
$21.7 million compared to negative $27.8 million in the 2001
fourth quarter. The Company reported an operating loss of $2.6
million in the first quarter of 2002 before restructuring
charges of $2.2 million, compared to an operating loss of $61.4
million, excluding the $10.0 million restructuring costs
recorded in the quarter ended December 31, 2001. The Company's
significantly improved operating results are primarily due to
lower headcount and continued cost control, as well as reduced
depreciation and amortization reflecting the write-down of
property, plant and equipment, goodwill and intangible assets
resulting from push down accounting.
"Our operating profit before depreciation and amortization and
restructuring charges totaled approximately $6 million in the
2002 first quarter, as a result of higher product volumes, cost
reductions, and higher manufacturing yields," commented Nabeel
Gareeb, MEMC's Chief Executive Officer. "Further, we reduced our
short and long term debt by approximately $17 million this
quarter."
"We expect to continue double-digit sequential growth in sales
in the 2002 second quarter, similar to first quarter 2002,
primarily as a result of a continued recovery in product
volumes. We expect our top line sales in the 2002 second quarter
to approach levels achieved in the year-ago second quarter. We
also expect our margins to improve sequentially in the 2002
second quarter," continued Gareeb. "We are cautiously optimistic
that product volumes will continue to recover as 2002
progresses."
Research and development decreased to $6.8 million in the 2002
first quarter compared to $17.8 million in the 2001 fourth
quarter as a result of the transition of 300 millimeter to full-
scale production, lower depreciation reflecting the write-down
of property, plant and equipment resulting from push down
accounting, and continued cost control.
Interest expense for the first quarter of 2002 was $5.1 million,
compared to $14.1 million in the quarter ended December 31,
2001. The decreased interest expense resulted primarily from the
restructuring of the Company's debt on November 13, 2001.
The Company has recognized no benefit for net operating loss
carryforwards in the current quarter. Income tax expense in the
2002 first quarter relates to tax jurisdictions in which the
Company expects to owe current taxes.
Equity in loss of the Company's Taiwanese joint venture was $0.3
million in the first quarter of 2002, compared to a loss of $2.8
million in the 2001 fourth quarter. Relative to the prior
quarter, Taisil's product volumes and average selling prices
declined moderately. In the 2001 fourth quarter, Taisil
increased its deferred tax valuation allowance related to
certain net operating loss carryforwards, of which the Company's
share was approximately $3.0 million. Taisil continues to
produce positive operating cash flows.
For the 2002 first quarter, the Company reported a net loss
allocable to common stockholders of $18.1 million, or $0.26 per
share, which is after cumulative preferred stock dividends of
$7.9 million, compared to a net loss allocable to common
stockholders of $82.3 million, or $1.18 per share for the 2001
fourth quarter.
The Company reported negative operating cash flow of $6.6
million for the 2002 first quarter, an improvement of $7.2
million compared to the 2001 fourth quarter. Capital
expenditures during the quarter totaled $2.7 million.
Depreciation and amortization in the 2002 first quarter totaled
$9.0 million, a decline of $18.5 million compared to the
previous quarter, reflecting the write-down of property, plant
and equipment, goodwill, and intangible assets resulting from
the application of push down accounting effective November 13,
2001.
MEMC is a leading worldwide producer of silicon wafers for the
semiconductor industry. Silicon wafers are the fundamental
building block from which almost all semiconductor devices are
manufactured, such as are used in computers, mobile electronic
devices, automobiles, and other consumer and industrial
products. Headquartered in St. Peters, MO, MEMC operates
manufacturing facilities directly in every major semiconductor
manufacturing region throughout the world, including Europe,
Japan, Malaysia, South Korea, Taiwan and the United States and
through a joint venture in Taiwan.
MERISTAR HOTELS: First Quarter Revenues Plunge 16.6% to $66.5MM
---------------------------------------------------------------
MeriStar Hotels & Resorts (NYSE: MMH), the nation's largest
independent hotel management company, announced results for the
first quarter ended March 31, 2002.
First-quarter revenues for 2002 declined 16.6 percent to $66.5
million. Excluding non-recurring items, net loss for the quarter
was $1.6 million compared to net income of $0.2 million in the
2001 first quarter. Pro forma net income in the 2001 first
quarter (excluding non-recurring items and adjusted for the
elimination of goodwill amortization as a result of a new
accounting rule pertaining to goodwill and intangible assets)
was $0.7 million. Recurring earnings before interest, taxes,
depreciation and amortization (EBITDA) was $2.2 million,
compared to $6.6 million for the 2001 first quarter. During the
first quarter, the company recorded a $0.3 million non-recurring
charge related to the company's proposed merger with Interstate
Hotels Corporation (Nasdaq: IHCO). Excluding non-recurring
items, the net loss per share was $0.03 ahead of the
consensus analysts' estimate of negative $0.07.
Same-store revenue per available room (RevPAR) for all full-
service managed hotels in the 2002 first quarter decreased 17.7
percent to $66.45. Occupancy declined 9.4 percent to 62.9
percent and average daily rate (ADR) fell 9.1 percent to
$105.73.
Same-store RevPAR for all limited-service leased hotels in the
2002 first quarter fell 9.7 percent to $48.28. ADR decreased 5.3
percent to $77.85, and occupancy declined 4.6 percent to 62.0
percent.
"The first quarter saw a nice rebound in group business and
encouraging signs from leisure travel," said Paul W. Whetsell,
chairman and chief executive officer of MeriStar. "However, we
remain disappointed with the continued sluggishness in the
transient business
traveler segment.
"We continued to focus heavily on cost containment, which had a
positive impact on operating profit margins," he noted. "We have
permanently changed the way we manage hotels by eliminating a
whole layer of middle management and by focusing more on cross
training so that employees can handle more functions, especially
during the hotel's busiest periods of the day."
He added that the company's corporate housing division,
BridgeStreet Corporate Housing Worldwide, also reaped the
benefits of reductions in its cost structure. "We are now
realizing the benefits of reducing the number of leased
apartments in the second half of 2001, as well as restructuring
our operations within the corporate housing division," said
Whetsell. "In the second quarter, we will shut down our
Sunnyvale, Calif., operation, a market that has been hit hard
by the reversals in the technology industry and is no longer
profitable. Unlike hotels, which are fixed assets, BridgeStreet
can rapidly expand and contract its inventory in response to
shifts in the economy. We will continue to adjust our corporate
housing inventory as local market conditions warrant."
The company continues to look for additional revenue sources,
according to John Emery, president and chief operating officer.
In the first quarter, the company announced the formation of a
new subsidiary, The NetEffect Alliance, which specializes in
information technology consulting and telecommunications
services tailored for the unique needs of the hotel industry.
"The NetEffect Alliance is already contributing to revenue
growth. By offering the benefit of our existing technology
programs and expertise to hotel owners and operators, we are
able to deliver services and products to the industry at reduced
costs," said Emery.
Interstate Merger Update
On May 2, 2002, MeriStar and Interstate Hotels Corporation
announced that they had signed a definitive merger agreement.
Upon approval of both companies' shareholders and appropriate
regulatory bodies, the merged company will manage more than 400
hotels, representing more than 30 franchise brands in North
America and Europe. The new company will retain the name
Interstate Hotels Corporation and will have estimated 2002 pro
forma revenues of $340 million, and estimated pro forma EBITDA
of $33 million to $35 million. The merger is expected to close
in the 2002 third quarter.
Outlook
"We are seeing steady improvements in demand and are buoyed by
the recent positive economic news," Emery said. "We are working
diligently to improve our transient business traveler base.
However, the sluggish economy and the delays and difficulties
due to heightened security measures at airports continue to
dampen this sector, especially for shorter duration trips. We
remain cautiously optimistic about the second half of the year
as the economy continues to rebound."
For the second quarter of 2002, MeriStar expects EBITDA of $5.5
million to $6.0 million and net income per common share of $0.01
to $0.02.
Key Financial Information
As of March 31, 2002:
-- Total debt of $138.1 million
-- Total debt to annual EBITDA of 7.6x
-- Senior debt to annual EBITDA of 4.4x
-- Annual interest coverage ratio of 1.6x
-- Average cost of debt of 8.2 percent
MeriStar Hotels & Resorts operates 276 hospitality properties
with more than 58,000 rooms in 42 states, the District of
Columbia, and Canada, including 55 properties managed by
Flagstone Hospitality Management, a subsidiary of MeriStar
Hotels & Resorts. BridgeStreet Corporate Housing Worldwide, a
MeriStar subsidiary, is one of the world's largest corporate
housing providers, offering upscale, fully furnished corporate
housing throughout the United States, Canada, the United
Kingdom, France and 39 additional countries through its network
partners.
For more information about MeriStar Hotels & Resorts, visit the
company's Web site: http://www.meristar.com
At December 31, 2001, Meristar Hotels recorded a working capital
deficit of about $36 million.
NTL INCORPORATED: Files Prepackaged Chapter 11 Reorg. Plan in NY
----------------------------------------------------------------
NTL Incorporated (OTC BB: NTLD; NASDAQ Europe: NTLI), has filed
its previously announced Chapter 11 "prearranged" Plan of
Reorganization under U.S. law.
As set forth in its Plan of Reorganization, the Company, a
steering committee of its lending banks and an unofficial
committee of its public bondholders (holding over 50% of the
face value of NTL and its subsidiaries' public bonds) have
reached an agreement in principle on implementing the
recapitalization plan announced last month. In addition, France
Telecom and certain other holders of the Company's preferred
stock, have also agreed to the plan.
None of NTL's operating companies or customers in the UK,
Ireland or Continental Europe will be affected by the Chapter 11
filings. Trade creditors, suppliers and employees will continue
to be paid in the ordinary course of business.
As previously announced, under the proposed recapitalization
plan, approximately $10.6 billion in debt will be converted to
equity in two reorganized companies - NTL UK and Ireland and NTL
Euroco. In addition, NTL has received from certain members of
the bondholder group a commitment of up to $500 million in new
financing for NTL's UK and Ireland operations during the
recapitalization process, subject to final approval by the U.S.
Court. This new financing will further ensure that the Company
and its business operations have access to sufficient liquidity
to continue ordinary operations.
Summary of the proposed Recapitalization Plan:
- NTL's current bondholders would in the aggregate
receive 100% of the initial equity of NTL UK and Ireland and
approximately 86.5% of the initial equity of NTL Euroco. NTL
(Delaware) bondholders would have the opportunity to reinvest
all or a portion of NTL (Delaware) cash to which they would
otherwise be entitled under the plan in additional shares of
common stock of NTL UK and Ireland. Current preferred and common
stockholders, including France Telecom, would receive a package
of rights (to be priced at a $10.5 billion enterprise value) and
warrants entitling them to purchase primary equity of NTL UK and
Ireland at the consummation of the plan (in the case of the
rights) and for the duration of the eight-year warrants, at
prescribed prices. If fully exercised, such rights and warrants
would entitle the current preferred stockholders to acquire
approximately 23.6% and the current common stockholders to
acquire approximately 8.9% of this entity's primary equity.
- In addition, current preferred stockholders, other than
France Telecom, would receive approximately 3.2%, and current
common stockholders, other than France Telecom, would receive
approximately 10.3%, of the primary equity of NTL Euroco. Bonds
at the Company's subsidiaries Diamond Holdings and NTL
(Triangle) would remain outstanding. Subject to the consummation
of the recapitalization, France Telecom would also receive NTL's
27% interest in Noos S.A.
More on NTL:
- The Company announced on May 2nd that it had reached a
comprehensive agreement in principle with a steering committee
of its lending banks and an unofficial committee of its public
bondholders on implementing its recapitalization plan.
- 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 fiber-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), says
DebtTraders, are quoted at a price of 42. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NLI4for
real-time bond pricing.
NTL INCORPORATED: Case Summary & Largest Unsecured Creditors
------------------------------------------------------------
Lead Debtor: NTL Incorporated
110 East 59th Street
New York, New York 10022
Telephone (212) 906-8440
Bankruptcy Case No.: 02-41316
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
NTL (Delaware), Inc. 02-41317
NTL Communications Corp. 02-41318
Communications Cable Funding Corp. 02-41319
Diamond Holdings Limited 02-41320
Diamond Cable Communications Limited 02-41321
Type of Business: The principal activity of NTL Incorporated
has been to raise funds in the financial
markets, primarily to support the financing
of operations and funding needs of certain
affiliates.
Chapter 11 Petition Date: May 8, 2002
Court: Southern District of New York
Judge: Allan L. Gropper
Debtors' Counsel: Kayalyn A. Marafioti, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telephone (212) 735-3000
Total Assets: $16,834,200,000
Total Debts: $23,377,600,000
A. Debtor's Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Wilmington Trust Company 5-3/4% Convertible $1,225,683,330
Rodney Square North Subordinated Notes
1100 North Market Street Due 2009
Wilmington, Delaware 198900
Attention: Corporate Trust
Administration
Telephone: (302) 636-6058
Fax: (302) 636-4140
Wells Fargo Bank Minnesota, 6-3/4% Convertible $1,185,362,500
National Association Senior Notes
MAC N9303-120
Sixth and Marquette
Minneapolis, Minnesota 55479
Attn: Mr. Gavin Wilkinson,
Vice President
Telephone: (612) 667-3777
Fax: (612) 667-9825
Wilmington Trust Company 7% Convertible $502,542,516
Subordinated
Notes
Wilmington Trust Company 5-3/4% Convertible $101,661,111
Subordinated Notes
Due 2011
ITN News Channel Guarantee Unliquidated
200 Gray's Inn Road Obligation
London, England WC1X 8XZ
Attention: James Scorer
Telephone: 44 020 7430 4779
Fax: 44 020 7430 4305
The Studio Guarantee Unliquidated
(c/o Vivendi Universal)
5-7 Mandeville Place
London, England W1U 3AR
Attention: Bradley Waxler
Telephone: 44 0207 535 3567
Fax: 44 0207 535 3565
Macquarie Communications Guarantee Unliquidated
Infrastructure Pty Limited Obligation
No. 1 Martin Place
Sydney, Australia NSW 2000
Attn: Shemara Wikramanayake
Telephone: 61 2 8232 5103
Fax: 61 2 8232 3656
B. NTL Delaware's Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Wilmington Trust Company 5-3/4% $1,225,683,333
Rodney Square North Convertible
1100 North Market Street Subordinated
Wilmington, Delaware 198900 Notes due 2009
Attn: Corporate Trust
Administration
Telephone: (302) 636-6058
Fax: (302) 636-4140
Wilmington Trust Company 7% Convertible $502,542,516
Subordinated
Notes Due 2008
Wilmington Trust Company 5-3/4% $101,661,111
Convertible
Subordinated
Notes Due 2011
Australian Broadcasting Guarantee Unliquidated
Corporation Obligation
Attention: Craig Todd
Telephone: 61 2 9950 3346
Fax: 61 2 9950 3441
SBS Corporation Guarantee Unliquidated
Attention: Hugh James Obligations
Telephone: 61 2 9430 3172
Fax: 61 2 9430 3773
Rangers Co. UK Limited Guarantee Unliquidated
Ibrox Stadium Obligation
150 Edmiston Drive
Glasgow, Scotland G51 2XC
Attention: Managing Director
Leicester City plc Guarantee Unliquidated
City Stadium Obligation
Filbert Street
Leicester, England LE27FL
The Football League Guarantee Unliquidated
Edward VII Quay Obligation
Navigation Way
Preston
Lancashire, England PR2 2YF
Attention: Chief Executive
Fax: 44 01772 325801
The Football Association Guarantee Unliquidated
Premier League Limited Obligation
11 Connaught Place
London, England W2 2ET
Aston Villa plc Villa Park Guarantee Unliquidated
Birmingham, England B6 6HE Obligation
Cable & Wireless Guarantee Unliquidated
124 Theobalds Road Obligation
London, England WC1X 8RX
Attn: Company Secretary
Telephone: 44 020 7315 4272
Commonwealth of Australia Guarantee Unliquidated
Department of Obligation
Communications, Information,
Technology and the Arts
GPO Box 2154
Canberra, Australia ACT 2601
Telephone: 61 2 6271 1533
Fax: 61 2 6271 1717
America Online, Inc. Guarantee Unliquidated
AOL (UK) Limited Obligation
80 Hammersmith Road
London, England W14
Attn: The Company Secretary
Telephone: 0800 376 5432
C. NTL Communications' Largest Unsecured Creditors
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Wells Fargo Bank Minnesota, 9-3/4% Senior $1,190,702,369
National Association Deferred
MAC N9303-120 Coupon Notes
Sixth and Marquette Due 2008
Minneapolis, Minnesota 55479
Attn: Mr. Gavin Wilkinson,
Vice President
Telephone: (612) 667-3777
Fax: (612) 667-9825
Wells Fargo Bank Minnesota 6-3/4% $1,185,362,500
Convertible
Senior Notes
Due 2008
Wells Fargo Bank Minnesota 11-1/2% Senior $1,079,852,083
Deferred
Coupon Notes
Due 2006
Wells Fargo Bank Minnesota 11-1/2% Senior $666,727,431
Notes Due 2008
Wells Fargo Bank Minnesota 11-7/8% Senior $534,470,486
Notes Due 2010
Wilmington Trust Company 7% Convertible $502,542,516
Rodney Square North Subordinated
1100 North Market Street Notes Due 2008
Wilmington, Delaware 198900
Attention: Corporate Trust
Administration
Telephone: (302) 636-6058
Fax: (302) 636-4140
The Bank of New York 10% Senior $408,222,222
48th Floor Notes Due 2008
One Canada Square
London E15 5AL
England
Attn: Sunjeeve D. Patel,
Assistant VP
Wells Fargo Bank Minnesota 9-3/4% Senior $391,746,728
Deferred
Coupon Sterling
Notes Due 2009
Wells Fargo Bank Minnesota 10-3/4% Senior $389,486,391
Deferred
Coupon Sterling
Notes Due 2008
Wells Fargo Bank Minnesota 12-3/8% Senior $379,555,576
Deferred
Coupon Notes
Due 2008
Wells Fargo Bank Minnesota 9-7/8% Senior $347,457,882
Euro Notes Due
2009
Wells Fargo Bank Minnesota 12-3/4% Senior $296,887,175
Deferred
Coupon Notes
Due 2005
Wells Fargo Bank Minnesota 12-3/8% Senior $293,719,219
Euro Notes Due
Due 2008
Wells Fargo Bank Minnesota 9-1/4% Senior $247,507,986
Euro Notes Due
2006
Wells Fargo Bank Minnesota 9-1/2% Senior $188,714,074
Sterling Notes
Due 2008
Wells Fargo Bank Minnesota 11-1/2% Senior $150,118,740
Deferred
Coupon Euro
Notes Due 2009
AT&T Uniplan Service Trade Debt $11,984
P.O. Box 9001309
Louisville, Kentucky 40290
Met Police Headquarters Guarantee Unliquidated
Offices of the Commissioner Obligation
and Receiver of the
Metropolitan Police
New Scotland Yard
1 Drummond Gate
London, England SW1
Telephone: 44 020 7230 1212
TXU Energy Guarantee Unliquidated
P.O. Box 40 Obligation
Wherstead Park
Wherstead, Ipswich
Suffolk, England IP9 2AQ
Telephone: 44 01473 688688
D. Diamond Cable Communications' Largest Unsecured Creditors
Entity Nature Of Claim Claim Amount
------ --------------- ------------
The Bank of New York 11-3/4% Senior $554,223,875
48th Floor Discount Notes
One Canada Square Due 2005
London E15 5AL England
Attn: Sunjeeve D. Patel,
Assistant VP
The Bank of New York 10-3/4% Senior $429,791,882
Discount Notes
Due 2007
The Bank of New York 13-1/4% Senior $288,143,047
Discount Notes
Due 2004
E. Diamond Holdings' Largest Unsecured Creditors
Entity Nature Of Claim Claim Amount
------ --------------- ------------
The Bank of New York 10% Senior $197,933,295
48th Floor Sterling Notes
One Canada Square Due 2008
London E15 5AL
England
Attn: Sunjeeve D. Patel,
Assistant VP
The Bank of New York 9-1/8% Senior $112,481,493
Notes Due 2008
NATIONAL STEEL: Ad Hoc Panel Seeks DIP Financing Order Revision
---------------------------------------------------------------
The Ad Hoc Committee of the holders of the First
Mortgage Bonds (9-7/8% due 2009 issued by National Steel
Corporation) asks Judge Squires to modify the DIP Financing
order.
H. Rey Stroube III, Esq., at Akin, Gump, Strauss, Hauer & Feld,
in Houston, Texas, reminds the Court that prior to the hearing,
the Ad Hoc Committee filed a limited objection to certain terms
of the DIP order. "Final resolution regarding that objection
has not been reached," Mr. Stroube says. The parties have been
working and continue to work diligently to arrive at agreed upon
documentation. Mr. Stroube explains that in order not to be
deemed to have relinquished the their objections, and in
compliance with the requirements of Rule 9023, the Ad Hoc
Committee is filing this motion to reconsider the previously
asserted objections and to alter or amend the DIP order
consistent with their prior objections.
Rule 9023 refers to new trials and amendment of judgments. Rule
59 of the Federal Rules of Civil Procedure, which applies in
cases under the Bankruptcy Code, regulates motions for a new
trial and amendment of judgment. Those motions must be served
within 10 days of the entry of judgment.
"The parties believe that acceptable documentation will be
forthcoming, and this motion serves as a precautionary measure,"
Mr. Stroube says. (National Steel Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
NATIONSRENT: Wins Nod to Hire Korn/Ferry as Search Consultants
--------------------------------------------------------------
NationsRent Inc., and its debtor-affiliates secured Court's
authority to employ and retain Korn/Ferry International as
executive search consultants in their Chapter 11 cases to assist
in their search for a new Chief Executive Officer.
As previously reported, the Debtors reasoned that Korn/Ferry is
particularly well suited and qualified to assist the Debtors in
this executive search since they are among the leading executive
search firms in the world. The firm began providing executive
search services in 1969 and since then has conducted more than
80,000 senior management or executive searches. Korn/Ferry
successfully has assisted many major corporations in the U.S. in
their respective searches for senior executives, including
recent searches for such well-known companies as Ann Taylor
Stores Corp., AutoNation, Inc. , CellularOne Group, Inc., Kaiser
Permanente, Krispy Kreme Doughnuts, Inc., Ocean Spray
Cranberries, Inc., and Waste Management, Inc.
Korn/Ferry will charge a retainer fee equal to one-third of the
projected first year's total cash compensation, including
bonuses of NationsRent's new chief executive officer, capped at
$250,000, which will be billed in four monthly installments. Mr.
Merchant says that notwithstanding any other language in the
search agreement, any fees of Korn/Ferry will only become due
and payable upon application to the Court. Korn/Ferry will
refund the difference if a new CEO is hired at a lower targeted
first year total cash compensation package than the original
estimate. (NationsRent Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
OPTICARE HEALTH: Sets Annual Shareholders' Meeting for May 21
-------------------------------------------------------------
The Annual Meeting of Stockholders of OptiCare Health Systems,
Inc., will be held on Tuesday, May 21, 2002, at 10:30 a.m.,
local time, at Montamey Golf Club, Route 9W, Alpine, New Jersey,
for the following purposes:
1. To elect eight members to serve on the Board of
Directors until the next annual meeting of stockholders
and until their successors are duly elected and
qualified (Proposal 1);
2. To approve the Company's Amended and Restated 2002
Stock Incentive Plan (the "2002 Plan") (Proposal 2);
3. To ratify the appointment of Deloitte & Touche LLP as
the Company's independent auditors for the year ending
December 31, 2002 (Proposal 3); and
4. To transact such other business as may properly be
brought before the Meeting.
Stockholders of record at the close of business on April 10,
2002 shall be entitled to notice of and to vote at the Meeting.
OptiCare Health Systems, Inc. is an integrated eye care services
company focused on managed care and professional eye care
services. It also provides systems, including internet-based
software solutions, to eye care professionals.
As previously reported, OptiCare Health had consummated a series
of transactions which resulted in a change in control of the
Company and a major restructuring of its debt, equity and voting
capital stock.
Pursuant to a Restructure Agreement among the Company, Palisade
Concentrated Equity Partnership, L.P., and Dean J. Yimoyines,
M.D. (the Chairman of the Board of Directors, President, and
Chief Executive Officer of the Company), dated December 17,
2001, as amended on January 5, 2002 and January 22, 2002,
Palisade purchased 2,571,429 shares of the Company's Series B
12.5% Voting Cumulative Convertible Participating Preferred
Stock, par value $.001 per share, convertible into 25,714,290
shares of common stock, for an aggregate cash purchase price of
$3.6 million. Palisade also received an additional 309,170.5
shares of the Company's Series B Preferred Stock, convertible
into 3,091,705 shares of common stock, as payment for the
outstanding balance (including accrued interest) of Palisade's
participation in a bridge loan to the Company, which principal
and interest aggregated $432,838.70 at the time of such issuance
and sale. Each share of Series B Preferred Stock is immediately
convertible into ten shares of common stock and has the voting
power equivalent to the number of shares of common stock into
which each share of Series B Preferred Stock may be converted.
In addition, pursuant to the Restructure Agreement, in
connection with providing a $13.9 million subordinated loan to
the Company, Palisade received warrants entitling Palisade, at
any time, to purchase up to 17,375,000 additional shares of
common stock at an exercise price of $.14 per share. All funds
used to make the loan and the purchase of the Series B Preferred
Stock came directly from the assets of Palisade.
PACIFIC AEROSPACE: Shoos-Away Andersen as Independent Accountant
----------------------------------------------------------------
On April 19, 2002, Pacific Aerospace & Electronics, Inc.
dismissed Arthur Andersen LLP as its independent accountant.
Arthur Andersen had served as the Company's independent
accountant since January 30, 2002. The decision to change the
independent accountant was recommended by the Company's Finance
and Audit Committee and approved by the Board of Directors.
Arthur Andersen did not render any report on the Companys's
financial statements during the term it acted as Company
independent accountant.
As of April 22, 2002, Pacific Aerospace & Electronics engaged
KPMG LLP as the Company's independent accountant to audit its
financial statements for the fiscal year ending May 31, 2002.
The decision to engage KPMG was recommended by its Finance and
Audit Committee and approved by the Board of Directors. KPMG
previously served as the Company's independent accountant from
April 17, 1998 to January 29, 2002.
KPMG's report on Pacific Aerospace & Electronics' consolidated
financial statements for the fiscal year ended May 31, 2001,
contained a separate paragraph stating that: "....the Company
has suffered recurring losses from operations and has a net
capital deficiency at May 31, 2001, which raise substantial
doubt about the entity's ability to continue as a going
concern." and KPMG's report on the Company's consolidated
financial statements for the fiscal year ended May 31, 2000,
contained a separate paragraph stating that: "....the Company
has suffered recurring losses from operations, which raise
substantial doubt about the entity's ability to continue as a
going concern."
PHOENIX INT'L: Dramatic Drop in Q3 Net Loss Credited to EPICUS
--------------------------------------------------------------
Phoenix International Industries, Inc. (OTCBB:PHXU) has
announced that they have filed their third quarter report with
the SEC and it shows that this quarter was its best in the last
10 years. For the third quarter of this fiscal year, PHXU
reported a net loss of only $179,755 compared to a net loss
$1,695,000 for the same quarter last year.
Phoenix President & CEO Gerard Haryman said, "We are pleased to
be current in our filings again and to have our normal symbol,
PHXU, back with no "E" attached. We are also pleased to
announce, this quarter we have proven that even in a market
where many telecom companies are losing huge sums of money and
some have even had to file bankruptcy, we continue to grow our
business and improve our financials. This can be attributed in
no small part to the ability, creativity and dedication of the
employees of our primary subsidiary, EPICUS. Thanks to their
development and implementation of new automated systems, we have
been able to reduce our costs while at the same time improve our
service. Based upon the initial success of its new Internet
Access marketing program and the results of this quarter, we
firmly believe that EPICUS will show a profit for the next
quarter."
EPICUS, Inc. is an Integrated Communications Provider (ICP),
providing comprehensive communications services to both
residential and business customers, and a wholly owned
subsidiary of Phoenix International Industries, Inc., a public
company, listed on the Over-the-Counter Bulletin Board under the
symbol "PHXU".
Phoenix International's November 30, 2001 balance sheet was
upside-down, with a total shareholders' equity deficit of about
$5 million.
PILLOWTEX CORP: Modifications to 2nd Amended Reorganization Plan
----------------------------------------------------------------
Other salient modifications to Pillowtex Corporation's Second
Amended Plan are:
1. On or before the Effective Date, these Restructuring
Transactions involving the Pillowtex Subsidiary Debtors will
be consummated:
(a) the merger of Bangor Investment Company and Moore's Falls
Corporation with and into Downeast Securities
Corporation, with Downeast being the surviving
corporation;
(b) the subsequent merger of Crestfield Cotton Company,
Amoskeag Management Corporation and Downeast Securities
Corporation with and into Fieldcrest Cannon, Inc., with
Fieldcrest Cannon, Inc. being the surviving corporation;
(c) the merger of Leshner of California, Inc. and The Leshner
Leasing Corporation with and into The Leshner Corporation
being the surviving corporation;
(d) the merger of Fieldcrest Cannon Transportation Inc., with
and into Fieldcrest Cannon SF, Inc., with Fieldcrest
Cannon SF Inc., being the surviving corporation and
changing the surviving corporation's name to Fieldcrest
Cannon Transportation, Inc; and
(e) Manetta Home Fashions, Inc., will change its name to FC
Online, Inc.
2. The executive officers of the Debtors expected to serve as
executive officers of the Reorganized Debtors on the
Effective Date are:
Name Position
---- --------
Anthony T. Williams President and Chief Operating Officer
Michael R. Harmon Executive Vice President and Chief
Financial Officer
Scott E. Shimizu Executive Vice President - Sales &
Marketing
A. Allen Oakley Executive Vice President -
Manufacturing
Richard A. Grissinger Senior Vice President - Marketing
Richard L. Dennard Senior Vice President - Purchasing
and Logistics
Deborah G. Poole Vice President and Chief Information
Officer
Donald Mallo Vice President - Human Resources
John F. Sterling Vice President, General Counsel and
Secretary
Henry T. Pollock Vice President and Treasurer
Thomas D. D'Orazio Vice President and Corporate
Controller
John Wahoski Vice President Financial and
Operational Analysis
These individuals are expected to serve as Directors of the
Reorganized Debtors on the Effective Date:
Class Name History
----- ---- -------
I Bradley I. Dietz Bradley Dietz has served as
Managing Director and Partner of
Peter J. Solomon Company, Ltd.
I Jeffrey J. Keenan Jeffrey J. Keenan has served as
Chairman of the Board of IESI
Corporation.
I Kenneth Liang Kenneth Liang has served as
Managing Director-Distressed
Debt of Oaktree and as General
Counsel of Oaktree.
II Chief Executive If hired by Pillowtex prior to
Officer the Effective Date, the chief
executive officer will begin
serving his or her term as a
director on the Effective Date.
If a chief executive officer has
not been hired prior to the
Effective Date, Ralph La Rovere,
the current Chairman of the
Board of Pillowtex, will serve
director on an interim basis.
II Bruce A. Karsh Bruce A. Karsh is a co-founder
and currently President of
Oaktree Capitol Management, LLC.
III Mariusz J. Mazurek Mariusz J. Mazurek has served as
Senior Vice President of
Oaktree.
III James P. Seery, Jr. James P. Seery, Jr. has served
as Senior Vice President, High
Yield Group of Lehman Brothers,
Inc.
Each of Messrs. Karsh, Liang, Seery and Mazurek will serve on
an interim basis pending selection of directors.
The Officers and Directors of each Debtor Subsidiary are:
Directors:
Anthony T. Williams
John F. Sterling
Officers:
Anthony T. Williams -- President and Chief Operating
Officer
Michael R. Harmon -- Executive Vice President and Chief
Financial Officer
Henry T. Pollock -- Vice President and Treasurer
John F. Sterling -- Vice President, General Counsel
and Secretary
Eric J. Blough -- Assistant Secretary
In addition to the officers, these individuals serve as
officers for Encee, Inc. and are presently expected to serve
as officers on the Effective Date:
Officers:
Sherry B. Dendy -- Controller and Assistant Secretary
Donald Mallo -- Vice President - Human Resources
These individuals serve as officers for Fieldcrest Cannon,
Inc. and are presently expected to serve as officers on the
Effective Date:
Officers:
Donald Mallo -- Vice President - Human Resources
Scott E. Shimizu -- Executive Vice President - Sales &
Marketing
A. Allen Oakley -- Executive Vice President -
Manufacturing
Richard A. Grissinger -- Senior Vice President - Marketing
Deborah G. Poole -- Vice President and Chief
Information Officer
Richard L. Dennard -- Senior Vice President - Purchasing
and Logistics
The Leshner Corporation will have these individuals as their
officers and presently expected to serve as officers on the
Effective Date:
Officers:
A. Allen Oakley -- Executive Vice President -
Manufacturing
Richard L. Dennard -- Senior Vice President - Purchasing
These individuals serve as officers and directors for PTEX
Holding Company and are presently expected to serve as
officers and directors on the Effective Date:
Directors:
Darrell L. Jones
Stephen D. Chanslor
Norman J. Shuman
Officers
Dan J. Protokowitz -- President
Darrell L. Jones -- Vice President and Treasurer
Stephen D. Chanslor -- Vice President and Secretary
These individuals serve as officers and directors for
Fieldcrest Cannon Financing, Inc. and are presently expected
to serve as officers and directors on the Effective Date:
Directors:
Darrell L. Jones
Stephen D. Chanslor
Norman J. Shuman
Officers:
Dan J. Protokowitz -- President
Darrell L. Jones -- Vice President and Treasurer
Stephen D. Chanslor -- Vice President and Secretary
These individuals serve as officers and managers of FCI
Corporate LLC and are presently expected to serve as officers
and managers of Reorganized FCI Corporate LLC on the Effective
Date:
Managers:
Anthony T. Williams
John F. Sterling
Officers:
Anthony T. Williams -- President and Chief Operating
Officer
Michael R. Harmon -- Executive Vice President and Chief
Financial Officer
Henry T. Pollock -- Vice President and Treasurer
John F. Sterling -- Vice President, General Counsel and
Secretary
Eric J. Blough -- Assistant Secretary
These individuals serve as officers and managers of FCI
Operations LLC and are presently expected to serve as officers
and managers of Reorganized FCI Corporate LLC on the Effective
Date:
Managers:
Anthony T. Williams
John F. Sterling
Officers:
Anthony T. Williams -- President and Chief Operating Officer
Scott E. Shimizu -- Executive Vice President - Sales &
Marketing
A. Allen Oakley -- Executive Vice President -
Manufacturing
Michael R. Harmon -- Executive Vice President and Chief
Financial Officer
Richard A. Grissinger -- Senior Vice President-Marketing
Richard L. Dennard -- Senior Vice President- Purchasing and
Logistics
Deborah G. Poole -- Vice President and Chief Information
Officer
Henry T. Pollock -- Vice President and Treasurer
John F. Sterling -- Vice President, General Counsel and
Secretary
Donald Mallo -- Vice President- Human Resources
Eric J. Slough -- Assistant Secretary
These individuals and entity serve as officers, resident
trustee and managing trustees of Pillowtex Management Services
Company and are presently expected to serve as officers,
resident trustee and managing trustees of Reorganized
Pillowtex Management Services Company on the Effective Date:
Managing Trustees:
Anthony T. Williams
John F. Sterling
Resident Trustee:
PNC Bank, Delaware
Officers:
Anthony T. Williams -- President and Chief Operating Officer
Michael R. Harmon -- Executive Vice President and Chief
Financial Officer
Scott E. Shimizu -- Executive Vice President - Sales &
Marketing
Richard L. Dennard -- Senior Vice President - Purchasing
John F. Sterling -- Vice President, General Counsel and
Secretary
Henry T. Pollock -- Vice President and Treasurer
Donald Malla -- Vice President - Human Resources
Eric J. Blough -- Assistant Secretary
These plans and agreements that will take effect on the
Effective Date:
A. List of Benefit Plans, Programs and Agreements To Be in
Effect on the Effective Date:
(a) Existing Benefit Plans, Programs and Agreements
401(k) Retirement Plans
Retiree Benefits
Health and Welfare Benefits
Executive Medical Expense Reimbursement Plan
Deferred Compensation
Supplemental Executive Retirement Plan
Key Employee Retention Plan
Employment Agreements with: Anthony T. Williams, Michael
R. Harmon, Scott E. Shimizu, A. Allen Oakley, Richard
Grissinger and certain other key employees
(b) New Benefit Plans, Programs and Agreements
Equity Incentive Plan
Employment/Severance Arrangements with Anthony T.
Williams, Michael R. Harmon, Scott E. Shimizu, A. Allen
Oakely
Director Compensation
B. Initial Grants Under Equity Incentive Plan
The initial grants of restricted stock and options under the
Equity Incentive Plan are presently expected to include
grants as follows:
No. of Shares of
No. of Shares New Common Stock
Recipient of Restricted Stock Underlying Option Grant
--------- ------------------- -----------------------
Anthony T. Williams 80,000 123,200
Scott E. Shimizu 60,000 90,000
Michael R. Harmon 60,000 90,000
A. Allen Oakley 60,000 90,000
The initial grants are also expected to include grants of
149,360 shares of restricted stock in the aggregate to certain
key employees and options to key employees exercisable to
purchase 224,040 shares of New Common Stock in the aggregate.
These grants will be made in accordance with the compensation
policies and procedures of New Pillowtex or Reorganized
Pillowtex, as appropriate. (Pillowtex Bankruptcy News, Issue No.
27; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PRIMUS CANADA: March 2002 Quarter EBITDA Climbs to C$15 Million
---------------------------------------------------------------
PRIMUS Telecommunications Canada Inc. (PRIMUS Canada), a wholly-
owned subsidiary of McLean, Virginia-based PRIMUS
Telecommunications Group, Incorporated (NASDAQ: PRTL), announced
results for the first quarter ended March 31, 2002. Due to the
increasing interest among Canadian businesses and consumers for
additional information on one of their country's largest
telecommunications carriers, this marks the first public
reporting of Primus Canada's quarterly financial results.
"We are very pleased with PRIMUS Canada's operating performance
in the first quarter of 2002, which represents our thirteenth
consecutive quarter of positive earnings before interest, taxes,
depreciation and amortization (EBITDA)," said Ted Chislett,
President and Chief Operating Officer of PRIMUS Canada. "In the
first quarter of 2002, PRIMUS Canada generated record EBITDA
of C$15 million and posted a record gross margin of 51%.
"These results validate the success of our business model. We
stand in stark contrast to many of our competitors who are
reporting shrinking margins and widening operating losses. Our
profitable results for the first quarter are particularly
remarkable during this challenging period for telecom
companies."
First Quarter Financial Results
PRIMUS Canada's net revenue in the first quarter of 2002 was
C$66.1 million. The mix of revenues by customer type in the
first quarter was approximately 70% residential and 30%
business.
As a percentage of net revenue, gross margin for the first
quarter of 2002 was a record 51%, which represents a record
C$33.5 million and compares to C$32.2 million in the prior
quarter and C$28.2 million for the first quarter of 2001. "The
record gross margin in absolute dollars and as a percentage of
net revenue is a result of network optimization and increasing
our on-net traffic volumes," said Mr. Chislett. "We have now
broken the 50% gross margin barrier, a significant challenge for
Canadian carriers, and our goal is to continue this
improvement."
Selling, general and administrative (SG&A) expenses for the
first quarter of 2002 were C$18.4 million, or 27.8% of net
revenue, compared to C$20.7 million for the fourth quarter of
2001 and C$24.3 million for the first quarter of 2001.
EBITDA for the first quarter of 2002 was a record C$15 million,
or 22.6% of net revenue, compared to C$11.5 million in the prior
quarter and C$3.8 million in the first quarter of 2001. "Our
efforts to control SG&A by harnessing the benefits of scale and
maximizing network efficiencies have enabled us to produce
industry leading EBITDA margin percentages," said Bob Nice, Vice
President Finance of PRIMUS Canada.
Financial Results Guidance
PRIMUS Canada's goals for the full year 2002 are to generate net
revenues in the range of C$265 million to C$280million, and
EBITDA in the range of C$58 million to C$62 million. "Given our
results to date and our expectations and targets for the balance
of the year, we forecast that PRIMUS Canada will be net income
and cash flow positive for the full year of 2002," said Mr.
Nice.
PRIMUS Telecommunications Canada Inc. is the largest alternative
communications carrier in Canada with approximately 800,000
retail customers. The Company offers facilities-based voice,
data, e-commerce, Web hosting and Internet services. As a
leading Internet Service Provider in Canada, PRIMUS Canada has
approximately 60,000 Internet subscribers served by a national
network of Internet points-of-presence (POPs) for dedicated and
dial-up access. PRIMUS Canada also offers local services to
businesses, bundling them with its long distance and Internet
services. The Company has a fully redundant and diverse Sonet
network across Canada, extending from Quebec City to Victoria.
PRIMUS Canada's national network consists of 2 Nortel DMS 500
switches with international connectivity through its parent
company's global network, and ATM and IP nodes at major cities
across the country. These network elements provide an integrated
and converged backbone for all of PRIMUS Canada's voice, data,
Internet and private line services. PRIMUS Canada is a wholly-
owned subsidiary of McLean, Virginia-based PRIMUS
Telecommunications Group, Incorporated (NASDAQ: PRTL).
PRIMUS Canada news and information are available at the
Company's Web site at http://www.primustel.ca
* * *
As previously reported in March, the senior unsecured debt
rating on international long-distance carrier Primus
Telecommunications Group Inc., was lowered on March 6, 2002 to
'CCC+'. The other ratings on company were affirmed at that time,
and all ratings were removed from CreditWatch, where they had
been placed on May 8, 2001, due to heightened liquidity
concerns.
The downgrade of the unsecured debt did not reflect a diminution
of the company's overall credit quality. Rather, it was based on
the fact that additional funding for the company is expected to
be largely secured in nature, which would cause the ratio of
priority obligations relative to a reasonable total asset value
to exceed 30%. Under Standard & Poor's criteria, this metric is
the threshold for rating debt two notches below the corporate
credit rating.
The affirmation of the company's corporate credit rating was
based on the fact that near-term concerns about Primus's
liquidity have been alleviated by its opportunistic buyback of a
portion of its debt, the equity conversion of some of its
subordinated convertible debt, and cost containment efforts.
Largely as a result of these factors, the company is most likely
funded through 2002.
Primus Telecommunications Group's 12.75% bonds due 2009 (PRTL4),
says DebtTraders, are quoted at a price of 44. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=PRTL4for
real-time bond pricing.
PRINTING ARTS: Has Until June 27 to Decide on Unexpired Leases
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware gives
Printing Arts America, Inc., an extension of its lease decision
period. The Court gives the Debtor until June 27, 2002 to elect
whether to assume, assume and assign, or reject unexpired
nonresidential real property leases.
Printing Arts America, Inc. filed for chapter 11 protection on
November 1, 2001 in the U.S. Bankruptcy Court for the District
of Delaware. Teresa K.D. Currier, Esq. and William H. Schorling,
Esq. at Klett Rooney Lieber & Schorling represent the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed estimated assets and
debts of over $100 million.
PRINTWARE INC: Board Approves Initial Liquidating Distribution
--------------------------------------------------------------
The Board of Directors of Printware, Inc. (previously Nasdaq-
NNM: PRTW) has authorized an initial partial liquidation payment
of $2.00 cash per share to its shareholders of record on April
16, 2002. This distribution is being made pursuant to the Plan
of Complete and Voluntary Dissolution and Liquidation of
Printware, Inc. approved by shareholders on April 16, 2002.
Payment should occur on or about June 3, 2002.
Since the date the liquidation plan was approved, other than for
its securities holdings in Select Comfort Corporation,
Printware, Inc. has converted most of its non-cash assets to
cash, including its 10% equity stake in Printware, LLC as well
as its $750,000 promissory note receivable.
With respect to its holdings of Select Comfort Corporation
securities, Printware is continuing to evaluate its options.
Also, as of now, substantially all known liabilities of the
Company have been settled. Furthermore, in accordance with
Minnesota statutes, the former creditors of Printware, Inc. have
been notified of the Company's pending liquidation and must
submit claims, if any, to Printware, Inc. on or before July 23,
2002.
Based on current information, Printware anticipates making final
liquidating distributions sometime prior to end of the year
pending resolution of the Select Comfort securities and the
settlement of any outstanding creditor or tax related
liabilities.
It is important to note that this announcement relates only to
Printware, Inc. and in no way affects the operations or status
of Printware, LLC, which is the privately held company that
acquired and is continuing to operate the Printware branded
computer-to-plate operating business.
PROVANT INC: March 31 Working Capital Deficit Tops $17 Million
--------------------------------------------------------------
Provant, Inc. (NASDAQ: POVT), a leading provider of performance
improvement training services and products, announced financial
results for the fiscal 2002 third quarter and nine months ended
March 31, 2002.
Third Quarter
Revenues for the third quarter ended March 31, 2002 were $35.8
million compared to revenues of $50.8 million for the third
quarter of fiscal year 2001. Loss from operations before
goodwill amortization for the quarter was $2.6 million compared
to $5.1 million of income from operations before goodwill
amortization for the third quarter of fiscal year 2001. Earnings
before interest, taxes, depreciation and amortization for the
current quarter were $0.2 million compared to $6.4 million in
the prior year period.
Net loss was $2.4 million for the three months ended March 31,
2002 compared to income of $0.7 million for the three months
ended March 31, 2001.
At March 31, 2002, Provant's total current liabilities exceeded
its total current assets by close to $17 million.
Curt Uehlein, Provant's President and CEO, said, "Our results
this quarter reflect the impact of the slow economy on our
business. Specifically, the telecom industry is suffering a
general weakness and our business experienced a weaker quarter
than originally anticipated as a major telecom customer deferred
a large project. Additionally, in our retail business, we saw a
significant slowdown in the quarter and a major client filed for
bankruptcy. We continue to implement expense controls in these
businesses and others as needed. In fact, our intense focus on
expense control during these difficult economic times has helped
Provant generate positive cash flow from operations for the
quarter and remain on track to be cash flow positive from
operations for the year.
"The Company continues to expect Fiscal 2002 revenues of $155 to
$165 million. Still delivering strong results during the quarter
was our Government Group, which now accounts for a greater part
of our overall revenue."
Nine Months
Revenues for the nine months ended March 31, 2002 were $120.6
million compared to revenues of $160.7 million for the nine
months ended March 31, 2001. Income from operations before
goodwill amortization for the nine months was $0.8 million
compared to $21.4 million of income from operations before
goodwill amortization for the nine months ended March 31, 2001.
Earnings before interest, taxes, extraordinary item,
depreciation and amortization for the current nine months were
$6.8 million compared to $25.0 million for the prior year
period.
Net loss after the second quarter extraordinary item was $16.2
million for the nine months ended March 31, 2002. Net loss
before the extraordinary loss was $1.6 million for the nine
months ended March 31, 2002 compared to income of $6.2 million
for the nine months ended March 31, 2001.
As a leading provider of performance improvement training
services and products, Provant helps its clients maximize their
effectiveness and profitability by improving the performance of
their people. With over 1,500 corporate and government clients,
the Company offers blended solutions combining web-based and
instructor-led offerings that produce measurable results by
strengthening the performance and productivity of both
individual employees and organizations as a whole.
More information is available on the World Wide Web at
http://www.provant.com
PSINET INC: Computer Associates Demands Prompt License Decision
---------------------------------------------------------------
Computer Associates International, Inc. (CA) and PSINet are
parties to agreements, entered pre-petition, pursuant to which
PSINet use Softwares of CA under license and receives consulting
services of CA.
CA asks the Court, pursuant to Secs. 365(d)(2) and 503(b) of the
Bankruptcy Code and Bankruptcy Rules 6006(b) and 9014, to compel
the Debtors to assume or reject the subject executory licenses
and contracts immediately, and to pay CA $303,169.55 as an
administrative expense.
CA complains that PSINet owes it $1,066,357.01 pursuant to the
CA Agreements, of which $763,187.46 represent amounts owed prior
to the Petition Date.
In particular, tells the Court that pursuant to the terms of the
Unicenter License and Platinum License, PSINet was authorized to
use the Software at its Herndon, Virginia facility, the assets
from which are presumably included in the sale of the Debtors'
U.S. businesses to PN Acquisition Corporation (PNAC), but the CA
Agreements are not listed on the schedules of contracts that the
Debtors intend to assume and assign to PNAC. Nor are they
included among the schedules of excluded assets or rejected
contracts. The Debtors should not be permitted to transfer the
Software or PSINet's rights under the CA Agreements without, at
a minimum, affording CA the protections of Sec. 365 of the
Bankruptcy Code, CA asserts.
CA also argues that the debtors should be ordered to assume or
reject the CA Agreements because the Debtors have had nearly a
year to determine their continuing need for the CA Agreements,
and CA has been and shall be further harmed by the delay in
making this determination, as PSINet continues to enjoy the
benefit of the use of CA's software without having to abide by
the burdens imposed upon it by the CA Agreements.
In total, CA asserts a Chapter 11 administrative claim in the
amount of $303,169.55 representing payments due under the
Unicenter License for periods after the petition date.
The subject agreements are:
-- a Licensing Agreement (the Unicenter License) for the use of
CA's Unicenter TNG software, and a related Education
Services Agreement (the Service Agreement).
-- a Statement of Work for Unicenter TNG Web Server Management
Services.
-- two agreements, each entitled Attachment to Professional
Services Agreement (the Consulting Agreements), pursuant to
which CA agreed to perform consulting services for PSINet.
-- a Product Schedule to Master License Agreement (the Platinum
License) entered by CA's predecessor-in-interest, Platinum
Technologies, Inc., pursuant to which CA is the licensor of
certain software products (the Platinum Software). (PSINet
Bankruptcy News, Issue No. 19; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
RELIANCE: Wants Plan Filing Exclusivity Stretched to August 6
-------------------------------------------------------------
For the third time, Reliance Group Holdings, Inc. asks the Court
for an extension of its exclusive periods.
Steven R. Gross, Esq., at Debevoise & Plimpton, advises tells
Judge Gonzalez that, on March 13, 2002, the Liquidator, RGH and
the Committees agreed to a temporary standstill of all
litigation on the Constructive Trust Action and the Bar Date
Objection. The standstill is scheduled to expire at 9:00 a.m.
on May 24, 2002, or the first business day after the date on
which the U.S. District Court for the Eastern District of
Pennsylvania hears argument of the Emergency Motion by RGH for a
Stay pending Appeal, whichever is earlier.
Mr. Gross tells Judge Gonzalez that because of the on-going
disputes with the Pennsylvania Insurance Department, and the
time and resources spent responding to the Commissioner's
objections and motions, the Debtors and the Committees have had
little opportunity to engage in meaningful negotiations on the
Debtors' restructuring. The standstill agreement has helped the
parties engage in substantive negotiations, but additional time
is needed.
Mr. Gross informs the Court that any plan will have to address
substantial priority claims for prepetition taxes submitted by
the Internal Revenue Service and other taxing authorities. The
IRS has filed a proof of claim for $433,600,000. Since this is
far in excess of the Debtors' current assets, it would not be
productive to propose a plan without first resolving the
validity of the IRS' Claim. RGH is engaged in meaningful
negotiations with the IRS and, Mr. Gross believes, the parties
have reached agreement on many of the IRS' claims. Mr. Gross
predicts that the remaining issues and amounts in dispute may be
resolved expeditiously.
Reliance asks that the exclusive period during which to propose
and file a plan of reorganization be extended until August 6,
2002 and that the Debtors' exclusive solicitation period run
through October 7, 2002. The request is made without prejudice
to Reliance's right to seek further extensions.
The Debtors assure Judge Gonzalez that an extension will not
prejudice creditors. Since the petition date, RGH has made
minimal expenditures and has closely monitored administrative
expenses in an effort preserve the estate. The Debtors offer
that the majority of professional expenses accrued to date have
been in response to litigation brought by the Pennsylvania
Insurance Department. Termination of the exclusive periods, on
the other hand, would surely harm the Debtors' estates.
(Reliance Bankruptcy News, Issue No. 23; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
SMTC CORP: Posts Improved Operating Results March 2002 Quarter
--------------------------------------------------------------
SMTC Corporation (Nasdaq: SMTX) (TSE: SMX), a global provider of
electronics manufacturing services to the technology industry,
today reported a first quarter loss per share, before
discontinued operations, of $0.09 compared to a $0.66 loss per
share, before discontinued operations, for the first quarter of
2001. On an adjusted basis, the net loss per share(1) is $0.09
for the first quarter 2002 compared to a loss of $0.07 per
share(1) for the same period last year. This is an improvement
over analyst expectations of a $0.16 per share(1) loss on an
adjusted basis for the first quarter of 2002. The financial
results represent significant improvement over the fourth
quarter 2001 adjusted net loss of $0.17 per share(1) (which
excluded restructuring and other charges). The Company remains
focused on continuous improvements in productivity and operating
margins.
Revenues for the first quarter increased to $139 million, up
10.3 percent from $126 million in the fourth quarter 2001,
reflecting organic growth realized during the first quarter.
Revenues were down from $198 million for the first quarter of
2001 due to the general decline in the technology market. Gross
profit for the first quarter 2002 was $6.7 million versus $2.2
million for the same period last year, which included $6.9
million of restructuring charges. Gross profit margin improved
to 4.9 percent in the first quarter of 2002 versus 1.1 percent
for the same period last year, and a loss of 3.9 percent in the
fourth quarter 2001, which included $8.0 million of
restructuring and other charges, as SMTC continued to realize
gains from cost reductions in response to the end market
slowdown.
The operating loss for the first quarter 2002 was $0.8 million
compared to an operating loss of $25.2 million during the same
period last year. Net loss before discontinued operations for
the first quarter improved more than 86 percent to $2.5 million
versus $18.8 million for the same period in 2001, which included
$22.5 million in restructuring and other charges. EBITDA,
before discontinued operations, for the first quarter of 2002
was $2.7 million.
Loss from discontinued operations of $10.2 million for the
quarter included a charge of $9.7 million. The charge was
associated with closing the company's facility in Cork, Ireland
and placing the subsidiary, which operates that facility, in
voluntary liquidation. SMTC will continue to conduct European
operations through its Donegal, Ireland facility, which is a
separately owned subsidiary.
"We have achieved significant improvements in our operations
since we first responded to the challenging market conditions of
2001," said Paul Walker, President and CEO of SMTC. "We have
been successful to date in reigning in costs by operating under
a realigned capital structure, while continuing to look for
strategic opportunities to reduce expenditures and improve
productivity levels. At the same time, we continued our
aggressive business development initiatives and secured several
new customer wins, strengthening our prospects for revenue
growth and share gains as the marketplace improves."
Working Capital Improvements
"The Company's focus on improving operating efficiencies and
cash flow resulted in further improvements in the use of working
capital. Though the Company will remain committed to reducing
its use of working capital, it will do so in partnership with
its customers and suppliers," said Frank Burke, Chief Financial
Officer of SMTC, "and we remain committed to continuing to
strengthen our balance sheet."
2002 Outlook
SMTC remains cautious about the current economic climate;
however given the Company's focus on improved plant utilization
and expense controls, the outlook for the second quarter is for
improved revenue and earnings compare to the first quarter of
2002, continuing the trends in the first quarter versus the
fourth quarter last year.
SMTC Corporation is a global provider of advanced electronic
manufacturing services to the technology industry. The Company's
electronics manufacturing and technology centers are located in
Appleton, Wisconsin, Austin, Texas, Boston, Massachusetts,
Charlotte, North Carolina, San Jose, California, Toronto,
Canada, Donegal, Ireland and Chihuahua, Mexico. SMTC offers
technology companies and electronics OEMs a full range of value-
added services including product design, procurement,
prototyping, printed circuit assembly, advanced cable and
harness interconnect, high precision enclosures, system
integration and test, comprehensive supply chain management,
packaging, global distribution and after-sales support. SMTC
supports the needs of a growing, diversified OEM customer base
primarily within the networking, communications and computing
markets. SMTC is a public company incorporated in Delaware with
its shares traded on the Nasdaq National Market System under the
symbol SMTX and on The Toronto Stock Exchange under the symbol
SMX. Visit SMTC's Web site, http://www.smtc.com,for more
information about the Company.
As reported in the November 9, 2001 edition of Troubled Company
Reporter, SMTC has received a proposed term sheet from its bank
group, under which the banks would:
- waive the Company's failure to comply with certain
EBITDA-based covenants at the end of the third quarter,
and
- revise the covenants that would apply for the next 12
months to correspond to the Company's current business
plan.
SAMSONITE CORPORATION: Fiscal 2002 Net Loss Tops $33.6 Million
--------------------------------------------------------------
Samsonite Corporation's fiscal year 2002 compared to fiscal year
2001 shows consolidated net sales decreased from $783.9 million
in fiscal 2001 to $736.3 million in fiscal 2002, a decline of
$47.6 million, or 6.1%, due to a significant decline in sales
during the final five months of the fiscal year. Sales during
the period August 31, 2001 through January 31, 2002 decreased
$53.1 million from the same period in the prior year, a decline
of 16.3%. In addition, fiscal 2002 sales were adversely affected
by the decline in the value of the euro compared to the U.S.
dollar in fiscal 2001. Without the effect of the exchange rate
difference, fiscal 2002 sales would have declined by $38.0
million, or approximately 4.8%.
On a U.S. dollar basis, sales from European operations declined
from $313.4 million in fiscal 2001 to $299.1 million in fiscal
2002, a decline of $14.3 million, or 4.6%. Expressed in the
local European currency (euros), fiscal 2002 sales declined by
1.5%, or the U.S. constant dollar equivalent of $4.6 million,
from fiscal 2001. Local currency sales of softside products
declined approximately 1% from the prior year while hardside
product sales declined approximately 9%. Local currency sales of
Samsonite black label products (clothing, footwear and
accessories) declined approximately 2% to $23.9 million.
Partially offsetting these declines was a 72% increase in local
currency sales from casual bag products and a 52% increase in
sales from expanding European retail operations. The decline in
European sales volumes is due primarily to the effect of the
September 11 events. Sales volumes in the four month period
immediately following September 11 declined $11.1 million, or
10.6%, from the same period in the prior year. Sales volumes in
Europe continued to be depressed through the end of fiscal 2002
but have slowly begun to recover since fiscal 2002 year end.
Sales from the Americas operations declined from $400.1 million
in fiscal 2001 to $353.8 million in fiscal 2002, a decline of
$46.3 million, or 11.6%. The decline was due to a decline in
U.S. Wholesale sales of $24.1 million, a decline in U.S. Retail
sales of $19.5 million and a decline in Other Americas sales of
$2.7 million. U.S. Wholesale sales declined from $210.3 million
in the prior year to $186.2 million in fiscal 2002, a decline of
11.5%. The decline in U.S. Wholesale sales is due primarily to
the impact of the September 11 events on travel, tourism and
consumer spending in the U.S., lower sales to the traditional
channel and the loss of $8.6 million in sales to a single
customer in the catalog sales distribution channel which
discontinued its luggage category. During the five month period
ended January 31, 2002, U.S. Wholesale sales volume declined
$26.1 million, or 30.6% compared to the same period in the prior
year. These declines were partially offset by higher sales to
the warehouse club, mass merchant and office superstore
distribution channels. Sales in the U.S. Retail division
declined from $131.3 million in the prior year to $111.8 million
in fiscal 2002. Comparable store sales in the U.S. Retail
division declined by 11.5% from the same period in the prior
year. The weakness in the outlet store distribution channel
prior to September 11, 2001 was exacerbated by the effects of
the September 11 events. During the period immediately following
the September 11 events, U.S. Retail comparable store sales
declined approximately 37% compared to the prior year. Although
sales have begun to recover, they continue to be depressed
compared to the period preceding September 11 and the prior
year. In accordance with the Company's plan to reduce the number
of retail stores, the Company closed a net 15 stores compared to
the prior year which lowered sales by $8.7 million. The decline
in sales of Other Americas from $58.5 million in the prior year
to $55.9 million in fiscal 2002, or 4.4%, is due to lower sales
from all of the Other Americas countries. The steepest decline
in sales came from Argentina due to the political and economic
difficulties present in that country.
Sales from Asian operations increased from $53.1 million in
fiscal 2001 to $62.6 million in fiscal 2002, an increase of $9.5
million, or 17.9%. Sales from Asian operations have benefitted
from economic recovery in some parts of this region, the
Company's strategy of building market share during the previous
economic crisis and building the prestige of the Samsonite brand
name in this region. The most significant increase in revenues
from Asian operations was in Korea with a $4.3 million, or
25.2%, increase in revenues from the prior year. In June 2000,
the Company acquired from its joint venture partner, its 50%
interest in Chia Tai Samsonite (H.K.) Ltd, a joint venture
formed to manufacture and distribute luggage in China. Prior to
the acquisition, the Company owned 50% of the joint venture and
accounted for it under the equity method. Since the acquisition,
the financial statements of Chia Tai have been consolidated with
the Company's. Revenues of Chia Tai totaling $9.4 million and
$3.5 million are included in sales from Asian operations for
fiscal 2002 and 2001, respectively. Despite the increase in
revenues from Asian operations compared to the prior year, sales
from the Asian operations were also unfavorably impacted by the
September 11 events compared to pre-September 11 sales growth
levels.
Revenues from U.S. licensing increased $3.2 million, or
approximately 32.9%, compared to revenues in the prior year.
Samsonite and American Tourister label licensing revenues
increased $2.6 million due to new license agreements signed in
fiscal 2002 and strong sales of licensed Samsonite business
cases. Global Licensing revenues increased $0.6 million due to
the sale of McGregor trademark registrations, primarily in
China.
Consolidated gross profit for fiscal 2002 of $292.7 million
declined from fiscal 2001 by $31.5 million. Gross profit as a
percentage of sales ("gross profit margin") declined by 1.6
percentage points, from 41.4% in fiscal 2001 to 39.8% in fiscal
2002.
Samsonite had a net loss in fiscal 2002 of $33.6 million
compared to a net loss in fiscal 2001 of $6.8 million. The $26.8
million increase in the net loss from the prior year is the
result of the declines in operating income, interest income,
other income, net, and extraordinary gain, offset by declines in
interest expense, income tax expense and minority interest in
earnings of subsidiaries.
At January 31, 2002, Samsonite Corp. recorded a total
shareholders' equity deficit of about $124 million.
SIMON WORLDWIDE: PricewaterhouseCoopers Bows Out as Accountants
---------------------------------------------------------------
On April 17, 2002, PricewaterhouseCoopers LLP resigned as Simon
Worldwide, Inc.'s independent accountants as a result of a
lawsuit filed by the Company's subsidiary, Simon Marketing,
Inc., against PWC and two other accounting firms. On the same
date, PWC withdrew its audit report dated March 26, 2002
covering the Company's financial statements for the fiscal years
ending December 31, 2001 and December 31, 2000, claiming it
believed the lawsuit impaired its independence in connection
with the audit covered by the 2002 Report. Simon worldwide has
indicated that it does not believe that PWC's independence was
impaired in connection with the audit.
The decision of PWC to resign was not recommended or approved by
Simon's Board of Directors or the Audit Committee of the Board,
and neither the Board nor the Audit Committee of the Board has
discussed PWC's resignation and withdrawal of the 2002 Report
with PWC.
Simon Worldwide has commenced the process of retaining new
independent accountants, but that process is not yet complete.
* * *
On March 29, 2002, Simon filed a lawsuit against PWC and two
other accounting firms, citing the accountants' failure to
oversee, on behalf of Simon, various steps in the distribution
of high-value game pieces for certain McDonald's promotional
games. Simon claims that this failure allowed the
misappropriation of certain of these high-value game pieces by a
former Simon employee.
Simon Worldwide is a diversified marketing and promotion agency
with offices throughout North America, Europe and Asia. Through
its wholly owned subsidiary, Simon Marketing, Inc., the Company
provides promotional agency services and integrated marketing
solutions including loyalty marketing, strategic and calendar
planning, game design and execution, premium development and
production management. The Company was founded in 1976.
As previously reported, as a result of the alleged fraudulent
actions of a former employee of its main operating subsidiary,
Simon Marketing, the Company's two largest customers, McDonald's
and Philip Morris, representing approximately 88% of its sales
base, terminated their relationship with the Company in August
2001. As a result of the loss of these major customers, along
with associated legal matters described in the Company's
quarterly report for the third quarter 2001 on Form 10-Q, there
is substantial doubt about the Company's ability to continue as
a going concern. Results for the three and nine-month periods
ended September 30, 2001 included pre-tax charges of
approximately $48.8 million and $69.0 million, respectively,
relating principally to the write-down of goodwill attributable
to Simon Marketing.
SWAN TRANSPORTATION: Wants Delaware Court to Fix Claims Bar Date
----------------------------------------------------------------
Swan Transportation Company asks the U.S. Bankruptcy Court for
the District of Delaware to fix the time period within which
creditors must file proofs of claim against the estate or be
forever barred from asserting that claim. The Debtor proposes
that the deadline be set at 75 days after the Disclosure
Statement is approved in this case.
The Debtor tells the Court that the requested bar date is
designed to facilitate confirmation and implementation of the
Plan.
All proofs of claim must be received by the court-approved
Claims Agent on the applicable Bar Date by mail, by courier, by
overnight delivery, by first-class mail or in person to:
Lain, Faulkner Co., PC
Docketing Agent
400 North Saint Paul
Suite 600
Dallas, Texas
Swan Transportation Company filed for chapter 11 protection on
December 20, 2001. Tobey Marie Daluz, Esq., Kurt F. Gwynne, Esq.
at Reed Smith LLP and Samuel M. Stricklin, Esq. at Neligan,
Tarpley, Stricklin, Andrews & Folley, LLP represent the Debtor
in its restructuring efforts. When the Company filed for
protection from its creditors, it listed assets and debts of
over $100 million.
TANDYCRAFTS: Court Stretches Lease Decision Period to June 14
-------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware expands
Tandycrafts, Inc., and its debtor-affiliates' time period during
which to elect whether to assume, assume and assign, or reject
unexpired nonresidential real property leases. The Court gives
the Debtors until June 14, 2002 to make these decisions.
Tandycrafts, a leading manufacturer and marketer of picture
frames, mirrors and other wall decor products, filed for chapter
11 protection on May 15, 2001. Mark E. Felger, Esq., at Cozen
and O'Connor, represents the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed assets of $64,559,000 and debts of
$56,370,000.
TIME WARNER: Revenues Drop 3% to $169MM in First Quarter 2002
-------------------------------------------------------------
Time Warner Telecom Inc. (Nasdaq: TWTC), a leading provider of
metro and regional optical broadband networks and services to
business customers, announced its first quarter financial
results. Revenue for the quarter was $168.7 million, a 3%
decrease from the same period last year which included $4.6
million of non-recurring acquisition related revenue. EBITDA for
the quarter increased 14% to $38.6 million for 2002, compared to
$33.9 million for the same period last year. Capital
expenditures for the quarter were $36.9 million as compared to
$95.6 million for first quarter of 2001. These financial results
reflect Time Warner Telecom's ability to leverage its metro and
regional fiber networks to provide high-margin products and
services.
The pre-tax loss of $43.0 million for the quarter decreased from
$46.9 million in the same period in 2001, reflecting the
Company's improvement in EBITDA. The Company reported a net loss
of $43.1 million for the first quarter of 2002, as compared to
$(28.7) million for same period last year, which reflects a
reduction in income tax benefit in the current period.
"Time Warner Telecom continues to be a strong company operating
in a weak environment. While it was a mixed quarter in terms of
results, we believe we are making the right decisions in this
environment, as demonstrated by our EBITDA," said Larissa Herda,
Time Warner Telecom's Chairman, CEO and President. "I am pleased
with our ability to control costs and manage our liquidity while
advancing our strategy of serving carrier and end-user customers
with our metro and regional networks."
Operating Achievements
Gross margin for the first quarter was 57% versus 55% for the
same period in 2001. The gross margin reflects an improvement of
200 basis points from the same period last year and 125 basis
points from the previous quarter. The Company utilizes a fully
burdened gross margin, including network costs, long haul
capacity costs and personnel costs for customer care,
provisioning, network maintenance, technical field and network
operations.
EBITDA margin for the first quarter was 23% versus 20% for the
same period of the prior year. The EBITDA margin reflects an
improvement of 330 basis points from the same period last year
and 70 basis points from the previous quarter, excluding a one-
time charge in the prior quarter for the consolidation of
network operations.
During the first quarter, the consolidation of network
operations was substantially completed. This included relocation
of the acquired location in Vancouver, Washington to the central
operations in Denver, resulting in a reduction of over 200 job
positions over the last two quarters. Additionally, subsequent
to the end of the quarter the Company announced a workforce
realignment, resulting in elimination of an additional 140 job
positions.
In the first quarter, the Company implemented separate reporting
for data and internet revenue and intercarrier compensation. See
the attached tables for current and prior period details.
Revenue for the quarter of $168.7 million decreased 3% over the
same period last year. This decrease was primarily the result of
recognizing nonrecurring acquisition related revenue of $4.6
million in the first quarter of 2001 and the effects of the
decrease in intercarrier compensation in the current quarter.
For the quarter, dedicated transport services revenue of $94.8
million and switched services revenue of $36.7 million,
increased 2% over the same period last year. Data and internet
services revenue of $20.4 million increased 34% over the same
period last year.
Intercarrier compensation revenue, which includes reciprocal
compensation and switched access, was $16.8 million, reflecting
a decrease of 30% from the first quarter of 2001 and 22% from
the previous quarter. This downward trend reflects the impacts
of mandated rate reductions by the FCC and other regulatory
rulings, as well as negotiated customer contracts. The Company
expects intercarrier compensation to continue to diminish as a
percent of total revenue in the future, primarily as a result of
further rate reductions. As a result of a settlement of a
dispute regarding reciprocal compensation, the Company expects
to recognize approximately $14 million of deferred revenue in
the second quarter.
The overall economic environment continues to result in customer
disconnects and bankruptcies, representing a loss of
approximately $3.0 million of recurring monthly revenue for the
first quarter of 2002, which is an improvement from the $4.2
million in the previous quarter. The Company believes that the
improvement may be temporary and disconnects could return to
levels experienced in prior quarters. The Company reported that
approximately 4% of monthly recurring revenues were from
companies in bankruptcy as of the end of the quarter. Also, as
an indication of the difficult economic environment, the Company
experienced an increase in customer disputes, which offset the
lower disconnects. The Company's practice is to defer
recognition of disputed revenue until resolved.
Capital expenditures for the first quarter of 2002 were $36.9
million, reflecting the Company's controllable success-based
capital spending plan as well as its ability to redeploy network
capacity. The Company expects capital expenditures in 2002 to be
substantially lower than the $425 million spent in 2001.
"We continue to have a strong balance sheet," said David Rayner,
Time Warner Telecom's Senior Vice President and Chief Financial
Officer. "We anticipate no change to our funding status and our
cash position remains strong." As of March 31, 2002, the Company
had $315 million in cash and equivalents, $750 million in
undrawn financing and a ratio of long-term debt to equity of
approximately 1.2-to-1. EBITDA for the first quarter covered
interest expense by 1.5 times.
Summary
The Company experienced positive net growth of over 250 new end-
user customers, as well as strong growth in data and internet
revenues. "We are not yet seeing the impact of any improvement
in the economy," said Herda. "Given our large carrier customer
base, it is understandable that we are feeling the pressure that
is impacting their businesses. However, as we have demonstrated
through our EBITDA performance and capital expenditure
management in this and past quarters, we make the decisions
necessary to manage our operations and cash flow. Our focus on
driving new sales growth and deeper penetration in our existing
markets has not changed."
"We have a strong brand name, a quality customer base, a
dedicated team of people, and valuable fiber networks extending
all the way to the customers' premises. I am confident we have
the right strategy and financial fundamentals in place. Our goal
to grow long-term shareholder value remains clear," concluded
Herda.
Time Warner Telecom Inc., headquartered in Littleton, Colo.,
delivers "last-mile" broadband data, dedicated Internet access
and voice services for businesses in 44 U.S. metropolitan areas.
Time Warner Telecom Inc., one of the country's premier
competitive telecom carriers, delivers fast, powerful and
flexible facilities-based metro and regional optical networks to
large and medium customers. Please visit
http://www.twtelecom.comfor more information.
As reported in the March 8, 2002 edition of Troubled Company
Reporter, Standard and Poor's revised the outlook on competitive
local exchange carrier Time Warner Telecom Inc. to negative from
stable. S&P also affirmed the company's B+ credit rating. Total
debt outstanding for Littleton, Colorado-based TWT was $1.1
billion at December 31, 2001.
The outlook revision was based on the company's increased
business risk resulting from the impact the weakening domestic
economy has had on its business base. Many of TWT's carrier
customers have reduced their purchases as they have groomed and
resized their networks to control spending in the face of
weakening demand for telecom services. Moreover, certain
carriers and large enterprise customers have either filed for
bankruptcy or experienced other financial difficulties, causing
them to disconnect from TWT's network. Because of these factors,
prospects over the next few years are somewhat uncertain,
despite the company's ability to generate a relatively healthy
level of growth in revenues and operating cash flows in 2001.
TRADED CUSTODY: Fitch Rates 2002-4 Bond Fund Rating at BB+/V5
-------------------------------------------------------------
Fitch Ratings assigns a bond fund credit and volatility rating
of 'BB+/V5' to Traded Custody Receipts, series 2002-4 (TRACERS
2002-4).
Bond funds rated in the 'BB+' category meet speculative
standards with respect to the credit quality of the fund's
underlying assets. The weighted average default probability of
the fund's portfolio is consistent with the default probability
of a 'BB+'-rated fixed-income obligation.
Bond funds rated in the 'V5' category are considered to have
moderate to high market risk. Total returns may experience
variability across a broad range of market scenarios. These
funds typically exhibit risks beyond exposure to interest rates
and changing market conditions. Bond fund volatility ratings are
assigned on a scale of 'V1' (least volatile) through 'V10' (most
volatile). Volatility ratings reflect the relative sensitivity
of the fund's total return and market price to changes in
interest rates and other market conditions.
TRACERS 2002-4 are custody receipts representing direct
ownership in a static, unlevered portfolio of 30 investment-
grade and below investment-grade corporate bonds. It is
anticipated that the last distribution on the TRACERS 2002-4
will be made on or about May 2, 2012. Purchasers of TRACERS
2002-4 will generally have all the rights and privileges of
owners of the underlying securities. Purchasers must withdraw
any underlying bond that has defaulted, their rating suspended
or withdrawn, their rating downgraded below 'B--', their rating
upgraded above 'A-', and certain other events, either in the
form of cash proceeds from liquidation or the transfer of their
pro rata share of the underlying bond.
As TRACERS 2002-4 approaches its maturity date, it is expected
that its market risk exposures will be reduced. Therefore, the
volatility rating assigned to TRACERS 2002-4 is expected to be
lower over time.
TRACERS 2002-4 will be held in trust by The Bank of New York, as
custodian, while Morgan Stanley & Co., Inc. will serve as
depositor, initial purchaser, and administrative agent.
TRICON GLOBAL: Wooing Lenders to Replace Facility with New Deal
---------------------------------------------------------------
Tricon Global Restaurants is negotiating with its existing
lenders to replace its $1.75 billion revolving credit facility
set to expire on October 2, 2002 with a $1.50 billion credit
agreement due 2005, says F&D Reports May 6, 2002 Edition.
According to the report, the company anticipates that interest
rate on the new facility based on Libor, "plus a variable margin
factor."
In its first quarter ended March 23 results, the company has
$1.6 billion borrowing availability under the existing revolver
net of outstanding letters of credit of $200.0 million.
USI INC: Maryland Court Confirms Chapter 11 Reorganization Plan
---------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Maryland confirmed
USi's Reorganization Plan, and the Company anticipates exit from
Chapter 11 court protection during the week of May 20. USi's
creditors voted in overwhelming support of the Plan.
Confirmation of the Reorganization Plan satisfies the primary
condition required for closing of the previously announced $81
million initial investment in USi by an affiliate of Bain
Capital. It is anticipated that this investment will close
during the week of May 20, providing the cash needed to fully
fund the business plan.
"Over the last 18 months, USi has made significant progress in
improving and strengthening the operational side of the
business, being the first in the industry to become EBITDA
positive, while delivering the highest service levels in our
history," said Andrew Stern, CEO, USi. "With the balance sheet
restructuring complete and a fully funded business plan
imminent, USi will be able to grow the business and execute
against the dramatic potential of the market we serve as the
industry leader."
USi, Inc., the leading Application Service Provider, delivers
enterprise and e-commerce software as a service. The company's
portfolio of service offerings delivers the functionality of
leading software from Ariba, BroadVision, Lawson, Microsoft,
Oracle, PeopleSoft, and Siebel as a continuously supported,
flat-rate monthly service via an advanced, secure global data
center network. Additionally, USi's AppHost managed application
hosting services provide the most advanced solutions for
enterprises, software companies, marketplaces, public sector
clients and system integrators that are seeking a better way to
deliver solutions over the Internet to their customers and end
users. For more information, visit http://www.usi.com
VERADO HOLDINGS: Gets Nod to Employ Richards Layton as Counsel
--------------------------------------------------------------
Verado Holdings, Inc. and its debtor-affiliates secured approval
from the U.S. Bankruptcy Court for the District of Delaware to
retain and employ Richards, Layton & Finger, PA as their co-
counsel in the company's on-going chapter 11 cases.
The Debtors assure the Court that Richards Layton has discussed
a division of responsibilities with Weil, Gotshal & Manges, LLP
to avoid duplication of effort in these cases.
Richards Layton is engaged under a general retainer and is
required to:
a) advise the Debtors of their rights, powers and duties as
debtors and debtors in possession;
b) take all necessary action to protect and preserve the
Debtors' estates, including the prosecution of actions
on the Debtors behalf, the defense of any actions
commenced against the Debtors' behalf the defense of any
actions commenced against the Debtors, the negotiation
of disputes in which the Debtors are involved, and the
preparation of obligations to claims filed against the
Debtors' estates;
c) prepare on behalf of the Debtors all necessary motions,
application, answers, orders, reports, and papers in
connection with the administration of the Debtors'
estates;
d) negotiate and prepare on behalf of the Debtors a plan of
reorganization and all related documents; and
e) perform all other necessary legal services in connection
with the Debtors' chapter 11 cases.
Before the Petition Date, the Debtors paid Richards Layton a
retainer of $100,000 in connection with and in contemplation of
the Debtors chapter 11 filing.
According to an affidavit filed by Mark D. Collins, Esq., the
principal professionals and paraprofessionals designated to
represent the debtors and their current standard hourly rates
are:
a) Mark D. Collins $385 per hour
b) Michael J. Merchant $180 per hour
c) Etta R. Wolfe $140 per hour
d) Ann Jerominski $115 per hour
Verado Holdings, Inc., through its subsidiaries, provides
outsourced services as well as professional services, data
center, and application hosting solutions for various
businesses. The Company filed for chapter 11 protection on
February 15, 2002. When the Debtors filed for protection from
its creditors, it listed $61,800,000 in assets and $355,400,000
in liabilities.
VIATEL INC: Court Stretches Lease Decision Period to June 30
------------------------------------------------------------
Viatel Inc. and its debtor-affiliates secured from the U.S.
Bankruptcy Court for the District of Delaware an extension of
their lease decision period. The Court gives the Debtors until
the earlier of the confirmation of the company's chapter 11
plan, or on June 30, 2002, to elect whether to assume, assume
and assign, or reject unexpired nonresidential real property
leases.
Viatel, through its domestic and foreign subsidiaries, is the
builder, owner and operator of a state-of-the-art, pan-European,
trans-Atlantic and metropolitan fiber-optic network and a
provider of advanced telecommunications products and services to
corporations, carriers, internet service providers, and
applications service providers in Europe and North America. The
Company filed for chapter 11 protection on May 2, 2001. Gregg M.
Galardi, Esq. and D. J. Baker, Esq. at Skadden, Arps, Slate,
Meagher & Flom LLP represent the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed $2,124,000,000 in assets and $2,683,000,000
in debts.
WARNACO GROUP: Seeks Court's Nod to Conduct Store Closing Sales
---------------------------------------------------------------
The Warnaco Group, Inc., and its debtor-affiliates seek the
Court authority to sell the inventory and fixtures and to
conduct store closing sales at Warner's, Olga and Warnaco outlet
stores:
Store No. Location Lessor
--------- ------------------------ -------------------
012 6415 Labeaux Ave., NE Albertville Factory
Albertville, MN Outlets, LLC
015 5000 Willows Road, Viejas Spring Village
Alpine, CA Outlet Center
017 6000 Bandini Road, Debtor-owned store
Commerce, CA
019 250 Prime Outlets Blvd. The Prime Outlets at
Barceloneta, PR Puerto Rico
032 8825 Market Place Dr., The Prime Outlets
Brich Run, MI
064 368 Fashion Way, The Prime Outlets
Burlington, WA
180 10801 Corkscrew Road Mimomar Properties
Estero, FL
196 13000 Folsom Bldv., Natoma Station
Folsom, CA Associates
206 2601 S. McKenzie St., Charter Oak Partners
Foley, AL
212 46 Maine Street, John & Susan Saunders
Freeport, ME
326 5000 Katy Mills Circle, Katy Mills Limited
Katy, TX Partnership
366 7400 S. Las Vegas Blvd., Belz Factory Outlet
Las Vegas, NV World (Mall II)
431 815 Lighthouse Place Chelsea GCA Realty
Michigan City, IN Partnership, LP
481 4628 Factory Stores Blvd., Charter Oak Partners
Myrthle Beach, SC
492 44 Settlers Green, Settler's Green OVP
North Conway, NH
502 8200 Vineland Ave., Chelsea GCA Realty
Orlando, FL Partnership, LP
532 2200 Petaluma Blvd. Chelsea GCA Realty
Petaluma, CA Partnership, LP
560 1770 West Main St., Tanger Properties
Riverhead, NY Limited Partnership
570 13118 US Highway 61 CFS Development, LLC
Robnsonville, MS
581 2700 State Road, New Plan Realty Trust
St. Augustine, FL
635 1645 Parkway, Tanger Properties
Sevierville, TN Limited Partnership
638 227 M Blue River Parkway Silverthorne Factory
Silverthorne, CO Stores, LLC
680 5000 Arizona Mills Circle Katy Mills Limited
Tempe, AZ Partnership
690 2839 Pacific Coast Hway Seely Company
Torrance, CA
810 1001 Arney Road, Craig Realty
Woodburn, OR
The Debtors also ask the Court to approve the sale without
complying with any applicable state and local statues, rules or
ordinances governing store closing, liquidation or "going-out-
of-business" sales, and notwithstanding any provisions in the
leases of the Stores restricting the Debtors' ability to conduct
such sales.
Pursuant to Section 363(f) of the Bankruptcy Code, the Debtors
further request Judge Bohanon to declare the sale to be free and
clear of any liens.
J. Ronald Trost, Esq., at Sidley Austin Brown & Wood LLP, in New
York assures the Court that if any party asserts a security
interest in the assets to be sold in the Store Closing Sale, the
Debtors will obtain their consent to such sale free and clear of
liens, claims and encumbrances.
Mr. Trost contends that the store closing sale is supported by
Section 363(b) of the Bankruptcy Code because:
-- the stores are unprofitable;
-- the closing sale is expected to generate approximately
$8,000,000 to $14,000,000 in cash flow from the liquidation
of the inventory and sale of any store equipment and
fixtures; and
-- the store closing sale will eliminate a future drain on
critical resources of the Debtors.
The Debtors were informed that conducting the sale in June 2002
will give the highest return to the Sale. Accordingly, the
Debtors propose to start the Store Closing Sale by June 3, 2002.
To meet the proposed timetable, Mr. Trost informs Judge Bohanon
that the Debtors sent the Stores information to four known
Liquidators on April 24, 2002. Along with the request for bid,
the Debtors also provided to the Liquidators the proposed Term
Sheet for Agency Agreement.
Salient terms of the Term Sheet are:
(1) Option A:
(a) As a guaranty of the Agent's performance, the Debtors
will receive from the Agent the "Guarantee Amount" equal
to the sum of ____% of the aggregate Cost Value of
Merchandise. Cost of Value means the standard cost of
each item of Merchandise, inclusive of freight in and
other expenses, as recorded in the Debtors' inventory
records as of the Sale Commencement Date, except for
defective merchandise;
(b) The Guaranteed Amount will be calculated based upon the
final certified inventory report of the Inventory Taking;
(c) The agent will receive all Proceeds after payment of:
-- expenses,
-- the Guaranteed Amount, and
-- any other amounts payable from Proceeds to the
Debtors;
(d) Proceeds means total sales of Merchandise plus insurance
proceeds, if any, minus:
-- sales taxes,
-- credit card and bankcard fees and chargebacks and
-- returns, allowances and credits;
(e) The Agent may use the Debtors' credit card facilities;
all credit card Proceeds will be held by the Debtors for
the Agent.
(2) Option B:
(a) As a guaranty of the Agent's performance, the Debtors
will receive from the Agent the Guaranteed Amount equal
to the sum of _____% of the Cost Value of Merchandise;
(b) The Guaranteed Amount will be calculated based upon the
final certified inventory report of the Inventory Taking;
(c) If the Proceeds from the Sale exceed the sum of the
Guaranteed Amount and Expenses, then the Agent will
retain as its base fee for conducting the Sale an amount
up to ____% of the Cost Value of the Merchandise. To the
extent that the Proceeds from the Sale exceed the sum of
the Guaranteed Amount, Expenses and the Agent's Fee, the
Agent and the Debtors will share equally the excess
proceeds;
(3) Expenses to be paid by the Agent:
The Agent will pay all store-level operating expenses at the
Store Closing Locations, including all expenses incurred in
conducting the Sale, including, without limitation:
(a) base hourly salary and overtime for actual days/hours
worked by store employees, together with holiday and
sick pay and any incentive and retention payments
under the Debtors' plans;
(b) Federal Insurance Contributions Act and
underemployment taxes;
(c) worker's compensation, 401(k), health care and
disability insurance for each employee;
(d) the full fees and costs of the Inventory Taking;
(e) Agent's supervision and travel expenses;
(f) advertising, promotional and signage expense;
(g) credit card and bank card fees, chargebacks and
discounts;
(h) cost of security at Stores;
(i) pro-rata portion of insurance attributable to the
Stores and the Merchandise during the Sale Term;
(j) costs of transfer of Merchandise from Store to Store
during the Sale Term;
(k) incentive and retention bonuses for store employees
and any severance payments related to Store employees;
(l) occupancy expenses incurred during the Sale Term;
(m) expenses arising from any service contracts relating
to the Stores;
(n) costs of any damage to Facilities, Fixtures and
Equipment the Stores incurred during the course
of the Sale;
(o) other costs deemed appropriate by Agent;
(p) cost of store supplies needed for Sale in excess of
supplies on hand; and
(q) all other customary store-operating expenses not set
forth herein. (Warnaco Bankruptcy News, Issue No. 24;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
WEINER'S STORES: Plan Confirmation Hearing Set for May 16, 2002
---------------------------------------------------------------
As previously reported, Weiner's Stores, Inc., on October 16,
2000, filed a voluntary petition for relief under Chapter 11 of
Title 11 of the United States Code in United States Bankruptcy
Court for the District of Delaware. Under Chapter 11, the
Company has operated its business as a debtor-in-possession,
subject to approval of the Court for certain actions. On June
25, 2001, the Board of Directors of the Company unanimously
approved the orderly wind down of its operations. On June 26,
2001, the Company commenced the process of winding down and
ceasing its operating activities, including termination of
employees, selling its assets and settling its obligations,
including leases. On July 13, 2001, the Court approved the
Company's agreement with a third party to conduct store closing
sales with respect to the Company's 94 retail outlets remaining
as of that date as part of the orderly wind down and cessation
of operations. The Company engaged the third party to acquire
the inventory and manage the inventory liquidation process in
these stores. As of August 4, 2001, all merchantable inventory
and substantially all fixtures and equipment in the Company's
store locations had been sold for approximately $27,475,000 in
cash to Ozer Group, LLC, a third party unaffiliated with the
Company. As part of the orderly wind down of operations, in July
2001, the Company, with Court approval, engaged a third party to
market substantially all of its unexpired leases. The Company
has completed the process of assuming and assigning or rejecting
the lease obligations in relation to all of its previous store
locations. In addition, on February 8, 2002, the Company sold
its corporate office/distribution facility and remaining
furniture and fixtures in Houston, Texas for approximately
$4,025,000 in cash to 6005 Westview Ltd., a third party
unaffiliated with the Company. The Company has completed the
sale or other disposition of all of its assets for the benefit
of the estate and the Company's creditors.
On March 22, 2002, the Court approved the proposed Joint
Liquidating Plan of Reorganization of the Company and the
Official Committee of Unsecured Creditors and the related
Disclosure Statement. As previously reported, after the orderly
wind down of the Company's operations, there will be no cash to
distribute to the Company's stockholders. As filed with the
Court, the Plan provides, among other things, that holders of
the common stock, par value $.01 per share, of the Company will
not, as such, receive or retain any interest, property or other
consideration or distribution of any nature under the Plan. The
Plan also provides that, on the effective date of the Plan, all
outstanding shares of common stock, and any option, warrant or
other agreement or right requiring the issuance of any common
stock, will be extinguished and the certificates and any other
documents representing such shares of common stock or other
securities or rights shall be deemed to have been canceled and
to be of no force or effect. The holders of equity interests are
deemed to have rejected the Plan. Holders of general unsecured
claims are required to submit ballots with respect to the Plan
not later than May 8, 2002. Holders of priority claims and
secured claims are deemed to have unimpaired claims and are not
entitled to vote on the Plan. The effectiveness of the Plan is
subject to, among other things, the confirmation of the Plan by
the Court and the entering on the Court's docket of the Court's
order confirming the Plan, and certain other conditions.
The Court has scheduled a hearing with respect to confirmation
of the proposed Plan on May 16, 2002, at 4:30 p.m. local time.
If approved by the requisite number of holders of general
unsecured claims and confirmed by the Court on such date, the
Plan is expected to become effective within thirty days
thereafter.
WILLIAMS COMMS: Pushing for Injunction Against Utility Companies
----------------------------------------------------------------
Williams Communications Group, Inc., and its debtor-affiliates
ask the Court to prohibit Utility Providers from altering,
refusing, or discontinuing utility services to, or
discriminating against, the Debtors solely because of the
commencement of the Debtors' Chapter 11 cases or their
nonpayment of amounts owed for services rendered before the
Petition Date. In addition, the proposed Utility Order:
A. determines that the Utility Providers are deemed to have been
furnished with adequate assurance of payment for future
utility services during the pendency of the Debtors' Chapter
11 cases, and may not alter, refuse, or discontinue service
to the Debtors;
B. prohibits the Utility Providers from requiring the Debtors to
make any post-petition deposits (or other forms of security)
as a condition of receiving post-petition service; and
C. prohibits the Utility Providers from drawing upon any
existing cash security deposit, surety bond, or other form of
security to apply to pre-petition claims; provided, however,
that entry of the Utilities Order is without prejudice to the
right of the Utility Providers to seek additional adequate
assurances from the Debtors or the Court pursuant to the
Determination Procedures.
Although the Debtors have made every attempt to identify all
Utility Providers, certain Utility Providers may not be included
on the Utility Providers Services List. Accordingly, the Debtors
request the Court direct that Utility Providers not listed on
the Utility Providers Service List, be subject to the terms of
the Utility Order, including the Determination Procedures,
following service of the Utility Order on any such Additional
Utility Provider.
The Debtors propose the following procedures by which a Utility
Provider may request additional assurance of payment from the
Debtors:
A. Within 10 business days after the entry of the Utility Order,
the Debtors will mail a copy of the Utility Order to the
Utility Providers identified on the Utility Providers Service
List. In addition, the Debtors will mail a copy of the
Utility Order to each Additional Utility Provider as soon as
practicable after such provider is identified by the Debtors.
B. A Utility Provider that wishes to seek additional assurance
of payment from the Debtors will be required to make a
written request for such additional assurance within 30 days
after service of the Utility Order on such provider and
address the Request to:
a. the Debtors, WILLIAMS COMMUNICATIONS GROUP, INC., One
Technology Center, Tulsa, Oklahoma 74103 (Attn: Mr. Richard
Martin);
b. counsel to the Debtors, JONES, DAY, REAVIS & POGUE, 222
East 41st Street, New York, New York 10017 (Attn: Erica M.
Ryland, Esq.); and
c. counsel to the Agent for the Debtors' prepetition secured
lenders, CLIFFORD CHANCE ROGERS & WELLS, 200 Park Ave, New
York, New York 10166 (Attn: Margot B. Schonholtz, Esq.).
C. Without further order of the Court, the Debtors may enter
into agreements granting Utility Providers any additional
assurance of future payment that the Debtors, in their sole
discretion, determine is reasonable.
D. If a Utility Provider timely files a Request the Debtors
believe is unreasonable, then, after good faith negotiations
by the parties, the Debtors will:
a. file a motion seeking a determination of adequate
assurance with respect to the Request; and
b. schedule a hearing before the Court on the Determination
Motion that is at least 20 days after the filing of the
Determination Motion.
E. Any Utility Provider that does not timely submit a Request
will be deemed to have adequate assurance of payment under
Section 366 of the Bankruptcy Code for the pendency of the
Debtors' Chapter 11 cases.
F. If a Determination Motion is filed or a Determination Hearing
is scheduled, the Utility Provider seeking additional
assurance of payment will be deemed to have adequate
assurance of payment for future utility services under
Section 366 of the Bankruptcy Code, without the need for
payment of additional deposits or other security, until the
Court enters an order in connection with such Determination
Motion or Determination Hearing.
According to Erica M. Ryland, Esq., at Jones Day Reavis & Pogue
in New York, New York, the Company currently receives utility
services from approximately 1,600 Utility Providers, including
the Utility Providers identified on the Utility Providers
Service List. All of the Company's obligations (including the
Debtors' obligations) to Utility Providers are paid by Williams
Communications LLC, a non-debtor affiliate of the Debtors, which
has an excellent payment history with each of the Utility
Providers. The Debtors believe Williams LLC has sufficient cash
reserves to pay all of the Debtors' obligations to Utility
Providers for post-petition utility services on an ongoing basis
and in the ordinary course of business.
Ms. Ryland submits that the Utility Providers provide essential
services to the Company and the Debtors and any interruption in
utility services could prove devastating. In fact, the temporary
or permanent discontinuation of utility services to the Company
or the Debtors could fundamentally undermine the Debtors'
reorganization efforts. The Debtors' pre-petition history of
prompt and full payment to the Utility Providers, Williams LLC's
ability to pay future utility bills, and the administrative
priority status afforded the Utility Providers' post-petition
claims together constitute adequate assurance of payment for
future utility services to each of the Utility Providers. It
thus is unnecessary, and would be an improvident use of
available cash of either the Debtors or Williams LLC, for the
Debtors or Williams LLC to make additional cash security
deposits for the benefit of the Utility Providers. (Williams
Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
XO COMMUNICATIONS: Continuing Talks to Restructure Balance Sheet
----------------------------------------------------------------
In December 2001 and January 2002, XO Communications, Inc.
entered into confidentiality agreements with certain members of
an informal committee of its senior noteholders, in order to
facilitate discussion of a proposed reorganization of its
capital structure. Pursuant to those agreements, the Company
disclosed information to certain members of that committee in
January 2002, including certain financial information derived
from its then-current financial projections. The applicable
confidentiality agreements now require the Company to make this
information available to the public, notwithstanding the fact
that the financial projections from which it is derived have
since been superseded by actual results and revised internal
projections, which remain confidential and have not been
provided to the senior noteholders. In the course of negotiating
the proposed reorganization, members of the committee have also
been apprised on a confidential basis of the terms and
conditions of various investment proposals and the status of
negotiations with prospective investors and other
constituencies, which, except as described below, have not yet
resulted in definitive agreements.
On April 1, 2002, Mr. Carl Icahn, through his Chelonian Corp.
affiliate, and certain members of an informal committee of the
Company's senior noteholders submitted a draft term sheet to the
Company (the proposal contemplated by such term sheet, as
modified to reflect the discussions among the various parties
subsequent to its delivery, the "Icahn Proposal") contemplating
a corporate reorganization, and the purchase by the Icahn Group
of a 55% ownership interest in the business and assets currently
operated by the Company and its subsidiaries for $550 million in
cash.
To implement the transaction contemplated by the Icahn Proposal,
the Company would file for protection under Chapter 11 of the
bankruptcy code. As part of the consideration for this
transaction, the Company would be required to engage in a
corporate reorganization in which a limited liability company
subsidiary ("XO Holdings") would serve as an intermediate
holding company holding interests in newly created limited
liability company subsidiaries that would, following the
corporate reorganization, conduct substantially all of the
Company's businesses and hold substantially all of its operating
assets.
Under the plan of reorganization contemplated by the Icahn
Proposal, the Company's equity and subordinated debt would be
cancelled, and senior noteholders and holders of certain other
claims against the Company would receive common equity interests
in the reorganized Company. As part of the plan of
reorganization, the Icahn Group would purchase, and the senior
notes held by the Icahn Group would be converted into, a
separate class of common stock initially having 49% of the
voting power in reorganized XO, and the Icahn Group would
initially nominate a majority of the members of the Company's
Board of Directors.
The $550 million investment provided for in the Icahn Proposal
would be implemented by the Icahn Group's purchase of 50% of XO
Holdings' common equity for $500 million, leaving the
reorganized Company as the owner of the remaining 50% common
equity interest in XO Holdings, and the purchase by the Icahn
Group of 10% of the common stock of the reorganized Company
(representing an indirect interest in 5% of XO Holdings' equity)
from the Company for $50 million. The Plan of Reorganization
would also provide for the establishment of a stock option plan
covering 14% of the reorganized Company's common stock
(representing an indirect interest in 7% of the common equity of
XO Holdings.) After the restructuring, holders of equity in the
reorganized Company would have certain tag-along rights and
other protections for minority holders for three and a half
years.
The investment and corporate reorganization transactions
contemplated by the Icahn Proposal are contingent upon the
approval of the holders of the Company's $1 billion senior
credit facility, including their consent to longer maturities
and extension of prepayment dates, as well as changes in a
number of financial and operational covenants.
The Company is continuing its discussions with its lending
institutions, holders of its senior unsecured notes and the
Icahn Group with a goal of reaching consensual agreement that
would permit it to complete its balance sheet restructuring
expeditiously. In the meantime, the Company's previously-
announced agreement with affiliates of Forstmann Little & Co.
and Telefonos de Mexico S.A., de C.V. remains in effect. There
can be no assurance that the negotiations with respect to the
Icahn Group proposal will lead to agreement, or that, failing
such an agreement, that the Forstmann Little/Telmex Agreement
would lead to a viable alternative restructuring plan.
* DebtTraders' Real-Time Bond Pricing
-------------------------------------
Issuer Coupon Maturity Bid - Ask Weekly change
------ ------ -------- --------- -------------
Crown Cork & Seal 7.125% due 2002 95 - 97 -0.5
Federal-Mogul 7.5% due 2004 20 - 22 -1
Finova Group 7.5% due 2009 34.5 - 35.5 -0.5
Freeport-McMoran 7.5% due 2006 87 - 89 +1.5
Global Crossing Hldgs 9.5% due 2009 2 - 3 0
Globalstar 11.375% due 2004 7 - 9 0
Lucent Technologies 6.45% due 2029 61 - 63 +0.5
Polaroid Corporation 6.75% due 2002 2.5 - 4.5 -0.5
Terra Industries 10.5% due 2005 86 - 89 +2
Westpoint Stevens 7.875% due 2005 65 - 67 -1
Xerox Corporation 8.0% due 2027 50 - 52 -1
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter
A. Chapman, Editors.
Copyright 2002. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers. Information
contained herein is obtained from sources believed to be
reliable, but is not guaranteed.
The TCR subscription rate is $625 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Christopher
Beard at 240/629-3300.
*** End of Transmission ***