/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/020522.mbx T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, May 22, 2002, Vol. 6, No. 100 Headlines ANC RENTAL: Wins Approval to Enter Master Lease Pacts with SPEs APW LTD: Files Prepack. Chapter 11 Plan and Disclosure Statement ACCUHEALTH: Mark Tulis Appointed as Interim Chapter 7 Trustee ADELPHIA BUSINESS: BellSouth Wants $5MM 2-Month Security Deposit AIMGLOBAL TECH: Closes $9.6MM Financing with New Bank Lender AMERICAN ENERGY: Continues Debt Workout Talks with Noteholder AMES DEPARTMENT: Resolves Claims Dispute with Assistant Managers ARDENT: PCCW Unit Will Purchase US Network Infrastructure Assets ARMSTRONG HOLDINGS: Court Okays Reed Smith as Corporate Counsel ASIACONTENT.COM: Falls Below Nasdaq Continued Listing Standards ATLAS AIR: Fitch Downgrades Class C EET Certs. to Low-B Level ATLAS AIR: Fitch Hatchets B-Rated Unsecured Debt Down One Notch AVITAR INC: Accountants Raise Doubt About Ability to Continue CAPTEC LOAN: Fitch Cuts Several Ratings On Weak Pool Performance CITICORP MORTGAGE: S&P Further Junks 2 Classes of Series 1990-5 COMDISCO INC: Court Approves Settlement Agreement with CIT Group COVANTA ENERGY: Wants Lease Decision Period Stretched to Nov. 27 CRIIMI MAE: Taps Friedman Billings to Evaluate Strategic Options DA CONSULTING: Falls Short of Nasdaq Minimum Listing Standards ENRON CORP: Judge Gonzalez Extends ENA Cash Freeze Permanently FLAG TELECOM: Wins Court Nod to Obtain Super-Priority Financing GLOBAL CROSSING: Seeks Exclusivity Extension Until September 30 GLOBAL CROSSING: Denies New York Times Report Re Deal with Enron GLOBAL TIRE: Indenture Trustee Issues Updates to Bondholders GREYVEST CAPITAL: Defaults on $11.7 Million Secured Loan HA-LO: Wants Plan Filing Exclusivity Further Extended to July 2 HARBISON-WALKER: Stay Against Halliburton Extended Until June 4 ICG COMMS: Will Slash Workforce by 10 to 15% in Second Quarter IT GROUP: Must Decide on 3 Contracts with South Florida Water KAISER ALUMINUM: Taps Yantek for Contract Consulting Services KAISER ALUMINUM: First Quarter 2002 Net Loss Tops $64 Million KELLSTROM INDUSTRIES: Court Okays Asset Sale to Inverness Entity KMART: Salton Asks Court to Determine Classification of Claim LANDSTAR: Expects Net Loss to Slide-Up to $1.3M in March Quarter MAXXAM INC: Q1 2002 Results Swing-Down to $54 Million Net Loss MAYOR'S JEWELERS: Reaches $11MM Investment Pact with Henry Birks METROCALL: Negotiating Prepackaged Chapter 11 with Creditors METROMEDIA FIBER: Case Summary & 50 Largest Unsecured Creditors NATIONAL STEEL: Comerica Pushing for Prompt Decision on 2 Pacts NAVIDEC INC: Fails to Comply with Nasdaq Listing Requirements NETIA HOLDINGS: Warsaw Court Opens Arrangement Process for Unit NOMURA CBO: S&P Puts BB+-Rated 1997-2 A-3 Note on Watch Negative OCCAM NETWORKS: Fails to Meet Initial Nasdaq Listing Criteria OSE USA: March 31, 2002 Balance Sheet Upside-Down by $27 Million ONVIA.COM INC: Brings-In Ken Hansen as Supplier Sales Director PACIFIC GAS: Will Make Interest Payment on Unsecured Fin'l Debt PHILIP SERVICES: Receives Nasdaq Non-Compliance Determination PINNACLE HOLDINGS: Fails to Meet Nasdaq Min. Bid Price Standard PINNACLE HOLDINGS: Registers $200M 5.5% Conv. Sub Notes with SEC PINNACLE HOLDINGS: Files Pre-Negotiated Chapter 11 in New York PINNACLE HOLDINGS: Case Summary & Largest Unsecured Creditors POLAROID CORP: Intends to File Disclosure Statement -- Later STANSBURY HOLDINGS: Mar. 31 Working Capital Deficit Tops $8.4MM STAR MULTI CARE: Nasdaq Delisting Stayed Pending Hearing Outcome TELEGLOBE INC: Ontario Court Grants CCAA Creditor Protection TELEGLOBE INC: Commences Reorganization with CCAA Protection TELETOUCH COMMS: Completes Renegotiation of Senior Debt Facility TRENWICK GROUP: Fitch Maintains Credit Ratings' Evolving Outlook TRISM INC: Hires Peisner Johnson to Hunt for Tax Refunds U.S. AGGREGATES: Wins Approval to Sell All Assets to Oldcastle US DIAGNOSTIC: Eyeing Bankruptcy Protection to Restructure Debts USG CORP: Brings-In Deloitte & Touche to Replace Arthur Andersen WARNACO GROUP: Court Okays Increase in FTI's Compensation Limit WHEELING-PITTSBURGH: Delays Form 10-Q Filing with SEC WILLIAMS COMMS: Committee Wants to Commence Rule 2004 Inquiry YOUBET.COM: Falls Below Nasdaq Minimum Bid Price Requirements YOUNG BROADCASTING: S&P Puts Credit Ratings on Watch Negative * Meetings, Conferences and Seminars ********* ANC RENTAL: Wins Approval to Enter Master Lease Pacts with SPEs --------------------------------------------------------------- In connection with a new Securities Transaction that has been entered into with Deutsche Bank Alex Brown, ANC Rental Corporation and its debtor-affiliates sought and obtained Court approval to: A. Enter into new Master Lease Agreements with Non-Debtor lessor SPEs, composed of Alamo Financing LP, National Car Rental Financing Limited Partnership and CarTemps Financing LP or other special-purpose subsidiaries that are to be formed; B. Guarantee the obligations of the Debtors' operating subsidiaries, including Alamo Rent-A-Car LLC, National Car Rental System and Spirit Rent-A-Car, d/b/a Alamo Local, under each new Master Lease Agreement; C. Pay certain fees associated with the New Securities Transaction with DB Alex Brown; and D. Enter into other agreements and documents necessary to consummate the transaction. Bonnie Glantz Fatell, Esq., Blank Rome Comisky & Mc Cauley LLP in Wilmington, Delaware, tells the Court the new Securities Transaction is necessary to enable the Debtors to meet their increased fleet needs and the fleet ramp-up necessary for the Debtors' seasonally strong summer period. The Debtors specifically require incremental financing to be in place starting in the latter half of April at $200,000,000, peaking in October at $750,000,000 and decreasing to $425,000,000 by the end of the year. Ms. Fatell explains that the new Securities Transaction relates to the issuance of Series 2002 Variable Funding Note (VFN) and the Series 2002 Medium Term Note (MTN), collateralized by a portion of the rental car fleet of ANC Rental Corporation. In this transaction, DB Alex will act as the structuring agent, placement agent, and book-runner in connection with placement of the Series 2002 MTN. DB Alex will also act as financial advisor to structure the securities and obtain ratings on them from rating agencies. This will include Moody's Investors Service, Standard & Poor's and, as applicable, Fitch Inc. The total notional amount of the Series 2002 MTN is expected to equal $750,000,000. The total notional amount of the Series 2002 VFN, meanwhile, is expected to equal $250,000,000. For its efforts, DB Alex will be paid a structuring fee equal to: A. After closing of the Series 2002 VFN, 0.50% of the MTN Notional Amount; and B. Upon closing of the issuance of the Series 2002 MTN, or other financings where DB Alex acts as structuring or placement agent in excess of $375,000,000, 1.00% of the notional amount of such Subsequent Financings in excess of $375,000,000. A commitment fee (calculated on an actual/360 day basis), in an amount equal to 1.00% per annum times the VFN Notional Amount, will begin to accrue on delivery of a commitment letter from DB Alex to ANC with respect to the Series 2002 VFN. This commitment fee will be payable by ANC to DB Alex, for the benefit of the Series 2002 VFN purchasers, both prior to the Issuance Date and after the Issuance Date. Ms. Fatell states that under the circumstances, the fees provided for in the Term Sheet are reasonable for the size of this particular engagement and are necessary to induce Deutsche Bank to facilitate the incremental financing critical to the seasonal fleet ramp-up. With the new Securities Transaction, ARG Funding Corp. will issue the 2002-1 VFN to an affiliate of DB Alex Brown in amount of $250,000,000 and the 2002 MTN in amount up to $750,000,000. Concurrent with the issuance of the 2002-1 VFN Note, the lessor SPEs will enter into new master lease agreements with the Debtors' operating companies and ANC. Each lessor SPE will issue a segregated series of variable funding notes to ARG as collateral for the Series 2002-1 VFN and, ultimately, the Series 2002-2 MTN. The lessor SPEs will then borrow funds from ARG to finance the purchase of vehicles that are to be leased to the Operating Companies under the New Master Lease Agreements. The new notes will be secured by the vehicles leased under the New Master Lease Agreements as well as the lessor SPE's rights to receive payments under the New Master Lease Agreements. (ANC Rental Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) APW LTD: Files Prepack. Chapter 11 Plan and Disclosure Statement ---------------------------------------------------------------- APW Ltd. and its debtor-affiliate, Vero Electronics, Inc. filed their prepackage chapter 11 Plan and Disclosure Statement together with their chapter 11 petition. The Debtors are now soliciting acceptances of the Joint Plan of Reorganization. Full-text copy of the Debtors' Chapter 11 Plan and Disclosure Statement are available at: http://www.researcharchives.com/bin/download?id=020520033955 http://www.researcharchives.com/bin/download?id=020520034139 The Debtors relate that they commenced solicitation after extensive discussions with a working group of the Senior Lenders who hold all of the Debtors' outstanding obligations under the Senior Credit Facilities (approximately $685 million). The Debtors believe that by conducting solicitation in advance to obtain sufficient votes, the pendency of the cases will be considerably shortened and administration will be simplified and less costly. Pursuant to the Plan, the Debtors' proposed capital structure following the Effective Date is expected to include the New Working Capital Facility in the aggregate amount of $110 million and the issuance of New Senior Notes under the New Secured Loan Agreement in an aggregate principal amount of $100 million. In addition to the 40,810,170 APW Common Shares currently outstanding, APW will issue 200 million APW Common Shares, APW Warrants to purchase 40,569,359,830 APW Common Shares, DIP Facility Warrants to purchase 12,366,718,182 APW Common Shares and New Warrants to purchase 2,473,343,636 APW Common Shares. Existing warrants to purchase 6,110,047 APW Common Shares and options to purchase 6,234,749 APW Common Shares issued pursuant to APW's existing stock option plans will be terminated. APW, a publicly-held, Bermuda company, operates as a holding company whose principal assets are the shares of stock of its worldwide operating subsidiaries. APW's operations consist solely of providing financial, accounting and legal services to its foreign and domestic direct and indirect subsidiaries. The Company filed for chapter 11 protection on May 16, 2002 in the U.S. Bankruptcy Court for the Southern District of New York. Richard P. Krasnow, Esq. at Weil, Gotshal & Manges represents the Debtors in their restructuring efforts. When the Company fled for protection from its creditors, it listed $797,104,000 in total assets and $899,751,000 in total debts. ACCUHEALTH: Mark Tulis Appointed as Interim Chapter 7 Trustee ------------------------------------------------------------- In connection to the conversion of Accuhealth, Inc.'s chapter 11 cases to chapter 7 Liquidation of the Bankruptcy Code, Mr. Mark Tulis has been selected to serve as the chapter 7 interim trustee for the bankruptcy cases of the Debtors. Mr. Tulis' address is: Oxman Tulis Kirkpatrick et al. 120 Bloomingdale Road White Plains, New York 10605 Tel: 914 422-3900 Fax: 914 422-3636 Before filing for chapter 11 protection, Accuhealth, Inc. were engaged in the business of providing home health care services in the New York metropolitan area. Gerard Sylvester Catalanello, Esq., James J. Vincequerra, Esq. at Brown Raysman Millstein Felder & Steiner and Martin A. Mooney, Esq. at Deily, Dautel & Mooney, LLP represent the Debtors as they wind-up their financial affairs. ADELPHIA BUSINESS: BellSouth Wants $5MM 2-Month Security Deposit ---------------------------------------------------------------- Paul M. Rosenblatt, Esq., at Kilpatrick Stockton LLP in Atlanta, Georgia, tells the Court that Adelphia Business Solutions, Inc.'s adequate assurance proposal raises questions as to whether these cases are exceptional cases. He asks if these cases are cases where adequate assurance can be satisfied by providing nothing more than what the Bankruptcy Code already provides to BellSouth. This is an administrative expense claim for post-petition services with promises of the Debtors to timely pay for those post-petition services. The Debtors argue that these are in fact such cases. BellSouth disagrees, and argues that something more than what is already required under the Bankruptcy Code is required to provide BellSouth with adequate assurance pursuant to Section 366. The Debtors propose to provide adequate assurance to BellSouth in the form of the Debtors' agreement to pay for services rendered post-petition, and that such services will be administrative expenses. Mr. Rosenblatt submits that this proposal is nothing more than what is provided for in the Bankruptcy Code, and is less than what was provided in Caldor. Although the Debtors propose to allow BellSouth to seek additional adequate assurance, such a proposal does not provide any adequate assurance to BellSouth, and rewrites the provisions of Section 366. Mr. Rosenblatt notes that the Caldor court did not unequivocally hold that an administrative expense priority claim is equal to adequate assurance. It did not hold that a timely pre-petition payment history was sufficient as the only factor to warrant adequate assurance in the form of an administrative expense claim. Rather, the Caldor court arrived at its conclusion after analyzing the specific facts in the case. Only after conducting an evidentiary hearing and finding that the Caldor debtors exhibited various qualities, did the Caldor court arrive at its conclusion. In the case at bar, the Debtors make no representation either in the Motion or in the Affidavit of Edward E. Babcock Pursuant to Local Bankruptcy Rule 1007-2 about having significant cash on hand. The Debtors are currently seeking approval of a proposed debtor-in-possession loan in the amount of $125 million. However, Mr. Rosenblatt believes that the Proposed DIP Loan should not be counted as a supporting factor in determining adequate assurance for BellSouth, particularly considering the multitude of potential defaults thereunder. The Debtors are absolutely dependent upon the Proposed DIP Loan to fund their operations and restructuring costs. In fact, "An immediate and critical need exists for the Debtors to obtain funds in order to continue the operation of their businesses. Without such funds the Debtors will not be able to pay their employees and other critical operating expenses, resulting in an immediate cessation of the Debtor's businesses and causing irreparable harm to the Debtors' estates. The ability of the Debtors to finance their operations and the availability to them of sufficient working capital and liquidity through the incurrence of new indebtedness for borrowed money, and other financial accommodations, are essential to the confidence of the Debtors' vendors and suppliers and their customers and to the preservation and maintenance of the going concern value of the Debtors' estates." In addition, the Adelphia Debtors were unable to obtain a credit facility on an unsecured basis. Mr. Rosenblatt observes that the Adelphia Debtors are relying exclusively upon their Proposed DIP Loan to pay BellSouth for post-petition services. The Proposed DIP Loan has over 13 categories of conditions, 10 categories of representation and warranties, eight reporting covenants, 11 affirmative covenants and seven negative covenants. In fact, there are 17 categories of defaults, making the Proposed DIP Loan a potential mine field. Should the Adelphia Debtors default under the Proposed DIP Loan, based upon findings already made by this Court, BellSouth can be assured that its post-petition invoices will not be paid. Such a precarious situation cannot be the basis of an adequate assurance representation to BellSouth. The Caldor debtors presented "significantly less risk than other customers of the Utilities." However, this is not the case with the Adelphia Debtors. In fact, Mr. Rosenblatt believes that the Debtors present significantly more risk to BellSouth than other customers of BellSouth. This is vividly illustrated in that the Debtors were past due on pre-petition invoices at the time of the Chapter 11 filings. The Debtors, however, are certainly not BellSouth's best risk customer. Even before the Debtors filed their Chapter 11 petitions, BellSouth identified risk in payment of the Debtors' outstanding obligations owed to BellSouth as the Debtors failed to maintain an established credit rating with BellSouth. Another factor in determining that the utility companies had adequate assurance in Caldor was the utilities' greater ability to monitor the financial strength of the Caldor debtors. The Adelphia Debtors do not contend in their Motion that BellSouth or any other utility has any greater ability than other creditors to monitor the Adelphia Debtors' financial strength. The Adelphia Debtors fail to propose any type of enhanced financial reporting to BellSouth for adequate assurance purposes. In Caldor, the bankruptcy court specifically determined that the Caldor debtors were solvent and were "operating out of the proceeds of their operations." On the other hand, Mr. Rosenblatt points out that the Adelphia Debtors appear to be insolvent, based upon the representations in the Babcock Affidavit that "[a]s of December 31, 2001, the Debtors' unaudited combined financial statements reflected assets of approximately $944.75 million and liabilities of approximately $1.44 billion." The Babcock Affidavit also discloses that the Adelphia Debtors anticipate significant negative cash flow during the 30-day period following the Chapter 11 filings, estimating cash disbursements of $31.8 million and cash receipts of $14.1 million during that period. Furthermore, the Adelphia Debtors are wholly dependent upon their Proposed DIP Loan. Thus, the Adelphia Debtors will not be "operating out of the proceeds of their operations." The Caldor debtors had a "solid pre-petition payment history." In their Motion, the Adelphia Debtors contend that they "timely paid their utility bills prior to the commencement of their chapter 11 cases" and that they have an "excellent pre-petition payment history with the Utility Companies." Mr. Rosenblatt asserts that these contentions are incorrect with respect to BellSouth. The Debtors were consistently delinquent in paying their bills to BellSouth at the time of the Chapter 11 filings. On average, the Debtors were 30 or more days past due on paying BellSouth's pre-petition invoices. That explains why BellSouth has a pre-petition claim in the amount of $8 million, representing approximately $2.5 million in monthly charges. These charges are for (i) the month of invoices for which the Debtors were past due (January 2002), (ii) the month of invoices for which the Debtors were not past due (February 2002), and (iii) the month of invoices which had not yet been billed (March 2002). In Caldor, the bankruptcy court found that the utilities generally had not required deposits from the Caldor debtors in the past. Unlike the Caldor debtors, Mr. Rosenblatt avers that BellSouth had specifically requested on multiple occasions prior to the Chapter 11 filings, dating back to early 2001, that the Debtors and non-debtor affiliates post a pre-petition deposit. The Debtors and non-debtor affiliates consistently and vigorously contested that they should post a pre-petition deposit. The pre-petition deposit dispute resulted in the filing by BellSouth of a specific public service commission proceeding to resolve the issue. The Debtors and non-debtors affiliates never paid the requested pre-petition deposit. Despite the Debtors' contentions that BellSouth did not need a deposit to protect its interests with respect to the Debtors, time has now shown that BellSouth was in fact correct is seeking a pre- petition deposit. The Adelphia Debtors support their adequate assurance proposal with four factors. However, none of these four factors support their proposal of providing adequate assurance to BellSouth. Each of the four factors are addressed below: A. Adelphia Factor One - The Debtors state that they have "an excellent pre-petition payment history with [BellSouth]." BellSouth disputes this contention and addresses this issue. In sum, the Adelphia Debtors were on average 30 or more days past due on paying pre-petition invoices. B. Adelphia Factor Two - The Adelphia Debtors state that there are no significant defaults or arrearages with respect to BellSouth, other than payment interruptions caused by the Chapter 11 filings. BellSouth disputes this contention. In sum, because of the Adelphia Debtors' pre-petition payment history, BellSouth is owed approximately $8,000,000 as of the petition date, including approximately $2,500,000 in past due amounts. C. Adelphia Factor Three - The Adelphia Debtors will pay all undisputed post-petition obligations as billed and when due. Because of the Adelphia Debtors' lack of unencumbered resources, the fact that they are balance sheet insolvent, that they are cash flow negative, and that they are wholly dependent on a precarious post-petition financing arrangement to satisfy monthly cash flow requirements, the Debtors' promise to pay does not amount to adequate assurance. Under this scenario, BellSouth could be exposed to at a minimum several months of unpaid post-petition invoices, in addition to the several month of unpaid pre-petition invoices. Even if the Debtors changed their pre-petition payment practice and timely paid post-petition invoices on 30 days terms, BellSouth will be exposed to two month of service, or $5 million at any one time. Couple that with the time it would take to notice a default and terminate service, BellSouth has exposure for over four months of post-petition service, or an additional $10 million. D. Adelphia Factor Four - The Debtors "have obtained interim Post-petition financing in the aggregate amount of $125 million, which should constitute adequate assurance for [BellSouth and the other utilities] . . . ." BellSouth disputes this contention and addresses this issue under Caldor Factor One above. The Debtors' adequate assurance proposal includes a provision by which BellSouth and other utilities can request "additional assurance" in the form of deposits or other security. In the case of BellSouth, Mr. Rosenblatt argues that the Debtors' adequate assurance proposal fails to provide any adequate assurance, so the use of the phrase "additional assurance" is misleading. The proposed procedure is also unfair and is at odds with Section 366(b). The proposal would require utilities to request adequate assurance from the Debtors within 25 days of entry of a utilities order, or presumably such request would be denied. The proposal fails to take into consideration that circumstances governing adequate assurance may change in the future. The proposal could be read to prohibit utilities from seeking to modify their adequate assurance at a later date should circumstances change, a procedure which is directly contrary to the language of Section 366(b) which says (". . . after notice and a hearing, the court may order reasonable modification . . . [of the] adequate assurance . . ."). Mr. Rosenblatt adds that the procedure is also unfair in that it would place control of adequate assurance issues not with the utility, or even with the Court, but with the Debtors, contrary to the explicit language of Section 366(b). Not only would the Debtors be the only party authorized to file an adequate assurance motion, but the Debtors would not have to do so until after a presumably lengthy negotiation process, which would likely take months from the time the utility requested "additional assurance" under the proposed procedures. This provision is inappropriate, and fails to take into consideration the exigencies that occur in bankruptcy cases. Section 366 adequate assurance issues need to be addressed now in these cases, not several months from now. Under the proposed procedures, Mr. Rosenblatt fears that it could be several months or more into the Debtors' bankruptcy cases before a final order is entered by the Court granting BellSouth "additional assurance." At that point, BellSouth will have provided $10 million or more of post-petition services to the Debtors while BellSouth will be prohibited from discontinuing service on account of adequate assurance issues. Prohibiting utilities from altering or disconnecting service based on adequate assurance issues where the Debtors and not the utility has selected the terms of adequate assurance is contrary to the specific language in Section 366(b), and fails to provide an incentive to the Debtors to expeditiously resolve adequate assurance issues. Mr. Rosenblatt asserts that adequate assurance is not satisfied in these cases through the Debtors' mere promise to pay coupled with an administrative expense claim. The only form of "adequate assurance" the Debtors are providing to BellSouth is the Debtors' promise to pay for post-petition services. Since BellSouth is being treated no differently than any other potential administrative claimant, and the Debtors are proposing nothing to differentiate any other administrative claimant from BellSouth, the Debtors are arguing that there is essentially no risk of non-payment for any administrative claimant in these cases. The Debtors specifically reference various bankruptcy cases in which the adequate assurance proposals sought in these cases were granted in other cases. Most Chapter 11 cases are commenced with the best of intentions, Mr. Rosenblatt explains. However, he continues, it is too early in these cases to know whether they will be administratively solvent, or a situation where the Debtors have a successful Chapter 11 outcome. Mr. Rosenblatt cites another major telecommunications Chapter 11 case pending in the Southern District of New York. In this case an administrative expense priority claim was on the first day deemed sufficient for adequate assurance to utilities. However, this case may now be administratively insolvent. As a result, BellSouth and other utility and non-utility vendors have not yet received, and may not receive, payment for services provided post-petition to the debtor. Critical in these cases is the time it will take BellSouth to effect a termination of services to the Debtors. Because of the complexity of the services provided by BellSouth to the Adelphia Debtors, and governance by public service commissions, Mr. Rosenblatt informs the Court that it will take BellSouth over two months to complete a termination of the services provided to the Debtors under standard termination procedures. The FCC and state public service commissions often vigorously oppose any type of accelerated termination proceedings. Even with a two- month deposit, BellSouth could still suffer an additional two months of post-petition exposure upon a termination of services. BellSouth is at risk for over $10,000,000 on a post-petition basis alone, and when combined with the existing pre-petition balances, BellSouth is at risk for close to $18,000,000. Based on the specific facts of these cases, BellSouth does not believe that adequate assurance provisions short of a 2-month deposit will provide BellSouth with adequate assurance. Mr. Rosenblatt contends that BellSouth's deposit request is supported by the facts of these cases, case law, Section 366 of the Bankruptcy Code and tariffs governing the provision of services by BellSouth to the Adelphia Debtors. BellSouth requests that the Court order and direct the Debtors to provide to them with a cash or equivalent deposit for $5 million. This deposit will be held and applied to unpaid post-petition services, which amount represents approximately two months of BellSouth services to the Debtors. Should the Court deny BellSouth's deposit request, in the alternative to a two-month deposit, adequate assurance may be achievable in these cases through a combination of setoff or "netoff" rights. These would be combined with bi-weekly or monthly pre-payments further coupled with an expedited termination proceeding that would allow for the termination of services to be accomplished on an expedited basis. Based upon experience in other cases, BellSouth believes that the expedited termination of services could occur no earlier than upon 31 days notice. (Adelphia Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) AIMGLOBAL TECH: Closes $9.6MM Financing with New Bank Lender ------------------------------------------------------------ AimGlobal Technologies Company Inc. (TSE/AMEX : AGT) announced that an Indianapolis based merchant bank has acquired the Company's outstanding indebtedness to the Canadian Imperial Bank of Commerce including all security and agreements outstanding under the CIBC operating facilities. The Company's loan, in default with CIBC, had expired on June 30, 2001. AimGlobal has been operating under a forbearance agreement with CIBC. The Company reported that its new lender is currently reviewing the Company's business plan with the expectation of amending the loan agreements in the near future. The Company commented that their new merchant bank will be providing additional working capital to the Company in keeping with completing its operational and financial restructuring. As part of its restructuring, the Company has entered into an agreement to sell its West Coast operations. The transaction is scheduled for completion later this month. The Company also reported on making considerable progress towards securing a cooperative creditor compromise agreement with creditors who supplied AimGlobal with parts and material in connection with manufacturing equipment for Cell-Loc Corporation, a former customer who defaulted on its contracts with the Company leading to an inventory write down in excess of $33 million in the fiscal year ended March 31, 2001. The Company is continuing the pursuit of their $46 million lawsuit against Cell-Loc and Mr. M. Fattouche. The new operating loan, subject to shareholder and TSE approval, provides for its conversion into 13,100,322 common shares of AimGlobal at $.933 per share, an 87% premium for 8,400,322 shares and $.375 per share for 4,700,000 shares. Fully converted, the new lender will acquire approximately 42% of the fully diluted, newly-issued and outstanding shares. In the event that the requisite approvals are not obtained, the new lender will be entitled to a break-up fee of $1,000,000. Steven A. W. deJaray, Chairman of AimGlobal stated, "This is an extremely progressive step in the continuing improvement of our business. And as a major shareholder, I look forward to supporting the conversion of this loan." In relation to the Company's new financing, AimGlobal reported it has expanded the number and breadth of its board of directors. The board will increase from three to four directors. Joining Mr. DeJaray, as Chairman of the Board, are new directors, Mr. Warren H. Feder, Senior Managing Director of Carl Marks Capital Advisors LLC, a New York based investment bank, Mr. Daniel Klausner, Senior Vice President of UBS PaineWebber, Inc. and Mr. Bruce N. Lemons, a Salt Lake City based business attorney, who will also serve as Company secretary. Mr. Bernard M. Joyce and Mr. Ron McMahan have resigned from the board. The Company wishes to express its sincere thanks to the Messrs. Joyce and McMahan for their lengthy and invaluable service to AimGlobal. Mr. deJaray further stated that, "As our efforts continue and are gradually realized towards perfecting the business and shifting from a model of rapid growth to profitability, working with Carl Marks, who served as the Company's investment banker in connection with the financing, has proven immeasurably beneficial in reaching our goals. We are fortunate to be associated with them." AMERICAN ENERGY: Continues Debt Workout Talks with Noteholder ------------------------------------------------------------- The American Energy Group Ltd. (OTCBB:AMEL) announced its financial results for the third quarter of fiscal year 2002 in its Form 10Q filed with the Securities and Exchange Commission. Oil revenues for the quarter decreased by 42% to $262,484 as compared to $452,872 in the prior fiscal year's quarter ended March 31, 2001. The company attributes this decrease to the decline in oil prices, of 28% ($19.76 March 2002 and $27.32 March 2001), which we attribute primarily to the events of September 11, 2001. The decline resulted in a reduction in monthly gross revenues from production. The resulting decline in overall revenues also materially impaired our ability to schedule and complete maintenance, reworking and new drilling operations, causing a decline in monthly gross production volumes. The net loss in March 31, 2001 was due to the substantial increase of the Depreciation and Amortization Expense. This increase was the result of writing off dry hole cost in Pakistan of approximately 5.4 million USD. The company also announced that its negotiations to date with the holder of the $1,500,000 note secured by the company's Texas-based oil and gas leases, which matured on March 17, 2002, are continuing in an attempt to restructure the debt or to extend it until such time as the company completes its ongoing efforts to achieve a capital infusion from investment and lending sources. The company previously announced that it expected to pay the matured note from the proceeds of an investment by a German investor which included both loan and stock purchase proceeds. The prospective investment has not been consummated as anticipated, although discussions with the investor are proceeding to determine with certainty whether a near-term closing of the transaction will occur. In anticipation of a closing of this investment into the company and the resulting payment of the note, the holder of the note previously agreed to refrain from any collection activity on the note until June 2002, and in connection with such agreement, scheduled a sale of the oil and gas leases securing the note for June 4, 2002 in the event that the note is not paid by such date. There can be no assurance that the investment transaction will be consummated or that continued negotiations with the holder of the matured note for further forbearance will be successful. The company will be exploring and pursuing financing alternatives in the event that the German investment transaction is not consummated. There can be no assurance that the company will be successful in obtaining alternative financing should the proposed German investment fail to be completed. The company also announced that the previously announced Special Meeting of Shareholders scheduled for June 1, 2002 has been postponed indefinitely at the request of the shareholders originally requesting the meeting. The company also announced that it has completed as a producing oil well the C-55 well drilled on its Blue Ridge Field Blakely lease. It will take several weeks for the daily production levels from this new well to stabilize, so the Railroad Commission can determine a daily allowable. The American Energy Group Ltd. is an independent oil and gas exploration, drilling and production company currently based in Houston and engaged in international exploration projects. AMES DEPARTMENT: Resolves Claims Dispute with Assistant Managers ---------------------------------------------------------------- Ames Department Stores, Inc., and its debtor-affiliates believe that it is in their interests to resolve the Motion and the District Court Litigation and liquidate the Claimants' claim. They obtained court approval of their stipulation with Edmund Smoot, III and Yousuf S.A. Sayeed, individually and on behalf of a Class of Ames Assistant Managers. Under this stipulation: 1. The Motion for relief from stay is withdrawn; 2. The automatic stay will be modified only to the extent and for the sole purpose of permitting the Parties to resolve the Fair Labor Standards Act (FLSA) Issue pursuant to the terms of the District Court Stipulation as modified; 3. The Debtors agree to remove the District Court Litigation to the New York District Court; 4. The Parties consent to the New York District Court referring the District Court Litigation to the Bankruptcy Court to hear and determine the FLSA Issue through a limited evidentiary hearing; 5. If for any reason the Bankruptcy Court does not conduct a limited evidentiary hearing as contemplated, the Debtors have the option of selecting a different forum for the determination of the FLSA Issue, the selection to be from among the District Court, a judge magistrate, or an alternative dispute resolution mechanism; 6. If the Determining Court finds that Ames's assistant managers are properly classified as exempt under the FLSA, the Claimants, as a class, will have an allowed pre-petition general unsecured claim in the Debtors' Chapter 11 cases. The amount of this claim is $1,000,000. It will include any and all attorneys' fees and expenses to be awarded Claimants' counsel; 7. If the Determining Court determines that Ames's assistant managers are not exempt under the FLSA, the Claimants, as a class, will have an allowed pre-petition general unsecured claim in the Debtors' Chapter 11 cases in the amount of $3,000,000 plus an additional amount agreed to by the Parties for reasonable attorneys' fees and expenses to be awarded Claimants' counsel; 8. The Claimants' claim will be treated pursuant to the terms of a Chapter 11 plan confirmed by the Bankruptcy Court in the Debtors' Chapter 11 cases and will be distributed among the Claimants in accordance with the terms and conditions of the District Court Stipulation. (AMES Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARDENT: PCCW Unit Will Purchase US Network Infrastructure Assets ---------------------------------------------------------------- Beyond the Network, Inc., an IP-based end-to-end global communications solutions provider, announced its purchase of the network infrastructure assets of Ardent, Inc. and Ardent Communications, Inc. Founded in Virginia in 1993, Ardent offers broadband access solutions and next-generation data communications services to more than 1,000 ISP and business customers in the U.S. Ardent has been operating under Chapter 11 bankruptcy protection since October 10, 2001. BtN, a wholly owned subsidiary of Hong Kong-based PCCW, successfully bid in an auction through the U.S. Bankruptcy Court to acquire the Ardent network infrastructure assets. Under the asset purchase agreement, BtN, based in Reston, Va., will acquire certain customers, and network equipment of Ardent. BtN plans to offer Ardent's existing customers continued communications services through Ardent's MPLS-enabled network featuring 29 points of presence (POPs) and serving more than 38 major metropolitan areas. Its main POPs include Boston, Chicago, Los Angeles, New York, San Diego, Seattle, and Washington DC. "Given the strategic deployment of BtN's legacy-free IP backbone in Asia, North America and Europe, this acquisition of Ardent's network infrastructure assets will enable BtN to expand our MPLS service offering and strengthen our ability to provide regional ISPs and carriers worldwide with access to content," said BtN's President and Chief Operating Officer Braham Singh. "Through the purchase of Ardent's tier-one network infrastructure, we are not only able to accelerate the implementation of our business strategy of providing reliable and competitive services to wholesale customers around the globe, but we have also achieved it at a fraction of the costs otherwise required for backbone build-out," he said. BtN's acquisition will be funded by internal resources. BtN's Chief Network Officer Bret Rehart said: "We selectively chose Ardent assets from among a range of those available in the market on the basis of their similarity with our own native IP MPLS-enabled backbone. The synergy brought forth from this acquisition includes seamless integration of the acquired assets into our infrastructure, uninterrupted services and continued support of current and future customers." The closing date for the purchase of Ardent's assets will occur in accordance with the terms of the asset purchase agreement approved by the Bankruptcy Court earlier Monday. Beyond the Network (BtN) is a legacy-free Internet backbone provider, offering IP-based end-to-end communications solutions over its own global native IP Multi Protocol Label Switching (MPLS)-enabled network. Launched in early 2001, BtN is a wholly owned subsidiary of Hong Kong-based PCCW. With offices and direct network access points located in Asia, North America, Europe and the Middle East, BtN delivers a comprehensive suite of wholesale products, including Internet access (IP Transit), MPLS-enabled virtual circuit connectivity (VPN), Voice over IP (VoIP), through its BtN Multi-Service IP Port. Unlike traditional legacy networks, where the "one port -- one product" rule prevails, the BtN Multi-Service IP Port allows wholesale customers to purchase products through one single port, thereby increasing their cost-efficiency, scalability and competitiveness. BtN's customers include emerging carriers, ISPs, Internet content providers and application-service providers. To learn more about PCCW-BtN, visit http://www.pccwbtn.com To learn more about MPLSVPN.net(TM), visit http://www.mplsvpn.net Pacific Century CyberWorks Limited (SEHK: 0008, ADR-NYSE: PCW), the Hong Kong-listed flagship of the Pacific Century Group, is one of Asia's leading integrated communications companies. From its market-leading position in Hong Kong, PCCW is focused on building shareholder value by leveraging synergies between its core businesses and partners, and by delivering total solutions to customers throughout Asia. PCCW provides key services in the areas of: integrated telecommunications; broadband solutions; mobility and connectivity; narrowband and interactive broadband (Internet Services); business e- solutions; data centers and related infrastructure. To learn more about PCCW, visit http://www.pccw.com ARMSTRONG HOLDINGS: Court Okays Reed Smith as Corporate Counsel --------------------------------------------------------------- Nitram Liquidators, Inc., Armstrong World Industries, Inc., and Desseaux Corporation of North America obtained Judge Newsome's approval to employ Reed Smith LLP as special corporate and Pennsylvania counsel to the Debtors, nunc pro tunc to February 8, 2001. The employment of JoEllen Lyons Dillon, Esq., now at Reed Smith, was first described in the Debtors' application to employ Buchanan Ingersoll in December 2000. Ms. Dillon has represented the Debtors for 14 years with respect to corporate and securities matters, including strategic advice, legal analyses, representation in negotiations, alternative dispute resolution proceedings, litigation, and other general corporate work, including the majority of the Debtors' acquisition, merger and divestiture work. The Debtors now ask Judge Newsome to approve her continued employment through her new firm, Reed Smith, for the same services. The Debtors list as examples of the professionals and paraprofessionals who will be employed in these cases as: Name Hourly Rate ---- ----------- James Restivo $475 Leo Hitt $455 Paul Singer $425 Frank Guadagnino $420 Stephen Johnson $390 Arlie Nogay $375 James Barnes $360 Hannah Thompson $290 JoEllen Dillon $275 Dave Franklin $270 John Chapas $240 Jonathan Lushko $160 Linda Patten $120 Ms. Dillon states that her normal billing rate is $335; however, she has discounted her rate to $275 for all professional services provided to the Debtors. Reed Smith's normal billing rates for attorneys ranges from $160 to $545 per hour, and paralegal rates range from $110 to $240 per hour, based on experience. The Debtors have not paid Reed Smith any monies during the year prior to the Petition Date, nor is the firm owed any payments with respect to prepetition fees or expenses. (Armstrong Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) ASIACONTENT.COM: Falls Below Nasdaq Continued Listing Standards --------------------------------------------------------------- Asiacontent.com Ltd. (Nasdaq: IASIA) has received a Nasdaq Staff Determination Letter stating that the Company has failed to maintain a minimum market value of publicly held shares of $5,000,000 and a minimum bid price per share of $1.00 as required by Marketplace Rules 4450(a)(2) and 4450(a)(5), respectively, for continued listing and that the Company's securities are, therefore, subject to delisting from the Nasdaq National Market. The Company will appeal the Nasdaq Staff Determination and request a hearing before Nasdaq's Listing Qualifications Panel, which will be scheduled within 45 days of the Company's appeal. The Company will continue to trade on the Nasdaq National Market under the symbol "IASIA" pending the outcome of these proceedings. On May 10, 2002, the Nasdaq Staff also notified the Company that it did not meet the audit committee requirement for continued listing under Marketplace Rule 4350(d)(2). The Company must provide the Nasdaq Staff on or before May 24, 2002 with the Company's specific plan and timetable to achieve compliance with the audit committee requirement. At this time, the Company does not expect that it will satisfy the audit committee requirement, which may subject the Company's securities to delisting from the Nasdaq National Market. There is no assurance that the Company will be successful in its appeal on the issues raised in the May 16, 2002 Staff Determination Letter or with respect to the audit committee deficiency. If the Company's common stock should ultimately be delisted from the Nasdaq National Market, it is currently eligible to be quoted on the electronic bulletin board. Asiacontent.com delivers targeted online advertising solutions through its DoubleClick Media Asia advertising network in Korea, China, Hong Kong, Taiwan and Singapore. In partnership with MTV Networks, Asiacontent.com produces local-language music news, information and promotions targeting high-value youth in Korea, China, Taiwan, Southeast Asia and India. ATLAS AIR: Fitch Downgrades Class C EET Certs. to Low-B Level ------------------------------------------------------------- Fitch Ratings downgrades Atlas Air, Inc.'s enhanced equipment trust certificates (EETCs), series 2000-1, 1999-1 and 1998-1 as outlined below. All three series, with a combined current outstanding balance of $1.1 billion, are also removed from Rating Watch Negative. These rating actions mark the end of Fitch's EETC review process. The review process was initiated by the events of Sept. 11. On Sept. 20, 2001, Fitch placed all EETC transactions on Rating Watch Negative. Reviews of other rated EETCs were completed in the 1st quarter of 2002 (see March 4, 2002 press release). At that time the Atlas EETCs remained on Rating Watch Negative, pending receipt of further information. Fitch's EETC rating criteria relies on the credit quality of the underlying obligor and the loan to value of the aircraft collateral backstopping the transaction. EETC ratings are linked to the underlying obligor's credit quality. Today's rating actions reflect assessments of Atlas Air Inc.'s credit quality and the collateral. The rating actions reflect first Fitch's downgrade of Atlas Air, Inc.'s unsecured debt from 'B+' to 'B'. Atlas is a wholly owned subsidiary of Atlas Air Worldwide Holdings, and is a provider of cargo capacity to major passenger airlines worldwide. For more information on the Atlas unsecured downgrade, see Fitch's press release dated May 17, 2002. The rating actions also reflect Fitch's conclusion that the long term value of the Boeing 747-400F aircraft that support all three series has likely been impaired. During the last eight months, Fitch has reviewed the unprecedented imbalance of aircraft supply/demand, the resulting declines in aircraft values and determined that a change has occurred in the fundamental prospects for many aircraft types, including the Boeing 747-400F. Ratings downgraded are outlined below: Atlas Air 2000-1 --Class A downgraded to 'A' from 'AA-'; --Class B downgraded to 'BBB' from A-'; --Class C downgraded to 'BB+' from 'BBB-'; --All classes removed from Ratings Watch Negative. Atlas Air 1999-1 --Class A-1 downgraded to 'A' from 'AA-'; --Class A-2 downgraded to 'A' from 'AA-'; --Class B downgraded to 'BBB' from 'A-'; --Class C downgraded to 'BB-' from 'BBB-'; --All classes removed from Ratings Watch Negative. Atlas Air 1998-1 --Class A downgraded to 'A' from 'AA-'; --Class B downgraded to 'BBB' from A-'; --Class C downgraded to 'BB' from 'BBB-'; --All classes removed from Ratings Watch Negative. ATLAS AIR: Fitch Hatchets B-Rated Unsecured Debt Down One Notch --------------------------------------------------------------- Fitch Ratings has downgraded the unsecured debt of Atlas Air, Inc. to 'B' from 'B+'. The rating change affects all of Atlas' outstanding senior unsecured notes. Concurrently, Fitch is issuing a rating of 'B+' on Atlas' secured bank debt. The Rating Outlook for Atlas is Negative. The downgrade reflects the ongoing impact of a sharp decline in global air cargo demand on Atlas' ability to generate strong operating cash flow from its core ACMI (aircraft, crew, maintenance, and insurance) contract business. Relative to its high level of fixed financing obligations (both debt service and aircraft lease payments), Atlas' cash flow generation outlook remains uncertain. After enduring the effects of a year-long downturn in global air cargo demand (particularly in trans- Pacific markets that Atlas aircraft have served extensively), the company is looking ahead to a gradual build-up in demand during the seasonally-strong second half of the year. Still, Fitch believes that uncertainties related to a significant change in Atlas' product mix, together with the need to finance three new Boeing 747-400 freighters in late 2002, will weaken the company's credit profile over the next several quarters. Atlas has made it clear in recent months that high levels of aircraft utilization and revenue growth can only be realized if the company embarks upon a strategy to supplement its traditional ACMI (wet lease) product. Responding to the changing needs of major airline customers for a more flexible cargo lift product, Atlas is rolling out so-called fractional and partial ACMI contracts that allow customers to fill only part of a contracted aircraft, or use an entire aircraft on a less regular basis. Along with Polar Air Cargo, Atlas' sister company acquired by Atlas Air Worldwide Holdings (AAWH) in November 2001, Atlas has also developed a network of hubs (Miami, Liege, Belgium, and a future hub in Anchorage) to optimize service levels and aircraft utilization. While Fitch believes that the strategy opens up new opportunities for Atlas to grow its customer base and diversify revenue sources over the long term, Fitch also recognizes the short-term risks associated with the transition to a new product and a possible shortfall in block hour utilization as the program ramps up. Recent operating results for Atlas demonstrate the degree to which a poor demand environment can affect the performance of a company with very high levels of financial and operating leverage. During 2001, Atlas was able to downsize its operation through crew furloughs and the parking of six older Boeing 747 (B747) freighters. However, given its relatively fixed cost structure, Atlas swung to a net loss of $68.5 million (vs. net income of $85.3 million in 2000). Total Atlas operating revenues (excluding Polar) fell by 13% in 2001 to $687.3 million. Weak demand has carried over into first quarter 2002 results. Atlas' revenues declined by 16% to $151.0 million in the first quarter, and the company reported a net loss of $11.1 million. This compares with a net profit of $1.6 million in the first quarter of 2001. Poor operating performance and scheduled aircraft lease payments translated into a net use of $47.5 million in cash for operating activities in the first quarter. Some of the weakness in ACMI contract services has been offset by strong demand for military charter cargo lift in support of broadened U.S. military activities overseas. Participation in the U.S. Air Force's Air Mobility Command (AMC) contract program will provide support for Atlas in its effort to rebuild the revenue base through the remainder of this year. Charter revenue grew to $40.1 million, or 27% of total Atlas revenue, in the quarter that ended March 31. Under its aircraft purchase agreement with Boeing, Atlas is currently required to take delivery of three new B747-400 freighters in the second half of this year. A fourth freighter will be delivered in late 2003. Although the company is pursuing alternative sources of financing for these new aircraft, it appears likely that Atlas will negotiate operating leases with the manufacturer. As part of this financing deal, some of the new aircraft delivery dates may be extended. In light of the weak revenue environment and the incremental ownership costs associated with the new aircraft, any extension of the delivery dates could limit operating cash outflow and improve the company's credit outlook. Besides the uncertain timing of a rebound in worldwide cargo demand and the new product roll-out, Atlas faces a continuing labor dispute with its pilots over a new contract. After a tentative agreement was reached in January, the Air Line Pilots Association (ALPA) membership failed to ratify the new contract. Atlas management appears optimistic that a deal can be reached, and discussions are set to resume during the week of May 20. With regard to liquidity and capital structure, Atlas Air, Inc. finished the March quarter with an estimated $236 million in cash and short-term investments, down from $312 million at year- end 2001. Beyond the effects of weak operating results in the first quarter, the change in cash reflected scheduled debt and lease payments that are higher in the first quarter. Atlas successfully amended its bank agreement covenants in late 2001 to reflect the changed operating environment. Management noted on last week's earnings call that they are most concerned about a minimum liquidity requirement of $200 million that may have to be waived or amended if revenues fall short of expectations in the second and third quarters. Of its $891 million in long-term debt and capital lease obligations on the balance sheet at March 31, about $437 million represents unsecured obligations maturing between 2005 and 2008. The company's aircraft credit facility matures in April 2003 with a two-year term-out provision to April 2005. Atlas' bank facilities are secured by Boeing 747 freighter aircraft and engines. In a separate but related rating action today, Fitch has lowered the ratings of three series of Atlas' enhanced equipment trust certificate (EETC) debt obligations. Those changes reflect not only the changes in corporate credit quality but also the reduced values of the B747-400 freighter aircraft that collateralize all three Atlas EETC transactions. Atlas Air, Inc. is a wholly owned subsidiary of Atlas Air Worldwide Holdings (NYSE: CGO), and is a provider of cargo capacity to major passenger airlines worldwide. Together with Polar Air Cargo, the holding company's other subsidiary, Atlas offers a range of ACMI (aircraft, crew, maintenance and insurance) contract services, charter, and scheduled freighter operations through a global route network. Atlas is based in Purchase, New York. Atlas Air Inc.'s 10.75% bonds due 2005 (CGO05USR1), DebtTraders reports, are quoted at a price of 87. For real-time bond pricing see http://www.debttraders.com/price.cfm?dt_sec_ticker=CGO05USR1 AVITAR INC: Accountants Raise Doubt About Ability to Continue ------------------------------------------------------------- Avitar, Inc., through its wholly-owned subsidiaries, Avitar Technologies Inc., United States Drug Testing Laboratories, Inc., and BJR Security, Inc. designs, develops, manufactures, markets and provides diagnostic test products and services as well as contraband detection and education services. Avitar sells these products and services to large medical supply companies, employers, diagnostic distributors, schools and governmental agencies. During Fiscal Year 2001 and the first half of Fiscal Year 2002, the Company continued the development and marketing of ORALscreen(TM), innovative point of care oral fluid drugs of abuse tests that use the Company's foam as the means for collecting the oral fluid sample. The Company has suffered recurring losses from operations and has working capital of $201,659 as of March 31, 2002. The Company raised net proceeds aggregating approximately $5,288,000 during the fiscal year ended September 30, 2001 from the sale of stock and the exercise of options and warrants. During the six months ended March 31, 2002, the Company raised approximately $2,563,000 from the sale of stock and the exercise of options and warrants. Based upon cash flow projections, the Company believes the anticipated cash flow from operations and proceeds from future equity financings will be sufficient to finance the Company's operating needs until the operations achieve profitability. There can be no assurances that forecasted results will be achieved or that additional financing will be obtained. If cash flow and equity sales projections fall short of Company needs, and the Company finds no suitable alternate financing, the Company may be unable to continue as a going concern. Sales for the three months ended March 31, 2002 increased $1,001,541, or approximately 81%, to $2,231,119 from $1,229,578 for the corresponding period of the prior year. For the six months ended March 31, 2002, sales increased $3,074,619, or approximately 128%, to $5,473,533 from $2,398,914. The change for the three and six months ended March 31, 2002 primarily reflects the increase in sales of its ORALscreen(TM) products which included sales to one major customer of $200,000 and $1,978,000, respectively. The Company had a net loss of $1,245,185, $ .03 per basic and diluted share, for the quarter ended March 31, 2002, as compared to a net loss of $1,607,640, $0.09 per basic and diluted share, for the quarter ended March 31, 2001. For the six months ended March 31, 2002, the Company had a net loss of $1,623,591, $.04 per basic and diluted share, versus a net loss of $3,218,157, $.18 per basic and diluted share, for the six months ended March 31, 2001. At March 31, 2002 and September 30, 2001 the Company had working capital deficiency of $201,659 and working capital deficiency $958,293, respectively, and cash and cash equivalents of $930,383 and $245,409, respectively. Net cash used in operating activities during the six months ended March 31, 2002 amounted to $1,794,552 resulting primarily from a net loss of $1,623,591, a gain from the sale on an equity investment and equipment of $18,943, an increase in inventories of $19,982, a decrease in accounts payable and accrued expenses of $181,558 and a decrease in deferred income of $385,000; partially offset by depreciation and amortization of $107,729, amortization of goodwill of $154,996, a payment of common stock for services of $26,900, an increase in the provision for losses on accounts receivable of $12,132, a decrease in accounts receivable of $113,003, a decrease in prepaid expenses and other current assets of $1,535 and a decrease in other assets of $18,227. Net cash provided by financing and investing activities during the six months ended March 31, 2002 amounted to $2,479,526 which included proceeds from the sale of an equity investment and equipment of $31,891, proceeds from the sale of common stock and warrants of $1,306,000, proceeds from the exercise of warrants and stock options of $1,257,423, and a decrease in stock subscription receivable of $35,000; offset in part by the repayment of notes payable and long term debt of $36,745 and purchases of property and equipment of $114,043. As a result of the Company's recurring losses from operations and working capital deficit, the report of its independent certified public accountants relating to the financial statements for Fiscal 2001 contains an explanatory paragraph stating substantial doubt about the Company's ability to continue as a going concern. Such report states that the ultimate outcome of this matter could not be determined as the date of such report (November 20, 2001). There are no assurances that management's endeavors to overcome these difficulties will be successful or sufficient. CAPTEC LOAN: Fitch Cuts Several Ratings On Weak Pool Performance ---------------------------------------------------------------- Fitch Ratings downgrades Captec Loan Receivables Trust 1996-A class A to 'CCC' from 'BBB', class B to 'CC' from 'B' and class C to 'D' from 'CCC'. Classes A and B remain on Rating Watch Negative. The actions are a result of continued deterioration in collateral quality and a significant amount of missed interest payments on classes C and D. Currently class C has accumulated interest shortfalls of $283,361 while class D has accumulated $139,838. Total impaired assets account for $16.3 million, or approximately 25% of the pool. Fitch downgrades Franchise Loan Trust 1998-1 class C to 'CCC' from 'BB' and class D to 'D' from 'CCC'. The downgrade is a direct result of deteriorating pool performance as losses have climbed over $37 million and total impaired assets are at $40.4 million ($1.13 million in delinquencies and $39.2 million in defaults). The erosion of available collateral has also resulted in a significantly reduced level of credit enhancement available to provide credit support to remaining classes of notes. Fitch believes the rating actions are necessary to reflect the current credit risk of the transaction. Additionally, all classes are placed on Rating Watch Negative. Fitch downgrades Captec Grantor Trust 2000-1 class D to 'B' from 'BB', class E to 'CCC' from 'B', and class F to 'CC' from 'CCC', with all classes remaining on Rating Watch Negative. The actions are a result of further deterioration in collateral quality, missed interest payments, and a significant amount of impaired assets in the trust. Missed interest payments have affected classes D, E, and F since January 2002. Class D has a total missed interest payment of $70,951, while classes E and F have accumulated interest shortfalls of $78,716 each. Currently, total losses account for 2.76% of the pool while total delinquent and defaulted assets are at $38 million, or 22.2% of the pool. The erosion of available collateral has also resulted in a significantly reduced level of credit enhancement available to provide credit support to remaining classes of notes. Fitch believes the rating actions are necessary to reflect the current credit risk of the transaction. CITICORP MORTGAGE: S&P Further Junks 2 Classes of Series 1990-5 --------------------------------------------------------------- Standard & Poor's lowered its ratings on classes A-4 and A-7 of Citicorp Mortgage Securities Inc.'s REMIC pass-through certificates series 1990-5 to double-'C' from triple-'C'. The lowered ratings reflect the continuing deterioration in the performance of the mortgage pool. Recently, the spread account balance was reduced to $9,250. The spread account is the only remaining form of credit support, as the subordinate class had been previously completely eroded. There is one loan currently in foreclosure with an outstanding principal balance of $181,996. When the losses resulting from the foreclosure process exceed that month's spread amount plus current credit support, then the certificates will default. This series will continue to be monitored closely as future losses are realized. Ratings Lowered Citicorp Mortgage Securities Inc. REMIC pass-thru certs series 1990-5 Rating Class To From A-4, A-7 CC CCC COMDISCO INC: Court Approves Settlement Agreement with CIT Group ---------------------------------------------------------------- The Official Committee of Equity Security Holders of Comdisco, Inc., and its debtor-affiliates contends that the Settlement Motion should be denied because the Debtors failed to articulate why the settlement is justified, fair and reasonable, and in the best interest of their estates. David F. Heroy, Esq., at Bell, Boyd & Lloyd, in Chicago, Illinois, asserts that the Debtors must provide sufficient facts for the Bankruptcy Court to make its own independent judgment of the merits of the proposed settlement. In addition, Mr. Heroy states that one issue that was questioned was how the Debtors resolve the $50,000,000 claim. "This deal was brokered in a matter of minutes without any serious consideration of the underlying merits," Mr. Heroy notes. Indeed, the Debtors accepted CIT Group's first Settlement proposal and settled this issue in three brief telephone calls. Moreover, Mr. Heroy continues, the Debtors have accused CIT Group of having acted in "bad faith" by withdrawing its bid before the deadline. Presumably, Mr. Heroy says, if a Court were to find that CIT Group did, act in bad faith, it would forfeit its "good Faith" deposit, irrespective of the Debtors' actual damages. However, Mr. Heroy observes that the Debtors did not even pursue this possibility. Instead, the Debtors attempted to cut a quick deal so as not to inconvenience their management. Although the Debtors assert that litigation over the subject of good faith deposit would be costly, the results uncertain and that the settlement provided a reasonable recoupment of the costs associated with CIT Group's bid, Mr. Heroy insists that the Debtors still failed to provide a sufficient factual and legal support. "The Court could not make an informed and independent determination as to why the Debtors compromised the $50,000,000 claim for just $1,000,000," Mr. Heroy states. Debtors Respond "Contrary to the Equity Committee's objection, the Debtors have provided the Committee with ample opportunity to receive information and even to litigate the return of the deposit," David N. Missner, Esq., at Piper Marbury Rudnick & Wolfe, in Chicago, Illinois, states. The Debtors further relates that in a meeting with the Equity Committee, the Debtors discussed the CIT Group deposit and a possible settlement. The Debtors also informed the Equity Committee that based on their initial review of the legal and practical issues related to CIT Group's deposit, the Debtors did not believe that it would be beneficial for them to pursuer the retention of the deposit through litigation. "The Debtors provided the Equity Committee with the opportunity to ask questions and raise issues," Mr. Missner adds. However, the Equity Committee was silent. In addition, when the Debtors inquired the Equity Committee if they wished to pursue litigation against CIT Group with respect to the deposit, the Equity Committee declined. As a result, the Debtors informed the Equity Committee that they would pursue a settlement. Mr. Missner tells the Court that despite being aware of the Debtors' settlement negotiations with CIT Group, the Equity Committee did not request information with respect to the parameters of the settlement and did not inquire into the nature of the Debtors' analysis in determining a fair settlement. Furthermore, Mr. Missner relates that upon reaching the Settlement, the Debtors provided a letter agreement to the Equity Committee and requested their approval. "The Equity Committee and the Debtors discussed the Settlement; however, they declined to agree to the Settlement, so the Debtors filed the Settlement Motion," Mr. Missner says. Mr. Missner asserts that any claim by the Equity Committee that they were not provided with sufficient notice or information is without merit. "The Equity Committee has been fully informed with respect to the Settlement at every step along the way and the Debtors have appropriately responded to the Equity Committee's requests," Mr. Missner states. The Debtors also reviewed the issues in connection with the Bid and the Deposit and concluded that any outcome from litigation would be uncertain. "Even if the Debtors prevail in litigation, the extent of a damages claim may be limited to costs associated with their review and analysis of the Bid," Mr. Missner adds. Thus, the Debtors pursued and obtained the Settlement in the amount of $1,000,000, which they believe, is sufficient to cover the Debtors' costs associated with evaluating the Bid. While the Debtors had selected the Bid as the highest and the best, they did not agree to a definitive agreement based on it. The Debtors did not accept the Bid but instead selected it as the best and proceeded to negotiate a variety of points through which they hoped to enhance the Bid. Mr. Missner further explains that the Bid constituted a binding letter of intent on the part of CIT Group to negotiate in good faith, and that the withdrawal of the Bid constituted a breach of the implied duty of good faith and fair dealing. "The damages that the Debtors would have likely obtained are those that they did obtain -- the costs associated with evaluating the Bid and negotiating a purchase agreement," Mr. Missner adds. Having obtained a settlement to recoup these costs, the Debtors determined that litigation was not warranted and that the pursuit of litigation would waste valuable resources of their estates. Additionally, Mr. Missner explains to Judge Barliant that the question of damages was far from certain. One likely measure of damages would be the differences between the value of keeping the IT Leasing assets and the sale price in the Bid. "The Committee itself has repeatedly stated that CIT Group's Bid was not at full value," Mr. Missner says. Yet the Equity Committee would now have the Debtors demonstrate damages for CIT Group's withdrawal wherein the Committee did not support the sale in the first place. Thus, the Debtors believe that the Committee's objection to the Settlement lacks credibility. Therefore, the Debtors ask the Court to overrule the Equity Committee's objection. * * * After due deliberation, Judge Barliant authorizes the parties to execute the Settlement Agreement under which the Debtors shall retain $1,000,000 and shall return the remainder of the deposit, plus accrued interest, to CIT Group. In addition, the Settlement Agreement shall also provide for a mutual release to the Debtors and CIT Group. (Comdisco Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) COVANTA ENERGY: Wants Lease Decision Period Stretched to Nov. 27 ---------------------------------------------------------------- James L. Bromley, Esq., at Cleary, Gottlieb states that Covanta Energy Corporation and its debtor-affiliates want to extend their lease decision period under Section 365(d)(4) of the Bankruptcy Code. This is in relation to their un-expired nonresidential real property leases. The leases include some instruments that are not true leases, and the Debtors want to avoid their rejection at the 60-day deadline if they are found to be true leases. He explains that Debtors have approximately 320 un-expired leases of non-residential real property. Approximately 290 of the un-expired leases relate to leases of surface and mineral rights in California, which produce geothermal fluid from the ground used to generate electricity. Another 25 of the un- expired leases relate to leases of power generation facilities and/or the land upon which those facilities are located. The remaining un-expired Leases are leases for office space. The Debtors intend to pay post-petition obligations under the un- expired leases as they become due. Under Section 365(d)(4) of the Bankruptcy Code, Mr. Bromley submits, a debtor's un-expired leases of nonresidential real property may be deemed rejected unless they are assumed within the initial 60 days of a Chapter 11 case or are the subject of a motion to extend the statutory period. At these early stages of these complex Chapter 11 cases, rejection would harm the Debtors' estates by causing loss of one or more leases of real property that may be essential to the Debtors' reorganization. Likewise, premature assumption of real property leases would harm the estates by causing the Debtors to be required to cure pre-petition claims and to elevate landlord claims to administrative expense status before an informed decision can be made and a reorganization ensured. The Debtors' initial Section 365(d)(4) period expires on May 31, 2002. The Debtors will be unable to make reasoned decisions by that time as to whether to assume or reject all of the un- expired leases. Accordingly, by this Motion, the Debtors request that the Court extend the date by which the Debtors must assume or reject un- expired Leases by 180 days, to November 27, 2002. This should be without prejudice to the Debtors' right to seek further extension of specific leases. Mr. Bromley asserts that a multitude of operational issues that have arisen during the initial stages of the Debtors' Chapter 11 cases. These issues have required the full and immediate attention of the Debtors' management. It is virtually impossible for the Debtors to devote the resources necessary to complete their analysis of the un-expired leases and make informed decisions about all the leases to date. Given the numerous business and administrative emergencies that typically are attendant to the commencement of large Chapter 11 cases, the Debtors submit that they will not have adequate opportunity to carefully review and analyze each of the un-expired leases. In the normal statutory 60-day period, the Debtors would have to analyze (i) the economics of each un-expired lease, (ii) the benefits or burdens of each un-expired lease to the Debtors' estates, and (iii) whether each un-expired lease is necessary in connection with the Debtors' ongoing business operations. He contends that these factors render the statutory 60-day period insufficient in the Debtors' Chapter 11 cases. The Debtors submit that the relief requested herein will (i) avert the statutory forfeiture of valuable assets, (ii) promote the Debtors' ability to maximize the value of their Chapter 11 estates, and (iii) avoid needless administrative expenses by minimizing the likelihood of inadvertent rejections of valuable leases or premature and uninformed assumptions of leases. (Covanta Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) CRIIMI MAE: Taps Friedman Billings to Evaluate Strategic Options ---------------------------------------------------------------- The Board of Directors of CRIIMI MAE Inc. (NYSE: CMM) has hired investment banking firm Friedman, Billings, Ramsey and Co., Inc. (NYSE: FBR) to assist the Board with an evaluation of strategic alternatives designed to maximize shareholder value. FBR will help the Board analyze opportunities concerning refinancing of the Company's existing debt and other strategic alternatives, including the possible sale of assets or the Company. CRIIMI MAE Chairman William B. Dockser said, "We have been committed to maximizing shareholder value since CRIIMI MAE was founded in 1989. Since emerging from Chapter 11 in April 2001, the Company has been pursuing strategies for replacing its exit financing. This exit financing permitted CRIIMI MAE to pay off its creditors in full and successfully emerge from bankruptcy. However, it contains restrictions that limit the Company's financial flexibility. This, we believe, has resulted in the value of CRIIMI MAE's shares trading below the Company's book value per share. Given what we believe to be a stabilizing trend in commercial real estate mortgage loans, we believe this is the right time to hire FBR. The Board will look to FBR for assistance in exploring possible ways of achieving improved financial flexibility and other strategic alternatives to maximize shareholder value." The Company also announced that it believes that the $7.00 per share offer received on May 8, 2002 is inadequate and not in the best interest of the shareholders. CRIIMI MAE Inc. (NYSE: CMM) is a commercial mortgage company based in Rockville-Md. CRIIMI MAE holds a significant portfolio of commercial mortgage-related assets and performs, through its servicing subsidiary, mortgage servicing functions for $18.8 billion of commercial mortgage loans. As of March 31, 2002, shareholders' equity was approximately $238 million or $13.81 per diluted share. For further information, see CRIIMI MAE's Web site: http://www.criimimaeinc.com Shareholders and securities brokers should contact Shareholder Services at (301) 816-2300, e-mail shareholder@criimimaeinc.com, and news media should contact James Pastore, Pastore Communications Group LLC, at (202) 546- 6451, e-mail pastore@ix.netcom.com Friedman, Billings, Ramsey Group, Inc. (NYSE: FBR) is a financial holding company for businesses that provide investment banking, institutional brokerage, specialized asset management, and banking products and services. FBR provides capital and financial expertise throughout a company's lifecycle and affords investors access to a range of proprietary financial products and services. Headquartered in the Washington metropolitan area, FBR has offices in Arlington, Va., and Bethesda, Md., and in Atlanta, Boston, Charlotte, Cleveland, Dallas, Denver, Irvine, Ca., New York City, Portland, Seattle, London, and Vienna. Bank products and services are offered by FBR National Bank & Trust, member FDIC and an Equal Housing Lender. DA CONSULTING: Falls Short of Nasdaq Minimum Listing Standards -------------------------------------------------------------- DA Consulting Group (Nasdaq: DACG), a global consulting firm specializing in corporate knowledge services, said that The Nasdaq Stock Market, Inc., has notified the Company its common stock will be delisted from the Nasdaq National Market because the Company did not meet the minimum market value of publicly held shares of $5,000,000 and a minimum closing bid price per share of $1.00 over the previous 30 consecutive trading days and, as a result, did not comply with Marketplace Rules 4450(a)(2) and 4450(a)(5) as required by the Nasdaq National Market. DA Consulting Group has requested a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. The hearing request will defer the delisting of the Company's securities pending the Panel's decision. There can be no assurance the Panel will grant the Company's request for continued listing. In the event the Panel does not grant the Company's request and the Company's common stock is delisted from the Nasdaq National Market, the Company will consider submitting a transfer application and applicable listing fees to transfer its common stock to The Nasdaq SmallCap Market prior to the delisting. If the Company submits a transfer application, it will then have until August 13, 2002 to meet the $1.00 minimum bid price requirement. Based solely on the Company's review of The Nasdaq SmallCap Market listing criteria, the Company has no reason to believe that an application for listing its common stock on The Nasdaq SmallCap Market would not receive a favorable determination by Nasdaq. ENRON CORP: Judge Gonzalez Extends ENA Cash Freeze Permanently -------------------------------------------------------------- Judge Gonzalez is prompted to reconcile concerns arising from certain findings in the interim cash management report from Harrison J. Goldin, the Enron North America Corp. Examiner. These concerns were raised in related pleadings filed by parties seeking to appoint additional examiners, trustees and committees in the Chapter 11 cases. Accordingly, Judge Gonzalez orders that: (1) The ENA Cash Freeze is extended permanently subject to the right of ENA to apply to terminate the ENA Cash Freeze with at least 20 day's notice to the ENA Examiner and other parties in interest; (2) Through the Freeze Period, the Examiner is to meet with the parties to discuss a follow-up report regarding a proposed methodology for repayment of the Net Intercompany Receivable and whether repayment may occur in connection with the treatment of pre-petition inter-company claims between Enron Corp. and ENA in a Chapter 11 plan; (3) Through the Freeze Period, the Examiner file a follow-up report regarding inter-company advances: -- between ENA and its subsidiaries and Enron Corp. and -- between ENA and its subsidiaries, if any, and their impact on the individual ENA entities and on repayment of the Net Intercompany Receivable; (4) The Examiner continue to monitor the Bankruptcy Transaction Review Committee with respect to Enron's credit valuation and other procedures regarding transfers to Debtors and non-Debtors; (5) The Examiner report on his assessment of the Debtors' proposed overhead cost allocation and, if necessary or appropriate, recommend amendments on or before July 22, 2002 as long as the Debtors propose their overhead allocation methods on or before July 8, 2002; (6) The Examiner investigate and file a follow-up report on cash sweeps from ENA's subsidiaries to ENA and payments from ENA to its subsidiaries, including a recommendation as to whether such transactions should continue and whether a Cash Freeze should apply to those sweeps; (7) In the event the Court approves a modification to the Debtors' DIP financing, the Examiner file a supplemental report addressing how the modification affects: -- ENA, and -- the recommendations included in the Report and in any subsequent report; (8) With ENA in the process of winding down the Trading Book and selling its other assets, the ENA Examiner will work with the Debtors, the statutory creditors' committee, and other parties in interest to facilitate the Chapter 11 plan process for ENA and its subsidiaries as expeditiously as possible; (9) This Order is without prejudice to the rights of any party in interest raising substantive consolidation claims in respect of any Debtor; (10) The Examiner investigate inter-company claims and/or transfers between ENA and Enron Natural Gas Marketing Corp. and ENGMC and other affiliates of Enron, and consideration, if any, for same; (11) Prior to resolution by trial or otherwise of the action entitled JPMorgan Chase Bank v. Liberty Mutual Ins. Co., et al., 01 Civ. 11523 (JSR) pending in the United States District Court for the Southern District of New York, the Examiner, unless otherwise ordered by the Court, will not conduct any discovery regarding any matter relating to Mahonia Limited or Mahonia Natural Gas Limited, including, without limitation, transactions between Mahonia and either of ENA or ENGMC, as the case may be, relating to forward contracts involving the sale and delivery of oil and natural gas and the proceeds of the transactions. This is provided however, that the Examiner may request from parties to the Surety Litigation copies of documents produced in discovery in the Surety Litigation and the transcripts of depositions conducted in the Surety Litigation, to the extent that they pertain to the inter- company claims or transfers or to the consideration therefore, in accordance with and subject to any protective order obtained in the Surety Litigation and any other appropriate confidentiality protections; (12) The Examiner and any examiner appointed for Enron Corp. must consult with one another to avoid duplication of efforts regarding the scope of any investigation to be conducted. They should endeavor not to create situations in which both Examiners are requesting potentially overlapping discovery from any third party witness; (13) The Examiner, to the extent possible, must avoid duplication of effort of the Debtors and any official Committee in connection with investigations to be pursued; (14) The Examiner must, on or before August 15, 2002 file a written report regarding the status of his investigations; (15) Upon entry of two orders memorializing the Court's prior rulings on the Debtors' requests to extend exclusivity and to implement a key employee retention plan, the scope of the Examiner's duties will be further expanded; (16) entry of this Order is without prejudice to the rights of the parties who requested, or joined in the requests for: (a) appointment of a Chapter 11 trustee for ENA, (b) appointment of a separate creditors' committee, or (c) permanent separation of ENA from the cash management system, to pursue hearings and final rulings on such matters, and without prejudice to the rights of ENA and other parties in interest to oppose those requests and to contend the Examiner's duties, in whole or in part, are cause to deny those requests. (Enron Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900) FLAG TELECOM: Wins Court Nod to Obtain Super-Priority Financing --------------------------------------------------------------- FLAG Telecom Holdings Ltd.'s continued use of the Lenders' cash collateral is approved and Judge Allan L. Gropper issues a second interim Order granting certain Debtors emergency post- petition financing on these revised terms. The Lender: FLAG Telecom Holdings Ltd. Debtor-Borrowers: FLAG Limited, FLAG Telecom Group Services Limited and FLAG Asia Limited as debtors in possession in cases under Chapter 11 of the Bankruptcy Code. The Non-Debtor Subsidiaries: FLAG Telecom Ireland Limited and FLAG Telecom Development Limited. The Borrowers The Debtor-Borrowers and the Non-Debtor Subsidiaries are referred to herein collectively as the Borrowers and individually as a Borrower. Use of Cash of FTHL: The Borrowers are authorized to use the cash of FTHL to pay actual expenses incurred in the ordinary course of business as consistent with past practice and of the types and in the amounts set forth in the monthly budget, pursuant to inter-company loans on borrowing terms consistent with past practice. This is provided, however, that the amount of the Debtors' disbursements does not exceed 110% of the total amount set forth in the budget without consent of a majority of the Official Committee or Committees of Unsecured Creditors. If no Creditors' Committee has been duly appointed, then by consent of a majority of a committee composed of the bondholders of FTHL willing to serve, the bondholders of FLAG Limited willing to serve, Alcatel Submarine Networks (if willing to serve) and Reach Ltd. (if willing to serve). The Debtors will provide the Creditors' Committee, or the Steering Committee if Creditors' Committee has not been duly appointed, with a proposed monthly budget 10 days prior to the end of each month for the next month's expenses. The Creditors Committee, or the Steering Committee if a Creditors' Committee has not been duly appointed, will have five days to object by written notice to counsel to the Debtors to the proposed budget. If no written objection is given, then the monthly budget will become an approved budget. If written objection is given, then if the Creditors' Committee, or the Steering Committee if no Creditors' Committee has been duly appointed, seeks to prohibit the use of cash, it must file an objection with the Court objecting to the Borrower's continued use of FTHL's cash. The authority of the Borrowers to use the FTHL cash in accordance with the proposed budget will continue until the Court has issued an order, upon which the Borrowers' right to use FTHL's cash will be determined by the Court's order. Nothing herein restricts the ability of the Borrowers and/or FTHL to move the Court for additional use of FTHL's cash. If an order for use of additional cash is granted, the use of the additional cash will be governed by the Court's order. Disclosure of Use of Cash: The Debtors will disclose to the Creditors' Committee, or the Steering Committee if a Creditors' Committee has not been duly appointed, the use of the FTHL cash on a rolling weekly basis for each week. The disclosure of each week's cash use will be transmitted to counsel to the Creditors' Committee, or if no Creditors' Committee has been duly appointed, then to Kasowitz, Benson, Torres & Friedman LLP (counsel to the ad hoc FTHL bondholders' committee), Proskauer Rose LLP (counsel to Alcatel) and Akin, Gump, Strauss, Hauer & Feld (counsel to the ad hoc FLAG Limited bondholders' committee) within seven days after the end of each weekly period. Adequate Protection by Debtor-Borrowers for Use of Cash: As adequate protection for the use of the FTHL's cash, FTHL will be granted a super-priority administrative claim, subject only to (i) a $6.9 million carve-out for professionals authorized to be paid from the Debtors' estates, (ii) a $100,000 carve-out for expenses of the trustee in the event of a conversion to a case under Chapter 7 of the Bankruptcy Code and (iii) a carve-out for statutory amounts owed to the United States Trustee, pursuant to Section 364(c)(1) against each Debtor-Borrower receiving cash, in the amount of cash received by the Debtor-Borrower that has not be repaid to FTHL. There will also be a lien on the Debtor-Borrower's inter-company accounts receivable. Borrowing by Non-Debtor Subsidiaries: Any disbursement of FTHL cash to a Non-Debtor Subsidiary (which may occur through direct or indirect funding by FTHL) will be deemed to be an inter-company loan to the Non-Debtor Subsidiary. Such inter-company loans will be secured by a lien on the inter-company account receivable of the Non-Debtor Subsidiary receiving FTHL cash. Borrowing by FLAG Atlantic: If the financial institutions that lent money to FLAG Atlantic Limited pursuant to that certain Credit Agreement dated as of October 8, 1999 consent (consent will be communicated to the Debtors and the Court by the agent), then FTHL's cash will be lent to FLAG Atlantic pursuant to an approved budget in accordance with the provisions regarding Use of Cash of FTHL and Disclosure of Use of Cash, above. Adequate Protection for Borrowing by FLAG Atlantic: As adequate protection for the use of FTHL's cash to FLAG Atlantic, FTHL will receive a priming lien on all assets of FLAG Atlantic, its wholly-owned subsidiaries and FLAG Atlantic Holdings Limited pursuant to Section 364(d), and a priority administrative expense claim pursuant to Section 364(c) in the amount of FTHL cash received by FLAG Atlantic. Events of Default and Remedy: If the Borrowers (i) fail to provide a monthly budget five days prior to the end of each month for the next month's expenses or (ii) in any month, use cash in an amount that exceeds 110% of the total amount set forth in the budget for that month without the consent of the Creditors' Committee, or the Steering Committee if no Creditors' Committee is duly appointed, in accordance with the provisions regarding Use of Cash of FTHL, above, then after the end of the period covered by the monthly budget, the cash use order and the Borrowers' and FLAG Atlantic's authority to use the cash of FTHL will terminate at the end of the period covered by the latest budget. Enforceability: The Creditors' Committee, or the Steering Committee if no Creditors' Committee is duly appointed, will be entitled to enforce the rights contained herein. (Flag Telecom Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Seeks Exclusivity Extension Until September 30 --------------------------------------------------------------- Global Crossing Ltd., and its debtor-affiliates request a 125- day extension of their exclusive periods during which to propose and file a plan of reorganization and solicit creditors' acceptance of that plan. The Debtors ask the Court for an extension of their Exclusive Plan Filing Period to September 30, 2002 and their Exclusive Solicitation Period through November 29, 2002. The Debtors make it clear that this request, pursuant to Section 1121(d) of the Bankruptcy Code, is without prejudice to their rights to seek additional extensions thereof. According to Michael F. Walsh, Esq., at Weil Gotshal & Manges LLP in New York, New York, the Exclusive Periods afford the Debtors full and fair opportunity to propose a consensual plan and to solicit acceptance of the plan. The primary objective of a Chapter 11 case is the formulation, confirmation, and consummation of a consensual Chapter 11 plan. It is the Debtors' intention to achieve this objective without undue delay. To terminate the Exclusive Periods in these Chapter 11 cases before the process of plan negotiation has begun is to defeat the very purpose of Section 1121 of the Bankruptcy Code. By any reasonable measure, Mr. Walsh contends, the Debtors' Chapter 11 cases are sufficiently large and complex to warrant the requested extension of the Exclusive Periods. It has been widely reported that these Chapter 11 cases are among the largest such cases in history. In just the first 80 days of these cases, there are over 960 docket entries, amounting to an average of 14 docket entries per business day since these cases were filed. To date, six adversary proceedings have been filed in relation to these Chapter 11 cases. The Debtors have also had to respond to over 400 requests for additional adequate assurance filed by utility companies and telecommunications providers. These numbers evidence the sheer size of these cases and the flurry of near constant activity on a daily basis with which the Debtors must contend. In terms of complexity, Mr. Walsh points out that these cases involve 56 Debtors located throughout the world, approximately 141 non-debtor foreign subsidiaries, thousands of employees, approximately 35,000 creditors, and approximately $15 billion of invested capital. The Debtors, collectively, are party to over 270,000 executory contracts. The Debtors are currently preparing their schedules of assets and liabilities, schedules of current income and expenditures, schedules of executory contracts and un-expired leases, and their statement of financial affairs, and will file 56 separate Schedules and Statements. The Debtors have had to respond to numerous creditor-initiated legal proceedings, including several motions to compel, orders to show cause, and motions to lift the automatic stay. 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. As with other large and complex reorganization cases, Mr. Walsh believes that the Debtors' initial Exclusive Periods do not provide adequate time to develop a consensual Chapter 11 plan. The sheer size and complexity of the Debtors' Chapter 11 cases, standing alone, constitutes sufficient cause to extend the Exclusive Periods. The Debtors' cases are of the size and complexity that Congress and the courts have envisioned and recognized as warranting an extension of the Exclusive Periods. Courts considering an extension of the debtor's Exclusive Periods may also assess the Debtors' progress during the initial stages of a case towards rehabilitation and development of a consensual plan. Mr. Walsh submits that the Debtors have taken significant strides to establish a framework to effectuate the Debtors' rehabilitation and the development of a plan of reorganization, including negotiating with the Creditors' Committee, establishing Auction Procedures, implementing expenditure reductions, Assets Analysis, rejecting Leases and Executory Contracts, and Key Vendor Negotiations. These activities are but a sampling of the multitude of critical components of the Chapter 11 cases that will affect the Debtors' reorganization and the scope and contours of a Chapter 11 plan. It is manifest that the Debtors have taken all necessary steps during the first 80 days of these bankruptcies toward rehabilitation and development of a consensual plan. Courts may also assess whether a debtor's motives for requesting an extension of the Exclusive Periods are proper. During the first 80 days of the Chapter 11 cases, Mr. Walsh claims that the Debtors have behaved in a manner consistent with their fiduciary obligations to their creditor constituencies, evidencing proper motive in seeking an extension of the Exclusive Periods. The Debtors have demonstrated good faith in their efforts to negotiate with all relevant parties at this critical stage of the reorganization. The Debtors have recognized the need to deal with all parties in interest in these cases, and have consistently conferred with these constituencies on all major substantive and administrative matters, often reaching an agreement or a compromise. Mr. Walsh assures the Court that granting an extension of the Exclusivity Periods in this instance would not give the Debtors unfair bargaining leverage over creditor constituencies. Instead of prejudicing any party in interest, such an extension will afford the Debtors an opportunity to propose a realistic and viable Chapter 11 plan. Thus, failure to extend the Exclusive Periods as requested would defeat the very purpose of Section 1121 of the Bankruptcy Code. The purpose of Section 1121 is to provide the debtor with a reasonable opportunity to negotiate with creditors and other parties in interest and propose a confirmable Chapter 11 plan. Courts considering an extension of the debtor's Exclusive Periods may consider the existence of unresolved contingencies, the resolution of which will impact the debtor's ability to formulate a confirmable plan. Mr. Walsh informs the Court that there are a number of unresolved contingencies which, when resolved, will determine the contours of the any viable plan of reorganization, including: A. The results of the Auction will determine the framework for any plan of reorganization in these cases. Until the conclusion of the Auction, it would be manifestly impossible to draft, let alone negotiate, the terms of any such plan. Assuming the results of the Auction are confirmed by the Court on July 11, 2002, the Debtors must thereafter first prepare for and consummate the transaction approved by the Court. Only after the approved transaction closes can the Debtors commence to formulate and draft their plan of reorganization. Once drafted, the plan must be circulated to the Debtors' constituent creditor groups. It is only at that point that plan negotiations can commence in earnest. The Auction timetable itself - which was approved by the Court, the Creditors' Committee, and the Senior Secured Lenders - necessitates that the Exclusive Periods be extended for the Debtors to have a realistic opportunity to formulate a confirmable plan. B. Further, as a result of the sheer magnitude and complexity of their cases, the Debtors have been constrained to seek a further extension of time - until May 31, 2002 - to file their Schedules and Statements. Thereafter, the Debtors will seek an order fixing a bar date for filing claims in these cases. It is indisputable that any meaningful Chapter 11 plan must consider the nature and extent of all claims. It is highly unlikely that a confirmable plan could be proposed in these cases before the Debtors have had an adequate opportunity to assess the full nature, validity, and extent of the claims that will be asserted against them. Any Chapter 11 plan proposed by the Debtors prior to the bar date and prior to a meaningful analysis of the claims ultimately filed would be premature. For the same reason, no other party in interest in these cases would be in a position to file a confirmable plan. C. The Debtors need additional time to continue their negotiations with the Creditors' Committee and the Senior Secured Lenders. Such negotiations are necessary to establish the parameters of a Chapter 11 plan and the terms and conditions for the formulation of a confirmable plan. These discussions are in their preliminary stages and much more time and resources will have to be devoted by the parties in furtherance thereof. Courts considering an extension of a debtor's exclusive period may also assess its liquidity and solvency. Mr. Walsh maintains that the Debtors have sufficient liquidity to pay - and are paying - their post-petition bills as they come due. Since the Commencement Date, the Debtors have taken many affirmative and effective steps towards stabilizing their businesses. Through prudent business decisions and cash management, the Debtors have sufficient resources to meet all projected post-petition payment obligations. The Debtors have $780 million in cash and, based on projected cash outflows, anticipated new financing, and asset sales, have sufficient cash to fund its Chapter 11 cases. The Debtors are in the process of disposing of non-profitable and non-core assets to raise cash and reduce expenses. Thus, the Debtors are managing their businesses effectively and are preserving - indeed, enhancing - the value of their assets for the benefit of creditors. A hearing on the motion is scheduled on June 3, 2002. (Global Crossing Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Denies New York Times Report Re Deal with Enron ---------------------------------------------------------------- Global Crossing issued a statement responding to a report in The New York Times May 19, 2002 edition regarding a transaction among Global Crossing, Enron and Reliant Resources. Global Crossing stated that, contrary to assertions in the Times article, the transaction in question did not increase Adjusted EBITDA, and was properly recorded as a liability on the balance sheet. Global Crossing confirmed that it entered into the transaction, which included an agreement to purchase approximately $17 million of network services from Enron to be paid over eight years, and an agreement to sell $17 million of network services to Enron, to be paid immediately upon completion of the transaction. Global Crossing recorded the $17 million owed to Enron as a liability. The $17 million of services sold to Enron was being recognized by Global Crossing as revenue over the life of the contract, and the cash received was not recorded as either Cash Revenue or Adjusted EBITDA. 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. On the same date, the Bermuda Court granted an order appointing joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the U.S. Bankruptcy Court and the Supreme Court of Bermuda. On April 23, 2002, Global Crossing commenced a Chapter 11 case in the United States Bankruptcy Court for the Southern District of New York for its affiliate, GT UK, Ltd. Please visit http://www.globalcrossing.comor http://www.asiaglobalcrossing.comfor more information about Global Crossing and Asia Global Crossing. Global Crossing Holdings Ltd.'s 9.625% bonds due 2008 (GBLX3), says DebtTraders, are quoted at a price of 2.125. See http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX3for real-time bond pricing. GLOBAL TIRE: Indenture Trustee Issues Updates to Bondholders ------------------------------------------------------------ The Bank of New York, as indenture trustee to the holders of the $9.25 million Sumter County Industrial Development Authority Revenue Bonds, Series 1997 reports that, Global Tire Recycling of Sumter County, the Borrower, filed a chapter 11 bankruptcy protection on December 21, 2001 in the Middle District of Florida. As a result of this bankruptcy filing, the Trustee is stayed from commencing any collection or other remedial action against the Borrower. The Trustee, on behalf of the holders of the Bonds, holds liens on certain of the Borrower's property (including certain Cash Collateral). The Debtor sought authorization from the Bankruptcy Court to use the Cash Collateral to remain in operation. The Trustee clarify that it did not oppose the Borrower's use of Cash Collateral, but it did file a limited objection stating that the Borrower failed to provide a budget suitable for governing expenditures under a cash collateral order and satisfactory to the Trustee. The Court authorized the Debtor to use the Cash Collateral through June 5, 2002 and granted the Trustee postpetition replacement liens in which the Trustee held a perfected security interest with such postpetition liens having the same priority, validity, and extent as the prepetition liens. The Trustee relates that the Official Committee of Bondholders sought authority from the Court to employ counsel in connection to the Borrower's bankruptcy case, and requested that the Borrower disburse $15,000 of the Cash Collateral to its counsel as a retainer. The Committee also asked the Court for an unlimited use of the Cash Collateral to pay the fees and expenses of its counsel, other professionals proposed to be retained and other expenses of the Committee. The Trustee points out that the Borrower is near administrative insolvency and that the Committee's expenses will only drain the Cash Collateral available for reorganization. The Court later ordered that the Committee can retain its counsel but cannot use the Cash Collateral to compensate its counsel. The Trustee added that it has filed a proof of claim on behalf of all holders of Bonds and that the individual holders of Bonds need not file individual proofs of claim relating to the Bonds. The Trustee gives no assurance to the Bondholders as to the amount or time of payment but assures the bondholder that it will continue to monitor and provide updates as information becomes available. As of April 24, 2002, the Trustee held trust funds in connection with the Bonds: Debt Service Reserve Fund $151,459 Interest Account $47 Principal Account $435 Global Tire Recycling of Sumter County, doing business as Global Tire Recycling filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Middle District of Florida in Orlando. Peter N. Hill, Esq. at Wolff, Hill, McFarlin & Herron, P.A. represents the Debtor in its restructuring efforts. GREYVEST CAPITAL: Defaults on $11.7 Million Secured Loan -------------------------------------------------------- Greyvest Capital Inc.(TSE:GFI) said that it has been unsuccessful in negotiating a further extension required with respect to an $11.7 million secured loan that matured in June 2001. Consequently, the lender has declared the loan in default and all amounts outstanding under the loan are now due and payable immediately. The lender also notified the Company that it is enforcing its security interest and rights with respect to its general security agreement and collateral and Greyvest Capital Inc. is not contesting these proceedings. All directors and officers resigned effective May 16, 2002. HA-LO: Wants Plan Filing Exclusivity Further Extended to July 2 --------------------------------------------------------------- Ha-Lo Industries and its affiliated debtors ask the U.S. Bankruptcy Court for the Northern District of Illinois to further extend their exclusive periods to file a plan and to solicit acceptances of the plan. The Debtors want the Court to enlarge their exclusive plan filing period to run through July 2, 2002 and to solicit acceptances of that plan through August 30, 2002. The Debtors assert that they have accomplished several important goals essential to their reorganization and emergence from bankruptcy: a) negotiation of a court-approved $31 million DIP Facility to assure that the Debtors would be able to meet their ongoing obligations to vendors, employees and sales representatives; b) development and implementation of a court-authorized vendor retention program to maintain or restore vendor confidence, as well as to improve the Debtors' liquidity; c) development and implementation of a court-authorized vendor retention program to maintain or restore vendor confidence, as well as to improve the Debtors' liquidity; c) development and implementation of a court-authorized employee retention program; d) development and implementation of a court-authorized sales representative program; e) analysis and rejection of approximately 100 executory contracts and unexpired leases to reduce or eliminate expenses and eliminate non-economic business units/contracts; f) development and implementation of a business consolidation program. Pursuant to which Ha-Lo rejected the highly expensive lease of its worldwide headquarters and consolidated its administrative operations with those of Lee Wayne in Sterling, Illinois, thereby reducing annual occupancy and personnel expenses by an aggregate amount in excess of $20 million; g) sale of Ha-Lo's Detroit division for approximately $8 million; h) sale of Halo's Canadian subsidiary for approximately $2 million; i) pending sale of certain assets if Ha-Lo Sports, Inc., a subsidiary of Ha-Lo, for approximately $450,000 in cash and credit; and j) radical restructuring of the business model described in Ha-Lo's recent motion to reject certain unexpired non- residential real estate leases and related executory contracts. The Debtors relate that with their efforts, they have achieved permanent elimination of some $30 million of recurrent annual expenses and the elimination of some $4 million in negative EBITDA. The Debtors continue to work with their major constituencies to rehabilitate their businesses and develop a viable plan of reorganization. HA-LO Industries, Inc. provides full service, innovative brand marketing in the custom and promotional products industry. The Company filed for chapter 11 protection on July 30, 2001. Adam G. Landis, Eric Lopez Schnabel, Mary Caloway at Klett Rooney Lieber & Schorling represent the Debtors in their restructuring efforts. HARBISON-WALKER: Stay Against Halliburton Extended Until June 4 --------------------------------------------------------------- Halliburton Company (NYSE: HAL) has reached agreement with Harbison-Walker Refractories Company and the Official Committee of Asbestos Creditors in the Harbison-Walker bankruptcy to consensually extend the period of the stay contained in the Bankruptcy Court's temporary restraining order until June 4, 2002. The Court's temporary restraining order, which was originally entered on February 14, 2002, stays more than 200,000 pending asbestos claims against Halliburton's subsidiary Dresser Industries, Inc. For more details on the stay entered by the Court on February 14, and extended on February 21 and April 4, Halliburton refers to its earlier press releases of February 22, 2002 and February 14, 2002. Halliburton, founded in 1919, is one of the world's largest providers of products and services to the petroleum and energy industries. The company serves its customers with a broad range of products and services through its Energy Services Group and Engineering and Construction Group business segments. The company's World Wide Web site can be accessed at http://www.halliburton.com ICG COMMS: Will Slash Workforce by 10 to 15% in Second Quarter -------------------------------------------------------------- ICG Communications Inc. will release approximately 10 percent to 15 percent of its 1,382 nationwide workforce in second quarter 2002. Employees were notified via a conference call with the company's Chief Executive Officer Randall E. Curran, although details of the plan are expected within the month. "Taking decisive action now positions ICG to thrive upon its emergence," said Curran. "ICG employees have demonstrated tremendous strength of character having turned the company around over the past 18 months, and at this time, we must act proactively to address near-term market realities." ICG anticipates emerging from bankruptcy protection later this month with approximately $248 million in funded debt, $160 million equity value and $99 million in cash. The company recently received Court approval of its Plan of Reorganization outlining a $65 million exit-financing package, which will serve to re- capitalize ICG. "ICG will have one the strongest balance sheets in the industry and combined with our nationwide and local footprint, the company is poised to deliver for our customers," said Curran. Curran joined ICG in September 2000 and has successfully led ICG's turnaround both operationally and financially over the past 18 months in which the company nearly doubled the traffic on its network and recorded approximately $40 million in EBITDA in 2001. ICG is expected to complete its financial restructuring in the late spring of 2002. (ICG Communications Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) IT GROUP: Must Decide on 3 Contracts with South Florida Water ------------------------------------------------------------- South Florida Water Management District asks the Court for relief from the automatic stay to proceed with claims against third parties. Matthew G. Zaleski, III, Esq., at Campbell & Levine, LLC in Wilmington, Delaware, assures the Court that South Florida Water does not seek to prohibit The IT Group, Inc., and its debtor- affiliates from completing the job nor from losing their right to profit. They do ask that an objective review of the Contracts be made immediately to determine the Debtors' ability to complete the work before the contracted deadlines. Pursuant to a 1988 lawsuit by US Government against South Florida Water and as mandated by the Florida Court, South Florida Water is made to comply with the Government's demand to restore, preserve and protect the Everglades National Park and the Arthur R. Marshal Loxahatchee National Wildlife Refuge and engage in an effort to eliminate phosphorous, specifically with the creation of 5 Storm Water Treatment Areas (STAs). The STAs must be completed on or before established deadlines pursuant to the attached agreement that is incorporated by the mandate of the Florida Court as well as the Everglades Forever Act (EFA). Four of the five STAs have been constructed and their respective contracts have been paid while the last STA to be constructed is STA 3/4. On May 3, 2001, Mr. Zaleski continues, South Florida Water solicited bids for the construction of STA 3/4. IT Corporation was the successful bidder for the construction of STA 3/4 which consists of three contracts: 1. The C-E301 Contract: Requires the construction of a supply canal, is approximately 75% complete and entitles the Debtors to receive $9,259,584. Performance and payment bond is provided by Travelers Casualty and Insurance Company of America et al; 2. The C-E302 Contract: Requires the enlargement of an existing canal, is approximately 80% complete and entitles the Debtors to receive $4,198,000. Performance and payment bond is provided by Travelers Casualty and Insurance Company of America et al; and, 3. The C-E307 Contract: requires the construction of STA 3/4 works, is only approximately 12% complete and entitles the Debtors to receive $31,457,700. Performance and payment bond is provided by Company of Hartford et al. Mr. Zaleski submits that the subcontractors of each of the contracts have abandoned work on the contracts because they have not been paid for many months. Currently, the only labor on the project premises is provided by the Debtors' employees. It is believed the Debtors can complete the work on C-E301 with their own labor before the deadline of April 20, 2003 and the work on C-E302 before the deadline of August 30, 2002. However, Mr. Zaleski believes that at the current rate of production, the completion of C-E307 will take 25 years. Unless production is increased substantially, the construction of STA 3/4 will not be completed by the October 1, 2003 deadline. The C-E307 Contract requires the building of an STA, canals and levies and providing a method for the waters from becoming laden with phosphorous in the future. Before the levies and canals can be built, however, IT must continue blasting but the blasting subcontractor left the job months ago because of nonpayment. Mr. Zaleski states that, because the time is limited for completing the C-E307 job, and the amount of work necessary to complete the C-E307 job before the deadline is rather severe, South Florida Water will most likely need to proceed with claims against the payment and performance bonds. The request upon the sureties or bonds is merely an act by third parties to enforce the terms and conditions of their contract which is neither property of the estate as defined Section 541 of the Bankruptcy Code nor a request by a creditor seeking enforcement of a pre- petition debt against the debtor in violation of Section 362(a). Mr. Zaleski adds that because of the time constraints, the District needs for IT to either commit in completing the jobs, assign the jobs, or terminate the Contracts. In any of the three events, the commitment must be made in the near future as any ability for the bonds to find substituted performance will diminish in the near future as the possibility of performance will become less probable. * * * The Court directs the Debtors to decide whether to assume or terminate the Contracts and to notify South Florida Water Management District in writing of their election. (IT Group Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) KAISER ALUMINUM: Taps Yantek for Contract Consulting Services ------------------------------------------------------------- Kaiser Aluminum Corporation and its debtor-affiliates ask for the Court's permission to allow them to retain and employ Yantek Consulting Group, Inc. as Contract Consultants for their executory contract and un-expired leases in the Chapter 11 cases. The Debtors and Yantek have previously structured a consulting agreement on April 6, 2002. In the agreement, Yantek would perform, among others, these services: a. the designing and maintaining of an executory contract database; b. the education of operational parties of Kasier Aluminum Corporation; c. the collection of the data; d. assistance with the assumption or rejection of priority contracts; e. the linking of scheduled and claimed items to specific executory contracts; f. the reconciliation of cure payments and the sending of cure notices; g. the reconciliation of cure objections and rejection damage claim objections; h. the negotiation of settlements with various creditors relating to executory contracts and leases; i. the analysis and re-characterization of lease agreements; j. estimation of payments under plan of reorganization; and, k. other further services as the Debtors may request in the Chapter 11 cases. Patrick M. Leathem, Esq., at Richards, Layton & Finger in Wilmington, Delaware, asserts that the Debtors require qualified professionals to render these essential professional services. In particular, the Debtors have determined that they require the assistance of such consultants to determine the appropriate treatment of numerous contracts and leases in these cases and minimize claims arising from the assumption and rejection of these contracts and leases. Mr. Leathem claims that Yantek is particularly well-suited to serve as the Debtors' Contract Consultants. Yantek has extensive experience with the administration and evaluation of executory contracts and un-expired leases in bankruptcy and the negotiation of issues regarding these contracts and leases. In particular, Yantek's professionals have provided services to debtors in numerous Chapter 11 cases, including those of Burlington Industries, Inc., Pillowtex, Inc,. Purina Mills, Inc., The Elder-Beerman Stores Corp., Federated Department Stores, Inc., and Allied Stores Corporation, Montgomery Ward & Co., Incorporated, R.H. Macy & Co., Inc., and Wang Laboratories. In addition, Mr. Leathem says that, as a preliminary work performed prior to the date of this application, Yantek is familiar with the general scope and nature of the Debtors' contracts and leases and related financial systems. Accordingly, Yantek has developed relevant experience and expertise regarding the Debtors that will assist it in providing effective and efficient services in these cases. Pursuant to the terms and conditions of the Consulting Agreement and subject to the approval of the Court, Yantek will be recompensed at an hourly basis for its professional services plus reimbursement of actual and necessary out-of-pocket expenses. According to Mr. Leathem, Frank Yantek, President of Yantek Consulting, bills $190 an hour for his services while all other professionals employed by Yantek charge a maximum of $175 per hour for their services. Mr. Yantek ascertains that Yantek has not been, and is not currently employed by any interested parties in matters related or unrelated to these Chapter 11 cases. Accordingly, Yantek stands as a "disinterested person" in these cases. (Kaiser Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) KAISER ALUMINUM: First Quarter 2002 Net Loss Tops $64 Million ------------------------------------------------------------- Kaiser Aluminum Corporation reported a net loss of $64.1 million for the first quarter of 2002, compared to net income of $119.6 million for the first quarter of 2001. The year-ago period included a number of special items and adjustments; excluding those items, the company had a net loss of $9.1 million for the first quarter of 2001. Net sales in the first quarter of 2002 were $370.6 million, compared to $480.3 million in the year-ago period. Commenting on the company's first-quarter performance, Kaiser President and Chief Executive Officer Jack A. Hockema said, "Excluding non-recurring items and adjustments from both periods, our results were below those of the year-ago quarter due largely to sharply higher costs for pension funding, postretirement medical benefits, and other benefit costs -- and a 50% decline in shipments of flat-rolled products, which reflected weak demand for aerospace and general engineering products. Additional factors in the quarterly operating results were lower realized prices and shipments in our primary aluminum business unit. Partially offsetting these unfavorable factors were improved cost performance at the Gramercy, Louisiana, alumina refinery and the 49%-owned Kaiser Jamaica Bauxite Company; improved results in the Engineered Products segment; and amortization of deferred income from metal hedging contracts closed during the quarter." "We were pleased to see clear signs of improvement in our Engineered Products and Bauxite & Alumina business units," said Hockema. "Our Engineered Products business unit reported its best segment operating income since the third quarter of 2000; in particular, operating income increased by 18% relative to the year-ago period as a result of reduced energy and overhead costs even though shipments declined modestly. Separately, the Bauxite & Alumina business unit reported a significant reduction in its operating loss in relation to that of the year-ago period due largely to planned reductions in operating costs at Gramercy, which now is consistently operating at just below 100% of its new annual rated capacity of 1.25 million metric tonnes and is steadily progressing toward its efficiency targets. "The company continues to focus on meeting the needs of its customers and in making continuous improvement in its operational performance," said Hockema. "While our Chapter 11 case proceeds as expected -- with routine Court hearings and committee meetings -- it has had virtually no effect on our operations. Moreover, Kaiser Aluminum's liquidity remains strong. As of April 30, 2002, the company had approximately $140 million of cash and cash equivalents -- with no borrowings and only $41 million of letters of credit outstanding under its Debtor-in-Possession credit facility." Kaiser Aluminum Corporation (OTCBB:KLUCQ) is a leading producer of alumina, primary aluminum, and fabricated aluminum products. DebtTraders reports that Kaiser Aluminum & Chemicals' 12.750% bonds due 2003 (KAISER2) are trading at about 21. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KAISER2for real-time bond pricing. KELLSTROM INDUSTRIES: Court Okays Asset Sale to Inverness Entity ---------------------------------------------------------------- Kellstrom Industries, Inc. said that Judge Mary Walrath of the United States Bankruptcy Court for the District of Delaware approved the proposed sale of Kellstrom's aviation inventory management business to KIAC, Inc., an entity controlled by Inverness Management LLC. KIAC increased its original bid by $5 million to $55 million in cash, and was approved as the successful bidder at the section 363 sale hearing by the United States Bankruptcy Court for the District of Delaware. The cash payment will be funded with equity from Inverness and other investors and a senior secured debt facility agented by GE Capital. Inverness is a privately held investment firm, based in Greenwich, Connecticut, which provides equity for acquisitions, recapitalizations and companies seeking additional capital. Inverness invests primarily in out-of-favor industries and has experience investing in the aviation services industry. Inverness manages private equity funds with over $350 million of committed capital, provided primarily by large institutional investors. James C. Comis, III, Managing Director of Inverness, stated, "Upon our purchase of Kellstrom's aviation inventory management business, the company will be one of the most strongly capitalized competitors in the industry. We believe that the sound financial footing of the company will enable its customers and vendors to trade with us with confidence." Yoav Stern, Chairman of the Board of Kellstrom stated, "With [Mon]day's announcement, the sale is moving forward. Our business plan, as originally envisioned and frequently shared with our customers and vendors, is on schedule. We expect the transaction to close shortly. As previously reported, KIAC will retain substantially all of the management and employees of Kellstrom. The sale of Kellstrom's other non-operational assets, primarily real estate, will be accomplished through confirmation of a plan to maximize recovery to creditors." Zivi R. Nedivi, President and CEO, noted, "During the sale process, we remained focused on our core business, value-added inventory management services for the aviation after-market. We have all of the resources in terms of access to capital, talent, inventory and technology to serve our 1200 commercial and defense oriented customers worldwide." Kellstrom is a leading aviation inventory management company. Its principal business is the purchasing, overhauling (through subcontractors), reselling and leasing of aircraft parts, aircraft engines and engine parts. Headquartered in Miramar, Florida, Kellstrom specializes in providing: engines and engine parts for large turbo fan engines manufactured by CFM International, General Electric, Pratt & Whitney and Rolls Royce; aircraft parts and turbojet engines and engine parts for large transport aircraft and helicopters; and aircraft components including flight data recorders, electrical and mechanical equipment and radar and navigation equipment. KMART: Salton Asks Court to Determine Classification of Claim ------------------------------------------------------------- According to Dennis E. Quaid, Esq., at Fagelhaber LLC, in Chicago, Illinois, Salton Inc. is a supply to Kmart Corporation and its debtor-affiliates of certain good and merchandise. Salton does business under the names, "Salton", "Salton/Maxim", "Toastmaster", and Ingraham Clocks". Mr. Quaid relates that those goods and merchandise shipped to the Debtors pre-petition included electronic and household products bearing the trade names White-Westinghouse, George Foreman, and Toastmaster, among others. As of the Petition Date, Mr. Quaid reports, the open invoices for all White-Westinghouse, Toastmaster, Ingraham Clocks and George Foreman merchandise shipped to the Debtors totaled in excess of $3,927,724. Mr. Quaid notes that the Debtors have never questioned the validity or disputed the amounts of any of the invoices. However, Kmart's Schedules reflect the amount owed to Salton is $3,927,724 and is "contingent". Salton contends this is an incorrect characterization of the debt. "There is no basis to characterize such valid and uncontested pre-petition debts as contingent," Mr. Quaid argues. Mr. Quaid explains that the characterization of the debts as "contingent" has serious ramifications to Salton's business. "Salton's ability to increase the liquidity of its working capital position through the sale of its claim is greatly diminished by the erroneous listing of its claims as 'contingent'," Mr. Quaid informs Judge Sonderby. In addition, Mr. Quaid continues, the Debtors' actions cast doubt on the ability of Salton to continue to supply the Debtors in the post- petition period with White-Westinghouse and George Foreman products. "It is unreasonable to expect Salton to continue to ship products in the post-petition period when it remains uncertain whether post-petition invoices for the very same type of goods will similarly be disputed as "contingent" for inexplicable reasons," Mr. Quaid says. Thus, Salton asks the Court to fix and determine that the debt owed to them for pre-petition goods and merchandise shipped is not contingent. (Kmart Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) LANDSTAR: Expects Net Loss to Slide-Up to $1.3M in March Quarter ---------------------------------------------------------------- LandStar, Inc. has accumulated the necessary information for filing of its current financial statements with the SEC. There has been a delay in such filing as the external auditors have the information and are completing the paperwork. Once filed the results of operations for the quarter ended March 31, 2002 will differ significantly from those results of the prior year. In the prior year, the Company's only source of revenue was the management fees earned from managing the company they subsequently purchased. On February 28, 2002, the Company purchased a manufacturing plant and consolidated the results of that operation for the month of March 2002. The Company will report both sales, which it has previously never had, as well as management fees. Net loss will approximate $1.3 million for the three months ended March 31, 2002 compared to $988,188 for the same period of the prior year. LandStar is an industry leading polymer redeployment and polymer reactivation company. It is aggressively expanding through acquisition and through the development of proprietary technologies and applications. With its recent acquisition of PolyTek Rubber & Recycling, Inc., LandStar is the world's largest producer of crumb rubber, the basic material used in the manufacture of recycled rubber products and applications. As reported in the May 9, 2002 edition of Troubled Company Reporter, 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. MAXXAM INC: Q1 2002 Results Swing-Down to $54 Million Net Loss -------------------------------------------------------------- MAXXAM Inc. (AMEX:MXM) reported a net loss of $54.2 million for the first quarter of 2002, compared to net income of $65.3 million for the first quarter of 2001. Net sales for the first quarter of 2002 totaled $240.3 million, compared to $544.4 million in the same period of 2001. The difference is primarily attributable to the deconsolidation of Kaiser Aluminum discussed below. Excluding aluminum operations, MAXXAM recorded net sales of $72.8 million for the first quarter of 2002 compared to $64.1 million for the comparable period of 2001. MAXXAM reported an operating loss of $20.4 million for the first quarter of 2002 compared to operating income of $209.3 million for the comparable period of 2001. The difference is primarily attributable to power sales made by Kaiser Aluminum during the first quarter of 2001. Excluding aluminum operations, MAXXAM had operating income of $3.2 million for the first quarter of 2002 compared to an operating loss of $7.6 million for the first quarter of 2001. Impact Of Kaiser Aluminum's Chapter 11 Reorganization MAXXAM holds 62% of Kaiser Aluminum. On Feb. 12, 2002, Kaiser Aluminum filed for Chapter 11 reorganization. In accordance with generally accepted accounting principles (GAAP), this Chapter 11 filing resulted in MAXXAM's decision to deconsolidate Kaiser's financial results beginning Feb. 12, 2002. MAXXAM previously reported its expectation to adjust the book carrying amount of its Kaiser investment from negative $450.2 million to $0 during the first quarter of 2002. The company now believes that it should consider this adjustment when Kaiser's bankruptcy is resolved or the company disposes of its shares of Kaiser common stock. Kaiser Aluminum's decision to file for Chapter 11 reorganization has not had, nor is it expected to have, an effect on the employees, vendors, or customers of MAXXAM's forest products, real estate or racing operations. Forest Products Operations Net sales for the first quarter of 2002 increased from the first quarter of 2001, reflecting increased shipments of common grade redwood lumber. This improvement in shipments more than offset the impact of a 15% decline in prices for redwood lumber and lower shipments of Douglas-fir lumber versus the first quarter of 2001. Operating results improved as a result of the increase in net sales, in addition to benefits realized as a result of the segment's ongoing performance improvement initiatives, which have emphasized more cost-efficient milling and logging operations. Real Estate Operations Net sales for the first quarter of 2002 increased from the same period of a year ago, reflecting increased acreage sales at the company's Palmas Del Mar development project, in addition to rental income from the Lake Pointe Plaza office complex, which was acquired in June 2001. The segment had operating income for the first quarter of 2002 compared to an operating loss for the same period of the prior year, primarily due to the increase in net sales. Racing Operations Net sales for the racing segment increased in the first quarter of 2002 compared to the first quarter of 2001. Increases in average daily attendance and net pari-mutuel commissions at Sam Houston Race Park, in addition to a higher number of live race days, contributed to the increase. Operating income decreased slightly versus the year ago period due to increases in marketing and administrative expenses. Corporate As previously announced in prior earnings statements, MAXXAM may from time to time purchase shares of its common stock on national exchanges or in privately negotiated transactions. * * * As previously reported in Troubled Company Reporter, Standard & Poor's ratings on Maxxam Inc. and Pacific Lumber Co. remain on CreditWatch with negative implications where they were placed January 15, 2002. Maxxam Inc. guarantees the 12% senior secured notes due Aug. 1, 2003, at its Maxxam Group Holdings Inc. (MGHI) subsidiary. The actions on MAXXAM and Pacific Lumber reflect concerns regarding Kaiser as well as issues affecting the wood products business. Wood product market conditions are weak, with oversupply and soft demand resulting in volatile pricing for lumber and logs. In addition, the company has not always been able to harvest at desired levels because the governmental approval process has been slow, although it has reportedly improved recently. Still, recent cost cutting measures and a focus on unit cost optimization, should improve cash flow and earnings coverages. Although cash balances of $129 million at Maxxam Inc. and $36 million at MGHI as of September 30, 2001, are more than the current outstandings of the MGHI notes and could be earmarked to meet the August 1, 2003, maturity, heightened uncertainty exists over whether these funds will be made available to meet the maturity as well as a possible bankruptcy filing by Kaiser and the ability of Kaiser's creditors to drag Maxxam into any bankruptcy proceedings. In resolving its CreditWatch, Standard & Poor's will review the operating conditions and financial profile of Pacific Lumber and its ability to service the MGHI debt as well as the aforementioned issues. Ratings Remaining on CreditWatch with Negative Implications MAXXAM Inc. Ratings Corporate credit rating B Senior secured debt CCC+ Pacific Lumber Co. Corporate credit rating B Maxxam Group Holdings Inc. Senior secured debt CCC+ (gtd. by MAXXAM Inc.) MAYOR'S JEWELERS: Reaches $11MM Investment Pact with Henry Birks ---------------------------------------------------------------- Mayor's Jewelers, Inc. (AMEX:MYR) has reached an agreement in principle with Henry Birks & Sons Holdings Inc. of Canada, a leading designer, manufacturer and retailer of fine jewelry in Canada, to make a substantial investment in Mayor's. The Agreement provides for Birks to invest in or cause to be provided to Mayor's $11.5 million in cash. Upon completion of the transaction, Birks will receive Preferred Stock that will be convertible into Common Stock of Mayor's representing 58% of the Common Stock on a fully diluted basis. Prior to conversion, Birks will be able to elect a majority of the Board of Directors of Mayor's. Birks will also receive warrants to purchase an additional 10% of the Common Stock (on a fully diluted basis) at an exercise price of $.50 per share. Mayor's and Birks will enter into a series of agreements through which Birks will provide management, merchandising and sales support to Mayor's. Completion of the transaction is subject to certain conditions, including without limitation, execution of definitive agreements (which the parties hope to accomplish in June) and the affirmative vote of the stockholders of Mayor's at a meeting of stockholders to be held as soon as practicable. Joe Cicio, Chief Executive Officer of Mayor's, said, "We are delighted to have reached an agreement with Birks, a company that will not only bring us much needed liquidity (in time to prepare for the Holiday season), but also offers us the opportunity to work with the management and resources of Canada's leading luxury jeweler. We have been searching for strategic alternatives for over a year without acceptable results and we believe that our arrangement with Birks gives us the best opportunity to enhance shareholder value when compared to other alternatives we have explored." The transaction with Birks was unanimously approved by the Directors of Mayor's. Mayor's continues to proceed with other aspects of its previously announced restructuring plan, including the closing of various stores and its assessment of its lending facilities. Mayor's will discuss the Agreement with its financial lenders to assess the impact this Agreement might have on Mayor's financing. Thomas A. Andruskevich, Chief Executive Officer of Birks, noted, "We are excited about our new relationship with Mayor's. It brings to us the opportunity to participate in the U.S. market and to build on the strong luxury franchise and reputation for quality that Mayor's has built over 90 years." METROCALL: Negotiating Prepackaged Chapter 11 with Creditors ------------------------------------------------------------ Metrocall, Inc., (OTCBB:MCLLQ), one of the nation's largest wireless data and messaging companies, released its first quarter, 2002 operating results. Metrocall's subscriber base finished the quarter at approximately 5 million paging, advanced messaging, data and PCS subscribers. Quarterly net revenue decline rates were cut almost in half as net revenues of $107.2 million represented a 4% loss from the prior quarter as compared to an over 7% loss for the previous period. Net revenue for advanced messaging also showed great improvement with growth rates doubling from 7.1% in the fourth quarter of 2001 to 15.5% in the first quarter of 2002. Traditional paging net revenues also showed improvement losing 6.7% for the first quarter of 2002 as compared to a loss of 8.8% for the previous quarter. Earnings before interest, taxes, depreciation and amortization were $21.8 million. As expected, in the first quarter of 2002, Metrocall's traditional paging subscribers decreased by approximately 463,000 units. However, approximately 80% of this decline was in indirect (reseller wholesale) channels of distribution characterized by lower average revenue per unit statistics, resulting in less revenue erosion for Metrocall than that experienced by other competitors. In recent quarters, the paging industry has experienced a reduction in demand for traditional numeric and alphanumeric paging services. Metrocall has taken actions to combat the decline in demand for traditional paging services and subscriber attrition with a continued focus on customer service and retention initiatives of existing direct distribution business, medical and government accounts. Additionally, Metrocall has focused on adding higher cost two-way advanced messaging products where revenue growth potential existed. As a result, Metrocall has outperformed its paging company competitors with respect to subscriber and revenue results in the first quarter of 2002 and throughout 2001. In addition to one-way and short-messaging services (SMS), Metrocall product offerings also include the distribution of other advanced messaging communication products such as eLink(SM) and Blackberry(TM) for those subscribers preferring an extension of their desktop e-mail. The company also offers cellular and PCS phone offerings under alliance relationships with AT&T Wireless, Inc., Nextel Communications, Inc. and other companies for subscribers seeking alternative or complimentary messaging and voice products. Metrocall is currently in discussions with several mobile telephony providers about offering advanced wireless data products and applications across these broadband networks. Metrocall believes that its network agnostic strategy of providing advanced messaging products and services will help position it to take advantage of its strong sales and distribution attributes, while mitigating risk associated with capital intensive and highly competitive wireless networks and wireless data product offerings. Currently, approximately 237,000 subscribers buy advanced messaging products and data services through Metrocall. Metrocall believes the industry acceptance of advanced messaging products using the narrowband Reflex(TM) protocol has slowed in recent months due to the onslaught or anticipated entrance of new wireless data devices using other broadband based technologies and the lack of a committed viable product device manufacturer due to Motorola's recent exit announcement. However, Metrocall intends to continue to support the placement of advanced messaging devices supported by the Reflex(TM) protocol and believes it has sufficient quantity of such devices in its inventory to serve demand through at least the end of 2002. During the first quarter the company continued its focus on operating expense and capital expenditure reductions. In the first quarter of 2002, operating expenses, which include service, rent and maintenance; selling and marketing; and general and administrative expenses decreased approximately $1.4 million (1.7%) and $15.4 million (15.2%) from the fourth and first quarters of 2001, respectively. This is a reduction of over $60.0 million on an annual basis since the first quarter of 2001. Metrocall expects to achieve significant additional annualized savings over the remainder of 2002 as a result of other scheduled cost containment and reduction initiatives. The company expects to continue to maintain its present high quality customer service and network airtime service standards throughout these containment efforts. Capital expenditures for the period were $14.0 million including amounts for messaging devices of $11.9 million and $2.1 million for infrastructure and other equipment requirements. During the quarter, Metrocall placed and prepaid last time buy order commitments for advanced messaging devices from Motorola. Late in 2001, Motorola announced that they would no longer manufacturer traditional paging devices and advanced messaging devices that utilize the Reflex(TM) protocol after June 2002. Metrocall has alternative suppliers for traditional paging equipment. Currently there are no other suppliers that manufacture Reflex(TM) devices at the quantity and quality levels previously attained by Motorola and no manufacturers are expected to be able to deliver such products until late in 2002. Metrocall has been operating its business without access to equity or debt financing for the past five quarters. Its present operations are free cash flow positive before debt service requirements. The recurring nature of its airtime service subscriptions and the cost containment and reduction initiatives have provided it with the positive cash flow from operations to fund its business plan and capital expenditure requirements over the past several quarters. Metrocall is currently in negotiations with its senior bank lenders and an Unofficial Committee of holders of a significant portion of its senior subordinated notes regarding the terms of a consensual pre- negotiated plan of reorganization. The plan proposed to its creditors includes the following objectives: -- Deleveraging Metrocall to provide a viable capital structure in light of declining traditional revenues and competitive pressures; -- Restructuring existing debt obligations in exchange for significantly less debt and the majority of the equity in reorganized Metrocall; and -- Extinguishing all current preferred and common stock claims. While there can be no assurances that the Company will be successful in negotiating a "pre-packaged" plan, Metrocall believes that a consensual plan will be confirmed through a plan of reorganization under Chapter 11 of the Bankruptcy Code and expects to commence such proceedings by June 30, 2002. Metrocall further expects that its nationwide business operations will continue to operate without interruption or disruption during its reorganization process. Metrocall, Inc. headquartered in Alexandria, Virginia, is one of the largest wireless data and messaging companies in the United States providing both products and services to nearly five million business and individual subscribers. Metrocall was founded in 1965 and currently employs more than 2,300 people nationwide. The Company currently offers two-way interactive messaging, wireless e-mail and Internet connectivity, cellular and digital PCS phones, as well as one-way messaging services. Metrocall operates on many nationwide, regional and local networks and can supply a wide variety of customizable Internet- based information content services. Also, Metrocall offers totally integrated resource management systems and communications solutions for business and campus environments. Metrocall's wireless networks operate in the top 1,000 markets across the nation and the Company has offices in more than forty states. Metrocall is the largest equity-owner of Inciscent, an independent business-to-business enterprise, that is a national full-service "wired-to-wireless" Application Service Provider. For more information on Metrocall please visit our Web site and on-line store at http://www.Metrocall.comor call 800-800-2337. DebtTraders says that Metrocall Inc.'s 10.375% bonds due 2007 (MCALL2) are quoted at a price of 4. See http://www.debttraders.com/price.cfm?dt_sec_ticker=MCALL2for real-time bond pricing. METROMEDIA FIBER: Case Summary & 50 Largest Unsecured Creditors --------------------------------------------------------------- Lead Debtor: Metromedia Fiber Network, Inc. 360 Hamilton Avenue White Plains, New York 10601 aka MFN aka AboveNet Communications Inc. aka SiteSmith, Inc. aka PAIX. net, Inc. Bankruptcy Case No.: 02-22736 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Metromedia Fiber Network Services, Inc. 02-22737 AboveNet Communications, Inc. 02-22738 SiteSmith, Inc. 02-22739 PAIX.net, Inc. 02-22740 Metromedia Fiber Network of Illinois, Inc. 02-22741 MFN Purchasing, Inc. 02-22742 Metromedia Fiber Network of New Jersey, 02-22744 Inc. MFN of Utah, L.L.C. 02-22745 MFN of Virginia, L.L.C. 02-22746 Metromedia Fiber National Network, Inc. 02-22747 Metromedia Fiber Network International, 02-22751 Inc. MFN International, L.L.C. 02-22752 MFN Japan Backhaul, Inc. 02-22753 MFN Europe Finance, Inc. 02-22754 Type of Business: Metromedia Fiber Network (MFN) builds urban fiber-optic networks distinguished by the sheer quantity of fiber available -- its 864 fibers per cable is up to nine times the industry norm -- and sells the dark fiber to telecommunications service providers. MFN supplies fiber to all types of telecom carriers as well as to other businesses. It has networks under construction in big cities across the US, has created intercity links by swapping fiber, and has begun operating in Europe. The company, which has expanded by buying AboveNet and SiteSmith, also provides Internet infrastructure management services, including Web hosting. Chapter 11 Petition Date: May 20, 2002 Court: Southern District of New York (White Plains) Judge: Adlai S. Hardin Jr. Debtors' Counsel: James A. Beldner, Esq. Lawrence C. Gottlieb, Esq. Kronish Lieb Weiner & Hellman, LLP 1114 Avenue of the Americas New York, New York 10036 (212) 479-6086 Fax : (212) 479-6195 Total Assets: $7,024,208,000 Total Debts: $4,262,086,000 Debtor's 50 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ The Bank of New York Bond Debt $641,690,000 and Ming Shiang Euro 229,000,000 101 Barclay Street New York, NY 10286 Tel. 212-896-7197 Fax. 212-896-7298 IBJ Schroder Bank & Bond Debt $633,810,000 Trust Company Ming Shiang One State Street New York, NY 10004 Tel. 212-896-7197 Fax. 212-896-7298 Verizon Investments, Inc. Convertible Debt $500,000,000 3900 Washington Street 2nd Floor Wilmington, Delaware 19802 Audrey Prashker 1095 Avenue of the Americas, 38th Floor New York, NY 10036 Tel. 212-395-0039 Fax. 212-764-2432 -and- Rick Sandell U.S. Bank Trust National Association 180 East Fifth Street, Suite 200 St. Paul, MN 55101 Tel. 651-244-0713 Fax. 651-244-5847 Verizon Investments, Inc. Convertible Debt $475,281,000 3900 Washington Street 2nd Floor Wilmington, DE 19802 Audrey Prashker 1095 Avenue of the Americas, 38th Floor New York, NY 10036 Tel. 212-395-0039 Fax. 212-764-2432 -and- Rick Sandell U.S. Bank Trust National Association 180 East Fifth Street, Suite 200 St. Paul, MN 55101 Tel. 651-244-0713 Fax. 651-244-5847 AT&T Trade Debt $9,650,283 Albert Uchaker 1200 Peachtree Street Atlanta, GA 30309 (404) 810-4602 CBP of China Trade Debt $9,049,530 Telecom Director, Central Billing Party 340 Mt. Kemble Avenue Room N100 Morristown, NJ 07960 EMCOR Technologies, Inc. Trade Debt $8,153,511 Jeffrey Levy 101 Merritt Seven Norwalk, CT 06851 Williams Communications, Trade Debt $6,863,667 LLC 21864 Network Place Chicago, IL 60673-1218 Tel. 888-465-9516 360 Networks Trade Debt $4,298,980 12101 Airport Way Broomfield, CO 80021 Adesta Communications Trade Debt $4,131,475 Jay Jorgenson 1200 Landmark Center Suite 1300 Omaha, NE 68102 Tel. 402-233-7687 Verizon Trade Debt $3,990,890 3900 Washington Street, 2nd Floor Wilmington, DE 19802 Audrey Prashker 1095 Avenue of the Americas, 38th Floor New York, NY 10036 Tel. 212-395-0039 Fax. 212-764-2432 Credit Suisse First Trade Debt $3,741,722 Boston, Inc. Accounts Receivable 11 Madison Avenue, 9th Floor New York, NY 10010 Hylan Datacom Trade Debt $3,334,422 Robert DiLeo 2878 Gulf Avenue Staten Island, NY 10303 718-273-9141 Enron Broadband Services Trade Debt $3,171,923 Attn: Contracts Administration 1400 Smith Street Houston, TX 77002 Comdisco Inc. Trade Debt $2,612,925 Linda Hayes P.O. Box 91744 Chicago, IL 60693 Tel. 847-518-5238 Fax. 847-518-7889 Washington Metropolitan Area Trade Debt $2,232,253 Transit Authority Kathleen V. Smith, Comptroller Office of the Treasurer 600 5th Street, NW Washington, DC 20001 Tel. 202-962-1567 Global Crossing Trade Debt $2,007,634 Bandwidth, Inc. 20 Oak Hollow Suite 300 Southfield, MI 48034-7406 CSX Railroad Trade Debt $1,896,000 Stephen Crosby 500 Water St., J180 Jacksonville, FL 32202 (904) 633-4550 N to N Fiber Inc. Trade Debt $1,744,365 Stephen M. Noone 8754 Virginia Meadows Drive Manassas, VA 20109 703-331-3884 20 Storage Way Trade Debt $1,566,602 Andy Brinch 3501 West Warren Ave. Fremont, CA 94538 (510) 360-5746 Fishel Company Trade Debt $1,464,710 Eric Smith 1810 Arlingate Lane Columbus, OH 43228 614-274-8100 Conti Enterprises, Inc. Trade Debt $1,459,082 Bill Picken 3001 S. Clinton Ave. S. Plainfield, NJ 07080 908-561-8005 Structuretone Inc. Trade Debt $1,437,848 Ray Froimowits 1420 K Street NW Suite # 700 Washington, DC 20005-2515 20005-2515 Sprint Trade Debt $1,375,560 PO Box 219061 Kansas City, MO 64121-9061 64121-9061 R.E. Lamb Inc. Trade Debt $1,256,516 Joseph Sterchak 939 Jefferson Avenue Norristown, PA 19403 (610)666-9200 ext 251 Cisco Systems Trade Debt $1,165,056 Christine Rossi One Penn Plaza New York, NY 10119 Tel. 212-714-4473 Fax. 212-714-4005 Consolidated Rail Corp. Trade Debt $1,145,618 John Enright P.O. Box 281557 Atlanta, GA 30384-1557 (215) 209-5012 28 CenturyTel MI Trade Debt $1,132,450 Network LLC Donald Antley 100 Century Park Drive Monroe, LA 71203 Trizec-Hahn Trade Debt $1,092,686 1114 Ave. of Americas 31st Floor New York, NY 10036 (212) 382-9300 WorldCom Trade Debt $973,328 2270 Lakeside Blvd. Richardson, TX 75082 CORIO, Inc. Trade Debt $963,893 Rachel Bairley 959 Skyway Road, Suite 100 San Carlos, CA 94070 Tel. 650-232-3062 Fax. 650-232-3262 Orius Corporation Trade Debt $900,000 John Naccarato 8331 Hoyle Dallas, TX 75227 (214)914-9473 Winstar Broadband Services Trade Debt $870,391 4742 N. 24 Street Phoenix, AZ 85016 (425) 455-3505 Dynamic Cable Construction Trade Debt $868,833 Mickey Redwine 591 VZ CR 4823 Ben Wheeler, TX 75754-9739 75754-9739 NTL Trade Debt $868,202 Douglas Muir 1 MacMillan Road Alderstone Business Park Livingston, UK EH547DF Tel. 011-015-0604 1100 Fax. 011-015-0640 1111 J. Fletcher Creamer Trade Debt $797,868 & Son Inc. Richard McLaughlin 101 East Broadway Hackensack, NJ 07601 Future Telecom Trade Debt $789,802 Don Riggs 2624 Hyacinth Dr. Mesquite, TX 75185-2728 (972) 222-9924 XO Communications Trade Debt $720,160 105 Molloy Street Suite 200 Nashville, TN 03720 P.E. Stone Inc. Trade Debt $688,395 50 Watts Street New York, NY 10013-1912 (212) 334-1113 CCG Facilities Trade Debt $633,736 Integration, Inc. Attn: Bruce Edwards 1401 S. Englewood Baltimore, MD 21227 Tel: 410-525-0010 Acclaim Technology, Trade Debt $617,084 Inc. Norman P. Schockley 55 South Market Street Suite 1500 San Jose, CA 95113 (408) 918-8110 San Francisco Tax Collector Trade Debt $613,528 1 Dr. Carlton B. Goodlet Place City Hall Room 140 San Francisco, CA 94102-0917 180 Baldwin, LLC Trade Debt $601,258 551 5th Avenue 34th Floor New York, NY 10176 Pinkerton Systems Trade Debt $595,264 Integration Scott Long 4995 Avalon Ridge Parkway Suite 100 Norcross, GA 30071 (678)533-3966 Danella Line Services Trade Debt $554,668 Suite 2 Dennis Daly 1402 Conshohocken Road Plymouth Meeting, PA 19462 John Caulfield Fiber Trade Debt $552,303 Optic Services Mike Kennedy 634 Route 303 West Nyack, NY 10913 (845)727-5015 Forest City Trade Debt $549,325 Management, Inc. Marisa Santos 150 S. 1st St. Ste 123 San Jose, CA 95113 Millennium Communications Trade Debt $510,492 Group Robert Ritchie 11 Melanie Place Suite 13 East Hanover, NJ 07936 M&P Utilities Trade Debt $500,444 Gary Thompson 500 Country Rd 37 East Maple Lake, MN 55358 (320) 963-2400 Norfolk Southern Trade Debt $453,171 Railroad Three Commercial Place Norfolk, VA 23510 NATIONAL STEEL: Comerica Pushing for Prompt Decision on 2 Pacts --------------------------------------------------------------- Comerica Leasing, a Division of Comerica Bank, seeks the Court's authority to compel National Steel Corporation and its debtor- affiliates to immediately assume or reject two Lease Financing Agreements. In the alternative, Comerica asks the Court for relief from the automatic stay. Kurt M. Carlson, Esq., at Tishler & Wald, in Chicago, Illinois, relates that the Debtors and Comerica are parties to a Lease Financing Agreement wherein the Debtors agreed to pay Comerica an aggregate of $8,154,485 by way of 60 monthly payments of $135,908 each plus applicable sales and use taxes beginning May 15, 1999 until fully paid. "The current balance owing under the Agreement is $3,533,610 with the Debtors' arrears totaling $271,816 plus late charges of $20,386," Mr. Carlson reports. Furthermore, both parties entered into a second Lease Financing Agreement wherein the Debtors agreed to pay Comerica an aggregate of $4,568,171 by way of 60 monthly payments of $76,136 each plus applicable sales and use taxes beginning June 15, 1999 until fully paid. The current balance owing under the second agreement is $2,055,677 with the Debtors' arrears totaling $152,272 plus late charges of $11,420. Mr. Carlson tells the Court that the agreements were for the Debtors' lease and use of: (i) New O[sic]&K Model Hydraulic Shovel and Auxiliary Crane, (ii) 3 New Caterpillar 6 speed Mining Haul Trucks, and (iii) 21 Wheel Assemblies and 21 Michelin Tires 40 x 57. "The Debtors have defaulted with the terms and conditions of the agreements by failure to make those payments due in March and April, 2002," Mr. Carlson says. Comerica believes that the Debtors may have been in pre-petition default by failing to adequately maintain and care for the Equipment, failing to properly insure the Equipment, and may have violated the representations of the agreements by allowing levies, liens, charges or encumbrances to attach to the Equipment. Thus, Comerica seeks the Court's authority to compel the Debtors to assume or reject the agreements immediately. "To allow the Debtors to delay indefinitely its decision whether to assume or reject the agreements will impose an unfair burden on Comerica," Mr. Carlson asserts. In addition, in the event the Court determines that the Debtors should not be compelled to decide on the agreements now, Comerica seeks the Court's approval to lift the automatic stay to terminate the agreements within 30 days through May 26, 2002. Mr. Carlson asserts that cause to lift stay is present because: (i) Comerica has an unfettered right, subject to the stay, to terminate the agreements upon default, which exists both pre-petition and post-petition; and (ii) the Debtors have offered no adequate protection for its continued use of the Equipment, the value of which rapidly decreases over time and with use. Furthermore, Mr. Carlson contends that the agreements are executory because both parties have significant unperformed obligations. Comerica is required to lease the Equipment under the agreements and the Debtors have agreed to take possession of the Equipment so long as they pay the amounts due and fulfill all other conditions to safeguard and protect the Equipment and Comerica's interest in it. "Comerica must be assured that the Debtors will make payments, keep the Equipment insured and provide assurances that the Equipment is being maintained," Mr. Carlson asserts. On the other hand, Mr. Carlson says, the Debtors must also be assured that they will have the use and benefit of the Equipment to assist them in their business operations. To date, Comerica has allowed the Debtors to retain the equipment though the continued use of the Equipment is diminishing the Equipment's value. The Debtors owe Comerica in excess of $455,895 in past due rent and late charges, exclusive of use taxes and attorney fees. Under the agreements, there remains a balance of approximately $5,589,287. Comerica also believes that the Equipment's estimated value is approximately $4,300,000, which equates to roughly 77% of the approximate $5,589,287 balance remaining on the agreements. "Therefore, the Debtors lack equity in the Equipment," Mr. Carlson concludes. Debtors Respond The Debtors claim the Agreements are not executory contracts or "true leases", but are disguised financing agreements for which assumption or rejection is not appropriate. Mark P. Naughton, Esq., at Piper Rudnick, in Chicago, Illinois, notes that Comerica has not made any factual allegations that: -- the Equipment is depreciating, -- the Equipment is unnecessary to an effective reorganization, or -- set forth any other basis for obtaining adequate protection or lifting the stay. Mr. Naughton argues that the express terms of the Agreements themselves demonstrate that they are not true leases but disguised security devices. In the event the Court believes there are material factual issues remaining as to whether the Agreements are true leases, the Debtors ask the Court to schedule an evidentiary hearing on the issue after an opportunity for the parties to take discovery. Accordingly, the Debtors urge Judge Squires to deny the relief requested by Comerica. (National Steel Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) NAVIDEC INC: Fails to Comply with Nasdaq Listing Requirements ------------------------------------------------------------- Navidec, Inc. (Nasdaq: NVDC), announced that on May 16, 2002 it received a notification that its common stock has not maintained a minimum market value of publicly held shares of $5,000,000 and a minimum closing bid price per share of $1.00 over the previous 30 consecutive trading days and as a result did not comply with Marketplace Rules 4450(a)(2) and 4450(a)(5) respectively. By May 23, 2002, Navidec has the right to apply for a transfer of its securities to The Nasdaq SmallCap Market or the Company may appeal the Staff's determination of listing on Nasdaq National Market, to the Listing Qualifications Panel set forth in the Nasdaq Marketplace rule 4800 Series. Navidec is a market-driven leader providing software solutions and integration. We combine best practices developed as a pioneering e-business expert with best of breed software products to create a unique approach to enterprise integration. Navidec draws upon thousands of hours of experience to provide packaged solutions with well-defined expectations and results. This innovative approach results in software and integration solutions that lower the cost, delivery time and risk associated with application integration initiatives. For more information on Navidec's enterprise solutions, visit http://www.navidec.com or contact us at 303.222.1071. NETIA HOLDINGS: Warsaw Court Opens Arrangement Process for Unit --------------------------------------------------------------- Netia Holdings S.A. (Nasdaq: NTIAQ, WSE: NET), Poland's largest alternative provider of fixed-line telecommunications services, said that the court in Warsaw today opened an arrangement proceeding with respect to Netia South Sp. z o.o., one of its subsidiaries, with a deadline for verifying creditors' claims set for July 16, 2002. As previously announced, filings for opening of arrangement proceedings had also been made by Netia Holdings S.A. and another of its subsidiaries, Netia Telekom S.A. These two arrangement proceedings were opened on May 15, 2002 and April 22, 2002 for Netia Holdings S.A. and Netia Telekom S.A., respectively. The arrangement proceedings for Netia Holdings S.A., Netia Telekom S.A. and Netia South Sp. z o.o. are occurring in the context of the Restructuring Agreement reached on March 5, 2002 with Netia's bondholders and certain of its creditors. Netia Holdings SA's 13.50% bonds due 2009 (NETH09PON2) are trading at about 18, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NETH09PON2 for real-time bond pricing. NOMURA CBO: S&P Puts BB+-Rated 1997-2 A-3 Note on Watch Negative ---------------------------------------------------------------- Standard & Poor's placed its rating on the class A-3 notes Nomura CBO 1997-2 Ltd., an arbitrage CBO transaction originated in October of 1997, on CreditWatch with negative implications. At the same time, the triple-'A' ratings on the class A-1 and A- 2 notes are affirmed based on the high level of overcollateralization available to support the class A-1 and A-2 tranches. The rating assigned to the class A-3 notes had previously been lowered to double-'B'-plus from single-'A' on Dec. 18, 2001. This CreditWatch placement reflects factors that have negatively affected the credit enhancement available to support the notes since the Dec. 18, 2001 rating action, including par erosion of the collateral pool securing the rated notes and a downward migration in the credit quality of the performing assets within the pool. As a result of asset defaults and credit risk sales at distressed prices, the overcollateralization ratios for Nomura CBO 1997-2 Ltd. have deteriorated. According to the most recent monthly report (May 2, 2002), the class A overcollateralization ratio was 106.33%, compared to a ratio of 111.92% as of the Dec. 2001 rating action, and substantially below the current minimum required class A overcollateralization ratio of 121%. Currently, $60.825 million (or 17.79%) of the assets in the collateral pool come from defaulted obligors rated 'D' or 'SD' by Standard & Poor's, and another $13.393 (or 3.93%) come from obligors rated double-'C', considered highly vulnerable to default. The credit quality of a number of the performing assets within the collateral pool has also migrated downward in recent months. According to the May 2, 2002 trustee report, 39.8% of the assets within the collateral pool come from obligors rated single-'B' or higher (compared with a minimum required percentage of 65%), and 58.6% of the assets come from obligors rated single-'B'- minus or higher (compared with a minimum required percentage of 95.00%). Standard & Poor's will be reviewing the results of current cash flow runs generated for Nomura CBO 1997-2 Ltd. to determine the level of future defaults the rated tranches can withstand under various stressed default timing scenarios while still paying all of the rated interest and principal due on the notes. The results of these cash flow runs will be compared with the projected default performance of the current collateral pool to determine if the ratings assigned remain consistent with the level of credit enhancement available to support the rated tranches. Rating Placed On Creditwatch Negative Nomura CBO 1997-2 Ltd. Rating Class To From Current Balance A-3 BB+/Watch Neg BB+ $105.3 million Ratings Affirmed Nomura CBO 1997-2 Ltd. Class Rating Current Balance A-1 AAA $32.6 million A-2 AAA $150.0 million OCCAM NETWORKS: Fails to Meet Initial Nasdaq Listing Criteria ------------------------------------------------------------- Occam Networks, Inc. (formerly Accelerated Networks, Inc.) (Nasdaq:OCCM) has been notified by Nasdaq that its staff believes that the merger of Accelerated Networks and Occam Networks, announced Wednesday, May 15, 2002, constitutes a "Reverse Merger" under Marketplace Rule 4330(f). The staff based its conclusion on the change in ownership and voting power and the changes in the company's management and Board of Directors following the merger. Under Rule 4330(f), the post-transaction company must meet all initial inclusion criteria on the Nasdaq National Market, or if it had elected to move to the Nasdaq SmallCap Market, the initial inclusion criteria of that market. As of the closing of the merger, the post-transaction company did not meet all initial inclusion criteria for either the Nasdaq National Market and, therefore, is subject to delisting. In addition, the staff has informed the company that it had not regained compliance during the 90-day period previously provided to the company to comply with the "Minimum Bid Price" requirement under Marketplace Rules 4450(a)(5). The "Minimum Bid Price" requirement mandates that a company must maintain a bid price per share of over $1.00 or Nasdaq will initiate delisting proceedings after 90 days. As a result, even were the merger not a "Reverse Merger," the staff informed the company that it would be subject to delisting in accordance with Marketplace Rule 4450(e)(2). The company intends to appeal these staff decisions. There can be no assurance that the appeal will be successful. The appeal will stay the delisting of the company's securities pending the decision by a Nasdaq Listing Qualifications Panel. Occam Networks, Inc. develops and markets a suite of Broadband Loop Carriers, innovative Ethernet and IP-based loop carrier platforms that enable incumbent local exchange carriers to profitably deliver a variety of traditional and packet voice, broadband and IP services from a single, converged all-packet access network and designs. The Company also markets a complete line of Integrated Access Devices (IADs), customer premise equipment that provides Local Area Network (LAN) and legacy voice services to business customers from a converged access network. Occam is headquartered in Santa Barbara, Calif. Additional information about the company can be found at http://www.occamnetworks.com OSE USA: March 31, 2002 Balance Sheet Upside-Down by $27 Million ---------------------------------------------------------------- OSE, USA, Inc. (OTCBB:OSEE), reported its results for the first quarter ended March 31, 2002. Revenues for the three-month period ended March 31, 2002 was $2,488,000, compared with revenues of $3,614,000 for the same period one year ago. The Company reported a net loss applicable to common stockholders of $2,373,000 for the first quarter of 2002, compared with a net loss applicable to common stockholders of $2,239,000 for the first quarter of 2001. Revenues for the three-month period ended March 31, 2002 for the Company's manufacturing segment was $1.5 million, compared with $2.5 million for the comparable period in the prior fiscal year. Revenues for the three-month period ended March 31, 2002 for the Company's distribution segment were $1.0 million, compared with $1.1 million for the comparable period in the prior fiscal year. The company's March 31, 2002 balance sheet shows that the company has a total shareholders' equity deficit of about $27 million, and a working capital deficit of about $24 million. Founded in 1992 and formerly known as Integrated Packaging Assembly Corporation (IPAC), OSE USA, Inc. is the nation's leading onshore advanced technology IC packaging foundry. In May 1999 Orient Semiconductor Electronics Limited (OSE), one of Taiwan's top IC assembly and packaging services companies, acquired controlling interest in IPAC, boosting its US expansion efforts. The Company entered the distribution segment of the market in October 1999 with the acquisition of OSE, Inc. In May 2001 IPAC changed its name to OSE USA, Inc. to reflect the company's strategic reorganization. San Jose-based OSE USA delivers competitive cost and quality in moderate volumes with fast cycle times relative to its offshore competitors. The company's close proximity to its customers allows OSE USA to provide dynamic, quick-response, application- specific packaging solutions to customers worldwide. The company's latest services include Micro Lead frame, Flip Chip, and Chip-Scale package assembly and manufacturing. OSE USA offers these services to support its customers' engineering, pre-production, low volume production and hot lot requirements. The company will continue to develop and lead in the areas of microelectronic packaging technology in the design, packaging, and electrical testing industry. OSE USA's customers include IC design houses, OEMs, and manufacturers. For more information, visit OSE USA's Web site at: http://www.ose-usa.com or contact Chris Ooi at 408/321-3629 about these services. ONVIA.COM INC: Brings-In Ken Hansen as Supplier Sales Director -------------------------------------------------------------- Onvia.com, Inc. (Nasdaq: ONVI) it hired Ken Hansen as Director of Supplier Sales. Hansen oversees a team of 25 full-time sales professionals that acquire subscribers for its government lead notification service. Onvia connects businesses to government opportunities on-line. Hansen was most recently Sales Manager for Qwest Wireless Direct Sales, where he ranked as the top Sales Manager for both the 3rd and 4th quarters of 2001. Prior to Qwest, Hansen was Regional Sales Manager for Staples Communications, a Nortel and Executone reseller of telephony equipment. At Staples Communications, Hansen set new company sales records for the Washington marketplace and increased the bottom line profit by 12% in one year. From 1993 to 1999, Hansen worked as a Sales Representative and then Sales Manager for IKON Office Solutions in both the Seattle and Portland marketplace where he consistently exceeded revenue and profit goals. "Ken brings direct business-to-business sales success that Onvia will leverage to drive our subscriber metrics," shared Clayton Lewis, President and Chief Operating Officer. "A strength of our business is our motivated and well-trained team of sales professionals. Ken has tremendous drive and is attracting some of the region's top sales people to Onvia." Onvia currently has 25,800 subscribing suppliers and is projected to reach operating cash flow profitability in 2002, pending the resolution of its idle lease facilities. Onvia.com, Inc. helps businesses secure government contracts and government agencies find suppliers online. Onvia assists businesses in identifying and responding to bid opportunities from more than 50,000 government purchasing offices in the $600 billion federal, state, and local government marketplace. Onvia also manages the distribution and reporting of requests for proposals and quotes from more than 400 government agencies nationwide. The size and strength of Onvia's network allows suppliers and agencies to find better matches quickly, saving time and money. * * * As previously reported (Troubled Company Reporter April 25, 2002 Edition), Onvia.com was advised by NASDAQ that it had begun enforcing compliance with its minimum bid price requirement, effective January 2, 2002. On February 14, 2002, the company received an initial warning letter from NASDAQ that the price of the company's common stock had closed below the minimum $1.00 per share listing requirement for 30 consecutive trading days and that the 90-calendar day grace period had begun. On May 15, 2002, the company will enter the appeal phase of the delisting process, which could take up to 90 days. The company also has the option of applying for SmallCap listing. If approved, this action could defer delisting into early 2003. Additionally, Onvia's Board of Directors is considering other actions, such as recommending to its shareholders a reverse stock split, in order to maintain its NASDAQ listing. PACIFIC GAS: Will Make Interest Payment on Unsecured Fin'l Debt --------------------------------------------------------------- Pacific Gas and Electric Company will make interest payments on May 31, 2002, for the month of March 2002 on certain of its unsecured financial debt. Pacific Gas and Electric Company requested and received permission from U.S. Bankruptcy Court to pay unpaid interest to certain unsecured financial creditors and to make quarterly payments to such creditors on a going forward basis. Pursuant to the court's March 27, 2002 order, the utility was required to make an initial payment of pre- and post-petition interest to holders of certain financial debt within ten days after court approval of the utility's disclosure statement. The court subsequently approved the disclosure statement on April 24, 2002, and Pacific Gas and Electric Company made an initial interest payment to these creditors on May 6, 2002 for the period ending February 28, 2002. The payment announced today is for interest for the month ended March 31, 2002. The ex-interest date for the interest payment is May 28, 2002, and the record date for the interest payment is May 30, 2002. Holders of the following unsecured financial debt will be included in these payments: commercial paper, medium-term notes, senior notes, floating rate notes, and Southern San Joaquin Valley Power Authority bonds. Future payments on unsecured financial debt will be made quarterly. The next interest payment date will be July 1, 2002. Information regarding the payment amount per security will be posted on the PG&E Corporation Web site -- http://www.pgecorp.com-- shortly. Pacific Gas and Electric Company also announced it will make an interest payment on May 31, 2002, for the month ended March 31, 2002 on its 7.90 percent Deferrable Interest Subordinated Debentures, Series A. The ex- interest date for the interest payment is May 28, 2002. The record date for the interest payment is May 30, 2002. The interest payment per $25 security is $.177976. The property trustee notified security holders on April 24, 2002, that on May 24, 2002, the 7.90 percent Deferrable Interest Subordinated Debentures, Series A, would replace PG&E Capital I's 7.90 percent cumulative Quarterly Income Preferred Securities, Series A. Future payments on these debentures will be made quarterly. The next interest payment date will be July 1, 2002. The Bankruptcy Court's March 27, 2002 order also gave Pacific Gas and Electric Company permission to pay interest to certain other unsecured creditors, including vendors and service providers. Pacific Gas and Electric Company plans to make the first payment of interest to these creditors on or about July 30, 2002 and on a quarterly basis thereafter. The record date for the interest payment is June 30, 2002. PHILIP SERVICES: Receives Nasdaq Non-Compliance Determination ------------------------------------------------------------- Philip Services Corporation (NASDAQ: PSCDE/ TSE: PSC) announced that it has received a letter from the staff of the Nasdaq Stock Market indicating that the Company is not in compliance with the filing requirement for continued listing set forth in Nasdaq Marketplace Rule 4310(c)(14). As previously reported by the Company in its Form 8-K filed with the Securities and Exchange Commission (the "SEC") on April 24, 2002 and its Form 10-Q filed with the SEC on May 13, 2002, the Company's certifying accountants resigned, and, because the Company has not yet appointed new external auditors, the financial statements contained in the Form 10-Q have not been reviewed by any outside auditors. Because the Company's financial statements have not yet been reviewed by an independent auditor, the staff of the Nasdaq Stock Market has determined that the Company's Form 10-Q does not fulfill its filing requirement for continued listing. The Company has a right of appeal and has been granted an oral hearing before a Listing Qualifications Panel to review the staff's determination. Pending that hearing, which is scheduled to occur on June 13, 2002, the Company's stock will continue to trade on the Nasdaq National Market. There can be no assurance as to the outcome of the hearing. The Company's common stock is also listed on the Toronto Stock Exchange. PINNACLE HOLDINGS: Fails to Meet Nasdaq Min. Bid Price Standard --------------------------------------------------------------- Pinnacle Holdings Inc. (Nasdaq: BIGT) received an anticipated Nasdaq Staff Determination that the Company failed to comply with the "Minimum Bid Price Rule" requirement for continued listing set forth in Nasdaq Marketplace Rule 4450(a)(5), and therefore, its common stock will be delisted from The Nasdaq National Market at the opening of business on May 24, 2002. On February 14, 2002, as previously disclosed, Nasdaq Staff notified the Company that the bid price of its common stock had closed at less than $1.00 per share over the previous 30 consecutive trading days, and, as a result, the Company was not in compliance with the Minimum Bid Price Rule. The Company was provided 90 calendar days, or until May 15, 2002, to regain compliance with the rule. The Company has not regained compliance with the rule. The Company is entitled to appeal the Staff's determination to a Nasdaq Listing Qualifications Panel. However, it does not anticipate doing so. Confirmation of Terms of Master Lease Agreement with Largest Customer -- Arch Wireless Holdings, Inc. The Company also announced that the terms of an amended and restated master lease agreement between it and Arch Wireless Holdings, Inc., the operating subsidiary of Arch Wireless, Inc. (OTC Bulletin Board: ARCHQ), were confirmed by the U.S. Bankruptcy Court for the District of Massachusetts, Western Division. Arch Wireless, Inc. and certain of its subsidiaries, including Arch, filed Chapter 11 petitions with the Bankruptcy Court on December 6, 2001, and have been operating in the ordinary course as debtors in possession. The Debtors' plan of reorganization was confirmed by the Bankruptcy Court on May 14, 2002, and they are expected to emerge from Chapter 11 by the end of May. The amended master lease agreement, once effective, provides Arch with flexibility to rationalize its network while guaranteeing the Company a minimum monthly rent, with predetermined escalations, for a specified minimum site commitment. The master lease also contains certain incentives, including relocation allowances, for Arch to relocate equipment to Pinnacle sites as part of Arch's efforts to rationalize its network. To the extent Arch exceeds the minimum site commitment, the agreement provides for additional rents. The anticipated net proceeds from the amended master lease agreement are approximately $56 million in aggregate over three years. As of March 31, 2002 (without giving effect to the new terms), Arch represented approximately 13% of Pinnacle's monthly run rate revenue, or approximately $24 million annually. Memorandum of Understanding to Settle Purported Class Action Lawsuit The Company also announced that it has entered into a memorandum of understanding to settle the consolidated securities class action lawsuit that is currently pending against Pinnacle, its Chief Executive Officer, Steven R. Day, its former Chief Financial Officer, Jeffrey J. Card, its former Chief Executive Officer, Robert J. Wolsey, various current and former directors of Pinnacle, Pinnacle's former accountants, PricewaterhouseCoopers, LLP, and the underwriters of Pinnacle's January 18, 2000 secondary offering. The litigation related to alleged misrepresentations contained in a prospectus for Pinnacle's January 18, 2000 secondary stock offering and alleged misleading statements contained in press releases and other filings with the SEC relating to certain of Pinnacle's financial statements, the acquisition of approximately 1,858 communications sites from Motorola, Inc., Pinnacle's relationship with its former accountants and other matters. The settlement, which has been agreed to by all of the parties to the litigation, provides that the claims against Pinnacle and its current and former officers and directors will be dismissed. In agreeing to the proposed settlement, Pinnacle and its current and former officers and directors specifically deny any wrongdoing. The settlement provides for a cash payment of approximately $8.2 million, all of which will be covered by Pinnacle's insurance. Of the $8.2 million payment, $4.1 million shall be deemed to have been made on behalf of Pinnacle, and $4.1 million shall be deemed to have been made on behalf of the individual defendants. In addition, the settlement provides for additional cash payments of approximately $2.6 million by PricewaterhouseCoopers and $200,000 by the underwriter defendants. The settlement is subject to certain customary conditions, including preliminary and final approval by the bankruptcy court in which Pinnacle files its Chapter 11 bankruptcy plan, the U.S. federal district court in which the action is pending and notice to the class. Once the courts give preliminary approval to this settlement, formal notices with the details of the settlement will be sent to the purported class members who purchased Pinnacle common stock during the period of June 29, 1999 to August 14, 2001. "We are pleased to put this matter behind us," said Steven R. Day, Pinnacle's Chief Executive Officer. "This settlement will enable Pinnacle to avoid further costly and protracted litigation and to continue our commitment to serve our customers and constituents." Recapitalization As previously announced on April 26, 2002, Pinnacle entered into a Securities Purchase Agreement with Fortress Investment Group and Greenhill Capital Partners LLP pursuant to which Pinnacle will be recapitalized through a pre-negotiated bankruptcy plan to be filed under Chapter 11 of the U.S. Bankruptcy Code. Pinnacle expects to file the Bankruptcy Plan during the month of May. It is contemplated that the Bankruptcy Plan will be funded by two new sources of capital: (1) an equity investment made by the Investors of up to $205.0 million, and (2) a new credit facility of $340.0 million to be led by a syndicate arranged by Deutsche Bank Securities Inc. with Bank of America, N.A., as evidenced by the financing commitment letter previously filed with the SEC. The lenders that issued the Investors the financing commitment letter have extended the date that Pinnacle is required to file bankruptcy that is a condition to their financing commitment from May 15, 2002 to May 22, 2002. Holders of at least two- thirds of the aggregate principal amount of the Company's 10% Senior Discount Notes due 2008 have agreed to vote in favor of the Bankruptcy Plan. Under the terms of the transaction documents, holders of approximately two-thirds of the aggregate principal amount of the Senior Notes have agreed, for a period of up to 60 days from April 25, 2002, not to exercise certain rights such holders may have against Pinnacle under the terms of the indenture governing the Senior Notes, including the right to receive principal of, and interest on, the Senior Notes. The proposed transaction with the Investors is subject to a number of conditions, including customary regulatory approvals, the requisite creditors' approvals in bankruptcy and confirmation of the Bankruptcy Plan. The Purchase Agreement also contains customary terms and conditions, including certain exclusivity rights and a termination fee of $12.0 million to be paid by Pinnacle in certain circumstances to the Investors if the Purchase Agreement is terminated and Pinnacle consummates an alternative transaction. During the bankruptcy process, Pinnacle anticipates operating in the ordinary course of business, subject to the provisions of the U.S. Bankruptcy Code, and does not currently expect that its trade suppliers, unsecured trade creditors, employees and customers will be materially impacted. As of March 15, 2002, Pinnacle has not made the last interest payment due on its 5-1/2% Convertible Subordinated Notes due 2007, which constitutes a default under the Convertible Notes indenture and a cross default under Pinnacle's senior credit facility. Pinnacle is a provider of communication site rental space in the United States and Canada. At December 31, 2001, Pinnacle owned, managed, leased, or had rights to in excess of 4,000 sites. Pinnacle is headquartered in Sarasota, Florida. For more information on Pinnacle visit its Web site at http://www.pinnacletowers.com PINNACLE HOLDINGS: Registers $200M 5.5% Conv. Sub Notes with SEC ---------------------------------------------------------------- Pinnacle Holdings Inc. has filed a registration statement with the SEC to register $200,000,000 aggregate principal amount of Pinnacle Holdings Inc.'s 5.5% convertible subordinated notes due 2007 and 2,551,840 shares of Pinnacle Holdings Inc.'s common stock, par value $0.001 per share, issuable upon conversion of these convertible subordinated notes. The Registration Statement covers resales of these convertible subordinated notes and such shares by securityholders. Approximately $12,450,000 principal amount of convertible subordinated notes had been converted into approximately 158,851 shares of Pinnacle Holdings Inc. common stock. In addition, certain holders of the convertible subordinated notes may have sold their notes pursuant to the Registration Statement. The remaining principal amount of the convertible subordinated notes and the shares of Pinnacle Holdings Inc. common stock issuable upon conversion of those convertible subordinated notes, which have not been sold pursuant to the Registration Statement, are now eligible for resale pursuant to Rule 144 of the Securities Act of 1933, as amended. Accordingly, the Company's Post-Effective Amendment is filed to deregister any unsold convertible subordinated notes and the shares of Pinnacle Holdings Inc. common stock issuable upon conversion of those unsold convertible subordinated notes. Pinnacle Holdings Inc.'s 10% bonds due 2008 (BIGT1), says DebtTraders, are quoted at a price of 26. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BIGT1for real-time bond pricing. PINNACLE HOLDINGS: Files Pre-Negotiated Chapter 11 in New York -------------------------------------------------------------- Pinnacle Holdings Inc. (Nasdaq: BIGT), together with its wholly owned subsidiaries, Pinnacle Towers Inc., Pinnacle Towers III Inc. and Pinnacle San Antonio LLC, filed their anticipated voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. As previously announced, Pinnacle's pre-negotiated bankruptcy filing is being made to implement the recapitalization of Pinnacle pursuant to the terms of the Securities Purchase Agreement entered into as of April 25, 2002 with Fortress Investment Group and Greenhill Capital Partners. Pinnacle currently expects to file a proposed plan of reorganization and disclosure statement with the Bankruptcy Court in the next few days. Once the Bankruptcy Court approves a form of disclosure statement, Pinnacle will distribute the plan of reorganization and disclosure statement in connection with its solicitation of votes from the holders of Pinnacle Holding's 10% Senior Discount Notes due 2008, Pinnacle Holding's 5-1/2% Convertible Subordinated Notes due 2007 and outstanding common stock. Holders of at least two-thirds of the aggregate principal amount of the Senior Notes and holders of at least two-thirds of the outstanding aggregate principal amount of the Convertible Notes have agreed to vote in favor of a plan which implements the Purchase Agreement. The Bankruptcy Plan will be funded by two new sources of capital: (1) an equity investment made by the Investors of up to $205.0 million, and (2) a new credit facility of $340.0 million to be led by a syndicate arranged by Deutsche Bank Securities Inc. with Bank of America, N.A. Immediately following confirmation of the Bankruptcy Plan, Pinnacle Holdings would be merged into a newly formed Delaware corporation formed by the Investors with New Pinnacle being the surviving corporation. Under the terms of the Purchase Agreement with the Investors, Fortress will purchase up to approximately 13,735,000 shares of common stock of New Pinnacle and Greenhill will purchase up to approximately 6,765,000 shares of common stock of New Pinnacle. The Purchase Agreement provides for the cancellation of the Senior Notes in exchange for up to $114.0 million (or $350.77 per $1,000 par value bond) in cash or, at the holder's election, a combination of cash and up to 49.9% of New Pinnacle's outstanding common stock. The number of Investor Shares (and hence their cash investment) will be proportionately decreased by the number of shares purchased by holders of the Senior Notes. The Purchase Agreement also provides for the cancellation of the Convertible Notes in exchange for up to $500,000 in cash and five-year warrants to purchase up to approximately 205,000 shares of New Pinnacle's common stock at approximately two times the price of the Investor Shares. Convertible Note holders can double this amount to a total of $1.0 million in cash and warrants to purchase 410,000 shares, representing approximately 2% of New Pinnacle's equity capitalization, if the Convertible Note holders agree to give certain releases. The Purchase Agreement further provides for cancellation of the outstanding shares of Pinnacle common stock. Former stockholders and plaintiffs in a stockholder class action shall receive five-year warrants to purchase up to 102,500 shares of New Pinnacle common stock (representing approximately 1/2% of New Pinnacle's equity capitalization) at approximately two times the price of the Investor Shares. This amount can be doubled to 205,000 shares, representing approximately 1% of New Pinnacle's capitalization, if the stockholders agree to give certain releases. Trade and other creditors will be paid in full in the ordinary course. The Purchase Agreement contains customary terms and conditions, including exclusivity provisions that generally prohibit Pinnacle from discussing or negotiating an alternative restructuring transaction, unless Pinnacle first receives an unsolicited bona fide proposal regarding such an alternative transaction. Pinnacle cannot enter into any agreement providing for an alternative transaction, except in certain circumstances where Pinnacle's board of directors determines that the alternative transaction would provide a higher value to Pinnacle than the transaction contemplated by the Purchase Agreement. If Pinnacle consummates such an alternative transaction, under certain circumstances, Pinnacle would be required to pay the Investors a break-up fee of up to $12 million. A syndicate of lenders, with Bank of America, N.A. as administrative agent, has agreed to furnish Pinnacle with a debtor-in-possession (DIP) revolving credit facility that will provide Pinnacle with use of cash collateral and up to $15.0 million in financing during the pendency of the reorganization proceeding. The DIP Facility is subject to the approval of the bankruptcy court. Pinnacle expects to emerge from bankruptcy during the fall of 2002. During the reorganization process, Pinnacle anticipates operating in the ordinary course of business, subject to the provisions of the U.S. Bankruptcy Code, and does not currently expect that its trade suppliers, unsecured trade creditors, employees and customers will be materially impacted. Pinnacle filed a number of customary first day motions in the bankruptcy court in New York to help maintain Pinnacle's business operations without interruption, maintain vendor, customer, employee and supplier confidence, and provide Pinnacle with appropriate professionals to enable a successful reorganization. The court filings include: (1) requests to pay pre-petition wages, salaries, benefits and reimbursable expenses to Pinnacle's employees and to continue existing employee policies and to continue the workers' compensation program then in effect; (2) determination of adequate assurance of payment for future utility services; (3) maintenance of most existing bank accounts and continued use of existing business forms and cash management system; (4) retention of counsel, investment banker, ordinary course professionals and a claims and balloting agent; (5) approval of post-petition financing and use of cash collateral; and (6) requests to obtain certain other relief. Pinnacle Holdings and its subsidiaries that filed the petitions for voluntary relief have also filed a scheduling motion asking for rapid hearings on their disclosure statement and confirmation of the Bankruptcy Plan. Steven R. Day, Pinnacle's Chief Executive Officer, said "We are pleased to continue advancing toward our goal of implementing our previously announced restructuring plan. A reorganization proceeding represents an effective vehicle for deleveraging Pinnacle's balance sheet, while allowing the holders of the Senior Notes to realize both a cash distribution and an opportunity to participate as equity holders in a significantly deleveraged company supported by dedicated sponsors. Because the holders of at least two-thirds of the aggregate principal amount of the Senior Notes and the Convertible Notes have agreed to the terms of the restructuring, we expect to emerge from the bankruptcy process expeditiously. I continue to be appreciative of the cooperation and support or our employees, customers, vendors and creditors." Amendment of Purchase Agreement Pinnacle also announced that in connection with the bankruptcy filing, Pinnacle has entered into an amendment and acknowledgement of the Purchase Agreement with the other parties to the Purchase Agreement and certain holders of its Senior Notes and Convertible Notes. The Amendment, among other items, revises the forms of the New Pinnacle Certificate of Incorporation and the Investor Agreement attached to the Purchase Agreement as Exhibits A and B, respectively. The Amendment further reflects the parties' agreement that, as a result of recent actions taken by Pinnacle and the Internal Revenue Service with respect to certain previous elections that as previously announced were not made by Pinnacle with respect to prior year acquisitions of C Corporations, the condition to closing in the Purchase Agreement that required Pinnacle to obtain a Determination (as defined in the Purchase Agreement) is deemed satisfied. Pinnacle will not owe tax, interest or penalties because such elections were not previously made. Pinnacle is a provider of communication site rental space in the United States and Canada. At December 31, 2001, Pinnacle owned, managed, leased, or had rights to in excess of 4,000 sites. Pinnacle is headquartered in Sarasota, Florida. For more information on Pinnacle visit its Web site at http://www.pinnacletowers.com PINNACLE HOLDINGS: Case Summary & Largest Unsecured Creditors ------------------------------------------------------------- Lead Debtor: Pinnacle Holdings, Inc. 301 North Cattleman Road, Suite 300 Sarasota, FL 34232 Bankruptcy Case No.: 02-12482 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Pinnacle Towers III Inc. 02-12477 Pinnacle Towers, Inc. 02-12483 Pinnacle San Antonio LLC 02-12484 Type of Business: The Debtors are leading independent providers of wireless communication site space in the United States. Debtors' business primarily focuses on renting space on communications sites to providers of wireless communications services, such as personal communications services, cellular, paging, specialized mobile radio, enhanced specialized mobile radio, wireless data transmissions and radio and television broadcasting. Chapter 11 Petition Date: May 21, 2002 Court: Southern District of New York Debtors' Counsel: Sandra E. Mayerson, Esq. Holland & Knight 195 Broadway New York, NY 10007 Tel: 212 513-3250 Fax: 212 385-9010 Total Assets: $1,002,675,000 Total Debts: $931,899,000 A. Pinnacle Towers III Inc.'s Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Radisson Waikiki Trade Debt $1,850 Prince Kuhio Con Ed Trade Debt $1,294 Royal Lahaina Resort Trade Debt $1,143 Locke Liddel & Sapp LLP Professional Services $703 SE&G Trade Debt $585 SAA Institutional Real Trade Debt $549 Estate Equities Olliers, Turley, Trade Debt $531 Martin & Tucker WTEC Trade Debt $508 L&B Biscayne Tower Trade Debt $460 Group Trust United Service Co. Trade Debt $426 Downtown North Sixty Trade Debt $269 Assoc Joint Venture McBee Systems, Inc. Trade Debt $155 Big Country Electric Trade Debt $117 Cooperative, Inc. Southwestern Bell Trade Debt $99 Total Comfort Service Trade Debt $81 Center, Inc. LIPA Trade Debt $72 Taylor Telephone Trade Debt $53 Cooperative Qwest BRI Property Trade Debt $13 Management B. Pinnacle Holdings, Inc.'s Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Senior Discount Notes Debt Securities $297,751,000 Notices c/o Bank of New York Attn: Enrique Lopes Corporate Trust Operations 15 Broad Street, 6th Floor New York, NY 10007 Tel: 212 235-2360 Convertible Subordinated Debt Securities $187,550,000 Notes Notices c/o Bank of New York Attn: Enrique Lopes Corporate Trust Operations 15 Broad Street, 6th Floor New York, NY 10007 Tel: 212 235-2360 Deutsche Banc Alex Brown Professional Services $3,000,000 Global Corporate Finance Attn: David Dunn 280 Park Avenue, 9th Floor New York, NY 10017 Tel: 212 454-6500 The NASDAQ Stock Annual Fee $29,820 Market Inc. C. Pinnacle Towers, Inc.'s Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Motorola Purchase Agreement $10,000,000 Jeff Moran 1307 E. Algonquin Rd. Schaumberg, IL 60196 Tel: 847 576-3687 American Tower Contract $500,000 Michelle Tedisco 116 Huntington Ave. 11th Floor Boston, MA 02116 Tel: 617 375-7500 Locke Liddell & Sapp LLP Professional Services $159,058 Piper Rudnick Professional Services $94,975 Solomon Pearl Blum Professional Services $71,514 Heyman & Stitch Sky Tek Wireless Trade Debt $71,510 Solution, Inc. Honeywell, Inc. Trade Debt $39,110 Modern technical Service Trade Debt $28,750 Tribune Television Trade Debt $28,134 Northwest Trico Tower Service, Inc. Trade Debt $26,633 Button Communications, Inc. Trade Debt $22,222 D. Pinnacle San Antonio LLC's Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Corban Communications Contract $1,700,000 Attn: Hal Thomas PO Box 703809 Dallas, TX 75370 Tel: 800 580-9075 Bexar County Tax Tax $35,813 Assessor-Collector Bexar County Tax Tax $13,437 Assessor-Collector Southwestern Bell Trade Debt $1,136 City Public Service Trade Debt $1,073 POLAROID CORP: Intends to File Disclosure Statement -- Later ------------------------------------------------------------ Pursuant to Bankruptcy Rule 3016(b), Polaroid Corporation and its debtor-affiliates ask the Court's authority to: (a) waive the requirement to file a Disclosure Statement with the filing of plan of reorganization; and (b) fixing the 30th day after the consummation of the Sale as the time to file a disclosure statement. Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, in Wilmington, Delaware, recalls that the Debtors filed the plan of reorganization on April 29, 2002. The Plan, Mr. Galardi explains, is premised on the consummation of the Sale with OEP or another bidder -- the liquidation of the Debtors' remaining assets and the distribution of the Sale proceeds and the Debtors' other assets to the Debtors' creditor constituencies. Hence, Mr. Galardi contends, it would be a greater benefit to the creditors and the Debtors' estate to file the Disclosure Statement later because: (a) the Debtors cannot determine the total consideration it will receive, including the full extend of the liabilities being assumed prior to the consummation of the sale; (b) there is a potential dispute between the Pre-petition Secured Lenders and the Debtors regarding the Amended and Restated Credit Agreement dated December 11, 1998, which the Debtors hope to resolve immediately. Mr. Galardi notes that postponing the filing of the Disclosure Statement will lessen the Debtors' administrative expense in the preparation of the disclosure Statement which would most likely be revised three months from now. (Polaroid Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) STANSBURY HOLDINGS: Mar. 31 Working Capital Deficit Tops $8.4MM --------------------------------------------------------------- Stansbury Holdings Corporation was incorporated in 1969 under the name Stansbury Mining Corporation. In 1985, Stansbury changed its name to Stansbury Holdings Corporation. Stansbury, and its wholly owned subsidiaries, are: Elk Creek Vermiculite, Inc., Dillon Vermiculite Limited LLC, International Vermiculite (Montana), Inc., International Vermiculite (California), Inc., and Sweetwater Garnet, Inc., The Company's business is the acquisition, exploration, development and operations of industrial mineral properties, particularly vermiculite and garnet mineral projects. The Company emerged from Chapter 11 bankruptcy proceedings during 1985, and was non-operating until June, 2000. At March 31, 2002, it's negative working capital was approximately $8.4 million, and accumulated deficit was approximately $17.1 million. There can be no assurances that the Company will be successful in obtaining the financing necessary to develop its mineral reserves. Nor can there be any assurances that other sources of funds can be obtained to cover general and administrative costs. The Company's independent public accountants have included a "going concern" emphasis paragraph in their audit report accompanying the June 30, 2001, consolidated financial statements reported in the Company's 10K-SB for that reporting period. The paragraph states that the Company's recurring losses and negative working capital raise substantial doubt about the Company's ability to continue as a going concern. The Company has been inactive and non-operating for most of its 30 years prior to the current fiscal year; consequently, it is questionable as to whether or not it can remain a going concern. The primary activity in the past few years has been to preserve and maintain mineral leases and claims. Little actual mining has occurred until the commenced its operation late in the Fiscal Year ending June 30, 2000. The Company has had no income since 1991, until the fourth quarter of the Fiscal Year ending June 30, 2000, and has utilized proceeds of loans from shareholders and the issuance of capital stock for meeting its operating capital commitments, as well as four secured loans obtained in the current fiscal year. The Company has had no income of consequence since March 31, 2001. STAR MULTI CARE: Nasdaq Delisting Stayed Pending Hearing Outcome ---------------------------------------------------------------- Star Multi Care Services, Inc. (Nasdaq: SMCS) announced that on May 13, 2002, the Company received notification from The Nasdaq Stock Market that it was not in compliance with Marketplace Rule 4310(C)(2)(B) that requires that the Company maintain a minimum of $2 million of net tangible assets or $2.5 million in stockholders equity. Nasdaq notified the Company that its common stock would be delisted from The Nasdaq Stock Market on May 21, 2002. However, the Company has appealed this decision by requesting a hearing that will stay this delisting action until a hearing is held and a final determination is made. Star Multi Care Services, Inc. is a primary provider of proprietary, long term care, and high-tech home health care services and staffing to hospitals and other medical facilities throughout Southeastern Florida, Ohio and Pennsylvania. The Company is headquartered in Huntington Station, New York. TELEGLOBE INC: Ontario Court Grants CCAA Creditor Protection ------------------------------------------------------------ Teleglobe Inc. confirmed that the honorable Judge J.M. Farley of the Ontario Superior Court of Justice has granted the Company an Order providing creditor protection under the Companies' Creditors Arrangement Act (CCAA). The Company will initiate ancillary filings in the United States and United Kingdom. These filings will provide the Company with time to complete its previously announced reorganization plan. TELEGLOBE INC: Commences Reorganization with CCAA Protection ------------------------------------------------------------ Teleglobe Inc. announced a major reorganization strategy to renew its focus on its core voice and related data business to maximize stakeholder value. Six elements support this reorganization strategy: - The Company is exiting from its hosting business and portions of its data transmission business to facilitate its renewed focus on its core operations. By exiting these businesses, Teleglobe will free itself from the high costs associated with recently built infrastructure, primarily developed to support the discontinued data and hosting operations. - To facilitate this process, Teleglobe is applying to the Ontario Superior Court of Justice for an Order providing creditor protection under the Companies' Creditors Arrangement Act (CCAA). The Company will initiate ancillary filings in the United States and United Kingdom. - As part of the reorganization strategy, Teleglobe reduced its workforce by 850 people. Approximately 950 jobs will remain at the Company to support the core business and its restructuring process. Fifty percent of the job losses will occur in the United States and 15 percent in Canada. Job losses are across all organizational levels. These losses relate primarily to the terminated data and hosting operations. - John Brunette has been appointed Chief Executive Officer to oversee the implementation of the overall strategy and to lead the financial restructuring process and the sale of non-strategic assets and businesses. Previously, he served as Teleglobe's Executive Vice President and Chief Administrative Officer. Executive Vice President of Voice, Serge Fortin, has been appointed Chief Operating Officer with the mandate to lead the operations of the core voice and related data business. Teleglobe's board of directors has accepted the resignation of Charles Childers, formerly the Company's president. - Teleglobe has secured US$100 million of debtor-in- possession (DIP) financing from BCE Inc. This financing will support the continued operations of the core business, including the servicing of customers and the payment of employee wages and benefits. - Teleglobe will ensure the orderly transition of customers of discontinued services to new service providers. "Our primary objective is to maximize the value of the Company for all stakeholders," said Mr. Brunette. "This strategy allows us to be free of a financial burden and focus on our core business, which has been built over a 50 year period." Returning to the Core Business Teleglobe's key asset moving forward is its traditional wholesale voice business, which provides voice and data services to other telecom carriers in North America and around the world. This business has a global base of longstanding customers and generated approximately $750 million of the Company's US$1.3 billion in revenues last year. "This strategy is good for our stakeholders and the customers of our core business, who can expect to see no decline in the level and quality of service as a result of today's developments. The integrity of our services and customer relationships remain intact. To these customers it is business as usual," added Mr. Fortin. Operating on a stand-alone basis, the Company's core business is expected to generate free cash flow and be self-funding, once freed from its current high cost structure. This business employs approximately 600 people and will be headquartered in Montreal. Immediate next steps for the Company include: - Separation and sale of assets from discontinued data and hosting businesses: -- Exit the hosting business immediately -- Rationalize the GlobeSystem network -- Scale back the product suite, including enterprise services - Maximization of stakeholder value through the enhancement and potential sale of the core business: - Continue discussions with potential buyers. - Work closely with key customers to expand the Company's commercial agreements - Immediately begin transition of customers of discontinued services to new providers: - Establish dedicated migration teams - Develop tailored communication programs Fair and Equitable Treatment of Employees Affected employees will receive separation benefits, including severance pay and outplacement assistance. Approximately US$25 million of additional funding from BCE Inc. is intended for employee retention and severance packages. "The job losses are a difficult but necessary action to ensure Teleglobe can focus its resources on operations that are financially strong, including our core business," added Mr. Brunette. TELETOUCH COMMS: Completes Renegotiation of Senior Debt Facility ---------------------------------------------------------------- Teletouch Communications, Inc. (Amex: TLL) has completed the renegotiation of its senior debt facility resulting in a significant reduction in its debt. The transaction also eliminated the Company's previous default under terms of its credit agreements. This arrangement has been the result of long and arduous negotiations spanning many months. Its successful conclusion affords Teletouch the opportunity to develop and grow its existing business and removes substantial impediments to the growth of the Company. "The negotiations regarding our senior debt were successful in eliminating approximately $60 million in principal and interest owed by Teletouch, saving approximately $1 million per quarter in interest costs," stated J. Kernan Crotty, President of Teletouch Communications, Inc. "The net result for Teletouch stockholders is a stronger balance sheet and improved cash flow. We appreciate the cooperation of our senior lenders in working with us in a settlement that was satisfactory to all parties." The transaction eliminated approximately $57.3 million in principal and $2.7 million in accrued interest in senior debt under its 1996 financing arrangements. The former lenders agreed to terminate and release Teletouch from its obligations under the credit agreement that was secured by substantially all of the assets of Teletouch and its subsidiaries. Borrowings under the credit agreement had required the principal be repaid in escalating quarterly installments through November 2005. In order to complete the transaction, Teletouch entered into new or amended credit agreements with First Community Financial Corporation, ING PRIME RATE TRUST, and TLL Partners, L.L.C. (an entity affiliated with Mr. Robert McMurrey, Chairman of Teletouch) aggregating $7.2 million. Proceeds from these facilities combined with working capital from the Company were used to fund the $12.5 million settlement. Contemporaneous with the reduction of the senior debt, TLL Partners, L.L.C. assisted Teletouch in obtaining a forgiveness of approximately $25.3 million in junior subordinated debt owed to CIVC and certain related parties. Subsequent to the completion of the transactions, the Company has a total of $7.2 million in institutional and subordinated debt. As a result of the transactions, Teletouch's stockholders equity will increase by approximately $70 million. "We have approximately $3 million in cash availability and expect a significant improvement in cash flow following the transaction," continued Mr. Crotty. "During the past few years, Teletouch was successful in generating positive cash flow, even though our business was impacted by cellular phone technologies. We have successfully transitioned our business to include these new products and believe our improved cash position will be an important part in funding additional growth opportunities in wireless communications services for Teletouch." The transaction that is the subject of this release is extremely complicated. Readers should read closely a Current Report on Form 8-K that Teletouch expects to file with the Securities and Exchange Commission within the ten days following this press release. Teletouch Communications provides wireless messaging, cellular and two-way radio communications services in Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Oklahoma, Texas and Tennessee. The Company focuses on smaller metropolitan markets where it believes there is less competition and more opportunity for internal growth than in larger metropolitan areas. Teletouch's common stock is traded on the American Stock Exchange under the stock symbol TLL. Additional financial information on Teletouch is available at the Internet Web address: http://www.irinfo.com/tll Teletouch Paging services are available at: http://www.teletouch.com TRENWICK GROUP: Fitch Maintains Credit Ratings' Evolving Outlook ---------------------------------------------------------------- Fitch Ratings is maintaining its Evolving Rating Outlook on Trenwick Group, Ltd. and its subsidiaries. Fitch's action follows Trenwick's May 16 announcement that it had sold the property catastrophe book of business of its LaSalle Re, Limited subsidiary, to Specialty Insurance Ltd. LaSalle Re is a wholly owned subsidiary of Trenwick. The sale was effected through a 100% quota share under which LaSalle Re sold its in-force property catastrophe book of business as of April 1, 2002 in exchange for a 25% ceding commission. LaSalle Re collected approximately $15 million representing ceding commission and other benefits at the close of the transaction. Terms of the sale also call for LaSalle Re to receive additional payments contingent on the business's profitability and renewal rate. Trenwick has also recently stated that it plans to pay off its existing $195 million of bank debt using cash from dividends that will be paid by LaSalle Re. The company has characterized this dividend, as capital in excess of that required to support LaSalle Re's remaining business in force. Fitch considers this a reasonable characterization since approximately 70% of LaSalle Re's gross premiums are from relatively short-tail property catastrophe reinsurance and since Trenwick recently exercised its right to raise $55 million of preferred equity under a CAT-E-Put contract with Swiss Re, thus providing a cushion against adverse loss development. Fitch believes that Trenwick's financial profile and financial flexibility will improve by paying down its bank debt. Fitch estimates that after paying down the bank debt, Trenwick's debt- plus-preferred to capital ratio will decline to 25% from 47%. Fitch also believes that Trenwick removed a source of earnings volatility by exiting the property catastrophe market. From a financing perspective, Fitch believes that Trenwick's next challenge is to obtain a replacement letter-of-credit facility for its current $230 million facility that expires in November 2002. This facility is used to support Trenwick's underwriting operations at Lloyds. In 2001, these operations generated approximately 30% of Trenwick's gross premiums written. Trenwick's non-laddered debt structure and corresponding refinancing risk were major factors impacting Fitch's thinking when it assigned its rating and rating outlook in January 2002. Rating List: Trenwick Group, Ltd. --Long-term - 'BB-'/Evolving. Trenwick America Corp - --Long-term 'BB-'/Evolving. LaSalle Re Holdings, Ltd. --Long-term - 'BB-'/Evolving. Trenwick America Corp. --Senior debt - 'BB-'/Evolving. Trenwick Capital Trust I --Preferred capital sec - B+'/Evolving. LaSalle Re Holdings, Ltd. --Preferred stock - 'B'/Evolving. TRISM INC: Hires Peisner Johnson to Hunt for Tax Refunds -------------------------------------------------------- Trism, Inc., asks for authority from the U.S. Bankruptcy Court for the Western District of Missouri to engage Peisner Johnson & Company, LLP as Tax Consultants and Auditors for the purpose of investigating, preparing and filing any claims for refunds due and owing to the Debtors. The Debtors assert that Peisner Johnson is an experienced tax consulting and auditing firm with extensive experience in state and local tax review for national and regional trucking companies. The services Peisner Johnson will perform for Debtors include: a) conducting a detailed review and analysis of Debtors' records, invoices and other documents to determine if Debtors are entitled to any tax refunds or credits or reductions in assessments, interest or penalties; b) researching all applicable issues and scheduling all items qualifying for refunds; c) providing Debtors with a detailed report of all areas of tax relief and documentation supporting the report; d) with Debtors' approval, preparing and filing all necessary and appropriate returns, claims, etc.; and e) negotiating any disputes and finalizing any compromises. Debtors propose to compensate Peisner Johnson on a contingency basis: a) Debtors will pay Peisner Johnson 50% of any refunds identified by Peisner Johnson and received by Debtors; b) To the extent that any refunds consist of tax credits, reduced assessments, or reduced interest or penalties, Debtors will pay 50% of the amount by which the taxes, interest or penalties is reduced; c) No fee will be owed to Peisner Johnson if no refunds are identified by Peisner Johnson and received by Debtors; d) All amounts owed to Peisner Johnson for any refunds received by Debtors will be due and payable upon the date of receipt by Debtors of said refund; e) All amounts owed to Peisner Johnson for any tax credits, reduced assessments, or reduced interest or penalties will be due and payable upon the date of distribution to the creditors in the bankruptcy cases; f) Peisner Johnson will be entitled to interest at the annual rate of 10% beginning 30 days after payment is due with said interest continuing to accrue until payment is received by Peisner Johnson; and To the best of the Debtors' knowledge, information and belief, Peisner Johnson has no connection with, and neither holds nor represents any interest adverse to, the Debtors, their estate, creditors or any other parties in interest. Trism, Inc., the nation's largest trucking company that specializes in the transportation of heavy and over-dimensional freight and equipment, as well as material such as munitions, explosives and radioactive and hazardous waste, filed for chapter 11 protection on December 18, 2001 in Western District of Missouri. Laurence M. Frazen, Esq. at Bryan Cave LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $155 million in assets and $149 million in debts. U.S. AGGREGATES: Wins Approval to Sell All Assets to Oldcastle -------------------------------------------------------------- As previously disclosed in a March 11 press release, U.S. Aggregates announced its intention to sell substantially all of the assets of U.S. Aggregates and its subsidiaries to Oldcastle Materials under section 363 of the U.S. Bankruptcy Code. On May 15, the Company received bankruptcy court approval to proceed with this transaction. The sale is expected to close at the end of May and U.S. Aggregates values the transaction at approximately $140 million. Oldcastle Materials is a subsidiary of CRH plc (Nasdaq: CRHCY), one of the largest producers of aggregates, asphalt and ready mix concrete in the U.S. Founded in 1994, U.S. Aggregates, Inc. is a producer of aggregates. Aggregates consist of crushed stone, sand and gravel. The Company's products are used primarily for construction and maintenance of highways and other infrastructure projects as well as for commercial and residential construction. USAI serves local markets in nine states in two regions of the United States, the Mountain states and the Southeast. US DIAGNOSTIC: Eyeing Bankruptcy Protection to Restructure Debts ---------------------------------------------------------------- US Diagnostic Inc. (OTCBB:USDL) reported its financial results for the first quarter 2002. For the quarter ended March 31, 2002, the Company's net loss was $.9 million as compared to a $1.2 million net loss for the quarter ended March 31, 2001. Net revenue for the first quarter 2002 was $11.3 million versus $17.0 million for the first quarter 2001. The reduction in revenues was attributable to the impact of the Company's sale and closure of 13 imaging centers in 2001. The Company's financial condition continued to deteriorate during 2001 and into 2002 despite efforts to improve operations and its cash flow remains inadequate to support its operating needs and to service its debt obligations. The Company is substantially dependent upon the willingness of its primary senior lenders to reduce their sweeps of the Company's available cash which in part secures the Company's obligations under its credit facilities with such lenders. If these forbearances were terminated, the Company would likely be forced to seek immediate protection in bankruptcy. In addition, the Company continues to negotiate with its senior lenders and a committee of debenture holders regarding a restructuring which would require the Company to commence a voluntary case under Chapter 11 of the Bankruptcy Code and pursuant to which an entity affiliated or supported by the Company's senior lenders would acquire substantially all of the Company's operating assets in exchange for a cash payment that would be used to partially repay creditors. In all likelihood there would be little or no value remaining in the Company for its current stockholders. There can be no assurance that a definitive agreement with respect to the proposed sale will be entered into or that such agreement would be approved by the bankruptcy court, nor can there be any assurance as to the amount of funds that will be available to pay the Company's creditors or the particular percentage of each class of creditors' claims that could be repaid. For more information, read the Company's Form 10-Q for the quarter ended March 31, 2002 and the Annual Report on Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission and which can be found on the Securities and Exchange Commission's Web site at http://www.sec.gov US Diagnostic Inc. is an independent provider of radiology services with locations in 10 states and owns and operates 22 fixed site diagnostic imaging facilities. USG CORP: Brings-In Deloitte & Touche to Replace Arthur Andersen ---------------------------------------------------------------- USG Corporation said that the Audit Committee of the Board of Directors, after careful consideration, has selected Deloitte & Touche LLP to replace Arthur Andersen LLP as its independent public accountant. The selection follows a thorough review process in which USG solicited proposals from several leading accounting firms amid growing concern about the impact of recent events on Andersen's ability to continue to meet USG's requirements. "This decision should not be viewed as a reflection on the quality of the work performed by Andersen, as they have served us well for nearly 80 years," said USG Corporation Chairman, President and CEO, William C. Foote. "We are pleased with the selection of Deloitte & Touche to serve as USG's auditor and are confident that the firm will provide USG and its shareholders with outstanding service. Their focus on quality and commitment to customer service is consistent with our own values," Foote added. USG Corporation is a Fortune 500 company with subsidiaries that are market leaders in their key product groups: gypsum wallboard, joint compound and related gypsum products; cement board; gypsum fiber panels; ceiling panels and grid; and building products distribution. For more information about USG Corporation, visit the USG home page at http://www.usg.com(USG Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) WARNACO GROUP: Court Okays Increase in FTI's Compensation Limit --------------------------------------------------------------- FTI Consulting, Inc., accountants of Dewey Ballantine -- Special Counsel to The Warnaco Group, Inc., sought and obtained the Court's authority to increase its compensation cap from $175,000 to $400,000. Raymond T. Sloane, Managing Director of FTI, relates that the Retention Order of FTI sets the compensation cap to $175,000. This amount is established on the basis of "certain understanding of facts and circumstances provided by the Debtors that turned out to be incomplete." As early as mid-November, 2001, Mr. Sloane says, FTI already alerted special counsel, Dewey Ballantine, that FTI's fees would likely breach the cap to finish the investigation. Upon Dewey's information, the Audit Committee stand that the audit should be "completed and that no short-cuts be taken." Thus, FTI continued the work to meet the presentation deadline of the report to the Audit Committee to curb: (a) a delay in providing the Audit Committee with the findings of the investigation to enable it to make any necessary action; (b) a delay in quantifying and reporting the Debtors' restatement of its prior year earnings; (c) a further delay in complying with the Securities and Exchange Commission's reporting requirements for past and current financial reports; (d) the inability to provide the Securities and Exchange Commission the timely information pertaining to the investigation; and (e) additional work to be performed and fees to be incurred by the Debtors' independent auditors. Furthermore, Mr. Sloane adds, the Debtors requested FTI, as additional services, "to meet with the Securities and Exchange Commission and separately with the accounting firm, Deloitte & Touche, LLP, to discuss the scope and substance of our work." Accordingly, Mr. Sloane contends that the request is warranted because, great benefit has been provided to the estate, given that: (a) FTI has conducted an independent accounting investigation, as an objective third party, into the facts and circumstances leading to the need for the Debtors to restate its financial results reported for earlier periods, and in support of the Audit Committee's on-going oversight responsibility regarding the Debtors' financial statements; (b) FTI's prior involvement in similar accounting, investigative and expert financial services to various constituencies provides the Debtors with crucial credibility with the Debtors' creditors and the SEC; and (c) the level of services FTI provided to the Debtors were not duplicative of the efforts of any of the other professionals retained by the Debtors or other constituencies. Finally, Mr. Sloane assures the Court that, pursuant to Section 101(14) of the Bankruptcy Code, FTI does not represent or hold any interest adverse to the Debtors, its estate or their creditors and equity security holders in the manners upon which FTI has been engaged. (Warnaco Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) WHEELING-PITTSBURGH: Delays Form 10-Q Filing with SEC ----------------------------------------------------- Wheeling-Pittsburgh Corporation has delayed the filing of its information/financial statements with the SEC for the first quarter ended March 31, 2002, due to difficulties in amassing the necessary information for inclusion. When filed, the Form 10-Q Results of Operation will reflect a net loss of approximately $41.0 million for the quarter ended March 31, 2002, as compared to a net loss of approximately $60.0 million for the quarter ended March 31, 2001. In addition, the Company expects to show an Operating Loss of approximately $38.2 million for the first quarter of 2002 as compared to an Operating Loss of approximately $53.0 million for the first quarter of 2001. Wheeling-Pittsburgh Steel is the ninth largest domestic integrated steel manufacturer. The Company filed for Chapter 11 reorganization on November 16, 2000 in the U.S. Bankruptcy Court for the Northern District of Ohio. WILLIAMS COMMS: Committee Wants to Commence Rule 2004 Inquiry ------------------------------------------------------------- According to Michael A. Cohen, Esq., at Kirkland & Ellis in New York, New York, the Official Committee of Unsecured Creditors of Williams Communications Group, Inc., understands that The Williams Companies, Inc. (TWC), the former parent of Williams Communications Group (WCG), intend to assert approximately $2,300,000,000 in claims against WCG. Because at least $2,150,000,000 of these insider claims relate to TWC's guarantee of WCG's obligations, and because the Debtors filed for bankruptcy only one year after TWC spun it off to the public as a supposedly viable entity, and for other reasons described below, the Committee believes that an investigation of the nature of TWC's claims -- and of its dealings with WCG -- is necessary. Specifically, Mr. Cohen relates that the Committee wishes to investigate whether TWC's claims are subject to equitable re- characterization, subordination, or other objection. Over the last several years, TWC caused debtor WCG to enter into numerous, complicated transactions, which continue to affect WCG's finances and operations. The Committee believes that TWC and its financial consultants have a substantial amount of information concerning debtor WCG's assets and financial affairs. Thus, to determine whether grounds exist to subordinate, recharacterize as equity, or otherwise object to TWC's claims, and to identify the assets and understand the transactions involving WCG's estate, the Committee must take discovery of TWC and its financial consultants. Consequently, with this motion, the Committee seeks authority to conduct Rule 2004 examinations of: A. The Williams Companies, Inc.; B. TWC officers who served on WCG's Board through the separation process, including Keith E. Bailey, James R. Herbster, Michael P. Johnson, Sr., Steven J. Malcolm, and Jack D. McCarthy; C. Other TWC officers and employees who were involved in the decision to separate as well as the implementation of the decision, including William G. von Glahn and Tony Gehres; D. TWC directors who approved the separation of the two companies, including Hugh M. Chapman, Glenn A. Cox, Thomas H. Cruikshank, William E. Green, Patricia L. Higgins, William R. Howell, James C. Lewis, Charles M. Lillis, George A. Lorch, Jack A. McAllister, Frank T. MacInnis, Peter C. Meinig, Gordon R. Parker, Janice D. Stoney, and Joseph H. Williams; and E. Advisors to TWC and/or WCG with respect to the WCG's business and the separation, including the Boston Consulting Group, Lehman Brothers and J.P. Morgan. Initially, the Committee will seek documents from each person or entity listed above. Once the Committee receives responsive documents, Mr. Cohen plans to schedule the depositions of each person or entity, including depositions of corporate representatives for the entities listed above. Pursuant to 11 U.S.C. Sections 1103 and 1109(b) and Fed. R. Bankr. P. 2004(b), Mr. Cohen tells the Court that the Committee is a party in interest entitled to investigate, among other things, matters related to the Debtors' liabilities and financial condition, the administration of the Debtors' estate, and any other matter relevant to this case or to the formulation of a plan. A central issue in this case will be the treatment of TWC's claims under a plan of reorganization. Was TWC's guarantee of the $1,400,000,000 in Secured Notes effectively an equity contribution that should be re-characterized as such? Did TWC act inequitably by threatening WCG with an involuntary proceeding or other litigation such that the $760,000,000 note issued by WCG instead of equity should be subordinated pursuant to Code Section 510? More broadly, did TWC engage in misconduct by spinning off a subsidiary that was over-leveraged and had no reasonable chance to survive as a stand alone entity given its capital structure? Mr. Cohen believes that these and other similar questions will need to be answered in the weeks ahead. However, they cannot be answered without discovery. Moreover, given that the Debtors have agreed in their "lock-up" agreement with TWC not to object to TWC's claims, Mr. Cohen states that the investigation of any claims the estate may have against TWC will have to be done by the Committee. Were the assets that the Debtors transferred to TWC as part of the spin- off transaction fraudulent transfers? What about the office building that was transferred from TWC to WCG, back to TWC, and then leased to WCG? Did WCG receive reasonably equivalent value with respect to each of these transactions? Discovery will also be needed to assess these potential claims. However, discovery from TWC alone will not be sufficient. Mr. Cohen submits that the Committee will also need discovery from the individual TWC directors and officers who conceived, approved, and implemented the separation of the two companies. The professionals who advised the two companies, including the Boston Consulting Group and J.P. Morgan, also have relevant documents and information. (Williams Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) YOUBET.COM: Falls Below Nasdaq Minimum Bid Price Requirements ------------------------------------------------------------- Youbet.com(R), Inc. (Nasdaq: UBET), the leading online live event and wagering company, announced that, as expected, it received a determination from the staff of The Nasdaq Stock Market on May 16, 2002, that the Company has failed to comply with the minimum bid price requirements for continued listing set forth in Nasdaq's Marketplace Rule 4450(a)(5), and that its securities are therefore subject to delisting from the Nasdaq National Market. The Company had previously announced, on March 7, 2002, that it expected to receive the staff determination in the event that the Youbet.com common stock did not trade on the Nasdaq National Market with a minimum bid price of at least $1.00 for ten consecutive trading days prior to May 15, 2002. Youbet.com is requesting a hearing before a Nasdaq Listing Qualifications Panel to review the determination. Youbet.com's hearing request will stay the delisting of the Company's securities pending the panel's decision. "Youbet.com has made tremendous progress over the last 60 days," said David Marshall, Chief Executive Officer of Youbet.com. "Our recent Board and management transitions, our co-marketing deals with Churchill Downs and Maryland Jockey Club, our record breaking handle, all show that Youbet is making important strides aimed at increasing the Company's strength and viability, and in turn increases the company's value," Marshall concluded. There can be no assurance that the Qualifications Panel will grant the Company's request for continued listing. Should the Qualifications Panel deny the Company's request for continued listing on the Nasdaq National Market, the Company may move to the Nasdaq SmallCap Market. In the United States, Youbet.com provides network members the ability to watch and, in most states, the ability to wager on a wide selection of coast-to-coast thoroughbred and harness horse races via its exclusive closed-loop network. Members have 24- hour access to the Youbet Network's features including live racing from a choice of over 80 racetracks representing all major racetracks, in the U.S., Canada and Australia such as Churchill Downs, Hollywood Park, Arlington, Pimlico, Oaklawn, Del Mar, Belmont Park, Aqueduct, Saratoga, Santa Anita Park, Gulfstream Park, Golden Gate Fields. Other Network features include commingled track pools, live audio/video, up-to-the minute track information, real time wagering information and value-added handicapping products. Youbet Network customers enjoy live coverage from and wagering accessibility to all major racetracks in 40 states, representing virtually 100% of major horse racing content. Youbet.com is a patent and content licensee and maintains a strategic relationship with TVG, a wholly owned subsidiary of Gemstar-TV Guide International, Inc. (Nasdaq: GMST) and also maintains a strategic relationship with MEC Pennsylvania Racing, part of Magna Entertainment Corp. (Nasdaq: MIEC). Youbet.com is an official online wagering platform of Churchill Downs Incorporated and the Kentucky Derby. Youbet.com operates Youbet.com TotalAccess(TM), an Oregon-based hub for the acceptance and placement of wagers. YOUNG BROADCASTING: S&P Puts Credit Ratings on Watch Negative ------------------------------------------------------------- On May 16, 2002, Standard & Poor's placed its ratings, including its single-'B'-plus corporate credit rating, on TV station operator Young Broadcasting Inc. on CreditWatch with negative implications. The action was based on very weak first quarter 2002 performance of Young's San Francisco station KRON-TV, and the likelihood that credit measures could remain below the level appropriate for the company at a single-'B-plus corporate credit rating for an extended period. New York City-based Young had about $1.2 billion debt outstanding on March 31, 2002. The soft San Francisco ad market is hampering Young's efforts at successfully running the newly-independent KRON. Even after assuming all proceeds from the Los Angeles station divestiture are used for debt repayment, Young's credit measures are weak. KRON began operating as an independent station on January 1, 2002, following the termination of its affiliation with the NBC Television Network. The station produced a first quarter cash flow loss, representing a sharper than expected cash flow decline following its change in affiliate status. Despite relative audience ratings success, revenue has been slow to develop at the station because of the very weak, competitive San Francisco ad market, which hasn't shown the signs of recovery seen in other markets. Standard & Poor's will resolve the CreditWatch listing after reviewing Young's operating prospects. Ratings list: Young Broadcasting Inc. * Corporate credit rating B+ * Senior secured bank loan BB- * Senior unsecured debt B * Subordinated debt B- * Meetings, Conferences and Seminars ------------------------------------ May 24-27, 2002 COMMERCIAL LAW LEAGUE OF AMERICA 54th Annual New England Meeting Cranwell Resort and Gold Club, Lenox, Massachusetts Contact: 312-781-2000 or clla@clla.org or http://www.clla.org/ May 26-28, 2002 INTERNATIONAL BAR ASSOCIATION International Insolvency 2002 Conference Dublin, Ireland Contact: Tel +44 207 629 1206 or member@int-bar.org or http://www.ibanet.org June 6-9, 2002 AMERICAN BANKRUPTCY INSTITUTE Central States Bankruptcy Workshop Grand Traverse Resort, Traverse City, Michigan Contact: 1-703-739-0800 or http://www.abiworld.org June 13-15, 2002 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy Seaport Hotel, Boston Contact: 1-800-CLE-NEWS or http://www.ali- aba.org/aliaba/cg097.htm June 20-21, 2002 RENAISSANCE AMERICAN MANAGEMENT, INC. & BEARD GROUP Fifth Annual Conference on Corporate Reorganizations Fairmont Hotel, Chicago Contact: 1-800-726-2524 or ram@ballistic.com June 27-29, 2002 ALI-ABA Chapter 11 Business Reorganizations Fairmont Copley Plaza, Boston Contact: 1-800-CLE-NEWS or http://www.ali-aba.org June 27-30, 2002 NORTON INSTITUTES ON BANKRUPTCY LAW Western Mountains, Advanced Bankruptcy Law Jackson Lake Lodge, Jackson Hole, Wyoming Contact: 770-535-7722 or Nortoninst@aol.com July 11-14, 2002 AMERICAN BANKRUPTCY INSTITUTE Northeast Bankruptcy Conference Ocean Edge Resort, Cape Cod, MA Contact: 1-703-739-0800 or http://www.abiworld.org July 12-17, 2002 COMMERCIAL LAW LEAGUE OF AMERICA 108th Annual Convention Grand Summit Hotel, Park City, Utah Contact: 312-781-2000 or clla@clla.org or http://www.clla.org/ July 17-19, 2002 ASSOCIATION OF INSOLVENCY AND RESTRUCTURING ADVISORS Bankruptcy Taxation Conference Snow King Resort, Jackson Hole, WY Contact: (541) 858-1665 Fax (541) 858-9187 or aira@airacira.org August 7-10, 2002 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Conference Kiawah Island Resort, Kiawaha Island, SC Contact: 1-703-739-0800 or http://www.abiworld.org September 26-27, 2002 ALI-ABA Corporate Mergers and Acquisitions Marriott Marquis, New York Contact: 1-800-CLE-NEWS or http://www.ali-aba.org October 9-11, 2002 INSOL INTERNATIONAL Annual Regional Conference Beijing, China Contact: tina@insol.ision.co.uk or http://www.insol.org October 24-28, 2002 TURNAROUND MANAGEMENT ASSOCIATION Annual Conference The Broadmoor, Colorado Springs, Colorado Contact: 312-822-9700 or info@turnaround.org November 21-24, 2002 COMMERCIAL LAW LEAGUE OF AMERICA 82nd Annual New York Conference Sheraton Hotel, New York City, New York Contact: 312-781-2000 or clla@clla.org or http://www.clla.org/ December 5-8, 2002 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference The Westin, La Paloma, Tucson, Arizona Contact: 1-703-739-0800 or http://www.abiworld.org April 10-13, 2003 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting Grand Hyatt, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org May 1-3, 2003 (Tentative) ALI-ABA Chapter 11 Business Organizations New Orleans Contact: 1-800-CLE-NEWS or http://www.ali-aba.org May 8-10, 2003 (Tentative) ALI-ABA Fundamentals of Bankruptcy Law Seattle Contact: 1-800-CLE-NEWS or http://www.ali-aba.org July 10-12, 2003 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy Eldorado Hotel, Santa Fe, New Mexico Contact: 1-800-CLE-NEWS or http://www.ali-aba.org December 3-7, 2003 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference La Quinta, La Quinta, California Contact: 1-703-739-0800 or http://www.abiworld.org April 15-18, 2004 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting J.W. Marriott, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org December 2-4, 2004 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Marriott's Camelback Inn, Scottsdale, AZ Contact: 1-703-739-0800 or http://www.abiworld.org The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, 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. 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