/raid1/www/Hosts/bankrupt/TCR_Public/021011.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, October 11, 2002, Vol. 6, No. 202
Headlines
ACT MANUFACTURING: Committee Balks at Scioli's Severance Claim
ADELPHIA BUSINESS: Implementing Key Employee Retention Program
ADELPHIA COMMS: Asks Court for First Exclusive Period Extension
AES CORP: Fitch Downgrade Excludes Latin American Subsidiaries
AIR CANADA: Revenue Passenger Miles Up by 19% in September 2002
ALLEGHENY ENERGY: Seeks SEC Nod to Provide Collateral for Unit
ALLEGHENY ENERGY: S&P Cuts Rating to BB After Technical Default
ALLEGHENY ENERGY: Fitch Concerned About Liquidity Position
AMERICAN SOIL: James C. Marshall Raises Going Concern Doubt
AMERISOURCE-BERGEN: S&P Affirms BB Corporate Credit Rating
ANC RENTAL: Court Okays Consolidation at Sacramento Airport
ANC RENTAL: Bill Plamondon will be New CEO as Ramaekers Retires
APPLICA INC: Will Publish Third Quarter Results on November 7
APPLIED EXTRUSION: S&P Affirms B Credit Rating With Neg. Outlook
AT&T CANADA: Repays Bank Facility After Deposit Receipt Deal
BAUSCH & LOMB: Will Issue Third Quarter Results on October 17
BEAR STEARNS: Fitch Rates 6 P-T Certs. Classes at Lower-B Level
BUDGET GROUP: Intends to Implement Key Employee Retention Plan
CARAUSTAR IND: Ron Domanico Hired as New Chief Financial Officer
CMS ENERGY: Improved Plan Sheds Need to Access Capital Markets
CONTINUCARE CORP: June 30 Working Capital Deficit Tops $7.6 Mil.
CORNING INC: Confirms Third Quarter Loss & Says Liquidity Okay
COVANTA ENERGY: Court Approves Insurance Financing Agreement
CREDIT SUISSE: Fitch Affirms Low-B Ratings on Class F & G Notes
CROWN CORK: Will Conduct Q3 2002 Conference Call on October 17
CTC COMMS: Seeking Court Nod to Use Lenders' Cash Collateral
DICE INC: Fails to Comply with Nasdaq Listing Requirements
EBT INTERNATIONAL: Sets Second Liquidation Distribution Payout
EGAIN COMMS: Reaffirms EBDA Breakeven Guidance for Dec. Quarter
ENRON CORP: Employee Committee Gets Nod to Hire Crossroads LLC
FARMLAND IND.: Court OKs Demolition of Pork Processing Facility
FMC CORPORATION: Releasing Third Quarter Results on October 29
FMC CORPORATION: Issuing $355MM of Senior Secured Notes due 2009
FOCAL COMMS: Brings-In Miller Buckfire for Financial Advice
GLIATECH INC: Completes Requirements to Resolve AIP Status
GUNTHER INTERNATIONAL: Thomas Tisch Discloses 76.7% Equity Stake
HIGHWOODS PROPERTIES: S&P Affirms BB+ Preferred Share Rating
INTERLEUKIN GENETICS: Fails to Maintain Nasdaq Listing Criteria
INTERPLAY ENTERTAINMENT: Nasdaq SmallCap Delists Shares
ITEX CORP: Reports Improved Operating Results for Fourth Quarter
KASPER ASL: Gets Lease Decision Period Extension to Dec. 30
KNOLOGY BROADBAND: Sec. 341 Meeting Scheduled for Oct. 15, 2002
LA QUINTA CORP: Updates Third Quarter 2002 Earnings Guidance
LEVEL PROPANE: Richard Jacobs Leads Group to Invest $15 Million
LIFESTREAM TECH.: Has $1.1MM Working Capital Deficit at June 30
MARTIN INDUSTRIES: Mulling Filing for Chapter 11 Reorganization
METROCALL INC: Successfully Emerges from Chapter 11 Proceeding
MOBILE TOOL: Bringing-In Bayard Firm as Bankruptcy Co-Counsel
NAPSTER INC: Hobart Truesdell Appointed as Chapter 11 Trustee
NEWCOR: Seeks Okay to Hire FTI Consulting for Financial Advice
NORTHWEST BIOTHERAPEUTICS: Taking Steps to Reduce Cash Burn Rate
ON SEMICONDUCTOR: Will Hold Q3 2002 Conference Call on Oct. 23
PACIFIC GAS: Committee Wins Nod to Hire FTI as Financial Advisor
PETROLEUM GEO-SERVICES: Selling PGS Assets to Petrofac for $50MM
RIVERWOOD: Names R. Spiller to Head Consumer Products Packaging
RIVERWOOD INT'L: Promotes Robert Simko and J. Derek Hutchison
SAFETY-KLEEN: Court Okays KPMG, et. al. as Consulting Advisors
SAIRGROUP: Selling Intercompany Loans to Griffin for CHF602 Mil.
SOUTH STREET CBO: S&P Junks Ratings on Three Note Classes
STARBAND COMMS: Lease Decision Period Extended to November 27
STELLAR FUNDING: S&P Further Junks Note Classes A-3 and A-4
TANGRAM ENTERPRISE: Fails to Satisfy Nasdaq Listing Standards
TEAM AMERICA: Lenders Agree to Relax Covenants Under Credit Pact
TECSTAR: Gets Court Nod to Amend and Extend Cash Collateral Use
UNITED AIRLINES: Receives Coalition's Alternative Framework
US AIRWAYS: Wants More Time to Make Lease-Related Decisions
VIASYSTEMS GROUP: Asks Court to Set Combined Hearing for Nov. 11
WHX CORPORATION: Intends to Exit Stainless Steel Wire Operations
WINSTAR COMMS: Trustee Has Until December 1 to Decide on Leases
WORLDCOM INC: Wants Approval to Enter into Secured Bond Facility
XML-TECH: June 30 Cash Insufficient to Continue Operations
* BOOK REVIEW: Bankruptcy Crimes
*********
ACT MANUFACTURING: Committee Balks at Scioli's Severance Claim
--------------------------------------------------------------
The Official Committee of Unsecured Creditors wants the U.S.
Bankruptcy Court for the District of Massachusetts to deny a
motion brought by Blaise Scioli to compel Act Manufacturing,
Inc., to immediately pay purported obligations under a Severance
Plan.
The Committee reminds the Court that it authorized the sale of
the Debtors' domestic businesses to Sun ACT Acquisition Corp.
The Debtors Key Employee Retention Plan provides that the
Debtors require Sun -- as the acquiring company -- to reimburse
the Debtors for any Severance Payment paid to employees
thereafter employed by Sun. However, neither Sun's purchase
agreement nor the Sale Order so provide.
Mr. Scioli, who was an Executive Vice President of the Debtors,
seeks immediate payment of the Severance Payment under the terms
of the KERP. Mr. Scioli claims that Sun has not offered him
employment and, therefore, demands payment of the Severance
Payment.
When advised of Mr. Scioli's intent to file the Motion, the
Committee asked Mr. Scioli's counsel to abstain from doing so at
least until the Committee has an opportunity to fully
investigate Mr. Scioli's entitlement to the Severance Payment.
Chief among the Committee's concerns has been the possibility
that Mr. Scioli has a "side deal" with Sun, such that Sun would
hire Mr. Scioli after he received the Severance Payment thereby
performing an "end-around" the terms and spirit of KERP.
The Committee adds that Mr. Scioli received from the Debtors
both:
i) a potentially preferential bonus payment within a month
prior to the Petition Date, and
ii) a post-petition payment of certain vacation pay to which he
was not entitled and which this Court did not authorize.
Therefore, any Severance Payment claim Mr. Scioli may hold may
be offset, in part or in full, by his liability to the Debtors
for the Prepetition Bonus and Vacation Payment.
The Committee wants the Court to deny Mr. Scioli's Motion or, in
the alternative, postpone any determination until such time as
Mr. Scioli's entitlement to the Severance Payment can be
properly determined.
Act Manufacturing, Inc., was a global provider of value-added
electronic manufacturing services to original equipment
manufacturers in the networking and telecommunications, high-end
computer and industrial and medical equipment markets. The
Debtors filed for chapter 11 protection on December 21, 2001,
and has sold its domestic businesses under the auspices of the
Bankruptcy Court. Richard E. Mikels, Esq., at Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo represents the Debtors in their
restructuring efforts. When the Company filed for protection
from its creditors, it listed $374,160,000 in total assets and
$231,214,000 in total debts.
ADELPHIA BUSINESS: Implementing Key Employee Retention Program
--------------------------------------------------------------
Judge Gerber authorizes Adelphia Business Solutions, Inc., and
its debtor-affiliates to implement its employee retention and
severance plan, subject to these modifications:
A. Tier I and Tier II employees will receive 1/3 of their
incentive retention payment without further delay, and
the remaining 2/3 upon confirmation of a Chapter 11 plan that
contemplates a sale or reorganization;
B. Solely as to the Tier I employees, the payment of the
remaining 2/3 of the incentive retention payment will be made
according to this schedule:
Confirmed Plan By: Pay 2/3 Remaining Bonus At:
------------------ ---------------------------
3/31/03 100.0%
4/30/03 97.5%
5/31/03 95.0%
6/30/03 92.5%
7/31/03 88.5%
8/31/03 84.5%
9/30/03 80.5%
10/31/03 76.5%
11/30/03 72.5%
12/31/03 68.5%
Two-thirds remaining bonus payment for plan confirmation
After December 31, 2003 will continue to drop by 4% per
month.
C. The incentive retention payment to each Tier II employee will
be calculated at 25% of that employee's base salary;
D. Any employee that is otherwise eligible to receive severance
payments will be required to execute a standard release of
any and all claims against the Debtors prior to receiving any
severance payments;
E. Any future employee terminations will result in the same
severance payment amounts per person as are set forth in the
Motion, provided, however, that the severance payment amounts
will not exceed $1,000 per severed employee;
F. The Accrued Bonuses to be paid is $1,181,000;
G. The cost of the severance plan is reduced to $902,000; and
H. The Stay Bonus amount is reduced to $40,000. (Adelphia
Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ADELPHIA COMMS: Asks Court for First Exclusive Period Extension
---------------------------------------------------------------
Marc Abrams, Esq., at Willkie Farr & Gallagher, in New York,
informs the Court that since the Petition Date, the Adelphia
Communications Debtors have been actively engaged in numerous
tasks incident to stabilizing their operations and forming the
predicate for their eventual emergence from Chapter 11. Most
importantly, ACOM the Debtors have:
-- retained an experienced and well-qualified team of
restructuring, accounting and legal professionals and claims
agent to assist them in navigating the Chapter 11 process;
-- successfully arranged and negotiated one of the largest and
most complex debtor-in-possession financing facilities ever
consummated. The $1,500,000,000 loan required coordination
with numerous financial institutions and ensures that the
Debtors will have sufficient liquidity to manage and grow
their businesses during these Chapter 11 cases;
-- established a process to analyze their thousands of executory
contracts and leases to determine whether these agreements
should be assumed or rejected by the various estates. On
September 17, 2002, this Court entered an order authorizing
the Debtors to reject nine of these agreements. The Debtors
intend to seek further approval from this Court to reject
additional agreements that are determined to be burdensome to
the Debtors' estates;
-- established procedures to identify and dispose of non-core
assets;
-- begun the process of analyzing numerous agreements between
the ABIZ Debtors and various third parties. This analysis
will enable ACOM and ABIZ to be able to verify the benefits
received and related obligations incurred by ACOM and ABIZ's
estates, respectively, so that claims of third parties
arising under the ABIZ Agreements can be attributed to the
appropriate set of estates and, to the extent the claims are
undisputed and administrative, be paid as soon as
practicable. In addition to the reconciliation and
allocation of claims arising under the ABIZ Agreements, ABIZ
and ACOM are in the process of reconciling the outstanding
payables due to each other pursuant to formal, informal,
written and unwritten management agreements or otherwise
arising due to the provision of services to one another;
-- begun to wind-down 14 of their 17 competitive local
exchange carrier markets. In order to effectuate this
process, the ACOM Debtors have now begun notifying their
customers, various local, state and federal agencies and
incumbent local exchange carriers that they intend to
discontinue service and disconnect circuits in these markets.
Moreover, in order to wind-down these businesses, the Debtors
must complete the contract analysis and claims reconciliation
process that they have begun with ABIZ, as many of the goods
and services utilized in connection with the ACOM Debtors' 14
CLECs are provided pursuant to ABIZ Agreements. Lastly, the
ACOM Debtors will either reject or assume and assign
agreements relating to the 14 CLECs to which they are a party
and sell any unneeded assets associated with these businesses
to maximize the value of their estates. If ABIZ and the ACOM
Debtors are able to complete the contract and claims analysis
in the near term, the ACOM Debtors estimate that it will take
them 90 days to effectuate the wind-down of their 14
unprofitable CLECs;
-- successfully negotiated and obtained Court approval to enter
into and perform under a five-year license agreement with
Niagara Frontier Hockey, L.P. for the right to broadcast and
distribute Buffalo Sabres hockey games in Western New York
and surrounding areas. The Debtors believe that the rights
acquired through this license agreement, and similar ones the
Debtors are investigating, will both preserve and create
value for these estates, to the benefit of all creditors and
equity holders;
-- successfully negotiated an agreement with the Hanover
Insurance Company, pursuant to which Hanover has agreed to
extend up to $95,000,000 in surety credit to the Debtors in
connection with the maintenance of existing surety bonds and
the extension of additional postpetition surety credit to the
Debtors by Hanover. This bonding capacity is integral to the
Debtors' continued and uninterrupted operations and
maintenance of their franchise agreements;
-- obtained an order from the Court establishing procedures for
trading ACOM's stock in order to preserve the use of the
Debtors' net operating losses to offset future income for tax
purposes. The procedures provide the Debtors with an
opportunity to object to trades and transfers in ACOM's
equity securities, allowing the Debtors to take necessary
steps to preserve their NOLs;
-- established procedures to communicate with various federal
and state agencies in order to respond in an orderly and
timely fashion to information requests and other inquiries.
In addition, the Debtors have provided extensive cooperation
to the SEC and the Department of Justice in connection with
their ongoing investigations and civil and criminal
proceedings;
-- worked closely with the Committees and senior secured lenders
and their professionals to keep all parties fully informed of
the Debtors' finances and efforts to formulate a business
plan. Throughout the postpetition period, the Constituents'
professionals have been given access to the Debtors' senior
management. The Constituents' advisors have also had open
access to Debtors' counsel and other advisors. In addition,
the Constituents have directly participated in meetings with
the Debtors and their professionals, including question and
answer sessions, concerning postpetition operations. The
Debtors anticipate that this open exchange between the
Debtors and the Constituents, and their professionals, will
continue;
-- engaged in discussions with local franchise authorities in an
effort to resolve issues relating to:
* alleged prepetition defaults under franchise agreements;
* monetary and performance upgrade obligations required under
the agreements;
* the continued provision of uninterrupted service to their
customers; and
* the renewal or extension of numerous franchises.
The Debtors are party to 3,000 franchise agreements with
various municipalities. The Debtors have spent a
considerable amount of time negotiating an extension of their
five Los Angeles area franchises to extend the term of these
agreements beyond August 2002. In addition, the Debtors are
in the process of compiling a database of all of their
nationwide franchise obligations;
-- enhanced internal controls over their cash management system
to seek to ensure that no payments are made in respect of the
Rigas family members or their affiliates and that payments
made in respect of Rigas managed entities and ABIZ are
appropriately captured and accounted for; and
-- expended considerable effort to preserve assets of these
estates and effectively addressed various threats posed by
numerous adverse claimants, including the Rigas family
affiliates and ML Media.
Mr. Abrams notes that as important as these accomplishments are,
the road ahead has significant challenges. To this end, the
Debtors are in the process of developing and refining a long-
term budget and business model that will serve as a guide for
the structure and operational decisions that will undergird
their long-range business plan. In the coming months, the
Debtors hope to be in a position to share these long-term
forecasts and plans with the Constituents. These models and
forecasts will help lay the foundation for the development of a
consensual plan or plans of reorganization.
In the short term, Mr. Abrams relates that there are still
enormous tasks facing the Debtors with respect to their
operations. Due to the Debtors' expansive operations in
numerous regional and national markets, the Debtors are
continually faced with unique legal and operational issues
concerning various franchise law issues, construction issues,
bonding issues, licensing and programming issues, and
interactions with unions. The usual and expected disruption
normally associated with the filing of a Chapter 11 case has
been drastically magnified due to the facts and circumstances
surrounding the Debtors' filings and the large number of
employees, government agencies, investigatory authorities,
contractors, vendors, customers and businesses with which the
Debtors interact on a daily basis.
Section 1121(b) of the Bankruptcy Code grants a debtor an
initial period of 120 days after the commencement of a Chapter
11 case during which the debtor has the exclusive right to
propose and file a plan of reorganization. Section 1121(c)(3)
of the Bankruptcy Code provides that if the debtor proposes and
files a plan within the initial 120-day exclusive period, then
the debtor has until the end of the period ending on the 180th
day after the Chapter 11 case was commenced to solicit and
obtain acceptances of such plan. Section 1121(d) of the
Bankruptcy Code enables a Bankruptcy Court to extend the
Exclusive Periods for cause. 11 U.S.C. Sec. 1121(d)
By this motion, the ACOM Debtors ask the Court to extend their
exclusive periods to file a reorganization plan to April 21,
2003 and to solicit and obtain acceptances of that plan to June
20, 2003.
Courts have identified certain factors as being relevant to
determining whether cause exists to extend an exclusive period.
These factors include:
(a) The size and complexity of the Chapter 11 case
The Debtors are the sixth largest operator of cable
television systems in the United States, having systems
located in 29 states and Puerto Rico. As of June 1, 2002,
the broadband networks for the Debtors' cable systems passed
in front of 9,000,000 homes and had 5,800,000 basic
subscribers. At that time, the Debtors employed 15,444
workers. In addition, the Debtors operate and hold
interests in six non-cable businesses, such as wireless
messaging and paging services and long-distance telephone
reseller services.
The size of the Debtors' operations, coupled with the
multitude of legal and operational challenges facing the
Debtors, makes these cases exceedingly complex. Indeed, in
the three-month period since these cases were filed there
have been over 780 entries in the case docket. Despite
the substantial efforts of the Debtors and their advisors
thus far, additional time is required to stabilize the
Debtors' operations and move forward to the plan process.
(b) Progress in attempting in good faith to formulate a viable
plan of reorganization
The Debtors have made substantial progress on completing
numerous tasks that will help lay the foundation for
proposing a reorganization plan. Nevertheless, much remains
to be done. Simply put, these cases are in their infancy and
plan negotiations are not yet possible.
(c) Whether a viable reorganization plan can be reasonably
expected to be filed by the debtor in the foreseeable future
The Debtors' efforts have been focused on transitioning into
an environment where operations are stabilized and
normalized to set the groundwork for the formulation of a
plan or plans. Certainly, the requested exclusivity
extensions cannot be characterized as delaying the Debtors'
reorganization for any speculative purpose or to pressure
creditors to accept an unsatisfactory plan.
Clearly, Mr. Abrams points out, cause exists to extend the
Debtors' exclusive periods.
According to Mr. Abrams, termination of the Exclusive Periods
would adversely impact the Debtors' business operations and the
progress of these cases. In effect, if this Court were to deny
the Debtors' request for an extension of the Exclusive Periods,
any party-in-interest then would be free to propose a plan of
reorganization for each of the Debtors. A chaotic environment
with no central focus would ensue. Conversely, an extension of
exclusivity now, during the early stages of these cases, should
enable the Debtors to harmonize the diverse and competing
interests that exist and to attempt to resolve conflicts in a
reasoned and balanced manner. "This role is precisely what
Congress envisioned for a debtor in possession in the Chapter 11
process," Mr. Abrams asserts.
* * *
Judge Gerber extends the ACOM Debtors' exclusive period to file
a reorganization plan until the conclusion of the October 25,
2002 hearing on this request. (Adelphia Bankruptcy News, Issue
No. 19; Bankruptcy Creditors' Service, Inc., 609/392-0900)
AES CORP: Fitch Downgrade Excludes Latin American Subsidiaries
--------------------------------------------------------------
The credit ratings of The AES Corporation's Latin American
subsidiaries remain unchanged following Fitch Rating's downgrade
of AES and its US-based subsidiaries. AES' subsidiaries continue
to operate normally and, while many have had their own credit
issues, have not been affected by the credit pressures on AES.
Fitch recently lowered ratings on AES' debt, following the
company's announced launch of a $1.6 billion multi-tranche
three-year senior secured credit facility and offer to exchange
up to $500 million of senior notes with a combination of cash
and secured notes.
Fitch provides international credit ratings on a number of AES'
larger investments in Latin America. The ratings of AES' Latin
American subsidiaries are based on the stand-alone credit
quality of each company and do not rely on explicit or implicit
support from AES. Further, some are already at or below the
ratings of AES.
The ratings of the subsidiaries generally reflect their
individual financial situations, their positions within their
respective countries, and the operating characteristics of their
businesses. Further factored into the ratings is the exposure of
these companies to currency, political, regulatory and economic
risks in Latin America, as well as these companies' track
records in responding to these risks.
The ratings of the subsidiaries may be separated from those of
AES by considering three main points. First, these subsidiaries
do not have any interdependency with AES or rely on AES for
additional capital or other support. Second, various loan
agreements at the operating company levels assert the rights of
lenders to the cash flow of the operating company prior to
distribution to AES. Also, in some cases, such as Brazil where
the company has acquired a concession, regulations generally
prevent the impairment of credit quality for the sake of
increased equity distributions. And third, the subsidiaries
benefit from ring-fencing and insulation under local laws and
regulations, which significantly limit the ability of foreign
proceedings, bankruptcy or otherwise, to attach assets owned by
foreign companies and domiciled abroad. While a US bankruptcy
court will have jurisdiction over a US company and could direct
it to take action with respect to its own assets (i.e., sell
ownership stakes), the US court would not have jurisdiction over
the assets of a foreign company, which would allow these
companies to avoid a substantive consolidation into the US
bankruptcy.
The various types of structural insulation of these companies
are supportive in assigning a stand-alone credit rating to AES'
subsidiaries and limits AES' flexibility to receive
extraordinary cash flows from subsidiaries. To illustrate the
point and ability of these companies to stand alone, AES is for
various reasons unlikely to receive dividends in the near future
from AES Gener, Eletropaulo Metropolitana, AES Tiete, AES Panama
and possibly Electricidad de Caracas.
At AES Gener in Chile, new loan agreements have capped future
dividends at the 30% minimum of net income required under
Chilean law and require proceeds from asset sales to be used to
reduce debt. Fitch maintains local and foreign currency ratings
of AES Gener at 'BBB-' with a Negative Rating Outlook.
At Eletropaulo, new loan agreements, recent accounting changes
that will suppress net income for the next five years, and
significant intermediate holding company debt will essentially
prohibit distributions up to AES. The current rating of
Eletropaulo is 'C'.
AES Tiete has intermediate holding company debt that has a
priority claim on dividends and will likely use all funds
available for debt service in the short-term. The current rating
of the structured transaction, AES Tiete Certificates Grantor
Trust, is 'BB-' Rating Watch Negative.
AES Panama closed a bank loan transaction in September 2002,
which was assigned a rating of 'BBB-' that includes a cash sweep
to repay lenders, which supports the projects credit rating.
This loan is expected to be refinanced in the near term, but
until then operating cash flow will be used to repay debt only.
Although, EDC paid $60 million of dividends in April 2002,
dividends for the remainder of the year may be limited by
dividend restriction covenants with multilateral lenders;
continued devaluation of the Bolivar may further restrict
dividends based on the impact on net income and cash balances.
Additionally, AES' ability to extract value from EDC is
constrained by the company's by-laws and the required approval
of independent directors for agreements between EDC and AES. EDC
has local and foreign currency ratings of 'BB-' and 'B',
respectively.
While dividends are expected to continue to come from AES Clesa
in El Salvador, the structural insulation of AES Clesa and
minimum net worth covenants with direct lenders to the operating
company are supportive in assigning a stand-alone credit rating
to AES Clesa and limits AES' flexibility to receive
extraordinary cash flows. AES Clesa generally pays dividends
based on the prior period's net income (approximately $6 million
during 2002). AES Clesa has local and foreign currency ratings
of 'BBB-' and 'BB+', respectively.
Fitch believes these various protections, country related and
structural, provide a measure of insulation for AES's Latin
American subsidiaries from the credit issues at AES and at
current rating levels, should not pressure the ratings of these
entities.
AES Corporation's 10.25% bonds due 2006 (AES06USR1) are trading
at 33 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AES06USR1for
real-time bond pricing.
AIR CANADA: Revenue Passenger Miles Up by 19% in September 2002
---------------------------------------------------------------
Air Canada flew 19.0 per cent more revenue passenger miles in
September 2002 than in September 2001, according to preliminary
traffic figures. Capacity increased by 10.3 per cent, resulting
in a load factor of 74.5 per cent, compared to 69.0 per cent in
September 2001; an increase of 5.5 percentage points.
"Year-over-year comparisons were affected by the events of
September 11, 2001, which resulted in a three-day suspension of
operations, a significant decline in passenger demand and a
subsequent reduction in capacity. In comparison to September
2000, traffic declined 2.6 per cent while capacity was reduced
by 4.1 per cent. Air Canada's September 2002 load factor, the
second highest among major North American carriers, rose 1.1
percentage points over that of September 2000," said Rob
Peterson, Executive Vice President and Chief Financial Officer.
* * *
As previously reported, Standard & Poor's downgraded its senior
unsecured debt rating for Air Canada to 'B' from 'B+',
reflecting reduced asset protection for unsecured creditors and
application of revised criteria for "notching" down of such debt
ratings based on the proportion of secured debt in a company's
capital structure.
According to the report, the rating actions did not indicate a
changed estimate of default risk, but rather poorer prospects
for recovery on senior unsecured obligations if the affected
airline were to become insolvent.
DebtTraders reports that Air Canada's 10.25% bonds due 2011
(AIRC11CAN1) are trading at 50 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AIRC11CAN1
for real-time bond pricing.
ALLEGHENY ENERGY: Seeks SEC Nod to Provide Collateral for Unit
--------------------------------------------------------------
Allegheny Energy, Inc., (NYSE: AYE) has filed with the United
States Securities and Exchange Commission an application seeking
approval for its subsidiary, Allegheny Energy Supply Company,
LLC, to provide collateral to support additional borrowings.
This application seeks authorization for Supply to borrow up to
$2 billion on a secured basis. As a part of the filing,
Allegheny Energy disclosed that it intends to reduce its
dividend to between 0 percent and 50 percent of the current
dividend level through at least the fourth quarter of 2003. No
determination has been made by the Board of Directors as to the
actual future dividend level within this range.
Allegheny said the SEC filing was part of its ongoing effort to
obtain the liquidity necessary to cure existing default
conditions and to resume posting collateral to trading
counterparties. "We are engaged in active discussions with our
banks regarding our position and are working to obtain
additional liquidity as quickly as is possible," said Alan J.
Noia, Allegheny Energy Chairman, President, and Chief Executive
Officer.
With headquarters in Hagerstown, Md., Allegheny Energy is an
integrated Fortune 500 energy company with a balanced portfolio
of businesses, including Allegheny Energy Supply, which owns and
operates electric generating facilities and supplies energy and
energy-related commodities in selected domestic retail and
wholesale markets; Allegheny Power, which delivers low-cost,
reliable electric and natural gas service to about three million
people in Maryland, Ohio, Pennsylvania, Virginia, and West
Virginia; and a business segment offering fiber-optic and data
services, energy procurement and management, and energy
services. More information about the Company is available at
http://www.alleghenyenergy.com
ALLEGHENY ENERGY: S&P Cuts Rating to BB After Technical Default
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
ratings of Allegheny Energy Inc., and its subsidiaries to
double-'B' from triple-'B' following the company's announcement
that its principal credit agreements are under technical
default. The ratings were placed on CreditWatch with negative
implications, pending the outcome of the company's negotiations
with its banks. Hagerstown, Md.-based energy provider Allegheny
has about $5 billion in outstanding debt.
Allegheny planned to issue between $400 million and $600 million
of equity and convertible debt in September to reduce financial
leverage and bolster liquidity.
"However, the company did not follow through with its plans
because of a sharp drop in its stock price and administrative
obstacles," said Standard & Poor's credit analyst Tobias Hsieh.
Allegheny then indicated to Standard & Poor's that, as an
interim measure, it planned to have an additional $400 million
bank loan in place by October to provide liquidity, but for
reasons unclear to Standard & Poor's, the schedule was postponed
to early December.
In the meantime, Allegheny's liquidity has become increasingly
constrained. The company had $450 million of liquidity as of
June 1, and as late as Sept. 30, the company indicated to
Standard & Poor's that it still had $230 million in cash and
available credit lines. Even though this liquidity level is low,
Allegheny indicated to Standard & Poor's that this should be
adequate for posting an estimated $60 million of collateral
following another rating agency's credit rating downgrade last
week, $16 million of cash flow consumed in the normal course of
business between now and the end of the year, and $54 million of
dividend to paid in December.
However, on Oct. 8, Allegheny stated that it refused to post
additional collateral to its trading counterparties, which led
those counterparties to declare Allegheny to be in default under
their respective trading agreements. This then triggered the
cross-default provisions under its principal bank credit
agreements and other trading agreements. Subsequent
conversations with management revealed that Allegheny had to
implement drastic cash conservation measures because its banks
pressured it not to make any more draws under its existing
credit revolvers.
Because Allegheny does not have access to capital markets, it
relies heavily on banks to provide liquidity. The company's
financial outlook could improve quickly if the banks were
willing to lend an additional $400 million and roll over its
credit facilities as they become due. On the other hand, if the
banks are not supportive, the company could default on $250
million of a credit facility that comes due between now and the
end of the year, and another $580 million in April 2003.
Complicating the situation, the banks would probably lend only
on a secured basis, but as a holding company under the Public
Utility Holding Company Act, secured lending requires SEC
approval.
ALLEGHENY ENERGY: Fitch Concerned About Liquidity Position
----------------------------------------------------------
Fitch Ratings lowered the ratings of Allegheny Energy, Inc.,
(AYE) and its subsidiaries Tuesday. Subsidiaries include
Allegheny Energy Supply Co. LLC, Monongahela Power Company,
Potomac Edison Company, West Penn Power Company, Allegheny
Generating Company and AE Supply's special purpose entity
Allegheny Energy Supply Statutory Trust 2001. In addition, Fitch
placed AYE and all of its subsidiaries on Rating Watch Negative.
The rating downgrade of AYE and AE Supply reflect Fitch's
concern over the group's liquidity situation over the short and
intermediate term. AYE announced Wednesday that it is in
technical default under its principal credit agreements and
those of AE Supply and AGC. To preserve liquidity, the company
declined to post additional collateral demanded by several
trading counterparties following the last week's rating
downgrade to below investment grade by another rating agency.
This action could cause trading counterparties to limit or cease
trading activities with the company, disrupt the company's
operations, and adversely impact cash flow. Due to unfavorable
capital market conditions, the company was not able to issue the
much needed $400-600 million of equity in early September as
planned. Capital markets conditions remain weak, and the company
may be forced to seek secured bank financing to salvage its
liquidity crunch, as has been the case recently with other
companies in the sector. While the company has plans to sell
non-strategic assets to raise cash, Fitch does not expect cash
from asset divestiture to be available in the near term.
The downgrade of AYE's regulated subsidiaries WP, PE, and MP
reflects Fitch's policy regarding the linkage of ratings of
subsidiaries with those of a lower-rated parent. On a standalone
basis, these three regulated utilities have a credit profile
that is comparable to companies in a the 'A' rating category.
Nevertheless, these companies could experience some stress due
to the financial distress of their parent.
AGC's downgrade was triggered by its majority ownership by AE
Supply and its reliance on AE Supply for its revenues. Currently
AGC's output is sold to AE Supply and marketed by AE Supply's
trading arm Allegheny Energy Global Markets and the energy is
available to serve AE Supply's long term supply contracts with
its regulated utility affiliates or for sale in the wholesale
market.
AE Supply Trust's downgrade was also occasioned by the downgrade
of AE Supply. AE Supply Trust's rating reflects AE Supply's
obligation to make rental and other payments that cover the
interest and principal payments of the notes issued by the Trust
and other related agreements associated with the notes.
The ratings affected are listed below:
Allegheny Energy, Inc.
-- Senior unsecured debt lowered to 'BB' from 'BBB';
-- Commercial paper lowered to 'B' from 'F2' and withdrawn;
-- Ratings Placed on Rating Watch Negative.
West Penn Power Company
-- Medium-term notes lowered to 'BBB-' from 'A-';
-- Commercial paper lowered to 'B' from 'F2' and withdrawn;
-- Ratings Placed on Rating Watch Negative.
Potomac Edison Company
-- First mortgage bonds lowered to 'BBB' from 'A-';
-- Senior unsecured notes lowered to 'BBB-' from 'BBB+';
-- Commercial paper remains unchanged at 'F2';
-- Ratings placed on Rating Watch Negative.
Monongahela Power Company
-- First mortgage bonds lowered to 'BBB' from 'A-';
-- Medium-term notes/Pollution control revenue bonds
(unsecured) lowered to 'BBB' from 'BBB+';
-- Preferred stock lowered to 'BB+' from 'BBB';
-- Commercial paper remains unchanged at 'F2';
-- Ratings placed on Rating Watch Negative.
Allegheny Energy Supply Company LLC
-- Senior unsecured notes lowered to 'BB-' from 'BBB-';
-- Commercial paper remains at 'B' and withdrawn;
-- Ratings Placed on Rating Watch Negative.
Allegheny Generating Company
-- Senior unsecured debentures lowered to BB- from 'BBB-';
-- Commercial paper remains at 'B' and withdrawn';
-- Ratings Placed on Rating Watch Negative.
Allegheny Energy Statutory Trust 2001
-- Senior secured notes lowered to 'BB-' from 'BBB-'
-- Ratings Placed on Rating Watch Negative.
The ratings not affected are as follows:
West Penn Funding LLC
-- Transition bonds 'AAA';
Allegheny Energy Supply Company LLC
-- Pollution control bonds (MBIA-Insured) 'AAA'.
AYE is a registered utility holding company, which owns three
regulated utilities, Monongahela Power, Potomac Edison and West
Penn Power and two non-utility subsidiaries. The utilities
deliver electric and gas service to 1.5 million customers in
parts of Maryland, Ohio, Pennsylvania, Virginia, and West
Virginia and 230,000 customers in West Virginia, respectively.
AYE's non-utility subsidiaries consist of AE Supply Co. LLC,
which develops, acquires, owns and operates generating plants
and is a marketer of electricity and other energy products and
Allegheny Ventures which is involved in telecommunications and
energy related projects.
AMERICAN SOIL: James C. Marshall Raises Going Concern Doubt
-----------------------------------------------------------
American Soil Technologies, Inc., formerly Soil Wash
Technologies, Inc., was incorporated in California on September
22, 1993. Effective December 31, 1999 the Company completed a
reverse acquisition and acquisition and changed its name from
Soil Wash Technologies, Inc., to American Soil Technologies,
Inc., and changed its state of domicile to Nevada. During 1998
and 1999, the Company operated as Soil Wash Technologies, Inc.
American Soil Technologies, Inc., develops, manufactures and
markets cutting-edge technology that decreases the need for
water in dry land farming, irrigated farming and other plant
growing environments while increasing crop yield and reducing
the environmental damage caused by common farming practices. In
addition, the Company holds exclusive rights to a soil washing
technology that removes hydrocarbon (petroleum) products from
contaminated soil and recycles the soil for commercial use.
The Company discontinued operations of its Soil Wash division
because, in April 2001, the Company was informed that the
landlord for its Soil Wash site was not renewing its lease and
that the Company was forced to remediate and vacate the
property. In conjunction with this notice, the Company sold its
client list and remaining book of business to another company.
The sales price was $1 million, which has been fully paid. The
Company retained the equipment and machinery and has decided to
sell these assets. Remediation of the site is complete and
closure has been approved by the San Diego Regional Quality
Control Board.
American Soil Technologies manufactures two primary products:
Agriblend(R), a patented soil amendment developed for
agriculture, and Nutrimoist(TM), developed for homes, parks,
golf courses and other turf related applications. The Company
has entered into marketing and distribution agreements with
Stockhausen, Inc., Bentonite Performance Minerals and JT Water
Management.
The Company is adding sales representatives and distributors in
both the agriculture and turf industries. On August 21, 2001,
the Company announced that it reached an agreement with
BioPlusNutrients L.L.C., of Grace, Idaho, to blend the Company's
polymer with their proprietary nutrients. This agreement allows
each entity to co-market the combined product to each other's
customers.
The company's revenues for the year ended June 30, 2002 were
$203,450 compared to $80,432 for the same period in 2001.
Revenue from the Soil Wash division decreased from $1,229,092 to
$1,500 as a result of the cessation of operations of that
division due to the non-renewal of its lease. Accordingly,
results of this operation have been classified as discontinued,
and prior periods have been restated, including
the allocation of overhead charges.
Cost of goods sold decreased from $276,297 for the fiscal year
ended June 30, 2001 to $191,013 for the fiscal year ended June
30, 2002.
The Company experienced losses in its last two fiscal years.
However, the Company expects that as a result of its efforts
during the last half of fiscal year 2002 and the first half of
fiscal 2003 to develop strategic alliances, marketing
agreements, and distribution networks, sales volume in
subsequent periods should increase. Revenue from the sale of
agricultural products increased from $80,432 during the
Company's prior fiscal year to $201,950 in its current fiscal
year. Since these arrangements are new and untested, it is
uncertain whether these actions will be sufficient to produce
net operating income for the fiscal year 20031. However, given
the gross margins on the Company products, future operating
results should be improved.
Nevertheless, American Soil Technologies has a deficit in
working capital (current assets less current liabilities) of
$582,530 as of June 30, 2002 compared to working capital of
$896,870 as of June 30, 2001. This deficit is due primarily to
the current payable status of debentures which is $825,000.
The Company has incurred an accumulated deficit of $6,279,985
and has a deficit in working capital as of June 30, 2002. The
ability of the Company to continue as a going concern is
dependent on obtaining additional capital and financing and
operating at a profitable level. The Company intends to seek
additional capital either through debt or equity offerings and
to increase sales volume and operating margins to achieve
profitability. To date, the Company has financed its operations
principally through the sales activities of the Soil Wash
division and the placement of Convertible Debentures. The
Company's working capital and other capital requirements during
the next fiscal year and thereafter will vary based on the sales
revenue generated by the recent accumulation of additional
products and the distribution and sales network the Company has
created and will continue to grow.
The Company will consider both the public and private sale of
securities and/or debt instruments for expansion of its
operations if such expansion would benefit its overall growth
and income objectives. Should sales growth not materialize, the
Company may look to these public and private sources of
financing. There can be no assurance, however, that the Company
can obtain sufficient capital on acceptable terms, if at all.
Under such conditions, failure to obtain such capital likely
would at a minimum negatively impact the Company's ability to
timely meet its business objectives.
James C. Marshall, CPA, P.C., of Scottsdale, Arizona, writes, in
part, in its independent Auditors Report concerning the
financial condition of the Company: "[T]he Company has suffered
recurring losses from operations and has a deficit working
capital that raise substantial doubt about its ability
to continue as a going concern." The statement is dated
September 27, 2002.
AMERISOURCE-BERGEN: S&P Affirms BB Corporate Credit Rating
----------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on
AmeriSource-Bergen Corp., to positive from stable to reflect
good operational and financial progress since the merger of
AmeriSource and Bergen.
Standard & Poor's also affirmed its double-'B' corporate credit
rating on the company. Chesterbrook, Pa.-based AmeriSource-
Bergen had about $1.8 billion total debt outstanding as of June
30, 2002.
"AmeriSource-Bergen's EBITDA coverage of interest was a solid 6
times for the first nine months of fiscal 2002, tracking well
ahead of pro forma coverage at the time of the merger. The
results reflect earlier-than-expected merger synergies, improved
capital management, and wider operating margins. Free cash flow
generated from more efficient use of capital should enable the
company to repay debt at a moderate pace," Standard & Poor's
credit analyst Mary Lou Burde said.
Standard & Poor's also said that AmeriSource-Bergen could
achieve a higher rating if the combination of the two companies
moves ahead as planned. If the company is able to demonstrate
continued solid progress in integration, the rating could be
reviewed within the next year.
The ratings on AmeriSource-Bergen reflect its participation in
the growing but fiercely competitive drug wholesaling industry,
and the challenges of integrating the operations of two large
companies. These factors are mitigated by the improved scale and
diversity of the new company, AmeriSource management's
experience in deleveraging its balance sheet, and satisfactory
cash flow protection.
ANC RENTAL: Court Okays Consolidation at Sacramento Airport
-----------------------------------------------------------
ANC Rental Corporation and its debtor-affiliates obtained
permission from the U.S. Bankruptcy Court for the District of
Delaware to reject the March 9, 1993 Rental Car Concession and
Lease Agreement between Alamo and the Sacramento County,
California and assume the March 9, 1993 Rental Car Concession
and Lease Agreement between National and the Sacramento County
and assign it to ANC. The agreements allowed Alamo and National
to operate a car rental concession and lease certain premises to
Alamo at the Sacramento Airport.
With the Court's approval, the operations consolidation at the
Sacramento Airport will result in savings to the Debtors of over
$1,508,000 per year in fixed facility costs and other
operational cost savings. (ANC Rental Bankruptcy News, Issue No.
20; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ANC RENTAL: Bill Plamondon will be New CEO as Ramaekers Retires
---------------------------------------------------------------
ANC Rental Corporation announced that Lawrence Ramaekers, its
Chief Executive Officer and President, has informed the
company's board of directors that he intends to go back into
retirement at the end of 2002. William Plamondon, currently
ANC's Chief Restructuring Officer and a car rental industry
veteran, has been named ANC's Chief Executive Officer and will
work with Mr. Ramaekers, who will act as Chief Restructuring
Officer through the end of this year, to ensure a smooth
transition.
"ANC has laid the foundation for a successful reorganization,"
Mr. Ramaekers said. "Given how far ANC has progressed, this is
probably the most appropriate time for me to resume my long-
awaited retirement without disrupting the restructuring effort."
Bill Plamondon, who will begin serving as CEO immediately,
thanked Mr. Ramaekers for turning ANC's business around. "Larry
has set this business up for the future," Mr. Plamondon said.
"Now our efforts must be focused on completing the restructuring
and building a strong, profitable company. I am looking forward
to working with our entire management team and our creditors in
order to achieve these goals." Mr. Plamondon added, "We have
been working closely and cooperatively with Lehman Brothers, our
largest creditor, and other major creditors. They have conveyed
their confidence in the new management team and their continuing
support for our efforts to achieve a successful reorganization."
Andrew Goldman, speaking for ANC's Creditors Committee said, "We
look forward to continuing to work together with ANC on the road
to a successful reorganization."
Mr. Ramaekers, 65, a veteran turnaround specialist, joined ANC
out of retirement in October 2001. Soon after ANC's chapter 11
filing in November 2001, Mr. Ramaekers was appointed ANC's
President and Chief Operating Officer. In April 2002 Mr.
Ramaekers was named the company's Chief Executive Officer.
Bill Plamondon, 55, has been ANC's Chief Restructuring Officer
since October 2001 and on the Board of Directors of ANC since
June 2000. Mr. Plamondon founded R.I. Heller Company LLC, a
management consulting firm, in April 1998, and served as its
President and Chief Executive Officer. Mr. Plamondon has also
served as President and Chief Executive Officer of First
Merchants Acceptance Corporation, a national financing company,
and as President of Budget Rent-A-Car. Mr. Plamondon worked at
Budget Rent-A-Car from 1978 until 1997.
ANC Rental Corporation, headquartered in Fort Lauderdale, is one
of the world's largest car rental companies with annual revenue
of approximately $3.2 billion. ANC, the parent company of Alamo
Rent-a-Car and National Car Rental, has more than 3,000
locations in 69 countries. Its more than 17,000 global
associates serve customers worldwide with an average daily fleet
of more than 275,000 automobiles.
APPLICA INC: Will Publish Third Quarter Results on November 7
-------------------------------------------------------------
Applica Incorporated (NYSE: APN) will issue its third-quarter
financial results before the market opens on Thursday,
November 7, 2002.
The conference call is scheduled for 11:00 a.m., Eastern
Standard Time, on the same day. David Friedson, Chairman of the
Board and Chief Executive Officer, Harry Schulman, President and
Chief Operating Officer, Terry Polistina, Chief Financial
Officer, and Michael Michienzi, Senior Vice President - Global
Business Development, will host the call.
Live audio of the conference call will be simultaneously
broadcast over the Internet and will be available to members of
the news media, investors and the general public. Broadcast of
the event can be accessed on the Company's Web site
http://www.applicainc.comby clicking on the Investor Relations
page. You may also access the call via CCBN at
http://www.streetevents.com The event will be archived and
available for replay through Thursday, November 14, 2002.
Applica Incorporated and its subsidiaries are manufacturers,
marketers and distributors of a broad range of branded and
private-label small electric consumer goods. The Company
manufactures and distributes small household appliances, pest
control products, home environment products, pet care products
and professional personal care products. Applica markets
products under licensed brand names, such as Black & Decker(R),
its own brand names, such as Windmere(R), LitterMaid(R) and
Applica(TM), and other private-label brand names. Applica's
customers include mass merchandisers, specialty retailers and
appliance distributors primarily in North America, Latin America
and the Caribbean. The Company operates manufacturing facilities
in China and Mexico. Applica also manufactures products for
other consumer products companies. Additional information
regarding the Company is available at http://www.applicainc.com
* * *
As reported in Troubled Company Reporter's June 20, 2002
edition, Standard & Poor's raised its senior secured bank loan
rating on Miami Lakes, Florida-based Applica Inc.'s $205 million
revolving credit facility due December 2005 to double-'B'-minus
from single-'B'-plus.
At the same time, Standard & Poor's affirmed its single-'B'-plus
corporate credit rating on the small appliance manufacturer and
marketer. The outlook is stable. Total debt outstanding at March
31, 2002, was $205.2 million.
APPLIED EXTRUSION: S&P Affirms B Credit Rating With Neg. Outlook
----------------------------------------------------------------
Standard & Poor's Rating Services has affirmed its single-'B'
corporate credit rating on Applied Extrusion Technologies Inc.,
and removed the rating from CreditWatch, where it was placed on
July 8, 2002. The outlook is now negative.
Peabody, Mass.-based Applied Extrusion is the leading oriented
polypropylene films producer in North America, with total debt
outstanding of $278 million as at June 30, 2002.
"The removal of the rating from CreditWatch follows the
company's announcement that it has concluded a review of its
strategic options, which indicates that the company will not be
sold at this time," said Standard & Poor's credit analyst Liley
Mehta. Applied Extrusion had hired a financial advisor in July
2002 to evaluate options to maximize shareholder value.
The rating reflects the company's below-average business risk
profile, very aggressive debt leverage, and limited financial
flexibility. The company enjoys a leading share of the OPP
market and benefits from a low-cost position.
The market is highly competitive and subject to swings in raw
material costs, namely polypropylene resins. Overcapacity has
significantly weakened pricing flexibility during the past few
years. Recently announced modest capacity additions by key
players could worsen industry fundamentals, if sluggish economic
conditions are prolonged. Although end markets include
relatively recession-resistant applications (such as labels on
beverage bottles and containers, and food packaging), the
company's narrow product mix is a limiting factor, and customer
concentration is high. Competitive pressures are likely to
constrain the company's ability to fully pass through increased
raw material costs to customers in the near term, adversely
affecting profitability levels.
Given the company's limited scale of operations and heavy debt
burden, the competition and overcapacity have led to
deterioration in the company's financial profile. Applied
Extrusion has been unable to meet its working capital and
capital expenditure needs through internal cash generation for
several years, and is unlikely to generate meaningful free cash
from operations until 2004. Near-term benefits of recently
announced restructuring initiatives and long-term benefits of
several planned product introductions should boost the company's
profitability and cash flow generation.
If Applied Extrusion's operating performance weakens further, or
liquidity and financial covenant pressures increase, the ratings
could be lowered.
AT&T CANADA: Repays Bank Facility After Deposit Receipt Deal
------------------------------------------------------------
AT&T Canada Inc., has repaid all amounts drawn from its bank
credit facility.
The repayment of approximately $200 million drawn follows the
completion of the deposit receipt transaction on October 8,
2002. The company now has cash reserves in excess of $400
million.
AT&T Canada is the country's largest competitor to the incumbent
telecom companies. With over 18,700 route kilometers of local
and long haul broadband fiber optic network, world class managed
service offerings in data, Internet, voice and IT Services, AT&T
Canada provides a full range of integrated communications
products and services to help Canadian businesses communicate
locally, nationally and globally. Visit AT&T Canada's Web site,
http://www.attcanada.comfor more information about the company.
AT&T Canada Inc.'s 10.75% bonds due 2007 (ATTC07CAR1),
DebtTraders reports, are trading at 9 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ATTC07CAR1
for real-time bond pricing.
BAUSCH & LOMB: Will Issue Third Quarter Results on October 17
-------------------------------------------------------------
In response to rumors about its third-quarter performance which
generated unusual activity in its stock, Bausch & Lomb
(NYSE:BOL) expects 2002 third-quarter comparable-basis earnings
per share to exceed the current First Call consensus estimate of
$0.42 by more than 10 percent.
Bausch & Lomb indicated that the better-than-expected
performance in the quarter was driven primarily by strong
revenue increases. The company expects to report total actual
dollar sales increases in excess of 10 percent versus the year-
ago quarter.
The expected results for the current quarter are before the
impact of restructuring charges and asset write-offs associated
with the profitability improvement plan announced by the Company
in July of this year. The company originally projected these
charges to total up to $20 million before taxes. They are now
projected to range between $25 million and $27 million before
taxes. The increase is due primarily to additional severance and
asset write-offs associated with the relocation of manufacturing
for PureVision(TM) contact lenses to Ireland following a legal
ruling in the United States.
The company previously indicated that it expected to issue
additional debt during the third quarter under its current shelf
registration. The company has not proceeded with that plan since
it has more than adequate liquidity to meet its needs for the
foreseeable future, with free cash flow running well ahead of
projections, and market conditions are less than favorable for
corporate debt at this time. The company indicated it will go to
market when conditions improve.
Additional details on the company's quarterly performance will
be provided in the third-quarter earnings release on October 17,
2002.
Bausch & Lomb Incorporated is the preeminent global technology-
based healthcare company for the eye, dedicated to helping
consumers see, look and feel better through innovative
technology and design. Its core businesses include soft and
rigid gas permeable contact lenses, lens care products,
ophthalmic surgical and pharmaceutical products. The Company is
advantaged with some of the most respected brands in the world
starting with its name, Bausch & Lomb(R), and including
SofLens(TM), PureVision(TM), Boston(R), ReNu(R), Storz(R) and
Technolas(TM). Founded in 1853 in Rochester, N.Y., where it
continues to have its headquarters, the Company has annual
revenues of approximately $1.7 billion and employs approximately
12,000 people in more than 50 countries. Bausch & Lomb products
are available in more than 100 countries around the world. More
information about the Company can be found on Bausch & Lomb's
Web site at http://www.bausch.com
* * *
As reported in Troubled Company Reporter's March 14, 2002,
edition, Moody's Investors' Services downgraded Bausch & Lomb's
Senior Ratings to Ba1 from Baa3.
BEAR STEARNS: Fitch Rates 6 P-T Certs. Classes at Lower-B Level
---------------------------------------------------------------
Bear Stearns Commercial Mortgage Securities Trust 2002-TOP8,
Series 2002-TOP8, commercial mortgage pass-through certificates
are rated by Fitch Ratings as follows:
-- $185,535,000 Class A-1 'AAA';
-- $538,794,000 Class A-2 'AAA';
-- $842,243,398 Class X-1 * 'AAA';
-- $775,603,000 Class X-2 * 'AAA';
-- $25,267,000 Class B 'AA';
-- $28,426,000 Class C 'A';
-- $9,475,000 Class D 'A-';
-- $11,581,000 Class E 'BBB+';
-- $6,317,000 Class F 'BBB';
-- $4,211,000 Class G 'BBB-';
-- $8,422,000 Class H 'BB+';
-- $3,159,000 Class J 'BB';
-- $4,211,000 Class K 'BB-';
-- $3,158,000 Class L 'B+';
-- $3,159,000 Class M 'B';
-- $2,105,000 Class N 'B-';
-- $8,423,398 Class O 'NR'.
* Interest-Only
Class O is not rated by Fitch Ratings. Classes A-1, A-2, B, C,
and D are offered publicly, while classes X-1, X-2, E, F, G, H,
J, K, L, M, N, and O, are privately placed pursuant to Rule 144A
of the Securities Act of 1933. The certificates represent
beneficial ownership interest in the trust, primary assets of
which are 120 fixed rate loans having an aggregate principal
balance of approximately $842,243,398 as of the cutoff date.
BUDGET GROUP: Intends to Implement Key Employee Retention Plan
--------------------------------------------------------------
Budget Group Inc., and its debtor-affiliates seek the Court's
authority to implementation a Key Employee Retention Plan.
In the months after the September 11 bombings, the Debtors
undertook efforts to preserve their management team by
implementing retention bonus plans for executives. Pursuant to
these prepetition plans, retention payments were made
periodically to the Debtors' employees during 2002, provided
that they remain with the Debtors throughout calendar year 2002.
Otherwise, all payments made under the plans would have to be
repaid.
Robert S. Brady, Esq., Young Conaway Stargatt & Taylor LLP, in
Wilmington, Delaware, tells the Court that when it became
apparent that the Debtors were heading for Chapter 11
protection, management became increasingly concerned that
employee morale would decline and would cause departures. To
address these concerns and to insure that the Debtors are able
to put in place a strong retention program, management retained
the services of Buck Consultants Inc. to assist in developing a
market-competitive KERP.
Buck developed the Debtors' KERP based on benchmarking analysis,
and reviewed the current levels of compensation for the Debtors'
senior management and considered the retention plans implemented
by similar service companies under Chapter 11 protection. Buck
also collected market compensation information from seven
surveys that closely matched the Debtors' industry, i.e.,
transportation and auto-truck rental, and size in terms of
annual sales revenue.
The KERP includes 64 employees who are divided into Tiers A, B,
C, and D depending on their positions. The various tiers are:
1. Tier A is comprised of:
-- Stanford Miller, Chairman and CEO;
-- Mark R. Sotir, President and COO;
-- William S. Johnson, Executive Vice President and CFO; and
-- Robert Aprati, Executive Vice President and General
Counsel;
2. Tier B is comprised of eight Senior Vice Presidents,
including vice-presidents of marketing, pricing and revenue
management, sales and vehicle operations;
3. Tier C is comprised of 28 regional vice-presidents and other
vice-presidents of operations; and
4. Tier D is comprised of 24 managing directors and other
directors or managers of operations.
The KERP components are:
A. Retention Bonus Plan: All 64 key employees participate in a
retention bonus plan that rewards employees for remaining
with the Debtors during the restructuring period.
The retention payments would be equal to a percentage of base
salary in three equal installments. Tier A employees would
receive between 100% and 125% of their base salaries over the
retention period. Employees under Tiers B, C and D, would
get 125% of their annual incentive target. The total
proposed target cost of the retention plan is $5,565,300.
The first retention payments would be made on the earlier of:
-- October 15, 2002, or
-- the closing of a sale of the employee's operating unit.
Second payments will be made on:
-- February 15, 2003, or
-- if a sale had not closed by October 15, 2002, the closing
of a sale of the employee's operating unit.
Third payments would be made upon:
-- confirmation of the Debtors' Reorganization Plan, or
-- if a Sale closed after October 15, 2002, six months after
the closing.
If an employee is involuntarily terminated for reasons other
than cause prior to the completion of the third payment, all
unpaid retention payments will be payable in full
immediately.
If an employee is offered a comparable position with the
company acquiring the employee's unit but declines the offer,
it will be viewed as a voluntary termination. The employee
would receive all payments triggered by the transaction but
forfeit all rights to payments on a going-forward basis.
If an employee's operating unit is not part of a Sale, the
retention plan will continue throughout the Chapter 11 cases
for employees within that unit;
B. Performance Bonus Plan: Only 57 of the 64 employees will
participate in a performance bonus plan that rewards
employees for achieving certain EBITDAR performance levels
during 2002. The Debtors' 2002 adjusted EBITDAR goal for the
entire calendar year is $61,700,000.
The performance awards are to be made within 45 days after
the end of the performance period. Employees must be
employed through the conclusion of 2002 in order to earn and
receive the awards. If the Court have not confirmed a
Reorganization Plan at the end of 2002, the performance plan
would continue into 2003 with a new six-month EBITDAR target.
All rights to a performance award are forfeited if a
participant voluntarily terminates employment prior to
December 31, 2002. If, an employee is involuntarily
terminated for reasons other than cause, or is effectively
terminated prior to December 31, 2002, the employee would be
entitled to a pro-rated portion of the award based on actual
performance.
If an employee is hired by a company that acquires the
Debtors through a Sale or a Reorganization Plan, the
performance against goal is to be measured to the date of
closing of the sale transaction. Actual awards are to be
determined on a pro-rated basis. If an employee is
involuntarily terminated, the performance against goal is to
be measured to the date of closing of the sale transaction
and actual awards are to be determined on a pro-rated basis.
The plan is designed to pay between 0% to 200% of target
depending on actual EBITDAR performance based on this
schedule:
% Achievement of % Payment of
Targeted EBITDAR Targeted Award
---------------- --------------
80% or less 0%
100% 100%
120% 200%
The targeted award is based on a percentage of base salary
and depends on which Tier the employee belongs. The
performance award of the various tiers are:
Performance award
based on base salary
--------------------
Tier A 50.0% - 62.5%
Tier B 25%
Tier C 15.0% - 17.5%
Tier D 7.5% - 15.0%
The total target cost of the performance plan is $2,230,000;
C. Severance Plan: The Debtors' existing severance plans are
for all 64 key employees to ensure their focus during
the restructuring period.
Under the plan, Tier A and B employees are to receive a
percentage of their base salary plus target annual incentive
-- 75% of base salary for Tier A, 50% of base salary for Tier
B -- including continuation of benefits for a designated
number of months. Tier C and D employees are to receive a
percentage of their base salary including continuation of
benefits for a designated number of months. The total
maximum cost of the severance plan is $13,532,900.
Severance is to be paid as salary continuation and is to be
subject to mitigation upon the recipient's re-employment with
the Debtors or an acquiring company. There is to be no
offset of severance payments against any other payments made
under the KERP upon termination; and
D. Discretionary Bonus Pool: A bonus pool, controlled by the
Chief Executive Officer and the Chief Operating Officer, is
to be established. The funds reserved in this pool may be
distributed to all current employees of the Debtors,
excluding the 64 key employees, for exemplary performance or
to make up for competitive shortfalls on an as needed basis.
The discretionary bonus pool will be in addition to the
benefits provided to the non-KERP employees under the
Debtors' existing employee benefit plans that were authorized
by the Court at the first day hearings.
The $500,000 discretionary bonus pool that is controlled by
the Debtors' CEO and CFO may be distributed:
* as rewards for exemplary performance,
* as a means of addressing competitive compensation
shortfalls on an individual basis, or
* to act as a retention arrangement for individuals not
covered by the KERP Bonus determinations will be made at
the discretion of the CEO and COO, who will define the
terms and conditions of any bonus awards.
Modifications to the KERP
According to Mr. Brady, the Debtors and the Official Committee
of Unsecured Creditors have discussed each component of the KERP
and the payment levels for each employee. From the
negotiations, the Debtors and Buck developed a compromise plan
that maintains the same four plan components, but revises the
maximum payout levels.
The agreed modification to the KERP reduces the total maximum
payout awards from $21,328,200 to $15,896,700. The Retention
Bonus Plan awards are reduced from $5,565,300 to $3,905,400 and
the Severance Plan awards are reduced from $13,532,900 to
$8,597,400. The Performance Bonus Plan awards are increased
slightly from $2,230,000 to $3,393,900.
The Debtors and the Committee have also agreed to two other
changes to the KERP. The Retention Bonus Plan awards will be
paid out over two, not three, equal installments. The first
installment is to be paid on October 15, 2002 and the second
either on February 15, 2003, on the confirmation of a plan of
reorganization, or six months following the sale of
substantially all of the Debtors' assets. The EBITDAR target
for the Performance Bonus Plan also has been changed from a full
year target of $61,700,000 to a second half 2002 target of
$35,400,000. (Budget Group Bankruptcy News, Issue No. 9;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
Budget Group Inc.'s 9.125% bonds due 2006 (BD06USR1) are trading
at 17 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BD06USR1for
real-time bond pricing.
CARAUSTAR IND: Ron Domanico Hired as New Chief Financial Officer
----------------------------------------------------------------
Caraustar Industries, Inc., (Nasdaq: CSAR) announced that Ronald
J. Domanico has joined the company as its new Vice President and
Chief Financial Officer, effective October 8, 2002.
From 1981 to 2000, Mr. Domanico worked for Kraft Foods and
Nabisco in a succession of progressively more senior financial
management, planning, business development and operations roles.
His most recent position was Executive Vice President and Chief
Financial Officer of AHL Services, Inc., in Atlanta.
"We are delighted to have Ron join our team," said Thomas V.
Brown, Caraustar's President and Chief Executive Officer. "Ron
brings a wealth of financial management and related experience
that we are confident will serve Caraustar well."
Mr. Domanico replaces H. Lee Thrash, III, who has been
Caraustar's CFO since 1986. Mr. Thrash will remain available to
perform special projects for the company but has resigned as CFO
to pursue other business opportunities and personal interests.
Tom Brown said, "Lee was instrumental in taking our company
public in 1992 and has played a significant role in Caraustar's
development since that time. We wish Lee the best in his future
endeavors."
Caraustar, a recycled packaging company, is one of the largest
and lowest-cost manufacturers and converters of recycled
paperboard and recycled packaging products in the United States.
The company has developed its leadership position in the
industry through diversification and integration from raw
materials to finished products. Caraustar is the only major
packaging company that serves the four principal recycled
paperboard product markets: tubes, cores and cans; folding
carton and custom packaging; gypsum wallboard facing paper; and
miscellaneous "other specialty" and converted products.
* * *
As previously reported, Standard & Poor's lowered its corporate
credit ratings on recycled paperboard manufacturer Caraustar
Industries Inc to 'BB' and removed them from CreditWatch where
they were placed on December 20, 2001. Rating outlook is stable.
The rating action reflects expectations that weak market
conditions amid continuing overcapacity will prevent Caraustar
from improving credit measures to levels expected for the prior
rating. Although most of the company's operating issues have
been remedied, and new business volumes are starting to ramp up,
recycled paperboard demand is unlikely to rebound sufficiently
in the near term to significantly boost performance.
CMS ENERGY: Improved Plan Sheds Need to Access Capital Markets
--------------------------------------------------------------
CMS Energy Corporation (NYSE: CMS) has updated its financial
plan to eliminate the need to access the capital markets for the
remainder of 2002.
The company has received bank commitments to use stored natural
gas as part of a collateral package to raise $200 million to
$250 million in financing for its main subsidiary, Consumers
Energy. This financing, which is expected to close in October,
will eliminate the need for Consumers Energy to go to the
capital markets for the remainder of 2002. Consumers Energy
currently has about 95 billion cubic feet of working natural gas
in its underground storage fields.
The company also said that further cost-cutting steps and sales
of non-strategic assets are expected to eliminate the need for
CMS Energy to access the capital markets this year. Asset sale
proceeds are expected to repay the balance of a CMS Energy $296
million credit facility due March 2003.
CMS Energy is seeking indications of interest to purchase its
interstate natural gas pipeline business, the CMS Panhandle
Companies, and its natural gas gathering and processing
business, CMS Field Services, as part of its overall
restructuring effort.
CMS Panhandle's major assets include 10,300 miles of gas
pipeline, extending from the Gulf of Mexico to Canada, and the
largest operating liquefied natural gas (LNG) terminal in the
United States. CMS Field Services, the midstream unit of CMS
Energy, gathers, treats, processes, and delivers natural gas and
natural gas liquids to market hubs throughout the supply regions
of Louisiana, West Texas, Central Texas, the Midcontinent, and
Rocky Mountains. CMS Field Services owns approximately 3,700
miles of gathering pipeline and through its subsidiary, Bighorn
Gas Gathering, LLC, is one of the largest gatherers of coal bed
methane in northern Wyoming's Powder River Basin.
CMS Energy also announced that a special committee of its Board
of Directors is nearing completion of its investigation into the
company's round- trip trading. The special committee will
present the results of its investigation to the board later this
month.
"Our mission is to provide a comprehensive report to the Board
of Directors. We are close to reaching that goal," said Kenneth
L. Way, the special committee chairman. "The only conclusion
that should be reached about the new schedule is simply that it
has taken the special committee a little longer than expected to
complete its work."
Meanwhile, the company's independent auditor, Ernst & Young LLP,
continues to make progress on its work to re-certify the CMS
Energy financial statements for 2000 and 2001. Ernst & Young
had indicated previously that it would need the special
committee to complete its work before it could issue those
certifications.
CMS Energy Corporation is an integrated energy company, which
has as its primary business operations an electric and natural
gas utility, natural gas pipeline systems, independent power
generation, and energy marketing, services, and trading.
* * *
As reported in Troubled Company Reporter's Sept. 6, 2002
edition, Fitch downgraded CMS Energy and its subsidiaries,
Consumers Energy Co., and CMS Panhandle Eastern Pipe Line Co.
The senior unsecured debt rating of CMS has been lowered to 'B+'
from 'BB-'. The downgrades of Consumers and PEPL reflect Fitch's
notching criteria with respect to parent and subsidiary ratings.
CMS and Consumers will remain on Rating Watch Negative due to
continuing concerns surrounding CMS' weak liquidity position,
high parent debt levels and limited financial flexibility. The
Rating Watch will remain in place pending a meeting with CMS
management within the next several weeks to review the company's
updated business plan. In addition, Fitch has revised the Rating
Watch of PEPL to Evolving from Negative, reflecting the recent
announcement by CMS that it is exploring the sale of PEPL and
related assets, including CMS Field Services, Trunkline Pipeline
and the LNG facility. The Rating Watch takes into consideration
that CMS will ultimately divest of PEPL, and as such, the
ratings of PEPL will no longer be tied to those of CMS.
The revised ratings for CMS and Consumers reflect concerns
regarding projected cash constraints at each of the companies
for the remainder of the year. Consumers' operating cash flow is
forecasted to be negatively impacted over the next several
months due to high capital expenditure requirements for
environmental compliance, gas purchases made during the summer
months and a $103 million dividend to CMS in October. Consumers
is expected to spend between $230-270 million between 2002 and
2004 on environmental compliance costs, and the utility is
currently unable to recover these costs through rates due to the
rate freeze in place through December 31, 2003.
CONTINUCARE CORP: June 30 Working Capital Deficit Tops $7.6 Mil.
----------------------------------------------------------------
Continucare Corporations financial statement filing with the SEC
for the period ended June 30, 2002, starts out with this
statement: "Our auditors' opinion on the June 30, 2002
consolidated financial statements states that, although our
financial statements have been prepared on a going concern
basis, there is a significant uncertainty as to whether we will
be able to fund our obligations and satisfy our debt obligations
as they become due in Fiscal 2003. At June 30, 2002, our working
capital deficit was approximately $7,587,000, our total
indebtedness accounted for approximately 91% of our total
capitalization and we had approximately $2.3 million outstanding
under our credit facility. Our cash flow from operations in
Fiscal 2002 was not sufficient to satisfy our debt obligations
as they became due, including payments on various notes payable,
and fund our capital expenditures. We funded our cash deficit in
Fiscal 2002 from our credit facility. However, on August 7,
2002, we drew down the remaining available balance under the
credit facility. The credit facility matures on March 31, 2003.
We obtained this credit facility in Fiscal 2000 based on the
personal guarantees of Dr. Phillip Frost and an entity
controlled by Charles Fernandez, former members of our board of
directors. Their guarantee is effective through the March 31,
2003 maturity date. Based on our current cash flow projections,
it appears unlikely that we will have sufficient funds available
to fully repay the credit facility by March 31, 2003. While we
intend to either extend or replace the credit facility, either
in whole or in part, uncertainty exists as to whether we will be
able to extend or replace the credit facility without either the
Guarantors extending their guarantees or other individuals
providing a personal guarantee. If personal guarantees are
required, there can be no assurance that we will be able to
obtain such guarantees. There can be no assurance that we will
be successful in our attempts to either repay, extend or replace
the credit facility and, if so, if this will occur on terms
acceptable to us."
The Company's net loss for Fiscal 2002 was approximately
$3,646,000 compared to a net loss of approximately $138,000 for
Fiscal 2001.
On July 30, 2002, the American Stock Exchange notified
Continucare it had completed its review of its listing
qualifications and has accepted the Company's plan to regain
compliance with continued listing standards by December 31,
2003. The plan includes quarterly milestones. If Continucare
does not show progress in obtaining these milestones or if it is
unable to regain compliance with the continued listing standards
by December 31, 2003, its common stock may be delisted from the
Exchange. Continucare is still below the continued listing
requirements of the Exchange with respect to requirements which
include the need for it to maintain stockholders' equity of at
least $4 million and not sustain losses from continuing
operations and/or net losses in two of its three most recent
fiscal years. The Company is unable to guarantee that the
Exchange will continue to list its common stock.
CORNING INC: Confirms Third Quarter Loss & Says Liquidity Okay
--------------------------------------------------------------
Corning Incorporated (NYSE:GLW) said that for the third quarter
ended September 30, 2002, it expects results to be within the
range of its previously announced guidance.
The company anticipates sales for the quarter will be between
$830 million and $840 million, and that it will record a net
loss in the range of $0.07 to $0.08 per share, excluding one-
time items. Corning's third-quarter results will also include
previously announced restructuring and impairment charges of
approximately $125 million pretax and a $0.12 reduction in
earnings per share as a result of the declaration of dividends
on Corning's 7.00% Series C mandatory convertible preferred
stock offering completed in the third quarter. Including these
items, Corning expects to incur a net loss in the range of $0.27
to $0.28 per share for the quarter.
James B. Flaws, vice chairman and chief financial officer, said,
"We are very pleased that our results appear to be coming in
within the range that we provided investors in our July
guidance. However, we are not satisfied with our loss position.
We warned investors in July that our telecommunications business
could see further weakness and that has occurred, evidenced by
our third-quarter sales being at the lower end of our guidance
range.
"The telecommunications industry outlook remains difficult,
driven by additional carrier capital expenditure reductions,
lack of industry consolidation and bankruptcies. These events
will require us to do more restructuring in the fourth quarter,"
Flaws said. "While our restructuring actions to date have helped
our bottom line, we must further align our telecommunications
business cost structure to the new realities of the markets in
which we compete. These necessary steps in our
telecommunications business, combined with the ongoing strength
that we see in our advanced materials and information display
segments, will help us achieve our goal of profitability in
2003."
Previously, Corning said that further restructuring initiatives
could include more headcount reductions, the potential sale or
discontinuation of some non-core assets, plant closures and
consolidation of manufacturing capacity within the
telecommunications segment, and the centralization of
administrative functions.
Flaws said, "We remain very comfortable with our liquidity
position." He noted that the company ended the third quarter
with cash and short-term investments in excess of $1.5 billion.
Corning will detail its third-quarter results, the next phase of
its restructuring actions and its liquidity position in a news
release and investor conference call on October 30, 2002.
October 30th Conference Call Information
The company will host a conference call at 8:30 a.m. EST on
Wednesday, October 30, 2002. To access the call, dial (212) 547-
0138. The password is Corning. The leader is Sofio. A replay of
the call will begin at approximately 10:30 a.m. EST and will run
through 5 p.m. EST on Wednesday, November 13, 2002. To access
the replay, dial (402) 220-9812; a password is not required. A
live audio webcast will be available at
http://www.corning.com/investor_relations/and will remain there
for 14 days following the call.
Established in 1851, Corning Incorporated --
http://www.corning.com-- creates leading-edge technologies for
the fastest-growing markets of the world's economy. Corning
manufactures optical fiber, cable and photonic products for the
telecommunications industry; and high-performance displays and
components for television, information technology and other
communications-related industries. The company also uses
advanced materials to manufacture products for scientific,
semiconductor and environmental markets. Corning revenues for
2001 were $6.3 billion.
* * *
As reported in Troubled Company Reporter's August 5, 2002
edition, Standard & Poor's lowered its ratings on two
synthetic transactions related to Corning Inc., to double-'B'-
plus from triple-'B'-minus.
The lowered ratings follow the lowering of Corning Inc.'s long-
term corporate credit and senior unsecured debt ratings on July
29, 2002.
The two deals are both swap independent synthetic transactions
that are weak-linked to the underlying collateral, Corning
Inc.'s debt. The lowered ratings reflect the credit quality of
the underlying securities issued by Corning Inc.
RATINGS LOWERED
Corporate Backed Trust Certificates Corning
Debenture-Backed Series 2001-28 Trust
$12.843 million corning debenture-backed series 2001-28
Rating
Class To From
A-1 BB+ BBB-
Corporate Backed Trust Certificates Corning
Debenture-Backed Series 2001-35 Trust
$25.2 million corning debenture-backed series 2001-35
Rating
Class To From
A-1 BB+ BBB-
COVANTA ENERGY: Court Approves Insurance Financing Agreement
------------------------------------------------------------
Pursuant to Section 364(c)(3) of the Bankruptcy Code and Rule
4001(c) of the Federal Rules of Bankruptcy Procedure, Covanta
Energy Corporation and its debtor-affiliates obtained the
Court's authority to enter into an insurance premium financing
agreement to finance the payment of premiums to be paid upon
their insurance policies.
These policies provide primary and excess coverage for:
(i) property, boiler and machinery damage and business
interruption -- the Property Policies;
(ii) Workers' Compensation, general and auto liability --
Casualty Policies;
(iii) director's and officer's liability -- D&O Policies; and
(iv) environmental liability -- Environmental Polices.
In the ordinary course of business, the Debtors will renew the:
(a) terms of the Property Policies for one year as of October
20, 2002 no later than November 19, 2002. The expected
annual premium will be no more than $20,000,000;
(b) terms of the D&O Policies for one year as of September
27, 2002. In addition, the Debtors intend to purchase
extended discovery coverage under the current policies.
The anticipated annual premiums will be at most
$4,000,000. The premiums are due before October 27,
2002; and
(c) terms of the Environmental Policy for three years as of
October 20, 2002. Expected term premium is not more than
$1,000,000 to be paid before November 19, 2002.
The Debtors were able to arrange for the insurance premium
financing with Cananwill, Inc. and A.I. Credit Corp. --
Financing Companies. Under the Financing Agreements, the
premiums will be paid by the Financing Companies to the
insurance companies on behalf of the Debtors for the full term
of the Policies.
Specifically, the Agreements provide that:
-- Cananwill would pay the Property Premium for Covanta in
consideration for which Covanta would pay Cananwill a
downpayment and would repay the remainder, plus interest
at a 6% annual rate, in monthly installments. Cananwill
will receive a security interest in the gross unearned
premiums for the Property Policies in the form of a lien
pursuant to Section 365(c)(3) of the Bankruptcy Code. The
lien will be junior in rank only to the security interests
granted under the DIP Agreement or the lien will have
priority over other liens to the extent consented by the
Secured Parties. In the event of cancellation of the
Property Policies, the gross unearned premiums would be
payable to Cananwill, subject to the security interests
granted to the Secured Parties; and
-- A.I. Credit Corp -- AICC -- would pay the Casualty Premium
in consideration for which Covanta would pay AICC a
downpayment and would repay the remainder, plus interest
at an annual rate of 6%, in monthly installments. AICC
will receive a security interest in the gross unearned
premiums for the Casualty Policies in the form of a lien
pursuant to Section 364(c)(3) of the Bankruptcy Code.
The lien will be junior to the security interests granted
under the DIP Agreement and the DIP Order or it will have
priority over other liens to the extent consented by the
Secured Parties. In the event of the cancellation of the
Casualty Policies, the gross unearned premiums would be
payable to AICC, subject only to the security interests
granted under the DIP Agreement and the Final DIP Order
to the Secured Parties or as the Secured Parties may
consent. (Covanta Bankruptcy News, Issue No. 15;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
CREDIT SUISSE: Fitch Affirms Low-B Ratings on Class F & G Notes
---------------------------------------------------------------
Credit Suisse First Boston Mortgage Securities Corp., commercial
mortgage pass-through certificates, series 1997-C2, $73.3
million class F currently at 'BB', and the $14.7 million class G
currently at 'BB-', have been affirmed and taken off Rating
Watch Negative. The $57.9 million class A-1, $322.3 million
class A-2, $523.3 million class A-3 and interest-only class A-X
are all affirmed at 'AAA'. In addition, the following classes
are affirmed: the $95.3 million class B at 'AA', the $80.6
million class C at 'A', the $95.3 million class D at 'BBB-', the
$29.3 million class H, and the $14.7 million class I at 'CCC'.
The $25.7 million class E and the $36.1 million class J
certificates are not rated by Fitch. In March 2002, Fitch
downgraded classes H and I and placed classes F and G on Rating
Watch Negative due to the large exposure to Kmart and the
expected losses on the specially serviced loans. The rating
affirmations follow Fitch's annual review of the transaction,
which closed in December 1997.
The removal of classes F and G from Rating Watch Negative is
primarily due to the improved outlook on three of the five loans
with Kmart exposure and a clearer estimate of the expected
losses on the specially serviced loans. 14 loans representing 7%
of the overall pool balance are currently in special servicing
including four REOs, two foreclosures and one 60 days delinquent
loan. Five of the loans (4.4%) in special servicing have Kmart
exposure. However, only two of the loans (1.4%) with Kmart
exposure are delinquent; significant losses are expected. No
losses are expected on two cross-collateralized and cross-
defaulted hotels (1.1%) that are being specially serviced while
one of the properties undergoes a change in franchise to Best
Western from Holiday Inn. Three of the REO loans and one loan in
foreclosure are retail properties all of which are expecting
losses. One loan secured by a hotel property is 60 days
delinquent. Additionally, 17 loans have DSCRs below 1.00 times,
representing 4.7% of the pool balance.
As of the September distribution date the pool's aggregate
balance has been reduced by 6.7% to $1.37 billion from $1.47
billion at issuance. Wachovia Securities, the master servicer,
collected year-end 2001 operating statements for 83% of the
loans by outstanding balance. The comparable weighted average
debt service coverage ratio for these loans is 1.47x for YE 2001
versus 1.59x at YE 2000 and 1.36x at issuance. Five loans (11%)
have been defeased, including the largest loan in the pool, MGM
Plaza.
Fitch applied various hypothetical stress scenarios taking into
consideration the expected losses on the specially serviced
loans, the increased risk of default on the other loans of
concern, and the defeased loans. Even under these stress
scenarios, subordination levels remain sufficient to affirm the
ratings. Fitch will continue to monitor this transaction, as
surveillance is ongoing.
CROWN CORK: Will Conduct Q3 2002 Conference Call on October 17
--------------------------------------------------------------
Crown Cork & Seal Company, Inc., (NYSE: CCK) will release its
earnings for the third quarter ended September 30, 2002 before
trading begins on the New York Stock Exchange on Thursday,
October 17, 2002. The Company will hold its customary
conference call to discuss these results at 11 a.m. (EDT) the
same day.
The dial-in numbers for the conference call are (712) 271-3220
or toll-free (888) 677-1185 and the access password is
"packaging." A replay of the conference call will be available
for a one-week period ending at midnight on Thursday, October
24. The telephone numbers for the replay are (402) 220-0321
or toll free (800) 695-4244 and the access passcode is 4846. A
live web cast of the call will be made available to the public
on the Internet at the Company's Web site,
http://www.crowncork.com
Crown Cork & Seal is a leading supplier of packaging products to
consumer marketing companies around the world. World
headquarters are located in Philadelphia, Pennsylvania.
DebtTraders says that Crown Cork & Seal's 8% bonds due 2023
(CCK23USR1) are trading at 55.5 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CCK23USR1for
real-time bond pricing.
CTC COMMS: Seeking Court Nod to Use Lenders' Cash Collateral
------------------------------------------------------------
CTC Communications Group, Inc., and CTC Communications Corp.,
wants the U.S. Bankruptcy Court for the District of Delaware to
give them authority to use their Lenders' Cash Collateral and
grant the Lenders adequate protection of their security
interests.
The Debtors relate that prior to the Petition Date, they owed
$225,000,000 under a Credit Agreement with Toronto Dominion
(Texas), Inc., as administrative agent, Lehman Brothers, Inc.,
Credit Suisse First Boston and TD Securities (USA) Inc.
The Lenders have consented to the Debtors' use of the Cash
Collateral pursuant to the Budget:
Cash Budget - October 2002
Beginning Cash Balance $ 29,500,000
Total Receipts 25,800,000
Total Disbursements 30,850,000
Net Cash Flow (5,050,000)
Ending Cash Balance $ 24,450,000
The Debtors' authority to use Cash Collateral will terminate on
the earlier of:
a) the date of entry by the Court of an order with respect
to the Final Hearing; or
b) the occurrence of an Event of Default.
The Debtors tell the Court that over approximately 30 days, the
Debtors anticipate spending approximately $27 million of Cash
Collateral. The Debtors' use of the Cash Collateral is necessary
to maintain the value of the Prepetition Collateral and to
provide the Debtors with working capital necessary to maintain
operation of the business. Absent the use of Cash Collateral,
the Debtors do not have working capital adequate to operate
their business, or even to maintain operations necessary to
prevent the deterioration in value of their assets. Unless the
business is able to meet its short-term financial obligations,
the value of the Lenders' and other creditors' collateral will
be seriously diminished. The Debtors argue that without the
interim use of Cash Collateral, they will suffer immediate and
irreparable harm, the business operations would cease, their
assets and value as a going concern would be damaged, and the
operational value of the business - which is significantly
higher that its liquidation value - would likely not be
realized.
The Debtors want the Court to schedule a final hearing to use
Cash Collateral not later than 45 days after the Petition Date.
CTC Communications Group, Inc., a source provider of voice,
data, and Internet Communications services to medium and larger
sized business customers, filed for chapter 11 protection on
October 3, 2002. Pauline K. Morgan, Esq., at Young, Conaway,
Stargatt & Taylor represent the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed $306,857,985 in total assets and
$394,059,938 in total debts.
DICE INC: Fails to Comply with Nasdaq Listing Requirements
----------------------------------------------------------
Dice Inc. (Nasdaq: DICE), the leading provider of online
recruiting services for technology professionals, received a
NASDAQ Staff Determination on October 8, 2002, indicating that
the Company fails to comply with the $3.00 minimum bid price
requirement for continued listing set forth in Marketplace Rule
4450(b)(4) and that its common stock is, therefore, subject to
delisting from the NASDAQ National Market.
The company will request a hearing before a NASDAQ Listing
Qualifications Panel to review the Staff Determination. There
can be no assurance that the Panel will grant the Company's
request for continued listing. Throughout the review process,
Dice's common stock will continue to be listed on the NASDAQ
National Market.
Third Quarter 2002 Performance
Dice intends to report full results for the third quarter 2002
on October 16, 2002. Dice expects to report revenues for the
third quarter of 2002 of approximately $7.8 million and
breakeven EBITDA (earnings before interest, taxes, depreciation,
amortization and one-time charges). Dice had $9.0 million in
cash and cash equivalents as of September 30, 2002.
In the third quarter, Dice recorded a $1.0 million charge for
the arbitration award announced in August 2002 relating to the
purchase of certain websites by EarthWeb Inc., (now known as
Dice Inc.) in 1999 from Mr. Scott Wainner. Dice has not made
any payment with respect to this award, and is seeking to
recover that amount from Jupitermedia Corporation (formerly
known as INT Media and internet.com) under the terms of the
Asset Purchase Agreement dated as of December 22, 2000, pursuant
to which Jupitermedia acquired these websites from the Company.
The probability of recovery is not determinable, and thus the
entire amount of the award has been accrued in the third
quarter. In addition, a net charge of $2.3 million has been
recorded reflecting the cost of the option agreements with three
bondholders announced in April 2002, as the options were not
exercised prior to their expiration on October 3, 2002. The net
charge reflects the gain resulting from the related early
extinguishment of debt, net of deferred financing costs, from
Dice's repurchase of $1.76 million in convertible subordinated
notes for $1.24 million in April 2002.
Dice Inc., (NASDAQ: DICE) -- http://about.dice.com-- is the
leading provider of online recruiting services for technology
professionals. Dice Inc., provides services to hire, train and
retain technology professionals through dice.com, the leading
online technology-focused job board, as ranked by Media Metrix
and IDC, and MeasureUp, a leading provider of assessment and
preparation products for technology professional certifications.
Dice Inc.'s corporate profile can be viewed at
http://about.dice.com
EBT INTERNATIONAL: Sets Second Liquidation Distribution Payout
--------------------------------------------------------------
eBT International, Inc., (OTC Bulletin Board: EBTI) announced an
increase in the minimum net proceeds estimated to be available
to shareholders over the remaining liquidation period to
approximately $.39 per share from the $.33 per share reported in
the Company's Form 10-Q for the period ended July 31, 2002.
The Company also announced that the second cash distribution
under the plan of complete liquidation and distribution approved
by its shareholders on November 8, 2001 will be $.30 per share,
approximately $4,406,000. The payment will be made on October
30, 2002 to shareholders of record at the close of business on
October 24, 2002. On December 13, 2001, the Company paid to its
shareholders the sum of $44,055,000, equivalent to $3.00 per
share.
The increase in minimum net proceeds estimated to be available
to shareholders was principally due to an adjustment in the
estimated settlement amounts of certain liabilities and
reserves. The total amount of the adjustment was $827,000 and
included reductions in accrued income taxes of $547,000, general
contingency reserve of $135,000 and miscellaneous other
liquidation basis liabilities in the amount of $145,000. The
reduction in accrued income taxes reflects the Board's current
judgment that a portion of the amounts recorded for potential
tax contingencies related to prior years is no longer required.
In years prior to the approval of the plan to liquidate and
dissolve, the Company periodically recorded amounts for
potential tax contingencies. The adjustment to the general
contingency reserve reduces the balance from $235,000 to
$100,000. The Company continues to maintain its reserve for
estimated litigation settlement costs at $976,000. This amount,
equivalent to approximately $.066 per share, represents amounts
that may be payable under the Company's By-laws to indemnify
certain former officers for expenses reasonably incurred in
connection with the Securities Exchange Commission's
investigation and allegations regarding the restatement of the
Company's financial results for the first three quarters of
1998.
Prior to May 23, 2001, eBT developed and marketed enterprise-
wide Web content management solutions and services. The
Company's shareholders approved a plan of liquidation and
dissolution on November 8, 2001, and a certificate of
dissolution was filed with the state of Delaware on November 8,
2001. The initial liquidation distribution in the amount of
$44,055,000 (or $3.00 per share) was returned to shareholders on
December 13, 2001.
EGAIN COMMS: Reaffirms EBDA Breakeven Guidance for Dec. Quarter
---------------------------------------------------------------
eGain Communications Corporation (Nasdaq:EGAN), a leading
provider of eService software to Global 2000 companies,
announced preliminary financial results for the first quarter of
its fiscal year 2003.
Revenue for the quarter is estimated to be in the range of $5.55
to $5.75 million. On a pro-forma (non-GAAP) EBDA basis, which
reflects earnings before depreciation, amortization and other
non-cash and restructuring charges, the company anticipates a
net loss per share between $0.07 and $0.09. These results are
preliminary and subject to change. Non-cash charges include
amortization of goodwill, other intangible assets and deferred
compensation, loss on disposition of assets as well as accreted
dividends and other non-cash charges related to the company's
cumulative convertible preferred stock.
"With a global operating model that enables us to realize
substantial cost savings, we remain committed to our goal of
achieving EBDA breakeven in December 2002," noted Ashutosh Roy,
eGain's Chairman and CEO. "At the same time, we are exploring
strategic alternatives to achieve critical mass and accelerate
our growth. As a company eGain has tremendous assets and
competence - product leadership, strong customer base, mature
global operating model and new offerings in the pipeline."
Management will discuss financial results for the quarter ended
September, as well as the outlook for the remainder of calendar
year 2002, during its quarterly conference call, which is
scheduled for October 31, 2002, at 5:00 p.m. EDT.
eGain (Nasdaq:EGAN) is a leading provider of software and
services for the Global 2000 that enable knowledge-powered
multi-channel customer service. Selected by 24 of the 50 largest
global companies to transform their traditional call centers
into multi-channel contact centers, eGain solutions measurably
improve operational efficiency and customer retention -- thus
delivering a significant return on investment (ROI). eGain
eService Enterprise -- the company's integrated software suite
-- includes applications for knowledge management, self-service,
email management, Web collaboration and productized integrations
with existing call center infrastructure and business systems.
Headquartered in Sunnyvale, Calif., eGain has an operating
presence in 18 countries and serves over 800 enterprise
customers on a worldwide basis -- including ABN AMRO Bank,
DaimlerChrysler, and Vodafone. To find out how eGain can help
you gain customers and sustain relationships, please visit
http://www.eGain.comor call the company's offices -- United
States: 888/603-4246; London: +44 (0) 1753 464646; or Sydney:
+612 9492 5400.
* * *
As reported in Troubled Company Reporter's August 28, 2002
edition, eGain Communications received a Nasdaq staff
determination stating that the company had failed to comply with
the $1.00 per share minimum bid price required by Nasdaq
Marketplace Rule 4450(a)(5) for continued listing on the Nasdaq
National Market. Accordingly, eGain's common stock is subject to
delisting from the Nasdaq National Market.
ENRON CORP: Employee Committee Gets Nod to Hire Crossroads LLC
--------------------------------------------------------------
With the revision of the scope of work, Judge Gonzalez permits
the Employment Related Issues Committee, in the chapter 11 cases
involving Enron Corporation and its debtor-affiliates, to retain
Crossroads LLC as financial advisor, nunc pro tunc to April 18,
2002, for the purpose of providing services in accordance with
the Employment Related Issue Committee's scope of duties.
To the extent that the prosecution of avoidance actions is
assigned to the Employment Related Issues Committee and
Crossroads provides services with respect to the prosecution
thereof, any fees and expenses incurred by Crossroads will be
paid or reimbursed, as the case may be, solely from the
recoveries generated from the prosecution and the standard for
awarding and allowance of compensation.
Specifically, the Crossroads professionals who will be working
with the Employee Committee and their hourly rates are:
Principals: Ruth E. Ford
Lawrence D. Morriss, Jr.
Dennis I. Simon
Joel M. Simon
Independent
Contractors: DeFrain, Mayer, a division of Palmer & Cay
Roland G. Simpson
Principals, Managing Directors & Directors $300 - $550
Senior Consultants, Consultants & Actuaries $175 - $350
Associates & Accountants $100 - $150
Financial & Actuarial Analysts $100 - $150
Administrators $90
(Enron Bankruptcy News, Issue No. 44; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
DebtTraders reports that Enron Corp.'s 9.125% bonds due 2003
(ENRN03USR1) are trading at 12.5 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR1
for real-time bond pricing.
FARMLAND IND.: Court OKs Demolition of Pork Processing Facility
---------------------------------------------------------------
Farmland Foods will begin demolition of the Albert Lea, Minn.,
pork processing facility that was destroyed by fire in July 2001
in compliance with the city's order of removal. A motion to
allow Farmland to enter into a contract for demolition and
removal of fire-damaged buildings and personal property in
Albert Lea, Minn., was approved Tuesday by the U.S. Bankruptcy
Court, Western District of Missouri.
Farmland's Albert Lea, Minn., processing facility was destroyed
by fire in July 2001. Farmland has submitted claims to its fire
and casualty insurance companies but the claims have not yet
been resolved.
In January, the City of Albert Lea issued an order for Farmland
to raze the remaining buildings from the property by Dec. 21,
2002, and to remove all personal property that might interfere
with razing by Oct. 21, 2002. The city has agreed to take title
to the property once demolition is complete.
"Our plans for rebuilding a plant at another site in Albert Lea
have been slowed by our reorganization and the delay in the
resolution of insurance claims. We will take another look at
that project once our claims are resolved and we emerge from
bankruptcy," said Bill Fielding, executive vice president of
Farmland's Refrigerated Foods businesses.
Farmland Foods -- http://www.farmlandfoods.com-- a subsidiary
of Farmland Industries, Inc., Kansas City, Mo., is the largest
farmer-owned meat company in North America, marketing quality,
wholesome pork and beef products bearing the Farmland(R) brand.
FMC CORPORATION: Releasing Third Quarter Results on October 29
--------------------------------------------------------------
FMC Corporation (NYSE: FMC) announced the following schedule and
teleconference information for its third quarter 2002 earnings
release:
-- Earnings Release: October 29, 2002, after close of
market by PR Newswire distribution and FMC Corporation's Web
site at http://ir.fmc.com
-- Teleconference: October 30, 2002, at 11:00AM Eastern
Standard Time (EST), hosted by Eric Norris, Director, Investor
Relations. Listen-only mode via Internet broadcast at
http://ir.fmc.com
-- Web Replay: Available beginning at 4:00PM on October
30, 2002, at http://ir.fmc.com
FMC Corporation is a global, diversified chemical company
serving agricultural, industrial and specialty markets for more
than a century with innovative solutions, applications and
products. The company employs approximately 5,700 people
throughout the world. FMC Corporation divides its businesses
into three segments: Agricultural Products, Specialty Chemicals
and Industrial Chemicals.
* * *
As reported in Troubled Company Reporter's Sept. 26, 2002
edition, Standard & Poor's assigned its triple-'B'-minus
rating to FMC Corp.'s proposed $550 million senior secured
credit facilities and affirmed its triple-'B'-minus corporate
credit rating on the diversified chemical company. The outlook
is revised to negative from stable. At the same time, Standard &
Poor's assigned its double-'B'-plus rating to FMC's proposed
$300 million senior secured notes due 2009 and lowered the
ratings on its existing senior unsecured notes from triple-'B'-
minus to double-'B'-plus. The downgrade reflects the
noteholders' diminished recovery prospects in a default and
liquidation scenario, pro forma for completion of the
refinancing plan that will provide the holders of bank
obligations with a first-priority claim on assets. Proceeds of
the notes, which will be secured on a second-priority basis,
will be used primarily to repay existing debt and to establish a
debt reserve account to meet near-term debt maturities. Pro
forma for the refinancing, Philadelphia, Pa.-based FMC has
nearly $1.4 billion of debt outstanding.
FMC CORPORATION: Issuing $355MM of Senior Secured Notes due 2009
----------------------------------------------------------------
As part of its previously announced refinancing plan, FMC
Corporation (NYSE: FMC) expects to issue $355 million of senior
secured notes due 2009. The notes were priced at 98.772% of the
principal amount and will generate gross cash proceeds of
approximately $350.6 million with a coupon of 10.25% and a yield
to maturity of 10.50%. The offering is expected to close on
Monday, October 21, 2002 and is subject to certain closing
conditions, including execution of a new $500 million credit
facility.
FMC Corporation is a global, diversified chemical company
serving agricultural, industrial and specialty markets for more
than a century with innovative solutions, applications and
products. The company employs approximately 5,700 people
throughout the world. FMC Corporation divides its businesses
into three segments: Agricultural Products, Specialty Chemicals
and Industrial Chemicals.
* * *
As reported in Troubled Company Reporter's Sept. 26, 2002
edition, Standard & Poor's assigned its triple-'B'-minus
rating to FMC Corp.'s proposed $550 million senior secured
credit facilities and affirmed its triple-'B'-minus corporate
credit rating on the diversified chemical company. The outlook
is revised to negative from stable. At the same time, Standard &
Poor's assigned its double-'B'-plus rating to FMC's proposed
$300 million senior secured notes due 2009 and lowered the
ratings on its existing senior unsecured notes from triple-'B'-
minus to double-'B'-plus. The downgrade reflects the
noteholders' diminished recovery prospects in a default and
liquidation scenario, pro forma for completion of the
refinancing plan that will provide the holders of bank
obligations with a first-priority claim on assets. Proceeds of
the notes, which will be secured on a second-priority basis,
will be used primarily to repay existing debt and to establish a
debt reserve account to meet near-term debt maturities. Pro
forma for the refinancing, Philadelphia, Pa.-based FMC has
nearly $1.4 billion of debt outstanding.
FOCAL COMMS: Brings-In Miller Buckfire for Financial Advice
-----------------------------------------------------------
Focal Communications Corporation (Nasdaq: FCOM), a leading
national communications provider of local phone and data
services, is taking additional steps to reduce its operating
expenses and continue its drive toward profitability. The
Company has eliminated approximately 300 positions through a
company-wide reduction in force. The Company expects that the
reduction, which is effective immediately, will result in annual
expense savings of approximately $25 million.
"It is important to demonstrate that we can manage our business
wisely in this very difficult economic environment while
continuing our drive toward profitability," commented Kathleen
Perone, president and CEO. "Therefore, we have taken steps to
streamline our organizational structure and maximize operational
efficiencies to more accurately reflect the nature of our
business today. These cuts have been structured so that we can
continue providing the exceptional service our customers expect
from us. We will not retreat from that commitment."
The Company also announced that it has engaged Miller Buckfire
Lewis and Co., LLC, as an independent financial advisor. As
previously disclosed, the Company is continuing discussions with
its senior lenders regarding the current status of its credit
facility.
"Focal has established a reputation for providing premier
communication services to our customers, backed by a state-of-
the-art network and unmatched customer service, at competitive
prices," said Perone. "Our commitment to maintaining Focal's
excellent level of current customer satisfaction and growing the
business by selling more to existing customers and by adding new
customers, remains our highest priority."
Focal Communications Corporation -- http://www.focal.com-- is a
leading national communications provider. Focal offers a range
of solutions, including local phone and data services, to
communications-intensive customers. Approximately half of the
Fortune 100 use Focal's services, in 23 top U.S. markets.
Focal's common stock is traded on the Nasdaq National Market
under the symbol FCOM.
* * *
As reported in Troubled Company Reporter's June 28, 2002
edition, Standard & Poor's assigned its triple-'C' bank loan
rating to integrated communications service provider Focal
Communications Corp.'s senior secured credit facility and
assigned its double-'C' rating to the company's senior unsecured
debt. The company completed a comprehensive recapitalization
plan on October 26, 2001.
A triple-'C' corporate credit rating was also assigned to the
company. The outlook is developing. As of March 31, 2002,
Chicago, Illinois-based Focal had total debt outstanding of
about $477 million, including $103 million of convertible notes.
The company offers voice and data services to large enterprise
and Internet service provider customers in 22 metropolitan
markets.
GLIATECH INC: Completes Requirements to Resolve AIP Status
----------------------------------------------------------
Gliatech Inc., (GLIAQ.PK) has been notified by the Food and Drug
Administration that the Company has adequately completed the
required audits and corrective actions to resolve its
Application Integrity Policy status and that the FDA will resume
scientific review of Gliatech's applications to the FDA. As a
condition of resuming ordinary course submissions, the FDA has
indicated that for a period of two years all submissions related
to ADCON must be reviewed and certified by an independent
auditor before they are presented to the FDA.
Gliatech was placed on AIP by the FDA in December 2000. In
January 2001, Gliatech conducted a voluntary recall of ADCON(R)-
L worldwide and ADCON(R)-T/N outside of the U.S. as a result of
a recall by the supplier of a raw material used in the
manufacture of these products. Gliatech has relaunched
ADCON(R)-L and ADCON(R)-T/N commercially outside of the U.S.
The Company has not relaunched ADCON(R)-L in the U.S., and a
future sponsor of ADCON(R)-L will be required to make certain
submissions to the FDA for review prior to a relaunch in the
U.S.
As previously announced, Gliatech is conducting an auction of
its ADCON(R) assets as part of the Company's bankruptcy
proceedings announced May 9, 2002.
"We are pleased that the FDA has resolved the Company's AIP
status, which allows the Company and the future buyer of ADCONr
to operate under normal procedures. This announcement removes a
significant regulatory hurdle for a potential buyer and enables
future submissions and constructive discussions between the
ADCONr buyer and the FDA," stated Steven L. Basta, President of
Gliatech. "I am grateful to all of Gliatech's employees for
their extraordinary efforts to reach this milestone and to the
many individuals at the FDA with whom we have worked for their
guidance and cooperation."
Gliatech Inc., is engaged in the discovery and development of
biosurgery and pharmaceutical products. The biosurgery products
include ADCON(R) Gel (ADCON(R)-L & T/N) and ADCON(R) Solution,
which are proprietary, resorbable, carbohydrate polymer medical
devices designed to inhibit scarring and adhesions following
surgery. Gliatech's pharmaceutical product candidates include
proprietary monoclonal antibodies designed to inhibit
inflammation.
GUNTHER INTERNATIONAL: Thomas Tisch Discloses 76.7% Equity Stake
----------------------------------------------------------------
Thomas J. Tisch beneficially owns 76.7% of the outstanding
common stock of Gunther International Ltd. by virtue of his
holding 16,127,034 shares of the Company's common stock, with
shared voting and sole dispositive powers over the total amount.
Gunther Partners, LLC beneficially owns 13,973,904 shares of the
common stock representing 72.1% of the outstanding common stock
of the Company. Four-Fourteen Partners, LLC, currently owns
494,189 shares, with shares in the amount of 1,658,941 issuable
upon the exercise of warrants. The total thus represents 10.2
of the outstanding common stock of Gunther International Ltd.,
or 2,153,130 shares.
Shares currently held by Gunther Partners, LLC and Four-Fourteen
Partners are 14,468,093. Added to the number of shares issuable
upon exercise of warrants, i.e. 1,658,941, the total represents
76.7% of the outstanding common stock of the Company, or
16,127,034 shares, as represented in the beneficial ownership of
Thomas J. Tisch.
The warrants are exercisable between January 1, 1999 and October
1, 2003 at $1.50 per share (subject to adjustment in the event
of any stock dividend or distribution, stock split, combination
or reclassification) to purchase a number of shares of common
stock equal to 35% of the pro forma, fully
diluted number of shares outstanding after including (i) all
common stock issued and outstanding on the date of exercise,
(ii) all common stock issuable upon the exercise of any then
exercisable rights, options or warrants to purchase common stock
and (iii) all common stock issuable upon the conversion of any
securities then convertible into common stock, but excluding
common stock issued after October 2, 1998 in a bona fide public
offering registered under the Securities Act of 1933. The
calculation of the number of shares issuable upon exercise of
the warrants is based upon there being outstanding 3,372,200
shares of common stock, other warrants to purchase 106,666
shares of common stock and options to purchase 463,000 shares of
common stock. The 16,000,000 shares issued by the Company in the
rights offering on November 28, 2001 are excluded in the
calculation of the number of shares outstanding for purposes of
the warrants.
On August 16, 2002, Gunther Partners, LLC purchased 300,000
shares of the common stock for cash in the amount of $0.25 per
share from Gerald Newman in a privately negotiated transaction.
By virtue of his status as manager of Gunther Partners, LLC and
manager of Four-Fourteen Partners, LLC, Thomas J. Tisch may be
deemed to be the beneficial owner of the shares held by Gunther
Partners, LLC and Four-Fourteen Partners, LLC and to have shared
power to vote or direct the vote and sole power to
dispose or direct the disposition of such shares.
Gunther International makes electronic publishing, mailing, and
billing systems that automate the assembly of printed documents.
Its EP-4000 Electronic Publishing System will staple, bind,
match, and insert documents into envelopes for distribution.
Primary customers include large insurance companies such as
Allstate, Metropolitan Life, and Mutual of Omaha. Gunther also
serves the government, retail, and service bureau sectors.
Director Gerald Newman and the estate of former chairman Harold
Geneen, through Park Investment Partners, collectively own
almost 40% of the company.
At June 30, 2002, Gunther's balance sheet shows a working
capital deficit of about $1.7 million.
HIGHWOODS PROPERTIES: S&P Affirms BB+ Preferred Share Rating
------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its triple-'B'-minus
corporate credit rating on Highwoods Properties Inc., and its
affiliates, Highwoods Exercisable Put Options Securities Trust
and Highwoods Realty L.P. Concurrently, the double-'B'-plus
preferred stock rating and the triple-'B'-minus senior unsecured
debt ratings are affirmed. The outlook is stable.
The ratings on Raleigh-based Highwoods, a southeastern-focused
suburban office REIT, reflect the company's improved portfolio
composition, reduced development exposure, and adequate debt
coverage measures. These strengths are offset by a heavy near-
term debt maturity schedule and the uncertain depth and duration
of the currently weak office environment in Highwoods' core
markets and the impact it might have on portfolio performance.
Highwoods is an office REIT with a current market capitalization
of $3.4 billion and a portfolio of 500 properties encompassing
38 million square feet (sq. ft.) in locations throughout the
southeastern U.S. A series of portfolio acquisitions pursued in
the mid-1990s materially expanded the company's portfolio size,
tenant base, and development pipeline, but also stressed the
balance sheet. The company's credit rating was lowered in late
2000 to the current triple-'B'-minus from triple-'B' in
anticipation of the impact deteriorating real estate
fundamentals would have on the development yields, leasing
activity, and overall financial flexibility. The company
retrenched and embarked on a capital recycling strategy largely
aimed at meeting funding requirements of the development
pipeline, while reducing exposure to weaker non-core markets.
More than $2 billion of assets have since been recycled through
outright sales and joint venture formations and a handful of
markets have been exited, thus allowing management to focus on
those markets where the company maintains a relatively deeper
concentration. The top five markets now include Tampa (12% of
portfolio sq. ft. and 15% of revenue), Research Triangle (11%
and 13%), Atlanta (17% and 13%), Kansas City (7% and 12%), and
Piedmont Triad (22% and 11%). While the portfolio remains
largely office focused (83% of revenue), there are also minor
concentrations in industrial (9%), and retail (8%).
Despite the slowdown in tenant demand, Highwoods' leasing
activity remains roughly in line with 2001 levels; however, a
higher level of expirations and the completion of low-occupied
development projects (roughly one million sq. ft. at 30%) have
brought the portfolio's occupancy rate down to 86% from 93% just
one year ago. The lease expiration schedule through 2004 will
continue to be higher than historical levels (six million sq.
ft. expires during the next two years) and there are a handful
of tenants (such as WorldCom and US Airways) facing near-term
operating pressure. Notwithstanding these difficulties, the
impact on Highwoods' operating results should be mitigated by a
number of factors. Weak tenants represent fewer than 5% of total
annual revenue (thereby minimizing the overall impact to
Highwoods credit measures), the low average rental rates on
expiring leases relative to current market, and the dramatically
reduced development pipeline ($82 million to fund and 52% pre-
leased).
Highwoods has maintained a moderately leveraged balance sheet
(in the high-40% range) with slightly below-average liquidity.
Much of the asset disposition proceeds during the past few years
have been used to complete existing development projects and,
more recently, to meet debt maturities and pay down the
unsecured corporate credit facility. Nevertheless, the company
is faced with a heavy debt maturity schedule during the next 18
months. The credit facility matures in late 2003 and had a
balance of $199 million at the end of the second quarter. It is
anticipated that the facility will be renewed with similar
terms. In addition to the two unsecured public notes maturing in
December 2003 (totaling $246 million), the $125 million
Mandatory Par Put Remarketed Securities have a potential put
option to Highwoods on Jan. 31, 2003. It is expected that
Highwoods will meet these capital obligations through planned
non-core asset sales (estimated net proceeds of roughly $200
million), potential unsecured note offerings, and a modest
increase in secured borrowings. At June 30, 2002, secured debt
represented roughly 32% of total debt; thereby encumbering 30%
of Highwoods' wholly owned net operating income. Highwoods'
joint venture investments are slightly more leveraged than on-
balance sheet investments (62% versus 48%) and, if fully
consolidated would encumber roughly 40% of NOI. It is expected
that Highwoods will maintain unencumbered NOI of greater than
50%, otherwise Standard & Poor's will be required to notch, or
distinguish between the company corporate credit rating and
unsecured credit rating.
Despite the weak operating environment, Highwood's debt coverage
measures are expected to remain near current levels. Debt
service coverage, which includes interest incurred (including
capitalized interest) and principal amortization, remains in the
2.7 times range. Fixed-charge coverage, which incorporates
preferred dividend payments for the six months-ended June 30,
2002, was 2.2x, and common dividends were covered nearly 1.2x.
The healthy cushion that has historically existed between
payment of all dividends and ongoing capital and tenant
improvement expenditures is expected to narrow, given the
potential for further occupancy and rent rate pressure. However,
there appears to be sufficient capacity within the existing cash
flow stream to meet these expenditures, which could actually be
slightly higher in the next few years, given the current
competitive environment for attracting and/or retaining tenants.
Outlook: Stable
Highwoods' successful capital-recycling activity has better
positioned the portfolio for the currently weak operating
environment. The company is now faced with a somewhat heavy debt
maturity schedule through 2003, but appears to have the
liquidity to adequately meet these needs within Standard &
Poor's notching parameters. Furthermore, it is expected that the
currently weak leasing environment will have a minimal impact on
near-term operating results; however, the longer-term outlook
for improvement in operating conditions continues to be poor.
Should this weakness translate into a material reduction in debt
service coverage or liquidity, the outlook and or rating would
be revisited
INTERLEUKIN GENETICS: Fails to Maintain Nasdaq Listing Criteria
---------------------------------------------------------------
Interleukin Genetics, Inc. (NASDAQ:ILGN), has received a letter
from NASDAQ stating that the Company has not met the $1 minimum
bid price and the $2.5 million stockholders' equity requirements
for continued listing of its common stock on the NASDAQ SmallCap
Market (Marketplace Rules 4310(C)(4) and 4310(C)(2)(B)).
Interleukin Genetics has requested a hearing before the NASDAQ
Listing Qualifications Panel to appeal the ruling by NASDAQ.
During the appeals process, which the Company expects will take
between 30 and 60 days, the Company's common stock will continue
to trade on the NASDAQ SmallCap Market. There can be no
assurance that the Panel will grant the Company's request for
continued listing. In the event that the Panel does not grant
continued listing, the Company expects that its common stock
would trade on the OTC Bulletin Board (OTCBB). The OTCBB is a
regulated quotation service that displays real-time quotes,
last-sales prices, and volume information for more than 3,600
equity securities.
Interleukin Genetics also announced that it is in the final
stages of negotiating a $1.5 million interim financing from the
same consumer products company with which the company has an
outstanding Letter of Intent per the press release on September
3, 2002. Although the interim financing may not be consummated,
management currently expects to complete this financing within
the next week, at which time the Company will have sufficient
cash to meet its operating requirements through January 2003.
The Company is continuing negotiations with that same consumer
products company towards a definitive strategic alliance and is
seeking further financing from other third parties to fund its
operations through 2003 and beyond.
Interleukin Genetics is a biotechnology company focused on
inflammation. The company uses functional genomics to develop
diagnostic, therapeutic and nutraceutical products based on the
genetic variations in people to help prevent or treat diseases
of inflammation. Interleukin's TARxGET (Translating Advanced
Research in Genomics into more Effective Therapeutics) programs
focus on the areas of cardiovascular disease, rheumatoid
arthritis and osteoporosis and include the development of tests
to assess a person's risk for heart disease and osteoporosis as
well as a test to help doctors and patients choose the best
course of therapy for rheumatoid arthritis. These products will
improve patient care and produce better allocation of healthcare
resources. In addition to its research partnerships with
numerous academic centers in the U.S. and Europe, Interleukin's
corporate collaborators include the leading healthcare
organizations, Kaiser Permanente and UnitedHealth Group. For
more information about Interleukin and its ongoing programs,
please visit http://www.ilgenetics.com
INTERPLAY ENTERTAINMENT: Nasdaq SmallCap Delists Shares
-------------------------------------------------------
Interplay Entertainment Corp., (Nasdaq: IPLY) received notice
from The Nasdaq Stock Market, Inc., that the Company's common
stock was delisted from trading on The Nasdaq SmallCap Market
effective with the opening of trading on October 9, 2002, due to
the Company not meeting certain minimum listing requirements.
The company expects that its common stock will become eligible
at that time or shortly thereafter for trading on the NASD-
operated Over-the-Counter Bulletin Board (OTCBB) under the
symbol IPLY.
The company has until October 23, 2002 to request a review of
the decision by the Nasdaq Listing and Hearing Review Council.
The company is considering whether to seek a review.
Interplay Entertainment is a leading developer, publisher and
distributor of interactive entertainment software for both core
gamers and the mass market. Interplay develops games for
personal computers as well as next generation video game
consoles, many of which have garnered industry accolades and
awards. Interplay releases products through Interplay, Digital
Mayhem, Black Isle Studios, its distribution partners, and its
wholly owned subsidiary Interplay OEM Inc.
ITEX CORP: Reports Improved Operating Results for Fourth Quarter
----------------------------------------------------------------
ITEX Corporation, (OTC Bulletin Board: ITEX) a trading and
business services company, announced the operating results for
its fourth quarter ending July 31, 2002 and its annual earnings
for Fiscal Year 2002.
Fourth Quarter and Year End Results
For the quarter ending July 31, 2002, the Company generated net
income of $102,000 compared to a net loss of $917,000 for the
same period last year. Earnings before interest, taxes,
depreciation and amortization (EBITDA) for the quarter were
$227,000 compared to a loss of $744,000 for the same period last
year. For the Fiscal Year ending July 31, 2002, ITEX incurred a
net loss of $593,000 compared to a net loss of $3,151,000 for
the prior Fiscal Year. EBITDA for the year was $200,000 compared
to an EBITDA loss of $2,269,000 for the prior fiscal year.
The significant reduction in the net loss for the fiscal year
and increase in net earnings for the fourth quarter are
primarily the result of the comprehensive corporate
restructuring that was initiated in November 2001. The Company
reduced the number of management and support staff in both the
corporate and regional offices and eliminated the Corporate
Trade Department. The Company also sold several regional offices
to ITEX Independent Licensed Brokers, further reducing expenses
while maintaining a substantial interest in the revenue stream
generated from those offices through trade transactions and
association fees.
Lewis "Spike" Humer, ITEX President and Chief Executive Officer
stated, "The results of our Fourth Quarter are a validation of
the corporate restructuring plan we initiated in November of
2001. During the restructuring we have remained true to our
strategy of redesigning the business model and culture of ITEX
Corporation. As evidenced by our second consecutive quarter of
profitability, our company is healthier, more effective, and
well positioned for controlled growth and future prosperity. We
remained on target with the design and implementation of our
restructuring plan; we are now entering a mode of growth and
revitalization of ITEX Corporation."
Continuing, Humer stated, "In our Fourth Quarter, we not only
generated net profit, we invested significant energy and capital
in reformulating our business model to include the sale and
placement of ITEX Franchises. It is our expectation that we
will derive significant revenues through the sale of franchises
in the coming Fiscal Quarters. While much of these revenues
will be reinvested in our marketing and support infrastructure,
we believe the sale of franchises will also support a favorable
effect to our bottom-line performance in 2003."
"We've spent a tremendous amount of time and energy working to
correct the challenges surrounding ITEX during Fiscal Year
2002." Humer further stated, "Fiscal Year 2003 will be
highlighted by increasing amounts of time and energy being
directed toward building ITEX Corporation and executing a
managed growth strategy."
Humer outlined key areas of emphasis for ITEX Corporation in
Fiscal Year 2003:
-- Increasing revenue through the provision of barter-
related business services
-- Implementing ITEX franchise sales
-- Increasing market share within the barter industry
-- Expan ding brand awareness throughout the greater
business community
-- Improving customer service and member retention within
the ITEX Trade Exchange
-- Enhancing/extending the application of technology
-- Strengthening the ITEX Corporation balance sheet
Humer went on to explain, "The economy and the business climate
in both the U.S. and Canada favors companies who can deliver a
positive impact for their customers. Our customers, members of
the ITEX Trade Exchange, can expand their market share, increase
their revenues, and conserve their cash by engaging in organized
barter with other members of the exchange. We've positioned
ITEX for an expanded presence within the barter industry and the
business community at large. It is our goal to add new member
businesses to our barter exchange, expand the number of
independent ITEX Brokers and Franchisees servicing our new and
existing members, and to increase the velocity and volume of
trading amongst our members. If we are successful, our revenues
will grow and our bottom-line performance should improve."
In conclusion, Humer stated, "During the last three quarters of
Fiscal Year 2002, ITEX Corporation was successfully restructured
and completely revitalized. Given the number of challenges
facing the company at the end of first Fiscal Quarter 2002 and
the limited amount of resources available to us at that time, I
believe few organizations could have achieved what was
accomplished at ITEX Corporation. We are tremendously excited
by the future potential of this company and the performance of
the ITEX team."
As of July 31, 2002, the company has current assets of
$1,190,000 and current liabilities of $2,518,000.
KASPER ASL: Gets Lease Decision Period Extension to Dec. 30
-----------------------------------------------------------
Kasper A.S.L., Ltd., and its debtor-affiliates sought and
obtained an extension from the U.S. Bankruptcy Court for the
Southern District of New York of their lease decision period.
The Court gives the Debtors until the earlier of:
a) December 30, 2002, and
b) the date on which an order is entered confirming the
Debtors' chapter 11 plan.
to determine whether it wants to assume, assume and assign, or
reject unexpired nonresidential real property leases.
Kasper A.S.L., Ltd., one of the leading women's branded apparel
companies in the United States filed for chapter 11 protection
on February 05, 2002. Alan B. Miller, Esq., at Weil, Gotshal &
Manges, LLP represents the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed $308,761,000 in assets and $255,157,000 in
debts.
KNOLOGY BROADBAND: Sec. 341 Meeting Scheduled for Oct. 15, 2002
---------------------------------------------------------------
On September 18, 2002, Knology Broadband Inc., filed for Chapter
11 protection in the U.S. Bankruptcy Court for the Northern
District of Georgia, Newman Division.
The United States Trustee will convene a meeting of Knoledgy's
creditors on October 15, 2002 at 10:00 a.m. in Room 365, 75
Spring Street, S.W., Atlanta, Georgia. This is the first
meeting of creditors as required pursuant to Section 341 of the
Bankruptcy Code.
The Debtor's representative must appear at the Section 341
meeting for the purpose of being examined under oath by the
United States Trustee and creditors about the Debtor's financial
affairs and operations. All creditors are welcome, but not
required, to attend.
Knology Broadband, Inc., provides services to certain of its
affiliates which are providers of cable TV, telephone and high
speed Internet access to business and residential customers. The
Debtor filed for chapter 11 protection on September 18, 2002.
Barbara Ellis-Monro, Esq., Michael S. Haber, Esq., and Ronald E.
Barab, Esq., at Smith, Gambrell & Russell, LLP represent the
Debtor in its restructuring efforts. When the Company filed for
protection from its creditors, it listed $43,646,524 in total
assets and $473,814,416 in total debts.
LA QUINTA CORP: Updates Third Quarter 2002 Earnings Guidance
------------------------------------------------------------
La Quinta Corporation (NYSE: LQI) is updating third quarter
earnings guidance based on weaker-than-expected lodging
revenues. La Quinta now anticipates that third quarter 2002
lodging EBITDA will be approximately $42 million based on a 4%
RevPAR decline. As a result, recurring and cash EPS for the
third quarter is anticipated to be below prior guidance.
The Company also announced it had repurchased 863,800 shares of
its common stock worth approximately $4 million during the third
quarter. La Quinta currently has authorization for $16 million
worth of additional stock repurchases.
"Through August, La Quinta's results were in line with our
expectations," said Francis W. ("Butch") Cash, President and
Chief Executive Officer. "RevPAR declined approximately 4% in
July and 5% in August. September, however, was weaker than
expected as business travel remained sluggish and leisure travel
trailed off from previous trends. RevPAR declined approximately
2% in September as the continued slow economy, coupled with
lodging demand weakness during the weeks surrounding the 9/11
anniversary, resulted in significantly lower-than-expected
occupancy of approximately 53%. We continue to expect to see
positive year-over-year RevPAR and EBITDA growth in the fourth
quarter 2002, albeit at lower levels than prior guidance. We
will update specific fourth quarter 2002 guidance with the
release of our third quarter earnings results."
Dallas-based La Quinta Corporation, a leading limited service
lodging company, owns, operates or franchises over 330 La Quinta
Inns and La Quinta Inn & Suites in 33 states. Today's news
release, as well as other information about La Quinta, is
available on the Internet at http://www.LQ.com
* * *
As reported in Troubled Company Reporter's Sept. 9, 2002
edition, Standard & Poor's revised its outlook on La Quinta
Corp. to stable from negative. The action followed the lodging
company's improved credit measures resulting from its successful
asset-sale program and use of proceeds towards debt reduction.
At the same time, Standard & Poor's affirmed its 'BB-' corporate
credit rating and other ratings on the Dallas, Texas, company.
Debt outstanding totaled $812 million at June 30, 2002, down
from $1 billion at the end of 2001. As of June, the company had
reduced the size of its health-care assets to $51 million (net
of impairments) and had used all proceeds to reduce debt.
LEVEL PROPANE: Richard Jacobs Leads Group to Invest $15 Million
---------------------------------------------------------------
Business executive Richard E. Jacobs leads an investor group
that proposes to save a financially troubled Westlake-based
energy company and ensure a winter heating supply for homeowners
and businesses in Ohio and 13 other states.
Jacobs leads a group that will invest approximately $15 million
in Level Propane Gases Inc., which has been under the
supervision of the Bankruptcy Court since June 6. Jacobs'
investment will allow a new management team to continue to
provide propane and honor customer contracts throughout the
winter and rebuild a strong, viable operation. The Jacobs
consortium expects to complete the bankruptcy reorganization
process in the spring of 2003.
"We will provide continuity of service for customers and rebuild
their confidence," said Jacobs. "Along with improvements in
customer service, the strong financial foundation and new
leadership mark the start of a new era for the company that will
benefit its customers and employees."
The reorganization plan is subject to approval by U.S.
Bankruptcy Judge Randolph Baxter. New management, led by local
businessman Richard Anter, former mayor of Fairview Park, will
assume control of the operation of the business immediately
following interim approval by the Court, which the parties hope
to obtain by October 15.
The company has approximately 134 employees at its Westlake
headquarters and an additional 205 throughout its 14-state
service territory.
In addition to Jacobs, the investment group includes Glenn
Pollack of Candlewood Partners LLC, a Cleveland-based merchant
bank specializing in corporate restructurings; David Glickman of
Sedgewick Capital Partners LLC, a Cleveland-based private equity
group; and Union Partners LLC, a Cleveland- based operating
investment group.
Jacobs is chairman and chief executive officer of the Richard E.
Jacobs Group, which has long been one of the nation's most
established and respected owners, developers and managers of
commercial real estate. He was also the principal owner of the
Cleveland Indians baseball team from 1986 to early 2000, turning
it from a perennial cellar-dweller into one of professional
sports' most successful and admired franchises.
LIFESTREAM TECH.: Has $1.1MM Working Capital Deficit at June 30
---------------------------------------------------------------
Lifestream Technologies Inc., is a healthcare information
technology company primarily focused on developing,
manufacturing and marketing proprietary smart card-enabled
medical diagnostic devices to aid in the prevention, detection,
monitoring and control of certain widespread chronic diseases.
Its current diagnostic product line principally consists of
three easy-to-use, hand-held, smart card-enabled cholesterol
monitors as follows:
-- The adult, over-the-counter total cholesterol monitor
for use by at-risk patients and health-conscious consumers,
-- The adult, point-of-care total cholesterol monitor for
use by qualified medical professionals, and
-- The pediatric, point-of-care total cholesterol monitor
for use by pediatricians.
The Company has incurred substantial operating and net losses,
as well as negative operating cash flows, since inception. As a
result, it has negative working capital and stockholders'
equity, including a substantial accumulated deficit, at June 30,
2002. Additionally, it has only realized modest revenues to date
which Lifestream primarily attributes to its continued inability
to fund the more extensive marketing activities believed
necessary to develop broad market awareness and acceptance of
its products, particularly its consumer monitor. The Company's
independent certified public accountants included an explanatory
paragraph in their report on Lifestream's fiscal 2002
consolidated financial statements that expressed substantial
doubt as to the Company's ability to continue as a going
concern.
The Company's consolidated net sales for the fiscal year ended
June 30, 2002 were $3,667,157, an increase of $1,910,433, or
108.7%, as compared to $1,756,724 for the fiscal year ended June
30, 2001. Lifestream's adult-care monitor, and related test
strips, accounted for 96% of the consolidated net sales for
fiscal 2002 as compared to 92% of the consolidated net sales for
fiscal 2001. The Company's professional monitors, and related
test strips, accounted for the respective balances. Its sales
increase was substantially attributable to increased unit sales
volume, primarily from the fulfillment of initial and follow-up
orders received from national and regional drug and pharmacy-
featuring grocery store chains. The balance of its unit sales
volume increase primarily was attributable to the fulfillment of
follow-up orders received from national and regional specialty
retailers and department store chains.
Consolidated net sales for the fiscal 2002 fourth quarter were
$674,060, as compared to $874,899, $1,238,353, $879,845 and
$1,158,914 during the immediately preceding four sequential
fiscal quarters. Lifestream primarily attributes the sequential
quarterly sales decreases realized since the fiscal 2002 second
quarter to the shared reluctance by both the Company and its
retail customers to further commit to Lifestream's current
consumer monitor in light of the Company's planned fiscal 2003
second quarter debut of its second-generation, basic-edition
consumer monitor, which can feature a significantly lower retail
price-point while providing the Company with a substantially
improved gross margin. Lifestream primarily attributes the sales
variability among the earlier fiscal quarters to the timing of
initial orders received from new retail customers and, to a
lesser extent, seasonal demands.
The Company incurred a net loss of $14,677,279 in fiscal 2002 as
compared to a net loss of $6,505,878 in fiscal 2001.
Lifestream recently executed an agreement with a financial
institution effective June 18, 2002 that provides it with a
revolving credit facility. Borrowings under the facility are
limited to the lesser of (i) $3.0 million or (ii) $1.0 million
plus 75% of approved accounts receivable, as defined, and 65% of
non-obsolete finished inventory. Outstanding borrowings accrue
interest at a fixed rate of 18.0% per annum and are secured by
Company accounts receivable, inventory, property and equipment
and intellectual property. Lifestream is required to service all
accrued interest monthly as well as to assign to the financial
institution all principal collections on all accounts
receivable. The financial institution retains ten percent of all
collected accounts receivable, subject to a limitation of ten
percent of the outstanding borrowings balance, with the
aggregate retentions to be returned to Lifestream upon repayment
of all outstanding borrowings. The facility matures, with all
outstanding borrowings due, on the earlier of (i) April 15, 2003
or (ii) the date on which the Company were to complete a
specified financing transaction. At June 30, 2002, Lifestream
had outstanding borrowings of $2,221,018 with additional
borrowings of $10,880 available to it. Concurrent with obtaining
the above facility, the Company cancelled its previously
existing $1.5 million credit facility with a bank.
The Company also recently executed an agreement with a bank
effective June 24, 2002 that provides it with a $600,000
irrevocable standby letter of credit facility for the exclusive
benefit of a principal vendor. Any draws against the facility
will accrue interest at a rate equal to the bank's variable
index rate plus one percent (5.75% at June 30, 2002) and be
secured by all of Lifestream's assets, including an assigned
$600,000 certificate of deposit which is reflected in the
consolidated balance sheet of the Company as a restricted cash
equivalent at June 30, 2002. All principal and interest are
payable on demand and the facility expires on June 30, 2003.
There were no outstanding draws at June 30, 2002.
The Company's unrestricted cash and cash equivalents decreased
by $1,060,125 to $589,854 at June 30, 2002 as compared with
$1,649,979 at June 30, 2001. Its working capital decreased by
$3,435,173, or 150.9%, to a working capital deficiency of
$1,157,962 at June 30, 2002, from a working capital surplus of
$2,277,211 at June 30, 2001. The reduction in unrestricted cash
and cash equivalents balance and increase in accounts payable
and accrued expense balances during fiscal 2002 primarily
reflect the building of inventory and funding of increased
administrative, technical and customer support infrastructure in
anticipation of achieving greater retail market penetration for
its consumer monitors. The Company indicates that there can be
no assurance that it will, in fact, be successful in achieving
such market penetration. Any significant failure on its part to
achieve this increased retail market penetration in a timely
manner may result in inventory write-downs and further working
capital constraints which, if realized, would likely have
material adverse effects on business, results of operations,
liquidity and cash flows.
MARTIN INDUSTRIES: Mulling Filing for Chapter 11 Reorganization
---------------------------------------------------------------
Martin Industries, Inc. (OTCBB: MTIN.OB), a manufacturer of
premium gas fireplaces and home heating appliances, announced
that its primary lender has amended its line of credit to extend
the maturity date from October 14 to November 29, 2002. The
amended loan agreement provides for an additional credit line of
up to $2.1 million. This amount is an increase from the original
$750,000 additional credit availability announced on September
25, 2002. The additional line can expand up to $2.1 million in
order to complete confirmed customer orders, but then must
decrease each week from October 18, or the Company will be in
default of the loan agreement.
As of October 8, 2002, the amount outstanding under the
Company's line of credit with its primary lender was $6.0
million, which included $1.2 million of the funds available to
the Company under the increased line.
The Company is obligated to stay within the operating budget
defined within the extension agreement and to continue to retain
an independent management consultant that specializes in
assisting businesses who are in under-funded or distressed
situations. The operating budget enables the Company to pay the
past due wages currently owed to its employees. As previously
reported, the Company has retained an independent management
consultant, Philip + Company Inc., to oversee the manufacturing
operations and to work with the Company's Board of Directors and
management in exploring available alternatives.
The extension to November 29, 2002 is conditioned upon the
Company entering into a letter of intent from a potential buyer
of the Company and receiving payment from the potential buyer of
a nonrefundable deposit of $100,000 by October 28, 2002. If the
Company does not enter into such a letter of intent and receive
the required deposit, the line will mature effective October 28,
2002 and future funding at that time would be at the discretion
of the lender.
The Company has considered the possibility of pursuing a
reorganization plan pursuant to a Chapter 11 bankruptcy filing.
If current strategy fails to find a reasonable solution to the
Company's circumstances, a bankruptcy filing remains an option.
Martin Industries designs, manufactures and sells high-end, pre-
engineered gas and wood-burning fireplaces, decorative gas logs,
fireplace inserts and gas heaters and appliances for commercial
and residential new construction and renovation markets in the
U.S. Additional information on Martin Industries and its
products can be found at its Web site at
http://www.martinindustries.com
METROCALL INC: Successfully Emerges from Chapter 11 Proceeding
--------------------------------------------------------------
Metrocall, Inc., one of the nation's largest narrowband wireless
data and messaging companies, announced that its Plan of
Reorganization, which was confirmed by the United States
Bankruptcy Court on September 26, 2002, became effective
Tuesday, October 8, 2002.
This formal exit from the Chapter 11 process marks the
completion of Metrocall's corporate and financial restructuring
and coincides with the consummation of the pre-negotiated terms
of the Plan, including the issuance of 1 million new common
shares of Metrocall Holdings, Inc., which will be traded under
the ticker symbol MTOHV on the Over-The-Counter Market.
"We are pleased to have completed our financial restructuring
process and look forward to continuing our 37-year tradition of
providing reliable wireless communications services to the
mobile public," said William L. Collins III, Metrocall's
Chairman and Chief Executive Officer. "The successful completion
of this reorganization is due to the commitment and hard work of
our employees and the confidence placed in us by our more than
four million wireless subscribers nationally. Their support is
greatly appreciated."
Vincent D. Kelly, Metrocall's Chief Operating and Chief
Financial Officer, added, "We are happy to have our pre-
negotiated, consensual financial restructuring behind us. We
look forward to moving into the next phase of our business
strategy, providing cost effective, reliable communications
products and services to our customers backed up by the lowest
financial leverage relative to cash flow in our industry." Kelly
continued, "The organizational adjustments which enabled us to
operate our wireless networks seamlessly, and quickly conclude
our restructuring without the need for debtor-in-possession
financing, has strengthened our ability to compete moving
forward."
Metrocall will continue to focus on its traditional subscriber
base, emphasizing business development and retention of small
business, government, healthcare and corporate customers.
Under the terms of the Plan, Metrocall's prior senior secured
debt of $133 million has been satisfied and discharged by (i) a
new $60 million secured term note issued by Holdings'
reorganized operating subsidiary, (ii) a new $20 million paid-
in-kind note issued by Holdings, (iii) 5.3 million shares of new
preferred stock having a $53 million initial liquidation
preference to be issued by Holdings and (iv) 42% of the new
common stock of Holdings (subject to dilution of up to 7% for
options that may be granted to employees and directors under a
new stock option plan).
Metrocall's general unsecured creditors' claims, totaling
approximately $751 million, including the holders of prior
unsecured public notes, have been satisfied and discharged by
pro rata distributions of (i) 500,000 shares of new preferred
stock of Holdings having a $5 million initial liquidation
preference and (ii) 58% of the new common stock (also subject to
dilution of up to 7% for the aforementioned stock option plan).
Pursuant to the Plan, ninety-five percent of the total voting
rights of Holdings are with the preferred stock until such stock
is fully redeemed. General unsecured creditors of Holdings'
wholly owned subsidiaries will receive payment of 100% of the
principal amount of their allowed claims.
The former equity holders of Metrocall, Inc., will receive no
distributions and their stock and options have been canceled.
Shares of Metrocall Holdings, Inc., Common Stock will be listed
on the Over-The-Counter Market under the symbol MTOHV with CUSIP
number 59164X 10 5. Metrocall Holdings, Inc., Class-A Preferred
stock will trade under the symbol MTOPV with CUSIP number 59164X
20 4.
Metrocall, Inc., headquartered in Alexandria, Virginia, is one
of the largest narrowband wireless data and messaging companies
in the United States, providing both products and services to
over four million business and individual subscribers. Metrocall
was founded in 1965 and currently employs approximately 2,000
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 multiple nationwide, regional and local networks.
Also, Metrocall offers integrated resource management systems
and communications solutions for business and campus
environments.
For more information on Metrocall please visit its Web site and
on-line store at http://www.Metrocall.comor call 800-800-2337.
MOBILE TOOL: Bringing-In Bayard Firm as Bankruptcy Co-Counsel
-------------------------------------------------------------
Mobile Tool International, Inc., and its debtor-affiliates ask
permission from the U.S. Bankruptcy Court for the District of
Delaware to employ The Bayard Firm as co-counsel.
The Debtors maintain that Bayard's services will be necessary in
the performance of the Debtors' duties in these proceedings, due
to the size and complexity of the Debtors' business and
transactions likely to arise.
It is anticipated that Bayard will:
a) provide legal advice with respect to the Debtors' powers
and duties as debtors-in-possession in the continued
operation of their business and management of their
properties;
b) take necessary action to protect and preserve the Debtors'
estates, including assisting in the prosecution of actions
on behalf of the Debtors, the defense of any action
commences against the Debtors, negotiations concerning all
litigation in which the Debtors are involved, and objecting
to claims filed against the Debtors' estates;
c) prepare on the Debtors' behalf all necessary applications,
motions, responses, objections, order, reports, and other
legal papers;
d) negotiate and draft any agreements for the sale or purchase
of assets of the Debtors, if appropriate;
e) if feasible, negotiate and draft a plan of reorganization,
consensual or otherwise, and all related documents,
including the disclosure statements and ballots for voting;
f) take the steps necessary to confirm and implement the Plan,
including modifications and negotiating financing for the
Plan; and
g) render such other legal services for the Debtors as may be
necessary and appropriate in these proceedings.
The Debtors will compensate Bayard at its hourly rates:
Directors $350 - $475 per hour
Associates $160 - $325 per hour
Paralegals $ 75 - $135 per hour
Mobile Tool International, Inc., is an employee owned
manufacturer and distributor of equipment, including aerial
lifts, digger derricks and pressurization and monitoring
systems, for the telecommunications, CATV, electric utility and
construction industries. The Company filed for chapter 11
protection on September 30, 2002. Steven M. Yoder, Esq.,
Christopher A. Ward, Esq., at The Bayard Firm and Brent R.
Cohen, Esq., at Rothgerber Johnson & Lyons LLP represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from its creditors, it listed $65,250,000 in
total assets and $46,580,000 in total debts.
NAPSTER INC: Hobart Truesdell Appointed as Chapter 11 Trustee
-------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approved
the U.S. Trustee's Motion to appoint Hobart G. Truesdell, Esq.,
at Walker, Truesdell, Radick & Associates as the chapter 11
Trustee to take control of Napster, Inc.
The amount of Mr. Truesdell's bond is fixed at $700,000. The
UST tells the Court that he has consulted these parties-in-
interest regarding Mr. Truesdell's appointment:
1) Rick B. Antonoff, Esq., Greenberg Traurig, LLP
(Counsel for Unsecured Creditors)
2) Michelle Morgan-Harner, Esq., Jones, Day, Reavis & Pogue
(Counsel for Debtors)
3) Charlene B. Davis, Esq., The Bayard Firm
(Counsel for Songwriter/Music Publisher)
4) Joel Waite, Esq., Young Conaway Stargatt & Taylor
(Counsel to Bertelsmann)
5) David Stratton, Esq., Pepper Hamilton
(Counsel to certain copyright plaintiffs ("Record
Labels"))
6) Richard Riley, Esq., Duane Morris
(Counsel to PlayMedia)
7) Jeremy Ryan, Esq., Saul Ewing
(Counsel to OpenWave)
Napster, Inc., and its debtor-affiliates own and operate the
peer-to-peer music service known as Napster. The Napster service
has provided music enthusiasts with an easy-to-use, high quality
service for finding and discovering music and communicating
their interests with other members of the Napster community. The
Company filed for chapter 11 protection on June 6, 2002. Daniel
J. DeFranceschi, Esq., Russell C. Silberglied, Esq., at
Richards, Layton & Finger and Richard M. Cieri, Esq., Michelle
Morgan Harner, Esq., at Jones, Day, Reavis & Pogue represent the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed debts of more than
$100 million.
NEWCOR: Seeks Okay to Hire FTI Consulting for Financial Advice
--------------------------------------------------------------
Newcor, Inc., and its debtor-affiliates ask for permission from
the U.S. Bankruptcy Court for the District of Delaware to employ
FTI Consulting, Inc., as their financial advisors, nunc pro tunc
to August 29, 2002.
The Debtors relate that in order to formalize an agreement with
the Creditors Committee concerning the Plan and to facilitate
the Plan Confirmation process, a financial advisor is needed to
review the Debtors' financial projections and business
operations.
Since the Debtors and the Committee desire to have the plan
confirmation process move with alacrity, FTI began providing
services on August 29, 2002.
FTI's professionals will:
A. Meet with the management and obtain an understanding of the
current status of operations, recent performance and
customer relationships.
B. Analyze the Debtors' year to date performance and gain an
understanding of variances from original projections.
C. To establish a sense of its reasonableness and
completeness, interview representative members of the
Debtors' management regarding the Debtors' financial
forecast for the balance of the year and for the next two
years and through such further period as the Debtors have
prepared or intend to prepare in connection with the plan
of reorganization.
D. Prepare and deliver a bullet-point outline of FTI's
findings and deliver an oral report to the statutory
committee of unsecured creditors appointed in these cases
regarding such findings.
Subject to a $50,000 cap, FTI will charge the Debtors at its
standard hourly rates:
Managing Director $525 to $575 per hour
Consultant $295 to $450 per hour
Support Staff $ 75 to $195 per hour
Newcor, Inc., along with its subsidiaries, design and
manufacture a variety of products, principally for the
automotive, heavy-duty, capital goods, agricultural and
industrial markets. The Company filed for chapter 11 protection
on February 25, 2002 Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl Young & Jones P.C., represents the Debtors in their
restructuring efforts. When the Debtors filed for protection
from its creditors, it listed $141,000,000 in total assets and
$181,000,000 in total debts.
NORTHWEST BIOTHERAPEUTICS: Taking Steps to Reduce Cash Burn Rate
----------------------------------------------------------------
Northwest Biotherapeutics, Inc., (Nasdaq: NWBT) announced that
its Board of Directors has authorized management to immediately
initiate actions to conserve cash. This will consist of reducing
and eliminating future commitments, such as suspending
recruitment in its Phase III DCVax-Prostate clinical trial,
selling of certain fixed assets and continuing to assess its
alternatives.
As disclosed in late July, the Company retained C.E. Unterberg,
Towbin to assist in searching out strategic and financial
alternatives, including the sale or merger of the Company or any
of its development programs or raising additional funds. There
can be no assurance that we will be able to sell or merge the
Company or to raise additional funds on terms favorable to us or
to our stockholders, or at all. Our failure to raise sufficient
funds will require us to eliminate some or all of our product
development efforts and significantly limit our ability to
operate as a going concern. If additional funds are raised by
issuing equity securities, the percentage ownership of our
stockholders will be reduced, stockholders may experience
substantial dilution or such equity securities may provide for
rights, preferences or privileges senior to those of the holders
of our common stock.
Other Recent Developments
As announced yesterday, October 8, 2002, the Company received
notification from NASDAQ that its common stock failed to
maintain a minimum $1.00 per share bid price for 30 consecutive
trading days as required by NASDAQ rules. The Company has 90
calendar days, or to January 6, 2003, to meet the minimum $1.00
per share bid price for 10 consecutive trading days to regain
compliance. If not, it may apply for SmallCap status or become
delisted. If the Company's securities are delisted,
stockholders' ability to obtain price quotations and buy and
sell shares may be materially impacted. It is possible that the
common stock may be eligible for trading on the OTC bulletin
board.
Northwest Biotherapeutics is a biotechnology company focused on
discovering, developing and commercializing immunotherapy
products that safely generate and enhance immune system
responses to effectively treat cancer. The Company combines its
expertise in dendritic cell biology, immunology and antigen
discovery with its proprietary technologies to develop cancer
therapies. Northwest Biotherapeutics' development efforts are
based on two proprietary and versatile approaches -- DCVax, a
dendritic cell-based immunotherapy platform and HuRx, a fully
human monoclonal antibody platform.
The Company's lead DCVax product candidate, DCVax-Prostate, is a
prostate cancer treatment that is currently in a pivotal Phase
III clinical trial that will be suspended due to financial
constraints. It has FDA clearance and is prepared to initiate a
multi-site Phase II clinical trial to evaluate DCVax- Brain as a
possible treatment for Glioblastoma Multiforme, a lethal form of
brain cancer and a Phase I evaluation of its DCVax-Lung as a
potential treatment for lung cancer.
HuRx is a human monoclonal antibody program that is being co-
developed with Medarex, Inc. Northwest Biotherapeutics' lead
HuRx product candidate, HuRx-Prostate is currently being
manufactured for anticipated Phase I clinical trials.
ON SEMICONDUCTOR: Will Hold Q3 2002 Conference Call on Oct. 23
--------------------------------------------------------------
ON Semiconductor Corp., (Nasdaq:ONNN) plans to announce its
earnings for the third quarter ending Sept. 27, 2002 after the
market closes on Wednesday, Oct. 23.
The company will host a conference call at 5 p.m. Eastern time
(EDT) following the release of its earnings announcement.
Investors and interested parties can access the conference call
in the following manner:
-- Through a webcast of the earnings call via the
investor-relations section of the company's Web site at
http://www.onsemi.com The re-broadcast of the call will be
available at this site approximately one hour following the live
broadcast and will continue through Nov. 13.
-- Through a telephone call by dialing 712/257-2272. To
access the conference, callers must use the pass code "ON
Semiconductor" when prompted by the call-in service. The company
will provide a dial-in replay approximately one hour following
the live broadcast and will continue through Oct. 30, 2002. The
dial-in replay number is 402/998-0750.
ON Semiconductor offers an extensive portfolio of power- and
data-management semiconductors and standard semiconductor
components that address the design needs of today's
sophisticated electronic products, appliances and automobiles.
For more information visit ON Semiconductor's Web site at
http://www.onsemi.com
As reported in Troubled Company Reporter's July 24, 2002,
edition, ON Semiconductor's June 28, 2002 balance sheet shows a
total shareholders' equity deficit of about $596 million.
PACIFIC GAS: Committee Wins Nod to Hire FTI as Financial Advisor
----------------------------------------------------------------
Since its retention by the Official Unsecured Creditors'
Committee (in Pacific Gas and Electric Company chapter 11 cases)
as Accountants and Financial Advisors to the Committee, PwC has
been providing financial advisory services to the Committee
primarily through its Business Recovery Services Practice, a
product line that specializes in providing this kind of services
to parties involved in distressed corporate situations.
On July 24, 2002, FTI Consulting, Inc., publicly announced that
it entered into a definitive agreement to purchase the BRS
Practice and related assets and receivables. The consideration
to be paid to PwC included, among other things, cash and equity
interests in FTI. This transaction formally closed on August
30, 2002. As a result of the transaction, PwC will own 7.6% of
the outstanding shares of FTI common stock, which is publicly
traded. The shares owned by PwC will be unregistered but will
otherwise not be subject to any transfer restrictions.
Upon the Closing, Thomas E. Lumsden and M. Freddie Reiss, the
partners in charge of the PG&E engagement, as well as
substantially all of the other members of the PwC BRS Practice
team, became FTI employees.
Michael J. Hamilton is the only professional at PwC who will
continue to provide services to the Committee on a going forward
basis. Mr. Hamilton is a partner and a senior Utility
Specialist in Accounting and Regulatory Matters at PwC.
Accordingly, the Committee sought and obtained the Court's
authority to employ FTI as the successor-in-interest to PwC's
BRS Practice, as Accountants and Financial Advisors to the
Committee, nunc pro tunc to September 1, 2002.
According to Mr. Lumsden, PwC will not have any rights to
participate in the management or board of FTI, in connection
with its share holdings, other than its rights to vote its
shares.
FTI's business address and telephone number are:
FTI Consulting, Inc.,
199 Fremont Street 7th Floor,
San Francisco, California 94105,
Telephone (415) 498-6542
Facsimile (415) 498-6699
PwC will only be expected to provide services in regulatory
accounting and tax matters to the Committee. PwC professionals
not associated with the BRS Practice will advise the Committee
on these matters.
The Committee believes FTI is both well qualified and uniquely
positioned to continue to provide financial advisory services to
the Committee in this case in an efficient and effective manner.
FTI is one of the preeminent financial services firms operating
in the Chapter 11 arena. Furthermore, the BRS Practice, which
has now joined FTI, has become intimately familiar with the
Debtor's business and affairs and the many financial and other
issues that have arisen or may arise in the context of this
case. As a result of the Closing, FTI succeeded to that
knowledge.
FTI will continue to provide BRS Services to the Committee under
the same terms and conditions of retention set forth in the
Original Application of PwC's retention, as approved by the
Order and updated by the Sixth Supplemental Declaration of
Thomas F. Lumsden.
Thomas E. Lumsden, as a Senior Managing Director with FTI,
reports on the status of matters for which FTI was engaged by
PG&E and another subsidiary of PG&E Corp.:
(a) In June 2002, FTI was engaged by PG&E to evaluate its levels
of emergency inventory stock. FTI is currently active on
this engagement, which is unrelated to the PG&E bankruptcy.
An ethical wall is established between the FTI professionals
working on this engagement and the FTI professionals working
on the PG&E case;
(b) In March 2002, FTI was engaged by PG&E to provide strategy
support for the transition of ETrans' assets under the PG&E
bankruptcy plan. This engagement is on hold and no FTI
professionals are currently performing services related to
this project. If this engagement is recommenced, FTI will
inform the Court and an ethical wall will be established
between this ETrans strategy team and the PG&E bankruptcy
team;
(c) FTI has an open contract with PG&E to perform scientific
analysis of materials, generally related to PG&E's gas
pipelines. This contract is unrelated to the PG&E
bankruptcy and FTI has established an ethical wall between
the FTI professionals working on this matter and the FTI
professionals working on the PG&E case; and
(d) A separate team of professionals from FTI is advising the
bank group of National Energy Group, a subsidiary of PG&E
Corp., in the restructuring of the bank group's debt with
NEG. NEG's operations were ring-fenced from PG&E's
operations prior to PG&E's bankruptcy filing. An ethical
wall has been established between the FTI professionals
working on the PG&E case and the FTI professionals advising
NEG's bank group.
In addition, Mr. Lumsden advises that FTI is serving as
financial advisor to Enron Corporation in its bankruptcy. An
ethical wall has been established between the professionals
working on the Enron case and the professionals representing the
Committee in the PG&E case, as was established for the Business
Recovery Services Practice under PwC.
The Court is satisfied that FTI is a "disinterested person" as
that term is defined in Section 101(14) of the Bankruptcy Code.
In order to avoid any interruption in the services being
provided by the BRS Practice to the Committee, and with the
Committee's understanding and approval, the BRS Practice will
continue to perform services for the Committee and will have
access to the information obtained by PwC in connection with its
pre-Closing services for that purpose, provided that:
(a) until FTI is formally appointed to serve as accountants and
financial advisors to the Committee, the BRS Practice will
not disclose any confidential information relating to the
PG&E Chapter 11 case to any pre-Closing FTI personnel;
(b) during the same period, no pre-Closing FTI personnel will be
assigned to perform services for the Committee. (Pacific Gas
Bankruptcy News, Issue No. 46; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
PETROLEUM GEO-SERVICES: Selling PGS Assets to Petrofac for $50MM
----------------------------------------------------------------
Petroleum Geo-Services ASA (NYSE:PGO) (OSE:PGS) announced the
signing of a share sale agreement with Petrofac Limited to sell
PGS Production Group, Ltd., the company's production services
division headquartered in Aberdeen for a total consideration of
approximately $50 million, including the assumption of
approximately $5 million in debt. This agreement is subject
inter alia to due diligence.
Following PGS' recent statements regarding corporate
restructuring and the continuing disposal of non-core assets,
this transaction is in line with the company's strategy of
consolidating its business in the core areas of geophysics and
floating production.
Petroleum Geo-Services is a technologically focused oilfield
service company principally involved in two businesses:
geophysical seismic services and production services. PGS
acquires, processes, manages and markets 3D, time-lapse and
multi-component seismic data and provides associated data
management solutions. These data are used by oil and gas
companies in the exploration for new reserves, the development
of existing reservoirs, and the management of producing oil and
gas fields. In its production services business, PGS owns four
floating production, storage and offloading systems and operates
numerous offshore production facilities for oil and gas
companies. FPSOs permit oil and gas companies to produce from
offshore fields more cost effectively. PGS operates on a
worldwide basis with headquarters in Oslo, Norway.
* * *
As previously reported, Standard & Poor's Ratings Services
placed its ratings on oil services company Petroleum Geo-
Services ASA on CreditWatch with developing implications, which
implies that the ratings may be raised, altered, or affirmed
based on future events. PGO has approximately 2.8 billion of
debt and preferred stock obligations outstanding.
In addition, Fitch Ratings downgraded Petroleum Geo-Services ASA
senior unsecured debt rating to 'B' from 'BBB-' and downgraded
PGO's trust preferred securities to 'B-' from 'BB+'. The Rating
Outlook has been changed to Negative from Stable.
RIVERWOOD: Names R. Spiller to Head Consumer Products Packaging
---------------------------------------------------------------
Riverwood International Corporation, a leading integrated
provider of paperboard packaging solutions, has appointed Robert
W. Spiller as Senior Vice President of Consumer Products
Packaging.
Spiller joins Riverwood from Sonopress USA, a manufacturing,
packaging and service subsidiary of Bertelsmann A.G. in
Asheville, North Carolina, where he served as President and CEO
for the past five years. Prior to Sonopress, he spent 12 years
with Avery Dennison Corporation in a number of key management
roles in manufacturing, quality and marketing. Spiller holds an
MBA from the University of Chicago and a Bachelor of Science in
Civil Engineering from Cornell University.
Riverwood International Corporation is a leading integrated
provider of paperboard packaging solutions to multinational
beverage and consumer products companies. Headquartered in
Atlanta, Riverwood has annual sales of over $1.2 billion and
approximately 4100 employees at its operations in six countries.
Riverwood International Corporation has approximately $900
million in public debt outstanding and represents substantially
all of the business assets of Riverwood Holding Inc.
* * *
As reported in Troubled Company Reporter's June 13, 2002
edition, Standard & Poor's said that its ratings on Riverwood
International Corp., including its single-'B' corporate credit
rating, remain on CreditWatch with positive implications where
they were placed on May 9, 2002, following the company's
announcement of a planned initial public offering (IPO) of $350
million of common stock.
Following a review of Riverwood's refinancing plans, Standard &
Poor's has determined that it would raise Riverwood's corporate
credit rating to single-'B'-plus and assign a stable outlook
following the IPO and related debt refinancing if they are
completed as currently structured.
RIVERWOOD INT'L: Promotes Robert Simko and J. Derek Hutchison
-------------------------------------------------------------
Riverwood International, a leading integrated provider of
paperboard packaging solutions, has promoted Robert M. Simko to
the newly created position of Vice President, Supply Chain
Management and J. Derek Hutchison to Vice President and Resident
Manager - Georgia for Paperboard Operations.
As Vice President, Supply Chain Management, Simko will be
responsible for coordination among the Company's operations,
procurement, order fulfillment and distribution functions.
J. Derek Hutchison is the current Director of Manufacturing at
the Company's Macon Mill.
Riverwood International Corporation is a leading integrated
provider of paperboard packaging solutions to multinational
beverage and consumer products companies. Headquartered in
Atlanta, Riverwood has annual sales of over $1.2 billion and
approximately 4100 employees at its operations in six countries.
Riverwood International Corporation has approximately $900
million in public debt outstanding and represents substantially
all of the business assets of Riverwood Holding Inc.
* * *
As reported in Troubled Company Reporter's June 13, 2002
edition, Standard & Poor's said that its ratings on Riverwood
International Corp., including its single-'B' corporate credit
rating, remain on CreditWatch with positive implications where
they were placed on May 9, 2002, following the company's
announcement of a planned initial public offering (IPO) of $350
million of common stock.
Following a review of Riverwood's refinancing plans, Standard &
Poor's has determined that it would raise Riverwood's corporate
credit rating to single-'B'-plus and assign a stable outlook
following the IPO and related debt refinancing if they are
completed as currently structured.
SAFETY-KLEEN: Court Okays KPMG, et. al. as Consulting Advisors
--------------------------------------------------------------
Safety-Kleen Corp., and its debtor-affiliates obtained the
Court's authority to employ and retain KPMG Consulting, Inc.,
Lucidity Consulting Group, LP, and Experio Solutions
Corporation, as consulting advisors to replace Arthur Andersen
LLP in connection with various Process Improvement Initiatives,
nunc pro tunc to July 1, 2002.
Retention Of The Consulting Firms For PII Services
(1) KPMG Consulting
KPMG Consulting was previously a part of KPMG LLP, one of the
"Big 5" accounting and consulting firms. In January 2000, KPMG
LLP transferred its consulting business to KPMG Consulting. In
2001, KPMG Consulting completed its initial public offering.
Its principal offices are in McLean, Virginia and it is one of
the world's largest consulting firms with over 9,200 employees.
(2) Lucidity
Lucidity is a professional services firm with its main office
located in Plano, Texas. Its consultants have over 50 years of
accounting and finance experience in global and middle market
companies. Lucidity's Strategic Finance Solutions consulting
practice offers solutions to the Chief Financial Officer's
business problems. Lucidity has served Chief Financial Officers
and their organizations in a variety of industries including
consumer products/services, retail, energy, entertainment,
healthcare, government, not-for-profit, financial markets, and
telecommunications.
(3) Experio
Experio, a subsidiary of Hitachi Data Systems Solutions Holding
Company, with over 20 years' experience in providing consulting
services, is a global business and information technology
consulting firm headquartered in Dallas, Texas. Experio has
helped hundreds of clients redesign customer touch points,
optimize supply chains, integrate and externalize applications,
as well as transform enterprise processes through e-business
initiatives.
The PII Services
The Consulting Firms are being retained to replace Arthur
Andersen in providing the PII Services to the Debtors and, more
specifically to provide:
(a) assistance in designing and administering a program
management office through which the Process Improvement
Initiatives will be managed and administered, and
(b) experienced resources to perform and administer the
individual Process Improvement Initiatives. The Debtors do
not expect the engagement to continue significantly beyond
September 30, 2002.
The Consulting Firms' responsibilities consist of:
(1) recommending a design, and
(2) providing appropriate staffing for the PMO for the Process
Improvement Initiatives.
Specifically, pursuant to the Engagement Letters, each
Consulting Firm is responsible for certain elements of the
Process Improvement Initiatives:
Process Improvement Initiative
Lucidity Experio KPMG
-------- ------- ----
Account Analysis and Close the Books X X
Inventory Equipment and
Customers -- Fixed Assets X X X
Order Entry and Billing X X X
PMO X X X
Payroll and Benefits Accounting X
Procurement-to-Payment Process X
Change Enablement X
SAP Integration X
Intercompany Accounting X
Accounts Receivable/Cash Collection X
Through PMO, the Consulting Firms will track the progress of all
Process Improvement Initiatives and work with the Debtors'
senior management team to:
(a) address the timely resolution of issues and the resource
allocations necessary to meet project timeliness, and
(b) develop the necessary training and implementation plans to
address material control weakness.
It is critical to the Debtors' restructuring efforts that they
retain independent consultants to render the PII Services.
Without these services, the Debtors may not sufficiently
eliminate their previously identified material control
weaknesses and control deficiencies to enable them to rely on
their internal controls within their accounting and finance
departments, which will be necessary for the Debtors to
successfully emerge from bankruptcy.
Professional Compensation
The Consulting Firms receive fees for services based upon their
customary hourly rates and receive reimbursement for reasonable
and necessary out-of-pocket expenses, which expenses include
travel (including lodging and meals), report preparation,
delivery services, and other necessary costs incurred in
providing services to the Debtors. The standard hourly rates
for each of the Consulting Firms' professionals anticipated to
be providing services on this engagement are:
KPMG Lucidity Experio
---- -------- -------
Partners $250 $250 $250
Managing Directors $250 $250 $250
Vice-Presidents $250 $250 $250
Senior Managers $250 $250 $250
Managers $200 $200 $200
Staff $200 $200 $200
Total Estimate for Engagement:
KMPG $$1,675,000 - $1,800,000
Lucidity $590,000 - $625,000
Experio $475,000 - $525,000
The Consulting Firms intend to seek compensation and
reimbursement for these fees and expenses upon application to
the Bankruptcy Court. (Safety-Kleen Bankruptcy News, Issue No.
46; Bankruptcy Creditors' Service, Inc., 609/392-0900)
SAIRGROUP: Selling Intercompany Loans to Griffin for CHF602 Mil.
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
will hold a hearing to consider the sale of SairGroup Finance
(USA) Inc.'s intercompany loans to Griffin Endeavour III
S.a.r.l., on October 15, 2002 at 10:00 a.m.
The Sale Transaction contemplates the transfer and assignment of
the Debtor's intercompany loans (which constitute a substantial
portion of the Debtor's assets) and provides for releases of
certain claims by and against SairGroup affiliates. The
Purchase Price is CH602,500,000 plus certain warrants and equity
subscription rights of an uncertain value.
Objections, if any, to the Sale Motion, must be filed and served
on:
* Counsel for the Debtor, Allen & Overy;
* Joint Counsel for the Ad Hoc Committee,
Bingham McCutchen LLP;
* Counsel to the Purchaser, Arnold & Porter;
* Counsel to SairGroup, Morgan Lewis & Bockius LLP;
* The Office of the United States Trustee; and
* Counsel to any other committee appointed in the
Debtor's Chapter 11 case; and
* any person or Counsel, if retained, appointed pursuant to
11 U.S.C. Sec. 1104.
Prior to the petition date, SairGroup Finance (USA), Inc.
participated in and assisted with financing transactions on
behalf of its parent and sole shareholder, SAirGroup. The
Company filed for chapter 11 protection on September 3, 2002.
David C.L. Frauman, Esq., at Allen & Overy represents the Debtor
in its restructuring efforts. When the Company filed for
protection from its creditors, it listed $460,161,000 in assets
and $582,888,000 in debts.
SOUTH STREET CBO: S&P Junks Ratings on Three Note Classes
---------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on the
class A-1LB, A-1, A-2L, A-2, and A-3 notes issued by South
Street CBO 1999-1 Ltd., and co-issued by South Street CBO 1999-1
(Delaware) Corp., and removed them from CreditWatch with
negative implications, where they were placed on August 14,
2002.
At the same time, the triple-'A' rating on the class A-1LA is
affirmed. The ratings on the class A-1LB, A-1, A-2L, and A-2
notes were previously lowered on February 1, 2002, and the
rating assigned to the class A-3 notes was previously lowered on
May 14, 2001, and again on February 1, 2002.
The lowered ratings reflect factors that have negatively
affected the credit enhancement available to support the notes
since the ratings were previously lowered on February 1, 2002.
These factors include continuing par erosion of the collateral
pool securing the rated notes and a negative migration in the
credit quality of the performing assets within the pool.
The affirmation of the class A-1LA note rating is based on the
high level of overcollateralization available.
Standard & Poor's noted that as a result of asset defaults, the
overcollateralization ratios for the transaction have suffered
since the February 2002 rating action was taken. As of the most
recent monthly trustee report (September 17, 2002), the class A
overcollateralization ratio was at 90.10%, versus the minimum
required ratio of 115.0% and a ratio of 98.96% at the time of
the February 2002 rating action. The ratio has been out of
compliance since January 2001. The current performing pool has
an aggregate par value of $208.80 million, compared to the
effective date portfolio collateral of $304.37 million. In
contrast, only $23.76 million of the principal amount of the
liability has been paid down due to the redemption since the
transaction's inception.
In addition, the credit quality of the collateral pool has
deteriorated since the previous rating action. According to the
September 17, 2002 monthly report, three of the transaction's
four required ratings distribution tests were failing, with
32.62% of the assets in the collateral pool coming from obligors
rated single-'B'-plus and above (versus the minimum required of
33%), 59.97% of the assets coming from obligors rated single-'B'
or higher (versus the minimum required 75%), and 72.08% coming
from obligors rated single-'B'-minus or higher (versus the
minimum required 95%).
As a part of its analysis, Standard & Poor's reviewed the
results of recent cash flow model runs. These runs stressed
various parameters that are instrumental in the performance of
this transaction, and are used to determine its ability to
withstand various levels of default. When the stressed
performance of the transaction was then compared to the
projected default performance of the current collateral pool,
Standard & Poor's found that the projected performance of the
class A-1LB, A-1, A-2L, A-2, and A-3 notes, given the current
quality of the collateral pool, was not consistent with the
prior ratings. Consequently, Standard & Poor's has lowered its
rating on these notes to the new level. Standard & Poor's will
continue to monitor the performance of the transaction to ensure
that the ratings assigned to the rated tranches continue to
reflect the credit enhancement available to support the notes.
RATINGS LOWERED
South Street CBO 1999-1 Ltd.
Rating
Class To From Current Balance(Mil. $)
A-1LB A AA+/Watch Neg 10.00
A-1 A AA+/Watch Neg 55.00
A-2L CCC BBB-/Watch Neg 24.00
A-2 CCC BBB-/Watch Neg 36.00
A-3 CC CCC-/Watch Neg 45.50
RATING AFFIRMED
Class Rating Current Balance (Mil. $)
A-1LA AAA 61.24
STARBAND COMMS: Lease Decision Period Extended to November 27
-------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the District of
Delaware, Starband Communications, Inc., obtained an extension
of its lease decision period. The Court gives the Debtors until
November 27, 2002 to decide whether to assume, assume and
assign, or reject unexpired nonresidential real property leases.
StarBand Communications Inc., currently provides two-way,
always-on, high-speed Internet access via satellite to
residential and small office customers nationwide. The Company
filed for chapter 11 protection on May 31, 2002. Thomas G.
Macauley, Esq., at Zuckerman and Spaeder LLP represents the
Debtor in its restructuring efforts. When the Company filed for
protection form its creditors, it listed $58,072,000 in assets
and $229,537,000 in debts.
STELLAR FUNDING: S&P Further Junks Note Classes A-3 and A-4
-----------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on the
class A-3 and A-4 notes issued by Stellar Funding Ltd. and co-
issued by Stellar Funding CBO Corp., an arbitrage CBO
transaction originated in December of 1998.
The ratings assigned to the class A-3 and A-4 notes have been
lowered three times previously: in February and April of 2001,
and in March of 2002.
The current rating action on the class A-3 and A-4 notes
reflects factors that have negatively affected the credit
enhancement available to support the notes since the ratings
were last lowered on March 5, 2002. These factors include
continued par erosion of the collateral pool securing the rated
notes, a continuing negative migration in the credit quality of
the performing assets in the pool, and a decline in the weighted
average coupon generated by the assets in the pool.
Standard & Poor's noted that $20.847 million of additional asset
defaults have occurred since the March 5, 2002 rating action was
undertaken. This equates to approximately 9.36% of the assets
that were performing at that time. As a result, the
overcollateralization ratio for the transaction has suffered.
According to the Sept. 10, 2002 report, the transaction's
overcollateralization ratio test (which covers the class A-3, A-
4 and B tranches) was out of compliance at 64.13% versus the
minimum required ratio of 101.8%. In addition, the weighted
average coupon generated by the portfolio has declined to
10.305%, versus the minimum required weighted average coupon of
10.5%.
Standard & Poor's has reviewed the results of cash flow runs
generated for Stellar Funding Ltd. to determine the level of
future defaults the rated tranches can withstand under various
stressed default timing and interest rate scenarios, while still
paying all of the rated interest and principal due on the notes.
When the results of these cash flow runs were compared with the
projected default performance of the collateral pool, it was
determined that the ratings assigned to the A-3 and A-4 notes
were no longer consistent with the credit enhancement available,
leading to the lowered ratings.
RATINGS LOWERED
Stellar Funding Ltd./Stellar Funding CBO Corp.
Rating
Class To From Current Balance ($ Mil.)
A-3 CCC- CCC $172.315
A-4 CC CCC- $48.000
TANGRAM ENTERPRISE: Fails to Satisfy Nasdaq Listing Standards
-------------------------------------------------------------
Tangram Enterprise Solutions (Nasdaq: TESI), a leading provider
of IT asset management solutions, has received a NASDAQ Staff
Determination dated October 2, 2002 indicating that the Company
has failed to comply with the minimum bid price requirement for
continued listing on the NASDAQ SmallCap Market as set forth in
Marketplace Rule 4310(C)(4), and therefore its common stock is
subject to delisting from the NASDAQ SmallCap Market. Although
the Company has the right to appeal NASDAQ's determination, it
does not intend to do so. Accordingly, the Company's common
stock will be delisted from the NASDAQ SmallCap Market as of the
opening of business on October 10, 2002. The Company's common
stock will trade on the Over-the-Counter Bulletin Board (OTCBB)
under the same symbol immediately following its delisting from
the NASDAQ SmallCap Market.
For further information, please contact John Nelli, Chief
Financial Officer at (919) 653-1265.
Tangram Enterprise Solutions, Inc., is a leading provider of IT
asset management solutions for large and midsize organizations
across all industries, in both domestic and international
markets. Tangram's core business strategy and operating
philosophy center on delivering world-class customer care,
creating a more personal and productive IT asset management
experience through a phased solution implementation, providing
tailored solutions that support evolving customer needs, and
maintaining a leading-edge technical position. Tangram is a
partner company of Safeguard Scientifics, Inc. --
http://www.safeguard.com-- (NYSE: SFE), an operating company
that creates long- term value by focusing on technology-related
companies that are developed through superior operations and
management support. Safeguard acquires and operates companies
in three principal areas: software, business and IT services and
emerging technologies. To learn more about Tangram, visit
http://www.tangram.com or call 1-800-4TANGRAM.
TEAM AMERICA: Lenders Agree to Relax Covenants Under Credit Pact
----------------------------------------------------------------
TEAM America, Inc., (Nasdaq: TMOSE) expects a substantial
improvement in its operating results for the third quarter and
will announce earnings in a conference call on Friday, November
8, 2002 at 2 p.m. EST.
TEAM America has entered into an arrangement with its principal
lenders, which provides, among other things, for a six-month
deferral of principal payments and substantially relaxed
performance covenants. TEAM intends to either refinance these
loans or renegotiate terms with its lenders prior to the loans'
maturity in six months.
"We expect an increase in revenue and gross profit and a
substantial increase in operating income and EBITDA over second
quarter results, as we realize the benefits of our restructuring
work conducted in the previous two quarters," said Chairman and
CEO, S. Cash Nickerson.
TEAM America, Inc., (Nasdaq: TMOSE) is a leading Business
Process Outsourcing Company specializing in human resources.
TEAM America is a pioneer in the Professional Employer
Organization industry and was founded in 1986. With 16 sales
and service offices nationwide, the Company is one of the ten
largest PEOs in the country serving more than 1,500 small
businesses in all 50 states. The Company is engaged in a "build
up" of the consolidating industry and is the leading acquirer of
quality, positive cash flow, independent PEOs in urban markets.
For more information regarding the company, visit
http://www.teamamerica.com
* * *
As previously reported, TEAM America received a Nasdaq Staff
Determination on August 21, 2002, indicating that the Company's
failure to file its Form 10-Q for the period ended June 29, 2002
was a violation of the continued listing requirements set forth
in Marketplace Rule 4310, and that its common stock, therefore,
is subject to delisting from The Nasdaq SmallCap Market. As a
result of the delinquency, the trading symbol for the Company's
common stock was changed from "TMOS" to "TMOSE" at the
opening of business on August 23, 2002.
TECSTAR: Gets Court Nod to Amend and Extend Cash Collateral Use
---------------------------------------------------------------
Tecstar, Inc., n/k/a Don Julian, Inc., and its debtor-affiliate
sought and obtained approval from the U.S. Bankruptcy Court for
the District of Delaware to amend and extend an agreement
governing use of their Lenders' Cash Collateral. The Court also
reaffirms the adequate protection granted to the Prepetition
Secured Parties and put its stamp of approval on a Stipulation
of Facts between Union Bank of America, N.A., as Agent and the
Debtors memorializing this agreement.
The Debtors obtained authority to use Cash Collateral pursuant
to an August to October Budget:
Beginning Cash $112,064
Operating Receipts 162,442
Operating Disbursements 365,536
Cash Flow (203,096)
Use of Cash Collateral
(Union Bank) 130,000
Ending Cash $466
Among other things, the Court finds that the Cash Collateral
Stipulation will permit the Debtors to meet payroll and other
expenses, continue the orderly liquidation of their assets and
propose a Plan in these proceedings.
Tecstar, Inc. manufactures high-efficiency solar cells that are
primarily used in the construction of spacecraft and satellite.
The Company filed for chapter 11 protection on February 07,
2002. Tobey M. Daluz, Esq. at Reed Smith LLP and Jeffrey M.
Reisner at Irell & Manella LLP represent the Debtors in their
restructuring efforts. When the company filed for protection
from its creditors, it listed assets of over $10 million and
debts of over $50 million.
UNITED AIRLINES: Receives Coalition's Alternative Framework
-----------------------------------------------------------
United Airlines issued a statement this week, saying:
"The productive dialogue between United Airlines and the
union coalition continues. On September 25th, we received the
coalition's alternative framework in support of our financial
recovery. We plan to enter into bilateral negotiations with
each of the coalition members, as we have always expected to do,
and that process began with the International Association of
Machinists.
"We are in the process of studying the latest coalition
proposal in an attempt to adapt it to an updated Air
Transportation Stabilization Board submittal. We are encouraged
by the shared sense of urgency and focus all members of the
coalition are putting toward an out-of-court solution to our
financial crisis."
* * *
As reported in Troubled Company Reporter's October 3, 2002
edition, Standard & Poor's lowered its ratings on UAL Corp.'s
(CCC/Watch Dev/--) 12.25% Series B preferred stock and on the
UAL Corp. Capital Trust I 13.25% trust originated preferred
securities to 'D' from double-'C'. Standard & Poor's said its
triple-'C' corporate credit ratings on UAL Corp., and unit
United Air Lines Inc., remain on CreditWatch with developing
implications, where they were placed on August 15, 2002.
US AIRWAYS: Wants More Time to Make Lease-Related Decisions
-----------------------------------------------------------
US Airways Group Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the Eastern District of Virginia to extend
their deadline to assume, assume and assign, or reject unexpired
leases of nonresidential real property until the confirmation of
a plan of reorganization, but no later than March 31, 2003.
Under Section 365(d)(4) of the Bankruptcy Code, the initial
60-day period within which the Debtors must assume or reject
nonresidential real property leases expires on October 10, 2002.
As of the Petition Date, the Debtors were lessees or sublessors
under more than 500 Unexpired Leases. The Debtors are in the
process of evaluating all of their owned and leased real estate
and each Unexpired Lease agreement. In considering their
options, the Debtors are evaluating a variety of factors to
determine whether it is appropriate to assume, assume and
assign, or reject each Unexpired Lease.
John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher &
Flom, explains that if the current deadline is not extended
beyond October 10, 2002, the Debtors may be compelled, without
sufficient time to make a reasoned decision, to either assume
substantial, long-term liabilities under the Unexpired Leases or
to forfeit the benefits associated with some Unexpired Leases,
which would be to the significant detriment of the Debtors'
ability to operate and preserve the going-concern value of their
business for the benefit of all creditors and other parties-in-
interest.
Mr. Butler assures Judge Mitchell that the Debtors have made
substantial progress in assessing a number of Unexpired Leases.
On the Petition Date, the Debtors sought to reject 25 Unexpired
Leases. Given the size of these cases, the number of Unexpired
Leases and the need for the Debtors to focus on their primary
objective of stabilizing their business, Mr. Butler explains
that more time is needed to adequately assess whether to assume
or reject each Unexpired Lease.
Mr. Butler informs that Court that the Debtors' decision about
each particular Unexpired Lease and the timing of assumption or
rejection depends, in large part, on whether the location will
play a future role in the Debtors' business plan going forward.
Whether each individual Unexpired Lease will be assumed or
rejected will depend, most significantly, on whether the Debtors
will continue operations at the location once the strategic
business plan is fully implemented.
The Debtors have made great progress in formulating their
business plan. However, locations are still being evaluated.
Accordingly, it is not possible to determine at this early stage
whether certain of those locations will remain a part of the
Debtors' business. The Debtors are also conducting an analysis
at certain of the locations to determine whether there is value
to the Debtors in an assignment rather than a rejection of those
Unexpired Leases. "These decisions cannot be made properly and
responsibly without an extension of the time within which the
Unexpired Leases must either be assumed or rejected," Mr. Butler
emphasizes.
Given the importance of the Unexpired Leases to their ongoing
business operations and restructuring efforts, the Debtors ask
the Court, out of an abundance of caution, for a bridge order
extending the deadline under Section 365(d)(4) until the Court
enters a final order with respect to this Motion.
* * *
Accordingly, Judge Mitchell extends the lease decision period
until the November 7, 2002 hearing. (US Airways Bankruptcy News,
Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900)
US Airways Inc.'s 10.375% bonds due 2013 (U13USR2), DebtTraders
reports, are trading at 10 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=U13USR2for
real-time bond pricing.
VIASYSTEMS GROUP: Asks Court to Set Combined Hearing for Nov. 11
----------------------------------------------------------------
Viasystems Group, Inc., and Viasystems, Inc., ask the U.S.
Bankruptcy Court for the Southern District of New York to
schedule a combined hearing to approve Disclosure Statement and
confirm the chapter 11 Plan the Companies have proposed.
Subject to availability in the Court's calendar, the Debtors
propose that the Combined Hearing on be held on November 11,
2002 or a date approximately 40 days from the Commencement Date.
Because the Plan was overwhelmingly accepted prior to the
Petition Date, there is no reason to delay consideration of the
Disclosure Statement and the Plan, the Debtors argue. The
Debtors further explain that because they have already
negotiated a consensual prepackaged plan of reorganization prior
to commencing these cases with the Debtors' largest creditors
and interest holders, the circumstances weigh heavily in favor
of scheduling the Combined Hearing for the earliest date
convenient to the Court.
The proposed schedule affords creditors and interest holders
ample notice of the Combined Hearing, and affords creditors and
all parties-in-interest ample notice and opportunity to obtain a
copy of and to evaluate the Plan and Disclosure Statement prior
to the proposed Combined Hearing. Therefore, no party-in-
interest will be prejudiced by the relief requested.
In this connection, the Debtors want to schedule the Objection
Deadline on November 6, 2002 or at least five days prior to the
Combined Hearing Schedule. Written objections to be deemed
timely-filed must be received by:
i) Weil, Gotshal & Manges LLP
Attorneys for Debtors and Debtors in Possession
767 Fifth Avenue
New York, New York 10153
Attn: Alan B. Miller, Esq. and
Kathryn L. Turner, Esq.
ii) Office of The United States Trustee
33 Whitehall Street, 21st Floor
New York, New York 10004
Attn: Mary E. Tom, Esq.
iii) Counsel for the Senior Lenders
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attn: Peter V. Pantaleo, Esq.
iv) Counsel for the Noteholder Committee
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attn: Michael J. Sage, Esq.
v) Counsel for Hicks Muse Tate & Furst
Vinson & Elkins LLP
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attn: William A. Wallander, Esq.; and
vi) counsel to any official statutory committee
appointed in the Debtors' cases.
Viasystems Group, Inc., is a holding company whose principal
assets are its shares of stock of Viasystems, Inc. Viasystems,
through its direct and indirect subsidiaries, is a leading,
worldwide, independent provider of electronics manufacturing
services to original equipment manufacturers primarily in the
telecommunication, networking, automotive, consumer, industrial
and computer industries. The Debtors filed for chapter 11
protection on October 1, 2002. Alan B. Miller, Esq., at Weil,
Gotshal & Manges, LLP represents the Debtors in their
restructuring efforts. When the Companies filed for protection
from its creditors, it listed $1.6 Billion in total assets and
$1.025 Billion in total debts.
WHX CORPORATION: Intends to Exit Stainless Steel Wire Operations
----------------------------------------------------------------
WHX Corporation (NYSE: WHX) announced that its wholly owned
Handy & Harman subsidiary has decided to exit certain of its
stainless steel wire activities. The affected operations are
Handy & Harman's facilities in Liversedge, England and
Willingboro, New Jersey.
Handy & Harman's stainless steel wire and cable activities
located at Cockeysville, Maryland and Oriskany, New York will
continue to supply its customers with a wide range of specialty
products. Capital improvements in machinery and equipment as
well as infrastructure improvements are in process to expand and
enhance the capabilities of Handy & Harman's Cockeysville,
Maryland facility. Fine wire customers currently being supplied
by the Company's Willingboro facility will be serviced by the
Cockeysville facility in the near future.
The decision to exit these operating activities will result in a
third quarter charge in the range of $7.0 to $8.5 million for
inventory write-downs and other exit costs and a fourth quarter
charge in the range of $4.0 to $4.5 million for employee benefit
costs. Additionally, in accordance with FASB Statement No. 144
"Disposal of Long Lived Assets," Handy & Harman will incur
increased depreciation expense of approximately $4.7 million on
equipment values during the remaining operating period of the
affected businesses, estimated to be approximately three months.
In addition to the above charges, Handy & Harman will also
record a third quarter charge of approximately $5.0 million for
excess and slow moving inventories and allowances for doubtful
accounts. This charge, which relates to the Company's ongoing
wire group operations, is a result of the severe downturn in the
telecommunications and other stainless steel wire and cable
markets.
WHX is a holding company that has been structured to invest in
and/or acquire a diverse group of businesses on a decentralized
basis. WHX's primary business is Handy & Harman, a diversified
manufacturing company with activities in precious metals
fabrication, specialty wire and tubing and engineered materials.
WHX also owns Pittsburgh-Canfield Corporation, a manufacturer of
electrogalvanized products used in the construction and
appliance industries.
* * *
As previously reported, WHX was notified by the New York Stock
Exchange that its share price had fallen below the continued
listing criteria requiring an average closing price of not less
than $1.00 over a consecutive 30 trading-day period. Following
notification by the NYSE, WHX has up to six months by which time
WHX's share price and average share price over a consecutive 30
trading-day period may not be less than $1.00. In the event
these requirements are not met by the end of the six-month
period, WHX would be subject to NYSE trading suspension and
delisting and, in such event, WHX believes that an alternative
trading venue would be available. WHX is currently evaluating
alternatives to bring its average share price back into
compliance with NYSE requirements, including a potential reverse
stock split which is one of the proposals to be acted upon at
the 2002 Annual Meeting of Stockholders.
Also, Standard & Poor's revised its outlook on WHX Corp., to
stable from negative. All ratings on the company are affirmed.
The outlook revision reflects the improvement in WHX Corp.'s
(B/Stable/--) financial flexibility following the sale of its
interest in Wheeling Downs Racetrack for $105 million. Proceeds
from the transaction are expected to be used for either debt
reduction or to service its future cash obligations related to
its Wheeling-Pittsburgh Corp., subsidiary, which filed for
Chapter 11 bankruptcy protection on November 16, 2000.
WINSTAR COMMS: Trustee Has Until December 1 to Decide on Leases
---------------------------------------------------------------
Judge Akard gives Winstar Communications, Inc.'s Chapter 7
Trustee Christine C. Shubert until December 1, 2002 to decide on
the remaining executory contracts and unexpired leases. (Winstar
Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
WORLDCOM INC: Wants Approval to Enter into Secured Bond Facility
----------------------------------------------------------------
Lori R. Fife, Esq., at Weil Gotshal & Manges LLP, in New York,
tells the Court that Worldcom Inc., and its debtor-affiliates
require bonds for numerous facets of its businesses.
Specifically, the Debtors are parties to numerous long-term
performance contracts with governmental agencies as well as
private enterprises. The Performance Contracts generate
$2,000,000,000 per year in revenues for the Debtors, with the
potential to generate an additional $500,000,000 to
$1,000,000,000 per year. In order to obtain the Performance
Contracts, the Debtors are required to post performance and
payment bonds. Failure to post performance bonds will prevent
the Debtors from bidding on government and other large
enterprise contracts, effectively shutting them out of this
market. Furthermore, failure to maintain the Performance Bonds
constitutes a default under the existing Performance Contracts.
In addition, in order to maintain their networking and cable
throughout their long-haul and local routes, the Debtors are
parties to numerous agreements and licenses. These agreements
include:
-- agreements with municipal and private entities allowing the
Debtors to attach and maintain aerial cables, wires and
associated appliances to poles and equipment;
-- licenses to install fiber optic network; and
-- rights-of-way use permits to allow the placing and
maintaining of communication facilities and fiber optic
network in public rights-of-way.
In connection with these agreements and licenses, the Debtors
are required to post certain bonds, for example, Utility Service
Guaranty Bonds, Concessionaire's Bonds, Pole Attachment Bonds,
Telecommunication License Agreement Bonds, and Payment Bonds.
Currently, the Debtors have posted $75,000,000 in Permit Bonds,
and anticipate requiring additional $20,000,000 to $30,000,000
of Permit Bonds for new facilities over the next 12 months.
Ms. Fife reports that certain of the Bonds have expired by their
terms, others are due to expire shortly, and others have been
terminated or have been noticed for termination. In particular,
Chubb Group of Insurance, from whom the Debtors had obtained a
majority of their Bonds, has sent 189 notices of cancellation
and termination of their bonds. If Chubb's attempted
termination is effective, the Debtors do not currently have a
bonding facility in place to replace these bonds, and would,
therefore be in default under numerous agreements and contracts.
The Debtors also are unable to enter into new contracts, thus
missing valuable opportunities to generate additional revenue.
Thus, it is critical to the Debtors' business operations that
they have a surety bonding facility in place in order to run
their businesses.
Accordingly, the Debtors solicited bond proposals from numerous
parties to avoid continuing and new defaults under the
Performance Contracts and the Maintenance Contracts, and
preserve the ability to enter into new contracts and generate
new revenue.
By this motion, the Debtors seek the Court's authority pursuant
to Sections 363 and 364 of the Bankruptcy Code to enter into the
secured bond facility with The Insurance Company of the State of
Pennsylvania, a wholly owned subsidiary of American
International Group, Inc. AIG submitted the most favorable bond
proposal to the Debtors.
At this time, the Debtors have determined to enter into an
agreement with AIG for the issuance of up to $150,000,000 in
surety bonds. The key terms and conditions for the proposed AIG
Facility are:
-- execution of an indemnity agreement by the Debtors and any
subsidiaries or affiliates named as principal on any bonds
issued by AIG;
-- collateral equal to 100% of the bond amounts to be posted in
cash or an irrevocable letter of credit, and Bankruptcy Court
approval thereof; and
-- a premium rate of 2% of the bond amount fully earned for
Performance Bonds and 1.5% of the bond amount per annum for
Permit Bonds. (Worldcom Bankruptcy News, Issue No. 9;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
XML-TECH: June 30 Cash Insufficient to Continue Operations
----------------------------------------------------------
Effective August 27, 1999, XML-Technologies, Inc., and
International Capital Funding, Inc., entered into an Agreement
and Plan of Reorganization. In accordance with the Agreement,
the stockholders of XML-Technologies received 12.5 million
shares of ICF stock in exchange for the 12.5 million outstanding
shares of XML-Technologies. The stockholders of ICF retained 5
million shares in exchange for no assets and the assumption of
$2,671 of liabilities of ICF by XML-Technologies. The
transaction was accounted for as a recapitalization of XML-
Technologies. After entering into the Agreement, the ownership
percentage of the original stockholders of XML-Technologies was
reduced from 100% to 71%. ICF was organized in 1991 for the
purpose of consummating a merger or acquisition with a private
entity. Prior to entering into the Agreement, it had no material
amount of assets or liabilities and no operations. Subsequent to
completing the Agreement, ICF changed its name to XML-Global
Technologies, Inc., and changed its fiscal year-end to June 30.
XML-Technologies is a Nevada corporation organized on May 18,
1999 to hold either directly or indirectly all outstanding
shares of XML-Global Research, Inc. and Walkabout Website
Designs, Ltd., both of which are British Columbia corporations.
XML Technologies and its subsidiaries engage in the business of
developing software applications using XML (eXtensible Markup
Language). XML is an abbreviated version of SGML (Standard
General Markup Language), an international standard for defining
descriptions of the structure and content of electronic
documents. In October 1999, DataXchg, Inc., was formed by the
Company and David Webber, a Director of the Company. Initially,
DataXchg was 40%-owned by XML Global Technologies and 60%-owned
by Mr. Webber. In exchange for his interest, Mr. Webber
assigned to DataXchg certain technology which underlies XML's
current product known as GoXML Transform, which offers the
ability to convert standard EDI documents into XML format. In
June 2000, XML acquired Mr. Webber's 60% interest in DataXchg in
exchange for issuing to Mr. Webber 1,000,000 shares of its
common stock. As a result of this transaction, DataXchg became
XML's wholly-owned subsidiary.
On January 17, 2001, XML acquired the issued shares of
Bluestream Database Software Corp through a newly incorporated
subsidiary, 620486 BC Ltd. Bluestream is a British Columbia
corporation which had developed proprietary XML database
software. On April 15, 2002, the Company entered into a letter
of intent to allow Mr. James Tivy to indirectly purchase an
interest in Bluestream. The transaction closed on September 26,
2002 and XML now holds preferred shares in Bluestream with a
redemption value of $575,000 and a 45% interest in Bluestream's
common stock. Due to the uncertainty of realizing value or a
return on the preferred stock, XML expects to ascribe only a
nominal carrying value. On November 5, 2001, XML Global formed
LE Informatics, Inc., a Delaware corporation, as a wholly-owned
subsidiary. The Company planned to transfer its intellectual
property rights associated with its "Xtract" software to LE
Informatics, Inc. and license its other products to LE
Informatics, Inc. From December 2001 to April 2002, LE
Informatics and its wholly-owned subsidiary Xtract Informatics
Corp. engaged in the marketing of XMLsoftware to law enforcement
agencies. LE Informatics and its subsidiary ceased operations in
April 2002 and are currently inactive. On August 14, 2002, XML
entered into a letter of intent to sell the Xtract technology to
Syscon Justice Systems Ltd. (a Canadian company) for two cash
installments aggregating $160,000 plus royalties of at least
C$50,000 annually in each of the next five years, depending on
Syscon's sales of Xtract. Total payments over the five-year
life of the contract are to be between C$500,000 and C$800,000
($320,000 and $510,000 in US dollars respectively, at current
exchange rates) depending on SysCon's sales volume. This
transaction has not yet closed. As part of a series of related
transactions with Paradigm Millennium Fund, LP (Paradigm), a
Delaware limited partnership, and Vertaport, Inc., a Delaware
Corp., XML has and will issue stock and warrants to Paradigm in
exchange for cash and intellectual property. The transaction
will be completed in three stages.
XML's independent auditor's report states that the Company's
consolidated financial statements for the year ending June 30,
2002 have been prepared assuming that the Company will continue
as a going concern. However, XML has incurred losses since
inception and has an accumulated deficit. These conditions raise
substantial doubt about the Company's ability to continue as a
going concern.
To date, the Company has experienced negative cash flows from
operating activities. For the year ended June 30, 2002, net cash
used in operating activities was $3,241,700 and was primarily
attributable to the net loss of $5,573,200. The net loss for the
year was partially offset by non-cash depreciation and
amortization of $538,600, stock based compensation of $20,300,
the loss on the write off of intellectual property of $281,900,
the loss on the write off of fixed assets of $3,700, expenses
paid through the issuance of common stock of $499,000, a
financing expense of $252,000 paid through the issuance of
common stock and a net cash outflow of $736,100 with respect to
working capital changes. For the year ended June 30, 2002, net
cash used in operating activities was therefore $3,241,700. In
the year ended June 30, 2001 $4,051,100 was used in operating
activities.
For the year ended June 30, 2002, net cash from investing
activities was $911,000. The Company spent $45,500 on computer
hardware, software and equipment, $21,700 on patent and
trademark applications, $1,900 on intellectual property, and
received proceeds of $980,000 on short-term investments. The
computer hardware and software purchases largely related to
server upgrades and computers used by programmers. In the year
ended June 30, 2001, net cash used in investing activities was
$603,500. For the year ended June 30, 2002, financing activities
generated $127,600 of cash. XML raised $100,000 from the
issuance of a note payable, $31,600 from the private placement
of equity securities and incurred $4,000 in deferred issue
costs. In the year ended June 30, 2001, financing activities
provided $307,000, relating to the private placements of equity
securities.
Changes in exchange rates had a net effect of decreasing the
Company's cash balance by $1,900 in the year ended June 30, 2002
compared to a increase of $400 in the prior year.
As of June 30, 2002, XML had no contractual capital commitments
outstanding.
The Company has incurred costs to design, develop and implement
search engine and electronic commerce applications and to grow
its business. As a result, it has incurred operating losses and
negative cash flows from operations in each quarter since it
commenced operations. As of June 30, 2002 it had an accumulated
deficit of $11,997,900.
Since inception, XML has financed operations primarily through
the placement of equity securities. In the year ended June 30,
2002, it received net proceeds from equity issuances of $31,600
and proceeds from a note payable of $100,000 which was converted
to equity during fiscal 2002. It did not receive any proceeds
during the year ended June 30, 2001. As of June 30, 2002, the
Company had $369,600 in cash and cash equivalents and no short-
term investments, compared to $2,574,600 and $980,000
respectively at June 30, 2001.
XML's cash at June 30, 2002 was not sufficient to fund
operations through the end of fiscal 2003 based on historical
operating performance. In order for the Company to maintain its
operations it will have to seek additional funding, generate
additional sales or reduce its operating expenses, or some
combination of these. At current and planned expenditure rates,
taking into consideration cash received from the first part of
the Paradigm financing, current reserves are sufficient to fund
operations through November 2002.
In August, XML closed the first part of a financing funded by
Paradigm Millennium Fund, LP. This first part of the financing
comprised the issuance of common stock and warrants for net
proceeds of $915,000. It is expected that the second part of the
Paradigm Millennium Fund, LP financing would contribute a
further $915,000 of cash before the end of September. If
unsuccessful in closing the second stage of the Paradigm
financing, XML will have cash reserves sufficient to fund
operations past June 2003. The Company expects to incur offering
costs of about $30,000 for total net proceeds from this
financing of $1,800,000.
In November 2001 and April 2002, XML reduced its staff to match
its available resources to its immediate needs. In April 2002,
certain of its employees and officers agreed to defer
compensation or take stock in lieu of cash compensation. The
salary deferral, which was in effect from April 2002 through
September 2002, has been recorded as an accrued liability in the
financial statements as of June 30, 2002. XML is continually
evaluating its operating plan in light of prevailing market
conditions, sales forecasts and personnel needs and will make
those changes to operations that are necessary to extend the
life of itsr cash resources. To date it has postponed planned
hires, not replaced certain staff that have left, canceled or
not implemented advertising and promotional campaigns, and
generally limited discretionary expenses. Where practical, it
will continue to limit expenditures but XML believes that its
scale of operations for the next three to six months will be
substantially similar to that in effect at June 30, 2002.It is
the Company's intention to improve liquidity by focusing on
increased sales rather than by reducing expenses.
The Company has discontinued development of GoXML™ DB and
have entered into a letter of intent with James Tivy that will
allow it to retain an ownership interest in this technology
without being responsible to fund ongoing development. It is not
expected that this transaction will generate cash in the short-
or medium-term, if at all.
XML has also entered in to a letter of intent with SysCon
Justice Systems Ltd. relating to the sale of the Xtract
technology and related customer relationship in exchange for
cash in two equal installments over six months totaling $160,000
plus ongoing royalty payments.
By reducing the scope of operations XML feels better able to
focus its efforts and resources on its core products,
particularly GoXML Transform. It is increasingly applying its
efforts to marketing and sales and expect that most of its new
hires in the next year will be for sales positions. The Company
is continuing to develop strategic alliances with larger
companies that can sell its products to their established
customer bases. These alliances include iWay, Seagull Software
and Sun Microsystems. In the event that future operating cash
flows do not meet all Company cash requirements, XML will need
additional financing. Success in raising additional financing is
dependent on the Company's ability to demonstrate that it can
fulfill its business strategy to sell XML-based e-commerce
solutions. Should the Company need additional financing through
debt or equity placements, there is no assurance that such
financing will be available, if at all, at terms acceptable to
the Company. If additional funds are raised by the issuance of
equity securities, stockholders may experience dilution of their
ownership interest and these securities may have rights senior
to those of the holders of the common stock. If additional funds
are raised by the issuance of debt, XML may be subject to
certain limitations on its operations, including limitations on
the payment of dividends. If adequate funds are not available,
or are not available on acceptable terms, it may be unable to
fund expansion, successfully promote brand name, take advantage
of acquisition opportunities, develop or enhance services or
respond to competitive pressures, any of which could have a
materially adverse effect on XML's business, financial condition
and results of operations.
The Company's ability to generate significant revenue is
uncertain. It incurred net losses of approximately $5,573,200
during the year ended June 30, 2002 and expects losses from
operations and negative cash flow to continue for the
foreseeable future since it has not yet built a sufficient sales
network to support its operations. The rate at which these
losses will be incurred may increase from current levels. If
revenue does not increase and if spending levels are not
adjusted accordingly, XML may not generate sufficient revenue to
achieve profitable operations. Even if the Company achieves
profitability, it may not sustain or increase profitability on a
quarterly or annual basis in the future.
XML's working capital requirements depend on numerous factors.
It has experienced increased expenditures since inception,
consistent with growth in its operations and staffing, and
expects that this trend will continue for the foreseeable
future. It anticipates incurring additional expenses to increase
marketing and sales efforts, and for software and infrastructure
development. Additionally, it will continue to evaluate possible
investments in businesses, products and technologies, the
expansion of its marketing and sales programs and brand
promotions. If it experiences a shortfall in revenue in relation
to expenses, or if its expenses precede increased revenue, its
business, financial condition and results of operations could be
materially and adversely affected.
Some of XML's revenues are earned, and a substantial portion of
its payroll and other expenses are paid, outside the United
States in currencies other than US dollars. Because its
financial results are reported in US dollars, they are affected
by changes in the value of the various foreign currencies in
which it makes payments in relation to the US dollar. XML does
not cover known or anticipated currency fluctuation exposures
through foreign currency exchange option or forward contracts.
The primary currency for which it has foreign currency exchange
rate exposure is the Canadian dollar. The Company's financial
instruments, including cash, accounts receivable, accounts
payable and accrued liabilities are carried at cost which
approximates their fair value because of the short-term maturity
of these instruments.
1. On August 23, 2002, Paradigm purchased 5,000,000 shares
of Common Stock and Class A Warrants exercisable to purchase an
additional 3,000,000 shares of Common Stock, for an aggregate
gross purchase price of $1,000,000. Subtracted from this amount
was a placement agent's fee and non-accountable expense
allowance of $85,000.
2. Upon delivery of a legal opinion related to the
intellectual property described in item 3 below, but in no event
later than September 30, 2002, Paradigm is to purchase an
additional 5,000,000 shares of Common Stock and Class A Warrants
exercisable to purchase an additional 3,000,000 shares of Common
Stock, for an aggregate purchase price of $1,000,000. Subtracted
from this amount will be a placement agent's fee and non-
accountable expense allowance in the amount of $85,000.
3. On August 23, 2002, we also purchased certain intangible
assets from Vertaport, Inc. including technology, software,
documentation, contracts and licenses. In particular we have
acquired Vertaport's XML-based VertaCom™ platform which
allows clients to universally translate, transform, and transmit
data from multiple sources as well as take advantage of
extensive data management reporting and administration tools.
Vertaport's VertaCom technology is complementary with our XML
middleware products. At the date of acquisition, VertaCom was
not a commercially viable product without further development.
Consequently the purchase price of 7,000,000 shares of Common
Stock, Class A Warrants exercisable to purchase an additional
7,000,000 share of Common Stock at $0.50 per share and Class B
Warrants exercisable to purchase an additional 2,500,000 shares
of Common Stock at $1.00 per share will be recorded as In-
Process Research and Development upon consummation of the
transaction. Based upon the estimated fair value of the common
stock and warrants, we estimate a charge to earnings of
approximately $2.9 million.
As part of this transaction, Vertaport, Inc., is to provide us
with a legal opinion confirming the validity and enforceability
of its technological assets, intellectual property rights and
trade secrets and the legal capacity of Vertaport, Inc., to
convey such rights and assets free and clear of liens or claims
of third parties. Additionally, Paradigm Group LLP (an Illinois
limited partnership) has agreed to indemnify us against any
qualifications or exception in the legal opinion to be provided
by Vertaport, Inc.
The Class A Warrants provide for the purchase of up to
13,000,000 shares of our common stock at an exercise price of
$0.50 per share until December 31, 2005. We estimate that legal
fees and other financing costs will be approximately $30,000 for
aggregate net proceeds of $1,800,000.We have agreed to undertake
reasonable efforts to register shares of Common Stock and the
shares underlying the Class A Warrants by October 23, 2002.
Paradigm has agreed not to dispose of Securities (shares of
common stock or warrants) for the 90 day period following the
effective date of the Registration Statement, and thereafter not
to dispose of more than 25% of all of the Securities during each
90-day period, determined without accumulation. In conjunction
with this transaction, we expect that Sheldon Drobny, Chairman
of Paradigm Millennium Fund, LP, will join our board of
directors.
* BOOK REVIEW: Bankruptcy Crimes
--------------------------------
Author: Stephanie Wickouski
Publisher: Beard Books
Softcover: 395 Pages
List Price: $124.95
Review by Gail Owens Hoelscher
Order your personal copy today at
http://amazon.com/exec/obidos/ASIN/1893122832/internetbankrupt
Did you know that you could be executed for non-payment of debt
in England in the 1700s? Or that the nailing of an ear was the
sentence for perjury in bankruptcy cases in 1604? While ruling
out such archaic penalties, Stephanie Wickouski does believe "in
the need for criminal sanctions against bankruptcy fraud and for
consistent, effective enforcement of those sanctions." She
decries the harm done to individuals through fraud schemes and
laments the resulting erosion in public confidence in the
judicial system. This leading authoritative treatise on the
subject of bankruptcy fraud, first published in August 2000 and
updated annually with new material, will prove invaluable for
bankruptcy law practitioners, white collar criminal
practitioners, and prosecutors faced with criminal activity in
bankruptcy cases. Indeed, E. Lawrence Barcella, Jr. of Paul,
Hastings, Janofsky, and Walker, in Washington, DC, says, "If I
were a lawyer involved in a bankruptcy matter, whether civil or
criminal, and had only one reference work that I could rely
upon, it would be this book." And, Thomas J. Moloney with
Cleary, Gottlieb, Steen & Hamilton describes the book as "an
essential reference tool."
An estimated ten percent of bankruptcy cases involve some kind
of abuse or fraud. Since launching Operation Total Disclosure in
1992, the U.S. Department of Justice has endeavored to send the
message that bankruptcy fraud will not be tolerated. Bankruptcy
judges and trustees are required to report suspected bankruptcy
crimes to a U.S. attorney. The decision to prosecute is based on
the level of loss or injury, the existence of sufficient
evidence, and the clarity of the law. In some cases, civil
penalties for fraud are deemed sufficient to punish and deter.
Ms. Wickouski suggests that some lawyers might not recognize
criminal activity that the DOJ now targets for investigation.
She gives several examples, including filing for bankruptcy
using an incorrect Social Security number, and receiving
payments from a bankruptcy debtor that were not approved by the
bankruptcy court. In both of these real life examples, DOJ
investigations led to convictions and jail time.
Ms. Wickouski says that although new schemes in bankruptcy fraud
have come along, others have been around for centuries. She
takes the reader through the most common traditional schemes,
including skimming, the bustout, the bleedout, and looting, as
well as some new ones, including the bankruptcy mill. The main
substance of Bankruptcy Crimes is Ms. Wickouski's detailed
analysis of the U.S. Bankruptcy Criminal Code, chapter 9 of
title 18, the Federal Criminal Code. She painstakingly analyzes
each provision, carefully defining terms and providing clear and
useful examples of actual cases. She ends with a good chapter
on ethics and professional responsibility, and provides a
comprehensive set of annexes.
Bankruptcy Crimes is never dry, and some of the cases will make
you nostalgic for the days of ear-nailing. This comprehensive,
well researched treatise is a particularly invaluable guide for
debtors' counsel in dealing with conflicts, attorney-client
relationships, asset planning, and an array of legal and ethical
issues that lawyers and bankruptcy fiduciaries often face in
advising clients in financially distressed situations.
Stephanie Wickouski is a partner in the Washington, D.C. firm of
Arent Fox Kintner Plotkin & Kahn, PLLC. Her practice is
concentrated in business bankruptcy, insolvency, and commercial
litigation.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices
are obtained by TCR editors from a variety of outside sources
during the prior week we think are reliable. Those sources may
not, however, be complete or accurate. The Monday Bond Pricing
table is compiled on the Friday prior to publication. Prices
reported are not intended to reflect actual trades. Prices for
actual trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter
A. Chapman, Editors.
Copyright 2002. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers. Information
contained herein is obtained from sources believed to be
reliable, but is not guaranteed.
The TCR subscription rate is $625 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Christopher
Beard at 240/629-3300.
*** End of Transmission ***