/raid1/www/Hosts/bankrupt/TCR_Public/021107.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, November 7, 2002, Vol. 6, No. 221
Headlines
AMERCO: Suspends Dividend Payment as Part of Debt Restructuring
AMERICAN SKIING: Performance Capital Reports 17.9% Equity Stake
ARMSTRONG: Has Until July 14 to Make Lease-Related Decisions
AT&T CANADA: Will Hold 3rd Quarter 2002 Teleconference Today
BETHLEHEM STEEL: Says Making Progress Toward New Labor Agreement
BETHLEHEM STEEL: USWA Welcomes Possible Consolidation with ISG
BIOENVISION: Says New Financing Enough to Meet Liquidity Needs
BLOUNT INT'L: Third Quarter EBITDA Jumps-Up 10% to $20.5 Million
BORDEN CHEMICALS: Asks Court to Move Lease Decision Deadline
BRIGHTPOINT INC: Reports Improved Results for Third Quarter 2002
BUDGET GROUP: Wins Approval to Hire Eversheds as Foreign Counsel
CALPINE CORP: Renegotiates Power Sales Agreement with Lodi City
CANADIAN SATELLITE: S&P Puts B+ Credit Rating On Watch Positive
CARBIDE/GRAPHITE: Completes Asset Sale to Carbide Industries
CMS ENERGY: Board of Directors Declares Common Stock Dividend
CNH GLOBAL: S&P Affirms & Removes Low-B Ratings from CreditWatch
COLUMBIA CENTER: S&P Downgrades Class E Note Rating to BB+
CONTOUR ENERGY: Court Sets Confirmation Hearing for December 4
CRESCENT REAL ESTATE: Meets Third Quarter 2002 Earnings Guidance
CTN MEDIA: Completes Sale of College TV Network to MTV Networks
DELTA AIR: Applauds Initialing of US-Jamaica Open Skies Pact
DENBURY RESOURCES: Posts Slightly Lower Results for 3rd Quarter
DIAMOND FIELDS: Denies Allegation of Default Under Conv. Note
ECHOSTAR COMMS: Pennsylvania Joins Suit to Block Proposed Merger
ENCOMPASS SERVICES: Misses $17MM Interest Payment on 10.5% Notes
ENRON: Seeks Approval of Stipulation & Consent Pact with Kopper
ENTREMED INC: Will Appeal Nasdaq Delisting Determination
FAIRPOINT COMMS: Will Host Q3 Conference Call on November 14
FEDERAL-MOGUL: Wants to Implement 2003 Key Employee Programs
FIRST INT'L: Fitch Puts Low B-Rated Class M-2 & B on Watch Neg.
FRONTIER AIRLINES: Gets Conditional OK for Fed. Loan Guarantee
GENESIS HEALTH: Appoints Robert Fish as Interim Board Chairman
GENTEK INC: Court Allows Payment of Prepetition Tax Obligations
GEO SPECIALTY: Low Liquidity Spurs S&P to Change Outlook to Neg.
GEOWORKS CORP: Nasdaq Delists Shares Effective November 6, 2002
GLIMCHER REALTY: Completes Financing on Community Center Assets
GLOBAL CROSSING: Court Approves Ingram Yuzek as Tax Counsel
GLOBAL CROSSING: Names Donald Poulter to Lead Conferencing Unit
GROUP TELECOM: Receives Merger and Acquisition Proposals
HOME INTERIORS: S&P Ups Low-B & Junk Ratings On Improved Results
HORSEHEAD: Wants Okay to Continue Frankfurt Garbus' Engagement
INTEGRATED HEALTH: Wants to Sell Vintage Health Care for $2 Mil.
INTERMOST CORP: Moores Rowland Expresses Going Concern Doubt
ISLE OF CAPRI: Consummates Sale of Las Vegas Lady Luck Assets
ISOMET CORP: BofA Extends Loan Repayment Date to November 12
KAISER ALUMINUM: Selling Aluminum Rod Mill for Nearly $1 Million
KMART CORP: Bags Nod to Consummate Purchase Pact with NetBrands
LA QUINTA CORP: Sandy Heilman Named VP for Electronic Marketing
LODGIAN: New York Court Confirms First Amended Joint Reorg. Plan
LTV: Asks Court to Fix Jan. 17 Non-Trade Admin. Claims Bar Date
LUBY'S INC: Seeks Waiver of Q4 Default Under Credit Agreement
M.A. GEDNEY: Seeking Court Nod to Use Lenders' Cash Collateral
MENTERGY INC: Inks Pact to Sell LearnLinc Assets to EDT Learning
MORGAN GROUP: Case Summary & Largest Unsecured Creditors
NABI: Says Cash Resources Sufficient to Meet Current Needs
NETIA HOLDINGS: Third Quarter 2002 Net Loss Tops $79 Million
OM GROUP: Taps CSFB as Financial Advisor and Suspends Dividend
ORGANOGENESIS: Fails to Maintain AMEX Min. Listing Requirements
P-COM INC: Closes Restructuring of 4-1/4% Sub. Convertible Notes
PEREGRINE SYSTEMS: Axios Unveils Migration Tools for Customers
PG&E NATIONAL: Selling 50% of Interest in Hermiston to Sumitomo
POLAROID CORP: Committee Proposes Uniform Settlement Procedures
POPE & TALBOT: Harmac Pulp Mill Resumes Operation after Repair
PRECISION AUTO: Closes Debt-to-Equity Conversion Transaction
PROVANT INC: Continues to be in Default Under Credit Agreement
RESCARE: Violates Financial Covenant Under Bank Agreement
RFS ECUSTA INC: Hires Bayard Firm as Bankruptcy Co-Counsel
SHELBOURNE: 568 Broadway JV Selling Assets for $87.5 Million
STAR MULTI CARE: Sternback & Solof Purchase 7% Preferred Shares
TALK AMERICA: Net Capital Deficit Narrows to $43MM at Sept. 30
UNIROYAL TECHNOLOGY: Committee Hires Blank Rome as Attorneys
US AIRWAYS: Asks Court to Approve Swap Financing Agreements
US INDUSTRIES: Fitch Drops Rating on 7.125% Notes to D from C
VENTAS INC: Completes $120 Million Trans Healthcare Transaction
WESTAR ENERGY: S&P Places BB+ Corp. Credit Rating on Watch Neg.
WHEELING-PITTSBURGH: Wants to Pay RBC Dain Fees as Loan Arranger
WILD OATS: Sept. 28 Working Capital Deficit Tops $70 Million
WINSTAR COMMS: Trustee Intends to Settle Avoidable Preferences
WORLDCOM INC: Obtains Approval to Implement Key Employee Program
WORLDCOM: Says Additional Restatements of Past Accounting Likely
XO COMMS: Court Approves Stipulation with Bank of America
* DebtTraders' Real-Time Bond Pricing
*********
AMERCO: Suspends Dividend Payment as Part of Debt Restructuring
---------------------------------------------------------------
AMERCO (Nasdaq: UHAL), the parent company for U-Haul
International, Inc., will not be making the dividend payment to
the Company's Series A, 8-1/2 percent preferred stockholders
(NYSE: AO+A), due December 1, 2002. The Company is presently in
discussions with bondholders and lenders concerning a consensual
reorganization of the Company's balance sheet. The Company
presently expects that process to be completed by the fiscal
year-ended March 31, 2003. When that process is complete, the
Company expects to make up any missed dividend payments.
"The completion of the Company's reorganization with our
bondholders and lenders will allow us to resume preferred
dividend payments," stated Joe Shoen, AMERCO Chairman of the
Board. "At this time, our focus continues to be on taking steps
to reduce debt and enhance our capital position. Several
options, including sale of assets, are under consideration. We
intend to emerge from this restructuring as a stronger, more
fiscally sound Company that will continue to deliver improved
performance."
After temporarily suspending the October 15, 2002 payment of the
Series-C 1997 Bond Backed Asset Trust notes, the Company
retained Crossroads, LLC, to assist in assessing the Company's
strategic financial alternatives. AMERCO has confidence that
the work in progress supports efforts to favorably restructure
its debt.
AMERCO is the parent company of U-Haul International, Inc.,
Republic Western Insurance Company, Oxford Life Insurance
Company and Amerco Real Estate Company. U-Haul is the largest
do-it-yourself moving and storage operator in North America. For
more information about AMERCO, visit http://www.uhaul.com
AMERICAN SKIING: Performance Capital Reports 17.9% Equity Stake
---------------------------------------------------------------
Performance Capital Group, LLC, a broker or dealer registered
under Section 15 of the Exchange Act, beneficially owns
3,355,000 shares of the common stock of American Skiing Company,
representing 17.9% of the total outstanding common stock of the
Company. Performance holds sole power both to vote, or direct
the voting of, and to dispose of, or direct the disposition of,
the entire amount of stock held.
Headquartered in Park City, Utah, American Skiing Company is one
of the largest operators of alpine ski, snowboard and golf
resorts in the United States. Its resorts include Killington
and Mount Snow in Vermont; Sunday River and Sugarloaf/USA in
Maine; Attitash Bear Peak in New Hampshire; Steamboat in
Colorado; and The Canyons in Utah. More information is
available on the Company's Web site, http://www.peaks.com
As reported in Troubled Company Reporter's October 7, 2002,
American Skiing signed an agreement with Textron Financial
Corporation to resolve loan defaults under its Grand Summit
Resort Properties Construction Loan Facility. The agreement
affects $42.6 million in outstanding real estate debt.
"This agreement is a significant milestone in the restructuring
of our real estate operations," said CEO B.J. Fair.
"Importantly, it allows us to meet our financial obligations to
the City of Steamboat Springs for agreed upon Mount Werner Rd.
and Transit Center improvements. In addition, it positions us
to move ahead with revitalized sales initiatives that will
accelerate the sell-down of unsold quartershare inventory and
further reduce real estate debt."
ARMSTRONG: Has Until July 14 to Make Lease-Related Decisions
------------------------------------------------------------
For the fourth time, Armstrong World Industries and its debtor-
affiliates obtained permission from the Court to extend their
deadline to decide whether to assume, assume and assign, or
reject unexpired non-residential real property leases until July
14, 2003.
DebtTraders says that Armstrong Holdings Inc.'s 9.0% bonds due
2004 (ACK04USR1) are trading at 58.50 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ACK04USR1for
real-time bond pricing.
AT&T CANADA: Will Hold 3rd Quarter 2002 Teleconference Today
------------------------------------------------------------
AT&T Canada Inc., has scheduled a teleconference call and
webcast to discuss third quarter 2002 financial and operating
results, and to provide a corporate update.
DATE: Thursday November 7, 2002
TIME: 11:00 a.m. Eastern
ACCESS NUMBER: 1.416.640.1907
REBROADCAST: 1.416.640.1917, pass code 217379 #
WEBCAST: http://www.attcanada.com
To participate in the teleconference, please call the access
number ten minutes prior to the scheduled start time and request
AT&T Canada's third quarter earnings teleconference. A live
webcast and a rebroadcast of the teleconference will be
available on the company's website http://www.attcanada.com.
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.
* * *
As previously reported in the October 22, 2002 issue of the
Troubled Company Reporter, S&P dropped several of its senior
unsecured debt ratings on AT&T Canada to Default level.
AT&T Canada Inc.'s 12% bonds due 2007 (ATTC07CAR2) are trading
at 15 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ATTC07CAR2
for real-time bond pricing.
BETHLEHEM STEEL: Says Making Progress Toward New Labor Agreement
----------------------------------------------------------------
In response to inquiries about the status of negotiations
between Bethlehem Steel Corporation (OTCBB:BHMSQ) and the United
Steelworkers of America and consolidation discussions with
International Steel Group, the following statement is
attributable to Robert S. Miller, Bethlehem's chairman and chief
executive officer:
"Since the commencement of Bethlehem's reorganization case on
October 15, 2001, Bethlehem's losses have been reduced, and the
corporation clearly would have reported net income so far this
year if it did not have the legacy expenses related to pension
and retiree healthcare obligations. Cash flow from operations is
positive, and liquidity, currently at about $260 million, is
expected to be adequate to provide time to complete a plan of
reorganization.
"We continue to believe that Bethlehem can emerge from chapter
11 as a healthy, viable stand-alone company by implementing a
competitive labor agreement and by substantially reducing legacy
costs for pensions and retiree healthcare. With respect to our
legacy costs, we believe the Pension Benefit Guaranty
Corporation will terminate Bethlehem's existing pension plan in
the next few months and that the recently passed Trade Act of
2002 could provide some assistance for healthcare costs to
certain pre-Medicare retirees after the pension plan is
terminated.
"Bethlehem Steel and the United Steelworkers of America (USWA)
entered into negotiations in early October and are making steady
progress toward a new, competitive labor agreement that will
allow Bethlehem Steel to reorganize as a stand-alone company to
serve its customers without interruption.
"The parties have reached preliminary agreement on a number of
important issues including a significant reduction in the number
of job classes. Both the USWA and Bethlehem are fully committed
to achieving an agreement while continuing operations.
"Bethlehem and the USWA also believe that additional value could
be achieved through consolidation. In that regard, Bethlehem has
agreed to a 60-day period of exclusivity with International
Steel Group during which time ISG and Bethlehem will complete
mutual due diligence for a possible combination of ISG's and
Bethlehem's steel-producing operations. During this period,
Bethlehem will continue to pursue its stand-alone plan of
reorganization."
Bethlehem Steel Corporation's 10.375% bonds due 2003 (BS03USR1),
DebtTraders says, are trading at 7 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BS03USR1for
real-time bond pricing.
BETHLEHEM STEEL: USWA Welcomes Possible Consolidation with ISG
--------------------------------------------------------------
The United Steelworkers of America said that it was encouraged
by the announcement that Bethlehem Steel and International Steel
Group have entered into an exclusive agreement to explore the
possible purchase of Bethlehem Steel by ISG.
"Our union has always supported a strong, consolidated American
steel industry," said USWA President Leo W. Gerard, "and we're
hopeful that the combination of ISG and Bethlehem could be an
important step in the right direction."
The union is currently in negotiations with both ISG and
Bethlehem for agreements that would enable both to survive and
become competitive as "stand-alone" companies.
Gerard noted, however, that "the union's overriding obligation
and objective is to represent the interests of our members and
retirees," and that any consolidation or stand-alone
restructuring plan "must be based on negotiations that result in
protecting our members and retirees, the communities in which
they live, and the nation's ability to make steel."
In September, the USWA's Basic Steel Industry Conference
expressed the union's willingness to begin bargaining with
financially distressed companies about more efficient ways of
operating their plants, and established a firm set of principles
for governing those negotiations.
The principles include a company's willingness to take necessary
steps to restructure financially in order to invest in its
facilities and meet its obligations; maintain existing levels of
wages and benefits; provide medical care for existing retirees
to the maximum extent possible; preserve our defined benefit
pension plans; and make a commitment that our members will share
in the company's successes upon return to profitability.
"Our goal is the survival of our jobs, our industry and the
well-being of our retirees," Gerard said. "We can get there
through consolidation, or through the restructuring of existing
companies, or through some combination of both."
BIOENVISION: Says New Financing Enough to Meet Liquidity Needs
--------------------------------------------------------------
Bioenvision is an emerging biopharmaceutical company. Its
primary business focus is the acquisition, development and
distribution of drugs to treat cancer. The Company has a broad
range of products and technologies under development, but its
two lead drugs are Clofarabine and Modrenal(R).
Bioenvision was incorporated as Express Finance, Inc., under the
laws of the State of Delaware on August 16, 1996, and changed
its name to Ascott Group, Inc., in August 1998 and further to
Bioenvision, Inc., in December 1998, at which time the Company
merged with Bioenvision, Inc., a development stage Company
primarily engaged in the research and development of products
and technologies for the treatment of cancer.
On February 1, 2002, Bioenvision completed the acquisition of
Pathagon Inc., a non-public company focused on the development
of novel anti-infective products and technologies. Pathagon's
principal products, OLIGON(R) and methylene blue, are ready for
market. Affiliates of SCO Capital Partners LLC, Bioenvision's
financial advisor and consultant, owned 82% of Pathagon prior to
the acquisition. Bioenvision acquired 100% of the outstanding
shares of Pathagon in exchange for 7,000,000 shares of its
common stock. With the acquisition, the Company added rights to
OLIGON(R) and methylene blue to its product portfolio.
Clinical trials for its products will be expensive and may be
time consuming, and their outcome is uncertain, but Bioenvision
must incur substantial expenses that may not result in any
viable products.
Before obtaining regulatory approval for the commercial sale of
a product, the Company must demonstrate through pre-clinical
testing and clinical trials that a product candidate is safe and
effective for use in humans. Conducting clinical trials is a
lengthy, time-consuming and expensive process. Bioenvision will
incur substantial expense for, and devote a significant amount
of time to pre-clinical testing and clinical trials.
Management believes that net proceeds from the May 2002 private
placement will be sufficient to continue currently planned
operations over the next 12 months, and Bioenvision will not
intend to raise any additional funds during that period in order
to fund operations. However, a key element of ita business
strategy is to continue to acquire, obtain licenses for, and
develop new technologies and products that it believes offer
unique market opportunities and/or complement its existing
product lines. The Company is not presently considering any such
transactions, and does not presently expect to acquire or sell
any significant assets over the coming 12 month period, but if
any such opportunity presents itself and it is deemed to be in
Company interests to pursue such an opportunity, it is possible
that additional financing would be required for such a purpose.
Bioenvision plans to utilize a portion of the proceeds of the
May 2002 private placement to conduct clinical trials of its
receptor modulation drug, trilostane, in the treatment of breast
and prostate cancer. Further laboratory studies will be
conducted to examine the effect of the drug on the hormone
receptor.
To date, the Company has incurred significant net losses,
including net losses of $5,735,981 for the year ended June 30,
2002. At June 30, 2002, it had a deficit accumulated of
$21,027,299. The Company anticipates that it may continue to
incur significant operating losses for the foreseeable future
and states that it may never generate material revenues or
achieve profitability and, if it does achieve profitability, it
may not be able to maintain profitability.
BLOUNT INT'L: Third Quarter EBITDA Jumps-Up 10% to $20.5 Million
----------------------------------------------------------------
Blount International, Inc., (NYSE: BLT) reported results for the
third quarter ended September 30, 2002. Sales were $121.5
million, a 7 percent increase from the prior year's third
quarter sales of $113.6 million. Earnings before interest,
taxes, depreciation, amortization, restructuring and non-
recurring costs (EBITDA) for the third quarter were $20.5
million, a 10 percent increase from last year's third quarter
EBITDA of $18.6 million. These sales and EBITDA figures exclude
the Sporting Equipment Group, which was sold in December of
2001. Restructuring costs of $0.3 million for the quarter, as
well as a $0.8 million loss recognized with the sale of the
corporate office building are excluded from this year's EBITDA.
There were no restructuring costs in the third quarter last
year. Net interest expense in the third quarter of $17.8
million is 25 percent lower than last year primarily due to a
lower debt level resulting from the repayment of a portion of
the senior debt from the proceeds of the sale of our Sporting
Equipment Group. Net loss for the third quarter was $3.5
million compared to the prior year's net loss of $6.2 million.
Included in this year's net loss is $1.7 million of expense
related to an adjustment on the loss on sale of the Sporting
Equipment Group and $0.8 million of expense related to
restructuring and loss on sale of the corporate office building.
This year's results reflect the non-amortization of goodwill due
to the company's adoption of Statement of Financial Accounting
Standards Number 142 "Goodwill and Other Intangible Assets" as
of January 1, 2002. Last year's third quarter included $0.7
million in goodwill amortization costs. Last year's third
quarter net loss included net income of $2.1 million from the
Sporting Equipment Group.
Year to Date Results
For the first nine months of 2002, Blount achieved sales of
$351.4 million, a slight increase from last year's sales of
$349.7 million. EBITDA for the first three quarters before
accounting for $6.4 million in costs related to restructuring
and a potential refinancing that was terminated was $61.4
million, a 6 percent increase over the prior year's EBITDA of
$57.9 million. This increase primarily reflects restructuring
actions taken earlier, including workforce reductions and a
plant closing in our Industrial and Power Equipment segment.
Net loss for the first nine months of 2002 was $9.5 million
compared to a net loss of $24.7 million for the same period of
2001. This year's results include $5.8 million related to the
restructuring, the loss on the sale of corporate assets, and
potential refinancing costs, and $1.7 million for the adjustment
to the loss on sale of the Sporting Equipment Group. Last
year's net loss for the first nine months included after tax
restructuring costs of $10.2 million and net income from the
Sporting Equipment segment of $3.8 million.
Commenting on third quarter results, James S. Osterman,
President and Chief Executive Officer, stated, "Our operating
performance in the third quarter improved solidly from a year
ago. The EBITDA growth was fueled by increased sales levels in
both segments and the reduced cost base within our Industrial
and Power Equipment Group. Looking forward, we remain focused
on cost reductions and efficiency improvements. We continue to
remain cautious about sales improvement for the balance of 2002
and 2003 due to the general economic environment. The
improvement we had expected in the second half has not occurred
and we do not foresee an upturn in the forestry industry in the
early part of 2003. The work we have completed in reducing
costs will provide contributions to income as we await the
anticipated upturn in the economy."
Segment Results
The Outdoor Products segment reported third quarter sales of
$84.9 million, a 3.5 percent increase from last year's sales of
$82.0 million. EBITDA for the quarter of $19.5 million compares
favorably to last year's EBITDA of $18.9 million. The higher
EBITDA reflects higher unit sales of lawn mowers from our Dixon
operation, as well as favorable product mix in our Oregon(R)
operations. Backlog in this segment is at $43.4 million, as
compared to $39.0 million in September of last year.
The Industrial and Power Equipment segment reported third
quarter sales of $36.6 million, a 16 percent increase from the
prior year's third quarter sales of $31.6 million. EBITDA for
the third quarter was positive at $3.0 million. This marks the
sixth consecutive quarter of positive EBITDA contribution and
compares to EBITDA of $1.2 million in last year's third quarter.
While the forestry equipment marketplace continues to be well
below normal levels, we have experienced better results due in
large part to earlier efforts to reduce breakeven levels through
a number of steps, including permanent and temporary plant
closures, headcount reductions and manufacturing
reorganizations. We continue, however to be cautious about the
economic environment and the forestry market.
Blount International, Inc., is a diversified international
company operating in two principal business segments: Outdoor
Products and Industrial and Power Equipment. Blount
International, Inc., sells its products in more than 100
countries around the world.
* * *
Standard & Poor's lowered its corporate credit, senior secured,
and subordinated debt ratings on Blount Inc. At the same time,
all the ratings were removed from CreditWatch where they were
placed October 25, 2001. The outlook is negative.
In addition, Standard & Poor's affirmed its bank loan rating on
Blount. The company's bank loan is now rated one notch higher
than the corporate credit rating, reflecting the facility's
senior secured and first priority claim status offering
reasonable recovery prospects.
The company's $150 million senior secured notes are now rated
two notches below the corporate credit rating. The senior notes
share equally and ratably in only certain of the assets relative
to the bank facility, which has a first priority claim on the
company's current assets. Therefore the notes would be in a
disadvantaged position in a default situation and full recovery
prospects would be unlikely.
The downgrades reflect Blount's very weak financial profile,
which offsets its strong position for outdoor products, and
decent position for industrial products. The rating actions take
into account the recent sale of the company's Sporting Equipment
Group (SEG), which helped reduce debt, however, the company's
debt burden remains onerous, not withstanding the sale.
Additionally, Standard & Poor's expects credit protection
measures to remain weak over the intermediate term.
Ratings Lowered, Off CreditWatch
Blount Inc. TO FROM
Corporate credit rating B- B
Senior secured debt CCC B
Subordinated debt CCC CCC+
Rating Affirmed, Off CreditWatch
Blount Inc.
Bank loan rating B
BORDEN CHEMICALS: Asks Court to Move Lease Decision Deadline
------------------------------------------------------------
Borden Chemicals and Plastics Operating Limited Partnership and
its debtor-affiliates ask the U.S. Bankruptcy Court for the
District of Delaware to give them more time to assume, assume
and assign, or reject unexpired nonresidential real property
leases. The Debtors tell the Court that they need until
April 24, 2003, to make decisions about their unexpired leases.
As was previously reported, the Debtors have been considering
various strategic alternatives, including sales of substantially
all of their assets. Potential purchasers of BCP's remaining
assets may be interested in having the Debtors assume some or
all unexpired leases associated with the remaining assets and
assign them to the purchasers.
Moreover, the potential purchasers say they require additional
time to coordinate their separate and cooperative analyses of
these issues and negotiate a mutually acceptable strategy. The
Debtors assert that the opportunity for potential purchasers of
the Company's assets to express interest in assignment of the
leases is imperative for obtaining the best and highest offers
for the assets.
Borden Chemicals and Plastics Operating Limited Partnership,
producer PVC resins, filed for chapter 11 protection on April 3,
2001. Michael Lastowski, Esq., at Duane, Morris, & Hecksher
represents the Debtors in their restructuring efforts.
Borden Chemical & Plastics' 9.50% bonds due 2005 (BCPU05USR1),
DebtTraders says, are trading at half a penny on the dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BCPU05USR1
for real-time bond pricing.
BRIGHTPOINT INC: Reports Improved Results for Third Quarter 2002
----------------------------------------------------------------
Brightpoint, Inc. (NASDAQ:CELL), whose corporate credit is
currently rated by Standard & Poor's at B, reported its
financial results for the third quarter ended September 30,
2002. Unless otherwise noted, amounts pertain to the third
quarter of 2002. Revenue was $345 million, representing an
increase of 10% from the second quarter of 2002 ($314 million)
and a decrease of 7% from the third quarter of 2001 ($371
million). Loss from continuing operations was $7.5 million,
including an $8.3 million non-cash investment impairment charge
related to the Company's investment in Chinatron Group Holdings
Limited. For the second quarter of 2002, the loss from
continuing operations was $7.0 million and for the third quarter
of 2001, income from continuing operations was $434 thousand.
Net income was $9.5 million, including an extraordinary gain on
debt extinguishment, net of tax, of $18.7 million. For the
second quarter of 2002, the Company reported a net loss of $5.2
million, including an extraordinary gain on debt extinguishment,
net of tax, of $7.5 million and a loss from discontinued
operations of $5.8 million.
For the third quarter of 2001, the Company reported a net loss
of $6.9 million, which included a loss from discontinued
operations of $7.3 million. The financial results stated above
and herein reflect the reclassification of the results of
Brightpoint's Middle East operations, which were divested in the
third quarter of 2002, to discontinued operations in all periods
presented.
For the nine months ended September 30, 2002: revenue was $969
million, representing a decrease of 5% from the same period in
2001 ($1.024 billion); loss from continuing operations was $20.3
million, including an $8.3 million non-cash investment
impairment charge related to the Company's investment in
Chinatron; and net loss was $43.7 million, which included a
cumulative effect of a change in accounting principle (SFAS
142), net of tax, of $40.7 million, a loss from discontinued
operations of $8.8 million and an extraordinary gain on debt
extinguishment, net of tax, of $26.2 million. For the nine
months ended September 30, 2001, the Company reported a net loss
of $6.7 million, which included a loss from discontinued
operations of $8.4 million, and an extraordinary gain on debt
extinguishment, net of tax, of $4.6 million.
Pro forma income from continuing operations, for the third
quarter of 2002, was $781 thousand, excluding the $8.3 million
non-cash investment impairment charge referred to above.
For the nine months ended September 30, 2002, pro forma loss
from continuing operations, was $12.0 million, excluding the
non-cash impairment charge. A reconciliation of pro forma income
from continuing operations to income (loss) from continuing
operations in accordance with GAAP is provided in a supplemental
table at the end of this release.
During the third quarter of 2002, the Company repurchased
162,706 of its outstanding zero-coupon, subordinated convertible
notes due in the year 2018. The Convertible Notes were purchased
for a total cost of $54 million ($332 per Convertible Note)
and had an accreted value of $88 million ($542 per Convertible
Note). The Company recorded an extraordinary gain on debt
extinguishment, net of tax, of $18.7 million. As of September
30, 2002, 34,327 Convertible Notes with an accreted value of
$18.6 million, were outstanding. To date, in the fourth quarter
of 2002, using internally generated cash, the Company
repurchased an additional 12,395 Convertible Notes for a total
cost of $5.8 million ($472 per Convertible Note), which had an
accreted value of $6.7 million ($544 per Convertible Note).
Currently, there are 21,932 Convertible Notes outstanding with
an accreted value of $11.9 million and on March 11, 2003,
holders of the outstanding Convertible Notes may require the
Company to repurchase them at the accreted value of $12.1
million.
The Company recorded a non-cash investment impairment charge of
$8.3 million with regards to its ownership of $21 million face
value Class B Preference shares in Chinatron by reducing the
carrying value from $10.3 million to $2 million. During the
third and fourth quarters of 2002, for liquidity reasons, the
Company elected not to participate in two financing rounds and
agreed to change the terms of the Preference Shares which would
materially reduce the Company's ownership interest if the
Company were to convert the Preference Shares to ordinary
shares. An independent nationally recognized valuation firm
estimated the fair market value of the investment and, as a
result, the Company adjusted the carrying value accordingly and
treated these events as a permanent impairment as of September
30, 2002.
Revenue growth from the second quarter of 2002 was driven by
continued growth in the Asia Pacific region and in Europe, where
most markets experienced increases in demand. The Americas
region grew slightly, but was impacted by continued soft demand
in the US market.
Gross margin improved to 6.1% from the second quarter of 2002
(4.5%) and from the third quarter of 2001 (5.9%). The
improvement in gross margin over the second quarter of 2002 is
attributable to a one-time loss in the second quarter of 2002
related to a purchase obligation to an accessory vendor and, in
the third quarter of 2002, a significant reduction of excess and
obsolescence costs and improved pricing management, sales mix
planning, inventory planning and operational efficiencies.
Selling, general and administrative ("SG&A") expenses decreased
$3.1 million, or 15% from the second quarter of 2002 to $18.1
million. SG&A expenses for the same period of 2001 were $18.7
million. As a percentage of revenue, SG&A expenses declined to
5.2% from 6.7% in the second quarter 2002. Included in SG&A
expenses are one-time charges of $0.6 million and $1.5 million,
in the third and second quarters of 2002, respectively. One-time
charges in the third quarter of 2002 pertain primarily to the
relocation of the Company's corporate offices into the Company's
North America headquarters and severance costs related to
restructuring a merchandising inventory business line within our
German operations. One-time charges in the second quarter
of 2002 pertained to the severance payments of the Company's
former Chief Financial Officer and other employees in worldwide
cost reduction measures. The improvement in the third quarter of
2002, measured as a percent of revenue, was driven by cost
reduction action taken in the second quarter of 2002, tight
controls on expenses, and the effect of a higher revenue base.
Operating income from continuing operations was $3.1 million, a
$10.0 million improvement from the second quarter of 2002 ($6.9
million loss) and a slight improvement from the third quarter of
2001 ($3.0 million income).
Operating income from continuing operations before depreciation
and amortization was $6.6 million. This compares to an operating
loss from continuing operations before depreciation and
amortization of $4.0 million in the second quarter of 2002 and
an operating income from continuing operations before
depreciation and amortization of $6.0 million in the third
quarter of 2001.
Loss from discontinued operations of $1.6 million was primarily
as a result of the divestiture of the Company's Middle East
operations.
Cash and cash equivalents (unrestricted) were approximately
$27.8 million. Pledged cash was $11.7 million. The cash
conversion cycle was 14 days, a decrease of 9 days from the
second quarter of 2002 and a decrease of 13 days from the third
quarter of 2001. Net cash provided by operating activities
during the third quarter of 2002 was approximately $2.3 million.
Capital expenditures were $0.8 million during the third quarter
of 2002. Total debt, including the accreted value of the
Convertible Notes and bank borrowings, was $38.6 million.
Brightpoint recently announced the sale of certain assets and
the shares of one of its subsidiaries in its Mexico operations.
The Company has received $1.7 million in cash and $1.1 million
in the form of a note receivable due in November and December
2002. The Company expects to record a loss on the sale in
discontinued operations within a range of $4.5 million to $5.0
million in the fourth quarter. The Company may also receive a
tax benefit of $1.4 million resulting from a planned liquidation
of the remaining assets and legal entities. The expected loss
includes a non-cash foreign currency translation loss of
approximately $3.4 million that was reported in the balance
sheet in the accumulated other comprehensive income line.
In the fourth quarter of 2002, the Company expects to earn
income from continuing operations within a range of $1 million
to $2 million, or within a range of $0.12 per share to $0.25 per
share.
"In the past several quarters, Brightpoint concentrated its
efforts in executing upon its restructuring plans, strengthening
its financial position, and returning to profitability while
maintaining the quality of service our customers and vendor-
partners rely on to succeed in a very competitive environment,"
said Robert J. Laikin, Brightpoint's Chief Executive Officer.
"This quarter was a turning point for Brightpoint."
"In the second quarter, we embarked on a mission to reach
profitability, address the Convertible Notes and strengthen the
balance sheet. I am pleased to report the significant progress
we have made in these areas," said Frank Terence, Brightpoint's
Chief Financial Officer. "On profitability, we have closed the
gap in operating income from losses in the first half of 2002 of
$11.1 million to an operating income of $3.1 million in the
third quarter of 2002. With regards to the Convertible Notes,
using internally generated cash supplemented by $15 million in
borrowings, we have, as of [Tues]day, repurchased 91% of the
Convertible Notes that were outstanding as of the first quarter
of 2002 and avoided the traditional debt restructuring plans
that are often dilutive to shareholders. In terms of
strengthening the balance sheet, our cash conversion cycle was
reduced from 31 days in the first quarter of 2002 to 14 days in
the third quarter of 2002, our debt to total capitalization
ratio has decreased from 54% in the first quarter of 2002 to 27%
in the third quarter of 2002, and stockholders' equity was $107
million. We will continue to run our business in a streamlined
and conservative fashion with the goal of rebuilding our cash
position and to prepare Brightpoint for future growth."
Brightpoint is one of the world's largest distributors of mobile
phones. Brightpoint supports the global wireless
telecommunications and data industry, providing quickly
deployed, flexible and cost effective third party solutions.
Brightpoint's innovative services include distribution, channel
management, fulfillment, eBusiness solutions and other
outsourced services that integrate seamlessly with its
customers. Additional information about Brightpoint can be found
on its Web site at http://www.brightpoint.comor by calling its
toll-free Information and Investor Relations line at 877-IIR-
CELL (877-447-2355).
BUDGET GROUP: Wins Approval to Hire Eversheds as Foreign Counsel
----------------------------------------------------------------
Budget Group Inc., and its debtor-affiliates obtained the
Court's authority to employ and retain Eversheds as their
special counsel to foreign matters pursuant to Section 327 of
the Bankruptcy Code and Federal Rules of Bankruptcy Procedure
2014.
Eversheds will bring:
-- expertise with respect to English insolvency/bankruptcy
related issues,
-- expertise with respect to French insolvency/bankruptcy
related issues,
-- commercial, corporate, employment and property law advice in
respect of assets of the Debtors situated in the United
Kingdom and in France, and
-- expertise with respect to international franchise
arrangements and related issues governed by English law.
The Debtors intend to compensate Eversheds based on the standard
hourly rates of its professionals:
Partners - 365 Pounds
Assistant Solicitors - 165 to 275 Pounds
Trainee Solicitors - 110 Pounds
(Budget Group Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
CALPINE CORP: Renegotiates Power Sales Agreement with Lodi City
---------------------------------------------------------------
Calpine Corporation (NYSE: CPN), the San Jose, California-based
independent power company, has renegotiated a 10-year power
sales agreement with the City of Lodi. Under the terms of the
revised contract, Calpine's obligations to deliver electricity
have ceased, and the parties have agreed to an amount to be paid
to Calpine in settlement of the City of Lodi's obligations under
the contract. The City of Lodi has the option to make
installment payments to Calpine for nine years or elect to
prepay its total obligation to Calpine at a predetermined
discount rate. The City has until November 30, 2002 to select a
payment option. Calpine has since sold this renegotiated
contract and monetized the installment payments under a separate
agreement with a major financial institution. The company has
received an initial payment of $33.2 million and expects to
receive an additional payment of up to $8.3 million.
"Calpine continues to advance its asset sales program to enhance
liquidity and our financial strength," stated Calpine CFO Bob
Kelly. "This transaction reflects Calpine's focused, balanced
approach to strengthening our cash position, while retaining the
long-term value of Calpine's core business."
Based in San Jose, California, Calpine Corporation is an
independent power company that is dedicated to providing
wholesale and industrial customers with clean, efficient,
natural gas-fired power generation. It generates and markets
power through plants it develops, owns and operates in 23 states
in the United States, three provinces in Canada and in the
United Kingdom.
Calpine also is the world's largest producer of renewable
geothermal energy, and it owns approximately 1.0 trillion cubic
feet equivalent of proved natural gas reserves in Canada and the
United States. The company was founded in 1984 and is publicly
traded on the New York Stock Exchange under the symbol CPN. For
more information about Calpine, visit its Web site at
http://www.calpine.com.
* * *
As reported in the April 3, 2002 issue of the Troubled Company
Reporter, Standard & Poor's lowered its corporate credit rating
on Calpine Corp., to double-'B' from double-'B'-plus. The
outlook is stable. At the same time, Standard & Poor's lowered
its rating on Calpine's senior unsecured debt to single-'B'-plus
from double-'B'-plus, two notches below the corporate credit
rating; its rating on the "SLOBS" (Tiverton/Rumford and
Southpoint/Broad River/Rockgen) to double-'B' from double-'B'-
plus; and its rating on the convertible preferred stock to
single-'B' from single-'B'-plus.
CANADIAN SATELLITE: S&P Puts B+ Credit Rating On Watch Positive
---------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on
Canadian Satellite Communications Inc., including the single-
'B'-plus long-term corporate credit rating, and its 100%-owned
subsidiary, Star Choice Communications Inc., on CreditWatch with
positive implications.
The CreditWatch placements reflect the expectation that in the
future, Standard & Poor's ratings approach on Cancom and its
100% parent, Shaw Communications Inc., will be either on a
partially or fully consolidated basis rather than on a stand-
alone basis. As a result, the ratings on Cancom are expected to
benefit from Shaw's significant liquidity and lower refinancing
risk. The ratings on Shaw are expected to be negatively affected
by the higher perceived business and financial risk profiles of
Cancom.
"Standard & Poor's review will focus on the extent of linkage
between Cancom and Shaw from a ratings perspective, including
factors such as strategic importance, required regulatory
separation, and funding support," said Standard & Poor's credit
analyst Barbara Komjathy.
Partial consolidation between Shaw and Cancom would have a
smaller ratings impact on Cancom, although the ratings could be
increased by more than one notch if they were to be fully
equalized.
In the past, the ratings on Cancom and Shaw reflected the stand-
alone creditworthiness of each, predicated on Cancom's fully
funded, largely nonrecourse debt profile, and some degree of
regulatory separation between the two companies. In addition,
Standard & Poor's viewed Cancom as less strategic to Shaw, given
the start-up nature of Cancom's direct-to-home (DTH) satellite
subsidiary, Star Choice.
Moreover, in April 2002, the Canadian Radio-television and
Telcommunications Commission (CRTC) modified the structural
separation required between the companies to allow Star Choice
and Shaw to integrate accounting and other administrative
functions. Thus, Star Choice converted to Shaw's billing system
in the fourth quarter of 2002, indicating a greater degree of
integration between the two companies. Nevertheless, the CRTC
continues to require Shaw and Star Choice to maintain separate
sales, marketing, and customer service functions. Standard &
Poor's views Cancom's liquidity as tight and its refinancing
risk as greater under current market conditions. The above
factors, coupled with Cancom's increased strategic importance to
Shaw as it approaches break-even cash flow generation, point to
greater ratings linkage between the companies. Shaw has
indicated, however, that its policy to finance Cancom and its
subsidiaries independently of Shaw, to the extent that this is
possible, has not changed.
Standard & Poor's expects to resolve the CreditWatch placement
shortly, following a detailed review of the parent-subsidiary
relationship between Shaw and Cancom. Standard & Poor's also
will assess the business and financial risk profiles of both
companies in light of recently announced 2002 results and growth
targets.
CARBIDE/GRAPHITE: Completes Asset Sale to Carbide Industries
------------------------------------------------------------
On November 4, 2002, Carbide Industries LLC announced that it
had completed the purchase of substantially all of the operating
assets of the Carbide Products Business Unit from The
Carbide/Graphite Group, Inc., a Pittsburgh based manufacturer of
graphite electrodes, needle coke and calcium carbide based
products.
Carbide Industries LLC is a newly created and privately owned
company that was formed expressly to purchase and operate the
facilities of C/G's Carbide Products Business Unit. The new
company will continue to produce quality calcium carbide
products and acetylene at its plants in both Louisville and
Calvert City, Kentucky.
Ara Hacetoglu, Carbide Industries President commented, "The
uncertainties of operating under bankruptcy protection has made
the past year very difficult for all concerned. With the
formation of our new company, we have an opportunity to
establish ourselves as the preferred supplier of calcium carbide
based products in North America and to secure long term
relationships with our stakeholders."
CMS ENERGY: Board of Directors Declares Common Stock Dividend
-------------------------------------------------------------
CMS Energy Corporation (NYSE: CMS) -- whose senior unsecured
debt is currently rated by Fitch at B+ -- announced that its
Board of Directors has declared a quarterly dividend on its
common stock.
The Board declared a dividend of 18 cents per share on CMS
Energy common stock, payable November 22, 2002, to shareholders
of record on November 11, 2002.
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.
For more information on CMS Energy, please visit its Web site at
http://www.cmsenergy.com
CNH GLOBAL: S&P Affirms & Removes Low-B Ratings from CreditWatch
----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its double-'B'
corporate credit ratings on CNH Global N.V., and related
entities and removed them from CreditWatch, where they were
placed on May 30, 2002. Consolidated debt at September 30, 2002,
totaled about $8.7 billion. The outlook is stable.
Lake Forest, Illinois-based CNH is a leading producer of
agricultural and construction equipment.
"Since the spring of 2002, CNH has been evaluating potential
transactions for its financing receivables portfolio to reduce
its funding requirements and balance sheet debt, but thus far no
deals have emerged, and the potential for transactions is
uncertain," said Standard & Poor's credit analyst Dan DiSenso. A
transaction for the firm's North American financing receivables,
similar to the joint venture it recently formed with BNP Paribas
Lease Group regarding its European retail financing portfolio,
could result in a modest upgrade.
Ratings factor in strong liquidity support, in the form of
intracompany loans and loan guarantees, from parent company
Italy-based Fiat SpA (--/Watch Neg/A-3), an 85.3% equity owner.
The June 2002 $1.3 billion exchange of debt owed to Fiat into
new common CNH shares provides further evidence of Fiat's
commitment to CNH. Moreover, exercise of the 2004 Fiat Auto put
option would increase the importance of CNH to Fiat. Ratings on
CNH Global as a stand-alone entity would likely be lower.
Ratings also reflect CNH's average business profile as one of
the world's two leading agricultural equipment producers and
third largest manufacturer of construction equipment, offset by
weak credit measures that are expected to improve only gradually
over the intermediate term.
Ratings stability is envisioned based on an expectation of
improving operating performance, a strengthening financial
profile, and continuing strong liquidity support from Fiat.
COLUMBIA CENTER: S&P Downgrades Class E Note Rating to BB+
----------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on
classes C, D, and E of Columbia Center Trust's commercial
mortgage pass-through certificates series 2000-CCT. At the same
time, the ratings on the remaining two classes are affirmed.
The rating actions reflect the high percentage of lease
rollovers at the property securing the trust at a time when the
Seattle, Wash., real estate office market is weak. The weakness
in this region's real estate office market is offset by strong
sponsorship (Equity Office Properties; triple-'B'-plus, and New
York State Common Retirement Fund), and experienced property
management.
Similar to other markets, Seattle's central business district
has experienced a weakness in office occupancy and rents. So
far, these conditions have resulted in a modest decline in the
operating performance of the property, based on the trailing 12-
month (ending September 2002) net operating income. However, the
risk of greater declines in the operating performance of the
property is possible, since approximately 30% of its space rolls
in the next 15 months and the current occupancy at 85%, is down
from 96% occupancy at issuance. Standard & Poor's analysis,
based on lower rents, higher tenant improvement and leasing
commission costs, resulted in a DSCR of 1.40 times and a LTV
ratio of 67.2%, compared to a DSCR of 1.50x and a LTV ratio of
59.6% at issuance.
The property, the Bank of America Tower, was built in 1985 and
consists of a 1.44 million sq. ft., 76-story office tower with
33,694 sq. ft. of retail space, a six-level underground parking
garage, and an adjoining five-story, 21,278 sq. ft. office
building that was built in 1909, known as the Columbia House.
The property is located in the financial district section of
Seattle's CBD. Five tenants occupy approximately 55% of
rentable space and contribute a similar portion of the in-place
gross revenue. Of the top five tenants, Heller, Ehrman, et al
(13% of gross leasable area (GLA)), has extended its lease
expiring in August 2003 until August 2008. However, Preston,
Gates, et al (13% of GLA) will not be renewing its lease, which
expires in January 2003. Preston, Gates occupies floors 48
through 55; the average rent for this space is $33 per sq. ft.
In addition, approximately 159,000 sq. ft of the smaller spaces
are scheduled to roll over by year-end 2003.
The office market in the Seattle CBD has changed abruptly since
this transaction was issued in 2000. This market posted positive
net absorption and a low vacancy rate of 2.3% at the end of 1999
and into 2000. At the end of 1999, the average asking rents were
in the mid- to high-$30 per sq. ft. range, with prime buildings
commanding as much as $45 per sq. ft. As of the second quarter
2002, the CBD market vacancy was at 9.1%. Additionally, Cushman
& Wakefield projects that by the end of the first quarter 2003,
the vacancy rate for the CBD's financial district will increase
to 15% due to new construction. The availability of space has
effectively help decrease the average asking rental rates to the
low-$30 per sq. ft. range for the CBD's financial district.
Currently, rents at the property range from $27 to $37 per sq.
ft.
The Bank of America Tower is one of tallest buildings in the
Northwest and is one of the region's most recognizable
properties. The property occupies an entire city block in an
area of the Seattle CBD that is considered to be 100% built out.
Standard & Poor's lease rollover risk concerns are somewhat
mitigated due to: the in-place rents are not much above current
market, so the downside risk is limited at rollover; a leasing
commission and tenant improvement reserve fund was set up at
issuance to mitigate the near-term lease expirations; and the
strong financial backing of the two sponsors.
The borrower, EOP-Columbia Center LLC, is controlled by equity
Office Properties Trust (triple-'B'-plus), the nation's largest
office REIT. Equity Office Properties also manages the property.
The current insurance policy, which includes terrorism coverage,
expires in February 2003. The transaction is a sequential-pay
structure, which pays interest only based on LIBOR plus 115
basis points. The structure includes a hard lockbox. The
scheduled maturity date is December 14, 2004.
RATINGS LOWERED
Columbia Center Trust
Commercial mortgage pass-thru certs series 2000-CCT
Rating
Class To From Balance (Mil. $)
C A- A+ 20.4
D BBB A- 16.9
E BB+ BBB 20.2
RATINGS AFFIRMED
Class Rating Balance (Mil. $)
A AAA 114.5
B AA 22.9
CONTOUR ENERGY: Court Sets Confirmation Hearing for December 4
--------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Texas
approved the First Amended Disclosure Statement explaining
Contour Energy Co., and its debtor-affiliates' First Amended
Joint Plan of Reorganization.
The Honorable Judge William R. Greendyke approved the Debtors'
Disclosure Statement in all respects, finding that the document
contains "adequate information" within the meaning of 11 U.S.C.
Sec. 1125 and gives creditors the right amount of the right kind
of information to make informed voting decisions.
A hearing to consider confirmation of the Plan will commence on
December 4, 2002 at 1:30 p.m. at Courtroom 403, 515 Rusk, 4th
Floor, Houston, Texas 77002 before Judge Greendyke. Written
objections to confirmation of the Plan, if any, are due by
November 18, 2002.
Contour Energy Co., a company engaged in the exploration,
development acquisition and production of oil and natural gas
primarily in south and north Louisiana, the Gulf of Mexico and
South Texas, filed for chapter 11 protection on July 15, 2002.
John F. Higgins, IV, Esq., and Porter & Hedges, LLP represents
the Debtors in their restructuring efforts. When the Company
filed for protection from its creditors, it listed $153,634,032
in assets and $272,097,004 in debts.
CRESCENT REAL ESTATE: Meets Third Quarter 2002 Earnings Guidance
----------------------------------------------------------------
Crescent Real Estate Equities Company (NYSE:CEI) announced
results for the third quarter 2002. Funds from operations for
the three months ended September 30, 2002 was $50.0 million,
which met the Company's earnings guidance and analyst consensus
earnings estimate. FFO for the nine months ended September 30,
2002 was $167.3 million. These compare to $63.0 million for the
three months ended September 30, 2001 and $216.6 million for the
nine months ended September 30, 2001.
According to John C. Goff, Chief Executive Officer, "We met our
earnings expectation for the third quarter. As our country
continues to experience a weak economy and world uncertainties,
office demand has remained soft. While we wait for job growth to
return to our markets, we are focused on taking care of our
customers and efficiently operating our business. We have also
used this time to further our office investment strategy by
completing two joint ventures on existing assets, Miami Center
in Miami and Three Westlake Park in Houston, selling Reverchon
Plaza in Dallas, and strategically recycling capital by
acquiring Johns Manville Plaza in Denver."
Net income available to common shareholders for the three months
ended September 30, 2002 was $21.2 million. Net income available
to common shareholders for the nine months ended September 30,
2002 was $38.5 million. These compare to $19.1 million for the
three months ended September 30, 2001 and $58.5 million for the
nine months ended September 30, 2001.
On October 15, 2002, Crescent announced that its Board of Trust
Managers declared cash dividends of $.375 per share for Common,
$.421875 per share for Series A Convertible Preferred, and
$.59375 per share for Series B Redeemable Preferred. The
dividends are payable November 15, 2002, to shareholders of
record on October 31, 2002.
Business Sector Review
Office Sector (67% of Gross Book Value of Real Estate Assets as
of September 30, 2002)
Operating Results
Office property same-store net operating income declined 2.6%
for the three months ended September 30, 2002 over the same
period in 2001 for the 24.1 million square feet of office
property space owned during both periods. Average occupancy for
these properties for the three months ended September 30, 2002
was 89.7% leased compared to 93.0% leased for the same period in
2001. As of September 30, 2002, the overall office portfolio was
90.7% leased based on executed leases. During the three months
ended September 30, 2002 and 2001, Crescent received $3.0
million and $3.7 million, respectively, of lease termination
fees. Crescent's policy is to exclude lease termination fees
from its same-store NOI calculation.
Office property same-store NOI declined 2.0% for the nine months
ended September 30, 2002 over the same period in 2001 for the
24.1 million square feet of office property space owned during
both periods. Average occupancy for these properties for the
nine months ended September 30, 2002 was 90.1% leased compared
to 93.2% leased for the same period in 2001. During the nine
months ended September 30, 2002 and 2001, Crescent received $4.8
million and $7.7 million, respectively, of lease termination
fees.
The Company leased 1.4 million net rentable square feet during
the three months ended September 30, 2002, of which 1.1 million
square feet was renewed or re-leased. The weighted average FFO
net effective rental rate (rental rate less operating expenses)
decreased 13% over the expiring rates for the renewed or re-
leased leases, all of which have commenced or will commence
within the next twelve months. Tenant improvements related to
these leases were $1.85 per square foot per year and leasing
costs were $1.11 per square foot per year.
The Company leased 3.4 million net rentable square feet during
the nine months ended September 30, 2002, of which 2.2 million
square feet was renewed or re-leased. The weighted average FFO
net effective rental rate (rental rate less operating expenses)
decreased 3% over the expiring rates for the renewed or re-
leased leases, all of which have commenced or will commence
within the next twelve months. Tenant improvements related to
these leases were $1.44 per square foot per year and leasing
costs were $.88 per square foot per year.
Denny Alberts, President and Chief Operating Officer, commented,
"Although the national office market is challenging, we have
been successful in addressing 66% of our space expiring in the
fourth quarter 2002. Of the 3.6 million square feet expiring in
2003, we have already addressed 68%, and in Houston,
specifically, we have addressed 83%. We anticipate our
occupancies on average to remain relatively flat over the next
several quarters."
Acquisition
On August 29, 2002, Crescent acquired Johns Manville Plaza, a
29-story, 675,000 square foot Class A office building located in
downtown Denver, adjacent to an existing Crescent office tower.
The two properties now comprise the Denver City Center, a
complex with shared operations and a common area plaza for its
customers. The property was acquired for $91.2 million.
Joint Ventures
On August 21, 2002, Crescent completed the joint venture of
Three Westlake Park, a 415,000 square foot office property
located in the Katy Freeway submarket of Houston. GE Pension
Trust purchased an 80% interest in the venture, which, including
financing, generated $47.1 million in proceeds for Crescent.
Crescent retained a 20% interest in the venture and continues to
provide property management and leasing services.
On September 25, 2002, Crescent completed the joint venture of
Miami Center, a 780,000 square foot office property located in
downtown Miami. JPMorgan Fleming Asset Management purchased a
60% interest in the venture, which, including financing,
generated $110.9 million in proceeds for Crescent. Crescent
retained a 40% interest in the venture and continues to provide
property management services.
Development
On September 16, 2002, 5 Houston Center, an office development
located in downtown Houston, was completed and placed into
service. The $117 million project, owned by Crescent and
JPMorgan Fleming Asset Management, was 88% leased and 34%
occupied as of September 30, 2002.
Dispositions
On September 20, 2002, Crescent sold Reverchon Plaza, a 374,000
square foot office property located in the Uptown/Turtle Creek
submarket in Dallas. The sale generated net proceeds of
approximately $29.2 million and a gain of $500,000.
On September 30, 2002, Crescent sold a parcel of land in
Washington, D.C. The sale generated net proceeds of $15.1
million and a loss of $0.9 million, which had already been
recorded as an impairment in the second quarter.
Resort and Residential Development Sector (22% of Gross Book
Value of Real Estate Assets as of September 30, 2002)
Destination Resort Properties
Based on actual performance of Crescent's five resort
properties, same-store NOI declined 13% for the three months
ended September 30, 2002 over the same period in 2001. The
average daily rate remained flat and revenue per available room
increased 2% for the three months ended September 30, 2002
compared to the same period in 2001. Weighted average occupancy
was 74% for the three months ended September 30, 2002 compared
to 72% for the three months ended September 30, 2001.
Based on actual performance of Crescent's five resort
properties, same-store NOI declined 9% for the nine months ended
September 30, 2002 over the same period in 2001. The average
daily rate decreased 1% and revenue per available room decreased
4% for the nine months ended September 30, 2002 compared to the
same period in 2001. Weighted average occupancy was 71% for the
nine months ended September 30, 2002 compared to 72% for the
nine months ended September 30, 2001.
On September 1, 2002, Crescent entered into an agreement with
Fairmont Hotels & Resorts, Inc.'s luxury management company for
Fairmont to manage the operations of Crescent's Sonoma Mission
Inn & Spa in Sonoma County, California. At that time, Fairmont
also purchased a 19.9% equity interest in the resort and will
make a loan to the venture for property renovation.
On October 21, 2002, Crescent effectively increased its equity
interest in the Ritz Carlton Palm Beach resort in Manalapan,
Florida, from 25% to 50%, for a total of $14.0 million equity
interest. The remaining 50% interest is held by a new joint-
venture partner, Westbrook Real Estate Partners. Together,
Crescent and Westbrook were able to acquire their interests at,
what we believe to be, considerable discounts to replacement
cost. Crescent's interest will be held in an unconsolidated
subsidiary of Crescent's operating partnership. The original
equity interest was held as an unconsolidated investment within
Crescent Resort Development, Inc.
Upscale Residential Development Properties
Crescent's overall residential investment generated $4.3 million
and $32.4 million in FFO for the three and nine months ended
September 30, 2002, respectively.
Investment Sector (11% of Gross Book Value of Real Estate Assets
as of September 30, 2002)
Business-Class Hotel Properties
Based on actual performance of Crescent's four business-class
hotel properties, same-store NOI increased 1% for the three
months ended September 30, 2002 over the same period in 2001.
The average daily rate decreased 2%, while revenue per available
room decreased 1% for the three months ended September 30, 2002
compared to the same period in 2001. Weighted average occupancy
was 73% for the three months ended September 30, 2002 compared
to 72% for the three months ended September 30, 2001.
Based on actual performance of Crescent's four business-class
hotel properties, same-store NOI declined 3% for the nine months
ended September 30, 2002 over the same period in 2001. The
average daily rate decreased 3%, while revenue per available
room decreased 5% for the nine months ended September 30, 2002
compared to the same period in 2001. Weighted average occupancy
was 71% for the nine months ended September 30, 2002 compared to
72% for the nine months ended September 30, 2001.
Temperature-Controlled Logistics Investment
AmeriCold Logistics' same-store EBITDAR (earnings before
interest, taxes, depreciation and amortization, and rent)
remained flat for the three months ended September 30, 2002,
compared to the same period in 2001. AmeriCold Logistics elected
to defer $11.3 million (of the $33.5 million contracted rent)
for the third quarter, of which Crescent's share was $4.5
million.
AmeriCold Logistics' same-store EBITDAR (earnings before
interest, taxes, depreciation and amortization, and rent)
remained flat for the nine months ended September 30, 2002,
compared to the same period in 2001. AmeriCold Logistics elected
to defer $20.6 million (of the $102.4 million contracted rent)
for the first nine months of 2002, of which Crescent's share was
$8.2 million. Crescent recognizes rental income when earned and
collected and has not recognized the $8.2 million deferral in
its equity in net income.
Balance Sheet Review
During the third quarter, the Company redeemed from GMAC
Commercial Mortgage Corporation the remaining $31 million of
non-voting, redeemable preferred Class A units in Crescent Real
Estate Funding IX L.P., a 100% owned Crescent subsidiary holding
select office and resort/hotel properties. The original $275
million of proceeds from GMACCM were used by the Company to
repurchase common shares in the open market during 2000 and
2001.
In August, Crescent's Chairman, Richard Rainwater, purchased 1.0
million common shares in the open market, then sold 300,000 of
those shares to his son in a one-time, private transaction at no
gain or loss. On October 16, 2002, Mr. Rainwater entered into a
transaction with Crescent whereby he exchanged 3,050,000 of his
common shares for 1,525,000 of the Company's operating
partnership units. Each partnership unit can be exchanged for
two common shares. This transaction provides flexibility for
both Mr. Rainwater and the Company to purchase additional shares
without causing Mr. Rainwater to exceed the 9.5% limit on
ownership of common shares that is provided in the Company's
charter. This in no way changes Mr. Rainwater's beneficial
ownership interest in the Company (including common shares and
operating partnership units), which as of September 30, 2002,
was approximately 13.5%.
On September 16, 2002, Crescent retired the remaining $97.9
million of its $150 million 7.0% senior notes due 2002.
On October 15, 2002, Crescent's operating partnership and its
finance company registered its 9.25% senior notes due 2009.
FFO Outlook
Crescent's management reaffirmed its 2002 FFO guidance range of
$2.00 to $2.10 per share. This range anticipates the completion
of several key operating initiatives during the fourth quarter
such as certain lease termination fees and land sales, which may
or may not occur in this period. In addition, because of the
current economic environment, visibility is limited by the
residential development segment, as it is largely a fourth
quarter business.
Crescent will address 2003 FFO guidance in the third quarter
earnings conference call and presentation scheduled for November
5, 2002. Refer to the call and presentation information provided
below.
Crescent Real Estate Equities Company (NYSE:CEI) is one of the
largest publicly held real estate investment trusts in the
nation. Through its subsidiaries and joint ventures, Crescent
owned and managed, as of September 30, 2002, a portfolio of 73
premier office properties totaling 28.5 million square feet and
centered in the Southwestern United States, with major
concentrations in Dallas, Houston, Austin and Denver. In
addition, the company has investments in world-class resorts and
spas and upscale residential developments.
* * *
As reported in the April 3, 2002 edition of Troubled Company
Reporter, Standard & Poor's affirmed its ratings on Crescent
Real Estate Equities Co., and Crescent Real Estate Equities
L.P., and removed them from CreditWatch, where they were placed
on Jan. 23, 2002. The outlook remains negative.
Ratings Affirmed And Removed From CreditWatch
Issue To From
Crescent Real Estate Equities Co.
Corporate credit rating BB BB/Watch Neg
$200 million 6-3/4%
preferred stock B B/Watch Neg
$1.5 billion mixed shelf prelim B/B+ prelim B/B+/Watch Neg
Crescent Real Estate Equities L.P.
Corporate credit rating BB BB/Watch Neg
$150 million 6 5/8% senior
unsecured notes due 2002 B+ B+/Watch Neg
$250 million 7 1/8% senior
unsecured notes due 2007 B+ B+/Watch Neg
CTN MEDIA: Completes Sale of College TV Network to MTV Networks
---------------------------------------------------------------
CTN Media Group, Inc., has completed the sale of College
Television Network to MTV Networks, a division of Viacom Inc.
(NYSE: VIA, VIA.B), for $15 million in cash.
CTN intends to use the proceeds of the sale to Viacom to repay
its secured indebtedness of approximately $11.9 million to
LaSalle Bank and U-C Holdings, LLC. The balance of the proceeds
from the sale and proceeds from the collection of accounts
receivable and other remaining assets will be used to pay
unsecured creditors. The Company's common stockholders will not
receive proceeds from this transaction. The College Television
Network was CTN's sole remaining business.
At June 30, 2002, CTN Media Group's balance sheets show a
working capital deficit of about $11 million, and a total
shareholders' equity deficit of about $2.3 million.
DELTA AIR: Applauds Initialing of US-Jamaica Open Skies Pact
------------------------------------------------------------
Delta Air Lines (NYSE: DAL) applauds the governments of the
United States and Jamaica for concluding and initialing a new
air service agreement on October 30, 2002. This open skies
accord will enable airlines of both countries to gain limitless
access to the U.S.-Jamaica market.
"This new agreement represents an important win for both the
U.S. and Jamaica by providing increased airline competition
between the two countries and an opportunity to grow and enhance
Delta's excellent partnership with Air Jamaica," said Scott
Yohe, Delta's senior vice president - Government Affairs.
Delta and partner Air Jamaica plan to review additional
codeshare opportunities to provide a more seamless travel
experience for the customer. New U.S. gateways will allow
additional choices for the traveling and shipping public, while
at the same time stimulating travel to and from the Caribbean,
Yohe added.
Delta Air Lines, the world's second largest carrier in terms of
passengers carried and the U.S. airline with the most
transatlantic destinations, offers 5,781 flights each day to 428
destinations in 77 countries on Delta, Delta Express, Delta
Shuttle, Delta Connection and Delta's worldwide partners. Delta
is a founding member of SkyTeam, a global airline alliance that
provides customers with extensive worldwide destinations,
flights and services. For more information, please go to
http://www.delta.com
Delta Air Lines' 9.25% bonds due 2022 are trading at about 46
cents-on-the-dollar.
DENBURY RESOURCES: Posts Slightly Lower Results for 3rd Quarter
---------------------------------------------------------------
Denbury Resources Inc., (NYSE: DNR) announced its third quarter
2002 financial and operating results. The Company posted
earnings for the quarter of $13.5 million, just slightly less
than the comparative prior year quarter of $13.9 million. Cash
flow from operations for the quarter (excluding the changes in
assets and liabilities) was $44.2 million, as compared to cash
flow for the third quarter of 2001 of $48.7 million. The
slightly lower results in 2002 can be primarily attributed to
(i) higher hedging gains in the third quarter of 2001 related to
the price floors purchased for the Matrix acquisition, (ii)
lower than anticipated production in the third quarter of 2002
due to production shut-ins related to Tropical Storm Isidore,
and (iii) higher operating costs in 2002 related to the
additional tertiary floods and the addition of the COHO
properties for one month of the quarter.
Production
Denbury's third quarter 2002 average daily production of 35,506
BOE/d was 1% higher than the 35,112 BOE/d average for the
comparable period in 2001, and approximately the same as the
2002 second quarter's average of 35,526 BOE/d. The properties
from the COHO acquisition, which closed in August 2002, added
approximately 1,230 BOE/d to the third quarter of 2002 average
production, but this increase was offset by the losses in
production due to Tropical Storm Isidore. The shut-ins of
primarily offshore natural gas properties also affected the
balance of Denbury's oil and natural gas production slightly,
with third quarter 2002 production averaging 53% oil and 47%
natural gas.
Production from our CO2 properties was up 60% year over year,
but down 9% from the second quarter of 2002 level. Production on
these properties declined slightly to 3,895 BOE/d for the third
quarter of 2002 from the second quarter of 2002 average of 4,278
BOE/d due to a temporary lack of deliverability of CO2 and
facility maintenance work performed at Little Creek Field during
the quarter, which required the field to be shut-in for a few
days. Production had begun to rebound by September as additional
CO2 volumes became available.
During the third quarter of 2002 the Company added additional
compression equipment for its CO2 production and drilled an
additional CO2 well which is expected to commence production in
late November or early December. By year-end, the Company
expects to be able to increase its daily CO2 production from the
third quarter of 2002 average of 112 MMcf/d to around 160 MMcf/d
(September 2002 averaged 121 MMcf/d with the additional
compression). The Company plans to commence the drilling of
another CO2 well immediately following the completion of the
current one, with two to three more wells tentatively scheduled
for 2003.
Third Quarter 2002 Financial Results
Oil and natural gas revenues increased $6.6 million, or 10%,
between the comparable third quarters, primarily due to higher
realized commodity prices. On a per BOE basis, our net realized
commodity prices were 9% higher in the third quarter of 2002
than in the third quarter of 2001, even though NYMEX oil prices
were up only 5% and NYMEX natural gas prices were up 9%. This
was possible because the Company's net realized oil price
discount to NYMEX was lower than historical averages as a result
of certain oil indices and prices. The Company is unable to
predict the movement of these indices, but would expect that its
oil price discount to NYMEX would increase in the future to a
level more in line with historical averages. The Company's oil
price discount did increase during the third quarter, after a
historically low price differential in the second quarter of
2002. However, in spite of higher oil and natural gas revenues,
total revenues were almost the same in the comparable third
quarters due to the large gain from natural gas hedges ($7.2
million) in the third quarter of 2001, as compared to a small
loss primarily on oil hedges ($218,000) in the third quarter of
2002.
Between the respective third quarters, lease operating expenses
increased 20% on a per BOE basis, primarily due to increased
operating expenses on the properties acquired from COHO and
additional facility maintenance work performed at Little Creek
Field during the quarter. Production taxes and marketing
expenses decreased 11% on a per BOE basis primarily due to a
reduction in Louisiana natural gas severance tax rates effective
July 1, 2002. General and administrative expenses increased 6%
on a per BOE basis between the respective quarters, as a result
of higher personnel costs resulting from the Matrix and COHO
acquisitions, and a lower percentage of overhead allocated to
operations as a result of the lower capital budget and less
drilling activity in 2002 as compared to 2001. Net cash interest
expense decreased 3% on a per BOE basis in 2002, in spite of
higher debt levels due to the Matrix and COHO acquisitions, as a
result of higher interest and other income in 2002 and a higher
percentage of non-cash interest expense following the issuance
of $75 million of subordinated debt at a discount in August
2001. With the addition of the properties acquired in the COHO
acquisition, the DD&A rate for the third quarter of 2002 dropped
by $0.30 per BOE, from the $7.35 per BOE average rate during the
first half of 2002, to reflect the lower cost per barrel of the
properties acquired in the COHO acquisition. For the comparative
nine month periods, the DD&A rate per BOE was higher in 2002
primarily as a result of the Matrix acquisition in July 2001.
Outlook
Denbury's 2002 development and exploration budget is currently
set at $118 million, (including approximately $6 million of 2001
projects carried over to 2002), of which approximately $83.2
million has been spent through September 30. The Company is in
the process of finalizing its 2003 development budget, which is
projected to be about $130 million.
In August 2002, the Company acquired COHO Energy Inc.'s Gulf
Coast properties auctioned in the U.S. Bankruptcy Court in
Dallas, Texas, which included nine fields, eight of which are
located in Mississippi and one in Texas. The net purchase price,
adjusted for interim cash flow from the June 1, 2002 effective
date, and purchase adjustments to date, was $48.2 million. As
previously announced, the Company's initial estimates indicate
the acquisition includes net proven reserves of approximately
14.4 million barrels of oil, with current production, net to the
Company, of between 4,000 and 4,500 barrels of oil per day. The
Company is pursuing selling Laurel, Bentonia and Glazier fields,
three of the acquired COHO fields, along with some of its other
minor properties before year-end 2002, assuming that, in the
Company's opinion, the prices bid for the properties are
adequate. The estimated aggregate proved reserves on the fields
that may be sold is approximately 8.0 million barrels with
current production of approximately 2,300 BOE/d. The Company
currently estimates that these sales will produce net proceeds
of as much as $45 million, depending on the level of interest,
commodity prices at the time, and the bids that it obtains. The
Company plans to use any proceeds that it obtains from property
sales to reduce its bank debt.
Denbury's total debt is currently $375 million ($200 million of
subordinated debt and $175 million of bank debt), with $45
million undrawn on its bank borrowing base of $220 million. In
September 2002, the maturity date of the Company's bank credit
line was extended from December 2003 to April 2006. The
borrowing base remained the same as the Company does not
anticipate needing the incremental borrowing capacity as it
plans to reduce debt during the next several months.
Due to Hurricane Lili in early October and the projected effect
and timing of prospective property sales, the Company is
expecting its fourth quarter production to be around 37,000
BOE/d, a 6% increase over the prior year's fourth quarter
production. Were it not for the hurricane, the Company's
production projection would be at least 1,500 BOE/d higher.
Based on this forecasted average for the fourth quarter, the
Company's average production for 2002 will be approximately 15%
higher than 2001 average production levels.
Gareth Roberts, Chief Executive Officer, said: "Apart from the
production interruptions from the two storms, we are very
pleased with our progress this year. We have essentially
completed the acquisition phase of the long-term tertiary
development plan for those fields in Southwest Mississippi that
are close to our CO2 pipeline. The detailed production estimates
for this plan can be found in our slide show at our Web site,
http://www.denbury.com We are also optimistic that our property
sales will be completed by year-end, allowing us to end 2002
with higher production and reserves than the prior year but with
lower debt, consistent with our primary goal of increasing net
asset value per share. Our development budget for 2003,
preliminarily set at $130 million, should be considerably less
than cash flow, assuming current prices hold, and should allow
us to reduce our debt to our target of $300 million. Details of
next year's development budget will be finalized in the next few
weeks, as soon as we have finished picking the best projects out
of about $250 million of opportunities identified by our staff."
Denbury Resources Inc. -- http://www.denbury.com-- is a growing
independent oil and gas company. The Company is the largest oil
and natural gas operator in Mississippi, holds key operating
acreage onshore Louisiana and has a growing presence in the
offshore Gulf of Mexico areas. The Company increases the value
of acquired properties in its core areas through a combination
of exploitation drilling and proven engineering extraction
practices.
* * *
As previously reported in the May 23, 2002 issue of the Troubled
Company Reporter, Standard & Poor's raised the corporate credit
rating on Denbury Resources Inc. to double-'B'-minus from
single-'B'-plus and revised its outlook to stable from positive.
The upgrade on Denbury's corporate credit rating reflects:
-- Management's continuing maintenance of leverage that is
consistent with the double-'B' rating category; since the severe
industry downturn of 1998-1999 when Denbury's financial
resources were strained, the company has operated with a more
disciplined financial philosophy, including protecting cash
flows with commodity price hedges, when appropriate.
--Expected improvement in the company's financial profile
resulting from likely elevated oil prices in 2002.
--Expectations for prudent reinvestment of upcycle cash
flows. --Good production growth during the next two years from
Denbury's long lead-time development projects in Mississippi,
which will further enhance the company's debt-service capacity.
DIAMOND FIELDS: Denies Allegation of Default Under Conv. Note
-------------------------------------------------------------
Diamond Fields International Ltd., has been informed by Jean-
Raymond Boulle, its largest shareholder, that he intends to
oppose the re-election of the incumbent independent Board of
Directors at the annual general meeting scheduled for November
21, 2002. Mr. Boulle and a group of his long-time friends and
business associates have filed a dissident proxy circular
indicating that they wish to replace all of the incumbent
independent directors with members of the Boulle Group.
The Board of Directors is surprised and extremely disappointed
by this opportunistic, capricious and totally unwarranted
attack, which appears to be motivated solely by Mr. Boulle's
desire to abuse his position as the Company's largest
shareholder and neuter the independence of the Board. As part of
his ambush agenda, Mr. Boulle is alleging that the Company is in
default of its obligations under a convertible promissory note
and has purported to accelerate payment. The Company denies that
it is in default and believes that Mr. Boulle has ulterior
motives.
Mr. Boulle refuses to communicate with members of the Board and
senior management despite repeated invitations to do so. As
such, the Board has no idea what legitimate concerns, if any, Mr
Boulle harbours concerning the Company's current governance,
business strategy and performance. The dissident proxy circular
issued by the Boulle Group sheds no light on why Mr. Boulle
thinks that the incumbent independent Board of Directors should
be replaced nor as to Mr. Boulle's plans for the Company, if
any, should he succeed in taking control.
The Board of Directors is, and always has been, committed to
serving the best interests of all shareholders. The Board is
proud of its independence and believes that it is the key
ingredient of good corporate governance. Shareholders should
draw their own conclusions as to how independent a board of
directors consisting of members of the Boulle Group would be and
the extent to which the interests of ALL shareholders would
continue to be served.
The Board has a plan for creating the conditions necessary to
enable the Company to become a competitive, low-cost, diamond
mining enterprise. This plan was implemented in late 2000
following the completion of a successful feasibility study. The
Company commenced mining operations with the DFI-Trans Hex Joint
Venture in May 2001 and shortly thereafter commenced its efforts
to secure financing for the purchase of its own mining vessel.
Until the Joint Venture was terminated in July 2002, production
exceeded 39,000 carats and the Company enjoyed operating profits
in every quarter. Despite the setback from Trans Hex's
termination of the Joint Venture, for which the Company is
seeking legal redress in the South African courts, the Company's
plan to purchase its own vessel remains on track. In September
2002, the Company entered into an agreement to purchase a
vessel, which will become, after conversion, the Company's first
fully owned and operated diamond mining vessel. On November 1,
2002, the Overseas Private Investment Corporation, a U.S.
governmental agency confirmed its commitment to finance the
conversion of the vessel. The financing is for US$15 million of
which $10 million can be drawn down immediately upon the
completion of documentation and working capital requirements.
The Company is also in advanced discussions with mining
contractors to resume mining operations at the Company's
Luderitz concessions.
The Boulle Group has no discernible plan for the Company. If
they have a plan, they prefer, for reasons known only to
themselves, to keep it secret. Again, shareholders should ask
themselves how well their interests are likely to be served by
the Boulle Group.
The Board of Directors urges all independent shareholders to
support the Board in opposing the efforts of the Boulle Group to
gain control of the Company in the pursuit of its own interests.
ECHOSTAR COMMS: Pennsylvania Joins Suit to Block Proposed Merger
----------------------------------------------------------------
Attorney General Mike Fisher announced that Pennsylvania has
joined a lawsuit to block a proposed merger between the only two
nationwide direct broadcast satellite television providers,
saying the proposed merger is anti-competitive.
The suit was filed in U.S. District Court in Washington, D.C.
against: EchoStar Communications Corp; General Motors Corp., and
its wholly-owned subsidiary Hughes Electronics Corp., and
Hughes' wholly-owned subsidiary DirecTV Enterprises Inc.
EchoStar offers DBS services through Dish Network.
Fisher, the U.S. Department of Justice and Attorneys General
from 22 states, Washington, D.C., and Puerto Rico allege that
the merger of EchoStar and Hughes would not only violate federal
law prohibiting anti-competitive practices, but take away
consumer options by placing the market for DBS customers in the
hands of one corporation.
"Consumers are just beginning to see the benefits of competition
between the DBS services and cable in the pay TV market," Fisher
said. "We believe this merger would undo those benefits. In
areas where cable is provided, consumers would only have two
instead of three choices for pay TV services. In areas where
cable is not provided, competition will cease to exist leaving
residents only one option for pay TV service."
According to the suit, Dish Network and DirecTV compete with
each other on many levels to attract consumers to switch from
cable, including offering special packages of channel and
discounts on services, installation and equipment. Without the
competition of two DBS providers, that incentive to offer lower
prices and improve customer service is gone.
"This is not the time to roll back competition in the pay TV
market," Fisher said. "The service is now a staple in consumers'
homes becoming the major source of information and entertainment
for many Pennsylvania consumers. Especially hurt by this merger
will be the thousands of rural Pennsylvanians who would be
forced to purchase these services from a monopoly."
In October 2001, EchoStar agreed to purchase Hughes Electronics
for approximately $25 billion in cash and stock. The merger has
been under review by the Federal Communications Commission as
well as the Department of Justice and the states.
Earlier this month, the FCC denied the application to approve
the merger for competitive reasons. The FCC has allowed the
parties to resubmit their transfer application by mid-November,
if they can remedy the anti-competitive concerns.
However, the suit claims that the proposed merger would make it
extremely difficult and expensive for any new DBS competitors to
enter the market. In addition, there would be no DBS
frequencies available that cover the entire continental United
States, so a competitor could not offer a nationwide service.
Fisher said the lawsuit asks the federal court to:
-- Find the merger unlawful under federal antitrust laws.
-- Prohibit the parties from proceeding with the merger.
-- Reimburse the DOJ and states for fees and costs.
The Commonwealth's suit is being handled by Chief Deputy
Attorney General James A. Donahue III and Deputy Attorney
General Joseph S. Betsko of Fisher's Antitrust Section.
* * *
Echostar Communications' June 30, 2002 balance sheet shows a
total shareholders' equity deficit of about $827 million.
ENCOMPASS SERVICES: Misses $17MM Interest Payment on 10.5% Notes
----------------------------------------------------------------
As a result of Encompass Services Corporation's default under
its Credit Agreement dated February 22, 2000, as amended, and in
accordance with the terms of the Indenture dated April 30, 1999
governing the Company's 10-1/2% Senior Subordinated Notes due
2009, the Company's senior lenders delivered to the Trustee
under the Indenture a payment blockage notice prohibiting the
payment of any kind or character with respect to the Notes.
As a result of such circumstances and other recent events,
including the Company's commencement on October 18, 2002, of a
30-day solicitation of its creditors, including the holders of
the Notes, for approval of a financial restructuring plan,
Encompass Services Corporation did not make the scheduled
interest payment of $17,587,500 due November 1, 2002 on its
Notes.
Encompass Services Corporation is one of the nation's largest
providers of facilities systems and services. Encompass provides
electrical technologies, mechanical services and cleaning
systems to commercial, industrial and residential customers
nationwide. Additional information and press releases about
Encompass are available on the Company's Web site at
http://www.encompass.com
ENRON: Seeks Approval of Stipulation & Consent Pact with Kopper
---------------------------------------------------------------
Enron Corporation and its debtor-affiliates, the Official
Committee of Unsecured Creditors, the Securities and Exchange
Commission and Michael J. Kopper agree that Mr. Kopper's
$8,000,000 payment will be distributed to holders of certain
publicly traded Enron debt securities.
Thus, the Creditors' Committee asks the Court to approve the
parties' Stipulation and Consent Agreement of Settlement. The
Stipulation contains these terms:
A. The SEC will propose and recommend to the United States
District Court for the Texas District Court, an amendment to
the SEC Final Judgment to incorporate the distribution
mechanism set forth in this Stipulation;
B. Upon and after the Effective Date of this Stipulation and
Consent Order:
(a) the Adversary Proceeding will be dismissed without
prejudice, except that the dismissal will be with
prejudice solely with respect to the payment and recovery
of the $8,000,000 payment and without costs to all
parties; provided, however, that Enron and the Committee
specially reserve the right to sue any party, including
Mr. Kopper, to the extent that any person or entity is
liable to Enron or any of it affiliates for any reason
whatsoever, and Mr. Kopper reserves his rights and
defenses with respect to any suits brought by Enron or
the Committee; provided, further, that neither Enron nor
the Committee may seek to collect or enforce any judgment
obtained against Mr. Kopper out of the $8,000,000
payment, and the amount of any total judgment against Mr.
Kopper will be reduced as provided in this Stipulation;
(b) Nothing in this Stipulation will alter Mr. Kopper's
obligations under the SEC Final Judgment. The SEC agrees
that the disposition of the funds as provided for in this
Stipulation satisfies Mr. Kopper's obligations to make
$8,000,000 payment pursuant to the SEC Final Judgment and
the Amended SEC Final Judgment;
(c) The $8 Million Payment will be held in the court registry
of the Texas District Court pursuant to the terms of the
SEC Final Judgment and when applicable, the Amended SEC
Final Judgment, until the day that it is distributed to
public investors who are holders of Enron's
unsubordinated debt securities issued pursuant to a
registration statement on Forms S-1 or S-3 as:
-- $1,907,698,000 Enron Corp. Zero Coupon Convertible
Senior Notes due 2021;
-- 400,000,000 Enron Corp. 4.375% Euro Notes due 2005;
-- $168,945,000 Enron Corp. 9 5/8% Notes due 2006;
-- $234,030,000 Enron Corp. 6.4% Notes due 2006;
-- $150,000,000 Enron Corp, 6.5% Notes due 2002;
-- $71,650,000 Enron Corp. 6.625% Notes due 2003;
-- $250,000,000 Enron Corp. 6.625% Notes due 2005;
-- $200,000,000 Enron Corp. 6.725% Remarketed Reset
Notes due 2037;
-- $178,500,000 Enron Corp. 6.75% Notes due 2009;
-- $84,875,000 Enron Corp. 6.75% Notes due 2004;
-- $40,000,000 Enron Corp. 6.75% Notes due 2004;
-- $89,000,000 Enron Corp. 6.875% Notes due 2007;
-- $179,945,000 Enron Corp. 6.95% Notes due 2028;
-- $195,291,000 Enron Corp. 6.95% Notes due 2028;
-- $255,875,000 Enron Corp. 7% Exchangeable Note due
2002;
-- $16,806,000 Enron Corp 7% Senior Debentures Notes
due 2023;
-- $149,000,000 Enron Corp. 7.125% Notes due 2007;
-- $384,320,000 Enron Corp. 7.375% Notes due 2019;
-- $188,085,000 Enron Corp. 7.625% Notes due 2004;
-- $325,000,000 Enron Corp. 7.875% Notes due 2003;
-- $187,950,000 Enron Corp. 9.125% Notes due 2003;
-- $100,000,000 Enron Corp. 9.875% Notes due 2003;
-- $175,000,000 Enron Corp. 8.375% Medium Term Note due
2005;
otherwise known as the "Debt Securities", pursuant to the
plan for the disposition of disgorgement of funds under
the SEC Final Judgment and the Amended SEC Final
Judgment. The distributions contemplated in the preceding
sentence will be made to the indenture trustees for the
Debt Securities. The distributions will be made pursuant
To the Bankruptcy Code's absolute priority rule;
(d) The allocation of the $8,000,000 Payment among the
Indenture Trustees will be made pro rata based on the
aggregate principal amount of the Debt Securities
outstanding on the date that Enron Corp. filed its
Chapter 11 cases;
(e) None of the Committee, Enron or the Indenture Trustees
will assert any claims in respect of the $8,000,000
Payment except as set forth in this Stipulation and
Consent Order; and
(f) The Effective Date of this Stipulation and Consent Order
will be the business day after the date when each of the
these have occurred:
-- this Stipulation and Consent Order is entered by the
Bankruptcy Court and becomes a final, non-appealable
Order; and
-- the Amended SEC Final Judgment has been entered by
the Texas District Court and becomes a final, non-
appealable order -- the Effective Date;
C. On the Distribution Date or as soon as practical thereafter,
the Indenture Trustees will distribute the portion of the
$8,000,000 Payment that they received to their holders of
Debt Securities pursuant to the terms of each applicable
Indenture;
D. For the purposes of determining to which holders of Debt
Securities the Indenture Trustees should distribute a portion
of the $8,000,000 Payment, the record date will be the date
used for the purposes of distributions to creditors pursuant
to a confirmed Enron Chapter 11 plan of reorganization or
liquidation or the first day that a Chapter 7 trustee makes a
distribution with respect to such Debt Securities;
E. Any distribution of the $8,000,000 Payment made under this
Stipulation and Consent Order will be treated as if it were
a distribution of property of the estate of Enron pursuant to
an Enron Chapter 11 plan of reorganization or liquidation or
by a Chapter 7 trustee, as applicable, and future
distributions in Enron's bankruptcy case to Indenture
Trustees on behalf of holders of Debt Securities will be
reduced to reflect their receipt of a distribution pursuant
to the terms set forth herein;
F. The Indenture Trustees will be paid only reasonable fees and
expenses associated specifically with the distribution of the
$8,000,000 Payment, which may be deducted from the $8,000,000
Payment, but no other fees and expenses may be deducted by
the Indenture Trustees from the $8 Million Payment;
G. Nothing contained herein will prevent Enron or the Committee
from pursuing any and all claims, rights, or actions they may
have against Mr. Kopper; provided, however, that neither
Enron nor the Committee may seek to collect or enforce any
judgment obtained against Mr. Kopper out of the $8,000,000
Payment, and provided further, however, that the portion of
any judgment against Mr. Kopper obtained by Enron or the
Committee that arises from a claim for turnover of the
$8,000,000 Payment, Constructive Trust or Money Had and
Received, as alleged in the Adversary Proceeding will be
reduced by an amount up to $8,000,000, and Enron and the
Committee will reduce the amount of any judgment that
arises from a claim for turnover of the $8 Million Payment,
Constructive Trust, or Money Had and Received, as alleged in
the Adversary Proceeding obtained against any third party for
which the fact finder determines that Mr. Kopper is liable to
for indemnification, contribution, or otherwise, by an
amount up to $8,000,000;
H. The parties agree that nothing contained herein will
be deemed to constitute either (i) an admission by Mr. Kopper
or (ii) a factual or evidentiary finding in any action
brought by Enron or the Committee against Mr. Kopper, and Mr.
Kopper reserves all of his respective rights and defenses
with respect to any suits or actions brought by Enron or the
Committee;
I. Subject to the other terms and conditions contained herein,
this Stipulation and Consent Order constitutes a final
settlement and compromise of the Adversary Proceeding between
and among Enron, the Committee, the SEC and Mr. Kopper
pursuant to Rule 9019 of the Federal Rules of Bankruptcy
Procedure; and
J. All parties to this Stipulation and Consent Order agree to
take all reasonable steps as may be necessary to cause the
Amended SEC Final Judgment to be entered promptly after
approval of the Stipulation and Consent Order by the
Bankruptcy Court.
Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in
New York, points out that Bankruptcy Rule 9019(a) "empowers the
Bankruptcy Court to approve compromises and settlements if they
are in the best interest of the estate." Mr. Despins contends
that the settlement is in the best interest of the Debtors
because:
-- it provides $8,000,000 payment to the Enron estate
without the expense of litigating the claims under the
Adversary Proceeding;
-- the Stipulation sets the nature and ownership of the
$8,000,000 payment; and
-- the Stipulation was negotiated in good faith and at arm's
length. (Enron Bankruptcy News, Issue No. 46; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
Enron Corp.'s 9.125% bonds due 2003 (ENRN03USR1) are trading at
11.875 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR1
for real-time bond pricing.
ENTREMED INC: Will Appeal Nasdaq Delisting Determination
--------------------------------------------------------
EntreMed, Inc. (Nasdaq: ENMD), a biopharmaceutical leader in
angiogenesis research and product development, will appeal a
Nasdaq staff determination to delist EntreMed's common stock
from the Nasdaq National Market. EntreMed is requesting an
appeal hearing before a Nasdaq Listing Qualifications Panel.
Under Nasdaq Marketplace Rules, EntreMed's hearing request will
automatically stay the delisting pending the Panel's review and
determination. Nasdaq staff will determine the date of
EntreMed's appeal hearing. Until the Panel's ultimate
determination, EntreMed's common stock will continue to be
traded on the Nasdaq National Market.
EntreMed said that it was notified by the Nasdaq Listing
Qualifications Department that EntreMed's common stock is
subject to delisting from the Nasdaq National Market because it
is not in compliance with Marketplace Rule 4450(b)(1)(A), which
requires that EntreMed's common stock have a market value of
listed securities of $50 million. There can be no assurance
that the Nasdaq Panel will grant EntreMed's request for
continued listing on the National Market. If EntreMed is unable
to comply with all Nasdaq National Market listing criteria,
EntreMed intends to apply to transfer its common stock to the
Nasdaq SmallCap Market where shares of EntreMed common stock
would continue to be traded under their existing ticker symbol,
ENMD.
In a move to further focus the Company's business and scientific
efforts, Dr. John Holaday, EntreMed Chairman and Chief Executive
Officer, has assumed the role of Chief Scientific Officer,
effective immediately. Dr. Holaday continues to serve as
Chairman of EntreMed Board of Directors, but has left the
position of Chief Executive Officer, which will not be filled
immediately. EntreMed President and Chief Operating Officer Neil
Campbell continues to be responsible for day-to-day business
activities, as well as the Company's overall financial and
business strategies. Mr. Campbell and Dr. Holaday both report
directly to a committee of the EntreMed Board of Directors.
Commenting on the change in his role, Dr. Holaday said, "Almost
a decade ago, we recognized that angiogenesis inhibitors may
have the potential to improve the lives of patients with cancer,
macular degeneration, and a variety of diseases characterized by
abnormal blood vessel growth. We are proud of the progress we
have made with Panzem(TM) (2ME2), Endostatin and Angiostatin in
the clinic where we continue to see tumor regression and disease
stabilization in some patients with advanced disease. Now, our
scientific priority is the further development of our small
molecule programs -- led by Panzem(TM), plus the 2ME2 and
thalidomide analogs -- which should accelerate our time to
commercialization. I look forward to directing our expert
scientific team while Neil concentrates his efforts on the
business of EntreMed's science."
EntreMed, Inc., The Angiogenesis Company(R), is a clinical-stage
biopharmaceutical company developing angiogenesis therapeutics
that inhibit abnormal blood vessel growth associated with over
80 diseases such as cancer, blindness and atherosclerosis.
Unlike other angiogenesis compounds, EntreMed's product
candidates target disease-associated endothelial cells only and
do not disrupt normal biological processes. As a result, our
drug candidates have shown a strong safety profile with neither
toxicity nor clinically significant side effects reported to
date. EntreMed has three Phase II clinical drug candidates in
oncology trials where doctors have reported some patients with
tumor regression and disease stabilization. The Company also
has a rich pipeline, consisting primarily of small molecules and
peptides, under development and in preclinical studies. For
further information, visit EntreMed's Web site at
http://www.entremed.com
Dr. John Holaday is Chief Scientific Officer and co-founder of
EntreMed, Inc. Dr. Holaday has served as Chairman of the
EntreMed Board of Directors since November 1995 and has been a
Director since August 1992. Dr. Holaday was also EntreMed Chief
Executive Officer from August 1992 to November 2002. Prior
thereto, from May 1989 to August 1992, he was the co-founder of
Medicis Pharmaceutical Corporation where he served as the Senior
Vice President for Research and Development and a Member of the
Board of Directors. Dr. Holaday also founded MaxCyte, Inc.,
where he serves as Chairman. Dr. Holaday was commissioned into
the US Army in 1966 and subsequently served as the
Neuropharmacology Branch Chief at the Walter Reed Army Institute
of Research where he served as an officer and civilian for 21
years. Dr. Holaday's academic appointments include Visiting
Associate Professor of Anesthesiology and Critical Care Medicine
at the Johns Hopkins University School of Medicine and Adjunct
Professor of Psychiatry at the Uniformed Services University of
the Health Sciences. Dr. Holaday was elected as the Chairman of
the Maryland Bioscience Alliance in April of 2000, and is a
member of the American Society for Pharmacology and Experimental
Therapeutics, the Society for Critical Care Medicine (Fellow,
1992), the Society for Neuropsychopharmacology (Fellow, 1989)
and Sigma Xi. He holds over 30 U.S. and foreign patents and has
published over 200 scientific articles and edited five books.
* * *
In its Form 10-Q filed with the Securities and Exchange
Commission on August 14, 2002, the Company reported:
"At June 30, 2002, we had cash and cash equivalents of
approximately $11,373,000 and working capital of approximately
$3,423,000, as compared to cash and cash equivalents of
approximately $41,386,000 and working capital of approximately
$21,258,000 at December 31, 2001. The decrease in cash and cash
equivalents primarily reflects the pay down of approximately
$11.4 million of accounts payable (including accrued
manufacturing expenses of approximately $13.9 million relating
to our fourth quarter 2001 manufacturing campaign) and payment
of other accrued liabilities of approximately $1.7 million. Our
6/30/02 working capital reflects a current liability of
approximately $2,937,000, versus approximately $1,368,000 at
December 31, 2001, relating to our stock repurchase obligations
to BMS discussed below. Net cash provided from financing
activities was approximately $6,342,000 for the six months ended
June 30, 2002.
In the absence of additional financing, based on outstanding
commitments (and assuming that no additional expense reduction
measures or limitations on cash disbursements are implemented by
us), we believe that our available cash and cash equivalents
will be sufficient to fund our operations into the fourth
quarter of 2002. Management is seeking to reduce cash used in
operating activities through a realignment of programs and
workforce reductions and exploring sources of additional
financing.
"In August 2002, we announced a realignment of research and
development programs to reduce expenses and focus resources on
the development of our clinical candidates. In conjunction with
this plan, we reduced our headcount by approximately 25% and
eliminated funding of research collaborations that do not
support our clinical programs. As a result of these actions we
will record a one-time charge of under $500,000 in the third
quarter of this year. Decreased manufacturing activity along
with actions described above will result in a significant
reduction in operating expenses in the fourth quarter onward.
"In addition, we intend to pursue strategic relationships to
provide resources for the further development of our product
candidates, and we are currently involved in discussions with
several potential partners. There can be no assurance, however,
that these discussions will result in relationships or
additional funding. In addition, we will continue to seek
capital through the public or private sale of securities. If we
are successful in raising additional funds through the issuance
of equity securities, stockholders may experience substantial
dilution, or the equity securities may have rights, preferences
or privileges senior to those of the holders of our common
stock. If we raise funds through the issuance of debt
securities, those securities would have rights, preferences and
privileges senior to those of our common stock.
"If we are unable to raise additional capital, we will take one
or more of the following actions:
- seek to renegotiate the terms of our current liabilities
and commitments;
- delay, reduce the scope of, or eliminate one or more of
our product research and development programs;
- reduce or eliminate our sponsored research programs,
which may result in the forfeiture of our rights to
future technologies;
- obtain funds through licenses or arrangements with
collaborative partners or others that may require us to
relinquish rights to certain of our technologies, product
candidates or products that we would otherwise seek to
develop or commercialize on our own."
EXIDE TECHNOLOGIES: Creditors Committee Hires Brown Rudnick
-----------------------------------------------------------
David B. Stratton, Esq., at Pepper Hamilton LLP, in Wilmington,
Delaware, relates that in connection with negotiating the terms
of the DIP Financing Order, the parties agreed that the Exide
Technologies' Official Committee of Unsecured Creditors, as well
as other parties-in-interest, is permitted to:
-- investigate, commence actions and object to, contest or raise
any defenses to the validity, perfection, priority or
enforceability of the liens, indebtedness or claims of the
Debtors' prepetition lenders; or
-- assert or prosecute any action for preferences, fraudulent
conveyances, other avoidance power claims or any other claims
or causes of actions against any of the Prepetition Lenders,
the agent for the Prepetition Lenders or their
representatives.
On October 9, 2002, the Committee filed a motion asking the
Court to further extend the Objection Deadline given the recent
decision by the United States Court of Appeals for the Third
Circuit in Cybergenics Corp. v. Chinery, No. 013805 (3rd Cir.
Sept. 20, 2002), the issues and uncertainties arising from the
decision and the importance of preserving the potential for
addressing any matters for the benefit of the Debtors' estates
and their unsecured creditors.
According to Mr. Stratton, the Committee, with the assistance of
Akin Gump and Pepper Hamilton, has been investigating those
matters since the early stages of these Cases. As the process
has begun to move from the objective investigation stage to the
stage for commencement of one or more adversary proceedings
against the Prepetition Lenders and the Prepetition Agent, the
Committee has been informed by Akin Gump and Pepper Hamilton
that neither firm will be able to commence adversary proceedings
with respect to the matters against the Prepetition Lenders and
the Prepetition Agent because of actual or potential conflicts
of interest with certain of the Prepetition Lenders and the
Prepetition Agent. The Committee was advised by Akin Gump and
Pepper Hamilton to retain special litigation counsel to assist
it with the prosecution of the prepetition liens.
By this application, the Creditors' Committee seek the Court's
authority to retain Brown Rudnick Berlack Israels LLP as its
special litigation counsel, nunc pro tunc to October 9, 2002.
It will be necessary to employ and retain Brown Rudnick to:
A. advise the Committee with respect to its rights, duties and
powers in these Cases with regard to any potential Matters
that may be asserted against the Prepetition Lenders, the
Prepetition Agent or their representatives, including, but
not limited to, the impact of Cybergenics on their rights,
duties and powers;
B. assist and advise the Committee in its consultations with the
Debtors, the Prepetition Lenders, the Prepetition Agent and
any other parties-in-interest in connection with the
prepetition liens;
C. assist the Committee's investigation of the Matters and any
related causes of action that may be asserted against the
Prepetition Lenders, the Prepetition Agent or any related
Parties-in-interest and advise and assist the Committee in
preserving its rights to assert the prepetition liens in
light of Cybergenics including, but not limited to, advice
and assistance concerning any actions necessary in respect to
the DIP Financing Order; and
D. represent the Committee in the prosecution of the Matters and
any related causes of action that may be asserted against the
Prepetition Lenders, the Prepetition Agent or any related
Parties-in-interest.
Akin Gump, Pepper Hamilton and Brown Rudnick will coordinate
their efforts to minimize any duplication of services.
The Committee tells the Court that Brown Rudnick possesses
extensive knowledge and expertise in the areas of law. In
selecting special litigation counsel for these matters, the
Committee sought counsel with considerable experience in
representing unsecured creditors' committees in the Cybergenics
Matters. Mr. Stratton contends that Brown Rudnick has this
experience since it is currently representing and has
represented creditors' committees and other key parties-in-
interest in similar proceedings in many significant Chapter 11
reorganizations, including as the Official Committee Counsel in
A.H. Robbins Company, Incorporated (E.D.Va.); Allis-Chalmers
Corporation (S.D.N.Y.); Angelo Energy Limited Budget Group, Inc.
(D.Del.); Business Express, Inc. (D.N.H.); Comdisco, Inc. (N.D.
III.); Continental Airlines, Inc. (S.D. Tex.); Days Inns of
America, Inc. (D. Del.); Elsinore Corporation and Four Queens,
Inc. FRD Acquisition Co. (D. Del.); Global Crossing (S.D.N.Y.);
Gordon Jewelry Corporation (tale Corporation) (N.D.Tex.);
Integrated Resources, Inc. (S.D.N.Y.); Leading Edge Computers,
Inc. (D. Mass.); Mercury Finance Company (N.D. Ill.);
Merry-Go-Round Enterprises, Inc. (D.Md.); Revere Copper and
Brass (S.D.N.Y.); R.H. Macy & Co., Inc. (S.D.N.Y.); Service
America Corporation Telemundo Group, Inc. Texscan Corporation
(D. Ariz.); Thermadyne Holdings Corporation (E.D.Mo.); Todd
Shipyards Corporation (D.N.J.); Tracor Holdings, Inc.
(W.D.Tex.); and Trump Taj Mahal Associates (D.N.J.);
In addition, Brown Rudnick has also represented, or is
representing, unofficial or ad-hoc committees, as well as
individual creditors, equity holders, and other parties-in-
interest, in a similar roster of prominent in-court and
out-of-court matters, including Arizona Charlie's, Inc.; Avalon
Marketing Circle Express, Inc.; Crime Control, Inc.; First City
Industries Granite Corporation; Greate Bay Hotel & Casino, Inc.;
Harrah's Jazz Company; Livent, Inc.; Marvel Entertainment Group,
Inc.; Mobile Media Communications, Inc.; O'Brien Energy; PSI
Net, Inc.; SCI Television; The Stratosphere Corporation;
Stratosphere Gaming Corp.; Trans World Airlines; Unitel Video,
Inc.; and Wang Laboratories, Inc.
Brown Rudnick will charge for its legal services on an hourly
basis in accordance with its ordinary and customary hourly rates
in effect on the date the services are rendered. The names,
positions and current hourly rates of the Brown Rudnick
professionals presently expected to have primary responsibility
for providing services to the Committee are:
Edward Weisfelner Bankruptcy Partner $625
Steven Levine Bankruptcy Partner 515
Scott Berman Bankruptcy Partner 480
Steven Smith 285
From time to time, it may be necessary for other Brown Rudnick
professionals to provide services to the Committee. The current
hourly rates charged by Brown Rudnick for other professionals
and paraprofessionals employed in its offices are:
Partners $400 - 625
Associates 225 - 380
Paraprofessionals 80 - 200
If the Committee determines to prosecute any of the prepetition
liens, the Committee and Brown Rudnick may enter into an amended
engagement letter concerning Brown Rudnick's compensation for
legal fees and reimbursement for costs and expenses in
connection with the prosecution of these matters.
Brown Rudnick Member Steven B. Levine, Esq., assures the Court
that the Firm does not represent and does not hold any interest
adverse to the Debtors' estates or their creditors in the
matters on which Brown Rudnick is to be engaged. However, Brown
Rudnick is a large firm with a national practice and may
represent or may have represented certain of the Debtors'
creditors, equity holders, affiliates or other parties-in-
interest in matters unrelated to these Cases. These include:
CSFB, AG Capital Funding Partners, Alliance Investments Ltd.,
Alpha Bank, AMMC CDO II Ltd., Archimedes Funding LLC, Avalon
Capital Ltd., Balanced High Yield I, Banca Popolare Di Bergamo,
Banco Espirito Santo, Black Diamond International Funding, BNP
Paribas, Centurion CDO I Ltd., Ceres II Finance Ltd., Credit
Industriel Et Com, Citadel Credit Trading Ltd., Contrarian Funds
LLC, Constantinus Eaton Vance, CSAM Funding I, Department of
Fire & Police Pension, Eaton Vance, First Dominion, Fortis Bank,
Franklin, Grayson & Co., HBK Master Fund LP, Indosuez Capital
Funding, ING, Investkredit Bank AG, KD Distressed & High Income,
KZH, Lehman Syndicated Loan, Monument Capital, Morgan Stanley,
Natexis Banque, Oxford Finance Corp., Perry Principals, Post
balanced Fund, Putnam, R2 Top Hat Ltd., Salomon Bros.,
Scotiabank Europe, Sequils, Silver Oak Capital, SP Offshore
Ltd., Textron Financial Corp., Toronto Dominion Bank, UBS AG,
Wachovia Bank NA, and Winged Foot Funding Trust.
Because of the potential conflict issues that may prevent Akin
Gump and Pepper Hamilton from prosecuting any matters against
the Prepetition Lenders as well as the significant benefit to
the Debtors' estate of the investigation and prosecution of the
prepetition liens, the Committee believes that the employment of
Brown Rudnick would be appropriate and in the best interests of
the unsecured creditor body that the Committee represents.
(Exide Bankruptcy News, Issue No. 13; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FAIRPOINT COMMS: Will Host Q3 Conference Call on November 14
------------------------------------------------------------
FairPoint Communications, Inc., will hold a conference call to
discuss its Third Quarter 2002 Financial Results and provide an
update on the current events of the Company. A Q&A session will
follow management's discussion.
The Conference call will be held at 10:00 a.m., on Thursday,
November 14, 2002. Those individuals interested in
participating should call (800) 858-5088 at 9:50 a.m. (EST) and
inform the Conference Coordinator that you are participating in
the FairPoint call. The Conference Coordinator will give you
instructions on the call at that time.
The call will be recorded and available to those who are unable
to participate. Please call (800) 642-1687 and enter the pin
code, which is 6465362, to access the recording. The recording
will be available, Thursday, November 14th, 2002, at 3:15 p.m.,
ending Friday, November 22nd at 11:59 p.m. (EST).
FairPoint Communications is one of the leading providers of
telecommunications services to rural communities across the
country. Incorporated in 1991, the company's mission is to
acquire and operate telecommunications companies that set the
standard of excellence for the delivery of service to rural
communities. Today, FairPoint owns and operates 29 rural local
exchange companies located in 18 states. The company
serves customers with more than 245,000 access lines and offers
an array of services including local voice, long distance, data
and Internet.
At June 30, 2002, Fairpoint's balance sheets show a total
shareholders' equity deficit of about $135 million.
FEDERAL-MOGUL: Wants to Implement 2003 Key Employee Programs
------------------------------------------------------------
Federal-Mogul Global, Inc., and its debtor-affiliates want to
implement a Key Employee Retention Program for the year 2003 and
institute certain changes to the current Supplemental Key
Employee Pension Plan.
James O'Neill, Esq., at Pachulski Stang Ziehl Young & Jones
P.C., explains that the modification to the Debtors' employee
compensation retention and severance programs are designed to
maintain cohesive and motivated management teams during the
Debtors' Chapter 11 proceedings. Without the programs, Mr.
O'Neill anticipates that "key employees will leave a debtor's
employ to pursue other employment opportunities offering greater
financial rewards and greater job security than that which a
debtor undergoing reorganization can offer."
2003 Key Employee Retention Plan
The 2003 KERP provides a retention award to 97 key leadership,
operations and management incumbents who continue their
employment with the Debtors until the earlier of the
confirmation of a reorganization plan or December 31, 2003. The
awards range from 10% to 143% of the employees' annual base
salary. The payments under the 2003 KERP will be offset against
any award payments under the Debtors' long-term incentive plan.
The projected cost of the 2003 KERP is $11,895,000. In
comparison, the 2002 KERP involved 462 participants and cost
$25,457,514.
If plan confirmation occurs earlier than December 31, 2003 and
the participating employee voluntarily terminates his or her
employment with the Debtors before December 31, 2003, that
employee is required to pay back a pro-rated portion of the
award covering the period between termination of employment and
December 31, 2003.
SKEPP To Include Two More Officers
The proposed Employee Compensation Provisions will include these
two top executives in the SKEPP:
(1) Frank Macher, Chairman and CEO of Federal-Mogul Corp.;
and
(2) Charles McClure, President and COO of Federal-Mogul
Corp.
Under the terms of the SKEPP, an executive is provided with
retirement benefits based on both the executive's:
-- average earnings for the three consecutive years in the
last five years before his or her retirement during which
his or her compensation was the highest; and
-- number of years of service with the Debtors, but not to
exceed 20 years.
Assuming that Messrs. Macher and McClure continue to be employed
by Federal-Mogul Corporation for a sufficient duration in the
future to have their SKEPP benefits ultimately vest, the present
value of Mr. Macher's SKEPP benefits would equal to $1,873,034.
The present value of Mr. McClure's would be equal to $1,872,442
as of June 30, 2002.
According to Mr. O'Neill, the Debtors commissioned Towers
Perrin, a compensation specialist, to complete a detailed market
comparison of the Employee Compensation Provisions. In this
regard, the market analysis conducted by Towers Perrin indicates
that the 2003 KERP is wholly consistent with the retention bonus
levels at other mass tort liability Chapter 11 companies like
Owens Corning, Armstrong World Industries, Inc., USG
Corporation, and W.R. Grace & Co. The retention bonus levels
are also consistent with those for most non-mass tort Chapter 11
debtors. Mr. O'Neill also notes that the confidential data
compiled by Towers Perrin indicates that the projected benefit
levels delivered by the SKEPP to Messrs. Macher and McClure are
within the market practices for similar executives of similar-
sized companies.
On September 27, 2002, the Debtors sent a detailed memorandum to
the creditor constituencies that explained the proposed employee
compensation changes.
Mr. O'Neill relates that the Prepetition Lenders subsequently
expressed general objections to the Employee Compensation
Provisions. They did not however, enumerate any specific
objections. The Prepetition Lenders focused on proposed
solutions to remedy their concerns, in hopes of reaching a
consensual resolution. Mr. O'Neill explains that the
Prepetition Lenders would prefer that the 2003 retention bonus
payout take place at plan confirmation rather than at December
31, 2003, or otherwise be reduced in some way. The Prepetition
Lenders also object to the proposed changes to the SKEPP
program.
The solution proposed by the Prepetition Lenders is that none of
the SKEPP benefits to any of the participating executives be
funded prior to plan confirmation. (Federal-Mogul Bankruptcy
News, Issue No. 26; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
FIRST INT'L: Fitch Puts Low B-Rated Class M-2 & B on Watch Neg.
---------------------------------------------------------------
Fitch Ratings downgrades and places on Rating Watch Negative the
following classes of securities. Either the unguaranteed
interests of SBA 7(a) loans or conventional business loans
extended to small business concerns back the securities.
Fitch downgrades and places the following classes of securities
on Rating Watch Negative:
First International Bank (FIB) business loan notes,
series 2000-A
--Class A notes to 'AA' from 'AAA';
--Class M-1 notes to 'BBB' from 'A';
--Class M-2 notes to 'BB' from 'BBB';
--Class B notes to 'B' from 'BB'.
Fitch Ratings places the following classes of securities
on Rating Watch Negative:
Business Loan-Backed Notes:
FNBNE Business Loan Notes, series 1998-A
--Class A notes 'AAA';
--Class M-1 notes 'A';
--Class M-2 notes 'BBB'.
FIB business loan notes, series 1999-A
--Class A notes 'AAA';
--Class M-1 notes 'A';
--Class M-2 notes 'BBB'.
SBA-Backed Notes:
FIB SBA loan-Backed Adjustable-Rate Certificates,
Series 1999-1
--Class A notes 'AAA';
--Class M notes 'A'.
--Class B notes 'BBB'.
FIB SBA loan-backed adjustable-rate certificates,
series 2000-1
--Class A notes 'AAA';
--Class M notes 'A'.
FIB SBA loan-backed adjustable-rate certificates,
series 2000-2
--Class A notes 'AAA';
--Class M notes 'A'.
These rating actions reflect the deterioration in credit quality
and adverse collateral performance within the securitizations
and, in some instances, the resulting decline of credit
enhancement. Fitch is concerned about the increasing number of
delinquencies in all of the securitizations as well as the
credit quality of the underlying manufacturing loans within the
securitizations. The loans backing the notes primarily consist
of loans made to small businesses operating in various
manufacturing sectors.
Conversations with the company indicate that problematic
manufacturing loans combined with the economic downturn have
contributed to the securitizations' high delinquency rates. It
is estimated that roughly 26% of the combined securitizations'
delinquencies consist of loans extended to businesses operating
in various manufacturing sectors, while 18% of delinquencies
stem from businesses operating in the metals/steel mill sector
and 14% of delinquencies are from businesses operating in the
millwork/textile industry.
One of the main components of credit enhancement in the
aforementioned transactions is the excess spread resulting from
the difference between the interest rate on the underlying loans
and the interest rate on the notes. The securitizations are
structured with a mechanism that traps excess spread to
compensate for delinquent loans. The transactions are required
to trap excess spread totaling 100% of delinquent loans 180-720
days past due. Because the amounts of delinquent loans in the
securitizations have significantly increased, many of the
transactions have experienced spread account shortfalls below
their required amounts. This, in turn, has contributed to the
erosion of credit enhancement in some of the securitizations and
poses substantial risk for future credit enhancement
deterioration for the remaining transactions.
Business Loan-Backed Transactions:
After 28 months of performance for FIB Business Loan Notes,
Series 2000-A, cumulative net losses as a percentage of the
original contract pool balance are 5.35%. In addition, total
delinquencies greater than 30 days past due are 26.07%, while
loans that are 180-720 delinquent totaled 20.98%. These higher-
than-expected loss and delinquency rates have contributed to the
transaction's accelerated pace of performance erosion. Credit
enhancement at the transaction's close for FIB 2000-A was 19%,
15%, 11% and 6% for the class A, M-1, M-2 and B notes,
respectively. As of the Sept. 30, 2002 reporting period,
however, credit enhancement for the class A, M-1, M-2 and B
notes was 13.8%, 9.6%, 5.3% and 0%, respectively.
After 45 months of performance for FNBNE Business Loan-Backed
Notes, series 1998-A, total delinquencies greater than 30 days
past due are 21.13%, while delinquencies 180-720 days past due
are 12.99%. Cumulative net losses as a percentage of the
original contract pool balance are 1.27%. Although credit
enhancement is adequate and cumulative net losses remain within
Fitch's original expectations, Fitch is concerned that higher-
than-expected delinquency rates could translate into future
losses and subsequently erode credit enhancement.
While credit enhancement levels for FIB Business Loan Notes,
series 1999-A are adequate after 37 months of performance,
cumulative net losses to date rose sharply from 2.77% as of Aug.
31, 2002 to 9.12% as of Sept. 30, 2002. The increase in
cumulative net losses is due to a $4.1 million loss that was
booked during the September reporting period. The effect of the
$4.1 million moving from the 180-720 day past due delinquency
bucket to a loss caused 180-720 day delinquencies to decline to
8.74% in September from 16.08% in August. Yet, as a direct
result of the $4.1 million loss, credit enhancement declined
roughly 6% for each class to 24.45%, 20.62% and 16.80%, for the
class A, M-1 and M-2 notes, respectively as of September 30,
2002 versus 30.21%, 26.34% and 14.27%, respectively as of Aug.
31, 2002.
SBA Loan-Backed Transactions:
Although credit enhancement continues to increase for all
classes in the FIB SBA Loan-Backed Adjustable-Rate Certificates,
series 1999-1 securitization after 36 months of performance, the
transaction has experienced a substantial increase in
delinquencies. As of Sept. 30, 2002, total delinquencies greater
than 30 days past due and 180-720 days past due were 27.12% and
12.86%, respectively. The transaction has incurred 2.26%
cumulative net losses to date. As with all of the FIB
securitizations, Fitch believes higher delinquencies put the
transaction at risk for future higher net losses, which could
led to a decline in credit enhancement if FIB liquidates the
delinquent loans.
After 31 months of seasoning, FIB SBA Loan-Backed Adjustable-
Rate Certificates, series 2000-1 has incurred 4.0% cumulative
net losses to date and enhancement levels for each class remain
below original enhancement levels. Current credit enhancement
for the class A and class M notes are 11.79% and 3.88%,
respectively compared to 13% and 5%, respectively as of the
March 2000 closing date. Total delinquencies greater than 30
days past due and delinquencies 180-720 days past due were
27.40% and 11.37%, respectively as of Sept. 30, 2002.
Credit enhancement levels continue to grow in the FIB SBA Loan-
Backed Adjustable-Rate Certificates, series 2000-2
securitization after 23 months of seasoning. Despite growing
enhancement and 0% cumulative net losses to date, total
delinquencies greater than 30 days past due in this transaction
have almost tripled to 21.87% as of Sept. 30, 2002 versus the
prior year. Furthermore, delinquencies 180-720 days past have
correspondingly grown to 10.28% as of Sept. 30, 2002. Once
again, delinquency performance for this transaction remains
outside of Fitch's original expectations. Fitch is concerned
that higher delinquencies could translate into increased future
net losses and adversely affect enhancement levels.
First International Bank, formerly First National Bank of New
England, is a Connecticut Bank and Trust Company organized in
1955 and headquartered in Hartford, Connecticut. Prior to August
2001, FIB was a wholly-owned subsidiary of First International
Bancorp, Inc., a Delaware Corporation. United Parcel Service,
headquartered in Atlanta, GA, purchased FIB in August 2001.
Since then, has provided funding to FIB's balance sheet in
addition to providing debt to the bank holding company.
Fitch will continue to closely monitor these transactions and
may take additional rating action in the event of further
deterioration. In addition, Fitch is in the process of obtaining
detailed collateral information from FIB with respect to the
collateral type (real estate versus equipment) and collateral
values underlying the delinquent loans within each
securitization. Once this information has been received, Fitch
will be able to perform an anticipated recovery analysis by
creating cash flow scenarios that default the loans within each
securitization that are 180-720 days past due. This will enable
Fitch to gauge the potential impact of future defaults and
recoveries on credit enhancement for each transaction based on
the loans' underlying collateral.
FRONTIER AIRLINES: Gets Conditional OK for Fed. Loan Guarantee
--------------------------------------------------------------
Frontier Airlines (Nasdaq: FRNT) has received conditional
approval from the Air Transportation Stabilization Board for a
$63 million federal loan guarantee of a $70 million commercial
loan facility.
"On behalf of Frontier's 3,000 employees, we are extremely
appreciative of the government's recognition of Frontier's solid
business plan and the value Frontier's presence brings to
aviation in our country," said Frontier President and CEO Jeff
Potter. "During the past eight years, the employees of Frontier
have worked hard to create a strong, economically viable airline
that brings affordable, competitive air service to millions of
air travelers each year.
"The events of September 11 and its aftershocks have had a
debilitating effect on the capital markets. We are in the midst
of our fleet improvement/transition plan, and access to capital
is a critical success factor. Obtaining conditional approval for
this government-backed loan helps to ensure that we can continue
our business strategy, bring competitive air travel options to
more communities and preserve competition in the aviation
industry. We are especially grateful for the professional manner
in which the ATSB and their staff conducted this process. We
found their knowledge of our industry and the unique challenges
we face to be thorough and comprehensive, and we thank them for
their efforts."
Congress enacted the ATSB loan guarantee program in September
2001 in order to provide financial stability for airlines
impacted by the September 11 terrorist attacks. Subject to
satisfaction of the conditions imposed by the ATSB and obtaining
the necessary internal approvals, Frontier Airlines expects to
obtain funds from the ATSB supported loan transaction in its
current quarter.
Denver-based Frontier Airlines employs approximately 3,000
aviation professionals and is the second largest jet service
carrier at Denver International Airport. The airline offers
service to 37 cities with a fleet of 34 aircraft, which feature
a single-class configuration. In 1999, 2000 and 2001, Frontier's
maintenance and engineering department received the Federal
Aviation Administration's highest award, the Diamond Certificate
of Excellence, in recognition of 100 percent of its maintenance
and engineering employees completing advanced aircraft
maintenance training programs. In April 2002, Entrepreneur
ranked Frontier one of two "Best Low-Fare Airlines," and in
September 2001, Fortune ranked Frontier 41st on its 100 Fastest
Growing Companies list. Frontier provides capacity information
and other operating statistics on its Web site, which may be
viewed at http://www.frontierairlines.com
GENESIS HEALTH: Appoints Robert Fish as Interim Board Chairman
--------------------------------------------------------------
Genesis Health Ventures, Inc., Board of Directors announced that
Robert Fish, interim CEO, has been named interim Chairman of the
Board. The Board also announced it has accepted the
resignations of Chairman Michael R. Walker and Board Member
Edwin M. Crawford.
In making the announcement, interim Chairman and CEO Robert Fish
said, "Mike Walker has dedicated two decades to building Genesis
into one of the strongest eldercare delivery systems in the
nation. Through his roles in the Alliance for Quality Nursing
Home Care and the Long Term Care Pharmacy Alliance, Mike has
also distinguished himself as a leader in Federal lobbying
efforts for adequate funding for healthcare providers."
Walker resigned as Genesis CEO in May to lobby congress to
restore drastic cuts in Medicare funding. Walker founded
Genesis in 1985 and had served as Chairman and CEO since then.
He had planned to remain Chairman until year end, but cited the
need to pursue business interests as the reason for his early
resignation.
Crawford served on the board since Genesis emerged from Chapter
11 in October 2001. He is currently chairman and CEO of
Caremark RX and cited increasing time demands as his reason for
leaving the board.
On October 2, the company announced it had retained UBS Warburg
LLC and Goldman Sachs & Co., to explore strategic business
alternatives, including the sale or spin off of the Genesis
ElderCare division.
Genesis Health Ventures (Nasdaq: GHVI) provides healthcare
services to America's elders through a network of NeighborCare
pharmacies and Genesis ElderCare skilled nursing and assisted
living facilities. Other Genesis healthcare services include
rehabilitation and respiratory therapy, hospitality services,
group purchasing, and diagnostics. Visit its Web site at
http://www.ghv.com
GENTEK INC: Court Allows Payment of Prepetition Tax Obligations
---------------------------------------------------------------
After considering the merits of the case, Judge Walrath signs an
Interim Order permitting GenTek Inc., and its debtor-affiliates
to pay, at least, the prepetition portion of their tax
obligations.
The aggregate payments, however, must not exceed $1,500,000.
Judge Walrath rules that the fee cap must be used for the
payment of trust fund and priority taxes only that are payable
within the next 30 days. (GenTek Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
GEO SPECIALTY: Low Liquidity Spurs S&P to Change Outlook to Neg.
----------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on GEO
Specialty Chemicals Inc., to negative from stable based on
concerns about operating conditions in the gallium market and
the firm's reduced liquidity.
Standard & Poor's said that it has affirmed its single-'B'-plus
corporate credit and bank loan ratings and its single-'B'-minus
senior subordinated debt rating on the company. GEO, based in
Cleveland, Ohio, produces a diverse line of specialty chemicals
and has about $217 million of debt outstanding.
"The outlook revision reflects concerns surrounding
substantially reduced volumes and profitability in the gallium
market, which has not recovered since its falloff in early 2001,
and a decline in liquidity during the first nine months of
2002," said Standard & Poor's credit analyst Franco DiMartino.
End markets for gallium products, primarily telecommunications
and electronics, are not expected to rebound materially in the
near-term, thus maintaining downward pressure on the firms
operating profits. In addition, liquidity has deteriorated
markedly as a result of lower operating cash flows and the
reduction of the revolving credit facility to $20 million from
$40 million as a result of an amendment to the bank credit
agreement in May 2002. However, the firm does not face
meaningful term loan amortization until mid 2004 and is expected
to fund working capital, debt service and capital expenditures
from operating cash flow.
Standard & Poor's said that its ratings on privately held GEO
continue to reflect its solid positions in niche markets, offset
by an aggressive financial risk profile.
GEOWORKS CORP: Nasdaq Delists Shares Effective November 6, 2002
---------------------------------------------------------------
Nasdaq delisted Geoworks Corporation's (Nasdaq SmallCap: GWRX)
common stock from the Nasdaq Stock Market effective with the
open of business Wednesday, November 6, 2002.
Geoworks Corporation is a provider of leading-edge software
design and engineering services to the mobile and handheld
device industry. With nearly two decades of experience
developing wireless operating systems, related applications and
wireless server technology, Geoworks has worked with industry
leaders in mobile phones and mobile data applications. Based in
Emeryville, California, the company also has a professional
services center in the United Kingdom. Additional information
can be found on the World Wide Web at http://www.geoworks.com
* * *
As reported in Troubled Company Reporter's May 31, 2002 edition,
Geoworks Corporation announced that its future capital needs
remain highly dependent on the success of its efforts to realize
the value of the professional services business by, among other
things, adding customers, increasing revenues and adding the
personnel necessary to support those customers. As the
Company's projections of future cash needs and cash flows are
subject to substantial uncertainty, the Company expects that the
opinion of its independent auditors, with respect to the
consolidated financials statements for the year ended March 31,
2002, will express uncertainty about the Company's ability to
continue as a going concern.
GLIMCHER REALTY: Completes Financing on Community Center Assets
---------------------------------------------------------------
Glimcher Realty Trust, (NYSE: GRT) -- whose corporate credit and
preferred stock ratings are rated by Standard & Poor's at BB and
B, respectively -- has completed mortgage financing on four
community center assets. The new debt consists of a $15.190
million mortgage note at a rate of LIBOR plus 1.95%, which
results in an initial interest rate of 3.67%. The new debt
matures November 1, 2004, and includes a one-year extension
option.
The centers are Audubon Village, 120,849 square foot center in
Henderson, KY; Chillicothe Plaza, a 97,271 square foot center in
Chillicothe, OH; Liberty Plaza, a 58,700 square foot center in
Morristown, TN; and Prestonsburg Village Center, a 175,347
square foot center in Prestonsburg, KY.
The proceeds were primarily used to repay an $11.064 million
bridge loan which carried an interest rate of LIBOR plus 6.00%
and a $3.851 million mortgage that bore interest at LIBOR plus
3.00%. These loans had maturity dates of January 31, 2003 and
were secured by mortgages on 24 community centers. As a result
of this refinancing, the Company now has 31 unencumbered assets
consisting of 27 community centers and 4 single tenant
properties aggregating 3.1 million square feet of gross leasable
area.
"The refinancing that we completed [Thursday last week]
represents another step forward in strengthening our balance
sheet and reducing our interest cost," said Michael P. Glimcher,
President. "It also provides us with flexibility in
structuring the retenanting of the vacancies created by the Ames
and Kmart bankruptcies," added Glimcher.
Glimcher Realty Trust, a real estate investment trust, is a
recognized leader in the ownership, management, acquisition and
development of enclosed regional and super-regional malls, and
community shopping centers.
Glimcher Realty Trust's common shares are listed on the New York
Stock Exchange under the symbol "GRT." Glimcher Realty Trust is
a component of both the Russell 2000(R) Index, representing
small cap stocks, and the Russell 3000(R) Index, representing
the broader market. Visit Glimcher at http://www.glimcher.com
GLOBAL CROSSING: Court Approves Ingram Yuzek as Tax Counsel
-----------------------------------------------------------
Global Crossing Ltd., and its debtor-affiliates obtained
permission from the U.S. Bankruptcy Court for the Southern
District of New York to retain Ingram Yuzek Gainen Carroll &
Bertolotti LLP to provide certain tax-related services to the
Debtors.
With the Court approval, Ingram will provide these tax services:
A. New York State Sales Taxes and Gross Receipt Taxes: The New
York State Department of Taxation and Finance has alleged
substantial liabilities for sales taxes and gross receipts
taxes allegedly owing by the Debtors. Ingram has been
representing the Debtors in discussions with the NYSDTF and
will assist the Debtors in negotiating agreements with NYSDTF
to resolve any alleged tax liabilities;
B. New York State Tax Refunds: Ingram has been assisting the
Debtors pursue significant tax refunds for New York State
sales taxes paid on various telecommunications equipment;
C. New York State Tax Filings: Ingram is assisting the Debtors
with the filing of their New York State tax returns and is
providing research and technical support in connections with
those returns;
D. Connecticut Sales Taxes: The Connecticut Department of
Revenue has proposed the audit of certain Debtors with a view
to assessing sales tax liabilities. Ingram is negotiating
with the CDR to resolve any sales tax liabilities; and
E. Pursuit of Other Sales Tax Refunds: Ingram will be assisting
the Debtors pursue refunds for sales taxes erroneously paid
on certain exempt telecommunications equipment in several
state and local taxing jurisdictions.
Ingram will charge the Debtors its customary hourly rates in
connection with this representation:
Roger Cukras $435
Associates $160 - $325
Paralegals $85 - $115
(Global Crossing Bankruptcy News, Issue No. 25; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
GLOBAL CROSSING: Names Donald Poulter to Lead Conferencing Unit
---------------------------------------------------------------
Global Crossing announced that Donald F. Poulter has been named
president of Global Crossing Conferencing. This position marks
Mr. Poulter's return to Global Crossing, having previously
served in executive posts for Global Crossing's conferencing
business and Canadian operations. In this position, Mr. Poulter
will oversee Global Crossing Conferencing and manage related
activities, including operations, customer care, marketing,
sales and platform and product development. He will report to
Carl Grivner, Global Crossing's chief operating officer.
"We are honored to welcome Don back to Global Crossing
Conferencing. His leadership, experience and knowledge will
prove essential to energizing the business," said Mr. Grivner.
"Don's appointment as president is yet another move we have
taken to strengthen the conferencing group. We have also taken
significant steps to fortify our account management and customer
care ranks in an effort to enhance our position as an industry
leader."
Mr. Poulter has a long history with Global Crossing and as a
conferencing executive. He previously served as president of
Global Crossing's Canadian business unit where he established a
network and business presence for Global Crossing in the region.
From 1989 through 2000, Mr. Poulter served in executive posts,
including president of Global Crossing Conferencing and of the
former ConferTech, which became part of Global Crossing through
its acquisition of Frontier.
During his tenure at Global Crossing Conferencing and
ConferTech, Mr. Poulter was a key contributor to the growth of
the business and led the introduction of Ready-Access, which
quickly became -- and remains today -- the global leader in
reservationless audio conferencing services. He also oversaw
entry into the European marketplace, launched an expanded multi-
lingual call center in Montreal and led numerous operational,
training, customer care and sales initiatives.
Mr. Poulter holds an Honors Bachelor of Business Administration
from Wilfrid Laurier University. He is also a Chartered
Accountant in Canada.
Global Crossing Conferencing is a full conferencing solution
provider offering automated and operator-assisted audio
conferencing services, Web conferencing and comprehensive video
conferencing -- all backed by the industry's best redundancy
protection and disaster recovery systems. With offices and call
centers located across the globe, Global Crossing Conferencing
is a market leader and currently serves 60 percent of all
Fortune 100 companies.
Ready-Access is a registered trademark of Global Crossing.
Global Crossing provides telecommunications solutions over the
world's first integrated global IP-based network, which reaches
27 countries and more than 200 major cities around the globe.
Global Crossing serves many of the world's largest corporations,
providing a full range of managed data and voice products and
services. Global Crossing operates throughout the Americas and
Europe, and provides services in Asia through its subsidiary,
Asia Global Crossing.
On January 28, 2002, Global Crossing and certain of its
affiliates (excluding Asia Global Crossing and its subsidiaries)
commenced Chapter 11 cases in the United States Bankruptcy Court
for the Southern District of New York (Bankruptcy Court) and
coordinated proceedings in the Supreme Court of Bermuda (Bermuda
Court). On the same date, the Bermuda Court granted an order
appointing joint provisional liquidators with the power to
oversee the continuation and reorganization of the Bermuda-
incorporated companies' businesses under the control of their
boards of directors and under the supervision of the Bankruptcy
Court and the Bermuda Court.
On April 23, 2002, Global Crossing commenced a Chapter 11 case
in the Bankruptcy Court for its affiliate, GT UK, Ltd. On
August 4, 2002, Global Crossing commenced a Chapter 11 case in
the United States Bankruptcy Court for the Southern District of
New York for its affiliate, SAC Peru Ltd. On August 30, 2002,
Global Crossing commenced Chapter 11 cases in the Bankruptcy
Court for an additional 23 of its affiliates (as specified in
the July Monthly Operating Report filed with the Bankruptcy
Court) in order to coordinate the restructuring of those
companies with its restructuring. Global Crossing has also
filed coordinated insolvency proceedings in the Bermuda Court
for those affiliates that are incorporated in Bermuda. The
administration of all the cases filed subsequent to Global
Crossing's initial filing on January 28, 2002 has been
consolidated with that of the cases commenced in Bankruptcy
Court on January 28, 2002.
Global Crossing's Plan of Reorganization, which it filed with
the Bankruptcy Court on September 16, 2002, does not include a
capital structure in which existing common or preferred equity
would retain any value.
Please visit http://www.globalcrossing.comor
http://www.asiaglobalcrossing.comfor more information about
Global Crossing and Asia Global Crossing.
Global Crossing Holdings Ltd.'s 9.625% bonds due 2008
(GBLX08USR1) are trading at 1.75 cents-on-the-dollar,
DebtTraders reports. For real-time bond pricing, see
http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX08USR1
GROUP TELECOM: Receives Merger and Acquisition Proposals
--------------------------------------------------------
GT Group Telecom Inc., (TSX: GTG.B, GTG.A) received a number of
bids in response to its request for merger and acquisition
proposals. Group Telecom has extensively reviewed the bids with
the Special Committee, the Company's Monitor,
PricewaterhouseCoopers, and with representatives of Group
Telecom's senior secured lenders.
Group Telecom also sought and obtained, from the Ontario
Superior Court of Justice, an order granting it and its
affiliates an extension of protection under the Companies'
Creditors Arrangement Act to November 8, 2002. The purpose of
the extension is to allow the Special Committee and the Monitor
adequate time to review the clarifications to the two bids and
determine an appropriate course of action in consultation with
Group Telecom's senior secured lenders.
Group Telecom continues to defer the issuance of its fiscal
third quarter 2002 financial results and the related
management's discussion and analysis. As a result, GT Group
Telecom's securities may be subject to a cease trade order
affecting certain insiders and a cease trade order affecting all
of its securities may be issued. Group Telecom continues to
comply with the Alternate Information Guidelines set out in
Ontario Securities Commission Policy 57-603.
Group Telecom is Canada's largest independent, facilities-based
telecommunications provider, with a national fiber-optic network
linked by 454,125 strand kilometers of fiber-optics, at March
31, 2002. Group Telecom's unique backbone architecture is built
with technologies such as Gigabit Ethernet for delivery of
enhanced network performance and Synchronous Optical Network for
the highest level of network reliability. Group Telecom offers
next-generation high-speed data, Internet, application and voice
services, delivering enhanced communication solutions to
Canadian businesses. Group Telecom operates with local offices
in 17 markets across nine provinces in Canada. Group Telecom's
national office is in Toronto.
HOME INTERIORS: S&P Ups Low-B & Junk Ratings On Improved Results
----------------------------------------------------------------
Standard & Poor's raised its corporate credit rating on Home
Interiors & Gifts Inc., to single-'B'-plus from single-'B.'
Standard & Poor's also raised its senior secured debt rating to
single-'B'-plus from single-'B,' and its subordinated debt
rating to single-'B'-minus from triple-'C'-plus.
The outlook is stable. At June 30, 2002, the company had $308.2
million in debt outstanding.
"The upgrade reflects Home Interiors' improvements in marketing
and infrastructure, with solid recruitment and retention of
strong management and sales personnel," said Standard & Poor's
analyst Martin S. Kounitz. "These positive steps have resulted
in stronger profitability and credit ratios."
The rating is based on the high level of business risk
associated with Home Interiors' direct sales business model and
the company's aggressive debt leverage.
Carrolton, Texas-based Home Interiors sells decorative
accessories such as framed art, mirrors, and candles to more
than 64,000 independent sales representatives called displayers,
who resell the products using a party-plan method. Sales are
vulnerable to changes in incentives for the displayers, slight
disruptions in fulfillment of orders, the training and
experience level of displayers, and competition in recruitment
for experienced personnel.
HORSEHEAD: Wants Okay to Continue Frankfurt Garbus' Engagement
--------------------------------------------------------------
Horsehead Industries, Inc., and its debtor-affiliates want to
continue the retention of Frankfurt Garbus Kurnit Klein & Selz,
PC, as special counsel.
Frankfurt Garbus is a general commercial law firm, with a
recognized focus in intellectual property law, located in New
York City.
The Debtors relate to the U.S. Bankruptcy Court for the Southern
District of New York that at the time the bankruptcy petition
was filed, Frankfurt Garbus was in the process of resolving two
complex matters:
(A) The consummation of a supply arrangement with Mitsui/ZCA
Zinc Powders Company, which operates a zinc powder
manufacturing facility on leased land at HII's Monaca,
Pennsylvania facility. This arrangement will form the basis
for the settlement of certain lengthy and complex
litigation. The resolution will free management to focus
on future business and will provide a continuing profit
source.
(B) A lawsuit pending in Massachusetts Superior Court in Boston
entitled Horsehead Industries v. Gillette, Inc., and
concerns a claim that Gillette, Inc., through its battery-
manufacturing division, Duracell, stole certain trade
secrets belonging to HII. This action can result either in
a substantial money judgment in HII's favor or a renewed
commercial arrangement with Gillette that will bring
dollars to HII's bottom line and increased business
opportunities.
Prepetition, the Debtors employed Frankfurt Garbus as their
counsel on both the MZC Transaction and the Gillette Action.
The Debtors believe that Frankfurt Garbus's continued retention
on their behalf will benefit the estates. The Debtors assert
that these matters weigh heavy on the ability of the Debtors to
improve their financial picture and timely resolution is
imperative.
Pursuant to a previous agreement between the Debtors and
Frankfurt Garbus, the Debtors propose to pay Frankfurt Garbus on
a modified contingency arrangement. Under this arrangement,
Frankfurt Garbus will receive:
(a) discounted legal fees which are:
Ronald C. Minkoff Partner $375 per hour
Michael Williams Partner $375 per hour
Wendy Stryker Associate $250 per hour
Mary Wagner Paralegal $115 per hour
(b) 15% of the net cash recovery (after expenses)
provided, however that if the settlement results in a
commercial supply arrangement between HII and
Duracell, Frankfurt Garbus and Mr. Minkoff's
predecessor firm on the matter, Beldock Levine &
Hoffman LLP are to receive an amount equal to the
greater of 15% of the cash portion of such settlement
or 120% of the accrued and unpaid fees.
Horsehead Industries, Inc., d/b/a Zinc Corporation of America,
the largest zinc producer filed for chapter 11 protection on
August 19, 2002. Laurence May, Esq., at Angel & Frankel, PC
represents the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$215,579,000 in assets and $231,152,000 in debts.
INTEGRATED HEALTH: Wants to Sell Vintage Health Care for $2 Mil.
----------------------------------------------------------------
Integrated Health Services, Inc., and its debtor-affiliates own
and operate a 110-bed skilled nursing facility known as the
Vintage Health Care Center located in Denton, Texas. Vintage,
together with six other properties owned by various of the
Debtors, is encumbered by a certain "blanket" mortgage in the
aggregate original principal amount of $37,500,000 held by Omega
Health Care Investors, Inc. In connection with the Mortgage,
Omega maintains a mortgage lien on the Vintage Real Property.
The Debtors believe that Omega will be "undersecured" with
respect to its Mortgage. Nevertheless, Omega has a lien and as
a result possesses the rights and intents of a mortgagee,
subject to applicable bankruptcy law, and is entitled to receive
the proceeds of sale from the disposition of the Vintage Real
Property, subject to the application of the proceeds in
reduction of Omega's Mortgage claim.
Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor LLP,
in Wilmington, Delaware, informs the Court that the 110-bed
skilled nursing facility of Vintage constitutes one unit of a
two-unit healthcare condominium project located in Denton,
Texas. These units are part of a single campus, and share
common service facilities. The Vintage Facility has been
marketed to prospective purchasers for nine months, and these
marketing efforts have revealed that few, if any, operators seek
to own and operate simply one unit without the other. For that
reason, Vintage is a unique property with a limited market.
Fortunately, Mr. Brady relates that Denton Realty has structured
the purchase of the Vintage Real Property as part of its
purchase of both condominium units in a single transaction. If
the Debtors are able to consummate the Sale, they will be able
to maximize the purchase price for the single condominium unit
comprised by Vintage, and will be able to reduce -- by the
amount of the Purchase Price -- Omega's secured claim arising
from the Mortgage, that is, the $2,000,000 Purchase Price will
be applied against the aggregate principal amount of the
Mortgage.
Thus, the Debtors ask the Court to approve the sale of the real
property and improvements of Vintage Health Care Center in
Denton, Texas, to Denton NH Realty Ltd., for $2,000,000, free
and clear of all liens, claims, charges, interests, and
encumbrances. The Debtors also ask the Court to approve the
transfer to the Purchaser of the Facility pursuant to a certain
Operations Transfer Agreement.
In October 2002, Omega asked CBIZ Valuation Group, Inc., a
licensed real estate appraisal firm located in Lawrenceville,
New Jersey, to appraise the Vintage Real Property and report its
market value. The Appraisal, dated October 1, 2002, indicates
that Vintage's fee simple market value at the date of the
Appraisal was $2,000,000.
Based on the Appraisal and the unique characteristics of the
Vintage property, the Debtors propose to implement the Sale with
Denton Realty. As a result, Mr. Brady relates, Denton Realty
and the Debtors engaged in extensive arm's-length, good faith
negotiations that have resulted in their, executing the Purchase
Agreement for the Vintage Real Property, and the execution of
the related Operations Transfer Agreement between the Debtors
and Denton Realty. The Transaction Agreements are inextricably
intertwined and together provide for and govern the disposition
of substantially all of the Debtors' assets and operations.
Specifically, the Purchase Agreement provides for the Debtors to
sell the Vintage Real Property, free and clear of all Liens,
except for the Permitted Encumbrances. The Operations Transfer
Agreement governs the disposition of the operations at the
Facility and certain personal property of the Debtors relating
to the operation of Vintage.
Among the salient provisions of the Purchase Agreement are:
-- Purchase Price: Denton Realty will pay to the Debtors
$2,000,000. Upon the signing of the Purchase Agreement,
Denton Realty will pay a $50,000 downpayment to the Debtors
to be held in escrow by Stewart Title Guaranty Company
pending the Closing;
-- Payment Method: On the Closing Date, Denton Realty will pay
the Debtors the total Purchase Price either by Acceptable
Checks payable to the order of the Debtors, without
intervening endorsement, or by wire transfer of immediately
available federal funds to the Debtors' account in a
commercial bank in accordance with wire transfer instructions
to be furnished by the Debtors prior to the Closing Date or
by a combination of both of the aforementioned payment
methods.
The Purchaser will purchase the Vintage Real Property in "as
is" condition, subject to the Permitted Encumbrances. The
deed to be delivered by the Debtors at the closing will be a
deed without warranty. The Purchaser will accept title
subject to the rights of the patients and clients of the
Facility;
-- Liens: The Vintage Real Property will be sold free and clear
of the Liens;
-- Closing Contingent Upon Closing Under Operations Transfer
Agreement: The Purchase Agreement provides that if the New
Operator fails to close under the Operations Transfer
Agreement due to its willful default or its failure or
inability to obtain a New Operator License, then this will
constitute a breach and failure of a condition precedent to
the closing under the Purchase Agreement and will entitle the
Debtors to retain the Downpayment as its sole and exclusive
remedy for the breach. If the closing under the Operations
Transfer Agreement fails to occur for a reason other than as
set forth, and the Operations Transfer Agreement is
cancelled, then the Purchase Agreement will be deemed
cancelled and the Purchaser will be entitled to the return of
the Downpayment;
-- Closing Contingent Upon Purchaser's Closing Under Third Party
Purchase Agreement for the "Vintage Retirement Community":
The Purchase Agreement provides that the Sale is contingent
on the simultaneous closing of the Purchaser's purchase of
the condominium unit known as the "Vintage Retirement
Community" located at 205 North Bonnie Brae, Denton, Texas.
If the Purchaser fails to close the purchase for any reason,
then the event will constitute a breach and failure of a
condition precedent to the closing under the Purchase
Agreement and will entitle the Debtors to retain the
Downpayment as its sole and exclusive remedy for the breach;
-- Closing: The Closing Date will be on the last day of the
month following the date of entry of the Court's order
approving the Sale, but in any event no later than December
2, 2002, time being of the essence with respect to the
Closing Date; and
-- Real Estate Broker: The parties represent to each other in
the Purchase Agreement that only the Purchaser utilized a
real estate broker, and the broker's commission, if any, will
be payable solely by the Purchaser.
The Debtors assert that the value to be received for the Vintage
Real Property is largely a function of the Purchaser's assembly
of the combination of the Vintage Real Property with the other
condominium unit located at the site, and the synergies and
economics to be derived from the operation of the Facility in
conjunction with the adjacent retirement facility. Thus, the
proposed sale is of a unique nature and offers the Debtors
special opportunity to maximize the realizable value of the
Vintage Real Property and Facility. The Debtors' prior efforts,
current information, and appraisal confirm that any further
marketing efforts would not produce a better result,
particularly as the Sale includes the orderly transfer of the
Facility and seamless transition of care for patients.
In this transaction, Mr. Brady reports that Omega has consented
to the Sale, free and clear of Liens, and has agreed to receive
and apply the proceeds of the Sale to reduce its secured claim
against the Debtors' estates arising from the Mortgage by the
Purchase Price. Based on the amount of the Mortgage, the
estimate of the value of all of the properties encumbered by the
Mortgage, and the appraised value and contract Purchase Price
for the Vintage Real Property, there is no equity in the Vintage
Real Property that would inure to the benefit of the Debtors'
unsecured creditors. If the Sale is consummated, however, the
amount of Omega's secured claim will be reduced by the total
Purchase Price, and the Debtors will have realized the value of
the Vintage Assets for the benefit of their estates and
creditors.
In addition, Mr. Brady asserts that the Sale satisfies Section
363(f)(5) of Bankruptcy Code, which authorizes a
debtor-in-possession to sell property of the estate free and
clear of interests if the party holding the interest could be
compelled in a legal or equitable proceeding to accept less than
a full, monetary satisfaction of its claim. The Debtors point
out that the Sale could have been achieved through a state law
foreclosure proceeding, or a distribution under Section 724 of
Bankruptcy Code, and that under either scenario, any secured
creditor of the Debtors who was adversely affected by the
transaction could be compelled to accept a money satisfaction in
an amount less than the full value of its lien.
Furthermore, upon Court approval of the Sale, the Liens will be
extinguished as to the Vintage Assets and attach to the net
proceeds with the same priority, validity, force and effect and
enforceability and subject to the same defenses and avoiding
power as these interests, if any, currently have with respect to
the Vintage Real Property. Mr. Brady believes that if the
Vintage Real Property is auctioned alone, any bids would, in all
likelihood, be substantially less than the Purchase Price.
Therefore, the Debtors assert that conducting a public auction
would be a waste of time and financial resources, and might even
jeopardize the Sale, to the detriment of the Debtors' estate and
creditors. (Integrated Health Bankruptcy News, Issue No. 45;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTERMOST CORP: Moores Rowland Expresses Going Concern Doubt
------------------------------------------------------------
Intermost Corporation and its subsidiaries was incorporated as
La Med Tech, Inc., under the laws of the State of Utah on March
6, 1985. The Company changed its name to Entertainment Concepts
International in 1987, to Lord & Lazarus, Inc. in 1988, and to
Utility Communication International, Inc. in 1996.
From the date of incorporation through October 1998, the
Company's operations were limited to efforts to identify and
acquire, or merge with, one or more operating businesses. In
October 1998, the Company acquired all of the issued share
capital of Intermost Limited, a British Virgin Islands Company,
by issuing to the then shareholders of IML a total of 4,970,000
shares of the Company's common stock, par value $0.001 per
share. Following the Merger, (i) IML became a wholly-owned
subsidiary of the Company, (ii) the shareholders of IML held
58.7% of all issued and outstanding shares of the Company, (iii)
the Company changed its name to Intermost Corporation, (iv) the
Company terminated all its prior business activities and adopted
IML's business plan, and (v) all officers and directors of the
Company resigned and were replaced by officers and directors of
IML.
The Company's operations are conducted through its largest
subsidiary, China e.com Information Technology Ltd., which is
the owner of 90% of Intermost Focus Advertising Company Ltd.,
and 55.3% of Shenzhen Bank Union & Jiayin e-Commerce Company
Ltd. While Intermost has two other subsidiaries, neither of
them is currently engaged in significant operations.
IML was incorporated in January 1998 to develop a Chinese-
language Internet business portal, and to render services in
connection therewith in the People's Republic of China. During
the period following the Merger, the Company entered into
agreements with, and completed acquisitions of, various
businesses that provided or supported Internet services in an
effort to implement this business plan. The Company also
endeavored to develop its own Internet services businesses,
including e-commerce business solutions. However, the global
decline in the demand for Internet services since mid-2000,
resulting in a significant economic slowdown experienced by many
of the companies with whom Intermost does business, among other
factors, has materially undermined the effectiveness of its
efforts. Currently, through China e.com Information Technology
Ltd., Intermost offers web design and hosting services and
system integration services to customers in China. Management is
also continuing efforts to identify and explore acquisition,
merger and development opportunities.
Moores Rowland, Chartered Accountants, CPAs, of Hong Kong, have
noted, in their cover letter to the Intermost Corporatiion's
Board of Directors accompanying their Auditors Report for the
period ended June 30, 2002: "[T]he Group has suffered recurring
losses from operations and continues to experience negative cash
flow from operations that raise substantial doubt its ability to
continue as a going concern."
Net revenues for the year ended June 30, 2002 decreased by
$392K1, or 40%, to $592K from $984K for the year ended June 30,
2001. Net revenues during fiscal 2002 and 2001 were derived
principally from e-commerce solutions and advertisement sales.
The term "e-commerce solutions" includes web site design and
development, web hosting, and system sales and integration.
At June 30, 2002 Intermost had cash and cash equivalents of $54K
and working capital of $98K as compared to $498K of cash and
cash equivalents and $128K of working capital at June 30, 2001.
ISLE OF CAPRI: Consummates Sale of Las Vegas Lady Luck Assets
-------------------------------------------------------------
Isle of Capri Casinos, Inc., (Nasdaq: ISLE) officials announced
that it has completed the previously announced sale of its Las
Vegas property.
A subsidiary of the company will continue to operate the casino
for up to six months, pending receipt of regulatory approval by
the Purchaser's designated gaming operator.
Isle of Capri Casinos, Inc., owns and operates 13 riverboat,
dockside and land-based casinos at 12 locations, including
Biloxi, Vicksburg, Lula and Natchez, Mississippi; Bossier City
and Lake Charles (two riverboats), Louisiana; Black Hawk,
Colorado; Bettendorf, Davenport and Marquette, Iowa; and Kansas
City and Boonville, Missouri. The company also operates Pompano
Park Harness Racing Track in Pompano Beach, Florida.
* * *
As reported in the March 26, 2002 edition of Troubled Company
Reporter, Standard & Poor's assigned a single-B rating to Isle
of Capri's $200 million senior subordinated notes. S&P gave the
ratings to reflect the company's diverse portfolio of casino
assets, relatively steady operating performance, lower than
expected capital spending levels, and improving credit measures.
These factors are partly offset by competitive market
conditions, the company's aggressive growth strategy, and its
high debt levels.
ISOMET CORP: BofA Extends Loan Repayment Date to November 12
------------------------------------------------------------
Isomet Corporation (Nasdaq: IOMT) has been granted an extension
under an existing forbearance agreement of the repayment date
from October 31, 2002 to November 12, 2002, of its $700,000 loan
with Bank of America NA.
The Company anticipates repaying this loan from the proceeds of
a new $1,500,000 working capital loan facility, the terms of
which are currently being negotiated.
KAISER ALUMINUM: Selling Aluminum Rod Mill for Nearly $1 Million
----------------------------------------------------------------
Kaiser Aluminum Corporation and its debtor-affiliates propose to
sell surplus equipment consisting of a complete aluminum rod
mill in accordance with a surplus sales contract dated October
4, 2002. The rod mill is located at Kaiser's plant in Tacoma,
Washington, which was shut down over two years ago. Rod mills
are used to process aluminum bars into round rods, which may
then be sold to manufacturers of aluminum wire for power
transmission or other commercial uses.
The pertinent terms of the transaction are:
Property: A complete aluminum rod mill
The majority of the equipment was originally
purchased by Kaiser in 1968 and includes:
* 17 mill stands,
* a bar heater,
* a bar cooler,
* troughs and
* testing equipment.
Buyer: ALRO S.A.
The Purchaser is a Romanian company that does not
have a relationship with any of the Debtors.
Price: $975,000 in cash
Conditions to
Transaction:
The Debtors propose to sell the Property:
-- on an "as is" and "where is" basis without any
representations or warranties from the Debtors
as to the quality or fitness of the assets for
either their intended or any particular
purposes; and
-- free and clear of all liens, claims,
encumbrances and other interests. All liens,
claims, encumbrances and other interests will
attach to the proceeds with the same validity
and priority as they attached to the Property.
Liens &
Interests: Other than the liens granted to the Debtors'
lenders under the Debtors' postpetition financing
facility, the Debtors are not aware of any liens
on or interests in the Property. But to the
extent that the Secured Lenders, or any other
party has a lien on or an interest in the
Property, the Debtors believe that those liens
and interests would be subject to money
satisfaction in accordance with Section 363(f)(5)
of the Bankruptcy Code.
Unexpired
Leases: The Debtors do not intend to assume and assign any
executory contracts or unexpired leases pursuant
to Section 365 of the Bankruptcy Code in
connection with the Transaction.
Etta R. Wolfe, Esq., at Richards, Layton & Finger, PA, relates
that any objection to the Transaction must:
(i) be in writing;
(ii) state with specificity the grounds for the Objection; and
(iii) be filed with the Court on or before November 6, 2002 and
served to the Notice Parties:
(1) The Debtors
(2) Counsel to the Debtors
(3) Counsel to the Postpetition Lenders
(4) Counsel to the Asbestos Committee
(5) Counsel to the Creditors Committee
(6) Office of the U.S. Trustee
(7) Taxing Authority for Tacoma, Washington
If no objections are filed with the Court and served on the
Interested Parties by the Objection Deadline, the Debtors will
be authorized to consummate the Transaction without further
notice and without further Court order. (Kaiser Bankruptcy News,
Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900)
KMART CORP: Bags Nod to Consummate Purchase Pact with NetBrands
---------------------------------------------------------------
BlueLight is a wholly owned direct subsidiary of Kmart
Corporation that operates the Debtors' e-Commerce business, the
dial-up Internet access and email services and the private label
internet access services. The ISP and Private Label Businesses
provide low cost, high quality dial-up Internet access services
covering areas that comprise more than 90% of the U.S.
population. The ISP Business has a user base of 160,000 active
subscribers in 49 states. Both Businesses market and distribute
the service through signage and CD-ROMs placed in 800 Kmart
stores nationwide. The service is also marketed through the
Kmart.com Web site.
As part of their reorganization efforts, John Wm. Butler, Jr.,
Esq., at Skadden, Arps, Slate, Meagher & Flom, tells Judge
Sonderby that the Debtors have been working with their legal and
financial advisors to assess and evaluate opportunities for
asset disposition to maximize cash flow, minimize excess
carrying costs, and increase return on invested capital.
Consequently, the Debtors determined that both ISP and Private
Label Businesses were not critical to the reorganization
efforts. The Debtors are willing to sell them if a reasonable
offer was received.
For the past 12 months, several parties interested in purchasing
the Businesses have informally contacted BlueLight's management
team. Recently, NetBrands, Inc., a wholly owned subsidiary of
United Online, Inc. contacted B1ueLight, met with B1ueLight
executives, and made its best offer to date with respect to the
Businesses. According to Mr. Butler, NetBrands offered to pay
$8,390,000 for the Businesses and assume certain liabilities,
among others.
With the viable offer, coupled with the overall turbulence in
the technology sector and the Debtors' goal to dispose non-core
assets to create liquidity for the estates, the Debtors resolved
to sell both ISP and Private Label Businesses to NetBrands.
From August to September 2002, Mr. Butler relates that the
Debtors, NetBrands and United Online negotiated a Purchase
Agreement and the Transaction Agreements for the sale of the ISP
and Private Label Businesses. On September 16, 2002, the
parties executed the Purchase Agreement under which:
-- the Debtors will:
(a) sell the assets of the ISP and Private Label Businesses
free and clear of all liens and encumbrances; and
(b) assume and assign certain contracts to NetBrands; and
-- the Purchaser will assume certain liabilities of the
Debtors.
The significant terms of the Purchase Agreement and the
Transaction Agreements are:
Assets: All assets and property necessary to operate the ISP
and Private Label Businesses.
The transaction will be accomplished through an asset
sale that includes customer databases, software
products, certain intellectual properly rights,
furniture, fixtures, equipment, certain contracts,
and the parties entering into the related Transaction
Agreements.
Certain identified assets have been excluded from the
Transaction. These include, but not limited to:
(1) the ATG, Oracle, ePiphany and Netapps assets and
the "bluelight.com" domain name and its
subdomains;
(2) equity securities of the Sellers or any direct or
indirect subsidiary or affiliate of the Sellers;
(3) any contracts that are not assumed;
(4) any avoidance actions or other similar causes of
action arising under Section 544 through 553 of
the Bankruptcy Code;
(5) the corporate seal, minute books, charter
documents, corporate stock record books and other
records that pertain to the organization,
existence or share capitalization of
BlueLight.com;
(6) all employee benefit plans and employee benefit
pension plan as respectively defined in Sections
3(3) and 3(2) of the Employee Retirement Security
Act of 1974, as amended, as well as all other
pension, profit sharing or cash or deferred
compensation plans and trusts and their assets;
and
(7) cash and cash equivalents; including deposits and
prepayments in the Seller's possession.
Price: $8,390,000
This is subject to:
-- a $500,000 prepetition cure cost adjustment;
-- a working capital adjustment; and
-- any adjustment based upon subscription base.
If the Qualified Subscribers as of the Closing is
greater than 175,000 or less than 145,000, the
Purchase Price will be adjusted upward or
downward, as appropriate, at a rate of $50 per
subscriber over 175,000 or under 145,000.
Qualified Subscribers are those current with their
payments.
Documentation:
The Transaction will be effected pursuant to the
Purchase Agreement and related documentation. At the
closing, the Sellers and the Purchaser will enter
into, among others, these agreements:
-- the Trademark License Agreement, which permits the
Purchaser to use the names B1ueLight and
BlueLight.com for a period of three years;
-- the Distribution Agreement, which provides for the
retail distribution of compact discs loaded with
the Internet service provider software for which
the Purchaser also will pay a $15 fee for each
qualified B1ueLight User;
-- a Transition Services Agreement, which allows the
Purchaser to use certain tangible personal or real
property that it did not assumed. The Purchaser
may use these properties for some time while it
removes the assets it acquired from the Debtors'
facilities. The Purchaser, however, will be
subject to the terms of the unassumed real estate
leases; and
-- a Patent Assignment Agreement, where BlueLight.com
LLC assigns its rights, title and interests to
certain patents and patent applications to the
Purchaser.
Representations
& Warranties:
The Sellers will provide representations and
warranties relating to the transaction and the
Businesses. The Purchaser will also provide standard
representations and warranties. The representations
and warranties expire six months following the
Closing Date.
Covenants: Between September 16, 2002 -- the Effective Date --
and the Closing, the Sellers are required:
-- to use their reasonable efforts to preserve
intact and operate the Businesses in the ordinary
course;
-- maintain the assets in good working condition; and
-- use reasonable efforts to maintain the Business,
customers, assets, and operations as an ongoing
business.
The Sellers are also obligated to promptly notify the
Purchaser:
-- of any circumstance or event that would have a
material adverse effect upon the Businesses and
any other circumstance or event that, if known as
of the Effective Date, would have been required to
be disclosed or would result in any of the
representations and warranties being untrue and
incorrect in all material respects;
-- regarding any material breach of any covenant or
obligation of the Sellers;
-- of the occurrence of any circumstance or event
which will result in the Sellers' failure to
timely satisfy any closing conditions.
The Sellers must forward to the Purchaser any
bankruptcy documents or pleadings related to the Sale
Transaction.
Indemnification:
The Sellers are not obligated to indemnify the
Purchaser. However, the Purchaser has agreed to
indemnify the Sellers for any claims against the
Sellers arising out of the use of CD-ROMs pursuant to
the terms of the Distribution Agreement.
Closing
Conditions:
The Purchaser's obligation to close the Transaction
is subject to the satisfaction of these conditions:
-- the performance in all material respects by the
Sellers of their obligations to be performed at or
prior to the closing;
-- the representations and warranties of the Sellers
contained in the Purchase Agreement will be true
and correct in all material respects on and as of
the Closing Date;
-- there will not have been any material adverse
change to the assets, except as a result of the
Sellers' Chapter 11 cases. A reduction of the
subscribers below 120,000 will also be deemed a
material adverse change; and
-- the actual prepetition cure amounts with respect
to the Assumed Contracts may not be materially
greater than those set forth.
Termination:
The Purchase Agreement may be terminated:
-- on mutual written consent by both parties;
-- if the closing has not occurred by, on or before
November 15, 2002; or
-- immediately after written notice by one party if
there are any material breaches by the other.
Still, in an effort to further maximize the value of the Assets,
the Debtors subjected the ISP and Private Label Businesses to a
public auction pursuant to the Bidding Procedures Order. Mr.
Butler relates that four other Qualified Bidders expressed their
interest on the Assets. But after several discussions, the
bidders declined to exceed NetBrands' offer. As a result,
during the auction on October 7, 2002, no bids were received.
In view of the circumstances, the Debtors seek the Court's
authority to consummate the sale of the ISP and Private Label
Businesses to NetBrands. The Debtors also ask the Court to
exempt the sale from stamp taxes or similar taxes provided under
Section 1146(c) of the Bankruptcy Code because the sale is
necessary to the ultimate consummation of their reorganization
plan.
Mr. Butler contends that NetBrands' proposal represents the
highest offer received by the Debtors. The offer is
significantly higher than any other offer that was discussed
with various potential purchasers.
Objections
(1) Prepetition Lenders Want Proceeds Segregated
JPMorgan Chase Bank, for itself and as administrative agent
under certain prepetition credit agreements, does not object to
the sale motion, per se. However, JPMorgan complains that the
motion did not explicitly detail the flow of the proceeds of the
sale. The Debtors did not indicate how the proceeds would be
segregated.
"[Absent] any requirement that BlueLight segregate the proceeds
permits Kmart and its creditors to improperly benefit from the
Asset Sale to the detriment of BlueLight's creditors, by
allowing the proceeds to be contributed to Kmart under the cash
management system," Jeff J. Marwil, Esq., at Jenner & Block, in
Chicago, Illinois, argues. Mr. Marwil asserts that BlueLight
has a fiduciary duty to preserve its assets for its own
creditors. Mr. Marwil notes that BlueLight has not demonstrated
to the prepetition lenders or this Court that the transfer of
the proceeds to the cash management system is in the best
interest of the BlueLight creditors.
Mr. Marwil contends that the cash management system is not the
appropriate mechanism for collecting and distributing the
proceeds. Moreover, the convenience of a cash management system
does not override BlueLight's fiduciary duties to its creditors.
Mr. Marwil further points out that the Debtors have significant
liquidity to operate and conduct their businesses without the
need to take the proceeds and redistribute the amounts to other
Debtors via cash management system. The Debtors are party to a
$2,000,000,000 postpetition credit facility that provides
substantial liquidity.
While BlueLight continues to operate its e-commerce business,
Mr. Marwil asserts that there are specific and limited
circumstances in which BlueLight could be permitted to use the
proceeds. BlueLight may use the proceeds to pay:
-- the costs it incurred in connection with the sale;
-- its postpetition operating costs and expense; or
-- its ongoing business expenses.
"However, such applications of the proceeds cannot be permitted
unless and until the Debtors are able to justify the application
of such amounts pursuant to an accounting in form and detail
satisfactory to the Agent," Mr. Marwil says. "Any use of the
proceeds does not eliminate the need for segregating the
proceeds into a separate account and, if any funds remain in the
segregated account following any permitted use of the proceeds."
(2) Creditors' Committee Finds Lenders' Objection Moot
The Official Committee of Unsecured Creditors asks Judge
Sonderby to disregard JPMorgan's Objection and approve the sale,
instead. The Creditors Committee contends that the sale proceeds
should serve as a postpetition administrative claim due from
BlueLight to Kmart.
According to David Wirt, Esq., at Winston & Strawn, in Chicago,
Illinois, BlueLight loses up to $18,000,000 per year from
operations. Hence, Kmart funds its operations without repayment
to date.
"Kmart's ever-increasing administrative claim against BlueLight
will only be extinguished in the event of a substantive
consolidation of the Debtors' estates, in which event there
would be no need for the segregation of the proceeds. Absent
such substantive consolidation, Kmart's administrative claim
against BlueLight must be paid before any prepetition unsecured
claims." Mr. Wirt points out. "It is inappropriate at this time
to require the Debtors to segregate the proceeds to protect the
interests of those asserting prepetition unsecured claims."
The Creditors' Committee argues that the segregation of the
proceeds will negatively affect the Debtors' liquidity. The
Creditors' Committee contends that it is critical for the
Debtors to optimize the use of their cash during the fourth
quarter.
"As Kmart enters the Christmas season, and its borrowings needs
under the DIP Facility are at their peak, it would be a misuse
of the Debtors' assets to require that they borrow an additional
$8,390,000 under the DIP Facility, thus incurring additional
interest charges as the proceeds sit idly in a segregated
account," Mr. Wirt notes.
But even if Kmart did not have an administrative claim against
BlueLight, the Creditors' Committee still finds it inappropriate
for the Court to determine whether the creditors of BlueLight
should receive a different treatment than the creditors of Kmart
or whether they are ultimately entitled to the proceeds. These
issues are best addressed in the context of a plan of
reorganization when all of the various intercompany issues can
be sorted out, Mr. Wirt says.
(3) States Taxing Authorities -- No Tax Exemption, Please!
The States of Illinois and Washington and the California Board
of Equalization dispute the sale motion to the extent it seeks
declaratory judgment that any of the sales are exempt from the
state and local stamp taxes and similar taxes as well as from
sales taxes.
James D. Newbold, Assistant Attorney General of the Revenue
Litigation Board for the State of Illinois, tells Judge Sonderby
that the motion fails to identify any transaction for which a
stamp of transfer tax on instruments of transfer would apply
absent declaratory judgment that the sale is exempt under
Section 1146(c) of the Bankruptcy Code. Mr. Newbold also
asserts that, to the extent that the motion seeks to bind taxing
authorities, it violates due process. A party must be given
notice and an opportunity to be heard before being bound by a
judgment, Mr. Newbold says.
For these reasons, the state taxing authorities ask the Court to
declare that the sales are not exempt from stamp, transfer,
sales and similar taxes.
Debtors Respond
The Debtors contend that there is no legal authority supporting
the Lenders' demand to segregate the proceeds. In requesting
the Court to forbid BlueLight from depositing the sale proceeds
into the Debtors' centralized cash management system, John Wm.
Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom,
argues that the Lenders are attempting to undo the terms of the
Cash Management Order that the Court entered at the outset of
these cases.
Mr. Butler reminds the Judge Sonderby that there is no authority
that affords unsecured creditors, like the Lenders, the power to
direct how proceeds of a sale must be applied. Because the
Lenders are unsecured, they have no liens in the sale proceeds
as a cash collateral that requires their consent before
BlueLight may use them.
The Lenders' assertion that BlueLight's failure to segregate the
sale proceeds constitutes a breach of fiduciary duty to the
Lenders is misplaced. Mr. Butler admits that there is no
question that the Lenders, through their guarantees, assert
significant prepetition claims against BlueLight. There is also
no question that BlueLight is a legal entity separate and
distinct from Kmart and the other Debtors.
"What the Lenders fail to disclose . . . is that BlueLight has
consistently suffered large losses since the Petition Date, and
that BlueLight's operations have been supported through
significant cash infusions by Kmart postpetition in amounts that
vastly exceed the sale proceeds," Mr. Butler relates. These
advances, according to Mr. Butler, give rise to an
administrative claim by Kmart against BlueLight that is superior
to the asserted claim of the Lenders.
Additionally, Mr. Butler tells the Court that the transfer and
similar taxes in the States of Washington and Illinois are not
triggered by the Sale. Hence, the Debtors will not include both
States from tax exemption.
* * *
After considering the arguments presented, Judge Sonderby
authorizes the Debtors to consummate the sale of the ISP and
Private Label Businesses of BlueLight.com LLC pursuant to the
Purchase Agreement with NetBrands, Inc. The Debtors are also
allowed to effect the various agreements associated with the
sale transaction.
Judge Sonderby further rules that the transfer of the assets to
the Purchaser will not be taxed under any law imposing a stamp
tax, transfer, or any similar tax. This, however, will not
apply to the States of Washington, Illinois and California. The
Debtors reserve all rights to seek to apply Section 1146(c) to
these three states on a separate motion.
Judge Sonderby rejected the Lenders' bid to segregate the sale
proceeds. (Kmart Bankruptcy News, Issue No. 37; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
Kmart Corp.'s 9.0% bonds due 2003 (KM03USR6), DebtTraders
reports, are trading at 17 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for
real-time bond pricing.
LA QUINTA CORP: Sandy Heilman Named VP for Electronic Marketing
---------------------------------------------------------------
La Quinta Corporation (NYSE: LQI) proudly announces the
appointment of Sandy Heilman to the position of vice president
of electronic distribution and marketing. In her new position,
Heilman will lead the development and implementation of business
and marketing strategies for third-party websites, global
distribution systems (GDS) and the company's new, redesigned Web
site at http://www.LQ.com
Heilman has nearly 20 years of experience in the hospitality
industry, serving in a variety of management capacities with
Choice Hotels International the last 15 years. Most recently,
as senior director of electronic distribution at Choice, she
oversaw the development of functions that generated revenue for
eight brands through multiple GDS and Internet distribution
systems, as well as company Web sites.
In June, La Quinta launched the company's new Web site,
http://www.LQ.com
Originally launched in 1997 as http://www.laquinta.comthe new
Web site offers visitors an improved reservations process, with
fewer steps needed from start to finish to confirm a
reservation. More user-friendly features include the ability to
search for a La Quinta Inn or La Quinta Inn & Suites hotel by
location, point of interest or by route, a complete description
of each La Quinta hotel nationwide, as well as a listing of
recent and future openings.
"We firmly believe our ability to generate additional revenues
via electronic distribution channels and http://www.LQ.comare
significant to the future RevPAR growth of La Quinta," said
Francis W. "Butch" Cash, president and CEO for La Quinta
Corporation. "Sandy's experience in maximizing revenues from
these areas will be key in helping us attain our company's
financial goals. I am pleased to welcome her to the La Quinta
family."
Based on surveys and other feedback, the new and improved,
http://www.LQ.comfeatures other enhancements, including:
-- La Quinta Returns(R) -- new function allows members to
enroll online, check account information and redeem
points in a secure environment.
-- Special Offers -- allows members to access special
promotions via the Web site or sign-up to receive
exclusive email updates on special deals and promotions
at La Quinta locations nationwide.
-- Company Information -- features additional information on
La Quinta's history, franchise opportunities, investor
relations, employment and media kit requests.
Dallas-based La Quinta Corporation, a limited-service lodging
company, owns, operates or franchises more than 330 La Quinta
Inns and La Quinta Inn & Suites in 33 states. For more
information about La Quinta, please visit its Web site at
http://www.LQ.comor for reservations at any La Quinta hotel
call 1-800-531-5900.
* * *
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.
LODGIAN: New York Court Confirms First Amended Joint Reorg. Plan
----------------------------------------------------------------
Lodgian, Inc., said that, at its Confirmation Hearing held on
November 5, 2002, the U.S. Bankruptcy Court for the Southern
District of New York confirmed the Company's First Amended Joint
Plan of Reorganization relating to subsidiaries owning 86
hotels.
David Hawthorne, President and CEO said: "We are pleased that
our Plan of Reorganization was confirmed within a year. We
attribute this success, in large part, to the support from our
franchisors, vendors and lenders. We especially appreciate the
loyalty and dedication of our employees under difficult
circumstances. "
The plan will become effective and the Company will emerge from
Chapter 11 on the finalization of its exit financing with
Merrill Lynch. While there can be no assurances, the Company
anticipates that the effective date will occur within 30 days of
the confirmation date.
On the effective date of the Plan, the existing equity shares
will be cancelled and the bondholders and general unsecured
creditors will receive a combination of preferred and common
stock, while the CREST holders and existing common shareholders
will receive a combination of warrants and common stock.
Details of the Plan of Reorganization are available on the
Company's Web site at http://www.lodgian.comand are also being
filed with the Securities and Exchange Commission as an Exhibit
to a Form 8-K.
Lodgian, Inc., is one of the largest owner/operators of full and
mid-priced hotels in the United States, with 105 hotels located
in 32 states and one hotel in Windsor, Canada. The Company
operates hotels under nationally recognized hospitality
franchises such as Holiday Inn, Marriott, Hilton, and Crowne
Plaza.
LTV: Asks Court to Fix Jan. 17 Non-Trade Admin. Claims Bar Date
---------------------------------------------------------------
LTV Steel Company has a history of default under the DIP Credit
Agreement, and subsequent use of its cash flow, which led to
adoption of the APP. To wind up its estate, LTV Steel must
ascertain the extent of its outstanding pre-APP, non-trade,
postpetition administrative expense claims.
Accordingly, LTV Steel asks Judge Bodoh to set a bar date for
entities to file proofs of claim with respect to non-trade
administrative expense claims.
Nicholas M. Miller, Esq., at Jones Day, in Cleveland, Ohio,
tells Judge Bodoh that within six days after the Court approves
its request, LTV Steel will serve on all known entities holding
potential Non-Trade Administrative Claims:
(1) notice of the Non-Trade Administrative Claim Bar Date, and
(2) a proof of claim form.
Suggested Bar Date: January 17, 2003
LTV Steel suggests that Judge Bodoh set January 17, 2003 as the
Non-Trade Administrative Claim Bar Date, which is 60 days after
the anticipated service date.
Creditors Included In Bar Date
With specified exceptions, the Non-Trade Administrative Claim
Bar Date would apply to all entities holding Non-Trade
Administrative Claims, including, among other entities generally
holding pre-APP claims against LTV Steel:
(a) entities whose claims against LTV Steel arise out of
or relate to obligations of those entities during the
pre-APP period under a contract for the provision of
liability insurance to LTV Steel;
(b) entities whose claims against LTV Steel arise out of
or relate to an executory contract or unexpired lease
rejected by LTV Steel on or after April 1, 2002 (Mr.
Miller explains that entities whose claims against LTV
Steel arose out of or relate to an executory contract
or unexpired lease rejected by LTV Steel through and
including May 20, 2002, are subject to the filing
requirements of the Administrative Trade Claim Bar
Date Order);
(c) unions;
(d) governmental units; and
(e) parties to postpetition lawsuits.
Creditors Excluded From Bar Date
The Non-Trade Administrative Claim Bar Date does not apply to
specified entities holding Non-Trade Administrative Claims,
including, among other entities generally holding pre-APP claims
against LTV Steel:
(a) any professional person retained or employed in these
Chapter 11 cases;
(b) any entity that already has properly filed a proof of
claim for an administrative expense against LTV Steel
in accordance with the procedures in this Motion or
under the Administrative Trade Claim Bar Date Order;
(c) any entity that should have filed a claim against LTV
Steel under the Administrative Trade Claim Bar Date,
but that failed to do so;
(d) any entity whose claim against LTV Steel previously
has been allowed by, or paid, under a court order;
(e) any Debtor that holds a claim against LTV Steel; and
(f) any Employee.
The Employee Claims
Employee claims are among the unpaid Non-trade Administrative
Claims, Mr. Miller says. These claims could be asserted by LTV
Steel's current or former employees, and consist of:
(a) claims related to the closure of certain of LTV Steel's
facilities for:
(i) alleged violations of the Worker Adjustment and
Retraining Notification Act, and
(ii) severance pay;
(b) claims for:
(i) outstanding amounts due under certain of the
employees' postpetition agreements to release
and waive any and all claims against LTV Steel
that were executed in the ordinary course of
business, and
(ii) unpaid benefits related to disabilities arising
postpetition during the pre-APP period; and
(c) claims for workers' compensation benefits for injuries
that occurred postpetition during the pre-APP period.
LTV Steel believes that no other employee claims exist.
Mr. Miller argues that the employees should not be required to
file proofs of claim with respect to these employee claims for
several reasons.
First, the United Steelworkers of America has already filed a
proof of claim with respect to the claims on behalf of its
members. Furthermore, former salaried employees have filed a
purported class action litigation styled "Franklin D. Super et
al v. LTV Steel Company et al," which is currently pending
before the United States District Court for the Northern
District of Ohio, and in which the plaintiffs assert WARN claims
and severance claims on behalf of LTV Steel's former salaried
employees. LTV Steel has disputed liability in this litigation,
has filed a motion to dismiss one of the causes of action on the
pleadings, and is in the process of preparing papers to dismiss
the other cause of action. If LTV Steel prevails in this
litigation, it will have successfully argued that no liability
for these alleged claims exists. If, on the other hand, LTV
Steel is not successful in this litigation, then it retains
sufficient data and records to calculate the claims of each
employee. Accordingly, LTV Steel believes it would be
burdensome and confusing to require each former employee to file
a separate proof of claim on account of any WARN or Severance
Claim that might be found to exist.
LTV Steel asks Judge Bodoh to exempt 55 disabled employees
holding claims totaling approximately $5.5 million from the bar
date, provided the employees agree with the amount of their
claim as computed by the Debtors. Since each employee is being
served with notice of this motion, they have an opportunity to
object to this relief with respect to their claims, including
the amounts of the claims as admitted by LTV Steel.
Third, the workers' compensation claims currently are being paid
either by:
(a) an insurance carrier, or
(b) in the case of states that permit self-insured workers'
compensation coverage, the applicable state workers'
compensation agency.
Accordingly, LTV Steel contends that the employees should not be
required to file proofs of claim on account of workers'
compensation claims. However, Mr. Miller emphasizes that the
insurance carriers and governmental entities will be required to
file proofs of claim with respect to these workers' compensation
claims.
Mr. Miller explains that any creditor who must file a proof of
claim and fails to do so, or fails to do so timely, will be
forever barred from:
-- asserting the Non-trade Administrative Claim against
LTV Steel or its properties, and
-- participating in any distribution from LTV Steel's
estate.
In addition, a creditor may not vote on any plan or plans of
liquidation that may be proposed in LTV Steel's case, and will
be bound by the terms of that plan as confirmed. (LTV Bankruptcy
News, Issue No. 39; Bankruptcy Creditors' Service, Inc.,
609/392-00900)
LTV Corporation's 11.75% bonds due 2009 (LTVC09USR1),
DebtTraders says, are trading at half a penny on the dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=LTVC09USR1
for real-time bond pricing.
LUBY'S INC: Seeks Waiver of Q4 Default Under Credit Agreement
-------------------------------------------------------------
Luby's, Inc., (NYSE: LUB) announced the results of operations
for the fiscal year ended August 28, 2002. Sales were $399
million compared with $467 million for the prior year. The
closure of 19 restaurants during the fiscal year ended August
31, 2001, and 18 closures during the fiscal year ended August
28, 2002, reduced sales by $24.2 million, while three fewer days
in the current fiscal year accounted for approximately $3.5
million of the total sales decline. Excluding the effect of
fewer restaurants and days, same-store sales this fiscal year
declined $40.4 million, or 9.3%, compared to last year.
The company's cost of food as a percent of sales increased
slightly from fiscal 2001 to fiscal 2002 due to an increase in
promotional offerings to help improve customer patronage. Labor
declined as a percent of sales due to lower workers'
compensation and general liability costs as a result of managing
these programs in-house. Occupancy and other operating costs
increased as a percent of sales primarily due to additional
resources directed toward management compensation and an added
focus on store maintenance. In fiscal 2001, the company
recorded a charge of $30.4 million as the total annual provision
for store closings and impairments. Comparatively, in fiscal
2002, total closing and impairment costs were $.3 million. The
net loss for fiscal 2002 was $9.7 million compared to a net loss
of $31.9 million last year.
Sales for the fourth quarter covered 112 days and were $119.5
million, compared to 92 days and $119.4 million for the fourth
quarter of 2001. As a percent of sales, food, labor, and
occupancy and other operating costs varied from the fourth
quarter of fiscal 2001 to the fourth quarter of fiscal 2002 due
to similar reasons as noted above for the fiscal year. The net
loss for the fourth quarter of fiscal 2002 was $2.0 million,
compared to a net loss of $19.4 million last year, which was
primarily due to a store closing and impairment charge in fiscal
2001 of $20.2 million. Comparatively, in the fourth quarter of
fiscal 2002, total closing and impairment costs were $.06
million.
At August 28, 2002, the Company's balance sheets show that its
total current liabilities exceeded total current assets by about
$120 million.
Under its current credit facility, the company has quarterly and
annual EBITDA (earnings before income taxes, depreciation,
amortization, and noncash executive compensation) requirements.
In fiscal 2002, the company achieved its first three quarterly
requirements. The company was unable to meet its fourth-quarter
EBITDA target, but met its annual covenant of $16.6 million.
Management is presently working to obtain a waiver and amendment
that would cure the fourth-quarter default, reset the company's
2003 EBITDA targets, and extend the loan's term from April 2003
to September 2003. The company is uncertain about whether these
efforts will be successful and, if so, whether the amendment
will be executed before the required issuance of its Annual
Report on Form 10-K. The company is also actively pursuing
alternative financing.
Management is encouraged by the company's efforts in the fourth
quarter to convert approximately five percent of its locations
to buffets. There are a variety of approaches being used in
those locations, including continuous buffet operations, lunch
and/or dinner buffets, and breakfast buffets. A previously
closed Luby's restaurant was converted and reopened as a steak
buffet after the end of the fiscal year. These locations are
showing promising results.
Chris Pappas, Luby's President and CEO, commented, "The
turnaround of Luby's operating results will take time. Our
management team is therefore focused on long-term strategies,
which we will fine-tune as our efforts evolve."
The San Antonio-based company operates 193 Luby's restaurants in
ten states, and its stock is traded on the New York Stock
Exchange (symbol LUB).
M.A. GEDNEY: Seeking Court Nod to Use Lenders' Cash Collateral
--------------------------------------------------------------
M.A. Gedney Company asks the U.S. Bankruptcy Court for the
District of Minnesota for authority to use its Lenders' Cash
Collateral.
The Debtor reports that it currently owes:
(A) U.S. Bank National Association $14,226,000.
Pursuant to a security agreement, the Debtor granted the
Bank a security interest in substantially all of the
Debtor's property, both real and personal.
(B) Certain Note Purchasers (Bayview Capital Partners, LP;
MorAmerica Capital Corporation; North Dakota Small Business
Investment Company, LP; Jeffrey Tuttle; Carl Tuttle; John
Tuttle; Andrew Tuttle; Thomas Hitch; and Peter Hitch)
approximately $2,500,000.
The Note Purchasers' Debt is secured by a security interest
in substantially all of the Debtor's personal property,
including inventory, equipment, accounts, and general
intangibles.
The Debtor tells the Court that it will use the lenders' cash
collateral to meet operating expenses. The Debtor's bankruptcy
estate will suffer immediate and irreparable harm if it is
unable to use the Lenders' cash collateral.
The Debtor proposes to grant the Secured Creditors replacement
liens in post-petition inventory, accounts, equipment and
general intangibles, and that those liens will have the same
validity, extent and priority in the collateral as the Lenders
enjoyed prepetition.
The Debtor agree to adhere to a strict Budget:
Week Ending
-----------
1-Nov 8-Nov 15-Nov 22-Nov 29-Nov
----- ----- ------ ------ ------
Gross Sales 615 648 657 883 526
Receipts 358 440 464 534 499
Disbursements 364 357 402 312 477
Net Cash (6) 83 62 221 21
6-Dec 13-Dec 20-Dec 27-Dec 3-Jan
----- ------ ------ ------ ------
Gross Sales 536 577 618 506 501
Receipts 532 541 723 441 463
Disbursements 343 413 239 392 499
Net Cash 86 128 484 50 (136)
10-Jan 17-Jan 24-Jan 31-Jan 7-Feb
------ ------ ------ ------ -----
Gross Sales 501 501 501 501 575
Receipts 499 535 443 429 429
Disbursements 425 366 460 374 650
Net Cash 74 169 (17) 55 (319)
14-Feb 21-Feb 28-Feb 7-Mar 14-Mar
------ ------ ------ ----- ------
Gross Sales 575 575 575 681 11-Nov
Receipts 429 429 429 491 491
Disbursements 352 487 390 665 375
Net Cash 77 (58) 39 (272) 116
21-Mar 28-Mar 4-Apr 11-Apr 18-Apr
------ ------ ----- ------ ------
Gross Sales 681 681 951 951 951
Receipts 491 491 585 585 585
Disbursements 626 529 834 536 671
Net Cash (135) (113) (353) 49 (86)
25-Apr
------
Gross Sales 951
Receipts 585
Disbursements 567
Net Cash 18
A final hearing on Debtor's motion for order authorizing use of
cash collateral is set for 1:30 p.m. on November 26, 2002, in
Courtroom No. 7W of the United States Courthouse, at 300 South
Fourth Street, in Minneapolis, Minnesota.
M. A. Gedney Company manufactures and markets acidified food
products. The Company filed for chapter 11 protection on
October 22, 2002 in the U.S. Bankruptcy Court for the District
of Minnesota. William I. Kampf, Esq., at Kampf & Associates,
P.A., represents the Debtor in its restructuring efforts. When
the Company filed for protection from its creditors, it listed
$15,371,257 in total assets and $28,954,441 in total debts.
MENTERGY INC: Inks Pact to Sell LearnLinc Assets to EDT Learning
----------------------------------------------------------------
Mentergy(TM), Inc., a leading global provider of blended e-
Learning solutions, announced the signing of an asset purchase
agreement with EDT Learning, Inc. (AMEX:EDT) for the purchase of
the LearnLinc(R) live virtual classroom software and the
TestLinc(R) online testing and assessment tool. The definitive
agreement requires approval by the District Court in Tel Aviv,
Israel, which is monitoring the restructuring of Mentergy,
Inc.'s parent company, Mentergy, Ltd. (NASDAQ:MNTE). The
transaction is expected to close soon. The sale will not affect
other products and services sold by Mentergy, Inc., including
TrainNet(R), the Quest(R) Authoring System, Designer's Edge(R),
and the company's award-winning courseware development services.
Both Mentergy, Inc., and Mentergy, Ltd., will continue to resell
and support LearnLinc domestically and globally and manage the
international VAR channels as part of their comprehensive e-
Learning services.
Ziv Mandl, co-CEO of Mentergy, Ltd., noted, "Mentergy, Ltd.,
plans to expand blended e-Learning of our IT training using the
LearnLinc virtual classroom platform. And, in doing so, we
expect to be one of EDT Learning's biggest customers."
Commenting on the purchase, James M. Powers, Jr., president and
CEO of EDT Learning Inc., said, "We have been pursuing the
acquisition of a synchronous software for many months, viewing
it as the final technology piece of our comprehensive e-Learning
platform. We are excited by our acquisition of LearnLinc because
it has long been recognized as one of the most comprehensive and
full-featured synchronous software products in the industry. As
a part of the transaction, we have also executed VAR agreements
with both Mentergy, Ltd., and Mentergy, Inc. Those agreements
permit the continued sale of the LearnLinc software by both
Mentergy, Ltd., and Mentergy, Inc., in the U.S. and
internationally."
Ron Zamir, general manager of Mentergy, Inc., added, "This
agreement is an important step in the development of our
services operation. Mentergy, Inc., through its Allen Division,
continues to innovate in the area of courseware development. The
company has identified a growing need for services around the
development of courseware and implementation of e-Learning. This
sale will inject needed capital and resources into our new focus
on development efforts without the R&D and marketing overhead of
a software tool in the virtual classroom space."
In the United States and operating from the company's
headquarters in Salt Lake City, Utah, Mentergy, Inc., will focus
on the operation of its well-regarded Allen Communication
Learning Services division, which continues to receive esteemed
industry recognition for its innovation in instructional design
and courseware development. Included among recent industry
accolades are:
- Silver Axiem Award for "The Classroom Connection," a
course developed for Motorola
- Gold Aurora award for "Powerful Time Management Skills for
the Palm Handheld," a course developed for Franklin Covey
- Silver Excellence in e-Learning Award presented by
brandon-hall.com and Online Learning Magazine for "Making
History: A Personal Leadership Adventure," a course
developed for Rockwell
- EDDIE Award for an innovative DVD-ROM course, "The
Contracts Experience," which Allen assisted on development
with client Duke University School of Law
Along with the custom course development recognition, Allen
Communication's tools, Designer's Edge and Quest, have recently
scored high in industry comparisons as well. For a complete
listing of Mentergy awards go to
www.mentergy.com/products/courseware/awards.html
Mentergy, Inc., a subsidiary of Mentergy, Ltd. (NASDAQ:MNTE),
formerly Gilat Communications, Ltd. (NASDAQ:GICOF), is a global
e-Learning company, providing e-Learning products, consulting,
and courseware development services for large enterprises. With
over 21 years of expertise in the learning industry, Mentergy
assists businesses worldwide to make a cost-effective shift from
traditional learning to a blended e-Learning approach. For more
information on the Company, visit http://www.mentergy.com
As reported in Troubled Company Reporter's September 27, 2002,
Mentergy(TM) Ltd. (Nasdaq:MNTE) filed a request with an Israeli
court seeking protection from creditors and appointment of a
trustee for the company for a period of three months in order to
prepare a recovery plan and an arrangement with creditors.
The filing relates only to creditors of Mentergy Ltd. (an
Israeli company), and does not apply to any of Mentergy's
subsidiaries.
Mentergy expects the recovery plan to include a sale of its U.S.
operations to local management, and is currently in negotiations
for such sale. In addition, Mentergy is considering transferring
its TrainNet activities to its subsidiary, Gilat Satcom Systems.
MORGAN GROUP: Case Summary & Largest Unsecured Creditors
--------------------------------------------------------
Lead Debtor: The Morgan Group
PO Box 1168
Elkhart, Indiana 46515
Bankruptcy Case No.: 02-36046
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Morgan Drive Away Inc. and IBM Corporation 02-36049
TDI, Inc. 02-36050
Type of Business: The Debtor is a holding company; its
subsidiaries Morgan Drive Away and TDI manage
the delivery of manufactured homes, trucks,
specialized vehicles, and trailers.
Chapter 11 Petition Date: October 18, 2002
Court: Northern District of Indiana (South Bend Division)
Judge: Harry C. Dees, Jr.
Debtors' Counsel: Andrew T. Kight, Esq.
Sommer Barnard Ackerson Pc
151 North Delaware Street Suite 1770
Indianapolis, IN 46204-2503
- and -
Michael P. O'Neil, ESq.
Sommer & Barnard, PC
111 Monument Circle
Suite 4000
Indianapolis, IN 46204-5198
Tel: (317) 630-4000
- and -
Steven H. Ancel, Esq.
151 N. Delaware St.
1770 Market Square Center
Indianapolis, IN 46204
Tel: (317) 634-9052
U.S. Trustee: Nancy J. Gargula
Alexander L. Edgar, Esq.
Office of the U.S. Trustee
One Michiana Square
Fifth Floor
100 E. Wayne Street
South Bend, IN 46601
574-236-8105 ext. 116
Fax: 574-236-8163
Total Assets: $17,278,000
Total Debts: $16,625,000
A. Morgan Drive Away's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Comdata Corporation $2,909,503
Bobby Morrow
5301 Maryland Way
Brentwood, TN 37027
Tel: 615-370-7420
Fax: 615-370-7410
Winnebago Industries $358,792
Ed Barker
605 West Crystal Lake Road
Forest City, IA 50436
Tel: 641-585-6627
Fax: 641-582-6205
Lynch Interactive Corp. $276,535
John Fikra
401 Theodore Fremd Avenue
Rye, NY 10580-1430
Tel: 914-921-7601
Fax: 914-921-5410
Ernst & Young, LLP $132,043
Tranceiver United Inc. $125,870
Liberty Mutual Insurance $106,103
Cornerstone Benefits Administration $91,056
IN Dept. of Revenue $85,619
Baker & Daniels $73,968
IOS Capital $54,703
Fleetwood Enterprises $44,049
MCI Telecommunications $27,424
Crowe Chizek $26,960
Relizon $25,175
National Diagnostics $22,676
IBM Credit Corporation $20,723
PA Dept. of Transportation $18,728
Barnes & Thornburg $17,530
Airborne Express $17,270
B. TDI's Largest Unsecured Creditor:
Entity Claim Amount
------ ------------
Liberty Mutual Insurance $131,301
NABI: Says Cash Resources Sufficient to Meet Current Needs
----------------------------------------------------------
Nabi Biopharmaceuticals discovers, develops, manufactures and
markets products that power the immune system to help people
with serious, unmet medical needs. The Company has a broad
product portfolio and significant research capabilities focused
on developing and commercializing novel vaccines and antibody-
based therapies that prevent and treat infectious, autoimmune
and addictive diseases, such as Staphylococcus aureus and
hepatitis infections, immune thrombocytopenia purpura and
nicotine addiction. It has several products in clinical trials,
as well as four marketed biopharmaceutical products. It has a
state-of-the-art fractionation facility for the manufacture of
certain of its biopharmaceutical products and for contract
manufacturing. Further, it also collects specialty and non-
specific antibodies for use in its products as well as to supply
pharmaceutical and diagnostic customers for the subsequent
production of their products.
On April 8, 2002, the Company redeemed its 6.5% Convertible
Subordinated Notes aggregating $78.5 million. The Notes were
redeemed for cash at 100% of the principal balance plus accrued
interest through April 8, 2002. The Notes had an original
maturity date of February 1, 2003. In conjunction with the
notification made to the holders of the Notes on March 15, 2002,
Nabi recorded $0.4 million as interest expense for the write-off
of loan origination fees in the first quarter of 2002.
Sales for the first nine months of 2002 were $137.9 million
compared to $180.1 million for the first nine months of 2001, a
decrease of $42.2 million, or 23%. This decrease reflects the
sale of the majority of the antibody business in September 2001.
Biopharmaceutical sales in the first nine months of 2002 were
$61.8 million compared to $48.4 million in the first nine months
of 2001, an increase of 28%. Sales of each of Nabi-HB, WinRho,
Aloprim and Autoplex T increased from the comparable period of
2001. Sales of Nabi-HB increased 32% in the first nine months of
2002 compared to the first nine months of 2001. Based on the
Company's review of internally and externally generated end-user
or sell through data, it believes there continues to be
increased end-user demand for Nabi-HB. This increased end-user
demand combined with its success in decreasing inventory levels
of Nabi-HB at wholesalers and distributors in the second half of
2001 resulted in the reported sales increase in the first nine
months of 2002. During the second half of 2001, Nabi reduced
inventory levels of Nabi-HB with distributors and wholesalers in
preparation for the transition to product manufactured at its
Boca Raton manufacturing facility. Sales of product manufactured
in its Boca Raton facility commenced in the first quarter of
2002 with approval from the FDA of the initial production lots
from the facility.
Sales of WinRho SDF in the first nine months of 2002 increased
17% from the comparable period in 2001. This increase in sales
is in line with Nabi's review of internally and externally
generated end-user data for this product. Sales of Aloprim and
Autoplex benefited from improved product supply from the
manufacturers of these products in the first nine months of
2002. Sales of Aloprim were limited in the 2002 first quarter
due to limited product supply from the manufacturer of the
product. During the second quarter of 2002, Nabi received two
back ordered lots of Aloprim, which, combined with the
continuation of a positive trend for patient use of Aloprim,
resulted in a two-fold increase from the comparable period of
2001. Sales of Aloprim in 2003 and thereafter may be limited by
product supply shortages from the manufacturer.
Total antibody sales for the first nine months of 2002 were
$76.1 million compared to $131.6 million in the comparable
period of 2001. This decrease reflects the sale of the majority
of the antibody business in September 2001. Non-specific
antibody sales include shipments to a single customer under a
supply contract, which was retained by Nabi Biopharmaceuticals
and expires in May 2003. The purchaser of the majority of the
antibody business supplied the Company non-specific antibodies
totaling $39.7 million in the first nine months of 2002, which
the Company then sold to the customer under this contract and
for which the Company earned no gross margin.
Gross margin for the first nine months of 2002 was $46.1
million, or 33% of sales, compared to $47.7 million, or 27% of
sales, in the first nine months of 2001. This increase was
driven by the higher proportion of biopharmaceutical product
sales to total sales in the first nine months of 2002 compared
to the first nine months of 2001. Offsetting the positive gross
margin impact of increased biopharmaceuticals sales were the
sale of the majority of the antibody business in September 2001
and excess plant capacity costs of $3.6 million. In its initial
periods of operation, the manufacturing capacity of the Boca
Raton facility will not be fully utilized and costs and expenses
related to excess manufacturing capacity will be expensed as
cost of products sold. Because the plant was not licensed and
operating until the fourth quarter of 2001, the results for the
first nine months of 2001 do not include any charges for excess
plant capacity. Product supply from the manufacturer of Autoplex
T continued to be below product supply minimums established by
contract. As a result of product supply shortfalls, gross margin
benefited from a contractual non-performance penalty payment of
$3.4 million in the first nine months of 2002 compared to $4.6
million in the first nine months of 2001. Royalty expense as a
percentage of biopharmaceutical sales was essentially even in
the first nine months of 2002 and 2001.
Selling, general and administrative expense was $28.2 million,
or 20% of sales, for the nine months ended September 28, 2002
compared to $29.6 million, or 16% of sales, in the nine months
ended September 29, 2001. General and administrative expense in
the first nine months of 2002 included increased insurance and
consulting expenses and a bad debt write off of $0.4 million
related to the antibody business. These expense increases were
more than offset by reductions in expenses, primarily
compensation related expenses, following the sale of the
majority of the antibody business in September 2001. Nabi's
selling expense is primarily focused on the biopharmaceutical
segment of its business and was not impacted by the sale of the
majority of the antibody business in September 2001.
Research and development expense was $14.9 million, or 11% of
sales, for the first nine months of 2002 compared to $10.2
million, or 6% of sales, in the first nine months of 2001. In
the first nine months of 2002, 44% of the research and
development expense supported projects related to the
development of Nabi's Gram-positive infections program. These
projects included the booster trial of StaphVAX, which results
were announced in June 2002, and costs to continue the transfer
of the manufacturing process for StaphVAX to the commercial
manufacturer's facility. In addition, increased research and
development spending was incurred for the production of Civacir
for use in clinical trials of that product, the continued
development of NicVAX, including an ongoing human clinical
trial, which initial results were reported in October 2002, and
for future trials of Altastaph, which are scheduled for later
this year. Other significant research and development expenses
include expenses related to Nabi-HB, including expenses to
develop a Biological License Application for submission to the
FDA for an intravenous formulation of Nabi-HB to treat liver
transplant patients suffering from hepatitis B.
Interest income for the nine months ended September 28, 2002 was
$1.1 million compared to $0.3 million for the nine months ended
September 29, 2001. The increase reflects interest income from
the net cash proceeds from the sale of the majority of the
antibody business in September 2001.
Interest expense for the first nine months of 2002 was $2.0
million compared to $1.2 million in the first nine months of
2001. On April 8, 2002, the Company redeemed its 6.5%
Convertible Subordinated Notes, which resulted in a reduction of
$2.6 million in interest expense for the first nine months of
2002 if the Notes had been retained until their original
maturity . In addition, bank debt, that had been outstanding in
the average amount of $22.8 million in the first nine months of
2001, was repaid in September 2001 from a portion of the cash
proceeds from the sale of the majority of the antibody business
in September 2001. Interest expense for the first nine months of
2001 net of the capitalization of incurred interest related to
construction of Nabi's biopharmaceutical manufacturing facility
in Boca Raton, Florida. The FDA's approval of the facility to
manufacture Nabi-HB was received in October 2001 and Nabi ceased
capitalizing interest related to the construction of this
facility at that time. Capitalized interest relating to
construction of its biopharmaceutical manufacturing facility was
approximately $4.7 million for the nine months ended September
29, 2001.
The provision for income taxes was $0.4 million for the first
nine months of 2002 compared to a provision of $6.8 million in
the first nine months of 2001. This represents a 27% effective
tax rate in the first nine months of 2002, which differs from
the statutory rate of 35% due to the Company's expectation of
realizing a current year tax benefit from the use of research
and development tax credits. The 27% effective tax rate for 2002
differs from the 6% effective tax rate for 2001 primarily due to
utilization of net operating loss carryforwards during 2001.
Cash and cash equivalents at September 28, 2002 were $43.5
million.
Cash used by operations for the nine months ended September 28,
2002 was $1.3 million. Interest on the 6.5% Convertible
Subordinated Notes prior to their redemption on April 8, 2002, a
reduction in trade accounts payable, accrued compensation earned
in 2001 but paid in 2002 and an increase in inventory balances
were the primary uses of cash by operations. Inventory balances
have increased as production of Nabi-HB has increased at the
manufacturing facility in anticipation of future demand, in line
with sales growth reported this year.
Investing activities included capital expenditures of $4.5
million for the nine months ended September 28, 2002 primarily
related to Nabi's Rockville, Maryland research and development
operations, antibody center operations and computer information
systems. The Company also paid $3.1 million related to the
acquisition of a Manufacturing Right at the facility that will
be used to manufacture StaphVAX at commercial scale. At
September 28, 2002, Nabi had commitments of $0.9 million for
future capital expenditures. The original contract to ready the
contract manufacturer's facility to manufacture StaphVAX has
been extended to December 2002. The Company expects to conclude
an amendment to its contract with the third party contract
manufacturer to complete readying the facility for its intended
use, the commercial manufacture of StaphVAX. This modification
will require Nabi to make significant additional payments
relating to the acquisition of the Manufacturing Right.
Cash outflows from financing activities in the first nine months
of 2002 consisted of the redemption of the Notes totaling $78.5
million and repurchase of common stock in the amount of $0.9
million under a stock buy back program approved by the Board of
Directors. Cash inflows of $0.7 million were received
from the exercise of employee stock options.
On September 19, 2001, the Board of Directors approved the
expenditure of up to $5.0 million to repurchase shares of
Company common stock in the open market or in privately
negotiated transactions. Repurchases will allow it to have
treasury stock available to support its stock option and stock
purchase programs. In the nine months ended September 28,
2002, Nabi acquired 171,483 shares of Nabi Biopharmaceuticals
stock for $0.9 million under this program. In total it has
acquired 345,883 shares of Nabi Biopharmaceuticals stock for a
total of $1.9 million since the inception of this buy back
program. Repurchased shares have been accounted for as treasury
stock. Nabi will evaluate market conditions in the future and
make decisions to repurchase additional shares of its common
stock on a case by case basis.
The Company's credit agreement provides for a revolving credit
facility of up to $45.0 million, subject to certain borrowing
base restrictions, and a $5.0 million term loan. The credit
agreement is secured by substantially all Nabi assets, requires
the maintenance of certain financial covenants and prohibits the
payment of dividends. At September 28, 2002, Nabi had no
borrowings under the revolving credit facility or the term loan
and availability under this credit facility was $17.5 million.
The current credit agreement expires on December 12, 2002. Nabi
intends to replace this credit agreement when it ends.
Management of the Company believes that cash flow from
operations and cash and cash equivalents on hand, together with
its ability to borrow funds should the need arise, will be
sufficient to meet anticipated cash requirements for operations
for at least the next twelve months.
NETIA HOLDINGS: Third Quarter 2002 Net Loss Tops $79 Million
------------------------------------------------------------
Netia Holdings S.A. (WSE: NET), Poland's largest alternative
provider of fixed-line telecommunications services (in terms of
value of generated revenues), announced unaudited financial
results for the third quarter and the nine months ended
September 30, 2002.
Financial Highlights:
- Revenues for Q3 2002 were PLN 152.4m (US$36.7m), a year-
on-year increase of 11%. Year-to-date revenues were PLN 450.4m
(US$108.6m), a year-on-year increase of 14%.
- One non-cash exceptional item of PLN 108.7m (US$ 26.2m)
affected financial results for Q3 2002, related to a provision
for impairment of fixed assets (27,350 connected lines and
100,975 ports installed on telecommunication switches).
- Adjusted EBITDA (before the provision for impairment of
fixed assets) for Q3 2002 was PLN 48.7m (US$ 11.7m),
representing an adjusted EBITDA margin of 31.9%. Year-to-date
adjusted EBITDA before the above item improved to PLN 121.0m
(US$ 29.2m), with an adjusted EBITDA margin of 26.9%.
- Cash at September 30, 2002 was PLN 374.1m (US$90.2m),
excluding restricted investments of PLN 56.8m (US$13.7m).
- Consolidated shareholders' equity at the end of Q3 2002
was negative PLN 1,166.0m or US$281.1m.
- The Restructuring Agreement relating to Netia's debt
restructuring, entered into by Netia, Telia AB, certain
companies controlled by Warburg Pincus & Co, certain financial
creditors and the ad hoc committee of noteholders on March 5,
2002, continues to be implemented. Pursuant to the Restructuring
Agreement, Netia's existing notes and certain creditor's claims
under certain currency swap agreements will be exchanged for the
new notes with an aggregate principal amount of EUR 50m to be
issued by Netia Holdings B.V., Netia's Dutch finance subsidiary,
and Netia's ordinary shares representing 91% of Netia's share
capital immediately post-restructuring. The existing Netia
shareholders will retain 9% ownership of post-restructuring
share capital and will receive warrants to acquire shares
representing 15% of Netia's post-restructuring share capital.
Additionally, up to 5% of the post-restructuring share capital,
excluding shares to be issued upon exercise of the warrants to
be issued to the existing shareholders will be issued under a
key employee stock option plan.
- All necessary share and warrant issuances in Netia's
restructuring have been approved by its shareholders. On October
25, 2002, Netia filed with the Polish Securities and Exchange
Commission ("Polish SEC") an updated version of the prospectus,
filed previously in April 2002, relating to the issuance and
registration of new shares pursuant to the Restructuring
Agreement. The updated prospectus is currently being reviewed by
the Polish SEC.
- Arrangement proceedings in Poland. The majority of
creditors of Netia, Netia Telekom S.A. ("Telekom") and Netia
South Sp. z o.o., representing over 95%, 98% and 100% of total
value of claims, respectively, voted in favor of the arrangement
plans. The Polish court approved the arrangement plan for Netia
and Telekom on August 9, 2002 and June 25, 2002, respectively.
The approval of the arrangement plan for South is still pending.
- Agreement with the dissenting creditors who had
previously objected to the restructuring in the Polish
arrangement proceedings and the ancillary proceedings in the
U.S. Bankruptcy Court was signed on October 21, 2002. The
parties agreed to mutually release each other from any claims
they may have relating to Netia's restructuring in Poland, the
Netherlands and to Netia's investment account in the United
States. Netia believes that the Agreement will facilitate the
consummation of the restructuring to the benefit of all the
Netia Group's customers and stakeholders.
- Composition proceedings in the Netherlands. At the
creditors' meetings of its three Dutch finance subsidiaries held
on October 28, 2002, all creditors present cast their votes in
favor of the composition plans of Netia Holdings B.V., Netia
Holdings II B.V. and Netia Holdings III B.V., respectively. The
hearing on verification of the votes and the approval of the
composition plans will be held on November 6, 2002.
- The license fee payments amounting to approximately EUR
33m, originally due in November and December 2001, were deferred
until December 31, 2002. In addition, a deferral fee, payable on
December 31, 2002, in the total amount of PLN 15.8m for the re-
scheduled license fee payments was imposed.
Operational Highlights:
- Netia's nationwide backbone network is comprised of 3,580
km as of September 30, 2002.
- Subscriber lines decreased to 340,232 net of churn and
disconnections, a year-on-year decrease of 1%.
- Business customer lines increased to 103,209, a year-on-
year increase of 10%. The business segment reached 30.3% of
total subscriber lines while year-to-date revenues from business
customers accounted for 57% of telecom revenues as of September
30, 2002.
- New, more competitive tariff plans for international
long-distance connections were introduced on November 1, 2002.
- Average revenue per line decreased by 2% to PLN 120 in
September 2002, compared to PLN 122 in September 2001 as a
result of price erosion. On the other hand, revenue growth
benefited from increased sales of data, carrier's carrier and
other non-direct voice services.
- Headcount decreased to 1,283 at September 30, 2002 from
1,639 at September 30, 2001 as a result of management's program
of cost reduction initiated in August 2001.
Other Highlights:
- Wojciech Madalski was appointed Chief Executive Officer
and President of the Management Board of Netia Holdings S.A.,
effective September 17, 2002.
- Extraordinary Shareholders' Meeting of Netia Holdings
S.A. held on August 30, 2002 adopted resolutions pursuant to
which the mandates of its Supervisory Board members appointed in
1999, i.e., Jan Guz, Donald Mucha and David Oertle, shall expire
in 2003 at Netia's Ordinary General Shareholders' Meeting to be
convened to approve its financial statements for the financial
year 2002.
- Netia's American Depository Shares were de-listed from
The Nasdaq Stock Market, effective October 15, 2002. Netia has
requested a review of this decision by the Nasdaq Listing and
Hearing Review Council.
Wojciech Madalski, Netia's President and Chief Executive Officer
commented: "Third quarter revenues increased by 11% year-on-year
as Netia continued to expand its business customer base in a
difficult economic environment. As a result of this and cost
reduction efforts our adjusted EBITDA margin continued to
increase. New efforts are being undertaken to strengthen Netia's
sales and marketing and customer service focus in order to drive
top-line growth, taking advantage of Netia's advanced
technological infrastructure and service offering.
"We are targeting to complete Netia's restructuring by year-end
2002. This will give Netia a solid capital structure for the
future."
Avi Hochman, Chief Financial Officer of Netia, added: "This has
indeed been a busy and productive quarter for the financial and
operational restructuring of Netia. We made significant progress
in the process of restructuring Netia's debt.
"We are also strengthening our balance sheet to reflect Netia's
intensifying focus on business customers in profitable urban
areas. This resulted in a decision to book an impairment charge
in relation to a number of telephone lines in other areas on
which we do not expect to generate adequate returns.
"Lastly, our revenue growth initiatives are complemented by
continuing programs to increase efficiency and strengthen
Netia's competitive position. This has contributed significantly
to the third quarter growth in positive adjusted EBITDA to PLN
48.7m and an adjusted EBITDA margin increase to 31.9%."
Financial Information
2002 Year to Date vs. 2001 Year to Date
Revenues increased by 14% to PLN 450.4m (US$108.6m) during the
nine-month period ended September 30, 2002 compared to PLN
394.0m for the same period in 2001.
Revenues from telecommunications services increased by 17% to
PLN 436.7m (US$105.3m) from PLN 372.9m in the corresponding
period of 2001. The increase was primarily attributable to an
increase in the number of business lines and an increase in
business mix of lines as well as expansion of new products, such
as indirect domestic long distance, data transmission and
wholesale services.
An exceptional non-cash item of PLN 108.7m (US$ 26.2m) impacted
the financial results for the period and was related to the
provision for the impairment of fixed assets. This provision
relates to our investment in 27,350 connected lines and 100,975
ports, which were located outside the main geographic areas of
strategic interest to Netia. The above provision follows the
impairment of goodwill and fixed assets of PLN 317.1m recorded
in Q3 2001, as a continued effort to solidify our balance sheet.
The majority of ports affected by this provision are associated
with the past write-off of 70,200 connected lines.
Adjusted EBITDA (before the provision for impairment of fixed
assets) increased by 147% to PLN 121.0m (US$ 29.2m) for the
first nine months of 2002 from PLN 48.9m for the same period in
2001. Adjusted EBITDA margin increased to 26.9% from 12.4%. This
increase was achieved thanks to a successful implementation of
Netia's cost reduction program in late 2001, part of our effort
to preserve cash, and increase revenues from new products.
"Other operating expenses" decreased by 12% to PLN 233.6m
(US$56.3m) for the nine-month period ended September 30, 2002,
from PLN 265.5m for the corresponding period in 2001. "Other
operating expenses" represented 52% of total revenues for the
nine-month period ended September 30, 2002, compared to 67% for
the same period in 2001, with salaries and benefits being the
main item. Salaries and benefits decreased year-on-year by 14%
to PLN 89.8m (US$ 21.6m) for the nine-month period ended
September 30, 2002 from PLN 105.0m for the first nine months of
2001, mainly as a result of the headcount reduction program. In
addition, "other operating expenses" recorded for the nine-month
period ended September 30, 2001 included an allowance for
receivables from Millennium Communications S.A. of PLN 16.9m.
Interconnection charges were PLN 89.5m (US$21.6m) for the nine-
month period ended September 30, 2002 as compared to PLN 89.7m
for the first nine months of 2001. Interconnection charges as a
percentage of calling charges decreased to 29% from 34%,
reflecting the increased proportion of traffic carried through
Netia's own backbone network.
Depreciation of fixed assets increased by 20% to PLN 152.2m
(US$36.7m) from PLN 126.7m for the nine-month period ended
September 30, 2001, as the construction stage of additional
parts of the network was completed.
Amortization of other intangible assets increased by 33% to PLN
54.8m (US$13.2m) from PLN 41.1m for the nine-month period ended
September 30, 2001, due to an increased level of amortization of
computer software costs associated with our information
technology systems.
Net financial expenses increased to PLN 634.4m (US$152.9m) for
the nine-month period ended September 30, 2002 from PLN 389.3m
for this period in 2001, due to foreign exchange losses
resulting from the significant depreciation of the Polish zloty
against the euro and U.S. dollar during the first nine months of
2002 compared to relatively stable level of foreign exchange
rates during the same period of 2001. Additionally, interest
costs on the notes issued by Netia accrued through the whole
nine-month period ended September 30, 2002 although Netia ceased
to pay interest on its notes in December 2001. In accordance
with Dutch law, the interest on notes accrues until the
composition proceedings are finalized. Upon completion of Dutch
moratorium proceedings, financial costs accrued during the
period of the proceedings shall be reversed.
Net loss decreased by 5% to PLN 823.6m (US$198.5m), compared to
a net loss of PLN 862.8m for the first nine months of 2001. The
loss for the period was attributable to an increase in net
financial expenses related mainly to unrealized foreign exchange
losses. However, a majority of the financial expenses are non-
cash items that do not impact Netia's cash flows. In addition,
the amount of net loss for the first nine months of 2001 was
impacted by three exceptional items totaling PLN 334.1m.
Cash used in investing activities decreased by 61% to PLN 221.1m
(US$53.3m) for the nine-month period ended September 30, 2002,
from PLN 570.3m for the same period of 2001, in accordance with
the revised business plan approved in late 2001, aimed at
preserving cash.
Cash and cash equivalents at September 30, 2002 amounting to PLN
374.1m (US$90.2m) were available to fund Netia's operations.
Netia also had deposits in an investment account of PLN 56.8m
(US$13.7m) at September 30, 2002 established, subject to
conditions, to service the interest payments on its 2000 Senior
Notes in June 2002. These deposits are expected to be
transferred to the Company in accordance with the Restructuring
Agreement at the completion of the restructuring.
Q3 2002 vs. Q2 2002
Revenues increased by 1% to PLN 152.4m (US$36.7m) for Q3 2002
compared to PLN 151.4m for Q2 2002. This increase was
attributable to a 2% increase in telecommunications revenues to
PLN 149.1m (US$35.9m) in Q3 2002 from PLN 146.9m in Q2 2002 and
a 27% decrease in other revenues, representing the operations of
Uni-Net, a joint venture with Motorola offering radio trunking
services, to PLN 3.3m (US$0.8m) for Q3 2002 from PLN 4.5m in Q2
2002.
Adjusted EBITDA for Q3 2002 increased by 15% to PLN 48.7m
(US$11.7m) from PLN 42.2m in Q2 2002. Adjusted EBITDA margin
increased to 31.9% for Q3 2002 from 27.9% for Q2 2002. The
increase in adjusted EBITDA and adjusted EBITDA margin was
mainly a result of the strict cost control policy implemented in
late 2001 and increase in revenues from new products.
Net loss amounted to PLN 328.1m (US$79.1m) in Q3 2002, compared
to a net loss of PLN 250.0m in Q2 2002. The increase in net loss
was mainly due to the impairment charge of PLN 108.7m (US$26.2m)
related to the exceptional item recorded in Q3 2002.
Operational Review
Connected lines at September 30, 2002 amounted to 503,358 lines.
The number of connected lines decreased in comparison with the
numbers reported for Q2 2002 and Q3 2001 due to provision for
impairment of 27,350 connected lines.
Subscriber lines in service decreased by 1% to 340,232 at
September 30, 2002 from 343,634 at September 30, 2001 and by 1%
from 342,145 at June 30, 2002. The number of subscriber lines is
net of customer churn and disconnections by Netia of defaulting
payers, which amounted to 8,257 and 5,341, respectively, for Q3
2002 and 19,599 and 18,550, respectively, for the first nine
months of 2002. The recorded churn was mostly due to the
deterioration of Polish economic conditions, which affected our
customers and customers moving outside the coverage of Netia's
network.
Business lines as a percentage of total subscriber lines reached
30.3%, up from 27.3% at September 30, 2001 and 29.8% at June 30,
2002, reflecting the intensified focus on the corporate and SME
market segments. Business customers accounted for all net
additions in the quarter while the residential segment saw net
disconnections. Revenues from business customers accounted for
57% of telecommunications revenues for the nine-month period
ended September 30, 2002.
Business customer lines in service increased by 10% to 103,209
at September 30, 2002 from 93,713 at September 30, 2001 and by
1% from 101,997 at June 30, 2002.
Average monthly revenue per line decreased by 2% to PLN 120 (US$
29) for September 2002, compared to PLN 122 for September 2001
and decreased by 2% from PLN 123 for June 2002.
Average monthly revenue per business line amounted to PLN 226
(US$ 54) for September 2002, representing a 7% decrease from PLN
243 for September 2001 and a 4% decrease from PLN 236 for June
2002.
Average monthly revenue per residential line amounted to PLN 73
(US$ 18) for September 2002, representing a 4% decrease from PLN
76 for September 2001 and a 1% decrease from PLN 74 for June
2002.
New, attractive tariff plans for international long-distance
connections were introduced on November 1, 2002, to replace the
current tariffs for these services offered both on standard
lines and on Voice over Internet Protocol technology.
New tariff packages for indirect domestic long-distance
(customers of Netia 1 Sp. z o.o. ("Netia 1")) and ISDN services
were introduced on June 1, 2002. These new packages supplement
the current Netia tariff offerings, providing easy-to-understand
tariff plans with the usage time measured on a per-second basis.
As of October 15, 2002, the ISDN Multi service customers on the
per-second tariff can also choose to pay their bills for analog
and ISDN Duo connections according to this plan.
Netia 1055 Internet telephony service, which offers cheaper
international calls based on VoIP technology, was launched on
July 1, 2002. The new service complements Netia's existing
service offerings of Netia 1, a provider of indirect domestic
long-distance service through Netia's prefix (1055).
Connections to mobile networks at competitive pricing levels
were offered to Netia 1055 customers as of August 1, 2002,
further enhancing Netia's indirect domestic long-distance
services.
Internet flat rate service was launched for Netia directly and
non-directly connected users of Internet dial-up access as well
as for Netia customers using ISDN Duo lines on April 16, 2002,
June 17, 2002, and July 5, 2002, respectively. The new service
enables a specified number of hours of Internet access each
month for a flat rate.
Netia's nationwide backbone network connecting Poland's largest
urban areas now stretches to 3,580 kilometers and consists of
2,470 kilometers of fiber and 1,110 kilometers of leased lines.
Netia is constructing additional infrastructure, planned for
completion in 2002, of approximately 960 kilometers.
Headcount at September 30, 2002 was 1,283, compared to 1,639 at
September 30, 2001 and 1,323 at June 30, 2002. During 2001 Netia
made announcements on headcount reductions of approximately 20%,
and finalization of this program is being carried out.
The number of active lines in service per employee increased by
26% to an average of 270 in Q3 2002, from 215 in Q3 2001. The
number of active lines in service per employee in the first nine
months of 2002 increased by 24% to an average of 261 compared to
211 in the same period last year.
Monthly average telecommunications revenue per employee
increased by 43% to PLN 39,451 in Q3 2002 from PLN 27,523 in Q3
2001. Monthly average telecommunications revenue per employee in
the nine months ended September 30, 2002 increased by 43% to PLN
37,276 compared to PLN 26,078 for the same period last year.
License payments. The Polish Minister of Infrastructure decided
on June 28, 2002 to postpone the payment of license fee
installments of certain Netia operating subsidiaries, originally
due in November and December 2001, until December 31, 2002.
Previously, on November 30, 2001 and January 19, 2002, the
Minister of Infrastructure announced his decision to postpone
the payment of these installments until January 20, 2002 and
June 30, 2002, respectively. The current total amount of these
installments is approximately EUR 33 million. A deferral fee of
PLN 15.8m is due in December 2002. Netia submitted claims to the
competent Polish regulatory authorities seeking to confirm
expiry, cancellation or deferral of its remaining license fee
obligations, following the regulatory changes introduced with
the enactment of the new Telecommunications Act on January 1,
2001.
Changes in capital base of Netia 1, a provider of indirect
domestic long-distance services. Netia Holdings S.A. and the
Warsaw electric utility, Stoen S.A. ("Stoen"), agreed on July 2,
2002 that Stoen will acquire 133,233 existing shares of Netia in
exchange for Stoen's 87,332 shares in Netia 1. The agreement was
entered into pursuant to the Netia 1 consortium agreement and as
a consequence of changes in the new Polish telecom law effective
as of January 1, 2001, abolishing the foreign ownership
restrictions on telecom operators in Poland. As a result of the
transaction, the Netia group companies jointly own an 89% stake
in Netia 1. The remaining 11% stake is owned by Telia AB.
The Polish Chamber of Commerce Arbitration Court (the
"Arbitration Court") dismissed the direct claims of Millennium
Communications S.A., and Newman Finance Corporation against
Netia for: (i) declaration of the Share Subscription Agreement
dated August 8, 2000 void and ineffective and (ii) payment of
PLN 11.5m by Netia. The Arbitration Court also dismissed Netia's
counter-claim for damages in the amount of PLN 8.5m. Netia
intends to petition the proper court of law to set aside the
Arbitration Court's ruling, claiming, among other things,
material breaches of material law and arbitration procedures by
the Arbitration Court. A separate litigation by Netia against
Millennium for the repayment of a loan in the amount of PLN
11.5m is still pending before the District Court in Warsaw.
OM GROUP: Taps CSFB as Financial Advisor and Suspends Dividend
--------------------------------------------------------------
OM Group, Inc., (NYSE: OMG) announced that its Board of
Directors has taken the following actions:
-- Hired Credit Suisse First Boston (CSFB) to serve as a
financial consultant to the Company as it develops its
previously announced restructuring plan.
-- Suspended the quarterly cash dividend indefinitely.
"[Tues]day's actions by the Board are important steps in
returning the Company's performance to the level our shareowners
have come to expect from us," said James P. Mooney, chairman and
chief executive officer. "Hiring CSFB allows us to bring
additional financial and business expertise to our team as we
develop an aggressive restructuring program to improve our cash
flow and strengthen our balance sheet. Suspending the dividend
commits approximately $16 million annually toward that end."
Mooney added that the Company's Board elected Frank E. Butler to
the newly created position of lead independent director. Butler,
65, retired in 1997 as the President and General Manager of the
Coatings Division of The Sherwin-Williams Company. He has been a
director of OM Group since 1996. In this new role, Butler will
preside over meetings of the independent directors.
"The creation of the role is in line with the Company's on-going
commitment to sound corporate governance practices," Mooney
said. "I am pleased that the Board is ensuring that our focus on
the creation of long-term shareholder value and objectivity is
beyond repute during this difficult restructuring process."
For additional information on OMG, visit the Company's Web site
at http://www.omgi.com
ORGANOGENESIS: Fails to Maintain AMEX Min. Listing Requirements
---------------------------------------------------------------
Organogenesis Inc., (AMEX: ORG) received a notice from the
American Stock Exchange on October 29, 2002, indicating that the
Company fails to comply with the Exchange's continued listing
standards as a result of its Chapter 11 bankruptcy filing, its
failure to file its quarterly report for the period ended June
30, 2002 and the deterioration in its financial condition
resulting from cumulative net losses, working capital
deficiency, stockholder's deficit and recurring negative cash
flow.
In view of the foregoing and in accordance with Sections
1003(a)(i)-(iv) and Section 1003(d) of the Amex Company Guide,
Amex has notified the Company that it will file an application
with the Securities and Exchange Commission to delist and
deregister Organogenesis' common stock from the Exchange. The
Company has appealed this determination and requested a hearing
before a committee of the Exchange. There can be no assurance
that the Company's appeal for continued listing will be granted.
Organogenesis was the first company to develop and gain FDA
approval for a mass-produced product containing living human
cells. The Company's principal product, Apligraf(R), a living,
bi-layered skin substitute, has received FDA approval for the
treatment of diabetic foot ulcers and venous leg ulcers.
P-COM INC: Closes Restructuring of 4-1/4% Sub. Convertible Notes
----------------------------------------------------------------
P-Com, Inc. (Nasdaq:PCOM), a worldwide provider of wireless
telecom products and services, announced more than $2 million in
orders for its point-to-point products to customers in Saudi
Arabia and Jordan.
The orders include P-Com's advanced, point-to-point product,
known as Encore, as well as its Tel-Link product. The Encore
product will provide high capacity communications services, such
as voice, data, Internet and video connectivity, to law
enforcement agencies in Jordan. The Tel-Link product will be
deployed by a large telecom operator in Saudi Arabia to deliver
voice, data, Internet and video services to business and
residential customers.
"P-Com's success in the Middle East is the result of our
strategic focus on countries where there is fast-growing demand
for telecom products and services," said P-Com Chairman George
Roberts. "We're particularly pleased with these orders because
they represent both repeat business as well business in new
markets."
On November 1, 2002, P-Com closed its previously announced
restructuring of 4-1/4% subordinated convertible notes. As part
of the restructuring, P-Com issued $22,390,000 aggregate
principal amount of 7% subordinated convertible notes due
November 2005 through a private placement to qualified
institutional buyers. The Notes are convertible into P-Com
common stock at a conversion price of $2.10 per share.
P-Com, Inc. develops, manufactures, and markets point-to-
multipoint, point-to-point, and spread spectrum wireless access
systems to the worldwide telecommunications market, and through
its wholly owned subsidiary, P-Com Network Services, Inc.,
provides related installation support, engineering, program
management and maintenance support services to the
telecommunications industry in the United States. P-Com's
broadband wireless access systems are designed to satisfy the
high-speed, integrated network requirements of Internet access
associated with Business to Business and E-Commerce business
processes. Cellular and personal communications service
providers utilize P-Com's point-to-point systems to provide
backhaul between base stations and mobile switching centers.
Government, utility, and business entities use P-Com systems in
public and private network applications. For more information
visit http://www.p-com.comor call 408/866-3666.
PEREGRINE SYSTEMS: Axios Unveils Migration Tools for Customers
--------------------------------------------------------------
International Help Desk and IT Service Management software
company Axios Systems -- http://www.axiossystems.com-- has
unveiled tools to allow customers of financially troubled
Peregrine Systems to migrate to its award-winning assyst
solution.
The tools are database-independent and can be tailored to each
customer's requirements. The tools are targeted towards both the
Peregrine Service and Asset Center products as well as the
recently de-commissioned Tivoli Service Desk.
A two-way event synchronization utility allows phased migration
to take place seamlessly. This enables contact users, events,
assets and configuration items to be imported into assyst.
Leading global technology research and advisory firm Gartner,
recently reported that: "Migration tools can have a dramatic
impact on a company's bottom line".
Citing the financial and legal issues rated by its inability to
file audited financial reports for the last three fiscal years,
US-based Peregrine announced on 22 September that it had filed
voluntary petitions for reorganization under Chapter 11 of the
US Bankruptcy Code for itself and its subsidiary, Peregrine
Remedy, Inc.
Axios, voted the UK's top Help Desk software vendor for the past
two years in succession, is also offering special commercial
arrangements for Peregrine and Tivoli Service Desk users wanting
to upgrade to assyst, an 'out of the box,' fully integrated
solution which complies with IT Information Library philosophy
and practices.
"We have engineered a proven migration tool specifically to move
historical data from Peregrine Service Center and Tivoli Service
Desk to assyst," Sales and Marketing Director Ailsa Symeonides
commented. Company specialists have experience in implementing
these systems.
She added: "Large corporate users have tended to have had their
Help Desk and ITSM systems custom-built. This has proved
expensive for them. Our 'out of the box' solution offers the
scalability that the typical Peregrine or Tivoli Service Desk
customer requires, with functionality and integration
capabilities to match and exceed them, at a fraction of the
cost."
Axios, with corporate headquarters in Edinburgh, also has
offices in the United States, Canada, France, Germany, Belgium
and the Netherlands. "This wide geographic spread, our technical
expertise and these new migration tools put us in pole position
to replace Peregrine and Tivoli Service Desk," Mrs Symeonides
said.
Peregrine is the leading provider of Infrastructure Management
software. Its solutions reduce costs, improve profitability and
release capital, generating a lasting and measurable impact on
the productivity of assets and people. Peregrine's software
manages the entire lifecycle of an organization's assets. In
addition, its Employee Self Service solutions empower employees
with anytime, anywhere access to enterprise resources, services
and knowledge -- resulting in improved productivity and asset
utilization. Peregrine file for Chapter 11 reorganization on
September 22, 2002, in the U.S. Bankruptcy Court for the
District of Delaware.
PG&E NATIONAL: Selling 50% of Interest in Hermiston to Sumitomo
---------------------------------------------------------------
PG&E National Energy Group, Inc., has signed an agreement to
sell one-half of its 50 percent interest in the Hermiston
Generating plant to Sumitomo Corporation and Sumitomo
Corporation of America. The plant will continue to be operated
and managed by an affiliate of PG&E National Energy Group, and
no employee changes are expected. PG&E National Energy Group is
a wholly owned subsidiary of PG&E Corporation (NYSE: PCG).
The 474-megawatt Hermiston plant is a cogeneration facility
fueled by natural gas. Employing more than 20, the plant entered
commercial service in July 1996. Electricity capacity and output
generated by the plant is provided to PacifiCorp under a long-
term power sale agreement. The facility also sells steam to a
nearby food processing facility owned by Lamb-Weston Inc.
PG&E National Energy Group and Sumitomo expect to complete the
sale by Dec. 31, 2002, following necessary regulatory approvals.
The move is consistent with PG&E National Energy Group, Inc.'s
previously announced strategy to explore options to raise cash
and reduce its indebtedness, ongoing guarantee and working
capital requirements. These options include, but are not
limited to sales of assets and businesses, debt restructuring,
and reorganization of existing operations.
Sumitomo Corporation -- http://www.sumitomocorp.co.jp-- is one
of the world's leading fully integrated trading and investment
enterprises, and a major distributor of commodities, industrial
goods, and consumer goods. Besides its role as international
trader, Sumitomo Corporation is an active investor in a diverse
range of businesses that integrate with existing operations, or
that position the company in markets with long-term potential.
Sumitomo Corporation is headquartered in Japan, and has offices
in 87 other countries around the world.
Established in 1952 and headquartered in New York, Sumitomo
Corporation of America -- http://www.sumitomocorp.com-- is the
largest wholly owned subsidiary of Sumitomo Corporation, with
offices in 12 major U.S. cities. As an integrated global
trading firm with diversified investments and trading
businesses, Sumitomo Corporation of America works closely with
its parent as an organizer of multinational projects and
financier.
Headquartered in Bethesda, Md., PG&E National Energy Group,
Inc., develops, builds, owns and operates electric generating
and natural gas pipeline facilities and provides energy trading,
marketing and risk-management services.
POLAROID CORP: Committee Proposes Uniform Settlement Procedures
---------------------------------------------------------------
The Official Committee of Unsecured Creditors, appointed in the
chapter 11 cases involving Polaroid Corporation and its debtor-
affiliates, asks the Court to establish uniform procedures
relating to:
-- objections to claims and interests; and
-- settlement authority.
Claims Objection Procedures
According to Brendan Shannon, Esq., at Young Conaway Stargatt &
Taylor LLP, in Wilmington, Delaware, Local Rules 3007-1(f)(i)
and 3007-1(f)(ii) of the Delaware Bankruptcy Court provide that
each omnibus objection to Claims and Interests based on
substantive grounds may only pertain to 150 claims and no more
than two Substantive Objections may be filed each calendar
month, unless this Court orders otherwise.
Mr. Shannon contends that this limitation is too restrictive in
the Debtors' cases because of the large volume of Claims and
Interests asserted against the Estates. Indeed, as of
October 9, 2002, more than 7,000 proofs of claim had been filed.
If the Rules are to be followed, it would take a year for the
Debtors to settle the claims. "This result will be detrimental
to the Estates, as well as to all parties-in-interest, and will
unnecessarily delay the distribution process under a Plan," Mr.
Shannon asserts.
Therefore, the Committee asks the Court to allow the estates to
object to, in each Substantive Objection, up to 400 Claims and
Interests. Furthermore, the Committee asks Judge Walsh to
modify Local Rule 3007-1(f)(ii) to allow the Estates to file
more than two Substantive Objections in any given calendar month
provided, however, that the Estates, subject to this Court's
availability, will schedule no more than two omnibus hearings in
any month during which the Substantive Objections may be heard.
Mr. Shannon assures the Court that the Estates will try to
consensually resolve their disputes with the claimant whose
claim is subject to the objection. The Committee believes that
a large portion of the Substantive Objections may be resolved in
this manner.
Mr. Shannon argues that the modification should be granted to
ensure the efficient and cost-effective disposition of the
Claims and Interests by providing a streamlined procedure for
their resolution.
Settlement Authority Procedures
In addition, the Committee asks the Court to authorize the
Estates to settle or compromise any disputed Claims, provided
that they consult, in good faith, with OEP Imaging Corp., now
known as Polaroid Holding Corporation, and the Agent for the
Prepetition Secured Lenders with respect to the settlement or
compromise, and provided further that no payment is excess of
$50,000 will be made on account of an administrative or priority
claim without the written consent of Holdings and the Agent,
which consent will not be unreasonably withheld, unless
otherwise ordered by the Court.
The Committee proposes these procedures:
1. If the proposed settlement amount of a disputed Claim is less
than $50,000, the Estates will be authorized and empowered to
settle the disputed Claim and execute necessary documents,
including a stipulation of settlement or release, without
notice to any party, or a further Court order;
2. If the proposed settlement amount of a disputed Claim is
equal to or more than $50,000 but less than $1,000,000, the
Estates will be authorized and empowered to settle the
disputed Claim and execute necessary documents, including a
stipulation of settlement or release, on five business
days' written notice to the Committee or the Plan Committee
and if no objection is received, without further Court order;
3. If the proposed settlement amount of a disputed Claim is
equal or greater than $1,000,000, the Estates will be
authorized and empowered to settle the disputed Claim and
execute necessary documents, including a stipulation of
settlement or release, only after five days' written notice
to the Committee or the Plan Committee and on receipt of
Court approval of the settlement; and
4. If the Committee or the Plan Committee objects to the
proposed settlement of a disputed Claim within the prescribed
time deadlines, then:
(a) if the Committee or the Plan Committee withdraws for any
reason its objection to the settlement, the Estates may
enter into the proposed settlement without further notice
and a hearing or entry of a Court order; or
(b) if the Committee or the Plan Committee does not withdraw
its objection, the Estates will have the option of:
-- foregoing entry into the settlement agreement that is
the subject of the Committee or the Plan Committee's
objection;
-- modifying the terms of the settlement agreement in a
way that results in the Committee or the Plan
Committee withdrawing its objection; or
-- after five days' written notice to the Committee or
the Plan Committee, as applicable, seeking an order of
this Court authorizing the Estates to enter into the
settlement agreement over the Committee's or the Plan
Committee's objection. (Polaroid Bankruptcy News,
Issue No. 26; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
DebtTraders says that Polaroid Corporation's 11.50% bonds due
2006 (PRDC06USR1) are trading at 4.25 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=PRDC06USR1
for real-time bond pricing.
POPE & TALBOT: Harmac Pulp Mill Resumes Operation after Repair
--------------------------------------------------------------
Pope & Talbot (NYSE: POP) announced that its Harmac pulp mill in
Nanaimo, British Columbia resumed full operation after one of
its recovery boilers was shut down for repairs. The boiler shut
down caused the mill to lose approximately 8,000 metric tons of
production, and is estimated to result in a $1.0 - $1.5 million
reduction in operating income for the fourth quarter of 2002.
All repairs have been successfully and safely completed and the
mill is back in full operation.
Pope & Talbot is dedicated to the pulp and wood products
businesses. The Company is based in Portland, Oregon and traded
on the New York and Pacific stock exchanges under the symbol
POP. Pope & Talbot was founded in 1849 and produces market pulp
and softwood lumber at mills in the U.S. and Canada. Markets for
the Company's products include the U.S., Europe, Canada, South
America, Japan and the other Pacific Rim countries. For more
information on Pope & Talbot, Inc., please check the Web site
at http://www.poptal.com
As reported in the July 18, 2002 edition of Troubled Company
Reporter, Standard & Poor's assigned its double-'B' rating
to pulp and lumber producer Pope & Talbot Inc.'s $50 million
senior unsecured notes due 2013.
Standard & Poor's also affirmed its existing ratings on the
company, including its double-'B' corporate credit rating. The
outlook remains stable. Debt outstanding at the company at March
31, 2002, totaled $230 million.
PRECISION AUTO: Closes Debt-to-Equity Conversion Transaction
------------------------------------------------------------
Precision Auto Care, Inc., (OTC Bulletin Board: PACI) has
reached an agreement with its two senior debt holders. Pursuant
to the agreement reached Wednesday last week, the two creditors
will exchange the outstanding debt held by them, which totals
approximately $18 million, for 2,500,000 shares of common stock,
500,000 shares of preferred stock and warrants to purchase
11,500,000 shares of common stock at $.44 per share, exercisable
over 10 years. Full exercise of the warrants is subject to
shareholder approval of an amendment to the articles of
incorporation increasing the number of authorized shares at the
annual shareholder meeting on January 15, 2003. In the event
that this shareholder approval is not obtained within two years,
the Company has agreed to issue additional shares of preferred
stock to each of the debt holders.
The Company's CEO, Louis M. Brown, Jr., stated, "We are
extremely pleased that we were able to consummate this
transaction. With this deal done, our balance sheet is
significantly stronger and our prospects going forward look much
brighter."
Robert Falconi, the Company's CFO stated, "With the completion
of this debt to equity conversion, we will virtually eliminate
our annual interest expense and it will be possible to start
making money. We are very grateful to the Company's debt
holders, Arthur Kellar and Mauricio Zambrano, and the vote of
confidence that they have given to the company." Mr. Kellar is
currently a member of the Board of Directors and Mr. Zambrano is
a former director.
Precision Auto Care, Inc.'s affiliate, Precision Franchising
LLC, is one of the world's largest franchisor of auto care
centers, with 444 operating centers as of June 30, 2002. The
Company franchises and operates Precision Tune Auto Care centers
around the world.
* * *
As reported in Troubled Company Reporter's October 28, 2002
edition, Precision Auto Care is renegotiating the terms of its
Senior Debt and is confident that the deal would significantly
reduce future interest expense and will be a major step forward
towards profitability. In FY03, cash flow will still be very
tight as the Company tries to liquidate obligations from the
past and at the same time increase sales and reduce operating
costs.
Although the Company has negotiated extensions of Senior Debt,
in the event that the Company is unable to consummate the
renegotiation of its Senior Debt, accomplish its strategic
objectives or is otherwise unable to generate revenues
sufficient to cover operating expenses and pay other debt, the
Company would not be able to sustain operations at the current
level. This would require the Company to further reduce expenses
and liquidate certain assets.
PROVANT INC: Continues to be in Default Under Credit Agreement
--------------------------------------------------------------
Provant, Inc. (NASDAQ: POVT), a leading provider of performance
improvement training services and products, announced financial
results for the fiscal 2003 first quarter ended September 30,
2002.
Revenues for the first quarter were $38.4 million, compared to
revenues of $45.9 million for the first quarter of fiscal 2002.
Revenues for the first quarter of fiscal 2002 included $5.2
million from the Sales Performance International business that
was sold in the second quarter of fiscal 2002. Loss from
operations was $2.0 million compared to income from operations
of $1.8 million for the first quarter of 2002. Net loss was $3.9
million for the quarter, compared to net income before
cumulative effect of a change in accounting principle of $0.6
million for the first quarter of 2002.
John Zenger, Provant's President and CEO said, "Our results this
quarter reflect the continued impact of the slow economy. Our
Government Group continues to have strong results and our other
groups have remained fairly consistent compared to last year's
first quarter results, although the results of our Leadership
Group were adversely affected by the deferral of a significant
contract. We continue to take appropriate cost-cutting
initiatives in light of the economy and our results. We believe
that the organizational changes we have made over the past year
and continue to make in fiscal 2003 position us to benefit from
a turnaround in the economy."
Mr. Zenger further stated, "Although we continue to be in
default under our credit facility agreement, we believe we are
close to finalizing the terms of an extension to it that would
end the current default. The terms of this extension will, among
other things, extend the due date of the facility to April 15,
2003, subject to our continued obligation to take actions that
would result in the early repayment of our indebtedness to the
banks. We also continue to pursue various strategic
alternatives, which include the sale of Provant or various of
its assets."
As a leading provider of performance improvement training
services and products, Provant helps its clients maximize their
effectiveness and profitability by improving the performance of
their people. With over 1,500 corporate and government clients,
the Company offers blended solutions combining web-based and
instructor-led offerings that produce measurable results by
strengthening the performance and productivity of both
individual employees and organizations as a whole.
For further information on the Company, visit
http://www.provant.com
RESCARE: Violates Financial Covenant Under Bank Agreement
---------------------------------------------------------
ResCare (Nasdaq/NM:RSCR), the nation's leading provider of
services to persons with developmental disabilities and people
with special needs, announced net income of $3.7 million for the
three months ended September 30, 2002, versus $3.5 million for
the same period in 2001. Revenues for the third quarter of 2002
were $236.6 million, up from $224.8 million in the year-earlier
period.
For the nine months ended September 30, 2002, net income was
$9.8 million versus $6.3 million for the nine months ended
September 30, 2001. Revenues for the nine months ended September
30, 2002, were $696.7 million, up from $665.5 million in the
year-earlier period.
Effective January 1, 2002, the Company adopted SFAS 142 and is
no longer amortizing goodwill. Pro forma earnings per share for
the third quarter and nine months ended September 30, 2001,
would have been $0.21 and $0.44 per share, respectively,
assuming the new accounting standard had been adopted at the
beginning of 2001.
The Company announced the signing of a definitive agreement with
Media, Pennsylvania-based ARBOR, Inc., a job training and
placement company with operations in New York, New Jersey,
Pennsylvania, Georgia and California, to purchase the assets of
ARBOR's Employment & Training Division. The transaction is
expected to close in the first quarter of 2003, subject to
licensing and other approvals. Upon completion of the
transaction, ARBOR E&T will become part of ResCare's Division
for Training Services and is expected to generate approximately
$20 million in annual revenue.
Ronald G. Geary, ResCare chairman, president and chief executive
officer, said, "We are pleased with our performance while
operating in an adverse environment. Challenging state
reimbursement issues, coupled with increasing costs during a
period of economic uncertainty, make me proud of the efforts of
all our employees who still manage to provide optimal care and
deliver positive financial results under such circumstances."
As anticipated in the second quarter 10-Q, effective September
30, 2002, the Company is in non-compliance of its interest
coverage covenant in its Bank Agreement. The Company is seeking
an amendment of the Bank Agreement that will, among other
things, provide a retroactive waiver of the covenant. Management
is confident that the amendment will be in place within the next
two weeks. To date, the Company has not drawn on the revolver
and has the capacity to replace the standby Letters of Credit
issued under the Bank Agreement.
Mr. Geary added, "We continued to make progress during the
quarter in adding new homes. Through the first nine months of
the year, we have added 108 new homes. In as much as these homes
are add-ons to our existing clusters, administrative costs are
lower and margins are strengthened. We are also on track with
our internal budget goals relating to the periodic in-home
services we deliver. This component of our business continues to
be strong, and we are focusing considerable resources on this
growing area to sustain and accelerate this positive trend."
The Company also announced that it expected to achieve the lower
end of the range of its earlier guidance of $0.53 to $0.57 per
diluted share for full year 2002. The Company cited challenging
factors including the general economic environment, state
reimbursement issues and reduced contribution from a non-core
operation in Texas that may be sold or closed. ResCare expects
earnings per share for 2003 to be approximately in the same
range as 2002, but the Company believes that there are
opportunities for some improvement.
In closing, Mr. Geary said, "We intend to capitalize on the
challenging economic environment. We view it as an opportunity,
and experience has proven our outlook to be correct. Being in
this business for 28 years has taught us to take advantage of
economic downturns while still being prudent stewards of our
shareholders' investment. Recent examples include our ongoing
assumption of distressed operations, which are adding
substantial value, as well as pursuing selective acquisitions
such as ARBOR E&T, which will be accretive to earnings. We will
be successful because we have a vital franchise. The vulnerable
populations we serve must have these essential services, and no
one is in a stronger position to provide them than ResCare."
ResCare, founded in 1974, offers services to some 27,000 people
in 32 states, Washington, D.C., Puerto Rico and Canada. Of
these, approximately 10,000 are youth with special needs and
17,000 are people with developmental or other disabilities. The
Company is based in Louisville, KY. More information about
ResCare is available on the Company's Web site at
http://www.rescare.com
RFS ECUSTA INC: Hires Bayard Firm as Bankruptcy Co-Counsel
----------------------------------------------------------
RFS Ecusta Inc., and RFS US Inc., ask the U.S. Bankruptcy Court
for the District of Delaware to approve the employment of The
Bayard Firm as co-counsel.
The Bayard Firm will render these professional services to the
Debtors:
a) providing 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) taking necessary action to protect and preserve the
Debtors' estate, including assisting the prosecution of
actions on behalf of the Debtors, the defense of any action
commenced against the Debtors, negotiations concerning all
litigation in which the Debtors are involved, and objecting
to claims filed against the Debtors' estates;
c) preparing on the Debtors' behalf all necessary
applications, motions, responses, objections, orders,
reports and other legal papers;
d) negotiating and drafting any agreements for the sale or
purchase of assets of the Debtors, if appropriate;
e) negotiating and drafting a plan of reorganization,
consensual of otherwise, and all documents related thereto,
including the disclosure statements and ballots for voting
thereon;
f) taking the steps necessary to confirm and implement the
Plan, including, if needed, modifications and negotiating
financing for the Plan; and
g) rendering such other legal services for the Debtors as may
be necessary and appropriate.
The Bayard Firm's hourly rates are:
Directors $350 to $475 per hour
Associates $160 to $325 per hour
Paralegals $ 75 to $135 per hour
RFS Ecusta Inc., and RFS US Inc., are leading manufacturers of
high quality premium paper products for the tobacco and
specialty and printing paper products. The Company filed for
chapter 11 protection on October 23, 2002. Christopher A. Ward,
Esq., at The Bayard Firm and Joel H. Levitin, Esq., at Dechert
represent the Debtors in their restructuring efforts. When the
Debtors filed for protection from its creditors, they listed
estimated debts and assets of more than $10 million each.
SHELBOURNE: 568 Broadway JV Selling Assets for $87.5 Million
------------------------------------------------------------
Shelbourne Properties I, Inc. (Amex: HXD), Shelbourne Properties
II, Inc. (Amex: HXE), and Shelbourne Properties III, Inc. (Amex:
HXF) said that 568 Broadway Joint Venture, a joint venture in
which each of the Shelbourne REITs hold an interest, has entered
into a contract to sell its property located at 568 Broadway,
New York, New York for $87,500,000. It is anticipated that the
sale of this property will occur during the first quarter of
2003.
The Board of Directors and Shareholders of each of the
Shelbourne REITs has previously approved a plan of liquidation
for each REIT. For additional information concerning the
proposed liquidation including information relating to the
properties being sold please contact Andy Feinberg at (617) 570-
4620 or John Driscoll at (617) 570-4609.
STAR MULTI CARE: Sternback & Solof Purchase 7% Preferred Shares
---------------------------------------------------------------
Star Multi Care Services, Inc., (OTC Bulletin Board: SMCS) said
that Stephen Sternbach, Chief Executive Officer of Star, and
Matthew Solof, purchased all of the issued and outstanding
Series B 7% Convertible Preferred Stock from the Shaar Fund Ltd.
This Preferred Stock is convertible into the common stock of
Star. As of October 30, 2002, closing price, the Preferred
Stock would be converted into more than a majority of the
outstanding common stock of the Company.
Additionally, Sternbach and Solof have committed to providing
additional funds for working capital. To date, Sternbach and
Solof have advanced $250,000 to the Company. Sternbach and
Solof have agreed to provide additional working capital loans of
up to $300,000.
Stephen Sternbach, Chief Executive Officer of Star stated: "I
am very happy to have Matt Solof as my co-investor in Star, as
we both believe that this Company and industry have tremendous
long-term potential. It appears that we have now turned the
corner and have reached break-even operations. It is
anticipated that we should be able to report a profit sometime
within this fiscal year."
Star Multi Care Services, Inc., a New York corporation, is a
primary provider of proprietary, long term care, and high-tech
home health care services and staffing to hospitals and other
medical facilities throughout Southeastern Florida, Ohio and
Pennsylvania. The Company is headquartered in Huntington
Station, New York.
As reported in Troubled Company Reporter's October 29, 2002
edition, Holtz, Rubenstein & Co., LLP, of Melville, New York,
stated in its August 23, 2002, Auditors Report: "[T]he Company's
significant recurring operating losses and working capital
deficiency raise substantial doubt about its ability to continue
as a going concern."
Net revenue for the year ended May 31, 2002 decreased
$23,602,,or 61.0%, to $15,077,134, compared to $38,679,374 for
the year ended May 31, 2001. This decrease was primarily
attributable to the sale and closing of the Company's New York
and New Jersey facilities, as well as the closing of one of its
Pennsylvania facilities and, to a lesser extent, the elimination
of poor margin contracts in its remaining five facilities.
Gross profit margin percentages for the years ended May 31, 2002
and 2001 were 35.4% and 33.3%, respectively. The increase in the
gross profit margin is primarily attributable to an elimination
of low profit margin contracts.
The Company's net loss for the fiscal year ended May 31, 2002
was $1,084,508, as compared to the net loss for the fiscal year
ended May 31, 2001 of $9,759,170. In fiscal 2000 the net loss
was $664,491.
The Company believes that it can meet its cash requirements for
the next twelve months through its existing credit sources. To
the extent that such sources are inadequate, the Company will be
required to seek additional financing. In such event, there can
be no assurance that additional financing will be available to
the Company on satisfactory terms.
TALK AMERICA: Net Capital Deficit Narrows to $43MM at Sept. 30
--------------------------------------------------------------
Talk America (NASDAQ:TALKD), an integrated communications
provider, announced financial results for the third quarter
ended September 30, 2002.
Commenting on the quarter, Gabe Battista, Chairman and Chief
Executive Officer of Talk America stated, "We are extremely
pleased with our results for the third quarter. Our financials
demonstrate the strength of our core local business and the
continued hard work of all our employees in achieving our goals.
We exceeded our guidance for the third quarter and raised our
EBITDA guidance for the year."
Key operational highlights for the third quarter:
-- Total revenue of $79.1 million, an increase of 1.9%
from Q2 2002
-- Local revenue of $44.5 million, an increase of 13.1 %
from Q2 2002
-- Billed bundled lines of 276,000, an increase of 13.1%
from Q2 2002
-- EBITDA of $20.4 million, an increase of 22.2% from Q2
2002
-- Net income of $13.4 million, an increase of 42.1% from
Q2 2002
-- Earnings per share of $0.45
-- Cash balance of $41.1 million, an increase of $10.4
million from Q2 2002
-- Completed a 1-for-3 reverse stock split
Talk America's September 30, 2002 balance sheets show a working
capital deficit of about $7.5 million, and a total shareholders'
equity deficit of about $43 million.
Mr. Battista continued, "I am pleased to report that we resumed
top line growth during the third quarter. The growth in total
revenues was driven by our success in growing our bundled
business, both in terms of new lines added and reduced turnover
of existing customers. We continue to gain share in Michigan,
with over 150,000 bundled lines, and have traction in other
states with enormous market potential. Looking to the fourth
quarter of 2002 and ahead into 2003, we will keep our focus on
the growth in bundled net lines."
Commenting on the regulatory environment, Mr. Battista added,
"We have been actively involved in the FCC's triennial review of
competition for local phone service. We believe that the federal
and state regulators will continue to support competition for
local consumer phone service. We, along with other UNE-P
providers, have filed with the FCC our comments and a proposal
to address our viewpoint concerning the UNE platform as a
necessary entry methodology to provide competition in the
residential and small business market. We feel confident that
Talk America is well positioned to address any changes that
arise."
Effective October 15, 2002, the Company's stockholders approved
a one-for-three reverse stock split of the Company's common
stock. The reverse stock split has been reflected retroactively
in the accompanying financial statements for all periods
presented and all applicable references as to the number of
common shares and per share information has been restated to
reflect the reverse stock split. As the result of the reverse
stock split, the Company's Nasdaq symbol was temporarily changed
to TALKD and will revert back to TALK at the opening of business
on November 13, 2002.
Third Quarter 2002 Compared to Third Quarter 2001
Total sales for the third quarter 2002 were $79.1 million,
compared with $126.3 million for the third quarter 2001. Bundled
local revenues for the third quarter 2002 were $44.5 million as
compared to $56.9 million for the third quarter 2001. Long
distance revenues for the third quarter 2002 were $34.6 million
as compared to $69.4 million for the third quarter 2001. Long
distance revenues during the third quarter 2001 and 2002
included amortization of deferred revenue of $1.9 million
relating to a telecommunications services agreement that
terminated in October 2002.
The Company reported positive EBITDA (defined as operating
income (loss) excluding depreciation and amortization and
impairment and restructuring charges) for the third quarter 2002
of $20.4 million, compared with $6.1 million for the third
quarter 2001. Network and line costs for the third quarter 2002
benefited from a credit of $0.4 million that the New York Public
Service Commission mandated that Verizon New York provide Talk
America in connection with a refund of certain UNE-P switching
costs. The Company recorded an additional benefit of $0.7
million, which reduced bad debt expense in the third quarter
2002, due to better than expected collections experience.
General and administrative expense benefited from the favorable
settlement of litigation relating to an obligation with a third
party of $1.7 million which amount was offset by an increase in
legal reserves of $0.5 million. The Company benefited from the
favorable resolution of disputes with vendors in the normal
course of business during the third quarter 2002. It is the
Company's policy not to record credits from certain disputes
until received.
Net income for the third quarter 2002 was $13.4 million,
compared with net loss of $162.3 million for the third quarter
2001. The net loss for the third quarter of 2001 reflects a non-
cash impairment charge of $168.7 million to write down the
goodwill associated with the acquisition of Access One
Communications, which was created by purchase accounting, $2.5
million of restructuring charges and an extraordinary gain of
$16.9 million related to restructuring of the certain
obligations with America Online during such period.
The cash balance at the end of the third quarter increased to
$41.1 million from $30.7 million at the end of the second
quarter 2002. This was accomplished while reducing accounts
payable to $29.8 million from $30.9 million over the same
period. Capital expenditures for the third quarter 2002 were
$0.9 million and capitalized software development costs were
$0.6 million.
On October 4, 2002, the Company retired its senior credit
facility prior to its scheduled maturity. Pro forma for the
repayment of the facility, cash on hand would have been reduced
to $27.3 million. As a result of the retirement of this debt
prior to maturity, the Company will incur a one-time, non-cash
extraordinary charge to earnings of approximately $1.1 million
in the fourth quarter of 2002 reflecting the acceleration of the
amortization of certain deferred finance charges. The retirement
of the outstanding debt under the facility prior to maturity
will allow the Company net cash interest savings of
approximately $1.4 million through the original June 2005
maturity date.
Year-to-Date 2002 Compared to Year-to-Date 2001
Total sales for the year-to-date 2002 were $236.3 million,
compared with $390.6 million for the year-to-date 2001. Bundled
local revenues for the year-to-date 2002 were $119.4 million as
compared to $154.3 million for the year-to-date 2001. Long
distance revenues for the year-to-date 2002 were $116.9 million
as compared to $236.3 million for the year-to-date 2001. Long
distance revenues for the year-to-date 2001 and 2002 included
amortization of deferred revenue of $5.6 million relating to a
telecommunications services agreement that terminated in October
2002.
The Company reported positive EBITDA for the year-to-date 2002
of $51.8 million, compared with a loss of $8.6 million for the
year-to-date 2001. Network and line costs for the year-to-date
2002 benefited from the Verizon New York credit of $1.2 million.
For the year-to-date 2002, the Company recorded an additional
benefit of $2.2 million, as a reduction to its bad debt expense,
due to better than expected collections experience. General and
administrative expense benefited from the favorable settlement
of litigation relating to an obligation with a third party of
$1.7 million which amount was offset by an increase in legal
reserves of $0.5 million. The Company benefited from the
favorable resolution of disputes with vendors in the normal
course of business during the year-to-date 2002. It is the
Company's policy not to record credits from certain disputes
until received.
Net income for the year-to-date 2002 was $30.9 million, compared
with a net loss of $235.1 million for the year-to-date 2001. The
net loss for the year-to-date 2001 reflects a non-cash
impairment charge of $168.7 million to write down the goodwill
associated with the acquisition of Access One Communications,
which was created by purchase accounting, $2.5 million of
restructuring charges and an extraordinary gain of $16.9 million
related to restructuring of the certain obligations with America
Online. The net loss for the year-to-date 2001 also reflects a
non-cash charge to operations of $36.8 million in connection
with the adoption of Emerging Issues Task Force (EITF) Abstract
No. 00-19, "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company's Own Stock."
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," which establishes the impairment approach
rather than amortization for goodwill and indefinite-lived
intangible assets. The Company completed the transitional
assessment of goodwill and determined that the carrying amount
of goodwill did not exceed the fair value. The impact of SFAS
142, on a pro-forma basis, would have resulted in a reduction of
the net loss for the three and nine months ended September 30,
2001 by $5.5 million and $16.0 million, respectively, for
goodwill amortization expense.
Effective January 1, 2002, the Company adopted Emerging Issues
Task Force 01-09, "Accounting for Consideration Given by a
Vendor to a Customer or a Reseller of the Vendor's Products."
The adoption of this issue resulted in a reclassification of
approximately $7.3 million from sales and marketing expenses to
a reduction in net sales for the nine months ended September 30,
2001 attributed to direct marketing promotion check campaigns.
The adoption of EITF 01-09 did not have a material effect on the
Company's consolidated financial statements for the three months
ended September 30, 2001 and the three and nine months ended
September 30, 2002.
The Company has potential tax benefits relating to approximately
$263 million of Net Operating Loss Carryforwards as of December
31, 2001 that may allow the company to reduce its federal income
taxes in future periods. Certain rules as defined in Section 382
of the Internal Revenue Code could limit the amount available in
future periods based on the changes in ownership of the
Company's common stock. Shareholders that own in excess of 4.9%
of the common shares outstanding, or 1.3 million shares will
impact ownership changes. Therefore, the Company urges investors
to advise Talk America in advance of accumulating a position in
excess of this amount. More information regarding the Company's
NOL Carryforwards may be found in its Annual Report on Form 10-
K/A filed with the Securities and Exchange Commission on April
12, 2002.
The Company has provided for a valuation allowance of
approximately $80 million for its net deferred tax assets as of
September 30, 2002, primarily related to the Company's NOL
carryforwards. The third quarter of 2002 represents the fourth
consecutive quarter of profitability for the Company. In the
fourth quarter 2002, as part of its 2003 budgeting process,
management will evaluate the valuation allowance and, if
appropriate, expects to reverse all or a portion of this
valuation allowance. At that time, the Company would record the
estimated net realizable value of the deferred tax asset and
beginning in 2003 would provide for income taxes at a rate equal
to the Company's combined federal and state effective rates.
Talk America is an integrated communications provider marketing
a bundle of local and long distance services to residential and
small business customers utilizing its proprietary "real-time"
online billing and customer service platform. Talk America has
added local service to its offerings, after ten years as a long
distance provider. The Company delivers value in the form of
savings, simplicity and quality service to its customers based
on the efficiency of its low-cost, nationwide network and the
effectiveness of its systems that interface electronically with
the incumbent local phone companies. For further information,
visit the Company online at http://www.talk.com
UNIROYAL TECHNOLOGY: Committee Hires Blank Rome as Attorneys
------------------------------------------------------------
The Official Committee of Unsecured Creditors of Uniroyal
Technology Corporation and its debtor-affiliates, seeks the
Court's stamp of approval of its application to retain Blank
Rome Comisky LLP as Counsel, nunc pro tunc to September 12,
2002.
The Committee expects Blank Rome's services to include:
a) The administration of these cases and the exercise of
oversight with respect to the Debtors' affairs including
all issues arising from or impacting the Debtors or the
Committee in these Chapter 11 cases;
b) The preparation on behalf of the Committee of all necessary
applications, motions, orders, reports and other legal
papers;
c) Appearances in Bankruptcy Court and at meetings of
creditors to represent the interest of the Committee;
d) The review, negotiation, formulation, drafting and
confirmation of any plans of reorganization and related
matters;
e) The investigation of the assets, liabilities, financial
condition and operating issues concerning the Debtors; and
f) The performance of all of the Committee's duties and powers
in conjunction with the Debtors Chapter 11 cases.
Mark J. Packel, Esq., discloses that Blank Rome will seek
compensation, from the Debtors' estates at the Firm's customary
hourly rates:
Partners $295 to $565 per hour
Counsel $290 to $525 per hour
Associates $190 to $360 per hour
Paralegals $110 to $210 per hour
Uniroyal Technology Corporation and its subsidiaries are engaged
in the development, manufacture and sale of a broad range of
materials employing compound semiconductor technologies, plastic
vinyl coated fabrics and specialty chemicals used in the
production of consumer, commercial and industrial products. The
Company filed for chapter 11 protection on August 25, 2002 Eric
Michael Sutty, Esq., and Jeffrey M. Schlerf, Esq., at The Bayard
Firm represent the Debtors in their restructuring efforts. When
the Debtors filed for protection from its creditors, it listed
$85,842,000 in assets and $68,676,000 in debts.
US AIRWAYS: Asks Court to Approve Swap Financing Agreements
-----------------------------------------------------------
US Airways Group Inc., and its debtor-affiliates seek the
Court's authority to enter into multiple Master Agreements
related to jet fuel hedging strategies. The Agreements will
govern swap option transactions in commodities, currencies,
rates or other measures of risk. John Wm. Butler, Jr., Esq., at
Skadden, Arps, Slate, Meagher & Flom, informs Judge Mitchell
that the first transaction may be with Morgan Stanley Capital
Group Inc.
As a function of the fuel requirements from operating its
aircraft fleet, US Airways entered into swap agreements to
manage risk by limiting its financial exposure to jet fuel price
increases. The swap agreements that US Airways entered into
prepetition and in the ordinary course of business served to
lock-in the price for jet fuel over fixed periods of time.
Corporations managing large aircraft fleets commonly engage in
this business practice, according to Mr. Butler.
Under a Master Agreement -- an Agreement based on the model
agreement form provided by the International Swaps and
Derivatives Association, Inc., the Debtors typically are
required to provide to a counterparty an initial Cash Collateral
as defined in Section 363(a) of the Bankruptcy Code. The amount
of Cash Collateral posted is generally a percentage of the total
notional value of all swap transactions executed under the
Master Agreement and any related supplements, attachments and
undertakings. This percentage will vary by Master Agreement.
In the case of the Morgan Stanley Master Agreement, as proposed,
the Debtors will be required initially to post 15% of the total
notional value of the swap transactions. The Debtors' strategy
is to protect the pricing on 25% to 50% of all fuel consumed in
a single year. Given the Debtors' projections for jet fuel
consumption in the next year and assuming that all swap
transactions require 15% of the value posted as Cash Collateral,
the amount required is estimated to fall into a range of
$32,000,000 to $64,000,000.
The Debtors will also be required to maintain the initial level
of Cash Collateral specified in each Master Agreement in case
the Collateral's value declines. The minimum level of Cash
Collateral available to cover the credit exposure of US Airways
to Morgan Stanley should never be less than 101% of the credit
exposure.
In order to enter into a Master Agreement, the Debtors are
required to grant to a counterparty, such as Morgan Stanley, a
first priority lien and security interest on any Cash
Collateral, and to grant the counterparty the right to apply the
Collateral to fulfill any obligations of the Debtors (e.g.,
rights of set-off or liquidation) that may arise under a Master
Agreement.
Morgan Stanley may agree to enter into a Master Agreement with
the Debtors, provided that the Court enters an order that grants
the Security Interests. If the Court grants the Security
Interests, it will provide Morgan Stanley with a lien on the
Cash Collateral senior to the lien granted to the DIP Lenders
under the Debtors' postpetition credit agreement.
Section 364(d) of the Bankruptcy Code provides that a debtor may
provide such a "priming" lien only if:
(a) the debtor is unable to obtain credit otherwise; and
(b) there is adequate protection of the interest of the
holder of the lien on the property of the estate on
which the senior lien is proposed to be granted.
Furthermore, any amounts owing under a Master Agreement will be
entitled to administrative priority pursuant to Sections
364(c)(1), 503 and 507 of the Bankruptcy Code. However, this
administrative priority will be junior to any and all claims
granted to the DIP Lenders under the DIP Agreement.
Mr. Butler asserts that the Debtors have met this burden.
First, the Debtors have attempted unsuccessfully to enter into
similar arrangements on an unsecured or junior lien basis with
Morgan Stanley and other potential swap counterparties. Second,
the Debtors assert that the DIP Lenders' interests in the Cash
Collateral are adequately protected by virtue of the liens on
the remainder of the Debtors' assets. The Debtors assert that
the DIP Lenders have specifically consented to the granting of
liens in the DIP Credit Agreement.
Specifically, Section 7.03(c)(vii) of the DIP Credit Agreement
provides that the Debtors are permitted to incur:
"Indebtedness in respect of Swap Contracts that terminate no
later than the earlier of December 31, 2003 and the date that
is six months from the date of the applicable Swap Contract,
and that are designed to hedge against fluctuations in fuel
costs incurred in the ordinary course of business, consistent
with past business practice and industry standards and not
entered into for speculative purposes."
Additionally, Section 7.01(f) of the DIP Credit Agreement
provides that the Debtors are allowed to grant:
"Liens incurred or deposits made to secure the performance of
tenders, bids, trade contracts, leases (real and personal)
(other than Indebtedness), statutory obligations, surety
bonds (other than bonds related to judgments or litigation),
performance and return of money (but not borrowed money)
bonds, reimbursement obligations and chargeback rights of
Persons performing credit card processing services for a Loan
Party and other obligations of a like nature incurred in the
ordinary course of business."
The Debtors' business activities demand a large consumption of
jet fuel. There are considerable risk management benefits that
will inure to the Debtors' estates if allowed to hedge jet fuel
prices through the Master Agreements. If authorization is not
granted, the Debtors will be at a financial disadvantage vis-a-
vis their competitors, and the Debtors will be unable to take
advantage of a common industry practice employed to manage the
costs of jet fuel. Thus, the Debtors ask the Court to grant the
Security Interests to Morgan Stanley and any other similar
counterparty in the future. (US Airways Bankruptcy News, Issue
No. 13; 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.
US INDUSTRIES: Fitch Drops Rating on 7.125% Notes to D from C
--------------------------------------------------------------
Fitch Ratings lowered the rating on US Industries, Inc.'s 7.125%
senior secured notes to 'D' from 'C' following the company's
announcement that it has accepted for payment approximately 96%
of the $250 million of originally outstanding 2003 notes that
were validly tendered for exchange. USI's $125 million 7.25%
senior secured notes due December 1, 2006, which are not
affected by the exchange offer, remain at 'B-' and on Rating
Watch Negative. The senior secured notes are co-obligations of
USI American Holdings, Inc., and USI Global Corporation and are
guaranteed by USI Atlantic Corp.
The exchange offer on the 7.125% notes was considered a
distressed debt exchange given the need to complete this
exchange to prevent a potential default if USI was not able to
refinance the notes prior to October 2003, the high 90% level of
participation necessary for the exchange to be made effective
and the lengthened maturity of the new securities. Therefore,
while not a contractual default, by definition Fitch considers
the exchange to be an in substance default.
The note holders that accepted the exchange offer will receive
$440 in cash plus a $560 principal amount 11-1/4% senior note
due December 31, 2005, for each $1,000 note tendered. The new
notes will rank pari passu with the existing 7.25% senior
secured notes and the bank credit facilities. The maturity on
USI's bank debt will be extended to October 4, 2004 upon the
completion of the exchange offer. Any remaining 7.125% senior
secured notes will continue to be supported by an allocation of
cash in the collateral accounts as well as a commitment from the
bank lenders for principal repayment on the original maturity of
October 15, 2003.
As a result of the exchange, USI's debt will be reduced by about
$106 million from cash in the collateral accounts. In addition,
USI has a tender offer outstanding for a portion of the 7.25%
notes due in 2006 to be paid for with cash collateral. Therefore
leverage, measured by total debt to EBITDA, is expected to
improve considerably.
Fitch expects to assign a rating to the new 11 ?% notes and
review the rating on the remaining 7.25% notes in the near term
following a meeting with management and review of financial
data. The review will consider USI's reduced debt burden, lower
interest expense despite the new bond's higher interest rate,
lengthened debt maturities and ongoing operating performance.
VENTAS INC: Completes $120 Million Trans Healthcare Transaction
---------------------------------------------------------------
Ventas, Inc., (NYSE:VTR) has completed the previously announced
$120 million transaction with Trans Healthcare, Inc., a
privately owned long term care and hospital company.
"Implementing our business strategy with the completion of the
THI acquisition is a significant achievement for Ventas. It
meets our twin goals of working with a high quality operator and
building value for our stockholders with a diversifying,
accretive acquisition," Ventas President and CEO Debra A. Cafaro
said. "Importantly, we customized this transaction with THI to
meet its business needs for speed and certainty of execution,
blended cost of capital and portfolio ownership, while at the
same time meeting our shareholders' expectations for returns on
invested capital and accretion."
The transaction with THI is structured as a sale-leaseback, a
first mortgage loan and a mezzanine loan with the following
terms:
-- A $53 million sale leaseback transaction covering five
properties, with three in Maryland and two in Ohio. Ventas
Realty, Limited Partnership is purchasing the assets and
leasing them back to THI under a Master Lease, which covers four
skilled nursing facilities and one continuing care retirement
community which is composed of one skilled nursing facility, one
rehabilitation hospital, and one assisted living facility, for a
total of 770 beds. The lease provides for annual base rent of
$5.9 million, escalating each year by three percent.
-- A $67 million loan, divided into two components:
-- a $45 million first mortgage loan secured by 17 skilled
nursing facilities and one related assisted living facility, 14
in Ohio and four in Maryland, containing 1,402 beds. The loan is
structured as a collateralized mortgage backed security that
Ventas has originated for investment purposes, but may later
sell. The CMBS loan bears interest at LIBOR plus 367 basis
points, inclusive of upfront fees (with a LIBOR floor of three
percent). This loan matures in three years, and THI has two one-
year extensions upon satisfaction of certain conditions.
-- a $22 million mezzanine loan, bearing interest,
inclusive of upfront fees, of 18 percent per annum, that is
secured by subordinate interests in the 18 facilities
collateralizing the senior CMBS loan, plus liens on four
additional healthcare/senior housing properties, and interests
in three additional assets operated by THI.
Ventas drew on its line of credit to fund the THI transaction on
a short-term basis. The line of credit bears interest at LIBOR
plus 275 basis points.
The transaction covers a total of 32 properties: 18 skilled
nursing facilities, four assisted living facilities, and one
rehabilitation hospital containing 1,546 beds in Ohio; and nine
skilled nursing facilities containing 1,206 beds in Maryland.
"The addition of these facilities to the Ventas portfolio has
given Ventas diversification by geography, property type and
most important, tenant," Ventas Chief Investment Officer Raymond
J. Lewis said. "We are pleased to partner with a quality
operator like THI and we look forward to continuing our
diversification strategy."
Trans Healthcare, Inc., is based in Camp Hill, Pennsylvania. It
operates 94 facilities with 9,993 beds in 12 states, including
Ohio, Maryland and Pennsylvania. Included in its facilities are
nine specialty hospitals, three of which are under development,
that have a total of 269 beds. Its facilities offer specialty
programs for patients with Alzheimer's and dementia, behavioral
care, bariatric and ventilator/pulmonary care, and
rehabilitation.
Ventas said that the THI transaction is expected to be accretive
to FFO. However, the final financial impact of the transaction
will depend on a variety of factors, including whether the
Company retains the CMBS senior mortgage loan or sells it; if
sold, the profit or loss to the Company; the final sizing of the
CMBS and mezzanine loans and the rating of the CMBS portion of
the loan; the Company's reinvestment rate; and the long term
financing strategy for the acquisition.
The Company may from time to time update its publicly announced
FFO and dividend guidance, but it is not obligated to do so.
Ventas, Inc. is a healthcare real estate investment trust that
owns 44 hospitals, 220 nursing homes and nine other healthcare
and senior housing facilities in 37 states. The Company also has
investments in 25 healthcare and senior housing assets located
in Ohio and Maryland. More information about Ventas can be found
on its Web site at http://www.ventasreit.com
At September 30, 2002, Ventas' total shareholders' equity
deficit widens to about $126 million.
WESTAR ENERGY: S&P Places BB+ Corp. Credit Rating on Watch Neg.
---------------------------------------------------------------
Standard & Poor's Ratings Services placed its double-'BB'-plus
corporate credit ratings on energy provider Westar Energy Inc.,
and subsidiary Kansas Gas & Electric Co., on CreditWatch with
negative implications.
The CreditWatch listing reflects Topeka, Kansas-based Westar's
announcement that it will restate its first- and second-quarter
2002 financial statements to reflect an additional goodwill
impairment on 88%-owned Protection One Alarm Monitoring Inc.
While the charge of $93 million, net of tax, is noncash, is
relatively small compared with the $657 million impairment
charge already taken this year, and will not affect Westar's
liquidity or violate any covenants, Westar's liberally leveraged
capital structure cannot withstand additional decimation at the
current ratings level. Independent of the impairment
restatement, Westar's 2001 and 2000 financials are required to
be reaudited.
Westar's financial condition remains quite depressed. Funds from
operations to total debt stands at just 10%, cash flow coverage
at about 2.4 times, and pretax interest coverage below 2.0x. Due
to aggressive use of debt financing and a series of write-offs,
the company's common equity cushion is a lean 25% and debt to
capital is about 73%.
Westar's plan to sell its ONEOK Inc. investment and use
available proceeds to repay debt demonstrates an attempt by
management to begin shoring up its balance sheet. Standard &
Poor's considers this a critical near-term goal in supporting
the company's creditworthiness despite reduction or elimination
of the steady ONEOK dividends. However, uncertainty regarding
the timing of, and exact proceeds from, the ONEOK sale, together
with continued deterioration of Westar's already frail capital
structure, in addition to regulatory difficulties and
investigations and subpoenas, are significant credit concerns
especially in light of the company's tenuous bondholder-
protection measurements.
The CreditWatch listing is expected to be resolved in the first
quarter of 2003, following completion of pending audits and a
full review with management to address these challenges,
including progress on the Oneok sale.
WHEELING-PITTSBURGH: Wants to Pay RBC Dain Fees as Loan Arranger
----------------------------------------------------------------
Since its engagement, RBC Dain Rauscher Inc., has invested
substantial time and effort in preparing the Debtors' loan
guaranty application and voluminous supporting material for
submission to the Emergency Steel Loan Guarantee Board. The
Application was filed with the ESLGB on September 24, 2002.
Accordingly, Wheeling-Pittsburgh Corporation and its affiliated
debtors ask Judge Bodoh's permission to execute and perform
under RBC Dain's amended engagement letter dated September 1,
2002, and pay certain fees in that connection.
The Amended Engagement Letter increases the Monthly Fee to be
received by RBC Dain from $50,000 to $200,000 per month,
effective on and from September 1, 2002. The increase in the
fee is required to offset the extraordinary and unexpected
expense incurred by RBC Dain in connection with the Application,
ongoing requests from the ESLGB and the continued assistance
provided to the Debtors in connection with the Financing and
their reorganization efforts. The Amended Engagement Letter
also eliminates the four-month limit on RBC Dain's retention.
Except as otherwise provided in the Engagement Letter Amendment,
the Original Letter and the related indemnification and
contribution agreement will remain in full force and effect.
Section 105(a) of the Bankruptcy Code provides that "[t]he court
may issue any order that is necessary or appropriate to carry
out the provisions of this title". The Debtors believe that the
approval of their request will enable them to emerge from
bankruptcy protection and will further the rehabilitative goals
of the Bankruptcy Code.
Section 363(b) of the Bankruptcy Code provides that a debtor
"after notice and a hearing, may use, other than in the ordinary
course, property of the estate". In this Circuit, the Debtors'
use of assets outside the ordinary course of business is usually
approved if sound business justification for the proposed
transaction is demonstrated.
The Debtors argue that the proposed use of the estates' funds to
pay the increased fees associated with the Amended Engagement
Letter is supported by the requisite reasonable exercise of
their business judgment. Exit financing is necessary to the
Debtors' successful reorganization and the Debtors will only be
able to obtain exit financing if RBC Dain is appropriately
compensated and incentivized. Moreover, the terms of the Amended
Engagement Letter are reasonable and customary for transactions
of this nature.
Noteholders Committee Objects:
Wrong Focus and Too Much Money
Daniel A. DeMarco, Esq., at Hahn Loeser & Parks LLP, in
Cleveland, Ohio, tells Judge Bodoh that the Official
Noteholders' Committee opposes the increase because the
renegotiation of RBC Dain's engagement within a few months after
the Court approved the retention is "wholly unwarranted". The
compensation package in place is "more than generous". Mr.
DeMarco reminds Judge Bodoh that, in addition to the monthly
fee, RBC Dain will be entitled to an "arrangement fee" equal to
2% of the loan. This fee will pay RBC Dain $5,000,000, if the
loan guaranty application is approved. Moreover, the
administrative cost for the Debtors' financial advisors is
already burdensome since RBC Dain's retention represents at
least the third time the Debtors have brought in financial
advisors in an attempt to restructure or raise capital.
Mr. DeMarco reminds Judge Bodoh that the Committee objected to
the Debtors' application to employ RBC Dain in the first place
because of the cost, and because it wanted the Debtors to
simultaneously embark on a sale process. In response, the
Debtors agreed to:
-- limit RBC Dain's retention to four months unless a Byrd
Bill application was being actively considered, and
-- hire another financial advisory firm to spearhead a sales
process.
The justification offered by the Debtors for a 300% increase in
RBC Dain's monthly fee; i.e., that there has been extraordinary
and unexpected expense, rings hollow since this process is no
different than should have been anticipated or than has been
encountered by any other steel company seeking approval of an
application.
Furthermore, the Debtors provided RBC Dain with extensive due
diligence materials and fully negotiated the original engagement
letter a few months ago. Presumably, RBC Dain has expertise in
these matters and knows how to set a price for its services.
RBC Dain should be held to its original deal and should not be
permitted to shift any mistake in pricing to the Debtors'
estates.
Mr. DeMarco notes that the financial advisory firm, which was
supposed to oversee the sales process, Conway DelGenio, has in
fact been devoting substantially all of its efforts to the plan
reflected in the Byrd Bill application. As a result of Conway's
involvement, RBC's workload was presumably lessened and the cost
to the estates in respect of the Byrd Bill application already
greatly increased.
Accordingly, the Committee does not object to the extension of
the time limit with respect to RBC Dain's retention, but
"strongly opposes" the proposed increase in fees. (Wheeling-
Pittsburgh Bankruptcy News, Issue No. 28; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
WILD OATS: Sept. 28 Working Capital Deficit Tops $70 Million
------------------------------------------------------------
Wild Oats Markets, Inc. (Nasdaq: OATS), a leading national
natural and organic foods retailer, announced financial results
for the third quarter and nine months ended September 28, 2002.
In the third quarter of 2002, the Company reported net income of
$2.2 million, compared to net loss of $2.9 million in last
year's third quarter. Sales in the third quarter of 2002
increased 2.7 percent to $228.1 million, compared to $222.2
million in the third quarter of 2001.
Third Quarter Highlights
The 2.7 percent sales increase in the third quarter was achieved
despite the sale and/or closure of eight stores during 2002.
For the most part, these closures were part of the Company's
planned rationalization program to divest under-performing
stores. The Company also closed one small vitamin store at the
end of the third quarter of 2002.
Comparable store sales increased 5.6 percent in the third
quarter of 2002, compared with 5.5 percent in last year's third
quarter. This was the seventh consecutive quarter of positive
same-store sales, which reversed what was a negative trend in
2000. The increase in comparable store sales in the third
quarter was comprised of a 1.6 percent increase in comparable
store customer count and a 4.0 percent increase in comparable
store average sale per customer in the period compared to the
third quarter of 2001. Increased comparable store sales,
customer traffic and average sale per customer were driven by
the Company's ongoing marketing initiatives.
At September 28, 2002, the Company's total current liabilities
exceeded its total current assets by about $70 million.
"We are encouraged that our sales performance continues to show
positive momentum despite a weak economy," said Perry D. Odak,
President and Chief Executive Officer. "We believe that this is
the result of the improvements we have made in our stores and
the continued growth in the natural and organic products
industry. Our same-store sales in the third quarter were
positive for the seventh consecutive quarter, even in light of
more challenging year-over-year comparisons to the third quarter
of 2001."
Net income in the third quarter of 2002 was $2.2 million,
compared with net loss of $2.9 million in the same period last
year. Third quarter 2002 net income included $174,000 pre-tax
in net reversals of previous restructuring and asset impairment
charges related to a gain on the disposal of a closed commissary
facility and a reduction in lease-related liabilities at two
other locations. Third quarter 2001 results included a non-cash
restructuring and asset impairment charge of $776,000 pre-tax,
primarily for the closure of three commissary kitchens.
"We generated financial results that were in the range of
expectations despite an overall softness in the food retailing
industry," said Mr. Odak. "In addition to favorable natural
foods industry trends and improved store execution, we achieved
these results while undertaking a major transition to Tree of
Life, our new primary distribution partner. And, in early
September, we completed a private placement of common stock,
with net proceeds of $48.3 million, that we will use to fund our
strategic growth, store expansion and infrastructure
initiatives."
Wild Oats reported gross profit of $67.1 million, or 29.4
percent of sales, in the third quarter of 2002, a 5.6 percent
increase compared with $63.5 million, or 28.6 percent of sales,
in the third quarter of 2001. Gross profit of 29.4 percent in
the third quarter declined from 30.2 percent in the second
quarter of 2002. This was primarily the result of lower-than-
expected sell-through rates and overly aggressive markdowns on
certain specialty produce items. Disciplined expense management
at the store level and lower-than-expected selling, general and
administrative (SG&A) expenses offset the margin decline and
contributed to the aforementioned increase in net income.
Direct store expenses continued to decline and contributed to
the overall increase in profitability. In the third quarter of
2002, direct store expenses were $48.6 million, a 6.7 percent
reduction, compared to $52.1 million in the third quarter of
2001. A portion of the decline was due to the previously
mentioned sale or closure of eight stores. However, due to
operational improvements in the stores, direct store expenses as
a percent of sales also declined and were 21.3 percent in the
third quarter of 2002, compared with 23.5 percent in the third
quarter of 2001. The store contribution margin continued to
improve in the third quarter of 2002, and was 8.1 percent of
sales, a 3.0 percentage point increase, compared to 5.1 percent
in the third quarter of 2001. The gain in store contribution
was primarily due to continued improvements in store-level
expense management.
SG&A expenses in the third quarter of 2002 remained steady at
5.6 percent of sales and were lower than the previously
announced forecast of 6.0 percent of sales. SG&A in the third
quarter of 2002 increased 1.9 percent to $12.7 million, compared
with $12.5 million, excluding goodwill amortization expense, in
the prior year third quarter. The lower-than-expected SG&A
expenses in the third quarter of 2002 were primarily due to more
disciplined cost management, including the deferral of headcount
expenses as the Company postponed three store openings into
2003, as well as the favorable resolution of a legal matter.
During the first nine months of 2002, net cash provided by
operating activities was $24.6 million. Capital expenditures
were $2.3 million for the third quarter and $6.9 million year-
to-date in 2002, compared to $2.9 million in the third quarter
and $18.9 million year-to-date in 2001. In the third quarter of
2002, Wild Oats paid down a net $5.5 million on its credit
facility and, as of the end of the quarter, had approximately
$90.8 million outstanding on its $125.0 million credit facility.
Business Developments
On September 4, 2002, Wild Oats announced it had completed the
sale of 4,450,000 shares of its common stock in a public stock
offering. The purchase price of the shares was $11.50 per
share, and the net proceeds of the offering were $48,289,000
after deduction of the expenses of the offering. The Company
plans to use the proceeds of the completed offering to fund its
aggressive new store development program, to remodel several of
its existing stores, and to make investments in information
systems and infrastructure aimed at reducing costs and improving
operating margins. The Company plans to open three new stores
in the first quarter of next year, and up to 10 additional
locations throughout the remainder of 2003.
On September 30, 2002, Wild Oats completed the transfer of all
of its U.S. stores to Tree of Life as its new primary
distributor for organic, natural and specialty food products.
The transfer process, which commenced on September 1, 2002, was
executed to the Company's plans and also included a previously
announced vendor and stock-keeping unit reduction. The stores
experienced increased service disruptions during the transfer to
Tree of Life, which included higher out-of-stock levels. By the
end of September, store in-stock conditions were consistent with
the Company's expectations. Additionally, the Company
anticipates that service levels will improve significantly with
the new distribution agreement. In the long-term, this new
contract is expected to reduce product costs, lower delivery
costs through freight consolidation, cross docking and greater
slotting, and reduce working capital levels through improved
payment terms.
Year To Date Financial Results
In the first nine months of 2002, comparable store sales of 6.0
percent drove a 3.9 percent increase in net sales to $697.3
million, compared to $671.1 million in the first nine months of
2001.
Net income for the first nine months of 2002 was $4.3 million,
compared with net loss of $41.1 million, in the first nine
months of 2001. Year-to-date 2002 net income included total
additional restructuring and asset impairment charges of
approximately $1.2 million and reversals of previous
restructuring and asset impairment charges of $2.0 million. In
the first nine months of 2001, the Company recorded a $55.6
million restructuring and asset impairment charge related to the
sale and closure of under-performing stores.
In the first nine months of 2002, the Company generated gross
profit of $206.1 million, or 29.6 percent of sales, a 5.0
percent increase compared with $196.3 million, or 29.3 percent
of sales in the same period last year.
Year-to-date direct store expenses were $150.6 million, or 21.6
percent of sales, a 5.2 percent decline compared with $158.7
million, or 23.7 percent of sales, in the comparable period last
year. For the first nine months of 2002, the store contribution
margin was 8.0 percent of sales, a 2.4 percentage point increase
from 5.6 percent in the same period of 2001.
SG&A expenses in the first nine months of 2002 were $41.6
million, a 17.5 percent increase, compared with $35.4 million,
excluding goodwill amortization expense, in the same period last
year. SG&A as a percent of sales in the first nine months of
2002 was 6.0 percent compared with 5.3 percent, excluding
goodwill amortization expense, in the same period last year.
The increase in SG&A expenses was primarily due to the Company's
ongoing investments in marketing and advertising to drive
improved top-line performance.
"With several major initiatives behind us, we have established a
strong foundation from which to grow this Company," said Mr.
Odak. "We are confident that we are moving into a period of
sustainable growth and that we have the tools in place, along
with a much more disciplined cost structure, to support an
aggressive growth phase for Wild Oats. This platform will be a
launching pad for us to achieve our objectives of growing our
store base by 50 percent over the next three years and
optimizing the growth opportunities of the natural and organic
products industry."
Wild Oats Markets, Inc., is a nationwide chain of natural and
organic foods markets in the U.S. and Canada. The Company
currently operates 99 natural foods stores in 23 states and
British Columbia, Canada. The Company's markets include: Wild
Oats Natural Marketplace, Henry's Marketplace, Nature's -- a
Wild Oats Market, Sun Harvest and Capers Community Markets. For
more information, please visit the Company's Web site at
http://www.wildoats.com
WINSTAR COMMS: Trustee Intends to Settle Avoidable Preferences
--------------------------------------------------------------
Sheldon K. Rennie, Esq., at Fox Rothschild O'Brien & Frankel
LLP, in Wilmington, Delaware, tells the Court that since the
Winstar Communications, Inc. Chapter 7 Trustee's appointment,
the Chapter 7 Trustee and her professionals have reviewed the
Debtors' books and records to conduct an analysis of the vast
amount of payments made by the Debtors that may constitute
preferences within the meaning of Section 547 of the Bankruptcy
Code. As a result of the analysis, the Chapter 7 Trustee
intends to assert recovery causes of action against hundreds of
commercial entities. However, since many of the entities are
small compared to the size of the cases, the Chapter 7 Trustee
may just have to facilitate settlement agreements.
Thus, Chapter 7 Trustee Christine Shubert asks the Court to
approve procedures for settlement under which she may, in her
discretion, compromise and settle avoidable preference recovery
controversies without further Court approval.
Pursuant to the settlement procedures, the Chapter 7 Trustee, in
her discretion, would be authorized in connection with the
settlement of any controversy to:
-- accept payment upon the parties' entry into the settlement,
-- accept property in lieu of cash, or
-- accept a secured promise to pay the settlement amount.
The Chapter 7 Trustee would be authorized to settle an avoidable
preference controversy if she will receive:
A. Not less than 70% of the gross preference amount, as
reflected on the Debtors' books and records, or
B. Not less than 70% of the net preference amount after
crediting the transferee with new value advances, which the
Chapter 7 Trustee believes would be valid defenses under
Section 547(c)(2) of the Bankruptcy Code, but the maximum
discount from this calculation under this clause will not
exceed $25,000.
Mr. Rennie tells the Court that the Chapter 7 Trustee will file
a notice of the settlement and disclose the terms of settlement.
For each settlement entered into in accordance with the
settlement procedures, the Chapter 7 Trustee will be authorized,
without further notice or Court approval, to take all actions
necessary or appropriate to effectuate the settlement. The
settlement procedures will not apply to any compromise and
settlement of an avoidable preference controversy that involves
an insider of the Debtors.
In view of the number of controversies and the likelihood that
many of them will be resolved consensually, the process of
drafting documents and pleadings, filing, serving and conducting
hearings on each individual controversy, would be impractical
and administratively burdensome for the estates and the Court.
The proposed settlement procedures, in effect, will result in
significant administrative savings to the estates. (Winstar
Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
WORLDCOM INC: Obtains Approval to Implement Key Employee Program
----------------------------------------------------------------
Worldcom Inc., and its debtor-affiliates seek the Court's
authority under Sections 363(b) and 105(a) of the Bankruptcy
Code to adopt a retention bonus plan to encourage the retention
of specific employees whose responsibilities are vital in these
Chapter 11 cases.
In developing the Retention Plan, the Debtors reviewed their
existing compensation and employee benefit plans and the
retention or "stay" bonus programs of large companies that have
adopted similar compensation programs while operating under
Chapter 11. In addition, the Debtors considered the size and
difficulty of these Chapter 11 cases, as well as the underlying
business strategy to continue their business operations with the
least amount of disruption to their major customers and vendors
and suppliers who continue to provide goods and services on
terms similar to those applied prior to the Petition Date.
Before the proposed Retention Plan was finalized, the Debtors
presented various proposals to the Corporate Monitor for his
review and comment. Following a thorough analysis, the
Corporate Monitor approved the Retention Plan in its proposed
form.
Lori R. Fife, Esq., at Weil Gotshal & Manges LLP, in New York,
explains that the Retention Plan provides bonuses designed to
encourage Key Employees to remain employed by the Debtors
throughout the reorganization process and to work productively
to ensure that the Debtors complete their reorganization in a
timely and efficient manner. The Retention Plan provides for a
stay bonus if the Key Employee remains employed by the Debtors
on specific target dates equal to a percentage of the
individual's annual base compensation according to the
classification of the Key Employee. The Debtors propose to pay
the Stay Bonuses pursuant to this schedule:
-- 25% of the Stay Bonus paid on December 1, 2002,
-- 25% of the Stay Bonus paid on March 31, 2003, and
-- 50% of the Stay Bonus paid 60 days after confirmation of
a plan of reorganization.
Notwithstanding the requirement that the Key Employee remains
employed by the Debtors on specific target dates, a Key Employee
whose employment is terminated in a reduction-in-force will be
entitled to receive the portion of the Stay Bonus allocated to
next target date, provided, however, a Key Employee terminated
prior to the Plan Confirmation Date will not be entitled to any
additional bonus amount.
In addition, the Retention Plan provides that each Key Employee
who remains employed on the date that a plan of reorganization
is confirmed will receive an additional bonus amount equal to
10% of the Key Employee's Stay Bonus. The Plan Progress Bonus
would be earned if the Plan Confirmation Date occurs by December
2003. Should the Plan Confirmation Date occur earlier, the Plan
Progress would increase by:
-- 100% of the Plan Progress Bonus if the Plan Confirmation Date
occurs in December 2003;
-- 150% of the Plan Progress Bonus if the Plan Confirmation Date
occurs in November 2003;
-- 200% of the Plan Progress Bonus if the Plan Confirmation Date
occurs in October 2003; and
-- 250% of the Plan Progress Bonus if the Plan Confirmation Date
occurs on or before September 30, 2003.
The proposed enhancements to the Stay Bonus provide additional
incentive for working intensely to facilitate a swift conclusion
of these Chapter 11 cases.
According to Ms. Fife, the Debtors have already identified 329
Key Employees who will participate in the Retention Plan. In
developing the Retention Plan, the Debtors classified those Key
Employees into four groups based on each employee's role in the
Company and expected contribution to the Debtors' reorganization
efforts. The classifications are composed of:
-- Group 1 includes 4 Key Employees who hold the most senior
positions at WorldCom. None of these employees will
participate in the Retention Plan;
-- Group 2 includes 25 Key Employees. The Stay Bonus for each
Group 2 Employee is equal to 65% of the individual's annual
base compensation, subject to a cap of $125,000. The range
of Stay Bonuses for Group 2 Employees is expected to be from
$90,000 to $125,000;
-- Group 3 includes 90 Key Employees. The Stay Bonus for each
Group 3 Employee is equal to 50% of the individual's annual
base compensation, subject to a cap of $125,000. The range
of Stay Bonuses for Group 3 Employees is expected to be from
$47,000 to $125,000; and
-- Group 4 includes 210 Key Employees. The Stay Bonus for each
Group 4 Employee is equal to 35% of the individual's annual
base compensation, subject to a cap of $125,000. The range
of Stay Bonuses for Group 4 Employees is expected to be from
$20,000 to $90,000.
The Retention Plan includes a provision that permits the
Debtors' management to vary an individual Key Employee's Stay
Bonus by as much as 20%; provided, however, under no
circumstances will the total Stay Bonus for any particular Key
Employee exceed the percentages or dollar caps.
As part of the Retention Plan, Ms. Fife informs the Court that
the Debtors will set aside a discretionary pool of up to
$2,500,000 to address unforeseen events and to send a positive
message to employees other than Key Employees. Payments from
the Discretionary Pool will not be made without the approval of
the Corporate Monitor. The total cost of the Retention Plan,
including the Discretionary Pool, is $25,000,000.
Ms. Fife contends that the successful rehabilitation of the
Debtors' business operations is dependent on the continued
employment, active participation, and dedication of Key
Employees who possess knowledge, experience, and skills
necessary to support the Debtors' business operations. The
Debtors' ability to stabilize and preserve their business
operations and assets will be substantially hindered if the
Debtors are unable to retain the services of these Key
Employees.
As in any large Chapter 11 case, the Debtors' Key Employees,
particularly those in management positions, are concerned about
the uncertainty regarding the Debtors' future operations and
each individual's job security. Ms. Fife believes that this
uncertainty could lead to resignations of Key Employees,
particularly those Key Employees who have skills that are
transferable to businesses whose prospects are generally less
uncertain. Employee morale has already been deteriorating due
to the Debtors' well-publicized financial difficulties, the
numerous criminal investigations into the conduct of certain
former employees of the Debtors, and the increased scrutiny that
has been focused on the Debtors in recent months. Moreover, the
Chapter 11 filings have increased employee responsibilities and
workload. The Debtors believe that unless the Retention Plan is
approved, there will be further erosion in employee morale and
additional resignations of Key Employees.
The loss of the Key Employees would be extremely costly. These
reasons justify the proposed retention incentives:
-- The Debtors have expended significant time and resources in
recruiting and retaining their Key Employees, which has been
difficult given the pressures and scrutiny facing the
Debtors;
-- A company in Chapter 11 is not a particularly appealing
employment option for experienced job candidates, thus making
it difficult to replace departing Key Employees;
-- To find suitable replacements for these departures, the
Debtors will have to pay executive search firm fees,
typically in the range of 25-35% of base salaries, signing
bonuses, moving expenses and above-market salaries so as to
induce qualified candidates to accept employment with a
Chapter 11 debtor;
-- The loss of a particular Key Employee could lead to
additional employee departures;
-- The loss of Key Employees may result in the loss of
institutional knowledge and key contacts with vendors and
customers; and
-- The loss of Key Employees will hinder, delay and disrupt the
Debtors in their pursuit of a timely and successful
reorganization.
The Debtors believe that the Retention Plan is the most cost-
effective manner in which to protect against attrition and to
improve employee morale. Ms. Fife points out that the Retention
Plan will offer financial incentives to be paid only if the Key
Employee remains actively employed by the Debtors during the
pendency of these Chapter 11 cases. By adopting the Retention
Plan, the Debtors will be sending a positive message to its Key
Employees that they are a valuable resource and that their
continued employment with the Debtors is essential to the future
of the enterprise.
The Debtors have determined that the costs associated with
adoption of the Retention Plan are more than justified by the
numerous benefits that by retaining Key Employees. Ms. Fife
notes that the Retention Plan will:
-- discourage resignations among Key Employees,
-- dispel the perceived risk of working for the Debtors
notwithstanding their chapter 11 cases, and
-- reduce or eliminate the direct and indirect costs attendant
to replacing Key Employees.
The Debtors also plan to continue to honor their obligations
under their existing severance program with respect to employees
terminated postpetition. Ms. Fife explains that the existing
Severance Program provides for severance pay benefits and
extended medical and dental benefits to eligible employees for a
period of time based generally on an employee's job position and
years of service with the Company, subject to signing a general
employment release. Generally, an employee is eligible for
severance benefits under the Severance Program if the employee's
employment is permanently terminated by the Debtors as a result
of a reduction in the Debtors' workforce or an elimination of
the employee's present job position. The Severance Program is
designed to alleviate concerns employees have expressed
regarding job security. By minimizing the risks associated with
a potential downsizing of the Debtors' workforce, continuation
of the Severance Program will support the Debtors' efforts to
retain not only employees covered by the Retention Plan, but
also employees in general.
* * *
Jeff St. Onge at Bloomberg News reports that Judge Gonzalez
approved WorldCom's proposal to pay $25,000,000 in bonuses to
its key executives and employees. The Court overruled
objections that WorldCom didn't supply enough information to
support its proposal. Court-appointed monitor Richard Breeden
and the Committee of Unsecured Creditors supported the bonus
plan. (Worldcom Bankruptcy News, Issue No. 12; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WORLDCOM: Says Additional Restatements of Past Accounting Likely
----------------------------------------------------------------
WorldCom, Inc., (Nasdaq: WCOEQ) issued the following statement
regarding the likelihood that additional restatements of past
accounting will take place.
"In settlement discussions with the Securities and Exchange
Commission, WorldCom advised the agency that, based on very
preliminary reviews of past accounting, it expects an additional
restatement of earnings which, when added to WorldCom's past
restatements, could total in excess of $9 billion.
"The company is continuing to finalize its review. Once
the review is complete it will make the final information
public.
"Additionally, the company said that restatements of past
accounting have no impact on its ability to continue to provide
service to its customers nor on its ability to emerge from
bankruptcy protection, which it expects to take place in mid-
2003. The company continues to possess more than $1 billion of
cash on hand and debtor-in-possession financing of $1.1 billion,
which it has not tapped."
WorldCom, Inc., (Nasdaq: WCOEQ, MCWEQ) is a pre-eminent global
communications provider for the digital generation, operating in
more than 65 countries. With one of the most expansive, wholly-
owned IP networks in the world, WorldCom provides innovative
data and Internet services for businesses to communicate in
today's market. In April 2002, WorldCom launched The
Neighborhood built by MCI -- the industry's first truly any-
distance, all- inclusive local and long-distance offering to
consumers. For more information, go to http://www.worldcom.com
Worldcom Inc.'s 11.25% bonds due 2007 (WCOM07USR4), DebtTraders
reports, are trading at 17.75 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOM07USR4
for real-time bond pricing.
XO COMMS: Court Approves Stipulation with Bank of America
---------------------------------------------------------
Bank of America, N.A. issued various Standby Letters of Credit
secured by cash collateral for XO Communications, Inc.'s account
prior to the Petition Date. According to Matthew A. Feldman,
Esq., at Willkie Farr & Gallagher, in New York:
-- two Letters of Credit with an aggregate drawable amount of
$2,100,000 remain undrawn and outstanding, and
-- five Letters of Credit for $8,606,084 was drawn by third
party beneficiaries, which amounts continue to be owed, as of
October 1, 2002.
Accrued and unpaid interest on the amounts total $68,476, which
includes the Bank's customary drawing fee equal to $21,690.
Interest continues to accrue and remains unpaid since October 1,
2002. Bank of America also retains cash collateral for three
Letters of Credit that were cancelled postpetition.
Mr. Feldman explains that all of the Debtor's obligations with
respect to the Letters of Credit are secured pursuant to a
Security Agreement in favor of Bank of America executed
prepetition. The collateral granted includes all securities in
Account #2218 and all proceeds thereof maintained at Bank of
America under the Debtor's account. The Debtor's account
balance as of October 1, 2002 is $12,514,741.
Section 362(d) of the Bankruptcy Code provides, in part:
"On a request of a party in interest and after notice and a
hearing, the Court shall grant relief from stay provided
under Section (a) of this Section by terminating, annulling,
modifying or conditioning the stay."
Mr. Feldman argues that cause exists to grant relief from
automatic stay because:
-- the resulting reimbursement obligations are now accruing
interest at a rate greater than the interest rate earned on
the account;
-- Bank of America has not drawn on the collateral and has not
released the excess collateral to the Debtor due to the
automatic stay; and
-- additional Letters of Credit may be drawn in the future,
which would create additional interest-bearing
reimbursement obligations in favor of Bank of America.
"In order to minimize the amount of accruing interest and secure
release of the excess collateral, it is in the Debtor's best
interests that Bank of America be allowed to draw on the
collateral in the Debtor's account and apply the proceeds
against obligations as they arise, which will also permit the
Debtor to receive the excess collateral in the account," Mr.
Feldman says. Furthermore, Mr. Feldman notes, unnecessary legal
fees will also be avoided.
Thus, the Debtor asks the Court to approve the Stipulation and
Order with Bank of America authorizing relief from the automatic
stay to permit Bank of America to apply collateral against the
Debtor's obligations in order to minimize the amount of accruing
interest.
* * *
Accordingly, Judge Gonzales approves the parties' agreement
that:
-- Bank of America's claims against the Debtor relating to
the Letters of Credit are allowed in full. The Bank will
be permitted to immediately apply the proceeds from the
Debtor's account against the Letter of Credit Amounts
without being required to seek relief from the automatic
stay;
-- Bank of America's claims are allowed to the extent that
the two undrawn Letters of Credit are drawn, cancelled or
expired; and
-- As new Letters of Credit are drawn, Bank of America is
permitted to immediately apply the proceeds from the
Debtor's account against any obligations arising without
being required to seek relief from automatic stay and
without any further action or notice of any kind.
After Bank of America draws proceeds from the Debtor's account,
they will release to the Debtor these amounts for the Letters of
Credit indicated, which have been cancelled or drawn:
Amount to be
Beneficiary Number Status returned to XO
----------- ------ ------ --------------
40 Broad Delaware, Inc. 3012794 Cancelled $68,139
Property Asset Management 3019725 Cancelled 579,727
75 Broad Street LLC 3017133 Cancelled 26,324
111 Eighth Avenue LLC 3017221 Drawn 130,000
195143 Drawn 31,608
KDC-Sunset, LLC 3025561 Drawn 370,000
3025562 Drawn 279,000
S.D.C. 7 3033369 Drawn 50,000
As any Letters of Credit expire undrawn or are drawn, Bank of
America will immediately return to the Debtor any balance in the
Account in excess of 110% of the sum of:
-- the face amount of any Letters of Credit remaining undrawn,
plus
-- any other reimbursement obligations remaining unpaid.
Bank of America will immediately return to the Debtor any amount
remaining in the account after all Letters of Credit have
expired or drawn and/or all obligations have been paid. (XO
Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
* DebtTraders' Real-Time Bond Pricing
-------------------------------------
Issuer Coupon Maturity Bid - Ask Weekly change
------ ------ -------- --------- -------------
Federal-Mogul 7.5% due 2004 16 - 18 0
Finova Group 7.5% due 2009 30.5 - 32.5 +1
Freeport-McMoran 7.5% due 2006 88 - 90 +1
Global Crossing Hldgs 9.5% due 2009 1.5 - 2.5 +0.5
Globalstar 11.375% due 2004 5 - 6 +1
Lucent Technologies 6.45% due 2029 41 - 43 +1
Polaroid Corporation 6.75% due 2002 3.5 - 5.5 0
Terra Industries 10.5% due 2005 87 - 89 +4
Westpoint Stevens 7.875% due 2005 21 - 23 -9
Xerox Corporation 8.0% due 2027 41 - 43 +1
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com
*********
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.
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