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/raid1/www/Hosts/bankrupt/TCR_Public/021219.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, December 19, 2002, Vol. 6, No. 251 Headlines 360NETWORKS: Selling Dark Fiber & Network Capacity to Videotron A NOVO BROADBAND: Files for Chapter 11 Protection in Delaware A NOVO BROADBAND: Case Summary & 20 Largest Unsecured Creditors AAMES FINANCIAL: Completes Exchange Offer for Junk-Rated Bonds ADELPHIA COMMS: Seeks Further Lease Decision Period Extension AIR CANADA: S&P Downgrades Ratings over Reduced Asset Protection AMERICAN SKIING: Appoints Betsy Wallace Chief Financial Officer ANC RENTAL: Court Okays Site Consulting as Florida Broker ASSOCIATED ESTATES: Will Pay Quarterly Share Dividend on Feb. 1 AVADO BRANDS: S&P Drops Corporate Credit Rating to Default Level BAYOU STEEL: Fails to Make Interest Payment on 9-1/2% Sr. Notes BROADWING INC: Receives Conditional $200MM Financing Commitment BURLINGTON INDUSTRIES: Hires Ivins Phillips as Special Counsel CALL-NET ENTERPRISES: S&P Ratchets Ratings Down a Notch to B CBR BREWING: External Accountants Express Going Concern Doubt CCC GLOBALCOM: Auditors Doubt Ability to Continue Operations CELL ROBOTICS: Needs to Turn a Profit to Continue Operations CHILDTIME LEARNING: Elects Benjamin Jacobson as New Board Chair CHRISTIANA CARE: A.M. Best Assigns B++ Financial Strength Rating COMMUNICATION DYNAMICS: Taps Hilco to Liquidate Amherst Assets CONSECO INC: Files for Chapter 11 Protection in Chicago CONSECO FINANCE: Inks Pact to Sell Assets to CFN Investment CONSECO: Chapter 11 Petition Summary CONSECO: Holding Companies' 30-Largest Unsecured Creditors CONSECO: Conseco Finance Debtors' 40-Largest Unsecured Creditors COVANTA CONCERTS: Case Summary & 20 Largest Unsecured Creditors COVANTA ENERGY: Asks Court to Approve Two Unwind Agreements CUMMINS INC: Names Jean Blackwell as New Chief of Staff and CFO DATATRAK INT'L: Fails to Comply with Nasdaq Listing Requirements DELIA*S CORP: Third Quarter Net Loss Balloons to $11 Million DOBSON COMMS: S&P Ratchets Corp. Credit Rating Down a Notch to B DRS TECH: S&P Revises Outlook to Positive After $115M Stock Sale DYNEGY: Sells Global Liquids Trading Business to Transammonia EMPLOYERS SECURITY: S&P Junks Fin'l Strength Rating at CCCpi ENCOMPASS SERVICES: Wants to Hire Ordinary Course Professionals ENERGY CORP: S&P Junks Corporate Credit and Sub. Debt Ratings ENRON: Court Approves Settlement Pact between ENA and XTO Energy ENRON CORP: ENA Selling Coal-Related Assets to Cline for $13MM ENVIRONMENTAL OIL: Case Summary & 20 Largest Unsecured Creditors EXODUS COMMS: Has Until Feb. 14 to Challenge Disputed Claims FAIRFAX: A.M. Best Puts B++ Fin'l Strength Ratings Under Review FAIRFAX FIN'L: Fitch Takes Downgrade Actions on Debt Ratings FAO INC: Wooing Wells Fargo to Relax Covenants Under Credit Pact FMC CORP: Appoints D'Aloia and Greer to Board of Directors FOCAL COMMS: Commences Trading on OTCBB Effective December 18 GENUITY INC: Look for Schedules and Statements by February 10 GIANT INDUSTRIES: Financial Profile Deterioration Concerns S&P GOLDEN NORTHWEST: S&P Drops Rating to D over Missed Payment HALLIBURTON: Completes Sale of ShawCor Shares for $64 Million HAYES LEMMERZ: Court Okays Deloitte & Touche as Tax Consultant ILLINOIS POWER: Commences $550 Million Mortgage Bond Offering INSILCO HOLDING: Receives Court Approval of 'First-Day' Motions INTEGRATED TELECOM: US Trustee Appoints Creditors Committee IRON MOUNTAIN: S&P Assigns B Rating to Proposed $100MM Sr. Notes IRON MOUNTAIN: Facing $5-Million Suit Filed by Cozen O'Connor KAISER ALUMINUM: Court Approves 2 Oxnard Workers Shutdown Pacts KEY3MEDIA: Interest Nonpayment Spurs S&P to Drop Ratings to D KLEENER KING: Case Summary & 6 Largest Unsecured Creditors LEVEL 8 SYSTEMS: Commences Nasdaq SmallCap Trading Today LTV: Court Approves LTV Steel's Proposed Prosecution Thresholds LUBY'S INC: First Quarter 2003 Results Show Improvement MAPLEWOODS SHOPPING: Chap. 11 Case Summary & Largest Creditors MICRON TECHNOLOGY: Reports Improved Results for 1st Quarter 2003 MID OCEAN: Fitch Slashes Rating on Class B-1 Notes to B MJ DESIGNS: Case Summary & 20 Largest Unsecured Creditors MOSAIC GROUP: Files for Chapter 11 Reorganization in Dallas, TX NATIONSRENT INC: Enters into Financing Agreement with Banc One ORGANOGENESIS: Committee Looks to Deloitte for Financial Advice OWENS CORNING: Commences Trading on OTCBB Effective Today OWENS CORNING: Enters Stipulation Resolving Valspar's Claims PACIFIC GAS: Court Says CPUC Alternative Plan Feasible & Legal POLYONE CORP: Expects a Seasonally Weak Fourth Quarter 2002 RENAISSANCE ENTERTAINMENT: Auditors Express Going Concern Doubt RURAL/METRO: Sets Annual Shareholders' Meeting for March 3, 2003 RURAL CELLULAR: Nasdaq Knocks-Off Shares Effective December 18 SONIC FOUNDRY: Fourth Quarter Revenues Slide-Up 19% to $6.4 Mil. SOTHEBY'S: Agrees to Sell & Lease Back Headquarters for $175MM SWIFTY SERVE: Wants to Surcharge CIT Group's Collateral SYMBOLLON PHARMACEUTICALS: Falls Below Nasdaq Listing Standards TERADYNE INC: Profitability Concerns Spur S&P's B+ Credit Rating TITANIUM METALS: Appoints Paul Zucconi to Board of Directors TRINITY INDUSTRIES: Selling Railcar Repair Business To Rescar UNION ACCEPTANCE: Reaches Pact to Sell $200 Mill. of Receivables UNITED AIRLINES: Employee-Shareholder Trust Can't Dump Shares UNITED AIRLINES: Reiterates Commitment to Reach Labor Agreements UNITED AIRLINES: Honoring Prepetition Employee Obligations US AIRWAYS: Wants Nod to Examine EDS Corp. Under Rule 2004 U.S. TIMBERLANDS: Commences Trading on OTCBB Effective Dec. 18 VIASYSTEMS GROUP: Court Okays Schulte Roth as Conflict Counsel WARREN ELECTRIC: Wants to Continue McCloskey's Engagement WHEELING-PITTSBURGH: Court Okays Financing Pact with Cananwill WORLDCOM: Board Members Offer Resignation to Chairman Capellas WORLDCOM INC: Seeks Approval to Enter into Pentagon City Lease * DebtTraders' Real-Time Bond Pricing ********* 360NETWORKS: Selling Dark Fiber & Network Capacity to Videotron --------------------------------------------------------------- 360networks Corporation, a leading provider of data telecommunications services, has signed a contract with Montreal-based Videotron Telecom Ltd., for the sale of dark fiber and the lease of network capacity. This new contract is one of several to be finalized since 360networks emerged from its restructuring in November of this year. VTL will use the dark fiber and the network capacity to further enhance its network in Ontario, Quebec and cross-border routes to the United States. The sale will add approximately 1,200 kilometers of fiber optic network to VTL's route footprint. "VTL is pleased to announce this multiple-services deal with 360networks," said VTL's chief executive officer, Eugene Marquis. "360networks was able to provide and provision the products and services we needed in a timely manner." "We are excited to partner with VTL and to announce another customer win for 360networks," said Jimmy Byrd, 360networks president and chief operating officer. "The decision to choose 360networks for network services by yet another leading Canadian telecommunications provider is further evidence of the value 360networks brings to its customers." 360networks offers telecommunications services and network infrastructure in North America to telecommunications and data communications companies. The company's optical mesh fiber network is one of the largest and most advanced on the continent, spanning approximately 25,000 miles (40,000 kilometers) and connecting 48 major cities in Canada and the United States. Videotron Telecom Ltd., owned by major shareholders Quebecor Media Inc., and US-based Carlyle Group, is a state-of-the-art business telecommunications provider delivering robust, high- quality services to large and medium-sized businesses - including Internet Service Providers, Application Service Providers and broadcasters - and to government institutions. VTL offers customers a complete portfolio of network solutions and Internet, local and long-distance telephony and studio-quality audio/video services. VTL's 10,000 km-plus fibre-optic network is accessible to over 80% of businesses in the metropolitan areas of Ontario and Quebec. VTL, established in 1989, employs more than 550 people. A NOVO BROADBAND: Files for Chapter 11 Protection in Delaware ------------------------------------------------------------- A Novo Broadband, Inc., (OTCBB:ANVB) has filed in Federal Bankruptcy Court in Delaware later for protection under Chapter 11 of the Bankruptcy Code. The Company repairs digital cable modems and TV set-top boxes on an industrial scale for equipment manufacturers and cable system operators, including Motorola and Comcast. Bill Kelly, the Company's chief executive officer, said the Company expects to continue to operate efficiently and without interruption under the protection of the Bankruptcy Court. He said the Company did not expect revenues to be materially affected by the filing. The filing was intended primarily to relieve liquidity pressure caused by the recent termination of the Company's bank line, which had been its primary source of working capital. The Company was in default under the bank line because of its failure to meet a financial covenant relating to tangible net worth. The default arose primarily because of losses and write-downs in the last quarter of its September 30 fiscal year. The Company has not yet reported its results for the quarter and the year. Kelly said that the filing would also enable the Company to extricate itself from certain unproductive contracts, which should sharply reduce monthly cash outflows. Kelly said, "Our business is sound and growing and producing cash. Our repair revenue has more than doubled in the past year, but we've suffered some growing pains and we're just now getting this growth under control. Unfortunately, in the meantime, we ran short of cash. That's primarily because we over expanded capacity in some areas and we wound up being burdened by expenses and obligations that don't relate to our ongoing business. Frankly, we need a little breathing space to straighten these things out." According to Kelly, the Company is optimistic that it will be able to obtain new financing that will allow it to emerge from Chapter 11 protection in the very near future. Kelly said the Company was already in discussions with its bank lender and prospective investors. A NOVO BROADBAND: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: A Novo Broadband, Inc. 196 Quigley Boulevard New Castle, Delaware 19720 aka Cable Link, Inc. aka Broadband, Inc. Bankruptcy Case No.: 02-13708 Type of Business: The Debtor is engaged primarily in the repair and servicing of broadband equipment for equipment manufacturers and operators of cable and other broadband systems in North America. Chapter 11 Petition Date: December 18, 2002 Court: District of Delaware Debtor's Counsel: Brendan Linehan Shannon, Esq. M. Blake Cleary, Esq. Young, Conaway, Stargatt & Taylor The Brandywine Bldg. 1000 West Street, 17th Floor PO Box 391 Wilmington, DE 19899-0391 Tel: 302 571-6600 Fax : 302-571-1253 Total Assets: $12,356,533 Total Debts: $10,577,977 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Worldwide Digital Trade Debt $473,857 PO Box 503970 St. Louis, MO 63150-3970 Tel: 1-800-227-0450 Fax: 1-518-382-8166 Fed Ex Freight Services $159,442 TRC Staffing Services Personnel $111,048 Kronish Lieb Weiner & Services $104,580 Hellman LLP GBQ Partners LLP Professional Services $81,145 Davis Personnel $73,412 Corporate Express Real Lease Obligation $70,372 Estate Dept. NEC Services $64,106 Synerfac Technical Staffing Personnel Services $60,106 Select Personnel Services Personnel Services $49,589 Delaware Temporary Systems Personnel Services $46,213 HP Cadwallader, Inc. Trade Debt $42,382 United Healthcare Medical Insurance $32,008 4speed Trade Debt $31,248 Avon Corrugated Trade Debt $23,051 Sterling High Quality Personnel Services $20,040 Services Pierre Brodeur Services $20,000 Worldwide Cable Trade Debt $18,430 Priority One Personnel Services $17,988 AT&T Telephone Services $16,237 AAMES FINANCIAL: Completes Exchange Offer for Junk-Rated Bonds -------------------------------------------------------------- Aames Financial Corporation (OTCBB: AMSF) announced that its offer to exchange its newly issued 5.5% Convertible Subordinated Debentures due 2012 for any and all of its outstanding 5.5% Convertible Subordinated Debentures due 2006 [rated Ca by Moody's] expired at 5:00 p.m., New York City time, on Friday, December 13, 2002. As of such time, the Company had exchanged approximately $49.6 million principal amount, or approximately 43.5%, of the outstanding Existing Debentures. The Company issued an equal amount of New Debentures in exchange for the tendered Existing Debentures. On December 23, 2002, the Company will redeem through a scheduled mandatory sinking fund payment 40.0% of the New Debentures then outstanding on a pro rata basis at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest to the date of redemption. The Company is a consumer finance company primarily engaged in the business of originating, selling and servicing home equity mortgage loans. Its principal market is borrowers whose financing needs are not being met by traditional mortgage lenders for a variety of reasons, including the need for specialized loan products or credit histories that may limit the borrowers' access to credit. The residential mortgage loans that the Company originates, which include fixed and adjustable rate loans, are generally used by borrowers to consolidate indebtedness or to finance other consumer needs and, to a lesser extent, to purchase homes. The Company originates loans through its retail and broker production channels. Its retail channel produces loans through its traditional retail branch network and through the Company's National Loan Centers, which produces loans primarily through affiliations with sites on the Internet. Its broker channel produces loans through its traditional regional broker office networks, and by sourcing loans through telemarketing and the Internet. At September 30, 2002, the Company operated 97 retail branches, 4 regional wholesale loan offices and 2 National Loan Centers throughout the United States. ADELPHIA COMMS: Seeks Further Lease Decision Period Extension ------------------------------------------------------------- Shelley C. Chapman, Esq., at Willkie Farr & Gallagher, in New York, reminds the Court that as of the Petition Date, Adelphia Communications and its debtor-affiliates are parties to over 1,000 leases of non-residential real property. The Unexpired Leases govern property used by the ACOM Debtors in the operation of their businesses and include leases for office space, warehouses, payment centers, earth stations, head-ends, tower sites and fiber hub sites. The Unexpired Leases may be valuable assets of the ACOM Debtors' estates and may be integral to the continued operation of their businesses. Since the Petition Date, Ms. Chapman relates that the ACOM Debtors have begun the process of analyzing their Unexpired Leases and determining which of them are critical to their operations and which are not necessary to their future business needs. During the coming months, the ACOM Debtors will continue to analyze their need for premises covered by the Unexpired Leases. The ACOM Debtors' ability to complete this task, however, requires an extension of time, which will enable them to evaluate the need for these locations in the context of a business plan, which has yet to be developed. Thus far in these cases, the Debtors have primarily focused their efforts and energies on: -- securing postpetition financing; and -- stabilizing their operations so they may pursue a successful reorganization. Ms. Chapman believes that requiring the Debtors to make significant business decisions as to which of the Unexpired Leases will be needed for their reorganization effort at this time would be impractical and contrary to their interests. The Debtors should not be forced to choose between losing valuable locations and assuming leases that ultimately should be rejected. Accordingly, the Debtors require an extension to avoid what would be a premature assumption or rejection of the Unexpired Leases. By this motion, the ACOM Debtors ask the Court to further extend their time to assume or reject all unexpired leases of non- residential real property from December 26, 2002 until June 26, 2003. Ms. Chapman insists that an extension would not prejudice the Lessors under the Unexpired Leases because: -- to the best of their knowledge, the Debtors are substantially current on their postpetition rent obligations under the Unexpired Leases; -- the Debtors intend to continue to perform timely all of their obligations under the Unexpired Leases as required by Section 365(d)(3) of the Bankruptcy Code; and -- in all instances, individual Lessors may, for cause shown, ask the Court to fix an earlier date by which the Debtors must assume or reject an Unexpired Lease. (Adelphia Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) AIR CANADA: S&P Downgrades Ratings over Reduced Asset Protection ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its senior unsecured debt ratings for Air Canada (B+/Negative), and for AMR Corp. (BB-/Negative) and unit American Airlines Inc. (BB-/Negative), but affirmed other ratings for those entities. Senior unsecured debt ratings of AMR and American Airlines were lowered to 'B' from 'B+'; a preliminary senior unsecured shelf registration was lowered to 'B' from 'B+'. In addition, senior unsecured debt ratings of Air Canada were lowered to 'B-' from 'B'. "The rating actions reflect reduced asset protection for unsecured creditors as secured debt and leases increase as a proportion of the capital structure and heavy losses erode equity," said Standard & Poor's credit analyst Philip Baggaley. "The rating changes do not indicate a changed estimate of default risk, but rather poorer prospects for recovery on senior unsecured obligations if the affected airlines were to become insolvent," Mr. Baggaley continued. Accordingly, no corporate credit ratings or other types of debt are affected; airport revenue bonds, though often senior unsecured debt in a legal sense, are related to a specific airport facility that has value in a bankruptcy reorganization and usually has a somewhat better prospect of continued payment or better recovery, and ratings of such bonds are not affected. Senior unsecured debt of Air Canada and AMR were lowered to one notch below those companies' corporate credit ratings on Oct. 29, 2001, as part of a general industry review, and the current rating action widens that disparity to two notches, as is already true for most large North American airlines. Standard & Poor's criteria for rating unsecured debt provide that such obligations be rated lower than the corporate credit rating where secured debt and leases exceed threshold levels as a proportion of total owned and leased assets (see note below for more information). The criteria recognize that certain industries, because of the ease of financing their revenue assets, can carry higher proportions of secured debt and leases and the criteria accordingly allow for higher thresholds before notching down of senior unsecured debt is warranted due to reduced asset protection for those creditors. Standard & Poor's has not defined specific, separate thresholds for airlines, but examines asset protection based on their individual characteristics and relative to industry norms and standard notching criteria. Speculative-grade companies can have their senior unsecured debt rated one or two notches below the corporate credit rating, depending on the proportion of secured debt and leases, while investment-grade companies can have their senior unsecured debt rated at most one notch below the corporate credit rating. However, the losses incurred by Air Canada and AMR over the past year, their reliance on secured debt and leases to maintain liquidity, and expected further operating losses and charges for pension underfunding (in the case of AMR) have eroded asset protection available to unsecured creditors. Air Canada's secured debt and leases as a proportion of total owned and leased assets (excluding certain intangible assets) is estimated at about 54%, and AMR's like ratio about 51%. AMR's proportion of secured debt and leases is expected to trend higher in coming quarters. Air Canada's 10.25% bonds due 2011 (AIRC11CAN1) are trading at about 65 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AIRC11CAN1 for real-time bond pricing. AMERICAN SKIING: Appoints Betsy Wallace Chief Financial Officer --------------------------------------------------------------- American Skiing Company (OTC: AESK) has appointed Betsy Wallace to the position of Senior Vice President and Chief Financial Officer. The Company further reported that Mark J. Miller has been named Executive Vice President and Chief Operating Officer, filling a position that was open. Both appointments are expected to become effective on January 13, 2003. "Betsy is an excellent addition to our senior management team," said CEO B.J. Fair. "She brings more than 20 years of accounting, tax and corporate finance experience as well as a proven ability to plan and execute complex financial transactions. Betsy possesses not only the necessary financial skills to complete the financial turn-around we implemented last year, but also the leadership skills necessary to deliver improved financial performance going forward." In a simultaneous strategic move, Mark J. Miller will leverage his extensive experience in the leisure industry and assume the COO position. B.J. Fair, who was named President and CEO of the Company in March 2001, previously held the COO position. Mr. Miller has served as Chief Financial Officer since joining the Company in December 1998. "Mark has done an exceptional job of navigating the Company through a number of significant challenges," continued Fair. "He brings over 17 years of experience in the leisure and entertainment industries to the COO position as well as a proven track record of strategic development and planning. I am confident that Mark has an optimal set of skills to further improve our resort operating performance and execute on our growth strategy." Prior to joining American Skiing Company, Ms. Wallace served as Chief Financial Officer of Cyrano Sciences, Inc., a late stage start-up technology company, where she was responsible for all financial, budgeting and legal aspects of the of the organization. From 1998 to 2000, Ms. Wallace worked for Citigroup, a leading international provider of financial services, and held the positions of Vice President, Director of Business Development and Vice President, Regional Financial Controller Investment Products & Distribution for the bank's Asia regional consumer bank business based in Singapore. From 1995 to 1998, Ms. Wallace held senior financial positions while in Singapore with Hubbell, Inc., a large U.S. based manufacturing company, and International Business Machines. Prior to joining IBM, Ms. Wallace served as Director of Finance for Esprit de Corporation, an international design and distribution clothing company, from 1988 to 1995. From 1979 to 1988, Ms. Wallace worked in public accounting starting her career with Touche Ross in Los Angeles. Ms. Wallace holds a Bachelor of Science Degree in Accounting from the University of Southern California and a Bachelor of Arts Degree in Psychology from the University of California, Los Angeles. She is married and will relocate from Los Angeles to Park City, Utah to assume her position with American Skiing Company. Prior to joining American Skiing Company, Mr. Miller served as Executive Vice President of Financial Administration with Showboat, a Nevada based gaming and hotel company, overseeing the company's financial operations during the transition period preceding its acquisition by Harrah's, Inc. From 1994 to 1997, he served as Executive Vice President of Operations overseeing resort and gaming operations in the United States and Australia. Prior to joining the executive division of the company, Mr. Miller was a senior manager at the Company's largest subsidiary, the Atlantic City Showboat, from 1985 until 1994 starting as Controller, becoming Vice President of Finance and Chief Financial Officer, Executive Vice President and Chief Operating Officer, and ultimately President and Chief Executive Officer. Mr. Miller has also held positions at Citibank and KPMG Main Hurdman, both in Las Vegas. Mr. Miller holds a Bachelor of Science and Masters Degree of Accountancy, both from Brigham Young University. He is married with four children. 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 at http://www.peaks.com As reported in Troubled Company Reporter's November 29, 2002 edition, American Skiing Company's primary real estate development subsidiary, American Skiing Company Resort Properties, Inc., has entered into an agreement with Fleet National Bank and the other lenders under its $63 million senior secured credit facility for a 30 day forbearance from the exercise of lenders' remedies. As previously reported, ASCRP has been in payment default under its senior secured credit facility since May 2002. Under the agreement, Fleet and the other lenders have agreed not to pursue any additional foreclosure remedies, and to cease publication of foreclosure notices, during a 30 day forbearance period commencing on November 22, 2002. ANC RENTAL: Court Okays Site Consulting as Florida Broker --------------------------------------------------------- ANC Rental Corporation, and its debtor-affiliates obtained permission from the Court to employ Site Consulting Corp. as their real estate broker -- nunc pro tunc to April 1, 2002 -- to assist them in marketing and selling their property at 13281 Treeline Avenue in Fort Myers, Florida. Site Consulting will receive a 3% commission of the sale price if it is the only broker. But if it has a cooperating broker, it will share a 6% commission on a 50/50 basis. (ANC Rental Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) ASSOCIATED ESTATES: Will Pay Quarterly Share Dividend on Feb. 1 --------------------------------------------------------------- Associated Estates Realty Corporation (NYSE: AEC) has declared a quarterly dividend of $0.17 per share on the Company's common shares, payable on February 1, 2003 to shareholders of record on January 15, 2003. The dividend reflects an adjustment from the current $0.25 per share quarterly amount. The Company had previously announced that the dividend level for 2003 would be reviewed in conjunction with its annual budget and planning process. Based on the current stock price, the $0.68 per share annualized dividend represents a yield of approximately 9 percent. "I am disappointed in our performance, which has necessitated this dividend reduction," said Jeffrey I. Friedman, President and CEO. Friedman said he plans to hire a leading real estate industry consulting firm to conduct an organizational evaluation and best practices study over the next few months. "My goal is to determine the best way to reengineer the Company so that we will be in a position to make a significant positive impact on our bottom line," said Friedman. Friedman also said the Company does not plan to implement salary and wage increases at this time, and all discretionary expenditures, such as travel for industry conferences and dues and subscriptions, for example, will be evaluated to determine whether they can be eliminated or deferred. Friedman added that based on the current outlook for apartments in the markets where the Company owns properties, he expects funds from operations for 2003 to exceed the First Call analysts' consensus estimate of $1.00 per share. The Company also announced that the Board of Directors has created a Nominating and Corporate Governance Committee and is addressing the proposed changes currently being considered by the New York Stock Exchange and Securities and Exchange Commission. As reported in Troubled Company Reporter's November 8, 2002 edition, Standard & Poor's revised its outlook on Associated Estates Realty Corp., to negative from stable. In addition, Standard & Poor's affirmed its double-'B'-minus corporate credit rating and its single-'B'-minus rating on the company's preferred stock. The outlook revision follows continued weak portfolio performance, high leverage, and weakening coverage measures. The company's current ratings acknowledge a very manageable near- term debt maturity schedule and largely fixed-rate capital structure. AVADO BRANDS: S&P Drops Corporate Credit Rating to Default Level ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on casual dining restaurant operator Avado Brands Inc., to 'D' from 'CC'. At the same time, Standard & Poor's lowered its ratings on the company's $116.5 million 9.75% senior unsecured notes due in 2006 and the $47.6 million 11.75% subordinated notes to 'D' from 'CC'. The company had $200 million of funded debt as of September 29, 2002. The downgrades are the result of the company's failure to remit the interest payment on the notes on Dec. 1, 2002 and Dec. 15, 2002, respectively. As of Sept. 29, 2002, the company was not in compliance with certain EBITDA requirements contained in its credit facility and master equipment lease. Under the terms of the credit facility, the company is not permitted to make interest payments on its bonds while it is in violation of financial covenants. BAYOU STEEL: Fails to Make Interest Payment on 9-1/2% Sr. Notes --------------------------------------------------------------- Bayou Steel Corporation (AMEX:BYX) did not make its interest payment on its 9-1/2% Senior Notes on December 16, 2002. On November 15, 2002, as previously reported, the Company elected, in order to preserve liquidity, to take advantage of a grace period allowed under its indenture regarding this interest payment. This grace period elapsed on December 16, 2002. "The Company decided not to make this scheduled interest payment in order to preserve our liquidity under our line of credit and to ensure sufficient funding for on-going operations in a period which is typically the slowest in the year at Bayou Steel's mills," said Jerry Pitts, Bayou's President. "The Company intends to continue business as usual with our customers and trade suppliers during the course of our coming discussions with our noteholders. The Company is addressing its liquidity by employing commercial and operating strategies consistent with cash conservation and improved customer service." The Company has retained the investment bank of Gordian Group, L.P., to assist it in evaluating its strategic alternatives, including a restructuring transaction. Preliminary discussions with a committee consisting of holders of in excess of 75% of the aggregate principal amount outstanding under the 9 1/2% Senior Notes have been initiated. The Company intends to pursue a consensual restructuring of its obligations through negotiations with this committee. BROADWING INC: Receives Conditional $200MM Financing Commitment --------------------------------------------------------------- Broadwing Inc.'s (B-/Watch Neg/--) recent signing of a commitment agreement in which a financial institution has conditionally agreed to provide the company with $200 million in financing in the form of senior subordinated discount notes due 2009 has no impact on the ratings and CreditWatch status of Broadwing and its subsidiaries. The commitment of financing is contingent upon Broadwing successfully renegotiating its current bank credit facility and the satisfaction of various closing conditions. At the end of September 2002, the company had about $2.5 billion of total debt, which includes about $1.7 billion of bank debt. The moderate commitment of financing does not significantly address three challenges that Broadwing faces. First, without obtaining a material extension of the bank amortization schedule and favorable amendments to maintenance covenants through its current bank negotiation process, Broadwing faces substantially increased risk of having a liquidity issue in 2003. Second, challenges that are causing its long-haul data business, Broadwing Communications Inc., to negatively affect consolidated free cash flows are likely to persist for some time. Broadwing Communications faces industry overcapacity and is exposed to a number of customers with risky financial profiles. Third, even assuming that Broadwing Communications is divested or successfully restructured, Broadwing may not be able to materially reduce its debt level for several years given the relatively small size of free cash flows generated by its healthy local incumbent and wireless businesses. BURLINGTON INDUSTRIES: Hires Ivins Phillips as Special Counsel -------------------------------------------------------------- Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, points out that the Court previously entered an Order Authorizing Burlington Industries, Inc., and its debtor-affiliates to Retain, Employ and Pay Certain Professionals in the Ordinary Course of Their Business. Pursuant to the Ordinary Course Professionals Order, Ivins, Phillips & Barker filed its affidavit on April 25, 2002, and has been providing the Debtors with tax and employee benefits legal services. For the four-month period from April 1, 2002, through July 31, 2002, IP&B was paid $215,492. As such, IP&B's average monthly fees on a four-month basis exceeded the $50,000 Monthly Fee Cap imposed by the Ordinary Course Professionals Order. Consequently, in accordance with the Ordinary Course Professionals Order, the Debtors seek the Court's authority to employ Ivins, Phillips & Barker as special tax and employee benefits counsel in these Chapter 11 cases pursuant to Sections 101 and 1330 of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure, nunc pro tunc to November 15, 2001. Founded in 1936, IP&B is a law firm of 33 lawyers, all of whom practice exclusively in areas relating to federal taxes and employee benefits law. According to Mr. DeFranceschi, IP&B is particularly well suited to serve as the Debtors' special tax and employee benefits counsel in these bankruptcy cases because: (a) Since its inception, IP&B has been engaged exclusively in a broad practice of law with particular emphasis on: -- tax issues relating to corporate acquisitions, reorganizations, accounting and finance; -- international tax issues; -- estate and gift tax issues, including closely held business tax planning, tax planning for exempt organizations and individual tax planning; and -- the handling of controversies and litigation related to these and other areas of law; (b) IP&B represent one-third of the Fortune 100 in federal tax and employee benefit matters in varying degrees; (c) IP&B is intimately familiar with the Debtors' business and related tax and employee benefit issues and needs, having provided tax and employee benefits services to the Debtors for over 50 years; and (d) IP&B has developed relevant experience and expertise regarding the Debtors that will assist them in providing effective and cost-efficient services on a going-forward basis. Accordingly, IP&B will continue to render legal services to the Debtors as needed throughout the course of these Chapter 11 cases with respect to certain Tax Matters, which include: (a) advising the Debtors on the tax implication of these Chapter 11 cases; (b) responding to issues raised by the Internal Revenue Service in connection with the audit of the Debtors' tax return for 1995 to 1997; (c) advising the Debtors concerning the taxation of split dollar life insurance; (d) advising the Debtors regarding a refund claim involving social security taxes paid with respect to certain post- employment benefits; and (e) providing general assistance and advice with respect to ongoing Tax Matters, as requested by the Debtors. "Because of the importance of tax matters to their business, the Debtors require knowledgeable counsel to render these essential professional services," Mr. DeFranceschi explains. In exchange, IP&B intends to: -- charge for its services on an hourly basis in accordance with its ordinary and customary billing hourly rates: Current Professional Position Hourly Rate ------------ -------- ----------- H. Stewart Dunn, Jr. Partner $600 Carol K. Nickel Partner 600 Alan W. Granwell Partner 600 Robert H. Wellen Partner 600 Kevin O. O'Brien Partner 600 Robert G. Lorndale, Jr. Associate 300 David D. Sherwood Associate 275 Amy D. Healy Associate 200 Shad C. Fagerland Associate 175 Danielle Rolfes Associate 150 -- seek reimbursement of actual and necessary out-of-pocket expenses. Mr. DeFranceschi assures that Court that IP&B will maintain detailed, contemporaneous records of time and any actual and necessary expenses incurred in rendering the services. Furthermore, all of IP&B's fees and expenses in these cases will be subject to Court approval on proper application by IP&B in accordance with Sections 330 and 331 of the Bankruptcy Code, Rule 2016 of the Federal Rules of Bankruptcy Procedure, Rule 2016-2 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware, the fee and expense guidelines established by the U.S. Trustee and any other applicable requirements. Kevin P. O'Brien, Esq., a member of Ivins, Phillips & Barker, discloses that the Debtors made payments to IP&B aggregating $91,352 during the year immediately preceding the Petition Date on account of fees and expenses incurred in connection with Tax Matters. Mr. O'Brien assures the Court that IP&B has no conflict of interest with the Debtors. IP&B has no connection with the Debtors, their creditors, the U.S. Trustee or any other party with an actual or potential interest in these bankruptcy cases or their attorneys or accountants. (Burlington Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) Burlington Industries' 7.25% bonds due 2005 (BRLG05USR1), DebtTraders says, are trading at 31 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BRLG05USR1 for real-time bond pricing. CALL-NET ENTERPRISES: S&P Ratchets Ratings Down a Notch to B ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit and senior secured debt ratings on Call-Net Enterprises Inc., to 'B' from 'B+'. The outlook on the Toronto, Ontario-based telecommunications operator is now stable. "The downgrade reflects continuing competitive pressures in both the long-distance and data-service markets in general, resulting in lower gross margins and cash flows from operations as compared to 2001," said Standard & Poor's credit analyst Joe Morin. "Current available sources of liquidity are only sufficient to allow for marginal growth for the company." The ratings actions also take into account cost savings from the second-quarter implementation of workforce reductions, curtailment of the company's network expansion program, and the debt buyback by the company in September 2002. The current outlook revision reflects Standard & Poor's view that the company the company should attain its stated objective of cash flow breakeven in 2003. The outlook also incorporates a capital-constrained business plan, as the company slow rolls its expansion in local voice and data services. Growth in 2003 also will be constrained by a weak long-distance and data-service market, offset, in part, by a more positive outlook for local telephony. There are no near-term debt maturities or risk of breach of covenants under the senior secured notes, allowing for some future flexibility. Call-Net, through its wholly owned subsidiary, Sprint Canada Inc., is Canada's second-largest nationwide (competitive local exchange carrier) CLEC, and offers long-distance, data, and local services to both business and residential subscribers. Call-Net executed a comprehensive restructuring plan, concluded on April 10, 2002, which saw the company reduce its debt level to US$377 million (or about C$611 million) from C$2.6 billion. The restructuring was completed outside of court protection and was the first and, to date, only successful restructuring of a national CLEC in Canada. CBR BREWING: External Accountants Express Going Concern Doubt ------------------------------------------------------------- CBR Brewing Company, Inc., formerly Natural Fuels, Inc. and National Sweepstakes, Inc., was originally incorporated as Video Promotions, Inc., on April 20, 1988 under the laws of the State of Florida. At December 31, 2001, the Company's then principal shareholder was Shenzhen Huaqiang Holdings Limited, incorporated in the People's Republic of China, which owned indirectly 63.2% of the outstanding Class A common stock and 80% of the outstanding Class B common stock. Huaqiang is a company controlled by the Province of Guangdong. Effective January 10, 2002, Zhaoqing City Lan Wei Alcoholic Beverage Limited acquired from Huaqiang all of its equity interest in the Company. The transaction has been approved by the relevant PRC governmental authorities in April 2002. Lan Wei is a company controlled by the City of Zhaoqing. In February 2002, Lan Wei acquired common shares representing an additional approximately 7.2% equity interest in the Company from a third party in a private transaction. Management and the Board of Directors of the Company were changed on January 22, 2002. As part of the transaction, Lan Wei also acquired Huaqiang's 19.6% equity interest in Noble China Inc., a Canadian public company. Substantially all of the beer currently sold by the Company is marketed under the Pabst Blue Ribbon label, and is brewed under a sublicense agreement with Guangdong Blue Ribbon Group Co., Ltd., which, through an assignment and transfer, obtained its license from Pabst Brewing Company. The term of this sub- license will expire on November 7, 2003. The Company has suffered recurring operating losses and had a working capital deficit at December 31, 2001 and September 30, 2002. The Company's independent certified public accountants, in their independent auditors' report on the consolidated financial statements as of and for the year ended December 31, 2001, have expressed substantial doubt about the Company's ability to continue as a going concern. During 2001, the Company experienced decreased sales and a net loss for the second successive year, reduced cash flows, diminished working capital, and intense competition. These pressures continued during the three months and nine months ended September 30, 2002, and are expected to continue for the remainder of 2002 and into 2003, resulting in continuing net losses. The Company has implemented an overhaul of its operations and marketing programs through the efforts of the management committee. With the pooling of the resources of Zhaoqing Brewery, Noble Brewery and the Marketing Company, the Company implemented a large scale restructuring plan in 2001 in which almost one-third of the work force was eliminated. Although effective control of the Company changed on January 22, 2002 and a new management team was appointed to operate the Company in 2002, the Company anticipates that the consolidation plan will continue. However, there can be no assurances that the Company will be able to re-establish sales volume growth and return to profitability in the near term. Should the Company not return to profitability and the operating losses continue into the near future, the Company may consider more severe restructuring alternatives. The Company anticipates that its operating cash flow, combined with cash on hand, bank lines of credit, and other external credit sources, and the credit facilities provided by affiliates or related parties, are adequate to satisfy the Company's working capital requirements in the near term. However, due to declining sales and diminishing working capital resources during 2002, the Company has revised its capital expenditures program. Approximately 25% of the 2002 annual repair and maintenance budget scheduled for Zhaoqing Brewery and Noble Brewery has been deferred until 2003. If the foregoing assumptions prove to be inaccurate, the Company's cash flow may be adversely affected, which would negatively impact the ability of the Company to conduct operations at current levels and continue as a going concern. The Company is a holding company and its principal subsidiaries are engaged in the production and sale of beer in the Peoples Republic of China. The Company's wholly-owned subsidiary, High Worth Holdings Limited, is a holding company that was formed to effect the acquisition of a 60% interest in Zhaoqing Blue Ribbon High Worth Brewery Ltd. High Worth JV is a Sino-foreign equity joint venture enterprise that was registered in the PRC on July 2, 1994 in which Guangdong Blue Ribbon, an unrelated joint stock limited company incorporated in the PRC, and Holdings hold 40% and 60% interests, respectively. CCC GLOBALCOM: Auditors Doubt Ability to Continue Operations ------------------------------------------------------------ CCC GlobalCom Corporation, a Nevada corporation, was named Emerald Capital Investments, Inc., prior to June 12, 2000. On June 9, 2000, the Company commenced operations in the telecommunications industry though the acquisition of CCC GlobalCom, Corp., a Texas corporation. CCC Texas was formed in 1999 and conducted no operations except for the acquisition of Ciera Network Systems, Inc., in June 2000. The Company's acquisition of CCC Texas, and as a result of such acquisition, the acquisition of Ciera, was accounted for as a reverse merger. Accordingly, for accounting purposes, Ciera is deemed to be the survivor of the CCC Texas/Ciera merger. Substantially all of the Company's operations are conducted by Ciera. As a result the Company's consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Ciera Network Systems, Inc., and CCCGlobaltel de Colombia, SA. Globaltel was organized under the laws of Colombia, to operate franchise stores and calling centers for people who do not have personal telephone service. The Company owns approximately 95 percent of the outstanding common stock of Globaltel. Globaltel's revenues for the first nine months of 2002 were $343,582 and its net income was $16,379. It has a working capital deficit of $12,509 as of September 30, 2002. The Company has had operating losses for every quarter since it began operations in June 2000. The auditor's opinion on the consolidated financial statements as of December 31, 2001, calls attention to substantial doubt about its ability to continue as a going concern. This means that they question whether the Company can continue in business. The Company is experiencing difficulty in paying its vendors, carriers and lenders on time, and it may continue to experience this difficulty in the future. If the Company is unable to pay its vendors, carriers and lenders on time, they may stop providing critical services or repossess critical equipment that the Company needs to stay in business. The Company has received disconnection notices for past due balances from significant carriers. It is Globalcom's belief that certain amounts included in these past due balances are in error and are being disputed. As of September 30, 2002, the Company had disputed $1,012,000 with various carriers. The Company is also in discussions with the carriers regarding extended payment terms for the undisputed balances and believes that ultimately these discussions will result in lower monthly charges for CCC GlobalCom. However, there can be no assurances that it can successfully dispute the balance identified as in error or negotiate favorable payment terms for the remaining undisputed balances. In September 2002, MCI disconnected service to Ciera. The Company had become delinquent on its payments and was unable to make satisfactory payment arrangements with the carrier. MCI represented approximately 24% of the Company's long distance service. Where possible, the Company was able to move the existing business to other carriers. The Company has incurred losses since inception and has a working capital deficit as of September 30, 2002. Additionally, in the past the Company has had negative cash flows from operations. For reasons stated by the Company regarding its liquidity and capital resources and subject to the risks inherent in the business, there is no assurance that CCC Globalcom can raise the money necessary to fund future operations. CELL ROBOTICS: Needs to Turn a Profit to Continue Operations ------------------------------------------------------------ Since inception, Cell Robotics International Inc., has incurred operating losses and other equity charges which have resulted in an accumulated deficit of $27,617,309 at September 30, 2002, and operations using net cash of $981,882 in the nine-month period ended September 30, 2002. The Company's ability to improve cash flow and ultimately achieve profitability will depend on its ability to significantly increase sales. Accordingly, the Company is manufacturing and marketing a sophisticated laser-based medical device that leverages the Company's existing base of patented technology. The Company believes the markets for this product are broader than that of the scientific research instruments market and, as such, offer a greater opportunity to significantly increase sales. In addition, the Company is pursuing development and marketing partners for some of its new medical products. The Company believes these partnerships will enhance the Company's ability to rapidly ramp-up its marketing and distribution strategy, and possibly offset the products' development costs. Although the Company is manufacturing and marketing its sophisticated laser-based medical device and continues to market its scientific research instrument line, it does not anticipate achieving profitable operations in the foreseeable future. As a result, the Company expects its accumulated deficit to increase in the near future. There is substantial doubt that the Company will be able to continue as a going concern. The ultimate continuation of the Company is dependent on attaining additional financing and profitable operations. Since inception, to provide working capital for product development and marketing activities, Cell Robotics has relied principally upon the proceeds of both debt and equity financings and, to a lesser extent, the proceeds of Small Business Innovative Research grants. Research and development grants accounted for revenues of $137,597 in 2001. No research and development grant revenue was received in the first nine months of 2002. The Company has not been able to generate sufficient cash from operations and, as a consequence, it must seek additional financing to fund ongoing operations. Management anticipates that existing current working capital and expected cash flow from operating activities will only be sufficient to allow Cell Robotics to meet operational obligations through December 12, 2002, assuming the repayment of the remaining amounts outstanding under its January 2001 loan agreement are not demanded before that date. As of September 30, 2002, net working capital was a deficit $1,635,077 and total cash and cash equivalents was less than $4,000. Additionally, it is expected that the Company will experience operating losses and negative cash flow for the foreseeable future. Therefore, it does not have sufficient cash to sustain those operating losses without additional financing. It presently needs financing to repay current indebtedness, including payment of notes in the aggregate principal amount of approximately $87,000 that are currently due and payment of borrowed indebtedness in the principal amount of $27,000 that was due on November 30, 2002. In addition to debt service requirements, the Company will require cash to fund its operations. Based on current operations, Cell Robotics estimates that its cash needs will be approximately $150,000 each month for the foreseeable future and will be a total of approximately $1,200,000 through June 30, 2003. Its operating requirements depend upon several factors, including the rate of market acceptance of its products, particularly the Lasette, its level of expenditures for manufacturing, marketing and selling its products, costs associated with staffing and other factors. If operating requirements vary materially from those currently planned, the Company may require more financing than currently anticipated. Although the Company has had discussions with potential investors, it has not been able to obtain financing on acceptable terms as of the date of it last financial report. The Company intends to continue to seek to raise equity or debt financing. However, no assurance can be given that it will be able to obtain additional financing on favorable terms, if at all. Borrowing money may involve pledging some or all of the Company's assets. Raising additional funds by issuing common stock or other types of equity securities would further dilute its existing shareholders. If it cannot obtain additional financing in a timely manner, it will not be able to continue operations. In addition, Cell Robotics has received a report from its independent auditors covering the Company's fiscal years ended December 31, 2001 and 2000 financial statements. The report contains an explanatory paragraph that states that Cell Robotics recurring losses and negative cash flows from operations raise substantial doubt about its ability to continue as a going concern. To date, the Company has generated only limited revenues from the sale of its products and has been unable to profitably market its products. The Company incurred net losses applicable to common shareholders of $1,524,232 and $1,989,762 for the nine-month periods ended September 30, 2002 and 2001, respectively, and net losses of $2,723,844 and $5,036,182 in 2001 and 2000, respectively. Revenues from the sale of its products were $976,330 and $1,007,453 for the nine-month periods ended September 30, 2002 and 2001, respectively, and were $1,461,447 and $992,710 for the years ended December 31, 2001 and 2000, respectively. As mentioned above, Cell Robotics expects to experience operating losses and negative cash flow for the foreseeable future. It does not have sufficient cash to sustain continuing operating losses without additional financing. Even if able to obtain additional financing to allow it to continue operations and repay indebtedness, it will still need to generate significant revenues and improve gross margins to fund anticipated manufacturing and marketing costs and to achieve and maintain profitability. The Company cannot assure that it will ever generate sufficient revenues to achieve profitability, which will have a negative impact on the price of its common stock. If it does achieve profitability, the Company cannot assure that it will be able to sustain or increase profitability in the future. CHILDTIME LEARNING: Elects Benjamin Jacobson as New Board Chair --------------------------------------------------------------- Childtime Learning Centers, Inc., (Nasdaq: CTIME) announced that its Board of Directors has elected Benjamin Jacobson as the Chairman of the Board of Directors of the Company. Mr. Jacobson has been a member of the Company's Board of Directors since 1996. Mr. Jacobson is the managing general partner of Jacobson Partners, a New York City based investment- banking partnership. Jacobson Partners has been providing management and financial consulting services to the Company since June 2000 and, through related parties, is a major holder of the Company's common stock. Mr. Jacobson also serves as a board member for several privately held companies. James Morgan will step down as the Company's Chairman but remain an integral member of the Company's Board of Directors. "I wish to thank Jim for his time and effort spent with the Company as Chairman. I value his insight and am privileged to have his continued presence on our Board. I am excited about the direction our Company is headed and am focused on overseeing management deliver a successful Tutor Time integration and continued operational improvements, providing value for both our parents and shareholders alike," Jacobson commented. Childtime Learning Centers, Inc., of Farmington Hills, MI acquired Tutor Time Learning Systems, Inc., on July 19, 2002 and is now the nation's third largest publicly traded child care provider with operations in 30 states, the District of Columbia and internationally. Childtime Learning Centers, Inc., has over 7,500 employees and provides education and care for over 50,000 children daily in over 450 corporate and franchise centers nationwide. Childtime Learning's total working capital deficit as of July 19, 2002, tops $16.5 million. CHRISTIANA CARE: A.M. Best Assigns B++ Financial Strength Rating ---------------------------------------------------------------- A.M. Best Co., has assigned an initial financial strength rating of B++ to Christiana Care Health Plans, Inc., (Wilmington, DE). The rating outlook is stable. The rating reflects Christiana Care's strategic role as the managed care affiliate of Christiana Care Corporation, a not- for-profit integrated health care delivery system. The rating also reflects an improved profitability at two divisions, First State Health Plans (Medicaid) and Mid-Atlantic Health Plans (Commercial). These divisions provide a strong working capital position and ample statutory surplus to support expansion. Partially offsetting these strengths is the limited service area, reliance on government plans and a competitive commercial marketplace. Established in 1994 to provide manage care products, Christiana Care with 121,000 members has become Delaware's second largest health insurer and the sole Medicaid underwriter for the Diamond State Health Plan. The health maintenance organization enrollment is augmented with ASO, POS and PPO commercial plan offerings. Premium increases are consistently driven by Medicaid and ASO with fully insured commercial premiums added over the past three years. The underwriting gain has benefited from a lower medical loss ratio of 85.1% and an administrative expense ratio of 8.9%, while the investment income remains stable as the asset allocation is primarily fixed income securities. Administrative expense has been held low by the application technology platforms and outsourcing of processing functions. Cash from operations supports a stronger working capital position with the current ratio at 221.1% and the overall liquidity ratio at 252.9%. In the past three years, capital contributions from the parent have lowered balance sheet leverage and increased equity reserve. Comparatively, premiums to capital of 3.7 times, months reserve of 3.5 times and equity per member per month of $51.58 are better than the median for small-managed care companies. The NAIC risk-based capital is above 500% of the authorized control level. Excess capital provides adequate cushion against risks inherent to the business strategy as Christiana Care is the sole Medicaid underwriter in Delaware. After several years of loss, the Title XIX Medicaid business turned profitable in 2001. In 2002, Medicaid membership was expanded significantly with the addition of 46,000 members from a competitor. Provider network advantages include; 745 primary care physicians, 1,393 specialty care physicians and 14 hospitals, which supports growth in the commercial HMO where Christiana Care offers a choice of plans for small and large groups. Finally, the service area is confined to New Castle, Kent and Sussex Counties in Delaware with ancillary services across state lines. As a small local plan, Christiana Care faces strong competition from established companies such as CareFirst, Coventry Health, Aetna U.S. HealthCare and Cigna HealthCare in marketing commercial plans, especially to large groups. A.M. Best believes it is important for Christiana Care to develop new commercial plan designs in order to achieve higher market share. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com COMMUNICATION DYNAMICS: Taps Hilco to Liquidate Amherst Assets -------------------------------------------------------------- Communication Dynamics, Inc., and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the District of Delaware to employ and retain Hilco Industrial, LLC as Liquidator of certain assets of Amherst Entities. Amherst is in the principal business of selling "fusion splicers" for use in the fiber optic cable manufacturing environment. The Debtors have determined that Amherst has no going concern value and that the only value which can be derived is through the sale of the Amherst Assets (other than Amherst Goodwill). In its capacity, Hilco will: a) develop an advertising and marketing plan for the auction of the Assets; b) implement the advertising and marketing plan, including advertising the auction of the Assets through print media, implementing a facsimile, e-mail or direct telephone marketing campaign to reach a specific target group of prospective buyers, and printing lot catalogs which will be available vie the Internet for downloading; c) provide adequate information to prospective out-of-town buyers regarding travel time and travel information (including hotel, motel, car rental and airline information); d) assign a sale site coordinator from Hilco to oversee auction sale routing, sorting and grouping of all sale items into suitable sized lots, the creation of a buyer's lot catalog, public inspection, calling of the lots during the auction and supervising the delivery of all sold items after completion of the auction; e) prepare the sale of the Assets, including gathering specifications and photographs for pictorial brochures and arranging the Assets in a manner, which in Hilco's judgment, would be designed to enhance the net recovery on the Assets; f) prior to the start of the auction sale, conduct a one-day preview and inspection for the benefit of potential purchasers of the Assets and make the Assets available for viewing by potential buyers on an appointment-only basis; g) provide a fully qualified, experienced and licensed auctioneer who will auction the lots for cash to the highest bidder "as is," and in accordance with the terms of the Asset Marketing Agreement; h) provide an absentee bid process on Hilco's Website to enable bidders who do not want to travel to the auction with a method of bidding, provided all absentee bids are first secured by a deposit before processing; i) make available to all buyers any drawing, mechanical specs or any other information Hilco may have in its possession at the time of the auction; j) contact local riggers to be available to assist buyers in the orderly removal of Assets from the Facilities in accordance with removal guidelines to be specified by the Debtors; k) charge and collect from all purchasers any purchase price together with all applicable taxes in connection therewith; l) collect a minimum deposit of 25% from each buyer at the time of purchase and bar the removal of any purchased Asset from the Facilities prior to Hilco's receipt of the full balance of the purchase price; m) provide a complete auction crew to handle computerized accounting functions necessary to provide auction buyers with invoices and the Debtors with a complete accounting of all items sold at the auction; n) deposit all auction proceeds into a separate client account utilizing the Debtors or its affiliates only; and o) submit a complete auction report to the Debtor within three weeks after the collection of funds from the auction. The Debtors will pay Hilco a 7.5% commission on the gross proceeds of the auction sale, net of taxes. The Debtors have also agreed that Hilco shall be entitled to charge and retain for its own account an industry standard buyer's premium of 10% for Assets that are auctioned or sold at Amherst FiberOptics' premises and 13.5% for Assets that are auctioned or sold via the Internet auction site for the sale. Communication Dynamics, Inc., together with its Debtor and non- Debtor affiliates, is one of the largest multinational suppliers of infrastructure equipment to the broadband communications industry. The Debtors filed for chapter 11 protection on September 23, 2002. Jeffrey M. Schlerf, Esq., at The Bayard Firm represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed more than $100 million both in estimated assets and debts. CONSECO INC: Files for Chapter 11 Protection in Chicago ------------------------------------------------------- Conseco, Inc., (OTCBB:CNCE) has reached an agreement in principle with representatives of its banks and bondholders on a financial restructuring of the Company's capital that would substantially reduce the Company's debt. To facilitate the restructuring, the Company and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The Company emphasized that the filing includes only certain holding companies, certain non-operating subsidiaries and certain entities related to Conseco Finance Corp., the Company's finance subsidiary. Conseco's insurance companies, Conseco Services, LLC and Conseco Capital Management are separate legal entities and are not included in the filing. President and Chief Executive Officer William J. Shea stated, "We believe we have achieved a major step toward what we set out to do in August. We have reached an agreement in principle with the bank and bondholder representatives to reduce the company's leverage to a level that, together with our targeted operating performance, will support the efforts by the Company's insurance subsidiaries to reclaim an "excellent" financial strength rating from A.M. Best following the restructuring." Shea further emphasized that the agreement in principle with the bank and bondholder representatives should significantly expedite the restructuring process. While negotiating with its major creditor constituents, the Company has worked closely with state insurance regulators. The Company believes the insurance subsidiaries are adequately capitalized, and that policyholders will not be affected by the parent company restructuring. Shea further stated, "Our business leaders have done an outstanding job during this difficult period. We continue to drive our businesses for improved results, both at the top and bottom line. We have terrific franchises with outstanding people. We intend to do everything we can to maximize their potential." "While we recognize the hardship that has been placed on our employees and many of our constituencies during this period, we believe we have made the hard decisions necessary to position Conseco for future success." The petitions were filed in the U.S. Bankruptcy Court for the Northern District of Illinois. Details regarding the filing can be obtained at http://www.bmccorp.net/conseco Conseco Finance Corp. Concurrently with the Company's announcement, Conseco Finance Corp., announced that it has reached an agreement in principle with CFN Investment Holdings LLC, a joint venture of Fortress Investment Group LLC, J.C. Flowers & Co. LLC, and Cerberus Capital Management, L.P., providing for the sale of Conseco Finance Corp.'s assets and operations. Under the proposed agreement, CFN Investment Holdings would acquire all of Conseco Finance Corp.'s assets and operations, subject to various closing conditions and CFN Investment Holdings' option to exclude certain assets. The proposed purchase price would be equal to the outstanding amount of CFC's secured debt as of the closing date, subject to adjustment. To facilitate the sale and to assist CFC in its efforts to restructure its Manufactured Housing servicing business, CFC and Conseco Finance Servicing Corp., filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Mill Creek Bank, Green Tree Retail Services Bank and Conseco Agency were not included in the Chapter 11 filing. DebtTraders reports that Conseco Inc.'s 10.75% bonds due 2008 (CNC08USR1) are trading at about 20 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CNC08USR1for real-time bond pricing. CONSECO FINANCE: Inks Pact to Sell Assets to CFN Investment ----------------------------------------------------------- Conseco Finance Corp., has reached an agreement in principle with CFN Investment Holdings LLC, a joint venture of Fortress Investment Group LLC, J.C. Flowers & Co., LLC, and Cerberus Capital Management, L.P., providing for the sale of CFC's assets and operations. Under the proposed agreement, CFN Investment Holdings would acquire all of Conseco Finance Corp.'s assets and operations, subject to various closing conditions and CFN Investment Holdings' option to exclude certain assets. The proposed purchase price would be equal to the outstanding amount of CFC's secured debt as of the closing date, subject to adjustment. To facilitate the sale and to assist CFC in its efforts to restructure its Manufactured Housing servicing business, CFC and Conseco Finance Servicing Corp., filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Mill Creek Bank, Green Tree Retail Services Bank and Conseco Agency were not included in the Chapter 11 filing. In conjunction with the Chapter 11 filing, and as required under Section 363 of the Bankruptcy Code, Conseco Finance Corp., will file a motion seeking to establish bidding procedures for an auction that will allow other qualified bidders to submit higher and better offers to purchase the company's assets. The company anticipates that the proposed sale will be completed in the first quarter of 2003, pending approval of the Bankruptcy Court and certain government regulatory agencies. "The expected sale of these assets to a well-capitalized buyer is positive news for Conseco Finance," said Chuck Cremens, President and CEO of Conseco Finance Corp. "We believe that the sale of the business will preserve the vast majority of our employees' jobs and enhance our ability to serve our customers," Cremens added. CFC also announced that it has reached an agreement in principle with an affiliate of the buyer and one of CFC's existing lenders to provide up to $125 million of DIP financing. Upon execution of definitive agreements and Bankruptcy Court approval, the DIP financing should provide the company with sufficient funding to continue to operate its business and serve its customers without interruption during the Chapter 11 process. Pending final approval of the DIP financing by the Court, CFC's secured lenders have agreed to allow CFC to use cash collateral to fund its ongoing operations. As a routine matter, ongoing employee compensation and benefit programs are being presented to the Court for approval as part of the company's "first-day" motions, and the company anticipates that the Court will approve these requests, thereby ensuring that employees will be paid and that benefit programs will remain intact. Vendors will be paid in the ordinary course for all goods furnished and services rendered after the filing. CFC and Conseco Finance Servicing Corp., filed their voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Northern District of Illinois. Conseco, Inc., CFC's parent, also announced today that it and certain of its non-operating subsidiaries filed voluntary petitions for reorganization under Chapter 11 with that Court. Conseco Finance Corp., with managed assets of $38 billion, is one of America's largest finance companies. Conseco Finance Corp., is a subsidiary of Conseco, Inc., which is headquartered in suburban Indianapolis. Conseco Finance Tr III's 8.796% bonds due 2027 (CNC27USR1) are trading at about 17 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CNC27USR1for real-time bond pricing. CONSECO: Chapter 11 Petition Summary ------------------------------------ Debtor entities filing separate chapter 11 petitions: Case No. Debtor -------- ------ 02-49671 Partners Health Group, Inc. 02-49672 Conseco, Inc. 02-49673 CTIHC, Inc. 02-49674 CIHC, Incorporated 02-49675 Conseco Finance Corp. 02-49676 Conseco Finance Servicing Corp. Chapter 11 Petition Date: December 17, 2002 Bankruptcy Court: United States Bankruptcy Court Northern District of Illinois Eastern Division 219 South Dearborn Chicago, Illinois 60604 Telephone (312) 435-5694 Fax (312) 408-7750 Bankruptcy Judge: The Honorable Carol A. Doyle Debtors' Bankruptcy Counsel: James H.M. Sprayregen, Esq. Anne Marrs Huber, Esq. Anup Sathy, Esq. Stephanie D. Simon, Esq. Timothy D. Elliott, Esq. KIRKLAND & ELLIS AON Center 200 East Randolph Drive Chicago, Illinois 60601 Telephone (312) 861-2000 Fax (312) 861-2200 - and - Richard L. Wynne, Esq. KIRKLAND & ELLIS 777 South Figueroa Street Los Angeles, California 90017 Telephone (213) 680-8400 Fax (213) 680-8500 Debtors' Financial Advisor: Frank A. Savage LAZARD FRERES & CO. 30 Rockefeller Plaza New York, NY 10020 Telephone (212) 632-6000 Debtors' Strategic Advisor: CREDIT SUISSE FIRST BOSTON CORPORATION CFC Debtors' Interim Managers: Anthony H.N. Schnelling David Phelps Carl Young Jean FitzSimon BRIDGE ASSOCIATES, LLC 747 Third Avenue, Suite 20A New York, New York 10017 Telephone (800) 838-6966 CFC Debtors' Special Counsel: Bruce J. Shnider, Esq. Michael E. Reeslund, Esq. Charles F. Sawyer, Esq. DORSEY & WHITNEY LLP 50 South Sixth Street, Suite 1500 Minneapolis, Minnesota 55402-1498 Telephone (612) 340-2862 Debtors' Special SEC Litigation Counsel: James R. Doty, Esq. James E. Rocap, III, Esq. Stacy Paxon, Esq. BAKER BOTTS L.L.P. The Warner 1299 Pennsylvania Ave., NW Washington, DC 20004-2400 Telephone (202) 639-7700 Fax (202) 639-7890 Debtors' Special Litigation Counsel: Gregory P. Joseph, Esq. Pamela Jarvis, Esq. Honey L. Kober, Esq. GREGORY P. JOSEPH LAW OFFICES LLC 805 Third Avenue, 31st Floor New York, NY 10022 Holding Company Debtors' Special Corporate Counsel: James M. Carr, Esq. BAKER & DANIELS 300 N. Meridian Street, Suite 2700 Indianapolis, IN 46204 Debtors' Accountants: John J. Quinn PRICEWATERHOUSECOOPERS LLP 300 North Meridian Street, Suite 1700 Indianapolis, IN 46204-1767 Telephone (317) 453-4100 Holding Company Debtors' Actuaries: Bruce W. Winterhof MILLIMAN USA, INC. Two Conway Park 150 Field Drive, Suite 180 Lake Forest, IL 60045 Telephone (312) 726-0677 Fax (847) 604-8671 Debtors' Claims Agent: Sean Allen Tinamarie Feil BANKRUPTCY MANAGEMENT CORPORATION 6096 Upland Terrace South Seattle, WA 98118 Telephone (206) 725-5405 Fax (206) 374-2727 Debtors' Corporate Communication Consultants: Michael S. Sitrick Ann Julsen Jeff Lloyd SITRICK & COMPANY, INC. 1840 Century Park East, Suite 800 Los Angeles, California 90067 Telephone (310) 788-2850 U.S. Trustee: Ira Bodenstein Constantine Harvalis Sandra Rasnak United States Trustee for Region 11 227 West Monroe St., Suite 3350 Chicago, Illinois 60606 Telephone (312) 886-5785 Fax (312) 886-5794 CONSECO: Holding Companies' 30-Largest Unsecured Creditors ---------------------------------------------------------- Pursuant to Rule 1007 of the Federal Rules of Bankruptcy Procedure, Conseco, Inc., and CIHC, Incorporated, disclose the identities of their 30-largest unsecured creditors who are not insiders, as of December 9, 2002: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Bank of America National Bank Debt $1,493,275,217 Trust and Savings Assoc. 231 South LaSalle Street Chicago, IL 60697 Attn: Bridget Garavalia Telephone (312) 828-1259 Fax (312) 828-6269 State Street Bank 8.70% Trust $500,000,000 Corporate Trust Division Preferred 225 Asylum Street Securities Hartford, CT 06103 Attn: Michael Hopkins Telephone (860) 244-1820 Fax (860) 244-1889 HSBC Bank USA 8.75% Senior Notes $423,706,000 Issuer Services 452 5th Avenue New York, NY 10018-2706 Attn: Robert Conrad Telephone (212) 525-1314 State Street Bank 9.0% Guaranteed $399,200,000 Senior Notes State Street Bank 8.75% Guaranteed $364,294,000 Senior Notes State Street Bank 10.75% Guaranteed $362,433,000 Senior Notes State Street Bank 8.70% Trust $325,000,000 Preferred Securities State Street Bank 8.796% Trust $300,000,000 Preferred Securities State Street Bank 9.44% Trust $300,000,000 Preferred Securities State Street Bank 9.16% Trust $275,000,000 Preferred Securities HSBC Bank USA 6.4% Senior Notes $234,064,000 State Street Bank 9.00% Trust $230,000,000 Preferred Securities HSBC Bank USA 8.5% Senior Notes $224,905,000 Bank of America, N.A. Director and $200,054,938 Officer Loan HSBC Bank USA 9.0% Senior Notes $150,800,000 State Street Bank 6.8% Guaranteed $150,783,000 Senior Notes The Chase Manhattan Bank Director and $141,551,144 270 Park Avenue Officer Loan New York, NY 10017 Attn: Helen Newcomb Telephone (212) 270-6260 Fax (212) 270-1511 Bank of America, N.A. Director and $129,812,258 Officer Loan HSBC Bank USA 6.8% Senior Notes $99,217,000 HSBC Bank USA 10.75% Senior Notes $37,567,000 State Street Bank 6.4% Guaranteed $14,936,000 Senior Notes Bank of America, N.A. Director and $9,856,737 Officer Loan State Street Bank 8.5% Guaranteed $991,000 Senior Notes Banc One 7% Feline Prides $67,000 Corporate Trust Services One Bank One Plaza Suite IL 1-0126 Chicago, IL 60670-0216 Attn: Mark J. Frye Telephone (312) 407-8810 Fax (312) 407-1708 CONSECO: Conseco Finance Debtors' 40-Largest Unsecured Creditors ---------------------------------------------------------------- Pursuant to Rule 1007 of the Federal Rules of Bankruptcy Procedure, Conseco Finance Corp. and Conseco Finance Servicing Corp., disclose the identities of their 40-largest unsecured creditors who are not insiders, as of December 9, 2002: Entity Nature Of Claim Claim Amount ------ --------------- ------------ U.S. Trust, N.A. 180 East 5th St., 2nd Floor Guarantee Payments $8,036,158 St. Paul, MN 55101 on Asset Attn: Tamara Schulty-Pugh Securitization Bonds Telephone (651) 244-0011 Fax (651) 244-0089 ALLTEL Information Services, Judgment $6,742,258 Inc. 4001 Rodney Parham Rd. Little Rock, AR 72212 Attn: Michael Gravelle Telephone (501) 220-7070 Fax (501) 220-4034 Menards Merchant Incentive $1,171,006 4777 Menard Drive Program Eau Claire, WI 54703 Attn: Jeff Sacla Telephone (715) 876-2428 Fax (715) 876-2743 U.S. Bank, N.A. Trustee Fees $304,684 180 Fifth St., 2nd Floor St. Paul, MN 55101 Attn: Tamara Schulty-Pugh Telephone (651) 244-0011 Fax (651) 244-0089 ZC Sterling Trade Debt $236,244 210 Interstate N. Pkwy Suite 400 Atlanta, GA 30339 Attn: Bob Davis Telephone (770) 690-8400 Fax (770) 690-8240 American Express Corp. Trade Debt $213,666 P.O. Box 0001 Chicago, IL 60679 Attn: Brent Muntz Telephone (623) 492-7269 Fax (623) 492-5339 Corporate Express National Trade Debt $208,238 P.O. Box 71217 Chicago, IL 60694 Attn: Richard Toppin Telephone (651) 638-8801 Fax (651) 638-8855 Airborne Express Trade Debt $204,968 P.O. Box 91001 Seattle, WA 98111 Attn: Eric DeWitt Telephone (800) 247-2676 Fax (317) 487-5751 Sharp Electronics Finance Trade Debt $130,952 P.O. Box 642333 Pittsburgh, PA 15264 Attn: Mike Torticilli Telephone (800) 789-5203 Fax (319) 841-6324 Sotiroff & Abramczyk, P.C. Professional Fees $126,139 30400 Telegraph, Suite 444 Bingham Farms, MI 48025 Attn: Barb Jester Telephone (248) 642-6000 Extension 206 Fax (248) 642-9001 Select Comfort Corporation Trade Debt $120,225 6105 Trenton Lane North Plymouth, MN 55442 Attn: Jim Raabe Telephone (763) 551-7428 Fax (763) 551-7826 Syntel Inc. Trade Debt $116,094 525 East Big Beaver Suite 300 Troy, MI 48083 Attn: Reghu Neelakanthun Telephone (248) 619-3546 Fax (248) 619-2891 Standard & Poor's Rating Trade Debt $100,500 Services 2542 Collection Center Dr. Chicago, IL 60693 Attn: Michael Sherifan Telephone (800) 767-1896 Extension 4 Fax (212) 438-5178 Imake Consulting Trade Debt $99,950 6700 Rockledge Drive Suite 101A Bethesda, MD 20817 Attn: Trami Tran Telephone (301) 896-9200 Fax (301) 897-2016 Iron Mountain, Inc. Trade Debt $95,738 P.O. Box 60709 Los Angeles, CA 90060 Attn: Doug Huffman Telephone (952) 888-3852 Fax (952) 888-8445 PRG Schultz International Trade Debt $68,951 P.O. Box 100101 Atlanta, GA 30384 Attn: Jim Baker Telephone (949) 234-2200 Fax (949) 487-0125 NCP Solutions, Inc. Trade Debt $64,115 P.O. Box 830876 Birmingham, AL 35283 Attn: Steve Greenwalt Telephone (205) 421-7000 Fax (205) 849-6926 Comdisco/CNS Trade Debt $62,772 7145 Collection Center Chicago, IL 60693 Attn: Linda Terrin Telephone (847) 518-7924 Fax (847) 518-5060 Repossessors, Inc. Trade Debt $60,262 10939 89th Avenue North Minneapolis, MN 55369 Attn: Larry Lobe Telephone (763)493-4951 Extention 236 Fax (763) 493-4974 Getsmart.com, Inc. Trade Debt $59,712 P.O. Box 193824 San Francisco, CA 94119 Attn: Sue Singh Telephone (415) 644-5211 Fax (415) 644-4944 Hewlett-Packard Trade Debt $58,974 P.O. Box 75629 Charlotte, NC 28275 Attn: Loretta Clayton Telephone (800) 209-9260 Extension 56524 Fax (404) 648-8201 De Lage Landen Financial Trade Debt $57,400 Services P.O. Box 41601 Philadelphia, PA 19101 Attn: Jane Condi Telephone (800) 736-0220 Extension 5434 Fax (800) 442-2086 U.S. Property & Appraisal Trade Debt $54,936 P.O. Box 16490 Pittsburgh, PA 15242 Attn: Jim Messineo Telephone (412) 220-8400 Extension 1811 Fax (412) 220-8443 Orion Marketing Group, Inc. Trade Debt $53,303 1200 Network Blvd. Building A, Suite 105 San Antonio, TX 78249 Attn: Eulonda Jackson Telephone (210) 690-4114 Fax (210) 690-9215 Datacomp Trade Debt $52,314 3215 Eaglecrest Drive N.E. Grand Rapids, MI 49525 Attn: Renie Smith Telephone (800) 365-1415 Fax (800) 841-8062 Asset One Marketing Group Trade Debt $51,469 600 17th Street, No. 1610S Denver, CO 80202 Attn: Heather Preston Telephone (303) 285-9094 Fax (303) 285-0523 David J. Stern, P.A. Trade Debt $50,260 801 S. University Drive Suite 500 Plantation, FL 33324 Parego, Inc. Trade Debt $47,815 Pitney Bowes Management Trade Debt $46,395 Deutsche Financial Services Trade Debt $45,050 RDI Marketing Services, Inc. Trade Debt $44,245 Brandt Fisher Alward & Roy PC Trade Debt $42,574 Secured Legal Services Group Trade Debt $41,656 Wingate Carpet Mills Trade Debt $38,375 Kenney & Solomon, P.C. Trade Debt $36,883 Ambassadors Performance Trade Debt $36,623 Pierce & Associates, P.C. Trade Debt $36,104 Promotional Alliance Trade Debt $35,582 Windsor Building, L.L.C. Trade Debt $35,573 Mortgage Specialists, Inc. Trade Debt $35,088 COVANTA CONCERTS: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Covanta Concerts Holdings, Inc. f/k/a The Metropolitan Entertainment Co., Inc. 40 Lane Road Fairfield, New Jersey 07004 Bankruptcy Case No.: 02-16322 Type of Business: The Debtor is an affiliate of Covanta Energy Corporation. Chapter 11 Petition Date: December 16, 2002 Court: Southern District of New York (Manhattan) Judge: Cornelius Blackshear Debtors' Counsel: Vincent Edward Lazar, Esq. Christine Childers, Esq. Jenner & Block, LLC One IBM Plaza Chicago, Illinois 60611 Tel: (312) 923-2989 Fax: (312) 840-7389 -and- Deborah M. Buell, Esq. James L. Bromley, Esq. Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, NY 10006 Tel: 212-225-2000 Estimates Assets: $100,000 to $500,000 Estimated Debts: $10 to $50 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Bank of America, Agent 477,000,000 Deutsche Bank, Agent O'Melveny & Myers, 153 E. 53rd New York, NY 10022-4611 Keith Beccia Breach of Contract Unknown 165 Kinglands Road Boonton, NJ 07005 c/o Alan M. Lebensfeld, Esq. Lebensfeld, Borker & Sussman 140 Broad St. Red Bank, NJ 07701 Blank, Rome, Tenzer, et al. Legal Fees $2,012 Paula M. Bridges Unknown Gary A. Brown Unknown Peggy Castle Personal Injury Claim Unknown State of Connecticut Taxes Unknown Dept. of Revenue Services Robert B. Dunlap Unknown Elliot, Reihner, et al. Legal Fees $46,624 Thom Greco, Harvey's Lake Breach of Contract Unknown Kilpatrick Stockton, LLP Legal Services $3,547 Manhattan Center Studios Breach of Letter Unknown d/b/a Hammerstein Ballroom Massa & Associates, Inc. Consulting Fees $1,620 State of New Jersey - CBT Taxes Unknown Div. of Taxation City of New York Taxes Unknown Penske Pinebrook Truck Leasing Claim $2,195 Riker, Danzig, Scherer, Legal Fees $59,807 et al. Rusted Root Royalties $22,794 City of Scranton Mercantile Taxes $178,909 Strates Shows Lease/Grant of Easement, $5,540 Covenants and Restructuring; ad valorem taxes COVANTA ENERGY: Asks Court to Approve Two Unwind Agreements ----------------------------------------------------------- Covanta Energy Corporation and its debtor-affiliates seek the Court's authority for Covanta Energy Corporation to enter into: (a) a Class A Unwind Agreement pursuant to the term of which Covanta would transfer certain Class A distress preferred shares to Palladium Finance Corporation I in return for a certain senior term loan payable by Palladium being transferred to Covanta; and (b) a Class II Unwind Agreement, pursuant to which Covanta would transfer certain Class II distress preferred shares to Senator Finance Corporation II in return for a certain secured subordinated loan payable by OSHC being transferred to Covanta. In Canada, a troubled company may issue Distressed Preferred Shares to Canadian financial institutions to pay, for up to five years, a lower tax-exempt interest rate on borrowed money. This is done by exchanging outstanding debt for preferred equity, the dividends on which are not taxable income for the DPS buyer. Class A Unwind Agreement Deborah M. Buell, Esq., at Cleary, Gottlieb, Steen & Hamilton, in New York, relates that in April 1997, Covanta borrowed $97,000,000 from a syndicated headed by Deutsche Bank AG to purchase a loan that NationsBank of North Carolina, N.A. and other had made to Palladium in 1994 in connection with the construction of the Arena. The Term Loan was secured by a first lien on the assets relating to the Arena, and by Covanta's guarantee of the Manager's obligation to make certain working capital advances to Palladium. Pursuant to a Canadian Customs Revenue Agency tax ruling dated as of December 19, 1997, a special purpose affiliate of Palladium, Palladium Finance Corporation I -- FinanceCo I -- issued in December 1997, 135,800,000 Class A distress preferred shares to a consortium of Canadian banks, including the Canadian Imperial Bank of Commerce for CND$1 per share. The Class A DPS transaction was to temporarily reduce the effective cost to Palladium of servicing the Term Loan. With the proceeds of the Class A DPS issuance, FinanceCo I purchased the Term Loan from Covanta, which in turn used the proceeds to repay the Deutsche Syndicate's loan in full. As part of the transaction, Covanta and CIBC, as agent of the Palladium DPS Holders, entered into the Ogden Put/Call Agreement A, which provided the Palladium DPS Holders with the right to put the Class A DPS to Covanta for CND$135,8000,000 after five years or, if earlier, on the occurrence of an Event of Retraction. Covanta's put obligation under the Ogden Put/Call Agreement A was secured by a $95,000,000 letter of credit issued by the Deutsche Syndicate. Covanta was obligated to reimburse the Deutsche Syndicate for any amount drawn on the Deutsche Letter of Credit. After a series of Events of Retraction in 2002, The Palladium DPS Holders exercised their rights to put the Class A DPS to Covanta in March 2002. In the same month, CIBC drew $86,200,000 from the Deutsche Letter of Credit as payment for the Class A DPS. Hence, the Term Loan currently remains in the hands of FinanceCo I, while Covanta holds the Class A DPS. Ms. Buell reports that FinanceCo I failed to declare and pay in full dividends the Class A DPS, which constitute Events of Retraction. An Event of Retraction triggers the rights of Covanta, as holder of Class A DPS, to call the Term Loan FinanceCo I hold. Covanta decided to exercise that call option to protect its interests. The Debtors, Palladium and other interested parties propose to enter into the Class A Unwind Agreement that will contain these basis provisions: (a) the parties recognize that Events of Retraction have occurred with respect to the Class A DPS, and that Covanta has duly exercised its option to call the Term Loan from FinanceCo I pursuant to the terms of the Debt Put/Call Agreement A; (b) Covanta will pay for the purchase of the Term Loan by transferring the Class A DPS to FinanceCo I in full consideration thereof; (c) Palladium consents to the transaction between FinanceCo I and Covanta, and agrees that the interest on the Term Loan will begin to accrue as of the date of the Class A Unwind Agreement; and (d) Covanta reserves its right to demand and receive any unpaid dividend on the Class A DPS that has accrued and remains unpaid as of the date of the Class A Unwind Agreement. Class II Unwind Agreement Ms. Buell relates that in January 1999, Covanta made a CND$30,000,000 subordinated loan to OSHC, secured by substantially all the assets of the Team, including the National Hockey League franchise. Pursuant to a CCRA tax ruling dated as of January 13, 1999, a special purpose affiliate of OSHC, Senator Finance Corporation II -- Team FinanceCo II -- issued in January 1999 30,000,000 of Class II distress preferred shares to CIBC and HSBC Bank of Canada for CND$1 per share. Team FinanceCo II used the Class II DPS proceeds to purchase the Subordinated Loan from Covanta. Covanta agreed that the Team DPS Holders could put the Class II DPS to Covanta for the purchase price of Class II DPS, plus accrued and unpaid dividends, after five years or upon the occurrence of an Event of Retraction. Covanta's obligation to purchase the Class II DPS was secured by a letter of credit Fleet Bank issued. Covanta though has to reimburse Fleet Bank for any drawn amount on the Fleet Letter of Credit. A year prior to Petition Date, OSHC failed to comply with certain financial covenants that constitute an Event of Retraction. This triggered the Team DPS Holders' right to put the Class II DPS to Covanta. In March 2002, the Team DPS Holders exercised their right to put the Class II DPS to Covanta. CIBS, as agent of the Team DPS Holders, obtained payment for the Class II DPS by drawing on the Fleet Letter of Credit. Accordingly, Fleet Bank demanded from Covanta immediate reimbursement. With Covanta's insufficient liquidity, it was unable to reimburse Fleet Bank for the drawn Fleet Letter of Credit. Thus, Ms. Buell informs Judge Blackshear, the Subordinated Loan is currently held by Team FinanceCo II while Covanta holds the Class II DPS. Covanta decided to call the Subordinated Loan from Team FinanceCo II to protect its investments. The transaction will be bound by the Debtors, OSHC and other interested parties' entry into the Class II Unwind Agreement for Covanta to transfer the Class II DPS to Team FinanceCo II in return for the Subordinated Loan. The Class II Unwind Agreement will substantially contain the same terms as the Class A Unwind Agreement when finalized. Pursuant to Section 363(b)(1) of the Bankruptcy Code, Ms. Buell contends that Covanta's entry into the two Agreements qualifies for a sound business judgment because unwinding the Class A DPS and Class II DPS in return for the Term Loan and the Subordinated Loan serves the best interest of Covanta and its creditors. Ms. Buell explains that by unwinding the Class A and Class II DPS, Covanta will be in a better position to ultimately dispose of its interests in the Team and the Arena as a secured lender. "This would represent a significant step toward achieving one of the most important objectives of these Chapter 11 proceedings, namely, the divestment of all of the Debtors' entertainment and aviation businesses," Ms. Buell points out. Moreover, Ms. Buell notes, there is no reason to leave the Term Loan or the Subordinated Loan with FinanceCo I and Team FinanceCo II respectively. On the contrary, if it becomes necessary to commence enforcement proceedings with respect to the two Loans, Covanta will benefit from having direct control over the Loans and their respective collateral. (Covanta Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., 609/392-0900) CUMMINS INC: Names Jean Blackwell as New Chief of Staff and CFO --------------------------------------------------------------- Cummins Inc., announced the appointments of the following senior staff to key positions within the company: -- Jean Blackwell, Vice President, Cummins Business Services, will assume the responsibilities of Chief Financial Officer and Chief of Staff. Blackwell, who joined Cummins in 1997, formerly served as Indiana State Budget Director, where she managed a $25 billion biennial state budget. -- Tom Linebarger, Vice President and Chief Financial Officer since 2000, will become President of the Cummins Power Generation Business, succeeding Jack K. Edwards, who will retire in June after a 30-year career with the company. Linebarger has been with Cummins eight years. -- Susan K. Carter, Cummins Vice President and Controller, will become Vice President of Finance and Chief Accounting Officer, responsible for control, auditing, tax and risk management functions, as well as various finance groups serving the Cummins administrative areas. She joined Cummins in March, after serving as Vice President and CFO of Honeywell, Inc.'s Transportation and Power Systems. The changes will take effect February 1, 2003, with a continued transition for a period thereafter. "In the Cummins tradition of providing broad experiences for our talented people, we are pleased to offer these outstanding executives new and exciting opportunities," said Tim Solso, Cummins Chairman and CEO. "While these are challenging positions, we are confident that all three have the background and expertise to make seamless transitions." Blackwell was selected for the position of Chief Financial Officer, Solso said, "because she has a proven track record with the company, has strong leadership skills, understands our business and is well versed in monetary matters based on her experience overseeing the financial strategy for the state of Indiana. "The Board has great confidence in her abilities," he added. Solso said the move is a positive one for Linebarger and a vote of confidence in his abilities and proven leadership: "This new position will continue to broaden the experiences of Tom Linebarger. As Cummins CFO, Tom has done an outstanding job managing the financial complexities of a global family of businesses. He also did an excellent job managing our Holset Engineering and Supply Chain operations," he added. Solso also said that Cummins is very optimistic about the future prospects of the Power Generation Business, which, under Jack Edwards' leadership, has already taken steps to position itself for the future. Although Carter has been with the company only a short time, Solso said she has made a significant contribution in her role as Controller. "Susan has done a tremendous job for us, and has proven that she can handle the additional responsibilities we are giving her in the Finance organization. She has also played a critical role in helping us strengthen our controls and governance processes in support of the new requirements of the Sarbanes-Oxley Act." He noted that Cummins will miss the "enthusiasm and dedication of Jack Edwards. He is a remarkable individual, a great humanitarian and a close personal friend. Jack was the main architect and builder of our current international business. He led our Power Generation Business during its restructuring and created the framework that will make this business a growth engine for our company." Edwards, 58, joined Cummins in 1972 after serving as Regional Director of Peace Corps Columbia. He was named President, Cummins Brazil, S. A., in 1986 and became Vice President, International in 1989. He has served as Executive Vice President and President of the Power Generation Business since April 1996. Blackwell, 48, has a degree in economics from the College of William and Mary and was graduated cum laude from the University of Michigan Law School. She has been a partner in the Indianapolis law firm of Bose McKinney & Evans, where she practiced in the area of financial and real estate transactions. She was Executive Director of the Indiana State Lottery Commission. She has served on numerous state and national boards, including the Governor's Committee on Welfare Property Tax Reform and as Chair of Indiana's Intelenet Commission and State Ethics Commission. She has served as Vice President and General Counsel at Cummins and Vice President of Human Resources. Linebarger, 39, was as an Investment Manager for Prudential Investment Corporation before joining Cummins in 1994. After serving in a variety of positions at the company, he was named Managing Director, Holset Engineering Company in 1997 and Vice President, Supply Chain Management in 1998. He was promoted to Vice President and Chief Financial Officer two years ago. He has an MBA from the Stanford Graduate School of Business and undergraduate degrees in mechanical engineering from Stanford University and in economics from Claremont McKenna College. Carter, 44, came to Cummins from Honeywell where she held several financial positions within Aerospace and Transportation and Power Systems. Carter has also held Controller and Audit positions in Crane Company's Valve Group and DeKalb Corporation. She has a degree in accounting from Indiana University and an MBA from Northern Illinois University. She is also a Certified Public Accountant. "Tom, Jean and Sue will work closely through the end of January to ensure that the transfer of responsibilities goes smoothly. During February, Jack will help integrate Tom into the Power Generation Business," Solso said. A global power leader, Cummins Inc., is a corporation of complementary business units that design, manufacture, distribute and service electrical power generation systems, engines and related technologies, including fuel systems, controls, air handling, filtration and emission solutions. Headquartered in Columbus, Indiana (USA), Cummins serves its customers through more than 500 company owned and independent distributor locations in 131 countries and territories. With 24,900 employees worldwide, Cummins reported sales of $5.7 billion in 2001. Press releases by fax can be requested by calling News On Demand (toll free) at 888-329-2305. Cummins home page can be found at http://www.cummins.com * * * As previously reported in the November 11 issue of the Troubled Company Reporter, Fitch Ratings downgraded the senior unsecured notes of Cummins Inc., to 'BB-' from 'BB+', assigned a rating of 'BB-' to the $200 million in new senior unsecured notes being issued, and assigned a rating of 'BB+' to the newly established $385 million secured revolving credit agreement. The company's mandatorily redeemable convertible preferred securities have also been downgraded to 'B+' from 'BB-'. The downgrades reflect persistently weak end markets, longer term concerns related to the company's competitive position and profitability, weak credit measures, increasing pension obligations and the granting of security to the company's revolving credit lenders (resulting in the subordination of the unsecured notes and preferred securities). The Rating Outlook remains Negative. DATATRAK INT'L: Fails to Comply with Nasdaq Listing Requirements ---------------------------------------------------------------- DATATRAK International, Inc., (Nasdaq: DATA) has been notified by the Nasdaq Stock Market (Nasdaq) that it is not in compliance with the minimum stockholders' equity requirement of $10 million for continued listing on the Nasdaq National Market. In its quarterly report on Form 10-Q for the period ended September 30, 2002, the Company reported stockholders' equity of approximately $4.3 million. Nasdaq has requested that the Company provide information as to how it intends to regain and sustain compliance with this requirement, and the Company is cooperating with that request. As previously announced, the Company is actively pursuing a potential substantial equity investment in the Company, which is expected to increase stockholders' equity well above the $10 million minimum requirement. After reviewing the Company's information as to how it will regain compliance, Nasdaq may determine to delist the Company's common shares as a result of the listing deficiencies. The Company will, however, be given an opportunity to appeal that determination prior to being delisted. In addition, the Company also may consider listing its common shares on the Nasdaq SmallCap Market. There can be no assurance that the Company will be able to cure the deficiency by completing a potential equity investment or by some other course of action, or that, alternatively, the Company's application for listing on the SmallCap Market would be accepted. DATATRAK International, Inc., is a worldwide ASP for the EDC industry. The Company provides a suite of software products supporting the use of DATATRAK EDC(TM) and related services to the pharmaceutical, biotechnology, and medical device industries. DATATRAK EDC(TM) was developed in order to deliver clinical research data from investigative sites to clinical trial sponsors faster and more efficiently than conventional, manual methods. DATATRAK EDC(TM) can be deployed worldwide in either a distributed platform using laptop computers or in a centralized environment using the Internet. DATATRAK EDC(TM) software and its earlier versions have successfully supported many international clinical studies involving thousands of clinical research sites and encompassing tens of thousands of patients in 39 countries. DATATRAK International, Inc.'s product suite has been utilized in some aspect of the clinical development of 13 separate drugs that have received regulatory approval from either the United States Food and Drug Administration or counterpart European bodies. DATATRAK International, Inc. has offices located in Cleveland, Ohio and Bonn, Germany. Its common stock is listed on the Nasdaq Stock Market under the symbol "DATA." Visit the DATATRAK International, Inc. Web site at http://www.datatraknet.comor http://www.datatraknet.de * * * Liquidity and Capital Resources In its SEC Form 10-Q filed on November 13, 2002, the Company reported: Since its inception, the Company's principal sources of cash have been cash flow from operations, proceeds from the sale of equity securities and the sale of its Clinical Business. The Company's investing activities primarily reflect capital expenditures and purchases and maturities of short-term investments. In January 2002 the Company raised approximately $3.8 million in cash with the completion of its private placement of common shares. The Company's contracts usually require a portion of the contract amount to be paid at the time the contract is initiated. Additional payments are generally received, as work progresses, throughout the life of the contract. All amounts received are recorded as a liability (deferred revenue) until work has been completed and revenue is recognized. Cash receipts do not necessarily correspond to costs incurred or revenue recognized. The Company typically receives a low volume of large-dollar receipts. Accounts receivable will fluctuate due to the timing and size of cash receipts. Accounts receivable (net of allowance for doubtful accounts) was $680,000 at September 30, 2002 and $430,000 at December 31, 2001. Deferred revenue was $700,000 at September 30, 2002 and $470,000 at December 31, 2001. Cash and cash equivalents decreased $540,000 during the nine months ended September 30, 2002. This was the result of $4.4 million used in operating activities, offset by $3.9 provided by investing and financing activities. Cash used for operating activities resulted from the funding of net operating losses and other working capital needs. Investing activities included net maturities of short-term investments of $1.3 million and $1.2 million used to purchase property and equipment. Financing activities include $3.8 million received from the Company's private placement of its common shares. At September 30, 2002, the Company had working capital of $2.4 million, and its cash, cash equivalents and short-term investments totaled $3.4 million. The Company's working capital decreased by $1.9 million since December 31, 2001. The decrease was primarily the result of the $1.8 million decrease in cash, cash equivalents and short-term investments. The growth in accounts receivable was offset by the growth in current liabilities. The Company is responsible for funding the future enhancement and testing of the DATATRAK EDC(TM) software. The Company will continue to invest in the development of the DATATRAK(R) process. The Company's operations and the EDC market are still in a developmental stage. DATATRAK has experienced marginal revenue growth; however, the Company anticipates negative cash flow from operations for the remainder of 2002, as it attempts to achieve profitability. The Company anticipates capital and related expenditures of approximately $200,000 through the end of the current year for continued commercialization and product development of DATATRAK EDC(TM), which the Company expects to fund from existing cash and cash equivalents, maturities of short-term investments and cash flow from operations. The Company believes that its cash and cash equivalents, maturities of short-term investments and cash flow from operations, together with its existing sources of equity, will be sufficient to meet its working capital and capital expenditure requirements through December 31, 2002. On September 23, 2002, the Company announced the signing of a definitive agreement to purchase Oriam, SA, a French Technology Firm with offices in Paris, France and Boston, Massachusetts. Closing of the proposed transaction is contingent upon appropriate financing. In order to complete the purchase of Oriam, SA and support its future working capital needs beyond December 31, 2002, the Company will need to raise additional funds by selling debt or equity securities or through other arrangements. Specific terms involved with potential financing are currently being evaluated by DATATRAK and its investment advisors, however, additional capital may not be available on acceptable terms, if at all. DELIA*S CORP: Third Quarter Net Loss Balloons to $11 Million ------------------------------------------------------------ dELiA*s Corp. (Nasdaq:DLIA), a leading multichannel retailer to teenage girls and young women, announced financial results for the third quarter and thirty-nine weeks ended November 2, 2002. The company's net sales for the quarter were $32.9 million, as compared to sales of $32.5 million in the prior year. Retail sales increased 23%, driven by new store openings. Direct sales decreased 19% on a 10% reduction in circulation. The net loss for the quarter was $10.7 million, compared to a loss of $3.2 million in the same period last year. Included in the net loss for the quarter were corporate severance and call center relocation charges totaling $1.6 million. In addition, the Company recorded a $2.3 million charge to Cost of Sales, relating primarily to the liquidation of under-performing back to school product. Stephen Kahn, Chief Executive Officer, stated, "The second and third quarters were the most difficult and disappointing in dELiA*s history. Significant Back to School product and planning miscues negatively affected performance in both the retail and direct channels. Accordingly, beginning in early August, we took austere steps to rationalize our overhead costs and work through our excess inventory. To address overhead, we reduced headcount by approximately $3.5 million, representing approximately 20% of corporate payroll. Additionally, we took immediate action to liquidate excess inventories to better position us for holiday." Kahn continued, "As a result of the above steps, both our direct and retail businesses have improved over the course of the holiday season and we currently expect to be operationally EBITDA positive in the fourth quarter. Additionally, we anticipate healthy inventories at seasonally appropriate levels heading into Spring. We believe that these steps have quickly put us on the path to recovery and represent a strong turn in direct and improved performance at retail. That being said, we remain focused on further streamlining our business and, given overall economic uncertainty, are also continuing to pursue strategic relationships to bolster our resources and optimize our operating flexibility. We hope to announce a decision in this regard by the end of the fiscal year." On a consolidated basis, net sales for the first three quarters of fiscal 2002 decreased 7.2% to $87.8 million from $94.7 million in the same period last year. The Company's net loss before the cumulative effect of a change in accounting principle in fiscal 2002 was $22.0 million. After the positive effect of a change in accounting principle, net loss for the first three quarters of fiscal 2002 was $6.6 million. The loss for the same period last year was $22.4 million. Separately, the Company announced that Dennis Goldstein is stepping down from his role as CFO to pursue other interests. Effective immediately, Evan Guillemin, currently Chief Operating Officer, is additionally appointed CFO, a position which he previously held from July 1996 to March 2000. Commenting on this move, Kahn stated, "We appreciate Dennis' work and dedication over the last four years and wish him the best for the future. We expect a seamless transition as Evan is well acquainted with leading the dELiA*s financial team." dELiA*s Corp., is a multichannel retailer that markets apparel, accessories and home furnishings to teenage girls and young women. The company reaches its customers through the dELiA*s catalog, http://www.dELiAs.comand 65 dELiA*s retail stores. * * * Liquidity and Capital Resources In its SEC Form 10-Q filed for the period ended November 2, 2002, the Company stated: "Cash used in operations in the first three quarters of fiscal 2001 and 2002 was $24.6 million and $24.7 million, respectively. The increase in cash used in operations primarily relates to higher operating losses offset by changes in working capital levels. "Investing activities provided $7.4 million in the first three quarters of fiscal 2001 primarily relating to net investment proceeds offset by capital expenditures and to the cash proceeds and payments relating to our non-core businesses. In the first three quarters of fiscal 2002, investing activities used $9.7 million relating to capital expenditures. During the fourth quarter of fiscal 2002, we expect to make additional capital expenditures of $300,000 to $500,000 resulting in total capital expenditures for fiscal 2002 of approximately $10.0 million. "Financing activities provided $35.5 million in the first three quarters of fiscal 2001, primarily as a result of the June 2001 sale of 5.74 million shares of our Class A common stock as well as borrowings under our new credit agreement and stock option exercises, and $15.3 million in the first three quarters of fiscal 2002, primarily relating to net activity under our credit facility. "We are subject to certain covenants under the mortgage loan agreement relating to the 1999 purchase of our distribution facility in Hanover, Pennsylvania, including a covenant to maintain a fixed charge coverage ratio. Effective May 1, 2001, the bank agreed to waive the fixed charge coverage ratio covenant through August 6, 2003 in exchange for an adjustment in our payment schedule. "Our credit agreement, as amended, with Wells Fargo Retail Finance LLC, a subsidiary of Wells Fargo & Company, consists of a revolving line of credit that permits us to borrow up to $25 million, limited to specified percentages of the value of our eligible inventory as determined under the credit agreement, and provides for the issuance of documentary and standby letters of credit up to $10 million. Under this Wells Fargo facility, as amended, our obligations are secured by a lien on substantially all of our assets, except certain real property and other specified assets. The agreement contains certain covenants and default provisions customary for credit facilities of this nature, including limitations on our payment of dividends. The agreement also contains controls on our cash management and certain limits on our ability to distribute assets. At our option, borrowings under this facility bear interest at Wells Fargo Bank's prime rate plus 50 basis points or at the Eurodollar Rate plus 275 basis points. A fee of 0.375% per year is assessed monthly on the unused portion of the line of credit as defined in the agreement. The facility matures September 30, 2004 and can extend for successive twelve-month periods at our option under certain terms and conditions. As of November 2, 2002, the outstanding balance was $19.3 million, outstanding letters of credit were $2.7 million and unused available credit was $20,000. "In November 2002, a cash concentration trigger event occurred under the terms of our Wells Fargo credit facility that permits Wells Fargo, among other things, to establish additional reserves which impact our availability under the line. As a result of that event, we are currently in discussions with Wells Fargo to amend the loan agreement , which will likely result in an adjustment downward of the effective advance rate under the line as well as introduce a number of financial covenants relating to sales performance, inventory levels and cash flow metrics. We anticipate that we will finalize the amendment on satisfactory terms by the end of December 2002. "Separately, in October 2002, we engaged Peter J. Solomon Company to assist in the evaluation of strategic alternatives. This process continues and will likely result in either a sale of the company or the infusion of additional capital in the form of equity or debt. We are currently evaluating a variety of alternatives and anticipate being able to announce a decision in this regard by the end of the fiscal year. "If our discussions with Wells Fargo are concluded on satisfactory terms and a capital infusion is received, we believe that our cash on hand and cash expected to be generated from operations, together with the funds available under our credit agreement, will be sufficient to meet our capital and operating requirements at least through the next twelve months. There can be no assurance that we will conclude our discussion with Wells Fargo on favorable terms or that we will be able to obtain a capital infusion. If we are not successful we may not be able to meet our operating and capital requirements for the next twelve months. The accompanying financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business." DOBSON COMMS: S&P Ratchets Corp. Credit Rating Down a Notch to B ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit ratings on cellular service provider Dobson Communications Corp., and its subsidiary, Dobson Operating Co. LLC, to 'B' from 'B+' due to the impact of lower roaming yield on revenue growth, lower net customer additions compared with guidance for full- year 2002, and overall slower industry growth. Standard & Poor's also placed the ratings on CreditWatch with negative implications reflecting the uncertainty related to the Dobson family loan with Bank of America which matures on March 31, 2003, unless extended. Oklahoma City, Oklahoma-based Dobson Communications provides cellular services to about 750,000 subscribers in rural and suburban areas in the U.S. Simultaneously, Standard & Poor's lowered its corporate credit rating on American Cellular Corp., a joint venture between Dobson Communications and AT&T Wireless Services, to 'CC' from 'CCC-' due to the potential for debt restructuring in the near term. The rating remains on CreditWatch with negative implications, where it was placed on April 5, 2002. American Cellular has not met its second and third quarters 2002 total debt leverage ratio for its $1.34 billion secured bank facility and is continuing negotiations with its banks. The rating on American Cellular does not assume any financial support from AT&T Wireless or Dobson Communications. The company provides wireless services to rural and suburban customers in the Midwest and East. As of September 30, 2002, Dobson Communications' total debt outstanding was about $1.3 billion. American Cellular's total debt outstanding was about $1.6 billion. "Over the past year, Dobson Communications' revenue growth has been impacted by the decline in roaming yield and overall slower industry growth. This has been offset somewhat by cost controls and aggressive marketing of local and preferred national plans. However, in the third quarter of 2002, Dobson Communications' revenue growth declined to 6% compared with the second quarter of 2002, which experienced a 12% growth rate sequentially, due to lower net customer additions and lower roaming revenue growth," said Standard & Poor's credit analyst Rosemarie Kalinowski. Favorable resolution of the Dobson family loan with Bank of America is essential to the rating. If required payment requirements are not met, Bank of America could foreclose on the collateral triggering a change of control under Dobson Communications' note indenture. This would result in an acceleration of the payment of the company's senior notes at 101% of the principal amount plus accrued and unpaid interest. DRS TECH: S&P Revises Outlook to Positive After $115M Stock Sale ---------------------------------------------------------------- Standard & Poor's Rating Services revised its outlook on DRS Technologies Inc. to positive from stable after the company sold 4.75 million shares of common stock for net proceeds of approximately $115 million. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit rating on the defense electronics company. "The equity sale improves DRS's capital structure after the recent partially debt-financed purchase of Paravant Inc.," said Standard & Poor's credit analyst Christopher DeNicolo. Total debt to capital is estimated to decline to below 45% pro forma for the equity sale from over 50% after the Paravant acquisition. The proceeds from the sale will be used for general corporate purposes including acquisitions, debt repayment, and capital expenditures. Ratings on DRS reflect good niche positions in the defense industry and a somewhat above average financial profile, offset by the risks inherent in an active acquisition program. Parsippany, New Jersey-based DRS is a supplier of defense electronics products and systems, providing naval combat display workstations, thermal imaging devices, electronic sensor systems, mission recorders, and deployable flight incident recorders. The company faces the characteristic industry risks of program delays, potential for cost overruns, and competition from much larger defense contractors. DRS is narrowly focused, but serves as a sole-source contractor on a number of well- supported military programs, with incumbency spanning many years. Backlog was a healthy $652 million at Sept. 30, 2002. Acquisitions are an important element of management's growth strategy. In September 2001, DRS acquired the systems and sensors business of Boeing Co., for $67 million, financed by debt, and in July 2002 acquired the assets and assumed certain liabilities of the Navy Controls Division of Eaton Corp., for $92 million using cash on hand. Recently, DRS completed the acquisition of Paravant Inc., for $92 million plus $13 million in assumed debt. The current equity offering follows a similar- sized sale in December 2001, giving DRS financing capacity for small to moderate-size acquisitions. Credit protection measures are expected to improve due to the earnings contribution of acquired operations, with total debt to EBITDA in the 2.5x to 3.0x range and EBITDA to interest expense about 4.0x. Management's disciplined growth strategy, combined with the benefits of a favorable defense budget environment, could lead to improvement in the company's credit profile and warrant an upgrade in the intermediate term. DYNEGY: Sells Global Liquids Trading Business to Transammonia ------------------------------------------------------------- Dynegy Midstream Services, LP, a wholly owned subsidiary of Dynegy Inc., (NYSE:DYN) has sold the London-based international LPG trading and transportation business operated by Dynegy Global Liquids to Trammo Gas International Inc., a wholly owned subsidiary of Transammonia Inc. The transaction closed on Dec. 13, 2002, and will be effective on Jan. 1, 2003. Terms of the sale were not disclosed. "Sale of our international liquids business will benefit liquidity through the return of significant amounts of posted collateral back to Dynegy in the first quarter of 2003, remove lease obligations and parent guarantees related to shipping activities, and is consistent with our strategy to focus our trading and marketing activities on our owned, physical assets in North America," said Steve Furbacher, president, Dynegy Midstream Services. Furbacher added, "The transaction structure benefits our customers and suppliers by providing for an efficient transfer of the business to Transammonia." Dynegy Midstream Services is an integrated midstream company with operations in both the Upstream and Downstream segments of the North American energy industry. The company ranks as one of North America's largest natural gas liquids marketers, and is engaged in the gathering, processing, fractionation, storage, transportation and marketing of natural gas and natural gas liquids. Dynegy Inc., owns operating divisions engaged in power generation, natural gas liquids, regulated energy delivery and communications. Through these business units, the company serves customers by delivering value-added solutions to meet their energy and communications needs. * * * As previously reported, Dynegy Holdings Inc.'s senior unsecured debt rating was downgraded to 'BB+' from 'BBB' by Fitch Ratings. In addition, Fitch downgraded Dynegy Inc.'s indicative senior unsecured debt to 'BB+' from 'BBB-'. The short-term ratings for DYNH and DYN' have been lowered to 'B' from 'F3'. The ratings for DYN and DYNH remain on Rating Watch Negative where they were originally placed on Nov. 9, 2001. In addition, ratings for affiliated companies, Illinois Power Co., and Illinova Corp., have been lowered and remain on Rating Watch Negative. EMPLOYERS SECURITY: S&P Junks Fin'l Strength Rating at CCCpi ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its counterparty credit and financial strength ratings on Employers Security Insurance Co., to 'CCCpi' from 'BBpi'. "This rating action was based on the company's poor operating performance, sharp decline in capitalization, high leverage, and continued geographic and product-line concentrations," said Standard & Poor's credit analyst Tom Taillon. ESIC, formed in 1992, writes primarily workers' compensation policies in Indiana, Illinois, Kentucky, and Missouri. Indiana, the company's home state, accounts for about 60% of its business. The company is a wholly owned subsidiary of Employers Security Holding Co. ESHC is principally owned by a group of independent insurance agents located throughout Indiana. These same agents conduct the majority of the company's marketing efforts, with all appointed agencies having equity rights to the company. ENCOMPASS SERVICES: Wants to Hire Ordinary Course Professionals --------------------------------------------------------------- Encompass Services Corporation management has identified 509 law firms, engineers, accountants, and other professionals that they routinely turn to in the ordinary course of their business. Pursuant to Sections 105 and 327 of the Bankruptcy Code, the Debtors are required to file formal applications with the Court should they wish to employ these professionals. The Debtors, however, see that costs would be astronomical if each of these professionals were required to step through the process of filing and prosecuting formal fee applications. They believe that the average total fees to all professionals is $1,570,000 per month. With this in mind, the Debtors ask Judge Greendyke to dispense with the employment application filing requirement for each of these 509 ordinary course professionals. The Debtors suggest that each professional will file with the Court an affidavit setting forth the information required under Rule 2014 of the Federal Rules of Bankruptcy Procedure within 30 days as agreed to with the U.S. Trustee. The Debtors further suggest that they be permitted to pay, without formal application, 100% of the interim fees and disbursements to each professional on the condition that the interim fees and disbursements do not exceed $50,000 per month over a six-month period. In the event a professional is paid more than $50,000 per month, the Debtors will submit a formal application to employ that professional for compensation and reimbursement of expenses. (Encompass Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENERGY CORP: S&P Junks Corporate Credit and Sub. Debt Ratings ------------------------------------------------------------- Standard & Poor's Rating Services lowered its corporate credit rating on independent oil and gas exploration and production company Energy Corp., of America to 'CCC+' from 'B', and its subordinated debt rating to 'CCC-' from 'CCC+'. The outlook is negative. Denver, Colo.-based ECA has about $175 million of total debt outstanding, pro forma for the recent repurchase of $42.5 million (face value) of its senior subordinated debt at a discount to par value. "The ratings downgrade reflects ECA's burdensome debt leverage with limited, near-term prospects for significant deleveraging and a likely decline in liquidity through 2003, as Standard & Poor's expects ECA to outspend its internally generated cash flow," noted Standard & Poor's credit analyst Steven K. Nocar. "Given the probable cash flow generation of ECA's properties, it may be very challenging for the company to continue servicing its debt while averting depletion," he continued. The ratings on privately held ECA reflect the company's challenging position as an independent E&P company with a small (201.1 billion cubic feet equivalent at year-end 2002; 92% gas; 83% proved developed), geographically limited reserve base, higher-than-average production and finding costs, very aggressive debt leverage, and limited liquidity. Debt leverage is extremely aggressive, with total debt as a percentage of total capital at Sept. 30, 2002, of about 86%. Substantial uncertainty also remains, regarding the company's ability to expand its operations into its capital structure. In 2003, weak cash flow protection measures are expected, with EBITDA interest coverage of between 1.0x and 2.0x. The negative outlook for ECA reflects continued uncertainty regarding the company's operational and financial condition. The ratings could be downgraded due to liquidity constraints that are preventing the company from covering its debt service charges and sufficiently investing to maintain production capacity. ENRON: Court Approves Settlement Pact between ENA and XTO Energy ---------------------------------------------------------------- XTO Energy Inc., (NYSE: XTO) announced that final approval has been granted by the presiding bankruptcy court to settle all outstanding claims with Enron North America Corporation. As a result, XTO Energy will pay Enron $6 million to settle all obligations between both parties and will recognize a $2 million gain on settlement. XTO Energy will also record additional gas revenue of $14 million relating to physical delivery contracts with Enron. In total, about $16 million of additional pre-tax income will be recognized in the fourth quarter of 2002. XTO Energy Inc., is a premier domestic natural gas producer engaged in the acquisition, exploitation and development of quality, long-lived oil and gas properties. The Company, whose predecessor companies were established in 1986, completed its initial public offering in May 1993. Its properties are concentrated in Texas, Oklahoma, Kansas, New Mexico, Arkansas, Wyoming, Alaska and Louisiana. For more information, visit http://www.xtoenergy.com ENRON CORP: ENA Selling Coal-Related Assets to Cline for $13MM -------------------------------------------------------------- Martin A. Sosland, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that Christopher Cline owns 100% interest in Jupiter Holdings, LLC, which was formed to hold the assets and operations of a coal mining project located in West Virginia. Jupiter owns three coal mines, a preparation plan and a CSX rail loadout facility in Boone County, West Virginia. On December 22, 1999, Mr. Sosland continues, Enron North America Corp. and Joint Energy Development Investments II, LP -- the Sellers -- acquired income participation certificates from Jupiter. ENA owns a Jupiter Holdings LLC Income Participate Certificate No. C-4, Series 1999, dated December 22, 1999, representing 25 Units. JEDI II, on the other hand, owns a Jupiter Holdings LLC Income Participation Certificate No. C-5 Series 1999, dated December 22, 1999, representing 75 Units. The Jupiter IPCs entitle the Sellers to receive 0.10% of the free cash flow from Jupiter for each income unit. Mr. Sosland reports that the Sellers agreed to loan Jupiter $16,000,000 pursuant to a Note dated December 22, 1999, due and payable March 31, 2002. The Jupiter Note is secured by all of Jupiter's assets. In connection with the transaction, the parties entered into several agreements, which include the Participation Agreement, Operating Agreement and Coal Purchase and Marketing Agreement -- the Cline Agreements -- entitling ENA to market all of Jupiter's coal production. According to Mr. Sosland, Mr. Cline also formed DPR Holding Company LLC, a West Virginia limited liability company. DPR owned three mining subsidiaries -- Dakota LLC, Panther LLC and Remington LLC. Direct Coal Sales LLC was also formed by Mr. Cline. On November 16, 1998, the Sellers committed $69,000,000 to be invested in DPR, Dakota, Panther and Remington: (i) $8,100,000 for the 19% Membership Unit interest in DPR; (ii) $24,900,000 for a 37% Income Participation Certificate interest in each of the three Mining Subsidiaries; (iii) $24,000,000 in the form of a term loan to Panther; and (iv) $12,000,000 in the form of a seven-year term loan to Dakota. Moreover, the Sellers committed $8,000 in exchange for a 19% Class A membership interest in DCS and $20,000 in exchange for 100% income participation certificate interests in DCS. Subsequent to the initial investment, Mr. Sosland informs the Court that the DPR Investments were restructured and the Panther Note and the DPR IPC interests in Panther were sold. Thus, the Sellers currently hold these assets as a result of the DPR transactions: 1. ENA -- DPR Holding Company LLC Unit Certificate evidencing 8,811 Units, dated July 1, 2001 and issued to ENA, as amended. 2. JEDI II -- DPR Holding Company LLC Unit Certificate evidencing 8,811 Units, dated July 1, 2001 and issued to JEDI II, as amended; -- Dakota LLC Income Participate Certificate No. C-7, Series 1998, evidencing 4,500 Unites, dated July 1, 2001, issued to JEDI II, as amended; -- Direct Coal Sales LLC Income Participation Certificate No. C-3, Series 1998, representing 7,500 Unites, dated November 16, 1998 and issued to JEDI II, as amended; and -- Remington LLC Income Participate Certificate No. C-3, Series 1998, representing 7,500 United, dated November 16, 1998 and issued to JEDI II, as amended. 3. ECT -- Dakota LLC Income Participation Certificate No. C-9, Series 1998, evidencing 1,500 Units, dated July 1, 2001, issued to ECT Merchant Investment Corp., a amended; -- Remington LLC Income Participation Certificate No. C-5, Series 1998, representing 2,500 Units, dated November 16, 1998 and issued to ECT, as amended; and -- Direct Coal Sales LLC Income Participation No. C-5, Series 1998, representing 2,500 Unites, dated November 16, 1998 and issued to ECT, as amended. Thus, ENA and JEDI II hold a 17.62% ownership interest in DPR, including the voting rights and entitling the holder to 17.62% of the DPR's free cash flow. JEDI II and ECT, on the other hand, collectively hold: (i) income participation certificates entitling them to 22.2% of Dakota's free cash flow; (ii) income participation certificates entitling them to 37% of Remington's free cash flow; and (iii) income participation certificates in DCS entitling them 100% of DCS' free cash flow. ENA and JEDI II collectively hold: (i) Term Notes from Dakota amounting $5,525,321; and (ii) Term Notes from Remington amounting $625,000. The Dakota Note and the Remington Note are secured by substantially all of the assets of Dakota and Remington, respectively. In connection with the DPR transactions, the parties entered into several agreements, which include the Omnibus Agreement, Operating Agreements and Coal Purchase and Marketing Agreements, entitling ENA to market all of Dakota, Remington and Panther coal production. ENA, JEDI II and ECT invested in Jupiter and DPR primarily to provide access to coal of the Coal and Emission Trading Group of Enron Global Markets. However, postpetition, the Debtors identify the group's operations to be non-core business operation. Hence, ENA, JEDI II and ECT began exploring a possible sale of their interests in Jupiter and DPR -- the Coal Assets. In early 2002, ENA initiated contact with 18 potential bidders wherein six Initial Contacts provided non-binding indicative bids or letters of interests. However, none wanted to submit final binding bids, except for -- Cline Resources and Development Company. Upon evaluation, ENA and JEDI II determined that the Coal Assets were worth more than Cline's bid offer and continued to negotiate the bid price. Hand in hand, in September 2002, ENA decided to further market the Coal Assets to 49 entities -- two of them visited the data room provided for due diligence. However, none of the two submitted a bid for the Coal Assets to date. After four months of substantial negotiation, Cline Resources agreed to significantly increase its bid price. In the absence of firm bids from the other parties and based on the potential diminution in the value of the Assets, ENA, in consultation with the Creditors' Committee, has determined that it would be in the best interests of the Debtors' estates to sell the Coal Assets to Cline Resources without additional auction procedure. ENA, JEDI II and ECT would sell their interests in the Coal Assets to Cline Resources on an "as is, where is" basis, and release Cline Resources from the Cline Related Agreements under the terms and conditions of the Purchase Agreement. The salient terms of the Purchase Agreement are: A. Purchase Price. The Purchase Price is $13,200,000. In addition, at the Closing, Cline Resources will cause to be paid and delivered to the Sellers the Held Amounts in proportions as ENA, ECT and JEDI II directs and to the specified accounts; provided that unless otherwise specified by ENA, ECT and JEDI II: (a) with respect to those amounts which are held in the Marketing Escrow Account, 100% thereof will be distributed and paid to ENA; and (b) with respect to those amounts which are held in the Cash Flow Escrow Account, 25% thereof will be distributed and paid to ENA and 75% remaining will be distributed and paid to JEDI II. The parties agree that no portion of the Purchase Price will be allocated to the release of claims by any member of Cline Resources Group under the terms of the Termination and Release Agreement. B. Deposit, Payment of Purchase Price and Held Amount. Cline Resources has deposited with, and paid to, the Sellers $1,000,000 as a deposit with 25% thereof to be paid to ENA and the rest to be paid to JEDI II. At the Closing, Cline Resources will pay the Purchase Price by wire transfer of immediately available funds to ENA and JEDI II in the proportions the Sellers specified. Cline Resources will also cause the Held Amounts to be paid and delivered to the Sellers at the Closing; C. Assumption of Liabilities. Effective on the Closing, Cline Resources agrees to assume, perform, discharge and fully satisfy all of the liabilities, duties and obligations of the Sellers of any kind whatsoever arising from, relating to or otherwise attributable to the Assets or the Applicable Entities, if any, or the ownership, handling, operation, maintenance or disposition thereof, together with any and all other obligations and liabilities expressly agreed to be assumed by Cline Resources under the Purchase Agreement, regardless of whether any of the same may arise from, be caused by or related to the sole, joint or concurrent negligence, strict liability or other fault or responsibility of any Seller Indemnified Party or any other person or party; D. Cline Guaranty and Commitment Letter. Mr. Cline will cause to be duly executed and delivered to the Sellers the Cline Guaranty. In addition, Cline Resources and Mr. Cline will cause to be duly executed and delivered to the Sellers the Commitment Letter; E. As Is, No Recourse. Cline Resources is acquiring the Assets on "as is, where is" basis, without recourse, with all defaults and without representations or warranties of any kind; F. Closing Conditions. The obligations of the parties to proceed with the Closing is subject to the satisfaction on or prior to the Closing Date certain conditions enumerated in the Purchase Agreement; G. Closing. The closing and consummation of the sale transaction will be held on the Closing Date at 10:00 a.m. Houston time, at the offices of Andrews & Kurth, or at other time and place as the parties may otherwise agree in writing; H. Indemnification by Cline Resources. Cline Resources will indemnify, defend, reimburse, release and hold harmless each of ENA, ECT, JEDI II and their respect Affiliates and Indemnified Parties from and against any and all Losses asserted against or incurred by any of the Seller Indemnified Parties: (a) for any inaccuracy or breach of Cline Resources, Mr. Cline, or any of its or his Affiliate's representations or warranties made in the Purchase Agreement, any Related Agreements or the Cline Agreement; (b) for any breach of the covenants or obligations of Cline Resources or Mr. Cline and its and his Affiliates under the Purchase Agreement, any Related Agreements or the Cline Agreement; (c) that relate to or arise out of any and of the Assumed Liabilities; or (d) that relate to or arise out of the Assets, the sale, transfer or other disposition of any of the Assets; I. Letters of Credit. On the Closing Date, Cline Resources and Mr. Cline will furnish to the Sellers, as security for all of their obligations, liabilities, indemnities and assumptions under the Purchase Agreement, an unconditional, irrevocable and transferable letter of credit for $2,000,000 with an expiration date of three years from the Closing Date; J. Termination of Agreement. The Purchase Price and the transaction contemplated may be terminated at any time prior to the Closing: -- by the written mutual consent of either party; -- if the Closing does not occur by December 11, 2002, then by the Sellers at any time; -- if prior to Closing, by Sellers if Cline Resources has breached the Purchase Agreement and the breach has not been cured after three days notice; -- if prior to Closing, by Sellers if Cline Resources fails to deliver the Commitment Letter or after issuance and delivery, it is terminated or revoked in whole or in part; -- if the Closing has not occurred by December 11, 2002, by Cline Resources if agreed conditions have not been satisfied by the Sellers or prior to Closing, the Sellers have breached the Purchase Agreement and the breach has not been cured within three days after notice; -- by Sellers if the Bankruptcy Court does not approve the transaction or an approval is awarded to a higher or better offer; and -- by either party if there will be any law enacted after the date of the Purchase Agreement that makes the consummation of the transactions illegal or if any Court of competent jurisdiction have issued a final and non-appealable order permanently restraining the consummation of the transactions contemplated by the Purchase Agreement; J. Effect of Termination. Without limiting the Parties' remedies and rights in regard to the Deposit, in the event of termination of the Purchase Agreement, written notice will be promptly be given by the terminating parties to the other parties and the Purchase Agreement will thereupon terminate. After the termination, the Parties will continue to be bound by their obligations and waivers, if any, as set forth in the Purchase Agreement. In addition, the terms and provisions of the Cline Agreement and the Consent Agreement will survive the termination of the Purchase Agreement; K. Sellers' Remedies. In the event the representations and warranties of Cline Resources are false or incorrect in any material respect or upon its failure to perform in all material respects any covenants prior to the Closing, the Sellers may elect to: -- enforce specific performance of the Purchase Agreement; and -- terminate the Purchase Agreement and retain the Deposit or pursue other available remedies whether at law or in equity. In addition, if the Purchase Agreement is terminated by the Sellers under circumstances in which all of Cline Resources' conditions have been satisfied and, nonetheless, Cline Resources has willfully or in bad faith failed or refuse to satisfy a covenant, then in addition to the right to retain the Deposit, Cline Resources will be and remain liable for all liabilities and losses imposed on, incurred by or asserted against the Sellers; L. Cline Resources' Remedies. Upon a termination of the Purchase Agreement by Cline Resources for cause, Cline Resources is entitled to receive back the Deposit and neither it or Mr. Cline will be entitled to any other remedy under the law, or in equity for the termination, all other remedies being waived; and M. Election of Remedies. If any Party elects to pursue singularly any remedy available to it under the Purchase Agreement, then that Party may at any time cease pursuing that remedy and elect to pursue any other remedy available to it under the Purchase Agreement. Mr. Sosland assures Judge Gonzalez that the Purchase Agreement was negotiated by the parties at arm's length and in good faith. Furthermore, Cline Resources does not hold any material interest in any of the Debtors, or any of its affiliates, including ENA, JEDI II or ECT and is not otherwise affiliated with ENA, any of the Debtors, JEDI II, ECT or their affiliates or their officers and directors. With respect to the Cline Related Agreements, Mr. Sosland notes that these Agreements are currently in default. Thus, ENA has determined that the Cline Related Agreement should be terminated. In connection with the Purchase Agreement, the Sellers, ENA CLO Holding Company I LP and Cline Resources and several of its affiliates, and Mr. Cline have agreed to terminate the 93 Cline Related Agreements and to settle their obligations thereunder pursuant to the Termination and Release Agreement attached to the Purchase Agreement. The termination will result in the Cline Group's -- Cline Resources, Mr. Cline, Panther, Remington and Jupiter -- payment to ENA the owed receivables of $1,845,514. By this motion, ENA seeks the Court's authority and approval of: (a) the sale of the ENA assets by ENA to Cline Resources, free and clear of all liens, claims, encumbrances, setoff rights, recoupment, netting and deduction; (b) the consent by ENA to the sale of the JEDI II/ECT Assets by JEDI II and ECT to Cline Resources; and (c) the Termination and Release Agreement and the Cline Agreement. Mr. Sosland contends that the sale of the Coal Assets is warranted under Section 363 of the Bankruptcy Code because: -- ENA had undertook substantial efforts to identify and contact potential purchasers and conducted an auction of the Coal assets and Cline Resources' bid is the best price obtainable for the Assets; -- the Court had previously approved sales of non-debtor affiliates of the Debtors through Section 105(a) in conjunction with Section 363(b); -- the terms of the Purchase Agreement have been negotiated at arm's length and in good faith; -- the Purchase Price is more than the value of the Assets as indicated in the engineering report issued in June 2002; and -- selling the Assets will maximize the value of the Assets for the estate. Furthermore, Mr. Sosland asserts, the Court should approve the Termination and Release Agreement and the Cline Agreement pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure since: -- the parties will terminate the 93 Agreements and resolve the claims consensually, without litigation; and -- the Agreements are products of arm's length bargaining between the parties. (Enron Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 609/392-0900) Enron Corp.'s 9.125% bonds due 2003 (ENRN03USR1) are trading at about 13 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR1 for real-time bond pricing. ENVIRONMENTAL OIL: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: Environmental Oil Processing Technology, Inc. 2801 Brandt Avenue Nampa, Idaho 83687 Bankruptcy Case No.: 02-04054 Type of Business: Used motor oil gathering, refining and sales. Chapter 11 Petition Date: December 9, 2002 Court: District of Idaho Debtor's Counsel: Wm. Lyman Belnap, Esq. Belnap & Curtis, PLLC 1401 Shoreline Drive, Suite 2 PO Box 7685 Boise, Idaho 83707 Tel: 208-345-3333 Fax: 208-345-4461 Total Assets: $12,266,286 Total Debts: $13,822,120 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Lewis & Clark College Refinery and Storage $11,933,096 0615 SW Palatine Hill Road facility Portland, OR 97219-7895 Lewis & Clark College Development Refinery $11,933,096 0615 SW Palatine Hill Road (1.5MM Secured) Portland, OR 97219-7895 Lewis & Clark College Machinery and $11,933,096 0615 SW Palatine Hill Road equipment, Nampa (1,502,500 Portland, OR 97219-7895 site Secured) Belyea Company, Inc. Trade Debt $302,000 2200 Northwood Avenue Easton, PA 18045-2239 Tel: 610-515-8775 Internal Revenue Service 2002 Payroll Taxes $128,996 Tod Tripple Personal Loans $195,408 Patton Boggs LLP Attorney Services $94,617 Idaho State Tax Commission Withholding Taxes $20,499 Oil Transportation Co. Hauling Services $44,967 PCE Pacific, Inc. Trade Debt $59,913 R. Gordon Jones, CPA Accounting Services $18,426 Chemical Transfer Company Oil Hauling Services $15,495 Storey County (Reno) Tax County Property Tax $12,596 Midwest Custom Chemicals Trade Debt $10,128 Gem Shop Trade Debt $8,104 HJ and Associtates Accounting Services $8,312 Liberty Equipment and Trade Debt $6,882 Supply Canyon County Tax Property Tax 2001 $5,767 Collector UNIVAR USA Inc. Waste Incineration $4,156 Services and trade debt Payne and Fears, LLP Attorney Services $3,466 EXODUS COMMS: Has Until Feb. 14 to Challenge Disputed Claims ------------------------------------------------------------ EXDS Inc., and the EXDS Plan Administrator obtained permission from the Court extending the deadline within which EXDS must object to the allowance of certain types of Disputed Claims identified in the Reorganization Plan, through February 14, 2003. Section 1.22 of Plan defines "Claims Objection Deadline" as: "the last day for filing objections to Disputed Claims (other than Disputed Claims set forth in Sections 1.36(a)(i), 1.36(b)(i), 1.36(b)(ii) or 1.36(b)(iii) hereof, for which no objection or request for estimation will be required), which day will be the later of: (a) one hundred eighty (180) days after the Effective Date or (b) sixty (60) days after the Filing of a proof of claim for, or request for payment of, the Claim or any other date as the District Court may order." With respect to the excluded claims, the deadline to object is December 16, 2002. EXDS wants to extend the claims objection deadline to February 14, 2003. A Disputed Claim is any claim, including any administrative claims, which has not been allowed pursuant to the Plan, a Final Order or a settlement stipulation, and: A. If no proof of claim has been filed by the applicable Bar Date: -- a Claim that has been listed on the Schedules as disputed, contingent or unliquidated; -- a Claim that has been listed on the Schedules as other than disputed, contingent or unliquidated, but to which the Debtors, Reorganized EXDS, the Plan Administrator, the Plan Committee or any other party-in-interest has posed a timely objection or request for estimation in accordance with the Plan, the Bankruptcy Code and the Bankruptcy Rules by the Claims Objection Deadline; and -- with respect to Fee Claims and Administrative Claims, the deadline set forth in Article XII of the Plan, as applicable, which objection or request for estimation has not been withdrawn or determined by a Final Order; and B. If a proof of claim or request for payment of an Administrative Claim has been filed by the applicable Bar Date: -- a Claim for which no corresponding Claim has been listed on the Schedules; -- a Claim for which a corresponding Claim has been listed on the Schedules as other than disputed, contingent or unliquidated, but the nature or amount of the Claim as asserted in the proof of claim varies from the nature and amount of the Claim as listed on the Schedules; -- a Claim for which a corresponding Claim has been listed on the Schedules as disputed, contingent or unliquidated; -- a Claim for which a timely objection or request for estimation is posed by the Debtors, Reorganized EXDS, the Plan Administrator, the Plan Committee or any other party-in-interest in accordance with the Plan, the Bankruptcy Code and the Bankruptcy Rules by the Claims Objection Deadline; or -- with respect to Fee Claims and Administrative Claims, by the deadline set forth in Article XII of the Plan, as applicable, which objection or request for estimation has not been withdrawn or determined by a Final Order. (Exodus Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) FAIRFAX: A.M. Best Puts B++ Fin'l Strength Ratings Under Review --------------------------------------------------------------- A.M. Best Co., has placed the financial strength ratings of B++ (Very Good) of Fairfax's TIG Insurance Group (Dallas) and Ranger Insurance Group, (Delaware) under review with developing implications. Concurrently, A.M. Best has placed the financial strength rating of A- (Excellent) of Commonwealth Insurance Company (British Columbia, Canada) under review with developing implications and has withdrawn the financial strength rating of B++ (Very Good) from International Insurance Company (Illinois), which was merged into TIG effective December 16, 2002. All other financial strength ratings and debt ratings of Fairfax Financial Holdings are unaffected. As recently announced, Fairfax will acquire the remaining 72% ownership interest in IIC over time but has immediately merged IIC into TIG. This transaction is part of a structural realignment to remove Ranger, Commonwealth and a significant portion of OdysseyRe from under the direct ownership of TIG. Concurrent with these actions, Fairfax has placed the substantial program business of TIG into voluntary run-off. It is expected that certain books of business within TIG, considered to be ongoing, will be continued in other insurance subsidiaries, which will not be direct subsidiaries of TIG. Furthermore, the combined entity will be adding approximately $200 million to its reserves and taking approximately $35 million in restructuring charges, most of which will be offset by negative goodwill at the Fairfax level embedded in the IIC transaction. The merger of IIC and TIG--combined with the subsequent movement of the specified insurance subsidiaries and the purchase of stop-loss reinsurance protection by Fairfax for the benefit of TIG--is expected to adequately support TIG's run-off plan and its current "Very Good" financial strength rating. A.M. Best expects the balance sheet and liquidity position of TIG together with the financial flexibility of the above referenced insurance subsidiaries will ultimately benefit from the actions taken and the contemplated future realignment of the existing ownership structure. Nonetheless, the under review status reflects the execution risk related to the planned transfer of books of business, the purchase of the reinsurance cover and the completion of the organizational restructuring. However, A. M. Best views the likely removal of Commonwealth from under TIG as positive. Although Fairfax will be adding approximately $200 million in future purchase obligations to its balance sheet to acquire the balance of IIC, Fairfax's financial leverage and cash coverage remain relatively unchanged from year-end 2001 due to higher earnings in 2002, while earnings coverage has improved. For a complete list of the subsidiaries placed under review, please visit http://www.ambest.com/press/TIGpdf A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com FAIRFAX FIN'L: Fitch Takes Downgrade Actions on Debt Ratings ------------------------------------------------------------ Fitch Ratings has downgraded the senior debt ratings of Fairfax Financial Holdings Inc., and TIG Holdings Inc., as well as the Insurer Financial Strength Ratings of the members of the TIG Insurance Group, excluding Ranger Insurance Company which is expected to be removed from the group during 2003. Additionally, Fitch has affirmed the IFS ratings of the Fairfax Insurance Group and Odyssey Re Group. These actions follow Fairfax's announcement of plans to restructure TIG and increase its investment in TRG Holding Corp. Specifically, Fairfax will place TIG Insurance Company and most of its subsidiaries into run-off, strengthen TIG's loss reserves by $200 million and purchase a $300 million adverse loss development cover. Fairfax will acquire additional shares of TRG from Xerox Corp., for US$425 million payable over a 15-year period, and merge TRG's International Insurance Co., subsidiary with TIG Insurance Company. TIG will distribute to Fairfax about C$1.25 billion of assets, which primarily consists of 33.2 million shares Odyssey Re Holdings, as well as all of Commonwealth Insurance Company and Ranger Insurance Company. Initially, these assets will be held in a trust and if Fairfax replaces a $300 million adverse development cover provided to TIG by an affiliated reinsurer with a third party cover, $300 million of securities will be released from the trust. Most of the remaining trust assets will be released upon TIG meeting certain financial tests at the end of 2003. Although the proposed restructuring alleviates some of the concern regarding the event risk related to sizable 2003 debt maturities and Fairfax's weak financial flexibility, Fitch has downgraded its senior debt rating one notch. This largely reflects the expectation of an increase in financial leverage related to the Xerox purchase agreement and Fitch's IFS/debt gapping guidelines. Additionally, ongoing concerns related to Fairfax's dependence on investment gains and asset sales to achieve profitability and holding company cash targets, significant exposure to reinsurance recoverables, and loss reserve adequacy of U.S. commercial lines companies. Furthermore, Fairfax's financial flexibility remains relatively weak, as evidenced by Fairfax's negotiations to extend the maturity of its RHINOS and declining level of available bank lines. Although, the restructuring is expected to significantly improve holding company flexibility, particularly in light of sizable 2003 debt maturities (i.e., option to spin-off a further stake in ORH and sell/extract dividends from Commonwealth and Ranger) parental dividend flow is expected to improve only moderately. The placement of TIG Insurance Group into runoff and the strengthening of its reserves were generally within Fitch's prior rating expectations, however, regulatory approval to de- stack (if certain guidelines are met) a majority ownership in Odyssey Re and all of Commonwealth Insurance Co. and Ranger Insurance Co., were not. Fitch has therefore downgraded TIG's IFS rating two notches to 'BB+'. This reflects an expectation of a significant decline in the overall level of surplus of TIG, concerns regarding the loss reserve adequacy at TIG Insurance Co. and IIC and the reduced financial incentive for Fairfax to support TIG following the completion of the restructuring. Fairfax Financial Holdings Limited is a publicly traded insurance holding company that is listed on the Toronto Stock Exchange with operating subsidiaries primarily engaged in property/casualty insurance, reinsurance and insurance claims management services. The company had assets of C$35.8 billion and shareholders' equity of C$3.6 billion at September 30, 2002. Rating Action Fairfax Financial Holdings Limited -- Senior Debt Downgrade to 'BB' from 'BB+' / Negative. TIG Holdings, Inc. -- Senior Debt Downgrade to 'B+' from 'BB'/ Negative; -- Trust Preferred Downgrade to 'B-' from 'BB-'/ Negative. Members of The Fairfax Primary Insurance Group --Insurer Financial Strength Affirm 'BBB+' / Negative Odyssey Re Group --Insurer Financial Strength Affirm 'A-' / Stable Members of the TIG Insurance Group --Insurer Financial Strength Downgrade 'BB+' / Negative The members of the Fairfax Primary Insurance Group are: Commonwealth Insurance Co.; Commonwealth Insurance Co. of America; Zenith Insurance Co.; Federated Insurance Co. of Canada; Industrial County Mutual Insurance Co.; Crum & Forster Insurance Co.; Crum & Forster Underwriters of Ohio; Crum & Forster Indemnity Co.; The North River Insurance Co.; United States Fire Insurance Co.; Lombard General Insurance Co. of Canada; Lombard Insurance Co.; Markel Insurance Co. of Canada. The members of the Odyssey Re Group are: Compagnie Transcontinentale De Reassurance; Odyssey America Reinsurance Corp.; Odyssey Reinsurance Corp. The members of the TIG Insurance Group are: Fairmount Insurance Company; Ranger Insurance Co.; TIG American Specialty Ins. Company; TIG Indemnity Company; TIG Insurance Company; TIG Insurance Company of Colorado; TIG Insurance Company of New York; TIG Insurance Company of Texas; TIG Insurance Corporation of America; TIG Lloyds Insurance Company; TIG Premier Insurance Company; TIG Specialty Insurance Company. Ranger Insurance Co. Affirm 'BBB' / Evolving. FAO INC: Wooing Wells Fargo to Relax Covenants Under Credit Pact ---------------------------------------------------------------- FAO, Inc. (Nasdaq: FAOO), warned of increased risk surrounding its liquidity situation. Due to rapid deterioration of its alternatives to obtain liquidity that it projects it will need, FAO announced that it was seeking to have its bank, Wells Fargo Retail Finance, LLC, relax recently imposed borrowing restrictions. In the event Wells were to refuse, FAO warned that it likely would have to seek protection under the bankruptcy code in order to reorganize its operations. FAO, Inc., (formerly The Right Start, Inc.) owns a family of high quality, developmental, educational and care brands for infants, toddlers and children and is a leader in children's specialty retailing. FAO, Inc., owns and operates the renowned children's toy retailer FAO Schwarz; The Right Start, the leading specialty retailer of developmental, educational and care products for infants and toddlers; and Zany Brainy, the leading retailer of developmental toys and educational products for kids. FAO, Inc., assumed its current form in January 2002 and operates a total of 253 retail stores nationwide. The Right Start brand originated in 1985 through the creation of the Right Start Catalog and is currently used in 61 retail stores nationwide. In September 2001, the Company purchased assets of Zany Brainy, Inc., which began business in 1991, and currently operates 169 Zany Brainy brand stores throughout the country. In January the Company purchased the FAO Schwarz brand, which originated 140 years ago in 1862, and certain related assets and currently operates 23 FAO stores nationwide. FMC CORP: Appoints D'Aloia and Greer to Board of Directors ---------------------------------------------------------- FMC Corporation (NYSE: FMC) announced that G. Peter D'Aloia and C. Scott Greer have been elected to the company's board of directors, effective December 11, 2002. D'Aloia, 57, is currently senior vice president and chief financial officer of American Standard Companies, Inc. Prior to joining American Standard in 2000, D'Aloia spent 28 years with Allied Signal, Inc., (now Honeywell International, Inc.) in a series of senior financial and corporate planning positions. At Allied Signal/Honeywell he held corporate positions of vice president of tax, vice president and treasurer, vice president and controller, and chief financial officer of the engineered materials sector. In 1997 he was named vice president, planning and development. Before joining Allied Signal, he was a tax attorney with Arthur Young and Company. D'Aloia has a bachelor's degree in accounting and a master's degree in taxation from New York University. He also holds a Juris Doctorate from St. John's University. Greer, 51, is chairman of the board, president and chief executive officer of Flowserve Corporation. Before joining Flowserve in 1999 as president and chief operating officer, he was president of UT Automotive, Inc., a subsidiary of United Technologies Corporation. Prior to United Technologies, he had been with Echlin Inc., for 18 years where last he served as president and chief operating officer. Greer received a bachelor's degree in business administration and a master's degree in accounting from the University of Wisconsin and is a certified public accountant. He also holds a bachelor's degree in liberal arts from St. Olaf College. Greer is also director of Washington Group International, Inc., an international design, engineering and construction company. With this election, FMC's board comprises nine members, with eight outside, independent directors and one inside director. FMC Corporation is a diversified chemical company serving agricultural, industrial and consumer markets globally for more than a century with innovative solutions, applications and quality products. The company employs approximately 5,700 people throughout the world. The company divides its businesses into three segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. * * * As reported in Troubled Company Reporter's Sept. 26, 2002 edition, Standard & Poor's assigned its triple-'B'-minus rating to FMC Corp.'s proposed $550 million senior secured credit facilities and affirmed its triple-'B'-minus corporate credit rating on the diversified chemical company. The outlook is revised to negative from stable. At the same time, Standard & Poor's assigned its double-'B'-plus rating to FMC's proposed $300 million senior secured notes due 2009 and lowered the ratings on its existing senior unsecured notes from triple-'B'- minus to double-'B'-plus. The downgrade reflected the noteholders' diminished recovery prospects in a default and liquidation scenario, pro forma for completion of the refinancing plan that will provide the holders of bank obligations with a first-priority claim on assets. Proceeds of the notes, which will be secured on a second- priority basis, will be used primarily to repay existing debt and to establish a debt reserve account to meet near-term debt maturities. Pro forma for the refinancing, Philadelphia, Pa.- based FMC has nearly $1.4 billion of debt outstanding. FOCAL COMMS: Commences Trading on OTCBB Effective December 18 ------------------------------------------------------------- Focal Communications Corporation, whose corporate credit is rated by Standard & Poor's at CC, received approval from the National Association of Securities Dealers to begin trading its common stock on the Over-the-Counter Bulletin Board on Wednesday, December 18, 2002, under the symbol (OTC Bulletin Board: FCOM). The Company is no longer in compliance with Nasdaq National Market listing standards and is voluntarily moving from the Nasdaq National Market system to the Over-the- Counter Bulletin Board. Focal's common shares ceased trading on the Nasdaq National Market system at the close of the trading session Tuesday, December 17, 2002. Focal Communications Corporation -- http://www.focal.com-- is a leading national communications provider. Focal offers a range of solutions, including local phone and data services, to communications-intensive customers. Approximately half of the Fortune 100 use Focal's services, in 23 top U.S. markets. Focal Communications' 12.125% bonds due 2008 (FCOM08USR1), DebtTraders says, are trading at a penny on the dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=FCOM08USR1 for real-time bond pricing. GENUITY INC: Look for Schedules and Statements by February 10 ------------------------------------------------------------- Genuity Inc., and its debtor-affiliates sought and obtained additional time to file comprehensive schedules of their assets and liabilities, executory contracts and unexpired leases, statements of financial affairs and lists of equity security holders and otherwise comply with the financial disclosure requirements imposed by 11 U.S.C. Sec. 521(1). Judge Beatty tells the Debtors to get those documents to the courthouse by February 10, 2003. According to J. Gregory Milmoe, at Skadden Arps Slate Meagher & Flom, in New York, there are thousands of parties-in-interest in Genuity's chapter 11 cases, located around the United States and in various nations around the world in which the Debtors operate. In light of the size, complexity and the international scope of their businesses, and the fact that certain prepetition invoices have not yet been received or entered into the Debtors' financial systems, the Debtors believe that completion of the Schedules and Statements will require an expenditure of significant time and effort by the Debtors' employees, many of whom will be simultaneously working on other aspects of the Debtors' restructuring efforts and endeavoring to stabilize operations by addressing the myriad of employee, customer and vendor issues raised by the filing of these cases. Although the Debtors already have commenced the extensive process of gathering the necessary information to prepare and finalize their Schedules and Statements, delivering schedules and statements now is impossible. At present, the Debtors believe an additional 60 days will be sufficient to prepare and file the Schedules and Statements. The Debtors make is clear their request is without prejudice to their right to seek further extensions if that becomes necessary. (Genuity Bankruptcy News, Issue No. 3 Bankruptcy Creditors' Service, Inc., 609/392-0900) GIANT INDUSTRIES: Financial Profile Deterioration Concerns S&P -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit ratings on independent petroleum refiner Giant Industries Inc., to 'B+' from 'BB-'. The outlook on Giant remains negative, as additional deterioration in the company's financial profile could trigger another ratings downgrade. Scottsdale, Ariz.-based Giant has roughly $400 million in outstanding debt. "The rating action reflects the prospects for continued, poor refining margins that could lead to deterioration in Giant's financial profile," stated Standard & Poor's credit analyst Daniel Volpi. "Standard & Poor's is concerned over the company's capacity to withstand an ongoing period of poor industry conditions," he added. A difficult operating environment has resulted in noncompliance with certain covenants in Giant's credit facilities. Although the credit facilities have since been amended, Giant has pledged additional collateral (first-priority liens on the Ciniza and Bloomfield facilities; New Mexico retail stations), limiting future financing alternatives. In addition, the amendments call for $15 million of asset sales to June 30, 2003, from Oct. 1, 2002 to reduce indebtedness. Since the Yorktown acquisition, Giant has sold six retail units for $11.25 million and the company is in the process of selling over 20 retail units in the Phoenix and Tucson areas. The ratings on Giant reflect its participation in the very competitive, erratically profitable, capital-intensive refining and marketing segment of the petroleum industry, as well as aggressive financial leverage. The negative outlook reflects near-term concerns about the company's liquidity. For the longer term, Standard & Poor's believes that competitive pressures could weaken Giant's market position through the commencement of various projects to deliver refined products into the company's Four Corners market. GOLDEN NORTHWEST: S&P Drops Rating to D over Missed Payment ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Golden Northwest Aluminum Inc., to 'D' from double-'C' following the company's missed $9 million interest payment on its 12% First Mortgage Notes. In addition, Standard & Poor's removed the rating from CreditWatch. Standard & Poor's does not believe the company will make this interest payment under the 30-day grace period granted under the indenture. At the company's request, Standard & Poor's will shortly be withdrawing its ratings on the company. HALLIBURTON: Completes Sale of ShawCor Shares for $64 Million ------------------------------------------------------------- Halliburton (NYSE: HAL) announced the completion of the sale of 7,723,996 ShawCor Ltd., (TSX: SCL.A, SCL.B) Class A Subordinate shares for approximately $64 million. The shares were received as partial consideration for the September 30, 2002, sale of Halliburton's interest in Bredero-Shaw to its partner, ShawCor Ltd. The sale of its interest in Bredero-Shaw, which is the world's largest pipecoating company, and the sale of the ShawCor Ltd., shares are part of Halliburton's previously announced plan to divest non-strategic assets. Halliburton, founded in 1919, is one of the world's largest providers of products and services to the petroleum and energy industries. The company serves its customers with a broad range of products and services through its Energy Services Group and Engineering and Construction Group business segments. The company's World Wide Web site can be accessed at http://www.halliburton.com HAYES LEMMERZ: Court Okays Deloitte & Touche as Tax Consultant -------------------------------------------------------------- Hayes Lemmerz International, Inc., and its debtor-affiliates sought and obtained Bankruptcy Court authority to employ and retain Deloitte & Touche LLP as their International Tax Consultant, nunc pro tunc to May 29, 2002, for the purpose of providing advice about the tax implications of restructuring the Company's international operations. Kenneth A. Hiltz, the Debtors' Chief Restructuring Officer, relates that Deloitte will: A. assist in the development of an international structure that minimizes global taxes and maximizes after tax cash flows necessary to service debt; B. assist in calculations necessary to support any international restructuring; and C. provide other international tax consulting services as requested. The Debtors believe that Deloitte is well qualified and able to provide these services to the Debtors in a cost-effective, efficient and timely manner. These services are necessary in the ongoing operation and management of the Debtors' businesses and assets, as well as to the Debtors' restructuring efforts under Chapter 11 of the Bankruptcy Code. According to Mr. Hiltz, Deloitte will bill for services at these discounted rates: Level Standard Rate Debtors' Rate -------------- ------------- ------------- Partner $660 $530 Senior Manager 550 440 Manager 475 380 Senior 360 290 Staff 260 210 The Debtors believe Deloitte's fees are fair and reasonable in light of industry practice, market rates both in and out of Chapter 11 proceedings, Deloitte's experience in reorganizations, and the scope of work to be performed. Mr. Hiltz informs the Court that Deloitte began serving as tax consultants to the Debtors on May 29, 2002. From that date, Deloitte estimates that its fees and expenses for international tax consulting services total $60,000. As of November 15, 2002, the Debtors have not made any postpetition payments to Deloitte. Deloitte Partner John T. Womack, assures the Court that his Firm's officers and employees: A. do not have any connection with the Debtors, their creditors, or any other party in interest, or their attorneys or accountants; B. are "disinterested persons" as defined in Section 101(14) of the Bankruptcy Code; and C. do not hold or represent an interest adverse to the Debtor's estates; However, out of an abundance of caution, Mr. Womack discloses that Deloitte has provided and is still currently providing services for these creditors in matters wholly unrelated to the Debtors' cases: A. Secured Creditors: CIBC; Credit Suisse First Boston; Merrill Lynch; ABN Amro Bank; Alliance Capital; AMEX; Banos, Nazionale del Lavoro Spa; Bank Leumi; Bank of America; Bank of Montreal; Bank of New York; Bank of Nova Scotia; Bank of Tokyo-Mitsubishil; Bank One; Bear Stearns Asset Management; BNP Paribas; Citibank; Comerica Bank; Conseco; Credit Agricole Indosuez; Credit Industrial Et Commercial; Credit Lyonnais; Dai-Ichi Kangyo Bank Ltd.; Deutsche Bank AG; First Union National Bank; Fleet National Bank; Fuji Bank Ltd.; Goldman Sachs; ING Capital; Mellon Bank N.A.; Michigan National Bank; Natexis Banque; National City Bank; Octagon; Pilgrim; Firstar Bank; Sterling; Sun America; Provident Bank; and Wachovia Bank; B. Major Bondholders: ASH Amro Securities LLC; American Express Trust Company; Banc of America Securities LLC; Bank of New York; Bankers Trust Company; Bear Stearns Securities Corp.; Bank One Trust Company, N.A; Brown Brothers Harriman & CO.; Charles Schwab & Co., Inc.; Chase Manhattan Bank; Citibank, N.A.; City National Bank; Commerzbank Capital Markets Corporation; Credit Suisse First Boston Corporation; Deutsche Bank AGEdward D. Jones & Co.; Fifth Third Bank; First Union National Bank; Goldman Sachs & Co.; Investors Bank & Trust; J.P. Morgan Securities Inc.; Legg Mason Wood Walker, Inc.; Lehman Brothers, Inc.; McDonald Investments Inc.; Mercantile- Safe Deposit & Trust Company; Mizuho Trust & Banking Co. (USA); Merrill Lynch Pierce Fenner & Smith; Morgan Stanley & Co. Incorporated; National Financial Services Corporation; Northern Trust Company; PNC Bank, National Association; Prudential Securities Incorporated; Salomon Smith Barney Inc./Salomon Brothers; State Street Bank and Trust Company; Sumitomo Trust & Banking Co. (USA); Suntrust Bank; Toyo Trust Company of New York; UPS Painewebber Inc.; UBS Warburg LLC U.S. Bank N.A.; Wachovia Bank, N.A.; and C. Unsecured Creditors: Alcan Aluminum Corp.; Alcoa Automotive Castings; Alcoa, Inc.; Ann Arbor Machine Company; Borden Chemical; I Grade Foundries; Honda of America Mfg. Inc.; Industrial Systems Associates Inc.; LTV Steel Company; National Steel Corporation; Pechiney Sales Corporation; PPG Industries Inc.; Stelco USA Inc.; Vista Metals; Oglebay Norton Ind. Sands Inc.; CDP North America, Inc.; Beef Corporation; Missouri Public Service; Delphi Automotive Systems; and Gosiger, Inc. (Hayes Lemmerz Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) Hayes Lemmerz Int'l Inc.'s 11% bonds due 2006 (HLMM06USR1) are trading at about 2 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=HLMM06USR1 for real-time bond pricing. ILLINOIS POWER: Commences $550 Million Mortgage Bond Offering ------------------------------------------------------------- Dynegy Inc., (NYSE:DYN) announced that its subsidiary, Illinois Power Company, a regulated energy delivery company located in Decatur, Ill., has agreed to sell $550 million of 11.5 percent mortgage bonds due 2010 in a private offering, $150 million of which will be issued on a delayed basis subject to regulatory approval. The mortgage bonds will be sold at a discounted price of $97.48. Following the completion of the offering, Illinois Power will use the net proceeds to refinance or repay debt. Closing of $400 million of mortgage bonds is expected to occur on Dec. 20, 2002 and is subject to satisfaction of customary closing conditions. The remaining $150 million of mortgage bonds is expected to close, subject to approval from the Illinois Commerce Commission, in January 2003. "This bond offering is another important step in our efforts to improve our financial profile. The response we received on the offering demonstrates that the capital markets recognize the value in a new Dynegy," said Bruce A. Williamson, president and chief executive officer of Dynegy Inc. "The expected net proceeds will be used to repay a substantial portion of Illinois Power's 2003 debt maturities, which is consistent with our plan for Illinois Power to meet its financing needs independently." These mortgage bonds may be resold by the initial purchasers to certain qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. These mortgage bonds have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration under the Securities Act. Illinois Power serves more than 650,000 natural gas and electricity customers in a 15,000-square-mile area across Illinois. Dynegy Inc., owns operating divisions engaged in power generation, natural gas liquids, regulated energy delivery and communications. Through these business units, the company serves customers by delivering value-added solutions to meet their energy and communications needs. The company's Web site is http://www.dynegy.com * * * As reported in Troubled Company Reporter's Wednesday Edition, Fitch Ratings expected to assign a 'BB-' rating to Illinois Power Company's proposed $500 million issuance of 144A mortgage bonds, due December 2010. The rating is currently on Rating Watch Negative, as are the 'B' senior unsecured and 'CCC' preferred stock ratings of IP. IP is an indirect subsidiary of Dynegy Inc., senior unsecured rated 'B', Rating Watch Negative. Proceeds from the proposed mortgage bond issuance will be used to refinance and repay debt. Any proceeds over existing Illinois Commerce Commission authorized levels will be placed in escrow pending ICC approval. The ratings for IP reflect the structural and functional ties between IP and its affiliate companies, DYN and Dynegy Holdings Inc., senior unsecured rated 'B', Rating Watch Negative. DYN is currently in the process of renegotiating $1.6 billion of bank credit facilities that mature in the second quarter of 2003. If DYN is successful in renewing its bank facilities on a secured basis, unsecured creditors will become structurally subordinated. As a result, Fitch would lower the senior unsecured ratings of DYN and DHI by one or more notches. Due to the relationship between DYN and IP, the ratings of IP, including the new mortgage bonds, would also likely be reduced. INSILCO HOLDING: Receives Court Approval of 'First-Day' Motions --------------------------------------------------------------- Insilco Holding Co., (OTC Bulletin Board: INSL) announced that the U.S. Bankruptcy Court for the District of Delaware has approved orders that will enable Insilco's businesses to conduct their operations in the ordinary course. Specifically, the Court approved an order granting interim approval of an agreement between Insilco and the Agent for its senior secured lending group allowing Insilco to meet all of its operating requirements through the use of its current cash reserves of approximately $22 million and its revenues from operations, in accordance with an agreed budget. Accordingly, Insilco is able to use these funds to pay suppliers in full, under normal terms, for all goods and services provided in the ordinary course of business after the bankruptcy filings. In addition, the Court approved an order authorizing Insilco to pay its current employees prepetition wages and compensation and to continue health and other benefit programs. The order also authorizes Insilco to pay any and all local, state and federal withholding and payroll-related taxes pertaining to prepetition periods. By order of the Court, all banks are directed to receive, process, honor and pay any and all checks drawn on the payroll and general disbursement accounts related to employee obligations of Insilco and its businesses, regardless of whether such checks are presented to banks before or after the date of Insilco's Chapter 11 filing. Additional first-day orders approved today by the Court, as well as other Court documents related to the Insilco Chapter 11 cases, can be obtained soon from http://www.insilco.com/chapt11.htmlor http://www.deb.uscourts.govcase number 02-13672. As announced yesterday, to facilitate the sales of Insilco's three business segments, Insilco Holding Co., and certain of its domestic subsidiaries filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code. None of Insilco's operations located outside of the United States was included in the Chapter 11 filings, though the shares of certain foreign subsidiaries and certain foreign assets will be included in the sale transactions, and it is anticipated that the completion of the sale of the assets of Insilco's Canadian subsidiary will require insolvency proceedings in Canada. The Chapter 11 filings allow the sale of the assets of the domestic entities to be free and clear from certain liabilities that the prospective purchasers do not wish to assume. Insilco Holding Co., through its wholly owned subsidiary Insilco Technologies, Inc., is a leading global manufacturer and developer of a broad range of magnetic interface products, cable assemblies, wire harnesses, high-speed data transmission connectors, power transformers and planar magnetic products, and highly engineered, precision stamped metal components. Insilco maintains more than 1.5 million square feet of manufacturing space and has 21 locations throughout the United States, Canada, Mexico, China, Ireland and the Dominican Republic serving the telecommunications, networking, computer, electronics, automotive and medical markets. For more information visit its sites at http://www.insilco.comor http://www.insilcotechnologies.com INTEGRATED TELECOM: US Trustee Appoints Creditors Committee ----------------------------------------------------------- Donald F. Walton, the Acting United States Trustee organized an Official Committee of Unsecured Creditors in the chapter 11 case involving Integrated Telecom Express, Inc. The five committee members are: 1. United Microelectronics Corp Attn: Stan Hung 106 3F, No. 76, Tunhwa South Rd., Sec. II Taipei, Taiwan, R.O.C. Phone: 886-2-27006999, Fax: 886-2-27026208; 2. Taiwan Special Opportunities Fund II Attn: T.J. Huang 16F, 169 Jen Ai Road Sec. 4, Taipei 106, Taiwan, R.O.C. Phone: 886-2-2772-2398, Fax: 886-2-2772-2397; 3. Techgains International Corporation Attn: Lolly Li 1111 Jupiter Rd., Ste. 100B, Plano, Texas, 75074 Phone: (972) 509-8588, Fax: (972) 509-8587; 4. Triton Venture Capital. Attn: Frank Jiang, D, 11th Floor, No. 89 Sung-Jen Rd., Taipei, Taiwan, R.O.C. Phone: 886-2-8780-6889, ext. 132 Fax: 886-2-8780-2089; and 5. Promate Electronic Co., Ltd. Attn: Eric Chen 4F32 Sec. 1, Huan Shan Rd., Hei Hu, Teipei, Taiwan, R.O.C. Phone: 886-2-2659-0303, Fax: 886-2-2798-8992. Integrated Telecom Express, Inc., provides integrated circuit and software products to the broadband access communications equipment industry. The Company filed for chapter 11 protection on October 8, 2002. When the Debtor filed for protection from its creditors, it listed $115,969,000 in total assets and $4,321,000 in total debts. IRON MOUNTAIN: S&P Assigns B Rating to Proposed $100MM Sr. Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' rating to Iron Mountain Inc.'s proposed $100 million senior subordinated notes due 2015, a rule 415 shelf drawdown. Net proceeds will be used to finance a cash tender offer and consent solicitation for all of the company's 9.125% senior subordinated notes due 2007 with an aggregate principal amount of about $75 million. Standard & Poor's also affirmed its 'BB-' corporate credit rating on the company. The outlook is stable. Boston, Mass.- based Iron Mountain had total debt outstanding of about $1.6 billion as of September 30, 2002. "Internal growth is expected to drive consistent financial performance in the near term. Earnings shortfalls, increased leverage, or aggressive capital spending that exceeds expected investment levels could pressure ratings," said Standard & Poor's credit analyst Andy Liu. The ratings reflect Iron Mountain's leading position as the world's largest records management company, its reliable internal growth generated from existing customers, its outsourcing of new customers' in-house storage operations, and modest debt capacity within the ratings to accommodate capital spending and acquisition activity. These factors are offset by fairly aggressive, although moderating, financial policies regarding its growth strategies. The company is the result of the February 2000 merger between Iron Mountain and Pierce Leahy Corp. The combination of the industry's two largest players also has resulted in a more favorable pricing environment and reduced competition for acquisitions. The company now enjoys a dominant market position and an established footprint in less developed markets. The company's aggressive expansion strategy culminated with the Pierce Leahy merger, and acquisition activity has since slowed. IRON MOUNTAIN: Facing $5-Million Suit Filed by Cozen O'Connor ------------------------------------------------------------- The law firm of Cozen O'Connor announced that two lawsuits were filed Monday in the Montgomery County Court of Common Pleas against Iron Mountain, Inc. Cozen O'Connor CEO Patrick J. O'Connor provided the following summaries: In one case, J. Peter Pierce, Sr.; Pioneer Capital L.P.; and Pioneer Capital Genpar, Inc.; have filed suit against Iron Mountain Inc., and several of its officers and directors, including chief executive officer, Richard Reese; chief financial officer, John Kenny; general counsel, Gary Watzke; and Board Member Vincent J. Ryan. Schooner Capital LLC, one of Iron Mountain's largest shareholders, is also named as a defendant in the lawsuit, which seeks more than $5,000,000 in damages. Mr. Pierce is currently a member of the Iron Mountain Board. The lawsuit contends that during the period of approximately November 2000 through March 2002, Iron Mountain intentionally interfered with Pierce and Pioneer's investment in trucking and warehousing company Logisteq, LLC, ultimately forcing Logisteq to file for bankruptcy, and causing the named plaintiffs to lose more than $5,000,000. During the same 16-month period, the lawsuit contends that Mr. Reese authorized an investigation of Mr. Pierce that was not disclosed to Mr. Pierce as a member of the Iron Mountain Board. The lawsuit also claims that Mr. Reese and the other defendants induced Mr. Pierce's former Logisteq business partner, Thomas Carr, to disclose confidential information about Mr. Pierce, Pioneer, and Logisteq; and that Mr. Reese authorized Iron Mountain's attorneys, Sullivan & Worcester, to pay Mr. Carr $50,000 after he filed a lawsuit against Mr. Pierce, Pioneer, and others. At the time of the payment, the lawsuit contends that Mr. Reese knew that Mr. Carr had been indicted by a federal grand jury in New York on criminal charges of receiving stolen checks, conspiracy, bank fraud and wire fraud involving in excess of $1 million. Mr. Pierce also asserts individual claims against the defendants for defamation and invasion of privacy during Iron Mountain's 16-month investigation of him, which included the secret taping of a Logisteq business meeting that was held at Pioneer's offices in January 2002. In another complaint, Hartford Windsor Associates, L.P., its general partner, and its limited partners have filed suit against Iron Mountain Inc., for intentional interference with contractual relations. The lawsuit centers on a facility owned by the partnership in East Windsor, Conn., which was leased to one of Iron Mountain's former competitors, Sequedex, LLC. The lawsuit contends that at sometime during the month of November 2001, Iron Mountain learned that Sequedex had secured an agreement with Travelers Insurance to perform records storage services in the Hartford area. Further, the plaintiffs contend that Iron Mountain also learned that Hartford Windsor had purchased a facility that was to be leased by Sequedex as its storage facility for the Travelers' business. With knowledge of these agreements, the lawsuit contends that Iron Mountain maliciously refused to transfer any of Travelers' boxes to Sequedex's storage facility, which caused Travelers to abandon its agreement with Sequedex. As a result, Sequedex was forced to breach its lease with Hartford Windsor, and the facility has been without a tenant since January 2002. Hartford Windsor and its partners are seeking substantial damages for Iron Mountain's actions. KAISER ALUMINUM: Court Approves 2 Oxnard Workers Shutdown Pacts --------------------------------------------------------------- Kaiser Aluminum Corporation and its debtor-affiliates obtained the Court's approval of its Shutdown Agreements with workers at their aluminum forging facility in Oxnard, California. To recall, Kaiser Aluminum Corporation and debtor-affiliates have negotiated with The International Brotherhood of Boilermakers, Iron, Shipbuilders, Blacksmiths, Forgers and Helpers -- AFL-CIO and its Local 343 regarding the sale's impact on the employees at the facility. On October 24, 2002, the Debtors and the Boilermakers Union inked a Closing Agreement that sets forth the benefits to be received by the Oxnard employees on the closing of the Oxnard Facility. The Oxnard Facility manufactures aluminum parts to be used in trucks, airplanes, medical equipment and other industrial products. The Facility employs 44 hourly employees whose employment is governed by a collective bargaining agreement between Kaiser and the Boilermakers Union. The Shutdown Agreements require the Debtors to: (a) pay all employees actively working as of December 15, 2002 one week of pay -- 40 hours -- for each 3 years of service. A fraction of a year is considered a full year; (b) provide medical insurance coverage for four full months after the closing date to all active employees. However, the employees will be responsible to make the normal monthly cash contribution. The four-month coverage will be included in the calculation of the COBRA coverage; (c) give five days sick leave pay. The eligibility of an employee to receive the sick leave pay will be determined by the terms of that employee's labor agreement with the Debtors; (d) pay all accrued and unused vacation pay; (e) actively cooperate with the Boilermakers' Union to seek state and federal funding for employee re-training and plant closure purposes; and (f) provide exit medical examination as a requirement for the employees to receive the severance pay. The medical exam includes Full Blood panel and Asbestos testing. The testing must be completed during work hours and a copy of the result must be distributed to the concerned employee. The Shutdown Agreements also provide that: -- any employee who desires to resign from Kaiser for other employment before November 30, 2002 will no longer be entitled to any severance payment; -- those employees requesting to leave Kaiser's employment after November 30, 2002 may also receive the severance package -- subject to the Debtors' and the Boilermakers Union's mutual approval. The mutual agreement will not be withheld without good reason. The Debtors' refusal to grant an exception will not be subject to the grievance procedure; -- the employees must be actively at work to receive any severance payment. Nevertheless, an employee with personal injuries may receive his severance benefits upon certification by a physician; -- any employees who are out of work due to compensable injury must be fully released by a physician to return to work before receiving any severance payments; and -- each employee must sign a General Release before receiving any severance payment. The General Release relinquishes that employee's right to bring any claims, known or unknown, against the Debtors in relation with his employment or termination. The claims include: (i) any claims under federal, state or local laws, or common law regarding rights or claims relating to employment; (ii) any right to statutory attorneys' fees under those laws; and (iii) any grievances or claims under the Collective Bargaining Agreement. Under the General Release, the employee also waives all seniority rights and any rights to be recalled to a job at any of the Debtors' facilities. The General Release does not apply, however, to an employee's timely claims, if any, against the Debtors arising under either the workers' compensation or unemployment insurance laws. (Kaiser Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders says that Kaiser Aluminum & Chemicals' 12.75% bonds due 2003 (KLU03USR1) are trading at about 10 cents-on-the- dollar. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=KLU03USR1 KEY3MEDIA: Interest Nonpayment Spurs S&P to Drop Ratings to D ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and subordinated debt ratings on technology trade show organizer Key3Media Group Inc., to 'D' following the company's failure to make the scheduled interest payment on its $300 million 11.25% senior subordinated notes due 2011. Los Angeles, California-based Key3Media had $370 million in total debt on September 30, 2002. Key3Media's senior secured debt rating remains on CreditWatch with negative implications. KLEENER KING: Case Summary & 6 Largest Unsecured Creditors ---------------------------------------------------------- Debtor: Kleener King Satellites, Inc. 1610 Bathgate Avenue Bronx, New York 10457 fka Joroq Cleaners, Inc. fka Jofern Ventures, Inc. fka Kleener King Industries Corp. fka Joang Ventures, Inc. fka Creston Cleaners, Inc. Bankruptcy Case No.: 02-16243 Type of Business: A chain of drycleaning stores in the Bronx and Upper Manhattan. Chapter 11 Petition Date: December 13, 2002 Court: Southern District of New York (Manhattan) Judge: Robert E. Gerber Debtor's Counsel: Martin P. Ochs, Esq. Ochs & Goldberg, LLP 60 East 42nd Street Suite 1545 New York, NY 10165 Tel: (212) 983-1221 Fax : (212) 983-1330 Estimated Assets: $1 to $10 Million Estimated Debts: $1 to $10 Million Debtor's 6 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ John A. Catsimatidis Arrearage on Rent $28,020 Jane M & Allan M Goldman Arrearage on Rent $17,856 et al Broadway 207 Realty Corp. Arrearage on Rent $16,645 Crotons Center Corp. Arrearage on Rent $16,047 601 W. 135th St. LLC Arrearage on Rent $15,906 Carl A. Blechner Arrearage on Rent $13,560 KMART CORP: Obtains Approval of Kimberly-Clark Letter Agreement --------------------------------------------------------------- Kmart Corporation and its debtor-affiliates obtained Court approval of its Letter of Agreement with Kimberly-Clark Corporation, resolving their prepetition claims dispute. As previously reported, the Agreement will effect the setoff of claims between Kmart and Kimberly-Clark. The Debtors owe $3,870,227 in trade and reclamation claims against Kimberly- Clark, while Kimberly-Clark owe the Debtors $6,976,111 with respect to the allowances Kimberly-Clark granted to the Debtors under the parties' Vendor Allowance Tracking System agreements. Under the Letter Agreement, Kimberly-Clark has agreed to honor $509,216 of the disputed $715,100 claim. Hence, Kimberly-Clark will pay the Debtors an even $2,900,000. Kimberly-Clark will issue a check payable to Kmart as full and final settlement of its proof of claim, related reclamation demand as well as any and all the Debtors' prepetition promotion allowance claims against Kimberly-Clark. (Kmart Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Kmart Corp.'s 9% bonds due 2003 (KM03USR6) are trading at about 16 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for real-time bond pricing. LEVEL 8 SYSTEMS: Commences Nasdaq SmallCap Trading Today -------------------------------------------------------- Level 8 Systems, Inc. (NASDAQ: LVEL), said that a Nasdaq Listing Qualifications Panel has approved the transfer of Level 8's common stock to the Nasdaq SmallCap Market pursuant to a temporary exception from the minimum bid price and shareholders' equity requirements and has determined not to delist the Company's common stock at this time. The decision was the result of the Company's appearance before the Nasdaq Listing Qualifications Panel to appeal the Nasdaq Staff Determination to delist the Company's common stock from the Nasdaq National Market without approving the Company's common stock for listing on the Nasdaq SmallCap Market. While Level 8 does not currently meet either the $1.00 minimum bid price or the $2,500,000 shareholders' equity requirements for continued listing on the Nasdaq SmallCap Market, the Company was granted a temporary exception from these requirements through January 13, 2003, or longer, if Level 8 is able to show compliance with the minimum bid price requirement and demonstrate shareholders' equity of $5,000,000. To meet the minimum bid price condition, the Company's common stock must trade at or above a $1.00 minimum bid price for ten consecutive trading days, beginning on or before January 13, 2003. In addition, the Company must show $5,000,000 in shareholders' equity on or before January 13, 2003 to meet the shareholders' equity condition. In connection with raising the minimum bid price, the Company has asked its stockholders to approve a reverse stock split at its annual meeting to be held on December 20, 2002. If the Company can demonstrate compliance with these conditions by, or beginning on, January 13, 2003, it will also be required to file its Annual Report on Form 10-K by March 31, 2003, demonstrating at least $2,500,000 of shareholders' equity as of the Company's fiscal year end of December 31, 2002. In the event the Company has complied with all these conditions by March 31, 2003, it will continue to be listed on the Nasdaq SmallCap Market. There can be no assurance that the Company will meet these requirements. Level 8 will begin trading on the Nasdaq SmallCap market under the symbol "LVELC" beginning at the open of business today, December 19, 2002. Until the Company has demonstrated compliance with the conditions for continued listing on the Nasdaq SmallCap Market, the "C" will remain appended to its trading symbol. "We are pleased about receiving this exception from the Nasdaq Listing Qualifications Panel and about our transfer to the Nasdaq SmallCap Market. We believe that this is an initial step towards the Company's overall goal to achieve definitive compliance with Nasdaq's requirements by continuing to sell Cicero to large institutional clients and improving the Company's overall financial performance," said Tony Pizi, Level 8's Chairman and CEO. Level 8 Systems, Inc., (NASDAQ: LVEL) is a global provider of high-performance, application integration software that enables organizations to extend the life of their IT investments and maximize the value of multiple business systems. Level 8 technologies, products, and services help innovative organizations in industries such as financial services, telecommunications, utilities, travel and hospitality, and retail streamline business processes, improve client satisfaction, increase efficiencies, and reduce costs. For more information about Level 8 visit http://www.level8.com At September 30, 2002, Level 8's balance sheet shows that total current liabilities exceeded total current assets by about $5 million. LTV: Court Approves LTV Steel's Proposed Prosecution Thresholds --------------------------------------------------------------- LTV Steel Company, Inc., obtained the Court's authority to establish certain "thresholds" for the pursuit and prosecution of certain preference avoidance actions that it may have in favor of its estate. The Proposed Parameters As a result, LTV and the Creditors' Committee -- the official representative of the recipients of the Preference Letters -- discussed the establishment of certain parameters for the continued pursuit of the Preference Actions. The proposed parameters are designed to: (a) pursue those Preference actions that are likely to result in a significant recovery to LTV Steel's estate based on the Alix analysis; (b) minimize the impact of the Preference Letters on as many creditors as possible while preserving the greatest potential recovery to the LTV Steel estate; (c) conserve the resources to be expended by LTV Steel in pursuing these actions, and (d) fulfill LTV Steel management's fiduciary duties. The parameters agreed to by the Creditors' Committee and LTV Steel are: (1) LTV Steel will continue to pursue non-insider Preference Actions where the expected recovery, net of new value, is $25,000 or more as reflected in the Alix analysis; (2) Settlement of any of LTV's Preference Actions will be subject to Judge Bodoh's approval; and (3) For those creditors who received Preference Letters, but who do not fall within these parameters, and who have sent or may send checks to Alix, LTV Steel seeks the Court's authority to return these checks to the applicable creditors, as it has not cashed any check it has received in connection with the Preference Letters. (LTV Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-00900) LUBY'S INC: First Quarter 2003 Results Show Improvement ------------------------------------------------------- Luby's, Inc., (NYSE: LUB) announced the results of operations for the first quarter ended November 20, 2002. Sales for the first quarter of 2003 were $88.2 million compared with $95.2 million for the first quarter of fiscal 2002. Even though sales declined, the Company was able to improve its bottom-line performance. The net loss for the first quarter of fiscal 2003 was $3.1 million, compared to a net loss of $5.3 million for the same period last year, representing an improvement of 41.5%. "We are excited that we are beginning to see the positive results of some of our initiatives in selected restaurants," said Chris Pappas, President and CEO. "We continue to work hard on operational changes necessary to improve restaurant level performance. Our focus is on driving sales and achieving our long-term vision for Luby's." The Company was able to achieve better results in its income (loss) from operations by reducing labor costs. As a result of a successful Company-wide cost control program, labor charges fell from 36.3% of sales in the first quarter of fiscal 2002 to 31.4% in the current quarter. The conversion of more restaurants to an all-you-can-eat buffet format and a continued focus on enhanced food quality increased food cost as a percent of sales, from 25.9% in the prior year to 28.4% in 2003. Even so, when combined, food and labor costs as a percentage of sales for the first quarter of 2003 compared to the first quarter of 2002 fell 2.5%, from 62.2% to 59.7%. EBITDA was $1.1 million for the first quarter of fiscal 2003 compared to a negative $541,000 for the same quarter of last year primarily due to the combined labor and food cost improvement described above. EBITDA is defined by the Company, but not necessarily other companies, as income (loss) from operations, before interest, taxes, depreciation, amortization, and noncash executive compensation; along with operating income and net income, EBITDA is used by the Company as an important measure of financial performance. Both operating income and net income are defined and prepared in accordance with accounting principles generally accepted in the United States. Net other income increased to $2.9 million in the first quarter of fiscal 2003 from $448,000 in the same quarter of last year. This occurred due to the timing of real estate sales and associated gains on their disposition. The effect of this variance was offset by the change in the income tax expense (benefit). The Company will have exhausted its loss carrybacks with its fiscal 2002 tax filing. However, since the timing of loss carryforward utilization is not certain, a tax benefit has not been recorded for the quarter. Of the total decline in sales, $4.3 million resulted from the closure of 22 restaurants since August 31, 2001. A 5.1% reduction in same-store sales accounted for $4.6 million of the total sales decline. Those amounts were offset by the positive impact of two additional days of sales in the current quarter of $1.9 million. As announced in November of 2002, management recently obtained a waiver and sixth amendment to its credit facility as well as a nonbinding commitment letter from another lender that would provide an $80 million loan. The new 15-year loan would be used entirely to pay down the existing credit facility and would allow Luby's to reclassify debt. Management continues in negotiations with the new lender and expects to complete the transaction relatively soon. During the first quarter of 2003, the Company reduced the credit facility by $4.9 million through proceeds from the sales of real estate mentioned above. Luby's provides its customers with delicious, home-style food, value pricing, and outstanding customer service at its 194 restaurants in ten states. Luby's stock is traded on the New York Stock Exchange (symbol LUB). Luby's Inc.'s November 20, 2002 balance sheet shows that total current liabilities exceeded total current assets by about $119 million. MAPLEWOODS SHOPPING: Chap. 11 Case Summary & Largest Creditors -------------------------------------------------------------- Lead Debtor: Maplewoods Shopping Center LLC 220 West Huron Suite 3003 Chicago, Illinois 60610 Bankruptcy Case No.: 02-48772 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- National Apartments, Inc. 02-48778 Chapter 11 Petition Date: December 11, 2002 Court: Northern District of Illinois Judge: Bruce W. Black Debtors' Counsel: Barry A. Chatz, Esq. Arnstein & Lehr 120 South Riverside Plaza, Suite 1200 Chicago, IL 60606 Tel: 312-876-7100 Estimated Assets: $1 to $10 Million Estimated Debts: $1 to $10 Million A. Mapplewoods' Largest Creditor: Entity Claim Amount ------ ------------ First Bank and Trust of Illinois $2,144,146 c/o Bryan Segal Barack Farrazzano Kirschbaum Perlman & Nagel 333 W. Wacker Drive Suite 2700 Chicago, IL 60606 and c/o Mark Shaiken Stinson Morrison Hecker 1201 Walniut, Suite 2800 Kansas City, MO 64106 B. National Apartments' Largest Creditor: Entity Claim Amount ------ ------------ First Bank and Trust of Illinois $3,296,795 c/o Bryan J. Segal Barack Farrazzano Kirschbaum Perlman & Nagelberg 333 W. Wacker Drive Suite 2700 Chicago, IL 60606 and c/o Mark Shaiken Stinson Morrison Hecker 1201 Walnut, Suite 2800 Kansas City, MO 64106 MICRON TECHNOLOGY: Reports Improved Results for 1st Quarter 2003 ---------------------------------------------------------------- Micron Technology, Inc., (NYSE:MU) announced results of operations for the first quarter of its 2003 fiscal year which ended November 28, 2002. The Company recognized an operating loss for the first quarter of fiscal 2003 of $297 million and a net loss of $316 million on sales of $685 million. These results compare to an operating loss of $468 million on sales of $748 million for the immediately preceding quarter and an operating loss of $452 million on sales of $424 million for the first quarter of fiscal 2002. These operating results include charges for write-downs of inventories to their estimated market values of $91 million for the first quarter of fiscal 2003, $174 million for the fourth quarter of fiscal 2002 and $173 million for the first quarter of fiscal 2002. Absent the effect of the first quarter of fiscal 2003 write-down and the effects of previous write-downs of products sold in the first quarter, the Company's operating loss for the first quarter of fiscal 2003 would have been $345 million. Average selling prices per megabit for the Company's semiconductor products decreased approximately 12% in the first quarter compared to the immediately preceding quarter ended August 29, 2002, principally as a result of lower selling prices for the Company's synchronous DRAM products partially offset by higher selling prices for DDR products. Megabit sales volumes were modestly higher comparing the first quarter to the immediately preceding quarter. Synchronous DRAM products constituted approximately 60% of the first quarter sales as measured in megabits, as demand allowed the Company to reduce inventories of these devices. The Company's production in the first quarter was slightly more than 50% DDR memory. Megabit production was slightly higher comparing the first quarter of fiscal 2003 to the immediately preceding quarter. This increase was accomplished in the midst of transitions to both DDR devices and .13 micron line-width processes. At quarter end, approximately 40% of the Company's worldwide production had shifted to .13 micron process. The Company's transition from trench technology used in its recently acquired Manassas, Virginia facility to Micron's stack technology is expected to be completed as scheduled in the first calendar quarter of 2003. The Company's 300mm pilot production line in Manassas is on schedule and progressing well. On November 21, 2002, the U.S. Department of Commerce initiated a Countervailing Duty investigation against subsidized Korean DRAM imports. On December 13, 2002, the U.S. International Trade Commission preliminarily determined that such imports injured the U.S. DRAM manufacturers. The DOC will next determine the level of subsidization and appropriate duty rate, after which the ITC will make its final injury determination. Steve Appleton, the Company's Chairman and CEO, acknowledged this step in the Countervailing Duty Case, noting, "We are pleased the ITC and Department of Commerce have decided to move forward in their respective investigations. We believe it is clear there has been inappropriate government subsidization of the Korean DRAM industry." The current quarter inventory write-downs were primarily attributable to SRAM and Flash products and Synchronous DRAM products. The write-down of SRAM and Flash products was necessitated by the extended downturn in the telecommunications and networking markets. The Company's provision for income taxes in the first quarter of fiscal 2003 primarily reflects taxes on the Company's non-U.S. operations. Consistent with the Company's treatment in the prior fiscal year, no tax benefit has been recognized in the current quarter from losses on its U.S. operations. At the end of the first quarter of fiscal 2003, the Company had $873 million in cash and marketable securities, which includes $215 million market value of securities classified as noncurrent. Micron Technology, Inc., is one of the world's leading providers of advanced semiconductor solutions used in today's leading-edge computing, consumer, networking, and communications products. Micron Technology, Inc., and its subsidiaries manufacture and market DRAMs, very fast SRAMs, Flash memory, TCAMs, CMOS image sensors, other semiconductor components and memory modules. Micron's common stock is traded on the New York Stock Exchange (NYSE) under the MU symbol. To learn more about Micron Technology, Inc., visit its Web site at http://www.micron.com * * * As previously reported in Troubled Company Reporter, Standard & Poor's Ratings Services affirmed its double-'B'-minus corporate credit rating on Micron Technology Inc., and revised its outlook to negative from stable, following Micron's announcement that pricing pressures in the semiconductor memory industry have accelerated. MID OCEAN: Fitch Slashes Rating on Class B-1 Notes to B ------------------------------------------------------- Fitch Ratings downgrades the class A-2 and class B notes issued by Mid Ocean CBO 2000-1 Ltd., which Fitch placed on Rating Watch Negative on Oct. 23, 2002. No rating action has been taken or contemplated at this time for the class A-1L notes of Mid Ocean, which are rated 'AAA' by Fitch. The following bonds are downgraded and removed from Rating Watch Negative effective immediately: Mid Ocean CBO 2000-1 Ltd. -Class A-2 notes to 'A-' from 'AA-'; -Class A-2L notes to 'A-' from 'AA-'; -Class B-1 notes to 'B' from 'BBB-'. Mid Ocean CBO 2000-1 Ltd., a collateralized bond obligation managed by Deerfield Capital Management LLC, was established in January 2001 to issue $296.5 million in notes and equity. Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward and conducted cash flow modeling of various default timing and interest rate scenarios. As a result of the analysis, Fitch has determined that the original ratings assigned to the class A-2 and B notes of Mid Ocean no longer reflect the current risk to noteholders. Several factors have led Fitch to re-evaluate the ability of the Mid Ocean to pay timely interest and ultimate principal on its class A-2 notes and ultimate interest and principal on its class B notes. Among the structural concerns are that the transaction is close to failing (according to the November 2002 month-end trustee report) its weighted-average coupon test. The steady decline in the weighted-average coupon on the fixed-rate portion of the collateral pool lead Fitch to question whether there will be enough excess spread in the transaction going forward to compensate for the deterioration of par value in the collateral pool. Additionally, a review of the collateral pool revealed that there has been substantial downward credit migration of certain securities within the collateral pool of Mid Ocean. Several assets in the collateral pool have experienced deterioration in credit quality, most notably a distressed aircraft lease transaction and several mutual fund fee transactions. As of July 31, 2002, Mid Ocean had an exposure of approximately 3.6% to a distressed aircraft lease transaction and approximately 3.1% of exposure to distressed mutual fund fee transactions. Deerfield's asset management team has made some trades out of some of this exposure since July, and the resulting current exposures to distressed aircraft lease and mutual fund fee transactions are approximately 0.9% and 1.8% of the pool, respectively. The trades made to sell out of these assets were done at distressed levels, thereby limiting the asset manager's ability to build par. The above-mentioned pressure on excess spread, combined with the deterioration in the par value of the collateral pool, have contributed to the current Fitch view on the class A-2 and B notes. It is important to note that since these bonds were put on Rating Watch Negative by Fitch in late October, several events have occurred that Fitch recognizes as being modestly positive for the CBO, and these events were factored into the downgrade analysis. Firstly, Deerfield had communicated to Fitch earlier its intention to sell out of a substantial portion of their distressed aircraft lease and mutual fund fee exposure, which it did. Their strategy has been to use these proceeds, as well as proceeds from the sale of some bonds trading at premiums in the portfolio, to invest in higher credit quality bonds in an attempt to improve the overall credit quality of the portfolio. The result of Deerfield's strategy is evidenced by the change over time in the Fitch Weighted Average Rating Factor Test, which has steadily improved from a score of 16 in July 2002 to 13 as of December 2002. Mid Ocean is further benefiting from a structural feature, the Additional Coverage Test, which the CBO has been failing since the October month-end trustee report. Fitch views the failure of this test as a positive development for the rated notes, as it diverts excess spread, which would have otherwise have gone to the equity holder, to be used to reinvest in additional collateral. This test enables Deerfield to reinvest and thus build par for the CBO. Given that the CBO is failing this test by a fairly small margin, it is unknown at this time how long the CBO notes will benefit from its failure. Despite some modest positive developments, the pressure on excess spread, combined with the decline in the overcollateralization of the notes, led Fitch to re-evaluate the CBO and determine that the initial ratings on the class A-2 and B notes no longer reflect the current risk to noteholders. MJ DESIGNS: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: MJ Designs, L.P. 9001 Sterling St., #120 Irving, Texas 75063-2422 Bankruptcy Case No.: 02-49955 Chapter 11 Petition Date: December 13, 2002 Court: Northern District of Texas (Fort Worth) Judge: Barbara J. Houser Debtors' Counsel: Michael D. Warner, Esq. Simon, Warner & Doby 1700 City Center Tower II 301 Commerce St. Ft Worth, Texas 76102 Tel: 817-810-5250 Estimated Debts: $10 to $50 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Allstate Floral & Craft, Trade Debt $467,741 Inc. 14038 Park Place Cerritos, CA 90703 XYZ Imports, Int'l. Trade Debt $263,641 PO Box 869317 Piano, Texas 75086-9317 Direct Export Trade Debt $260,457 925 22nd Street #11 Plano, TX 75074 Regency International Trade Debt $185,070 SBAR's Inc. Trade Debt $180,503 Diamond Art & Craft Trade Debt $160,336 Distributors, I Raz Imports Trade Debt $150,393 Celebrity, Inc. Trade Debt $140,392 J. Hobert Co. Trade Debt $139,434 Structural Industries Trade Debt $120,322 Westrim Crafts Trade Debt $94,492 Mixon Investments Trade Debt $91,997 Lindy Bowman Co., Inc. Trade Debt $91,621 The Plus One Import Trade Debt $89,762 Gemline Frame Co. Trade Debt $84,947 Santa's Own Trade Debt $82,744 Dallas Morning News Trade Debt $80,779 Carlton Cards Trade Debt $78,592 A.I. Root Co. Trade Debt $78,065 Candle-Lite Trade Debt $64,207 MOSAIC GROUP: Files for Chapter 11 Reorganization in Dallas, TX --------------------------------------------------------------- Mosaic Group Inc., (TSX:MGX) has voluntarily initiated a restructuring of its debt obligations and capital structure. The Company is seeking Court Orders to proceed with this activity under the Companies' Creditors Arrangement Act, or CCAA, in Canada. Certain of Mosaic's U.S. subsidiaries also have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas. Mosaic Data Solutions Inc., and Mosaic InfoForce LP will not be commencing bankruptcy proceedings. If the court Orders in Canada being sought are granted and upon the commencement of the US Subsidiaries' Chapter 11 proceedings, the Company anticipates that it and its filing subsidiaries will be provided with the time and the legal protection necessary to formulate a restructuring plan with its creditors. Marc Byron, Vice Chair and CEO of Mosaic Group Inc., said, "[Tues]day's initiative provides the Company the opportunity to address its challenges while preserving the interest of its stakeholders. If the court Orders in Canada being sought are granted, and upon commencement of the US Subsidiaries' Chapter 11 proceedings, the businesses will continue to operate with little interruption while a restructuring plan is developed. The Company has a commitment in principle from its lenders to provide additional funding in the form of a Debtor-in-Possession facility that should provide adequate liquidity while a restructuring plan is pursued. Mosaic anticipates that Associates' salaries, wages, benefits and expenses will continue to be paid and that suppliers will be paid for the goods and services provided post-filing on an ongoing basis. The debt obligations incurred before today's action will be addressed in the restructuring plan. Mosaic will also strive to provide its Brand Partners with best-in-class solutions at the same high standard they have come to expect." Mosaic's board of directors also announced the appointment of Mr. Hap Stephen as Chief Restructuring Officer of the Company, effective immediately. Mr. Stephen is one of Canada's leading restructuring advisors. He has assisted a number of major corporations in successful financial restructurings. Reporting directly to the independent committee of the board of directors, Mr. Stephen will be responsible for directing the financial restructuring process, and recommending operational changes, working in conjunction with the Company's senior management team. KPMG, Inc., will serve as the Court-appointed Monitor under the CCAA process and will assist the Company in formulating its restructuring plan which could include the sale of all or parts of the Company or recapitalization. The Company also plans to retain the services of an investment banking firm to assist in the restructuring process. Marc Byron continued, "Mosaic has been adversely impacted primarily by such factors as a loss of revenue and earnings resulting from unforeseen difficulties encountered by some of the Company's largest Brand Partners, the level of debt incurred in the Company's previous acquisition strategy and the unsatisfactory performance of the Company's UK operations. These challenges caused the liquidity issue the Company is addressing through the process initiated Tuesday. "The Company's message to the Brands with whom it partners and serves, to its talented Associates and, to its suppliers is that Mosaic is open for business. Mosaic serves a number of Fortune 100 companies that count on it each and every day. A prime example of Mosaic's strength is demonstrated through the performance of its Sales Solutions division, which has grown its revenues by over 25% year over year and increased earnings by over 50% through to the third quarter. This cash flow positive business is the leader in North America, significantly larger in size to that of its nearest competitor, providing mission critical sales and merchandising solutions to world-class brands. We are determined to achieve a successful restructuring which will enable Mosaic to realize its full potential." Mosaic Group Inc., with operations in the United States and Canada, is a best-in-class provider of results-driven, measurable marketing solutions for global brands. Mosaic specializes in three functional solutions: Direct Marketing Customer Acquisition and Retention Solutions; Marketing & Technology Solutions; and Sales Solutions & Research, offered as integrated end-to-end solutions. Mosaic differentiates itself by offering solutions steeped in technology, driven by efficiency and providing measurable and sustainable results for our Brand Partners. Mosaic trades on the TSX under the symbol MGX. Further information on Mosaic can be found on its Web site at http://www.mosaic.com NATIONSRENT INC: Enters into Financing Agreement with Banc One -------------------------------------------------------------- On June 14, 2002, NationsRent Inc., and its debtor-affiliates commenced adversary proceedings seeking to recharacterize their prepetition lease agreements with various equipment lessors. The Debtors believed that the equipment leases are not "true leases" but financing agreements. Since then, the Debtors initiated negotiations with the equipment lessors to settle the litigation as well as their obligations under the lease agreements. According to Daniel J. DeFranceschi, Esq., Richards, Layton & Finger, in Wilmington, Delaware, the Debtors ultimately came up with a Master Inventory Financing, Security and Settlement Agreement to purchase the equipment they lease by Banc One Leasing Corporation. Banc One leases various construction equipment pursuant to a November 29, 1999 Master Equipment Lease Agreement and related equipment schedules. The salient terms of the Master Inventory Financing, Security and Settlement Agreement are: A. Sale of Inventory and Terms of Sale Banc One will sell to the Debtors all its equipment covered under schedules B-B01 through B-B04 to the Master Equipment Lease -- the Inventory. The Debtors will finance the purchase of the Inventory by borrowing $2,191,647 from Banc One. B. Loans Banc One will loan to the Debtors these amounts: Inventory Description Maturity Date Loan --------------------- ------------- ---- Schedule B-B01 April 1, 2004 $424,885 Schedule B-B02 April 1, 2005 83,943 Schedule B-B03 July 1, 2004 33,372 Schedule B-B04 October 1, 2005 1,649,447 Total: 2,191,647 For each loan, the Debtors will issue to Banc One a promissory note. Beginning January 2, 2003, the unpaid principal amount of each loan will accrue interest at 7% per annum. The Debtors will pay the interest quarterly in arrears beginning on April 1, 2003 and on the first business day of each quarter thereafter. During the continuation of an Event of Default, a premium of 2.0% per annum will be added to the interest rate. C. Security Interest in Purchased Inventory To secure the Debtors' outstanding obligations under the financing agreement and with respect to the loans, Banc One will be granted a security interest in the Inventory. The parties further agree to modify the automatic stay to permit Banc One to: -- file necessary or appropriate documents to perfect its security interests and liens granted with respect to the financing agreements; and -- on the occurrence of an Event of Default: (a) terminate the financing agreement, each note and any other documents, agreements or instruments executed or delivered in connection with the loans; (b) declare the Debtors' outstanding obligations under the financing agreement and the notes immediately due and payable; (c) exercise the rights of a secured party under the Uniform Commercial Code to take possession and dispose of the collateral under the financing agreement and the loans; and (d) exercise any other rights or remedies permitted to Banc One under applicable law. An Event of Default occurs when: (i) the Debtors fail to make any payments of principal or interest with respect to the notes within five days after becoming due and owing, and that failure continues for a period of ten days after the Debtors receive a written notice from Banc One of that failure; (ii) any statement, warranty or representation of the Debtors in connection with or contained in the financing agreement and related other related transactions, or any financial statements furnished to Banc One by them or on their behalf, is false or misleading in any material respect; (iii) the Debtors breach any material covenant, term, condition or agreement stated in the financing agreement or other related transaction and that breach remains unremedied within 30 days after the Debtors receive a written notice from Banc One; (iv) the Debtors cease to do business, sell all its assets, dissolve, merge or liquidate, except as provided in the a Plan of Reorganization; (v) any attachments, execution, levy, forfeiture, tax lien or similar writ or process -- to the extent the same does not constitute a Permitted Lien -- is issued against the Collateral and is not removed within 30 calendar days after filing, unless an adverse action is being contested in good faith and does not present a material risk to Banc One's interest in the Collateral; and (vi) the lenders under the Fifth Amended and Restated Revolving Credit and Term Loan Agreement dated August 2, 2000, as amended, declares the Debtors in default and have accelerated the indebtedness due. D. Termination of the Prepetition Agreements The Debtors and Banc One agree to terminate their prepetition master equipment lease and related schedules. Banc One will be allowed unsecured non-priority claims for general unsecured claims arising with respect to the prepetition agreements. The claims will be determined after giving the Debtors a credit for the aggregate original principal amount of the loans. Banc One will have no further claims against the Debtors with respect to the prepetition agreement. E. Mutual Release and Dismissal of Litigation Both parties will fully release the other from any and all claims and liabilities arising under the prepetition agreements. The Debtors will also dismiss the litigation with respect to Banc One. Thus, the Debtors ask the Court to approve the financing agreement. Mr. DeFranceschi explains that the financing agreement provides for the purchase of Banc One's equipment at a reasonable price and on reasonable financing terms. In addition, the monthly payments due Banc One under the financing agreement will be significantly less than the Debtors are currently paying for the use of Banc One's equipment pursuant to the lease. Mr. DeFranceschi also notes that, at the end of the term of the financing agreement, the Debtors will continue to own, and will be able to utilize, the purchased equipment for its remaining useful life. Mr. DeFranceschi asserts that the resolution of the Banc One litigation is warranted. Mr. DeFranceschi points out that, if it is not resolved consensually, the Debtors would be required to further prosecute the litigation, which would require significant time for preparation of motions and other documents and ultimately, a full trial. Further litigation would also mean the incursion of additional attorneys' fees and expenses. "In comparison, the cost to the Debtors in complying with the terms of the Master Agreement is reasonable," Mr. DeFranceschi says. The dismissal of the litigation with prejudice and the mutual release as provided under the financing agreement brings to a certain and final resolution any claims with respect to the parties' prepetition agreements, Mr. DeFranceschi maintains. (NationsRent Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) ORGANOGENESIS: Committee Looks to Deloitte for Financial Advice --------------------------------------------------------------- The Official Committee of Unsecured Creditors of Organogenesis Inc., asks the U.S. Bankruptcy Court for the District of Massachusetts for authority to employ Deloitte & Touche LLP as its Consultants and Financial Advisors. The Committee retained Deloitte on November 4, 2003, and asks the Court to approve the Firm's retention, nunc pro tunc to that date. The Committee expects Deloitte to: a) assist and advise the Committee in its analysis of the current financial position of the Debtor; b) assist and advise the Committee in its analysis of the Debtor's business plans, cash flow projections, restructuring programs, selling and general administrative structure, and other reports or analyses prepared by the Debtor or its professionals in order to advise the Committee on the viability of the continuing operations and the reasonableness of the projections and underlying assumptions with respect to industry and market conditions. c) assist and advise the Committee in its analysis of the financial ramifications of proposed transactions for which the Debtor seeks Bankruptcy Court approval including use of cash collateral, assumption/rejection of leases, employee compensation or retention and severance plans; d) assist and advise the Committee in its analysis of the Debtor's internally prepares financial statements and related documentation, or order to evaluate performance of the Debtors as compared to its projected results; e) attend and advise at meetings with the Committee and its counsel and representatives of the Debtor; f) assist and advise the Committee and its counsel in the development, evaluation and documentation of any plan of reorganization or strategic transaction, including developing, structuring and negotiating the terms and conditions of potential plan or strategic transaction and the value of consideration that is to be provided to the unsecured creditors; g) assist and advise the Committee in its preparation of hypothetical orderly liquidation analyses or "going concern" value; and h) provide such other services, as requested by the Committee and agreed by Deloitte. To the best of the Committee's knowledge, Deloitte neither holds nor represents any interest adverse to the Debtor or its estate and is a "disinterested person" as defined in the Bankruptcy Code. Deloitte intends to charge the Debtor's estate at a blended hourly rate of $295 per hour or its regular hourly rates for the professionals involved. The regular hourly rates are: Partner $500 to $650 per hour Senior Manager $300 to $450 per hour Manager $300 to $450 per hour Senior Consultant $250 to $350 per hour Consultant $180 to $275 per hour Organogenesis Inc., development and manufacturer of skin substitutes and related items, filed for chapter 11 protection on September 25, 2002. Andrew Z. Schwartz, Esq., at Foley Hoag LLP represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $24,536,000 in total assets and $32,346,000 in total debts. OWENS CORNING: Commences Trading on OTCBB Effective Today --------------------------------------------------------- Owens Corning will begin trading its shares on the Over-The- Counter Bulletin Board as of today, December 19, 2002. Owens Corning shares will trade under a new trading symbol yet to be assigned. The OTC Bulletin Board is a regulated quotation service that displays real-time quotes, last-sale prices and volume information on more than 3,600 OTC equity securities. Information regarding the OTCBB can be found at http://www.otcbb.com The New York Stock Exchange announced Monday that it determined that the common stock of Owens Corning (NYSE: OWC) should be suspended prior to the opening on Thursday December 19, 2002. In addition, an application from the NYSE to the Securities and Exchange Commission to delist the company is pending the completion of applicable procedures. In reaching its decision, the NYSE cited the fact that Owens Corning had fallen below certain NYSE continued listing standards. Specifically, Owens Corning's average global market capitalization over a consecutive 30 trading-day period is less than $50 million and its total stockholders' equity is less than $50 million; and the average closing price of the company's stock is less than $1 over a consecutive 30 trading-day period. Owens Corning and certain of its subsidiaries filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code on October 5, 2000, in response to the company's mounting asbestos liability. "The decision of the NYSE to suspend trading of our shares is related solely to the price of our shares, and in no way affects our continued operations nor our ability to successfully restructure our company under Chapter 11," said Dave Brown, Owens Corning's chief executive officer. "We will continue to serve our customers with the innovative products, services and solutions they have come to expect from Owens Corning." Owens Corning is a world leader in building materials systems and composite systems. Founded in 1938, the company had sales of $4.8 billion in 2001 and employs approximately 19,000 people worldwide. Additional information is available on Owens Corning's Web site at http://www.owenscorning.com On October 5, 2000, Owens Corning and 17 United States subsidiaries filed voluntary petitions for relief under Chapter 11 of the U. S. Bankruptcy Code in the U. S. Bankruptcy Court for the District of Delaware. The Debtors are currently operating their businesses as debtors-in-possession in accordance with provisions of the Bankruptcy Code. The Chapter 11 cases of the Debtors are being jointly administered under Case No. 00-3837 (JKF). The Chapter 11 cases do not include other U. S. subsidiaries of Owens Corning or any of its foreign subsidiaries. The Debtors filed for relief under Chapter 11 to address the growing demands on Owens Corning's cash flow resulting from its multi-billion dollar asbestos liability. Owens Corning is unable to predict at this time what the treatment of creditors and equity holders of the respective Debtors will ultimately be under any plan or plans of reorganization finally confirmed. Based on the Debtors' known assets and known and currently estimated liabilities, it is likely that pre-petition creditors generally will receive under a plan or plans less than 100% of the face value of their claims, and that the interests of Owens Corning's equity security holders will be substantially diluted or cancelled in whole or in part. It is not otherwise possible at this time to predict the outcome of the Chapter 11 cases, the final terms and provisions of any plan or plans of reorganization, or the ultimate effect of the Chapter 11 reorganization process on the claims of the creditors of the Debtors, or the interests of the Debtors' respective equity security holders. Owens Corning's 7.50% bonds due 2005 (OWC05USR1), DebtTraders reports, are trading at about 26 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=OWC05USR1for real-time bond pricing. OWENS CORNING: Enters Stipulation Resolving Valspar's Claims ------------------------------------------------------------ Prior to the Petition Date, Owens Corning Debtor Exterior Systems Inc., routinely purchased products from Valspar Corporation. As a result of these purchases, Exterior Systems was entitled to receive certain rebates pursuant to Valspar's Rebate Program. Under the Rebate Program, Valspar owes Exterior Systems $422,818 in prepetition obligations. On the other hand, Valspar and Lilly Industries Inc., an entity which was acquired by Valspar, filed proofs of claim in the Debtors' cases, consisting of: Claim No. Claimant Amount --------- ---------------- ------------ 6334 Valspar $1,234,154 6768 Valspar 1,234,154 12153 Valspar 1,072,154 6583 Lilly Industries 4,743 ------------ $3,545,205 After a review of the proofs of claim, Exterior Systems and Valspar agree that Exterior Systems owe Valspar $1,622,407 as of the Petition Date, as a result of Exterior Systems' prepetition purchases. Accordingly, the parties agreed to consensually resolve their mutual obligations through a stipulation, which provides in pertinent part that: A. The automatic stay will be modified to the extent required to permit Valspar to set off and reduce Exterior Systems' debt by the amount of Valspar's Debt; B. Subsequent to the setoff, and after taking into account the reclamation payment, Exterior Systems will owe Valspar $1,072,883 as remaining prepetition obligation; C. After Court approval, Valspar will be deemed to have an allowed general unsecured non-priority claim against Exterior Systems amounting to $1,072,883. Within 10 days after Court approval of this stipulation, Valspar will: -- file an amendment to Claim No. 12153, to reflect that Valspar has a general unsecured non-priority claim against Exterior Systems for $1,072,883; -- file an amendment of Claim No. 6768 to reflect that Valspar has a claim against Owens Corning for $0; and -- file an amendment of Claim No. 6583 to reflect that Lilly has a claim against Exterior Systems for $0; and D. The stipulation resolves outstanding prepetition claims between Exterior Systems and Valspar with respect to the Exterior Systems Debt, the Valspar Debt, Claim Nos. 6334, 6583,6768, 12153, provided, however, that: -- the Debtors will retain any and all claims against Valspar on account of, or arising under, any warranties provided in connection with the products purchased by the Debtors from Valspar; and -- nothing in the Stipulation will affect or limit Exterior Systems' rights, if any, under Sections 502(d), 544, 547, 548, 549 and 550 of the Bankruptcy Code. (Owens Corning Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Court Says CPUC Alternative Plan Feasible & Legal -------------------------------------------------------------- PG&E Corporation, Pacific Gas and Electric Company's parent and co-proponent of the PG&E Plan, asserts that the joint plan proposed by the California Public Utilities Commission and the Official Committee of Unsecured Creditors is unconstitutional as the plan purports take its interest as well as those of other equity holders' in the Debtor's estates. PG&E Corporation also complains that the CPUC Plan, as amended, fails to maximize the estate's value for the benefit of interest holders. In addition, the CPUC Plan impairs PG&E Corporation's interest in the Debtor to the tune of several billion dollars. PG&E Corporation holds all interests classified as Class 14 common stock under the CPUC Plan. The CPUC represents that Class 14 equity interests are not impaired because PG&E Corporation's legal and equitable rights as a shareholder remain unchanged. So long as common stockholders retain the same stock certificates, the CPUC has stated that it does not matter that the CPUC Plan reduces the economic value of their ownership interest by billions of dollars. Subsequently, PG&E Corporation observes that the CPUC offered no evidence to satisfy its best interest test burden to compare the residual value received by the equity under the CPUC Plan to the value that the same class would receive under a Chapter 7 case distribution. Alan S. Gover, Esq., at Dewey Ballantine LLP, tells Judge Montali that the CPUC Plan deliberately and materially impairs PG&E Corporation's equity interest in these respects: 1. The CPUC Plan Reduces Equity's Value By Releasing The Rate Recovery Litigation And Other PG&E Claims The CPUC Plan not only forces the Debtor to release and dismiss with prejudice its Rate Recovery Litigation claims, currently pending in the U.S. District Court, but also its: (a) pending breach of contract claim against the State of California filed on September 6, 2002, in the California Superior Court for the County of Sacramento; (b) claims pending before the CPUC seeking recovery of its unrecovered procurement and investment-related costs under provisions of the Public Utilities Code and AB 1890's "regulatory bargain"; and (c) potential other claims. Mr. Gover contends that the Debtor's Rate Recovery Litigation as well as its other claims constitutes valuable assets of the bankrupt estate. The Rate Recovery Litigation seeks to recover $9,200,000,000 the Debtor incurred to purchase electricity for delivery to its customers. The Rate Recovery Litigation also includes claims under the Supremacy, Takings, Due Process, and Commerce Clauses of the U.S. Constitution for recovery of, inter alia, the Debtor's past capital costs and reasonable rate of return. The other claims include not only claims currently pending before the California Courts and the CPUC, but also claims that may arise from future CPUC decisions before the implementation date of the CPUC Plan. Pursuant to the filed rate doctrine, the regulatory compact and the Fifth Amendment, Mr. Gover asserts that the Debtor is entitled to full recovery of its power procurement and stranded costs and reasonable return on its investment. Since the Debtor is solvent and notes that creditors are being paid in full, Mr. Gover notes that the loss of all Debtor's claims reduces the residual value of PG&E Corporation's equity interests. 2. The CPUC Plan Reduces Equity's Value By Limiting The Debtor's Return On Equity Mr. Gover informs the Court that the return of equity projected under the CPUC Plan for each of the 12 years contained in CPUC's financial model is lower than PG&E Corporation's currently authorized return of 11.22%. This alone spells a loss to equity between $366,000,000 to $608,000,000. The UBS Warburg financial model is premised on: (a) the equity's reinvestment of 100% of the Reorganized Debtor's net income during the initial five-year period and 35% for the balance of the period covered by the model; and (b) a constant 9.12% return on rate base. Although the rate of return appears to be adequate at the initial 39.3% equity component and the initial weighted average of interest rates on debt and preferred stock, Mr. Gover notes that, as net income is retained and used to pay down lower-cost debt, then a 9.1% return on rate base no longer provides the authorized return on equity. The return on equity decreases because the percentage of equity in the capital structure increases, while the overall return on rate base is kept constant. The result is that the additional equity only provides the shareholder with a return equal to the lower after-tax cost of the debt being retired, instead of the higher authorized return on equity. Even if the UBS Warburg Model projected that no dividends would be paid for five years, Mr. Gover argues that the return on rate base assumptions embedded in the model would still not provide revenues sufficient for an equity holder to earn the authorized return on equity under the Debtor's historical capital structure. This is because the 9.1% return on rate base, which is held constant in the model, is based on 39.3% equity in the Debtor's initial post- reorganization capital structure. As the percentage of equity in the capital structure rises in subsequent years, Mr. Gover notes that the same 9.1% overall return on rate base results in decreasing returns on equity. 3. The CPUC Plan Impairs The Equity's Governance Rights And Protections Under The California Corporation Code The CPUC concedes that a common stockholder is entitled to "basic rights" under California law, but it ignores the actual impact of its plan on those rights. PG&E Corporation accuses the CPUC of stripping its rights to have the CPUC Plan, including the settlement of claims, subject to the analysis and decision-making of the Debtor's board of directors. Mr. Gover reminds Judge Montali that, by definition, a plan of reorganization or settlements of major litigation are the types of transactions that fall within the board's jurisdiction to manage a corporation's business and affairs in accordance with California law. * * * According to a November 25, 2002 Reuters report, Judge Montali denied PG&E's motion to dismiss the Alternative Reorganization Plan proposed by the California Public Utilities Commission and the Official Committee of Unsecured Creditors. Judge Montali ruled that the CPUC's proposal is financially feasible and does not violate California law. According to Judge Montali, the CPUC has the legal standing to what is best to regulate the state's utilities. (Pacific Gas Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 609/392-0900) POLYONE CORP: Expects a Seasonally Weak Fourth Quarter 2002 ----------------------------------------------------------- PolyOne Corporation (NYSE: POL), a leading global polymer services company, expects to report a net loss before special items of between $16 million and $20 million for fourth-quarter 2002, based on October and November financial results and the projection for December. This estimate equates to a loss before special items of $0.17 to $0.22 per share. For the quarter, special items are expected to include restructuring cost from previous announcements and the recently announced sale of the So.F.teR S.p.A. joint venture. These special items are projected to increase the net loss by approximately $0.01 to $0.02 per share. "We anticipated a seasonally weak fourth quarter in 2002, but the decline in our North American sales and in U.S. industrial production overall has been worse than expected," said Thomas A. Waltermire, PolyOne chairman and chief executive officer. "The decline has been broad-based across our industrial market segments. In particular, we experienced slowing from automotive and construction applications." Third-Quarter Slowdown Persists On October 30, 2002, PolyOne stated that it expected revenues to decline from third-quarter to fourth-quarter 2002, but less steeply than the 11 percent drop experienced in 2001. The Company also said it anticipated that fourth-quarter 2002 revenues would increase compared with fourth-quarter 2001. It now appears that revenues for fourth-quarter 2002 should decline approximately 12 percent from third-quarter 2002 and should approximate fourth-quarter 2001 revenues of $589.9 million. Most of the anticipated shortfall is attributable to slower- than-expected demand in PolyOne's North American Plastic Compounds and Colors business group. The forecast for North American PCC shows sales in fourth-quarter 2002 declining 12 to 14 percent from third-quarter 2002 levels. Customers in most PCC markets are driving inventories lower in response to both slowing demand and a focus on improving their year-end working capital positions. Historically, Company sales trends have correlated closely with the U.S. Industrial Production Index (less the high-tech component). The index started declining in third-quarter 2002, has continued to fall in the fourth quarter and is likely to end the year near fourth-quarter 2001 levels. In its third-quarter outlook commentary, PolyOne stated that the Resin & Intermediates equity contribution could decline between $9 million and $11 million in fourth-quarter 2002 compared with third-quarter 2002. It now appears that the reduction should be between $10 million and $13 million. This revised outlook is due primarily to lower polyvinyl chloride (PVC) resin shipments and market selling prices and lower-than-anticipated market price increases for caustic soda. Average quarterly market selling prices for PVC could decline between 2 cents and 3 cents per pound in the fourth quarter compared with the average for the third quarter of 2002. PolyOne has made steady progress during the fourth quarter to reach its commercial working capital targets through inventory reduction. The Company anticipates reducing its commercial working capital by at least $70 million by the end of the fourth quarter compared with the end of the third quarter. PolyOne forecasts that sales in its North American PCC unit should decline from 4 percent to 5 percent in fourth-quarter 2002 compared with fourth- quarter 2001. The Company further projects that PCC shipments will decline from 1 percent to 3 percent in fourth-quarter 2002 compared with fourth- quarter 2001. This decline will more than offset anticipated year-over- year revenue improvements from the International and Formulators units and the Distribution segment, although they, too, are experiencing normal seasonal slowdowns. Comparing the anticipated fourth-quarter 2002 performance with third-quarter 2002 results, lower volumes will contribute at least $30 million to the operating income change. Additionally, unfavorable changes in high- leverage variables will lower earnings from the Resin and Intermediates segment by slightly less than $10 million. Comparing the anticipated fourth-quarter 2002 performance with fourth- quarter 2001 results, approximately $17 million of the forecasted lower operating earnings will be due to variable margin compression as a result of higher chlor/vinyl chain costs and slightly lower compound selling prices in PolyOne's operating businesses. Company Charts Actions to Return to Profitability "Simply put, this performance cannot be allowed to continue. It calls for immediate action," said Waltermire. "While we have made tremendous progress in reducing costs and realigning our North American asset base, our financial results demand both short- and long-term solutions to return us to acceptable profit levels, improve our balance sheet and strengthen our position within our markets. Our management team, united in this commitment with our Board of Directors, will take the necessary actions to accomplish this task swiftly." During third-quarter 2002, PolyOne's management team initiated a thorough assessment of the Company's business platforms, its overall cost structure, the effectiveness of its approach to customers and its debt level. As a result of this work, the Company will act on a number of significant recommendations in each of these areas: * The Company has targeted a reduction of $200 million to $300 million in its overall debt level. To this end, management is assessing alternatives for non-strategic assets. * Effective with the first quarter of 2003, PolyOne will not pay out a dividend until its balance sheet and operating income performance improve. In the past, PolyOne declared a $0.0625 per share (approximately $6 million) quarterly dividend. * The Company will limit capital spending to approximately $50 million in 2003 versus approximately $75 million in 2002. * Management intends to reduce its selling, general and administrative (SG&A) costs to less than 10 percent of sales. The forecast shows that in 2002, SG&A costs will be about 12 percent of sales. * To ensure that PolyOne's go-to-market strategy is targeting the appropriate customer base and is cost effective, management is reassessing its commercial organization. Already, the North American Plastic Compounds and Colors unit has taken steps to realign into three product-focused platforms: vinyl, engineered materials and color. * A salary freeze for U.S. employees, started in 2002, will continue into 2003 until a clear recovery in the Company's profitability becomes evident. * The Company is reviewing ways to reduce the cost of various U.S. employee benefit programs. By the end of January 2003, PolyOne will provide additional information, including financial details, on the anticipated impact of these actions. The Company has adopted an aggressive schedule to implement these changes as early as feasible in the new year. PolyOne Corporation, with revenues approximating $2.6 billion, is an international polymer services company with operations in thermoplastic compounds, specialty resins, specialty polymer formulations, engineered films, color and additive systems, elastomer compounding and thermoplastic resin distribution. Headquartered in Cleveland, Ohio, PolyOne has employees at manufacturing sites in North America, Europe, Asia and Australia, and joint ventures in North America, South America, Europe, Asia and Australia. Information on the Company's products and services can be found at http://www.polyone.com * * * S&P Credit Rating Remains at BB+ As reported in the September 20, 2002 issue of the Troubled company Reporter, Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured debt ratings on PolyOne Corp., to double-'B'-plus from triple-'B'-minus, citing slower- than-expected progress in improvement to the financial profile. The outlook is negative. "The rating action reflects the deterioration in operating and financial performance stemming from adverse business conditions, and the likelihood that needed improvement to the financial profile could take longer than anticipated," said Standard & Poor's credit analyst Peter Kelly. The continuation of challenging industry fundamentals has weakened the financial profile and is likely to limit the improvement anticipated in the prior rating. Standard & Poor's recognizes the company's efforts to reduce costs and manage cash flow, as well as recent modest improvement in earnings. RENAISSANCE ENTERTAINMENT: Auditors Express Going Concern Doubt --------------------------------------------------------------- Renaissance Entertainment Corporation presently owns and produces four Renaissance Faires: the Bristol Renaissance Faire in Kenosha, Wisconsin, serving the Chicago/Milwaukee metropolitan region; the Northern California Renaissance Pleasure Faire, serving the San Francisco Bay and San Jose metropolitan areas; the Southern California Renaissance Pleasure Faire in Devore, California serving the greater Los Angeles metropolitan area; and the New York Renaissance Faire serving the New York City metropolitan area. The Renaissance Faire is a re-creation of a Renaissance village, a fantasy experience transporting the visitor back into sixteenth century England. This fantasy experience is created through authentic craft shops, food vendors and continuous live entertainment throughout the day, both on the street and stage, including actors, jugglers, jousters, magicians, dancers and musicians. As of September 30, 2002, the Company's Southern California, Wisconsin and New York Faires had finished their operating season and the Northern California Faire had operated three of six weekends. The Company's Renaissance Faires operated the same number of weekends in 2002 as 2001, with the exception of the New York Faire and Northern California Faire. The New York Faire operated seven weekends in 2002 as compared to eight in 2001. The Northern California Faire was relocated to Casa de Fruta in Hollister, California in 2002. As of September 30, 2001, the Faire had operated six of eight weekends, while in 2002 it had operated three of six weekends. During 2002, the Company began operating the Sterling Forest Ski Center and incurred ongoing expenses that were not experienced in 2001. Revenues decreased $1,010,625, or 14%, from $7,107,549, in 2001 to $6,096,924 in 2002. In 2002, both the Wisconsin and Southern California Faires experienced an increase in attendance. The New York and Northern California Faires experienced a decrease in overall attendance that largely explains the decline in revenue. The decrease in attendance at the New York Faire was weather related, with inclement weather affecting nine out of fifteen days of operation. The Northern California Faire attendance was down 7.5% as of September 30, 2002 as compared to 2001, and was affected by its relocation and the aforementioned revised schedule of operations. As of this date, revenue has not been recognized for the Ski Center as its operating season does not begin until December 2002 or January 2003, depending on weather conditions. Net income to common stockholders also decreased $304,214, from $1,183,917 for the 2001 period to $879,703 for the 2002 period. Finally, net income per common share decreased from $.55 for the 2001 period to $.41 for the 2002 period, based on 2,144,889 weighted average shares outstanding in the years 2001 and 2002. Revenues decreased $900,674, or 8%, from $10,785,396 in 2001 to $9,884,722 in 2002. In 2002, both the Wisconsin and Southern California Faires experienced an increase in attendance. Again, as in the report on the three month period above, the same factors were at play, i.e., the New York and Northern California Faires experienced a decrease in overall attendance that largely explains the decline in revenue. The decrease in attendance at the New York Faire was weather related, with inclement weather affecting nine out of fifteen days of operation. The Northern California Faire attendance was down 7.5% as of September 30, 2002 as compared to 2001, and was affected by its relocation and the aforementioned revised schedule of operations. As of this date, revenues has not been recognized for the Ski Center as its operating season does not begin until December 2002 or January 2003 depending on weather conditions. Net income to common stockholders also decreased $177,629, from $591,804 for the 2001 period to $414,175 for the 2002 period. Finally, net income per common share decreased from $.28 for the 2001 period to $.19 for the 2002 period, based on 2,144,889 weighted average shares outstanding in the years 2001 and 2002. The Company's working capital surplus increased during the nine months ended September 30, 2002, from $524,782 at December 31, 2001 to $838,284 at September 30, 2002. The Company's working capital requirements are greatest during the period from January 1 through May 1, when it is incurring start-up expenses for its first Faire of the season, the Southern California Faire. While the Company believes it has adequate capital to fund anticipated operations for fiscal 2002, it will be required to raise additional capital by March of 2003 if the notes due November 30, 2002, are not extended and if the notes are extended, may still be required to raise additional capital for 2003 depending on the operation of the Ski Center. Reviewing the change in financial position over the six months, current assets, largely comprised of cash and prepaid expenses, increased from $1,489,308 at December 31, 2001 to $2,722,322 at September 30, 2002, an increase of $1,233,014 or 83%. Of these amounts, cash and cash equivalents increased from $834,257 at December 31, 2001 to $1,352,210 at September 30, 2002. Accounts receivable increased from $116,369 at December 31, 2001 to $146,971 at September 30, 2002. Inventory increased from $155,367 at December 31, 2001 to $235,270 at September 30, 2002. Prepaid expenses (expenses incurred on behalf of the Faires) increased from $365,499 at December 31, 2001 to $983,673 at September 30, 2002. These costs are expensed once the Faires are operating. Current liabilities increased from $964,526 at December 31, 2001, to $1,884,038 at September 30, 2002, an increase of $919,512, or 95%. Accounts payable and accrued expenses increased $232,207, or 50%, from $468,309 at December 31, 2001 to $700,516 at September 30, 2002. Unearned income, which consists of the sale of admission tickets to upcoming Faires, passes for the Sterling Forest Ski Center and deposits received from craft vendors for future Faires, increased from $181,177 at December 31, 2001 to $867,751 at September 30, 2002. Approximately $180,000 unearned income is associated with the Sterling Forest Ski Center. This revenue is recognized once the Faires and the Ski Center are operating. The Company's notes payable account for $315,771 of the total current liabilities at September 30, 2002. This amount is largely attributable to the promissory notes that mature in November, 2002 and August, 2003. The Company has incurred operating losses in all fiscal periods since 1995 except fiscal 2000. For the nine months ended September 30, 2002, the Company reported a net profit of $414,175. There is no assurance that the Company will be profitable in any subsequent period. The Company had a working capital surplus of $838,284 as of September 30, 2002. Based on the Company's planned operations for 2002, the Company believes it has adequate capital to fund operations and fund required capital expenditures during the 2002 fiscal year. To the extent that operations do not provide the necessary working capital or notes due November 30, 2002 in the amount of $287,500 are not extended, the Company will need to obtain additional capital for 2003 and future fiscal periods. Additional capital may be sought through borrowings or from additional equity financing. Such additional equity financing may result in additional dilution to investors. In any case, there can be no assurance that additional capital can be satisfactorily obtained, if and when required. Renaissance Entertainment has suffered recurring losses from operations and has a negative stockholders' equity that raise substantial doubts about its ability to continue as a going concern. RURAL/METRO: Sets Annual Shareholders' Meeting for March 3, 2003 ---------------------------------------------------------------- The Annual Meeting of Stockholders of Rural/Metro Corporation, a Delaware corporation, will be held at the Company's corporate headquarters, at 8401 East Indian School Road, Scottsdale, Arizona, on Monday, March 3, 2003, at 3:00 p.m., Phoenix, Arizona time, for the following purposes: 1. To elect two (2) directors to serve for three-year terms or until their successors are elected; 2. To consider and act upon a proposal to amend the Certificate of Incorporation to increase the authorized number of shares of common stock from 23,000,000 to 29,000,000; 3. To consider and act upon a proposal to amend the Employee Stock Purchase Plan to increase the number of shares of common stock that may be purchased pursuant to the plan from 2,150,000 shares to 3,950,000 shares; and 4. To transact such other business as may properly come before the meeting or adjournment(s) thereof. Only stockholders of record at the close of business on January 14, 2003 are entitled to notice of and to vote at the meeting. Rural/Metro Corporation is a leading national provider of medical transportation and fire protection services. At September 30, 2002, Rural/Metro's balance sheet shows a total shareholders' equity deficit of about $159 million, down from a deficit of about $165 million as recorded at June 30, 2002. Rural/Metro Corp.'s 7.875% bonds due 2008 (RURL08USR1) are trading at about 68 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=RURL08USR1 for real-time bond pricing. RURAL CELLULAR: Nasdaq Knocks-Off Shares Effective December 18 -------------------------------------------------------------- Rural Cellular Corporation (Nasdaq:RCCC) announced that the Nasdaq Listing Qualifications Panel had denied its request for continued listing of its common stock on the Nasdaq National Market. As a result, the RCC's common stock was delisted from the Nasdaq National Market effective at the opening of business on December 18, 2002. As previously reported, the Company received a Nasdaq Staff Determination letter on October 9, 2002, indicating that the Company failed to comply with the minimum bid price requirement for continued listing on the Nasdaq National Market. The Staff Determination letter informed the Company that, due to such non- compliance, the Company's common stock was subject to delisting from the Nasdaq National Market. As permitted by Nasdaq rules, the Company requested a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. That hearing was held on November 22, 2002. The Company's common stock commenced trading on the OTC Bulletin Board under the symbol RCCC.OB on December 18, 2002. The OTC Bulletin Board is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter securities. Information regarding the OTC Bulletin Board is available at http://www.otcbb.com Despite the delisting from the Nasdaq National Market, the Company will remain a public reporting company under Securities and Exchange Commission rules. The Company expects to reconsider its listing options in the future, based upon its financial condition and stock price. Richard P. Ekstrand, president and chief executive officer of the Company, stated: "In light of RCC's record financial performance in 2002, we are obviously disappointed by the Panel's decision, yet we continue to believe in RCC's mission of efficient growth and eventual profitability." Ekstrand added, "As market conditions within the telecommunications sector improve, we look forward to reconsidering RCC's future listing options." Rural Cellular Corporation, based in Alexandria, Minnesota, provides wireless communication services to Midwest, Northeast, South and Northwest markets located in 14 states. At September 30, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $34 million. SONIC FOUNDRY: Fourth Quarter Revenues Slide-Up 19% to $6.4 Mil. ---------------------------------------------------------------- Sonic Foundry(R), Inc. (Nasdaq:SOFO), a leading digital media software solutions company, announced its fourth quarter and year-end results for fiscal 2002. The company increased its fourth quarter revenues by almost 20 percent and continued strong improvement in gross margins, both quarter-to-quarter and year-to-year. Year-to-year revenues were approximately unchanged. The company continued to make strides in paring expenses in a drive to achieve profitability. Highlights include: -- Revenues for the fourth quarter of fiscal 2002 were $6.4 million, up 19 percent from the $5.4 million reported in fourth quarter of fiscal 2001. Annual revenues for 2002 were $26.2 million compared to $26.3 million reported the year earlier. -- Quarterly and annual gross margins increased significantly. Gross margins for the 2002 fourth quarter were 61 percent compared to 54 percent for the same period one year ago. For the 2002 year, the company achieved a nine-percentage point increase in gross margins of 60 percent versus 51 percent reported in fiscal 2001. -- Sonic Foundry decreased its net loss for the fourth quarter to $4.0 million ($1.3 million of which was due to non- cash interest as well as $1.2 million of other non-cash depreciation and amortization), compared to a loss of $11.4 million it reported for the fourth quarter of 2001. -- Despite significant one-time accounting charges which impacted the company's first quarter and fiscal year bottom line, the company reported a net loss of $56.7 million ($44.7 million of which was due to non-cash accounting changes), compared to $49.9 million recorded one year earlier. -- Cash from operations improved both for the quarter and year. For the fourth quarter, Sonic Foundry reported positive cash generated from operating activities of $.5 million compared to a use of cash in operating activities of $.7 million for fourth quarter 2001. For the immediate past year, it recorded a use of operating cash of $4.9 million versus a use of $10.2 million for fiscal 2001. Since fiscal 2000, Sonic Foundry has progressively improved its operating cash flow. In 2000, it recorded an operating cash use of $19.0 million. At September 30, 2002, the Company's balance sheet shows that total current liabilities eclipsed total current assets by about $500,000. Also, the Company's total shareholders' equity narrowed to about $18 million from $61 million recorded a year earlier. "The past year's activities and results were intended to pave the way for our long-term future and success," explained Rimas Buinevicius, chairman and CEO of Sonic Foundry. "Our goal this past year was to implement operational, financial and strategic measures for our continued shift into the broader, more lucrative markets we intend to help shape and lead," he said. "In the coming weeks and months ahead, we will execute initiatives centered on these objectives -- actions designed to strengthen our balance sheet, improve shareholder value and increase our focus and presence in key markets that benefit from rich media. We are confident in our strategy and ability to execute our vision toward our goals." A strategic focus on the enterprise and the company's core competency of digital media At the beginning of the fiscal 2002 year, Sonic Foundry completed its acquisition of MediaSite, a Pittsburgh, Pa.-based company that offered digital media indexing and management. Sonic Foundry integrated the technological assets of MediaSite with its own suite of digital media assets and launched MediaSite Live(TM), a rich media online presentation solution that is quickly gaining ground within education, government and corporate enterprises. "Now that we have expanded our channel network and clearly defined our product offering, we are continuing our momentum in the rich media market, which is at its infancy and expected to grow exponentially over the next several years," Buinevicius said. "We have concentrated on this strategic focus for well over a year. We expect to expedite our growth and presence in these markets in the near future through various cash generation strategies we are exploring. "We believe that the current market capitalization of Sonic Foundry does not properly reflect the true combined value of various intangible assets and intellectual property that the company owns," he explained. "Therefore, we fully intend to generate cash for the business through the sale of various assets while using a portion of the proceeds to meet key strategic and financial objectives, among which is the elimination of most or all Company debt." Additional company achievements and highlights for the year include: -- Over the fiscal year, the Company introduced new versions of Vegas(TM) Video, ACID(R) PRO, and Sound Forge(R); -- Continued to move away from expensive retail channels in favor of a direct model and the use of third parties to market into retail; -- Demonstrated continual operating improvements, shedding of expenses and improvements in cash management, while maintaining a constant top line revenue stream; -- Reduced cash required to fund the company's operations by more than 50 percent despite increased costs from growing its new Systems business as well as assumption and payment of acquisition-related liabilities; -- Began the build-out of a reseller channel focused on selling MediaSite Live and future software offerings destined for the enterprise marketplace; -- Established and furthered key government contractual relationships, including the hosting of a congressional briefing that leveraged the technology and built the awareness of the company's MediaSite acquisition in October 2001. Founded in 1991, Sonic Foundry (NASDAQ:SOFO) is a leading provider of desktop and enterprise digital media software solutions. Its complete offering of media tools, systems and services provides a single source for creating, managing, analyzing and enhancing media for government, business, education and entertainment. Sonic Foundry is based in Madison, Wis., with offices in Santa Monica, Toronto and Pittsburgh. For more information about Sonic Foundry, visit the Company's Web site at http://www.sonicfoundry.com SOTHEBY'S: Agrees to Sell & Lease Back Headquarters for $175MM -------------------------------------------------------------- Sotheby's Holdings has entered into an agreement to sell its York Avenue headquarters for $175 million to RFR Holding, LLC. The Company will lease back the building, widely regarded as the best auction house facility in the world, from RFR Holding for a period of up to 40 years, which includes renewals. "This is an outstanding opportunity for Sotheby's," said Bill Ruprecht, Sotheby's President and Chief Executive Officer. "The attractive price of $175 million reflects the high asset quality, desirable location and Sotheby's bright future prospects. Sotheby's, similar to other major corporations, has decided to enter into a sale-leaseback transaction as a means of financing to provide long-term liquidity for our business. It will also allow Sotheby's to pay down $100 million in short-term debt as well as antitrust fines, which strengthens our balance sheet." Mr. Ruprecht added: "Sotheby's expects to report a gain on the sale of the building in the range of $25 million, which will be amortized over the initial term of the lease as required by the relevant accounting rules. "Sotheby's looks forward to a long and exciting future in our worldwide headquarters that are without equal in the auction world," continued Mr. Ruprecht. "After an architectural makeover, which added six floors and completely redesigned the existing four floors, we have a state-of-the-art auction facility that has received international acclaim, particularly for its tenth-floor exhibition space. The renovation and expansion were designed with Sotheby's unique auction business in mind and ever since it opened, it has offered us a competitive advantage. All our New York auction operations are centralized in one convenient location and, importantly, the building provides permanent exhibition and storage space for each department, allowing our specialists to 'live` with their objects. "We are delighted at the prospect of a future affiliation with RFR Holding whose ownership of premier locations, including the Seagram Building and Lever House, show a clear appreciation for buildings of great quality." "RFR Holding is delighted to add the Sotheby's Building to our expansive portfolio of prime Manhattan commercial real estate," said Aby Rosen, Principal of RFR Holding LLC. "We are privileged to have Sotheby's as our tenant and look forward to a mutually rewarding long-term relationship." J.P. Morgan Securities, Inc., acted as exclusive financial advisor to Sotheby's. Sotheby's Holdings, Inc., is the parent company of Sotheby's worldwide live and Internet auction businesses, art-related financing and real estate brokerage activities. The Company operates in 34 countries, with principal salesrooms located in New York and London. The Company also regularly conducts auctions in 13 other salesrooms around the world, including Australia, Hong Kong, France, Italy, the Netherlands, Switzerland and Singapore. Sotheby's Holdings, Inc., is listed on the New York Stock Exchange and the London Stock Exchange. * * * As previously reported, Standard & Poor's said its single-'B'- plus corporate credit rating on Sotheby's Holdings Inc., remained on CreditWatch, however, the implications have been revised to developing from negative. Sotheby's Holdings' 6.875% bonds due 2009 are currently trading at about 74 cents-on-the-dollar. SWIFTY SERVE: Wants to Surcharge CIT Group's Collateral ------------------------------------------------------- Swifty Serve, LLC and its debtor-affiliates ask the U.S. Bankruptcy Court for the Middle District of North Carolina to to allow them to dip into their secured lenders' collateral to pay whatever expenses may be necessary to preserve or dispose of that collateral. During a hearing conducted on the Petition Date, the Debtors consented to The CIT Group/Business Credit, Inc.'s request for relief from the stay to repossess and sell its alleged collateral -- which is all of the Debtors' inventory. As a result, the Debtors have no source of cash to operate in this bankruptcy proceeding whatsoever. Additionally, the Debtors ceased to operate at the time of the Petition Date. The Debtors relate that they have negotiated with the Primary Secured Creditors and has not been able to reach agreement over an operating or wind down budget to be funded by those creditors through Section 506(c) charges or otherwise, for the payment of the fundamental expenses of preserving the collateral of the Primary Secured Creditors, i.e., insurance, security, utilities and the like for the convenience stores owned by the Debtors. Accordingly, the Debtors believe that it is in the best interest of all Creditors and the estate that this case be concluded rapidly through a sale of substantially all of the Debtors' assets. A very quick sale process, which, although it would not maximize a total return to the estate, would at least maximize the possibility that the Debtors would realize something for the benefit of unsecured creditors from its encumbered assets. In the alternative, the Debtors want the Court to appoint a Chapter 11 Trustee acceptable to the Court and the Creditors, to operate this Debtor through this Chapter 11 case. While a Chapter 11 Trustee would be confronted with much of the same dilemma that confronts the Debtors, a Chapter 11 Trustee may be better equipped and experienced to operate under such circumstances and may encounter less resistance from the secured creditors. Furthermore, if the Court should conclude that it would not impose Section 506(c) charges for the benefit of the Debtors and would not appoint a Chapter 11 Trustee, the Debtors ask the court to enter an Order converting this case to Chapter 7 and appointing Chapter 7 Trustee. Swifty Serve, LLC, along with its 4 debtor-affiliates, filed a chapter 11 petition on October 4, 2002. Paul R. Baynard, Esq., at Rayburn Cooper & Durham, P.A., represents the Debtors. When the Company filed for protection from its creditors, it listed estimated assets of more that $50 million and estimated debts of more than $100 million. SYMBOLLON PHARMACEUTICALS: Falls Below Nasdaq Listing Standards --------------------------------------------------------------- Symbollon Pharmaceuticals, Inc., (Nasdaq: SYMBA) received a Nasdaq Staff Determination indicating that Symbollon has failed to comply with the minimum $2,500,000 stockholders' equity requirement for continued listing set forth in Nasdaq Marketplace Rule 4310(C)(2)(B), and that its common stock will be delisted from the Nasdaq SmallCap Market at the opening of business on December 20, 2002. Symbollon does not plan to request a hearing before a Nasdaq Listing Qualifications Panel to review the Nasdaq Staff Determination. The Company believes that its common stock will likely be quoted on the Over-the-Counter Bulletin Board (OTCBB) following delisting from the Nasdaq SmallCap Market. Symbollon Pharmaceuticals, Inc., is a specialty pharmaceutical company focused on the development and commercialization of proprietary drugs based on its molecular iodine technology. Molecular iodine is the active species of iodine, a proven therapeutic. The Company has developed patented iodine-based technology that it believes maximizes the 'therapeutic index' of iodine, thereby making iodine potentially useful in a number of pharmaceutical applications. Symbollon already has completed Phase I and II clinical trials evaluating IoGen(TM) as a potential treatment for fibrocystic breast disease. IoGen(TM) is an oral tablet that generates molecular iodine in situ (in the stomach of the patient). For more information about Symbollon, please visit the Company's Web site at http://www.symbollon.com * * * Financial Condition, Liquidity and Capital Resources The Company has primarily funded its activities through proceeds from private and public placements of equity and revenues from research and development collaborations with corporate partners. The Company continues to incur operating losses and has incurred a cumulative loss through September 30, 2002, of $8,734,840. As of September 30, 2002, the Company had working capital of $1,437,574. The Company believes that it has the necessary liquidity and capital resources to sustain planned operations for the twelve months following September 30, 2002. The Company's planned operations for 2002 include manufacturing IodoZyme, conducting certain limited manufacturing scale-up activities relating to IoGen and securing additional resources to sustain the operations of the Company and to complete the clinical development of IoGen. The Company estimates that it will cost approximately $20 to 25 million to complete the clinical development of IoGen. Until the Company secures additional resources, it will not be able to conduct any further significant clinical development of IoGen, including necessary clinical trials or animal toxicity studies that are required to submit IoGen for FDA marketing approval, on which the Company's future is likely dependent. If the Company cannot secure additional resources before existing resources are exhausted, which is estimated to occur during 2004, the Company will have to curtail, or perhaps cease, existing operations. The Company's ability to obtain new financing may, in part, be affected by the Company's ability to continue to meet the criteria for continued listing of its securities on the Nasdaq SmallCap Market. Nasdaq's current SmallCap continued listing criteria require, in part, that the Company maintain stockholders' equity of at least $2,500,000, a minimum bid price of $1.00 per share of common stock and two market makers for its securities. As of September 30, 2002, the Company's stockholders' equity is $1,869,988. Additionally, the bid price of the Company's common stock is presently below $1.00 per share. If the Company continues to be unable to meet the criteria for continued listing, its securities will be delisted from Nasdaq. During the remainder of 2002, the Company is committed to pay approximately $110,000 as compensation to its current executive officers and approximately $8,800 for lease payments on its facilities. The Company anticipates that the continued clinical development of IoGen that it is planning to undertake even without new financing will cost approximately $100,000 during the remainder of 2002. At December 31, 2001, the Company had a net operating loss carryforward for federal income tax purposes of approximately $8,040,000 expiring through 2021. TERADYNE INC: Profitability Concerns Spur S&P's B+ Credit Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured note ratings on Teradyne Inc. to 'B+' from 'BB-'. The action recognizes continued stressed conditions in the semiconductor capital goods industry that are likely to impede the company's ability to restore operating profitability over the intermediate term. The outlook was revised to stable from negative on the Boston, Mass.-based Teradyne, which supplies the semiconductor testing industry. Teradyne had debt outstanding of $545 million, including capitalized leases, as of September 2002. "Teradyne's good industry position and current liquidity should provide a degree of near-term downside ratings protection during the currently stressed phase of the semiconductor capital goods industry," said Standard & Poor's credit analyst Bruce Hyman. R&D expenses must remain high (currently 25% of sales) to support product-development initiatives. Recognizing stressed markets, Teradyne has been reducing its workforce and expects further restructuring activities. TITANIUM METALS: Appoints Paul Zucconi to Board of Directors ------------------------------------------------------------ Titanium Metals Corporation (NYSE: TIE) announced the appointment of Paul J. Zucconi as a director of TIMET, bringing the size of the Board to seven members. Mr. Zucconi will also serve as a member of the TIMET Audit Committee replacing Norman N. Green on the Audit Committee. Mr. Green will remain on the Board and all other committees of which he is currently a member. With the appointment, the Audit Committee consists of Dr. Albert W. Niemi, Jr., Gen. Thomas P. Stafford and Mr. Zucconi. Mr. Zucconi retired in January 2001 as an audit partner with KPMG where his career spanned more than thirty-three years. Mr. Zucconi is a member of the American Institute of Certified Public Accountants Quality Control Inquiry Committee and is involved in instructing AICPA Professional Development Institute courses. Mr. Zucconi was also recently elected to the Board of Directors of Torchmark Corporation, a major life and health insurance company. Titanium Metals Corporation, headquartered in Denver, Colorado, is a leading worldwide producer of titanium metal products. Information on TIMET is available at http://www.timet.com * * * As reported in Troubled Company Reporter's October 31, 2002 edition, Standard & Poor's lowered its preferred stock rating on Titanium Metals Corp., to single-'C' from triple-'C'- minus following the company's announcement that it plans to defer future dividend payments on its preferred stock. Standard & Poor's said that it has affirmed its single-'B'-minus corporate credit rating on the company. The outlook remains negative. TRINITY INDUSTRIES: Selling Railcar Repair Business To Rescar ------------------------------------------------------------- Trinity Industries, Inc., (NYSE: TRN) a leading industrial manufacturing company, signed an agreement with Rescar, Inc., whereby Rescar will purchase Trinity Industries' existing railcar repair facilities for cash and enter into a supply agreement for a portion of the railcar repair work required by Trinity's other railcar related businesses. Terms of the transaction were not disclosed. Rescar, Inc., is a privately held company that offers maintenance services to companies that own and/or lease railcars. Services include mechanical repair, exterior painting, interior coating and cleaning. Rescar has a nationwide network of 100+ service locations in the US and Canada. The deal is subject to certain conditions including financing and is expected to close by the end of January 2003. Stated Michael E. Flannery, CEO of Trinity Rail Group, "This move will allow Trinity Rail to focus on its core businesses of designing, manufacturing, leasing and managing railcars. Trinity will continue to pursue strategic relationships with key players in the rail industry that help it offer a complete package of rail transportation solutions to its customers." Trinity's repair business consists of sixteen facilities located in twelve states. Executives in Trinity's Repair business based in Dallas, Texas will take on new responsibilities within Trinity Industries and those based in the repair locations are expected to continue in their current roles. Trinity Industries, Inc., with headquarters in Dallas, Texas is one of the nation's leading diversified industrial companies. Trinity reports five principal business segments: the Trinity Rail Group, Trinity Railcar Leasing and Management Services Group, the Inland Barge Group, the Construction Products Group and the Industrial Products Group. Trinity's Web site may be accessed at http://www.trin.net Rescar, Inc., with headquarters in Chicago, Illinois is North America's leading railcar maintenance company. Rescar's Web site may be accessed at http://www.rescar.com * * * As previously reported, Standard & Poor's Ratings Services assigned its preliminary triple-'B'-minus senior unsecured debt rating and its preliminary double-'B'-plus subordinated debt rating to Trinity Industries Inc.'s $150 million shelf registration. At the same time, Standard & Poor's affirmed its triple-'B'- minus corporate credit rating on the general industrial manufacturer. The outlook remains negative. UNION ACCEPTANCE: Reaches Pact to Sell $200 Mill. of Receivables ---------------------------------------------------------------- Union Acceptance Corporation (OTCBB:UACAQ) has reached an agreement for its subsidiary, UAFC-2 Corporation, to sell substantially all of the approximately $200 million of receivables held under its warehouse facility with Wachovia Securities to a partnership between First Investors Financial Services Group, Inc., and The First National Bank of Omaha. The transaction, which has been approved by the U.S. Bankruptcy Court, is subject to final documentation and is expected to close December 18, 2002. UAC expects net proceeds of $11 million to $15 million resulting from the sale of the portfolio. UAC has continued its efforts to work collaboratively with MBIA Insurance Corporation toward a resolution of its proceeding involving MBIA in UAC's bankruptcy. Most recently, UAC and MBIA with the Court's approval have agreed that UAC will continue as servicer on its servicing portfolio at least through January 7, 2003. Discussions between UAC and MBIA are ongoing. The Company continues to examine all strategic alternatives for resolution of its pending bankruptcy reorganization. Among other alternatives, the Company is pursuing efforts, coordinated with the Creditors' Committee in its bankruptcy proceeding, to investigate the possibility of a transfer of its servicing platform in coordination with MBIA. Such a transaction may involve a transition of servicing of the Company's servicing portfolio to a third party under circumstances where the successor would purchase UAC's servicing assets and hire servicing employees. No assurance can be given that UAC will ultimately decide to pursue such a transaction, when or whether such a transaction could be effected or its terms. Any such transaction would be subject to Bankruptcy Court approval. "We are pleased with our progress on the warehouse portfolio sale, and we will continue our efforts to preserve our assets in the interest of our creditors and to provide for an optimal outcome for our shareholders and employees," said Lee Ervin, president and chief executive officer of UAC. "On a related personnel note, it is with regret that I announce the resignation of Mark Turner, our chief financial officer, who is leaving UAC on December 20, 2002 for personal reasons," said Ervin. "Mark brought a wealth of financial experience and tremendous hard work to us, and we wish him well in his new endeavors." The company has planned for the transition of Mr. Turner's responsibilities. The company's existing executive and financial management, with the advice and assistance of its reorganization management firm, ReeseMcMahon L.L.C., will be well positioned to continue to perform critical financial management functions on an ongoing basis. Union Acceptance Corporation is a specialized financial services company headquartered in Indianapolis, Indiana. The company's primary business is the servicing of automobile retail installment sales contracts representing primarily late model used, and to an extent, new automobiles purchased by customers who exhibit favorable credit profiles. Union Acceptance Corporation commenced business in 1986 and became an independent public corporation in 1995. By using state-of-the art technology in a highly centralized servicing environment, Union Acceptance enjoys one of the lowest cost servicing structures in the independent prime automobile finance industry. UNITED AIRLINES: Employee-Shareholder Trust Can't Dump Shares ------------------------------------------------------------- UAL Corp. (NYSE:UAL), the parent company of United Airlines, said that the bankruptcy court denied an emergency motion to exempt State Street Bank & Trust, the independent fiduciary of the UAL ESOP, from the injunction preventing certain parties from selling substantial shares of UAL common stock. The court affirmed its previously set schedule for considering objections to the injunction at a hearing on December 30, 2002. UAL had obtained the injunction in order to preserve its net operating loss. The company said that preserving the NOL could generate substantial tax benefits following its emergence from Chapter 11 protection, and that a change in ownership of the company prior to emergence could severely limit the use of the NOL. The injunction prevents certain parties from selling shares of UAL common stock. These parties include holders of more than 2.5 million shares of common stock on an as-converted basis and holders of claims of $65 million or greater against UAL or United. DebtTraders says that United Airlines' 10.67% bonds due 2004 (UAL04USR1) are trading at about 12 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL04USR1for real-time bond pricing. UNITED AIRLINES: Reiterates Commitment to Reach Labor Agreements ---------------------------------------------------------------- UAL Corp. (NYSE: UAL), the parent company of United Airlines, restated its commitment to achieving consensual agreements with its labor unions regarding employee participation in the company's business plan to successfully emerge from Chapter 11 bankruptcy. United said that active discussions with its unions on cost reductions are continuing. The company has presented its plan and cost reduction proposals to the unions and the unions are now considering these proposals. United also informed the U.S. Bankruptcy Court for the Northern District of Illinois and the company's unions that, in the absence of consensual agreements, it intends to file a motion under Section 1113 of Chapter 11 of the U.S. Bankruptcy Code late next week. While United will continue to work collaboratively with its unions, the filing of this motion would be necessary to ensure that United remains in compliance with the financial requirements of the company's debtor-in-possession financing agreements by seeking the Court's assistance should the company and the unions fail to reach consensual agreements. United's DIP financing is structured such that the cost reductions must be in effect by February 15, 2003. In order for the company to be certain that it meets that deadline and avoids being in default of the terms of the financing, United must protect its ability to use the 1113 process by filing a motion with the court on December 26, 2002, in the absence of consensual agreements. In the meantime, reaching consensual agreements with United's unions remains a top priority, and United will continue to negotiate in good faith as the company proceeds toward December 26 and beyond. United Airlines operates nearly 1,800 flights a day on a route network that spans the globe. News releases and other information about United Airlines can be found at the company's Web site at http://www.united.com UNITED AIRLINES: Honoring Prepetition Employee Obligations ---------------------------------------------------------- Paying employees what they're owed, James H.M. Sprayregen, Esq., at Kirkland & Ellis says, is critical and necessary to UAL Corporation/United Airlines Inc.'s restructuring. If United doesn't honor its prepetition employee obligations, the Company will be unable to retain its current employees and maintain positive employee morale. These are the two factors Judge Lifland deemed critical to the rehabilitation of Eastern Air Lines in In re Ionosphere Clubs, Inc., 98 B.R. 174 (Bankr. S.D.N.Y. 1989) (citing H.R. Rep. No. 595 95th Cong. 1st Sess. 16 (1977)), and has been recognized on Day One in every airline restructuring since that time. Retention of the skilled employees is not only necessary, Mr. Sprayregen continues, but "indispensable" in an airline reorganization, and payment of prepetition wages and benefits is in the best interest of creditors, the debtor and the employees. In re Gulf Air, Inc., 112 B.R. 152, 153-54 (Bankr. W.D. La. 1989) (citing In re Ionosphere Clubs, supra, and an unpublished opinion by Judge Corcoran in the Braniff Airlines bankruptcy in which an order was granted paying prepetition wage and other claims of airline employees to allow that air carrier to continue to function as a going concern). "Yes," Judge Wedoff said at the First Day Hearing, finding that the "necessity of payment" doctrine authorizes the Debtors to pay prepetition employee-related obligations and provide continued benefits to their workforce. Judge Wedoff sees that many employees live from paycheck to paycheck and rely exclusively on receiving their full compensation or reimbursement of their expenses to continue to pay their daily living expenses. These employees will be exposed to significant financial and health related problems if the Debtors are not permitted to pay certain of the unpaid reimbursable expenses and employee obligations, particularly wages, salaries and medical benefits. Judge Wedoff agrees that if United is unable to honor its employee obligations, employee morale and loyalty will be jeopardized at a time when employee support is critical. Employee uncertainty and anxiety needs to be minimized at this time when the Debtors need their employees to perform their jobs at peak efficiency. Subject to a $4,650 cap per employee, Judge Wedoff authorizes the Debtors to continue to pay wage, salary and other compensation in the ordinary course of business including the payment of prepetition obligations and authorizes the Debtors to continue to maintain their benefit programs, including the payment of prepetition obligations. Mr. Sprayregen stepped Judge Wedoff through United's Employee- Related Obligations, Compensation and Benefit Programs: A. Payroll and Deductions The Debtors employ approximately 72,000 active fulltime and 5,900 active part-time employees in the United States and approximately 5,100 employees in 26 foreign countries. The Debtors issue payroll checks to their employees. The Debtors' aggregate gross monthly payroll for all domestic employees is approximately $425 million, which includes approximately $30 million of employer paid FICA and other payroll taxes and $15.5 million for reimbursable Expenses. The Debtors' aggregate monthly payroll for their foreign employees is approximately $11 million. As of the Petition Date, approximately $225 million in accrued prepetition wages, salaries, and overtime earned by the Debtors' current and former employees prior to the Petition Date was unpaid. From time to time, the Debtors also utilize the services of independent contractors, including employees provided by temporary agencies. The Debtors believe that if the Temporary Employees (or the agencies that pay the employees) remain unpaid for prepetition services rendered to the Debtors, they will not return (or the applicable agency will not permit the temporary employees to return) to their positions. Accordingly, the Debtors seek to pay the Temporary Employees for any prepetition amounts. B. Other Miscellaneous Compensation In addition to their Wage Obligations, the Debtors provide other compensation to their employees, including paid vacation, sick and personal days, pay for time dedicated to jury duty, expense reimbursement and severance. By this Motion, the Debtors seek authority to pay Other Compensation to their employees. 1. Vacation, Sick and Personal Day Pay The Debtors request that all employees be authorized to use their accrued vacation days, sick days and personal holidays in the ordinary course of business. The Debtors provide their employees with vacation pay. Vacation hours are provided to full-time and part-time employees and accrue on a monthly basis for use in the following calendar year. Employees are allowed to use vacation days not yet accrued. Prepetition accrued vacation liability is approximately $387,000,000. 2. Jury Duty Full-time and part-time employees are paid, based on regularly scheduled work hours, for days not worked because of jury duty commitments. C. Expense Reimbursement The Debtors reimburse their employees certain expenses incurred within the scope of employment, including expenses for travel, lodging, professional seminars and conventions, ground transportation, meals, supplies and other miscellaneous business expenses. Approximately $15,000,000 is paid to employees for Reimbursable Expenses each year. It is difficult for the Debtors to estimate the amount of Reimbursable Expenses outstanding as of the Petition Date because not all employees have submitted expense reports. It is critical that the Debtors be authorized to reimburse all these expenses as and when reports are submitted. D. Incentive Programs The Debtors maintain various types of bonus plans for different types of employees including the PIP and LTIP. The Debtors' Performance Incentive Plan provides eligible employees of United Air Lines, Inc. and UAL Loyalty Services, Inc., with an opportunity to receive additional cash compensation dependent upon (a) the performance of the relevant Debtor whose performance is measured against financial and/or operational criteria and (b) the performance of the specific employee. UAL Loyalty Services, Inc., also maintains a long-term incentive plan that provides the opportunity for ULS employees to earn additional cash compensation based on the increase in the value of certain ULS businesses over a defined period. The Debtors' equity incentive plans permit grants of stock options or restricted stock to certain management employees. The UAL Corporation's board of directors approves grants based on the employee's job level and performance. E. Severance The Debtors provide severance benefits to their employees. These policies can be divided into two general categories: the Executive Severance Policies and the Severance Policies. The Debtors' Executive Severance Policies cover certain of the Debtors' executive vice presidents, senior vice presidents, vice presidents and directors. The Debtors' Other Severance Policies, most of which are contained in the Debtors' collective bargaining agreements and cover all of the Debtors' remaining employees. F. Benefit Programs The Debtors have plans and policies to provide their employees with medical, dental, prescription drug, disability, life insurance, accident insurance, mental health, retirement savings, pension, stock and other similar benefits. 1. Medical Benefits The Debtors provide primary health coverage for all employees and their eligible dependents, including coverage for medical, dental, prescription drug and mental health expenses. This coverage is generally self-insured; however, fully insured HMOs are offered as an option in many geographic locations. a. Self Insured Plans The Debtors' Self-Insured Medical Plans are administered by BlueCross and BlueShield of Illinois, the Debtors' self-insured traditional dental plans are administered by MetLife, and the Debtors' self-insured prescription drug benefit programs are administered by MedcoHealth. Approximately 55,000 employees and their eligible dependents are covered through the Debtors' Self- Insured Medical Plans. The Debtors' liability under the Self- Insured Medical Plans as of the Petition Date is approximately $52,600,000. The Debtors' liability under the prescription drug plan as of the Petition Date is approximately $1,500,000. The Debtors' liability under their traditional dental plan is $9,900,000. b. HMO Plans Employees may opt to obtain, sometimes at an additional expense, coverage provided through various health maintenance organizations. Approximately 28,500 employees and their eligible dependents have opted for coverage under HMO Plans. Employee benefit contributions under the HMO Plans are made through payroll deductions and are deposited in the Debtors' VEBA. Approximately $12,100,000 of prepetition premiums are owed by the Debtors for payments to the HMO providers, which includes an estimated $750,000 of employee benefit contributions which were still being held by the Debtors pending transfer to the HMOs in the ordinary course of business. The Debtors' liabilities under their Dental HMO Plans are $546,000. G. Insurance The Debtors provide life insurance, accidental death and dismemberment insurance and disability insurance to their employees. The Debtors pay the entire cost of providing basic life insurance at varying levels to all employees and their eligible dependents. Approximately 82,000 employees and their eligible dependents participate in the Debtors' life insurance plans. The Debtors' December, 2002 basic life insurance premium is approximately $900,000. The Debtors provide basic accidental death and dismemberment insurance to all employees and their eligible dependents, enhanced accidental death and dismemberment benefits for pilots, flight attendants and officers, and a voluntary personal accident policy available to all employees. The Debtors' monthly premiums for this insurance are approximately $4,900,000. The Debtors maintain a voluntary personal accident insurance plan covering approximately 37,000 employees. Employee benefit contributions to this voluntary personal accident insurance plan are made through payroll deductions and paid over to the insurance carrier on the 15th of each month. The Debtors provide various long-term and short-term disability benefits to their employees. The Debtors provide disability benefits under a short-term disability plan to the following employee groups: flight attendants, flight dispatchers, mechanics, ramp and stores, food service and security officers. The benefits are fully insured by MetLife, and the premiums are paid entirely by the Debtors. There are approximately 49,000 employees in the Weekly Disability Plan, which has an annual cost of approximately $4,200,000. The Debtors provide these benefits partially to comply with state law disability insurance requirements. The Debtors maintain long-term Disability Plans covering approximately 35,281 employees. The Disability Plans cover the following employees who are employed for at least one year: administrative employees, fleet instructors, flight attendants, management, flight dispatchers, maintenance instructors, meteorologists, officers and public contact employees. The Disability Plans are fully insured by MetLife, and the Debtors share the cost of the annual $4,590,675 of premiums with the participating employees. As of December 2, 2002, the Debtors' outstanding obligation to pay premiums was $433,712. H. Savings Plans The Debtors maintain several qualified defined contribution Savings Plans that meet the requirements of Section 401(a) and 401(k) of the Internal Revenue Code. Employees may elect to make before-tax contributions to the Savings Plans through payroll deductions which are paid to trusts shortly thereafter. The Debtors also make contributions to these plans, based on plan design and collective bargaining agreements. First, the United Air Lines Management and Administrative 401(k) Plan has an average of 10,300 participants and an average monthly employee benefit contribution of $3,403,000. Second, the United Air Lines Pilot Directed Account Plan has an average of 8,800 participants and an average monthly employee benefit contribution of $4,638,000, as well as a monthly company contribution of $15,000,000. Third, the United Air Lines Ground Employee 401(k) Plan has an average of 30,400 participants and an average monthly employee benefit contribution of $7,226,000. Finally, the United Air Lines Flight Attendant 401(k) Plan has an average of 19,600 participants with an average monthly employee benefit contribution of $4,893,000. I. Pension Plans The Debtors maintain several Pension Plans that are qualified defined benefit plans under the Internal Revenue Code. The Debtors are responsible for making minimum funding contributions to the plans, based on annual actuarial calculations. In addition, the Debtors must pay annual premiums for each plan to the Pension Benefit Guaranty Corporation. The Pension Plans are as follows: The Debtors maintain an employee stock ownership plan which is qualified under Section 401(a) of the Internal Revenue Code. The Debtors also maintain a supplemental employee stock ownership plan which is intended to be both a nonqualified stock plan with respect to certain plan participants and an excess benefit plan with respect to certain participants. Finally, the Debtors maintain an employee stock purchase plan under which employees may purchase company stock through payroll deductions. J. 24-Hour Nurse Line The Debtors request, by this Motion, authority to continue to provide, through an outside vendor, Carewise, a 24 hour nurses line to aid employees and their eligible dependents in obtaining health care information. Monthly service fees associated with this hotline are approximately $100,000. K. Flexible Spending Program This program allows employees to make pre-tax premium payments to medical coverage, health and dependent care accounts. Employees contribute pre-tax dollars to these accounts to aid them in paying health and dependent care expenses. Employee contributions to this flexible spending plan are made through payroll deductions and are reimbursable to employees throughout the year. Approximately 28,500 employees participate in this plan. In November 2002, the Debtors' fees paid to SHPS Healthcare Services, a third-party employee benefits provide utilized by the Debtors, to administer this program were $27,000. L. Workers' Compensation Programs The Debtors provide certain workers' compensation programs for payment of workers' compensation benefits. Pursuant to state laws, the Debtors must maintain Workers' Compensation Programs in the ordinary course of business to ensure prompt and efficient payment and/or reimbursement to its employees. The Workers' Compensation Programs are utilized to make payments as claims arise. M. Social Security, Income Taxes and Other Withholding The Debtors routinely withhold from employee paychecks amounts that the Debtors are required to transmit to third parties for purposes as credit union payments, insurance, union dues, savings plans deposits, wage garnishments, court ordered deductions, child support payments and other wage and salary check-offs and deductions. Examples of withholdings include Social Security, FICA, federal and state income taxes, garnishments, health care benefits, union dues, retirement fund withholding and charitable donations. The Debtors believe that withheld funds, to the extent that they remain in the Debtors' possession, constitute monies held in trust and therefore are not property of the Debtors' bankruptcy estates. Thus, the Debtors believe that their practice of directing the funds to the appropriate parties is in the ordinary course of business. Out of an abundance of caution, the Debtors request authority to pay or withhold and direct all federal and state withholding and payroll related taxes relating to prepetition periods, including, but not limited to, all withholding taxes, Social Security taxes and Medicare taxes, as well as all other withholdings such as union dues, charitable contributions and garnishment contributions, including prepetition funds. To the extent deductions were made from employees' wages and salaries including bonuses and commissions) prior to the Petition Date, the Debtors also propose to implement and effectuate the prepetition arrangements and to apply or deliver the deducted sums as provided in the arrangements. N. Retiree Benefits Approximately 24,000 retired employees currently receive employment-related benefits from the Debtors. The Debtors are obligated to timely pay and honor all retiree benefits unless those benefits are modified in accordance with Section 1114 of the Bankruptcy Code. 11 U.S.C. Section 1114(e)(1)(A)-(B) or otherwise terminated by the Debtors. As is customary in the case of most large companies, the Debtors utilize the services of several professionals and consultants in the ordinary course of their business to facilitate the administration and maintenance of their books and records in respect of employee benefit plans and programs and certain related trusts. In 2001 the Debtors paid Automatic Data Processing $1.6 million to provide retiree benefit administration. The Debtors expect to make similar payments in 2002. The Debtors have contracted with ADP to provide services because ADP can provide them more efficiently and cost effectively. A non-exhaustive list of the Debtors other employee-benefits-related service providers includes: BlueCross and BlueShield of Illinois, MetLife, CIGNA, SHPS, Carewise, GeoAccess, Universal Life Resources, ReloAction, and e-Benx. (United Airlines Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) US AIRWAYS: Wants Nod to Examine EDS Corp. Under Rule 2004 ---------------------------------------------------------- US Airways Group, Inc., and its debtor-affiliates seek the Court's authority, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure, to examine Electronic Data Systems Corporation. John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, relates that on December 15, 1997, US Airways, The Sabre Group, Inc. and The Sabre Group Holdings, Inc., entered into an Information Technology Services Agreement, whereby Sabre agreed to provide data processing and telecommunications services to US Airways Group. On March 14, 2001, EDS and Sabre entered into an Asset Purchase Agreement where Sabre sold to EDS certain assets including data processing and telecommunications facilities. As part of this agreement, it was contemplated that EDS would assume Sabre's obligations to perform the data processing and telecommunications services set forth in the ITSA while Sabre retained the obligation to perform other parts of the services in accordance with the ITSA. Later, US Airways and EDS Amended the ITSA. Pursuant to the Amended ITSA, US Airways pays EDS more than $200,000,000 per year for data processing and telecommunications services. These services are crucial to the airline. Without the steady and reliable delivery of these services, US Airways would not be able to provide competitive air transport services. An important aspect of how US Airways reorganizes its operations depends on the treatment afforded the Amended ITSA, Mr. Butler says. US Airways and EDS agreed that if Sabre or EDS entered into services agreements with competitor airlines that are less favorable to Sabre or EDS, then Sabre or EDS would offer to revise the US Airways arrangement so that US Airways received the pricing benefits of the other agreements. This provision was a key part of US Airways' decision to outsource its data processing and telecommunications functions to Sabre and later to agree that EDS could assume those responsibilities. The failure by either Sabre or EDS to grant US Airways the most favored customer treatment would frustrate an essential basis of the bargain between US Airways and its service providers. The provision is implemented by having executive officers from Sabre and EDS certify in writing annually that their companies are in full compliance with this Most Favored Customer clause. When US Airways entered into the original ITSA, it was understood that one of the benefits of the transaction was that US Airways would receive pricing and other service terms that were comparable to those to American Airlines, Inc. At the time of the original contract, representatives from US Airways were given an opportunity to review the American Airlines contract to confirm that Sabre was offering US Airways pricing and terms that were comparable to those provided to American. Much of the structure of the original ITSA was adopted so that US Airways could "piggyback" on top of the Sabre-American Airlines transaction and get the benefits of any improvements in that relationship. This was well known to EDS when it agreed to acquire significant parts of the Sabre business and assume the US Airways contract. The Amended ITSA was also structured so that US Airways would continue to "piggy-back" on the American Airlines relationships with EDS and Sabre. Pursuant to the Amended ITSA, on January 30, 2002, in a letter from Paulett Eberhart, EDS President, Information Solutions U.S. to Paul Walters, US Airways Managing Director for Information Technology, EDS purported to certify that it was in full compliance with the material provisions of Section 7.12 of the Amended ITSA (relating to most favored customer status). Subsequent to receipt of this letter, US Airways has engaged in discussion with EDS about the basis for this certification and has requested documents that question the validity of certification. To date, EDS has not provided the requested documents and has insisted that US Airways accept as correct the reasoning offered as to why the certification is proper. EDS' failure to provide this information is itself a breach of US Airways' contractual rights, Mr. Butler asserts. US Airways is aware that, as of the beginning of 2002, American Airlines and EDS entered into a renegotiated agreement to include revised pricing and other terms and conditions. Based on general industry knowledge, and on statements made by EDS personnel to US Airways personnel, US Airways believes that the pricing and other terms and conditions offered by EDS to American Airlines make the American Airlines agreement a "less favorable" agreement for EDS than the US Airways agreement. Accordingly, EDS should have offered US Airways the revised and more favorable pricing and other terms included in the American Airlines agreement. EDS disputes that the American Airlines agreement is less favorable than the US Airways agreement. However, as part of the requested Rule 2004 examination, US Airways seeks access to the renegotiated American Airlines agreement so that US Airways and its experts can determine for themselves whether the American Airlines agreement is more or less favorable. US Airways is also seeking to examine Ms. Eberhart to determine the basis on which she made the certification and to determine whether that certification is valid. The Amended ITSA contains numerous provisions that specify the work that EDS is to perform in return for the contract price. A failure to perform the work, or inadequate work performance, would constitute a breach of the Amended ITSA. At a minimum, US Airways would be entitled to a refund for work not performed and may be entitled to damages for the failure either to perform the work or to properly perform the work. Examples of the types of work include: a) the procedures and processes EDS has established to provide US Airways with cost reductions and efficiencies on products and services provided under the Amended ITSA; b) the procedures and processes EDS has established to keep the technology platform that EDS uses to provide services to US Airways current and at least as good as that used by EDS internally, for other airline customers, and in the air transportation industry generally; c) upgrades to the shared processing environments; d) the procedures and processes EDS has established to use resources efficiently; e) the procedures and processes EDS has established to provide upgrades of off-the-shelf software; f) implementation at US Airways of service level agreements that EDS may have with other most favored customers; g) conduct of annual satisfaction surveys and use of surveys for incentive compensation of various EDS personnel providing services to US Airways; h) fair allocation of costs to charges invoiced by EDS to US Airways; and i) the processes and procedures EDS has established to provide security for US Airways data no less stringent than that which is typical in the airline industry. US Airways wants EDS to produce documents evidencing the work performed and the manner in which it has been performed. US Airways also seeks to examine knowledgeable EDS personnel about this work. Mr. Butler explains that US Airways needs this information to decide whether to assume or reject the Amended ITSA under Section 365(a) of the Bankruptcy Code. The Amended ITSA is a material contract of the Debtors. The Debtors can only exercise their business judgment after careful evaluation of the Amended ITSA. In conducting an evaluation of the Amended ITSA, US Airways has two major objectives: a) it desires to obtain the data processing and telecommunications services set forth in the Amended ITSA at rates and charges, which reflect current market prices for comparable services, and b) the terms and conditions these services are rendered should reflect best industry practices. US Airways and EDS have been discussing potential revisions to the Amended ITSA to achieve these two objectives. However, the parties have not been able to reach a conclusion on either a market-based price or industry-standard terms. The best evidence of market-based pricing and industry-standard terms and conditions are the contracts that EDS has entered into with other airlines and with other providers of comparable services to other airlines. Accordingly, as part of a Bankruptcy Rule 2004 examination, US Airways wants to review contracts and related documents on current agreements between EDS and other airlines and airline service providers and to examine knowledgeable EDS personnel about these agreements, so US Airways will be able to exercise its business judgment in deciding whether to assume or reject the Amended ITSA. (US Airways Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) US Airways Inc.'s 9.820% bonds due 2013 (U13USR1) are trading at about 10 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=U13USR1for real-time bond pricing. U.S. TIMBERLANDS: Commences Trading on OTCBB Effective Dec. 18 -------------------------------------------------------------- US Timberlands Company, LP (OTC Bulletin Board: TIMBZ) received a letter from the Nasdaq Listing Qualifications Panel informing the Company that the Panel had determined to delist the Company's Common Units from The Nasdaq Stock Market effective with the opening of business on Wednesday, December 18, 2002. As the Company previously announced, the Panel had previously determined to transfer the listing of the Common Units from the Nasdaq National Market to the Nasdaq Small Cap Market contingent upon the Company's successful completion of a listing application and the payment of the applicable listing fees. However, the Company determined that the Common Units were no longer eligible to be listed on the Nasdaq Small Cap Market as it did not meet certain of the continued listing criteria. The Company was further advised that its Common Units would automatically be eligible for trading on the OTC Bulletin Board. U.S. Timberlands Company, L.P. and its affiliate own 670,000 fee acres of timberland and cutting rights on 18,000 acres of timberland containing total merchantable timber volume estimated to be approximately 1.8 billion board feet in Oregon and Washington, east of the Cascade Range. U.S. Timberlands specializes in the growing of trees and the sale of logs and standing timber. Logs harvested from the timberlands are sold to unaffiliated domestic conversion facilities. These logs are processed for sale as lumber, molding products, doors, millwork, commodity, specialty and overlaid plywood products, laminated veneer lumber, engineered wood I-beams, particleboard, hardboard, paper and other wood products. These products are used in residential, commercial and industrial construction, home remodeling and repair and general industrial applications as well as a variety of paper products. U.S. Timberlands also owns and operates its own seed orchard and produces approximately five million conifer seedlings annually from its nursery, approximately 75% of which are used for its own internal reforestation programs, with the balance sold to other forest products companies. * * * As previously reported, Standard & Poor's raised its corporate credit and senior unsecured debt ratings on timber company U.S. Timberlands Klamath Falls LLC and its affiliate, U.S. Timberlands Finance Corp., to triple-'C'-plus from triple-'C'- minus after company management confirmed that the May 15, 2002, interest payment on the $225 million of senior unsecured notes issued jointly by the two companies was made within the 30-day grace period. Standard & Poor's also removed the ratings from CreditWatch. The current outlook is negative. The senior unsecured notes represent the total amount of debt outstanding. U.S. Timberlands Co. LP is Klamath's 99%-owner. VIASYSTEMS GROUP: Court Okays Schulte Roth as Conflict Counsel -------------------------------------------------------------- Viasystems Group, Inc., and its debtor-affiliates obtained permission from the U.S. Bankruptcy Court for the Southern District of New York to retain Schulte Roth & Zabel LLP as Special Conflicts Counsel. Schulte Roth will represent the Debtors in connection with claims, litigation or other matters now pending or which may arise as to which the Debtors' general bankruptcy counsel, Weil, Gotshal & Manges LLP, is or becomes unable to represent due to a conflict of interest. Specifically, Schulte Roth will be retained as special conflicts counsel for the purposes of: (i) objecting to the allowance of the claim asserted by Enron Energy against Viasystems and prosecuting a counterclaim against Enron Energy for breach of the Transaction Agreement, and (ii) representing the Debtors in connection with any other claims, litigation or other matters now pending or which may arise as to which WG&M is or becomes unable to represent the Debtors due to a conflict of interest. Schulte Roth will charge the Debtors for its legal services in accordance with its ordinary and customary hourly rates, which are: Partners $450 to $675 per hour Special Counsel $425 per hour Associates $190 to $400 per hour Paralegals $80 to $220 per hour Viasystems Group, Inc. is a holding company whose principal assets are its shares of stock of Viasystems, Inc. Viasystems, through its direct and indirect subsidiaries, is a leading, worldwide, independent provider of electronics manufacturing services to original equipment manufacturers primarily in the telecommunication, networking, automotive, consumer, industrial and computer industries. The Debtors filed for chapter 11 protection on October 1, 2002. Alan B. Miller, Esq., at Weil, Gotshal & Manges, LLP represents the Debtors in their restructuring efforts. When the Companies filed for protection from its creditors, it listed $1.6 Billion in total assets and $1.025 Billion in total debts. WARREN ELECTRIC: Wants to Continue McCloskey's Engagement --------------------------------------------------------- Warren Electric Group, Ltd., asks the U.S. Bankruptcy Court for the Southern District of Texas for permission to continue its employment of McCloskey & Herberger, P.C., as Special Counsel. The Debtor tells the Court that it requires the advice and services of Special Counsel to defend it in connection with lawsuits pending on the Petition Date: a. Warren Electric Group v. John F. Giles, Jr., Individually and Merlin Process Equipment, Inc.; In the County Civil Court at Law No. 1, Harris County, Texas b. Warren Electric Group v. Automation Resources, Inc.; In the County Civil Court at Law No. 1 of Harris County, Texas c. Warren Electric Group v. West Texas Lighting Company, Inc.; In the County Court at Law No. 4 of Harris County, Texas d. Warren Electric Group v. George M. Karam, Individually and Karam Construction, Inc.; In the Harris County Civil Court at Law No. 3 e. Warren Electric Group v. SystemNet Corp d/b/a Computer Cabling Division, Inc.; In the Harris County Civil Court at Law No. 2 f. Warren Electric Group v. Crews Electric, Inc.; In the County Court at Law No. 3, Harris County, Texas g. Warren Electric Group v. IDEX Global Services, Inc. dba IDEX Technologies; In the County Court at Law No. 2, Harris County, Texas h. Warren Electric Group v. Lowry Food Products, Inc. d/b/a The Lowry Food Company, Inc.; In the County Civil Court at Law No. 3, Harris County, Texas i. Warren Electric Group v. Air Condenser Construction, Inc. and Chris Bachtel, Individually; In the County Civil Court at Law No. 4, Harris County, Texas j. Warren Electric Group Ltd. d/b/a Warren Electric Group v. Brian Pruitt d/b/a The Beach Street; In the Justice Court, Precinct 1, Place 2, Harris County, Texas k. Warren Electric Group v. Sun West Supply, Inc.; In the County Civil Court No. 1, Harris County, Texas l. Warren Electric Group Ltd. d/b/a Warren Electric Company v. Ideamasters, Inc.; in Pct. 5, Position 1 of Harris County, Texas m. Warren Electric Group v. M.H. Integration, Inc. and Mickey Horn, Individually; In the County Court at Law No. 1 of Harris County, Texas n. Warren Electric Group v. Cauley Electric Company, Inc.; In County Civil Court at Law No. 3, Harris County, Texas o. Watson Electric Supply Company v. Allen Hall & Sons' Electric, Inc. d/b/a Hall & Sons' Electric, et al; In the 19th Judicial District Court of McLennan County, Texas p. Warren Electric Group v. NORDCO, Inc.; In the County Civil Court at Law No. 2, Harris County, Texas q. Warren Electric Group v. Craig K. Hatanville d/b/a Energy Electrical Services; in the County Court at Law, Lamar County, Texas. John D. Herberger, Esq., a partner of McCloskey & Herberger, will be the attorney in charge in this representation along with other attorneys and professionals. McCloskey & Herbergerwill's current hourly rates are: Timothy M. McCloskey Partner $225 per hour John D. Herberger Partner $195 per hour Daniel M. Pacious Associate $160 per hour Shari K. Hall Paralegal $ 55 per hour Sandie R. Potrzeba Paralegal $ 55 per hour Sheryl A. Warren Paralegal $ 55 per hour The Debtor adds that McCloskey & Herberger has represented the Company for approximately three years. This retention has afforded the Firm an intimate familiarity with the Debtor and the Debtor believes that McCloskey & Herberger is uniquely capable to represent the Debtor in these litigations. Warren Electric Group, Ltd., filed for chapter 11 protection on September 27, 2002. Harlin C. Womble, Jr., Esq., at Jordan Hyden Womble and Culbreth represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $50 million each. WHEELING-PITTSBURGH: Court Okays Financing Pact with Cananwill -------------------------------------------------------------- Wheeling-Pittsburgh Steel Corp., sought and obtained Court approval of an insurance premium financing agreement with Cananwill, Inc. The insurance policies for which premium financing is sought cover the Debtors' property interests. The Debtors are required to maintain this insurance to protect these estates and their creditors. To pay for these policies, which are necessary for an effective reorganization, WPSC attempted to obtain unsecured credit. Having been unable to obtain credit, WPSC turned to Cananwill to finance the premium payments. The Premium Financing Agreement requires that WPSC make a $1,675,000 cash downpayment, with a $4,689,000 balance financed over nine monthly payments of $530,620.20. This reflects interest at an annual rate of 4.41%. Cananwill will, thus, receive total payments equal to $4,775,581. In return, WPSC grants Cananwill a power of attorney to cancel the policies financed under the PFA in the event of a default in payment by WPSC. To further secure payment of the amounts due to Cananwill, WPSC grants to Cananwill a security interest in unearned or returned premiums and other amounts due to WPSC under the Policies that result from any cancellation. WPSC further agrees that, in the event of a payment default, the automatic stay is immediately lifted, and Cananwill may cancel any or all of the Policies after giving notice as required by applicable state law. Cananwill may then apply any unearned or returned premiums due under the Policies to any amount owing to Cananwill without any application to the Bankruptcy Court. In the event that the unearned or returned premiums are insufficient to cover the full amount due to Cananwill, any deficiency, including reasonable attorney's fees, will be deemed as an unsecured claim entitled to priority under the Bankruptcy Code. Mr. Lawniczak asserts that these policies are vital to the Debtors' ongoing operations and their ability to sustain their businesses during these Chapter 11 cases. Furthermore, under the terms of the DIP Credit Agreement, the Debtors are required to maintain insurance in such amounts and covering such risks as is usually carried by companies engaging in similar businesses and owning similar properties in the same general areas in which the Debtors operate. Property insurance is essential for any operating business, and particularly so for steel manufacturers. In addition, under the Operating Guidelines of the Office of the United States Trustee, the Debtors are also required to maintain this insurance. The Debtors cannot meet these requirements without this financing with Cananwill. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM: Board Members Offer Resignation to Chairman Capellas -------------------------------------------------------------- WorldCom, Inc., (WCOEQ, MCWEQ) announced the majority of its Board members have offered their resignation to new Chairman and CEO Michael Capellas and he has accepted. Departing Board members include Carl J. Aycock, Max E. Bobbitt, Franceso Galesi, Gordon S. Macklin, Bert C. Roberts, Jr. and John W. Sidgmore. Judith Areen resigned from WorldCom's Board last week. Only recently appointed Board members will remain, including Nicholas deB Katzenbach, former U.S. Attorney General, Dennis Beresford, former chairman of the Financial Accounting Standards Board, and C.B. Rogers, Jr., former chairman and CEO of Equifax. "With the courts' approval [Mon]day of Michael Capellas as WorldCom's new chairman and CEO, it is now appropriate for each of us to stand down as directors and give him the opportunity to continue the process we have started to put in place substantive reforms and best governance practices," said the departing Board members. At Monday's hearing, U.S. District Court Judge Jed S. Rakoff complimented the existing WorldCom Board of Directors for making a series of positive reforms to the Company's governance, and for mandating strong and consistent cooperation with all government investigations and the District Court's monitoring process. "I appreciate the Board's hard work over the past months in laying the groundwork for good corporate governance going forward, including the appointment of three new Board members," said Capellas. "These actions show that WorldCom is absolutely committed to establishing the highest standards of ethics and integrity at all levels throughout the organization." WorldCom, Inc., (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: Seeks Approval to Enter into Pentagon City Lease -------------------------------------------------------------- Sharon Youdelman, Esq., at Weil Gotshal & Manges LLP, in New York, informs the Court that Worldcom Inc., currently own an office complex located at 701 South 12th Street and 601 South 12th Street, known as "Pentagon City", in Arlington, Virginia. In the months prior to the Petition Date, the Debtors began to consolidate their office space occupancy in the Washington, D.C. area. By early May 2002, the Debtors determined that their continued occupancy of Pentagon City was no longer necessary or desirable. Accordingly, the Debtors marketed Pentagon City for sale to potential purchasers. On July 11, 2002, the Debtors entered into a contract for the sale of Pentagon City to TST/Pentagon City, LLC, an affiliate of Tishman Speyer Properties. On September 13, 2002, the Debtors filed a motion in the Bankruptcy Court seeking approval of the sale of Pentagon City to TST. However, prior to the hearing to consider the proposed sale, the Debtors determined that based on new facts, the consummation of the sale of Pentagon City to TST would not be in the Debtors' best interests because the terms of the sale no longer represented adequate consideration. The Creditors' Committee agreed with the Debtors' determination in that regard, and ultimately, the sale motion was withdrawn. At about this time, the Debtors learned of the intent of the federal government and one or more of its agencies to seek a ten-year lease of office space in the Washington, D.C. area commencing in January 2003. In connection therewith, the Government circulated a Solicitation for Offers, a formal request for offers from building owners, setting forth: -- the requirements of the Government; -- the award factors by which all offers would be evaluated; -- the broad terms of the services needed; and -- any special requirements, which the Government may have with respect to the procurement. Ms. Youdelman relates that the Debtors, with the assistance of their professionals, reviewed the criteria set forth in the SFO, and on October 31, 2002, timely submitted their offer to the Government in response. Since then, the Debtors have been in discussions with the Government and recently have been informed that the Government has established November 29, 2002 as the deadline for the submission of "best and final offers" from all offerors, i.e., revised final offers upon which the Government will make its award determination. The Debtors intend to timely respond to the request for best and final offers and anticipate that the award determination will be announced by the Government during the first half of December 2002. In the context of their discussions with the Government, the Debtors were informed that, in view of the Government representative's inexperience with the Chapter 11 process and the Government's January 2003 occupancy requirement, the Government would require assurances of the Debtors' ability and authority to consummate the lease transaction if selected as the successful offeror. Accordingly, although the Debtors believe that the lease of their owned real property is within the ordinary course of their business and does not require Court approval, out of an abundance of caution and to apprise the Court and parties-in-interest of the status of the Pentagon City property, as well as to provide the Government with added comfort regarding the Debtors' ability to move forward with the transaction, the Debtors seek the Court's authority to consummate a lease transaction for Pentagon City with the Government if the Debtors are the successful offeror, and to execute all documents and take all action necessary or appropriate. Although the Government has not yet made its award determination and best and final offers have not yet been submitted, the Debtors provide the Court with these general parameters of the proposed transaction: A. Term of Lease: 10 years; B. Square Footage: 450,000 to 550,000; C. Tenant: U.S. Government; D. Rent: $20 to $40 per square foot or $9,000,000 to $22,000,000 annually. Additional rental rate for parking will be either on a per space basis or at a set price for the entire parking area; E. Tenant Improvement Allowance: Indicated by the Government at $40 per square foot or $18,000,000 to $22,000,000, to cover expenses including Debtors' general contractor and architect, furniture, fixtures, and infrastructure improvements to support technical requirements; F. Capital: $5,000,000 to $10,000,000. Includes upgrades to systems, improvements cosmetic repairs, and similar improvements specific to the Government's requirements but not covered by tenant improvement allowance; G. Occupancy: Partial occupancy to begin January 1, 2003, with the occupancy increased to between 100,000 and 150,000 square feet by March 1, 2003. It is estimated that full occupancy of the remainder of the premises will occur on or around the end of the first quarter of 2004; and H. Duration of Offer: Government proposes all offers remain valid until 90 days after award. Ms. Youdelman notes that the Government is considered a high quality long-term tenant. Thus, risk of non-payment of the rent is minimized, while the marketability of the property to potential purchasers is enhanced. Moreover, Pentagon City is currently unoccupied and not generating any income for the Debtors. The Debtors will benefit economically as a result of the transaction -- either by the stream of income under the lease or the future sale of the property at optimal value. Ms. Youdelman contends that the contemplated terms of the lease are reasonable as the rental rate range is within market parameters for property of this kind. Additionally, tenant improvements are often requested by a new lessee and the cost of the tenant improvements is taken into consideration in setting the rental rate. Likewise, the capital improvements that the Debtors propose to make are necessary to attract this tenant. The investment of $23,000,000 to $32,000,000 for the capital improvements and tenant improvements will enable the Debtors to realize an income stream of $9,000,000 to $22,000,000 annually for the course of the ten-year lease term and these investments are, therefore, wholly warranted. According to Ms. Youdelman, the Government has set January 2, 2003 as the deadline for partial occupancy of the property. Therefore, it is critical that the Debtors avoid any time delays in executing the lease documentation if they are awarded the lease. The Debtors expect to receive a notification of the award decision in the first half of December 2002. Thus, it is imperative that the motion be heard on an expedited basis so that the Government can be assured of the Debtors' authority to consummate a transaction and the Debtors can then move expeditiously if they are offered the lease so that the property is ready for occupancy by January 2, 2003. (Worldcom Bankruptcy News, Issue No. 15; 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 14 - 16 0 Finova Group 7.5% due 2009 33.5 - 35.5 +1 Freeport-McMoran 7.5% due 2006 90 - 92 0 Global Crossing Hldgs 9.5% due 2009 2 - 3 -0.25 Globalstar 11.375% due 2004 8 - 9 +1 Lucent Technologies 6.45% due 2029 42 - 44 -5 Polaroid Corporation 6.75% due 2002 3 - 5 0 Terra Industries 10.5% due 2005 90 - 92 0 Westpoint Stevens 7.875% due 2005 25 - 27 +2.5 Xerox Corporation 8.0% due 2027 55 - 57 +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. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2002. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $625 for 6 months delivered via e- mail. 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