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/raid1/www/Hosts/bankrupt/TCR_Public/021226.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 26, 2002, Vol. 6, No. 254 Headlines ACC ACQUISITION: Sept. 30 Working Capital Deficit Tops $1.6 Bil. AKORN: John Kapoor Resigns as CEO but Stays as Board Chairman ALLIANCE PHARMACEUTICAL: Capital Insufficient to Continue Ops. AMERCO: Executes Term Sheets for New $650-Million Financing AMERICAN PAD: Case Summary & 20 Largest Unsecured Creditors AMES DEPARTMENT: Wants Nod to Sell 7 Store Leases to Landlords ANC RENTAL: Court Extends Cash Collateral Use Until February 16 APPLIED EXTRUSION: Will Restate Fin'l Statements for 1998 - 2001 ARMSTRONG HOLDINGS: AWI Files Disclosure Statement in Wilmington ARMSTRONG: Summary of AWI's Proposed Disclosure Statement ARTEMIS ASSOCIATES: Case Summary & 13 Largest Unsec. Creditors ASIA GLOBAL CROSSING: All Bids to Acquire Assets Due by Jan. 9 AVANTAGE LINK: Raymond Chabot Appointed Receiver to Sell Assets AVAYA INC: Names Louis J. D'Ambrosio to Lead Services Business BETHLEHEM STEEL: Court Approves Columbus Restructuring Loan Pact CELLSTAR CORP: Completes Mandatory Conversion of 5% Senior Notes CENDANT CORP: SEC Completes Review of 2001 Annual Report CHESAPEAKE ENERGY: Board Declares Common and Preferred Dividends CLARENT CORPORATION: Voluntary Chapter 11 Case Summary CMS ENERGY: Inks Pact to Sell Panhandle Companies for $1.8 Bill. COMMUNICATION DYNAMICS: Gets Go-Signal to Hire AlixPartners COVANTA ENERGY: Wins Nod to Renew & Modify AIG Insurance Program CTC COMMS: Gets Final Court Nod to Use Lenders' Cash Collateral DANA CORP: Completes Sale of FTE Brake & Clutch Actuation Assets DLJ MORTGAGE: S&P Junks Class B-2 Note Rating at CCC EL PASO: Closes Over $3.6-Billion in Sales Transactions in 2002 ENCOMPASS SERVICES: Honoring Obligations to Critical Vendors ENRON CORP: Court Approves Proposed Overhead Allocation Formula EOTT ENERGY: Intends to Assume 2 Premium Financing Agreements EXTREME NETWORKS: S&P Junks $200MM 3.5% Conv. Sub. Note Rating FEDERAL-MOGUL: Signs-Up DoveBid as Lighting Business Auctioneer FLOWER FOODS: Fitch Expects Company to be Cash Flow Neutral FONIX CORP: Limited Capital Raises Going Concern Doubt FRIEDE GOLDMAN: Court Approves Offshore Division Asset Sale GENUITY INC: Turning to Lazard Freres for Financial Advice GLOBAL CROSSING: Wants Go-Signal to Dissolve Two UK Subsidiaries HAYES LEMMERZ: Plan's Classification and Treatment of Claims HERCULES INC: Consummates $200-Mill. Credit Facility Refinancing INTEGRATED TELECOM: Unsecured Claims To Be Paid in Full INTEGRATED TELECOM: Signs-Up BSI as Claims and Noticing Agent KEMPER INSURANCE: S&P Hatchets Sub. Debt Rating to BB from BBB+ KMART CORP: Secures Okay to Transfer $2 Million to S.F.P.R. Inc. LTV: LTV Steel Wins Nod to Pay Covington on Contingency Basis METROMEDIA INT'L: John Kluge Steps Down from Board of Directors MIRANT: Reports Year-to-Date Net Loss Topping $227 Million MUTUAL RISK: Files Proposed Creditors' Arrangement in Bermuda MYRIENT INC: Delays Filing SEC Form 10-K for Fiscal Year 2002 NATIONAL STEEL: St. Paul Wants to File Late Proof of Claim NATIONSLINK: S&P Affirms Low-B Ratings on Four Classes of Notes NATIONSRENT: Asks Court to Deem CIT Master Pact Not True Leases NRG ENERGY: Contests Rogue Ex-Executives' Involuntary Petition NSI GLOBAL: Unit Files for Assignment in Bankruptcy in Canada OM GROUP: Realigns Corporate and Management Structures OWENS CORNING: Obtains Okay to Restructure Chinese JVs' Debts PACIFIC GAS: Wants to Procure Power to Meet Year 2003 Shortage PACIFICARE HEALTH: Selling $10MM of 3% Conv. Subordinated Notes PEGASUS COMMS: Won't Pay Dividend on 12-3/4% Preferred Shares PERMAGRAIN PRODUCTS: Voluntary Chapter 11 Case Summary PERSONALCARE: AM Best Says B+ Rating Unaffected by Asset Sale PETROLEUM GEO-SERVICES: Deferring Distributions on Preferreds PHILLIPS-VAN HEUSEN: S&P Affirms BB Rating over CKI Acquisition PILLOWTEX: Receives Waiver of Compliance from Term Loan Lenders POLYONE CORP: Selling Majority Stake in Techmer to TPM Holdings PROVIDIAN FINANCIAL: Completes $750-Million Term Securitization PUBLIC SERVICE: Enters into New 3-Year $350MM Credit Facility REGENERATION TECHNOLOGIES: Inks $15-Mill. BofA Credit Agreement RFS ECUSTA: Delaware Court Fixes February 7 as Claims Bar Date RIVIERA TOOL: Deloitte & Touche Expresses Going Concern Doubt ROHN INDUSTRIES: Wins Major Shareholder's Approval of Asset Sale SCIENTIFIC GAMES: Completes 2002 Debt Workout Plan's Final Phase SEVEN SEAS PETROLEUM: AMEX Will Delist Shares Effective Tomorrow SHILOH INDUSTRIES: Reports Improved Results for Fourth Quarter SMARTSALES INC: DataMirror Intends to Acquire Certain Assets TELSCAPE INT'L: Trustee Selling Telereunion Assets to Lambco TESORO PETROLEUM: Completes Sale of 23 Retail Outlets to Nella TRICO MARINE: Secures New $50-Million Revolving Credit Facility TXU: Inks Pact to Provide Energy Services to Rio Grande Electric UNITED AIRLINES: Appoints Executive Leadership Team UNITED AIR: Realigns Responsibilities in Revenue-Producing Divs. UNITED AIRLINES: Hires Rothschild Inc. as Investment Banker UNITED AUSTRALIA: Castle Harlan Sponsors Plan of Reorganization US AIRWAYS: Flight Attendants Agree to Cost-Cutting Plan US AIRWAYS: Machinists Agree to Cost-Cutting Plan U.S.I. HOLDINGS: Names Thomas O'Neil as VP & Chief Ops. Officer VIASYSTEMS: Gets Final Nod to Obtain $37.5 Million DIP Financing VISKASE COMPANIES: Illinois Court Confirms Prepackaged Plan WARNACO GROUP: Obtains Approval of Speedo Settlement Agreement WARREN ELECTRIC: Signs-Up Littler Mendelson as Special Counsel WICKES INC: Commences Exchange Offer for 11-5/8% Senior Notes WORLDCOM INC: Gets Green Light to Reject 30 Circuits with 4 LECs WYNDHAM INT'L: Completes Sale Transaction with Sunstone Hotels * DebtTraders' Real-Time Bond Pricing ********* ACC ACQUISITION: Sept. 30 Working Capital Deficit Tops $1.6 Bil. ---------------------------------------------------------------- ACC Acquisition LLC is a limited liability company equally owned by AT&T Wireless and Dobson Communications Corporation; it was originally formed on February 15, 2000, to acquire the operations of American Cellular Corporation and its subsidiaries. On February 25, 2000, the Company acquired American for $2.5 billion, including fees and expenses. American is a provider of rural and suburban wireless telephone services in portions of Illinois, Kansas, Kentucky, Michigan, Minnesota, New York, Ohio, Oklahoma, Pennsylvania, West Virginia and Wisconsin. On February 8, 2002, two of the Company's wholly-owned, indirect subsidiaries completed the sale of Tennessee 4 RSA for a total purchase price of $202.0 million to Verizon Wireless. Proceeds from this transaction were primarily used to pay down bank debt. The Tennessee 4 RSA covered a total population of approximately 290,800 and had a subscriber base of approximately 24,900. For the three months ended September 30, 2002, the Company's total operating revenue increased $7.6 million, or 6.6%, to $124.2 million from $116.6 million for the comparable period in 2001. For the three months ended September 30, 2002, Company net income was $4.3 million. Net income increased $34.6 million from a net loss of $30.3 million for the three months ended September 30, 2001. The increase in net income was primarily attributable to the increase in operating income, which resulted from decreases in interest expense and depreciation and amortization expense. For the nine months ended September 30, 2002, Company total operating revenue increased $27.0 million, or 8.6%, to $339.9 million from $312.9 million for the comparable period in 2001. For the nine months ended September 30, 2002, ACC's net loss was $659.5 million. The Company's net loss increased $557.7 million from $101.8 million for the nine months ended September 30, 2001. The increase in net loss was primarily attributable to impairment of goodwill and the cumulative effect of change in accounting principle related to the implementation of SFAS No. 142. The Company has required, and will likely continue to require, substantial capital to further develop, expand and upgrade its wireless systems and those it may acquire. ACC has financed its operations through cash flows from operating activities, bank debt, which may not be available to it in the future, the sale of debt securities and infusions of equity capital from one of its parents and its affiliates. Neither Dobson Communications nor AT&T Wireless is obligated to contribute equity capital or other financing to ACC's subsidiaries or to ACC. At September 30, 2002, ACC had a working capital deficit of $1.6 billion, a ratio of current assets to current liabilities of 0.08:1 and an unrestricted cash balance of $6.0 million, which compares to a working capital deficit of $10.5 million, a ratio of current assets to current liabilities of 0.9:1 and an unrestricted cash balance of $6.0 million at December 31, 2001. The working capital deficit and ratio of current assets to current liabilities have both been negatively impacted as a result of reclassification of long-term debt to current. The Company's credit facility includes a financial covenant requiring that it not exceed a total debt leverage ratio ranging from 9.25 to 1.00 in the first quarter to 7.75 to 1.00 in the fourth quarter 2002. At June 30, 2002 and September 30, 2002, ACC failed to comply with this covenant. It has had and will continue to have discussions with its lenders regarding the credit facility. The lenders presently have the right, but not the obligation, to accelerate the repayment of the entire amount outstanding under the credit facility. Acceleration under the credit facility would allow the holders of American's Senior Subordinated Notes to declare the principal and interest of the Senior Subordinated Notes immediately due and payable. The Company would then be required to either refinance the debt or repay the amounts due. If this were to occur, the Company would attempt to renegotiate the debt with the holders to provide, among other things, for an extended repayment term. However, ACC can provide no assurance that it would be able to renegotiate the debt under these conditions or meet its obligation under the accelerated repayment terms. Therefore, as of June 30, 2002 and as of September 30, 2002, the Company classified all of its long-term debt as current. Unless such non-compliance is resolved, there continues to be substantial doubt about ACC's ability to continue as a going concern, as expressed in the independent auditors report on the Company's 2001 financial statements. Also as a result of its non-compliance, subsequent to September 30, 2002, all borrowings under the credit facility are only available based on prime rate, which will increase the Company's borrowing rate in the future. AKORN: John Kapoor Resigns as CEO but Stays as Board Chairman ------------------------------------------------------------- Akorn, Inc., announced that Dr. John N. Kapoor has submitted his resignation as Chief Executive Officer of the Company effective December 18, 2002. Dr. Kapoor, who will continue as Chairman of the Board of Directors, had served as CEO of Akorn since March 2001. Mr. Art Przybyl, President and Chief Operating Officer of Akorn, stated, "The Company greatly appreciates the many contributions that Dr. Kapoor has made to the Company as CEO, and looks forward to continuing to work closely with Dr. Kapoor as we restructure and rebuild the Company for the future." In September of this year, as part of the Forbearance Agreement entered into by the Company with its Senior Lenders, the Company retained the firm of AEG Partners, LLC to assist in the development and execution of a restructuring plan for the Company's financial obligations and to oversee the Company's day-to-day operations. In executing these responsibilities, the Consultant works with the Governance Committee of the Board of Directors, which is composed of two of the Company's independent directors. In light of the role being played by the Consultant, Dr. Kapoor believed it was the appropriate time to step away from the day-to-day operations of the Company. The Company has no immediate plans to fill the vacancy left by Dr. Kapoor's resignation. Akorn, Inc., manufactures and markets sterile specialty pharmaceuticals, and markets and distributes an extensive line of pharmaceuticals and ophthalmic surgical supplies and related products. ALLIANCE PHARMACEUTICAL: Capital Insufficient to Continue Ops. -------------------------------------------------------------- Since commencing operations in 1983, Alliance Pharmaceutical Company has applied substantially all of its resources to research and development programs and to clinical trials. The Company has incurred losses since inception and, as of September 30, 2002, has an accumulated deficit of $477.5 million. The Company expects to incur significant losses over at least the next few years as the Company continues its research and product development efforts and attempts to commercialize its products. The Company's revenues have come primarily from collaborations with corporate partners, including research and development and milestone payments. The Company's expenses have consisted primarily of research and development costs and administrative costs. To date, the Company's revenues from the sale of products have not been significant. The Company believes its future operating results may be subject to quarterly fluctuations due to a variety of factors, including the timing of future collaborations and the achievement of milestones under collaborative agreements, whether and when new products are successfully developed and introduced by the Company or its competitors, and market acceptance of products under development. Alliance Pharmaceutical believes it lacks sufficient working capital to fund operations for the entire fiscal year ending June 30, 2003 and cannot fund its current obligations. Therefore, substantial additional capital resources will be required to fund the ongoing operations related to the Company's research, development, manufacturing and business development activities. The Company's current financial condition raises substantial doubt about its ability to continue as a going concern. Management believes there are a number of potential alternatives available to meet the continuing capital requirements such as public or private financings or collaborative agreements. In September, October and November 2002 the Company received a total of $1.1 million through the issuance of 8% Convertible Secured Promissory Notes to institutional investors. The Company is negotiating the issuance of comparable notes of up to $1.9 million to provide additional funding for operations. An Imagent-related financing is also being negotiated, however there can be no assurance that either of these financing arrangements will be consummated in the necessary time frames needed for continuing operations or on terms favorable to the Company. On October 18, 2002, Alliance's common stock was delisted from the NASDAQ National Market for failure to meet the National Market continued listing requirements. The Company's common stock is now trading on NASDAQ's Over-the-Counter Bulletin Board under the symbol ALLP.OB. AMERCO: Executes Term Sheets for New $650-Million Financing ----------------------------------------------------------- AMERCO (Nasdaq: UHAL), the parent company for U-Haul International, Inc., has received proposals and has executed term sheets with two major financial institutions for up to $650 million in connection with the Company's planned debt restructuring. "We have entered the standard contract for due diligence and will continue to work expeditiously to meet the objectives of the company," said Joe Shoen, president and chairman of AMERCO. This financing is the keystone in AMERCO's overall recapitalization, which began on October 15, 2002. The Company's bank group has already entered into a standstill agreement during the pendency of the new financing. Standstill agreements with other lenders to the Company are being negotiated and are expected to be in place as part of the total restructuring picture. The Company is working constructively towards finalizing a standstill agreement with the members of the ad hoc committee of bondholders. This committee is comprised of holders of, among other bonds, the $100 million in [BBATS] that matured on October 15, 2002. Under the standstill agreement, it is anticipated that bondholders will agree not to take any action with respect to the Company's nonpayment of the bonds for a period of time while the Company completes its refinancing. The Company is also in the final stages of completing a standstill agreement with certain other real estate lenders. "Under the guidance of Crossroads LLC, a nationally recognized restructuring firm, we are making significant progress in restructuring the Company's balance sheet," said Joe Shoen. "Not all creditors are on board yet, but we are pleased to report this progress and hope that the others will soon come along." AMERCO anticipates that the restructuring, including the new financing will be in place by the end of the Company's fiscal year on March 31, 2003. AMERCO is the parent company of U-Haul International, Inc., Republic Western Insurance Company, Oxford Life Insurance Company and Amerco Real Estate Company. U-Haul is the largest do-it-yourself moving and storage operator in North America. For more information about AMERCO, visit http://www.uhaul.com AMERICAN PAD: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: American Pad & Paper, LLC 3000 Plano Parkway Plano, Texas 75074 Bankruptcy Case No.: 02-46551 Type of Business: Manufacturer and distributor of writing pads, filing supplies, retail envelopes and specialty papers Chapter 11 Petition Date: December 20, 2002 Court: Eastern District of Texas (Sherman) Judge: Donald R. Sharp Debtors' Counsel: Deirdre B. Ruckman, Esq. Gardere & Wynne, L.L.P. 3000 Thanksgiving Tower 1601 Elm Street Dallas, TX 75201 Tel: (214) 999-3000 Estimated Assets: $10 to $50 Million Estimated Debts: $50 to $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Greenwich Insurance Unsecured Loan $10,500,000 One Exchange Place Suite 501 Jersey City, NJ 07302 Actrade Capital, Inc. Unsecured Loan $8,431,982 200 Cottontail Lane NJ 08874 International Paper Co. Trade Debt $2,082,143 PO Box 676565 Dallas, TX 75267-6565 Strategic Paper Group LLC Trade Debt $912,968 Mafcote Industries, Inc. Trade Debt $711,555 PO Box 5646 Hartford, CT 06102 Bell Packaging Corp. Trade Debt $649,570 c/o Pratt Industries PO Box 406882 Appleton Papers, Inc. Trade debt $539,078 PO Box 359 Appleton, WI 54912 Chapco Carton Co. Trade Debt $381,951 Dept. 77-2962 Hicago, IL 60678-2062 Vanguard Tool & Mfg. Co. Trade Debt $357,974 Inc. 8338 Utica Avenue Rancho Cucamonga, CA 91730 Lafayette Steel Sales Trade Debt $311,962 PO Box 4337 2407 N. 9th Street Lafayette, IN 47903-4337 Durango-Georgia Trade Debt $309,191 Drawer CS 198106 Atlanta, GA 30384-8106 Franklin Boxboard Corp. Trade Debt $249,251 Et al Mid-Indiana Trade Debt $246,058 Transportation Dupont, E.I. De Nemoura & Trade Debt $231,293 Co. Kruger, Inc. Trade Debt $202,123 J.J. Collins Trade Debt $200,541 Kingery Printing Trade Debt $183,304 Creative Printing Trade Debt $176,566 Wausau Papers Trade Debt $157,908 Premium Funding Associated Unsecured Loan $119,642 AMES DEPARTMENT: Wants Nod to Sell 7 Store Leases to Landlords -------------------------------------------------------------- During the wind-down process of their operations, Ames Department Stores, Inc., and its debtor-affiliates discussed with various landlords the consensual disposition of their leases, their obligations under each of the leases, and all of the claims that the landlords assert against them. Subsequently, the negotiations concluded in separate buy-out agreements with seven landlords: Landlord Store No. Location -------- --------- -------- Javit Asset Partners 736 Vernon, CT Big Y Trust 215 East Longmeadow, MA Pinewood Realty Trust 264 Great Barrington, MA Preferred Merchant Hood 439 Derry, NH Chester Mall, LLC 706 Chester, NY Burr Plaza Limited 732 Manchester, CT Mansfield-Eastbrook 734 Willimantic, CT Pursuant to the agreements, the parties assent that the Debtors will sell the leases to the landlords, while the landlords will waive all of their claims against the Debtors. The salient terms of the purchase agreement are: A. Purchase Price: The landlords agree to pay for each store: Store No. Purchase Price --------- -------------- 736 $735,741 215 1,750,000 264 850,000 439 100,000 706 200,000 732 90,000 734 675,000 (i) The purchase price for Store No. 736 consists of $725,000 cash plus $10,741 credit bid of all monetary defaults under the Vernon lease; and (ii) The purchase price for Store No. 706 will be deducted by any unpaid postpetition rent, additional rent and costs Chester Mall incurred for the repair of the store ductwork caused by the removal of a mezzanine from the Chester Mall store, if not already paid. The amount will also be deducted by the costs Chester Mall incurred for the removal of storage trailers and trash, if not done by Ames. B. Termination of Lease; Delivery of Premises -- The Debtors and Javit agree to execute a short form of lease termination agreement in recordable form. The Debtors will deliver the Vernon premises broom clean and otherwise in the condition required by the lease; -- Chester Mall also requires the Debtors to surrender the premises vacant and in broom clean condition; -- the Debtors and Big Y and Pinewood decide that the lease will be deemed rejected the date the Debtors surrender and deliver possession of the Longmeadow Store to Big Y and the Great Barrington Store to Pinewood; and -- the Willimantic store lease will also be deemed rejected when the Debtors surrender possession of the premises in a broom-swept condition. C. Releases and Waiver of Claims Upon the termination of the leases, the landlords will be deemed to waive any and all filed or asserted claims they may have against the Debtors under or relating to the leases and any defaults, monetary arrears, and all maintenance or repair obligations of the Debtors under the leases. (a) Store No. 736 The lease termination agreement between the Debtors and Javit, is subject to the Debtors' responsibility to pay the costs of removing any property that has been abandoned at the premises. Javit will also waive any claims against the Debtors and their estate for rejection and lease termination damages. Javit will also hold the Debtors responsible for, and at closing will pay, all obligations of the tenant under the lease from the Petition Date through the date of closing; (b) Store No. 215 On March 27, 2002, Big Y filed these proofs of claim: Claim No. Amount Nature of Claim --------- ------ --------------- 5220 $16,121 prepetition base rent 5221 130,435 prepetition taxes & CAM charges 5215 unliquidated potential rejection damages To reflect Big Y's waiver of its claims, its will be reduced to, or expunged as of the Termination Date: Claim No. Amount --------- ------ 5220 $12,565 5221 54,212 5215 expunged (c) Store No. 264 On March 27, Pinewood filed these proofs of claim: Claim No. Amount Nature of Claim --------- ------ --------------- 5214 unliquidated potential rejection damages 5218 15,731 prepetition taxes & CAM charges 5219 9,545 prepetition rent All of Pinewood's claims will be expunged; and (d) Store No. 439 The Debtors have scheduled Preferred Merchant Hood as having a $6,313 general unsecured claim for the prepetition rent due and owing under the Derry lease. The claims, however, is not contingent, unliquidated or disputed. Preferred Merchant Hood has not filed a claim against the Debtors relating to the lease or the Derry store. Nonetheless, Preferred Merchant Hood agrees to waive any claim it may have against the estate; (e) Store No. 706 Chester Mall requires the Debtors to satisfy their remaining postpetition rent and additional rent obligations through November 30, 2002, by a credit against the $200,000 Purchase Price at the closing. However, Chester Mall will not collect additional rents for December 2002. Both parties, nonetheless, reserve all claims that they may have, independent of, the agreement, for indemnification to the extent of any claim for damages asserted against the other by any third party relating to the Debtors' occupancy and operation of the Chester Store; (f) Store No. 732 Burr Plaza waives any and all scheduled, filed or asserted claims it may have against the Debtors under or relating to the lease or the Manchester Store. Any filed claims will be subsequently expunged. However, both Burr Plaza and the Debtors reserve all claims that each may have, independent of, the agreement, for indemnification against the other to the extent of any claim for damages asserted against the other by any third party relating to the Debtors' occupancy and operation of the Manchester Store; (g) Store No. 734 On March 19, 2002, Mansfield filed these proofs of Claim: Claim No. Amount Nature of Claim --------- ------ ---------------- 3533 $65,239 prepetition base rent, CAM & real estate tax escrow deficiencies 3534 65,239 guaranty obligation On the termination date, the Mansfield claims will be deemed expunged. Mansfield also waives any and all claims for defaults, monetary arrears, and all maintenance or repair obligations of the Debtors under the lease, including, the claim for: Misc. Obligations Amount ----------------- ------ rent arrears $65,239 repair of roof 350,000 repair of HVAC system 200,000 Nevertheless, both parties reserve all claims that they may have, independent of, their agreements, for indemnification against the other to the extent of any claim for damages asserted against the other party by any third party relating to the Debtors' occupancy and operation of the Willimantic Store. Consequently, the Debtors presented the agreements to Judge Gerber and, after some deliberation, obtained his approval. Ames Senior Vice President and General Counsel, David H. Lissy, Esq., asserts that the Debtors' decision to sell the leases is warranted. According to Mr. Lissy, the Debtors' interests in their real estate assets are collectively among the most valuable assets of the estates. Maximizing the value of these assets therefore is of paramount importance to the Debtors, their creditors, and their estates. As a result of the Debtors' decision to wind down their business, Mr. Lissy maintains that any recovery to the creditors will primarily be from the proceeds of the sale of the assets. In reaching the conclusion to sell the real estate assets, the Debtors and their advisors have determined, among other things, that the landlords' offers represent an economically advantageous means of relieving themselves of an unnecessary administrative burden. The overall value to be obtained by the Debtors, which includes cash purchase plus the waiver of claims, represents a significant recovery for the benefit of the estates. (AMES Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) ANC RENTAL: Court Extends Cash Collateral Use Until February 16 --------------------------------------------------------------- Judge Mary F. Walrath authorizes ANC Rental Corporation and its debtor-affiliates to continue to use their lender's cash collateral through February 16, 2003, on the same terms and conditions set forth in previous cash collateral orders. (ANC Rental Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) APPLIED EXTRUSION: Will Restate Fin'l Statements for 1998 - 2001 ---------------------------------------------------------------- Applied Extrusion Technologies, Inc., (NASDAQ NMS: AETC) will restate its financial statements for fiscal years 1998 through 2001 and the first three fiscal quarters of fiscal 2002. The financial impact of the restatement is due primarily to the accounting for three sale-leaseback transactions and the 1998 restructuring. In addition to these adjustments, additional items will have to be restated in the interim financial statements for fiscal 2002. The Company anticipates that the five-year cumulative effect of all of these adjustments from 1998 through the end of fiscal 2002 (including the fourth- quarter impact of these items) will decrease retained earnings by approximately $18,000,000 to $20,000,000. None of the adjustments will have an impact on the Company's cash position or increase obligations requiring a future use of cash. The Company will reflect the restated periods in its Annual Report for the current year and will file amended Form 10-Qs for the first three quarters of fiscal 2002. As a result of the foregoing, the full year 2002 loss will be significantly greater than earlier expectations. All of the aforementioned information and adjustments are approximate and subject to changes, which could be significant. The Company's auditors have not yet completed their audit work, and the Company's management and the Audit Committee of its Board of Directors are involved in bringing the Company's year- end review to conclusion. Upon completion of their review and finalization of the financial statements, the Company will schedule a conference call to discuss the events of fiscal year 2002 and the restatement. Applied Extrusion Technologies, Inc., is a leading North American developer and manufacturer of specialized oriented polypropylene (OPP) films used primarily in consumer products labeling and flexible packaging applications. * * * As reported in Troubled Company Reporter's October 11, 2002 edition, Standard & Poor's affirmed its single-'B' corporate credit rating on Applied Extrusion Technologies Inc., and removed the rating from CreditWatch, where it was placed on July 8, 2002. The outlook is now negative. Peabody, Mass.-based Applied Extrusion is the leading oriented polypropylene films producer in North America, with total debt outstanding of $278 million as at June 30, 2002. "The removal of the rating from CreditWatch follows the company's announcement that it has concluded a review of its strategic options, which indicates that the company will not be sold at this time," said Standard & Poor's credit analyst Liley Mehta. Applied Extrusion had hired a financial advisor in July 2002 to evaluate options to maximize shareholder value. The rating reflects the company's below-average business risk profile, very aggressive debt leverage, and limited financial flexibility. The company enjoys a leading share of the OPP market and benefits from a low-cost position. ARMSTRONG HOLDINGS: AWI Files Disclosure Statement in Wilmington ---------------------------------------------------------------- Armstrong World Industries, Inc., (OTC Bulletin Board: ACKHQ) has filed a proposed Disclosure Statement for its Chapter 11 Plan of Reorganization with the U.S. Bankruptcy Court in Wilmington, Delaware. The Court must approve the proposed Disclosure Statement, which provides additional details to the POR, before AWI can solicit votes on its POR. The POR was filed with the Court on November 4, 2002, with the support of the asbestos personal injury claimants' committee, the representative for future asbestos personal injury claimants and the unsecured creditors' committee. The POR will only become effective after a vote of various classes of creditors and with the approval of the Court. The Court has not yet scheduled a hearing on the proposed Disclosure Statement. The proposed Disclosure Statement, along with AWI's POR and related press releases, is available at http://www.armstrongplan.com In the proposed Disclosure Statement, AWI estimates that, based upon an assumed effective date of the POR of July 1, 2003, the total value of consideration to be distributed to the asbestos personal injury trust, other than the insurance asset, will be approximately $2.1 billion, and the total value of consideration to be distributed to holders of allowed unsecured claims (other than convenience claims) will be approximately $1.1 billion. Based upon the estimated value of the POR consideration and AWI's estimate that allowed unsecured claims (other than convenience claims) will total approximately $1.7 billion, AWI estimates that holders of allowed unsecured claims (other than convenience claims) will receive a recovery having a value equal to approximately 66.5% of their allowed claims. AWI's estimates of value and potential recoveries are based upon a number of assumptions, which are set forth more fully in the proposed Disclosure Statement. Armstrong World Industries, Inc., a subsidiary of Armstrong Holdings, Inc., is a global leader in the design and manufacture of floors, ceilings and cabinets. In 2001, Armstrong's net sales totaled more than $3 billion. Founded in 1860, Armstrong has approximately 16,000 employees worldwide. More information about Armstrong is available on the Internet at http://www.armstrong.com Armstrong Holdings Inc.'s 9.0% bonds due 2004 (ACK04USR1) are trading at about 58 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ACK04USR1for real-time bond pricing. ARMSTRONG: Summary of AWI's Proposed Disclosure Statement --------------------------------------------------------- Armstrong World Industries, Inc., delivered a Proposed Disclosure Statement -- with a number of blanks to be filled in and with tons of exhibits and appendixes to follow -- in support of its previously filed Plan of Reorganization. Value of Consideration to Be Distributed under the Plan In the proposed Disclosure Statement, AWI estimates that, based upon an assumed Effective Date of the Plan of July 1, 2003, the total value of consideration to be distributed to the Asbestos PI Trust, other than the Insurance Asset, will be approximately $2.1 billion. The total value of consideration to be distributed to holders of allowed unsecured claims (other than convenience claims) will be approximately $1.1 billion. Based on the estimated value of the Plan consideration and AWI's estimate that allowed unsecured claims (other than convenience claims) will total approximately $1.7 billion, AWI estimates that holders of allowed unsecured claims (other than convenience claims) will receive a recovery having a value equal to approximately 66.5% of their allowed claims. In estimating the value of distributions under the Plan, AWI assumes that: (i) cash has a value equal to its face amount, (ii) the New Notes have a value equal to their face amount, (iii) the New Warrants have an aggregate value of $40-50 million, or $11.10 to $13.90 per New Warrant (with a midpoint of $12.50 per warrant), and (iv) the New Common Stock will have an aggregate value of approximately $2.030 billion, or $30.00 a share. $300 Million Exit Facility AWI expects to enter into a $300 million syndicated bank credit facility at the time of emergence to provide for liquidity through short-term borrowings for working capital and other general corporate purposes and to permit the issuance of letters of credit. This credit facility will include covenants and terms and conditions that are expected to be similar to comparably rated industrial companies obtaining similarly structured credit facilities at that time. The Debtors expect that "the syndicated credit facility will be unsecured, multi-year in maturity, and permit borrowings in both U.S. Dollars and Euros, priced at applicable margins over the lenders' cost of funds. No significant borrowings are expected immediately post-emergence, but AWI will use the facility to replace the Letters of Credit issued under the DIP Credit Facility." The Debtors indicate that their yet-to-be filed financial projections assume that AWI will draw $49.7 million under the credit facility to increase Available Cash to $350 million on the Effective Date, and those borrowings will be repaid by the end of 2003. Restructuring of AWI The major points of AWI's restructuring outlined in the Proposed Disclosure Statement are: * All asbestos-related liabilities are to be assumed by one of two Trusts. * The Trusts will be funded and unsecured creditors paid as described in the Plan. * Armstrong Holdings, AWI's present parent and a non-debtor, will be dissolved and liquidated. * Reorganized AWI will become a holding company. Its business operations will be divided in a yet-to-be described manner, into 4 entities. One or more of these entities, referred to now Only as AWI Progeny, is to be a limited liability entity. All of these will be Pennsylvania corporations. * Reorganized AWI and its Progeny will be protected from future asbestos-related claims through a channeling injunction. The Asbestos PI Permanent Channeling Injunction -- barring the assertion of "future" Asbestos Personal Injury Claims against AWI and the other PI Protected Parties -- is "the cornerstone of the Plan" the Proposed Disclosure Statement emphasizes. Listing of the New Common Stock As soon as practicable after the Effective Date, Reorganized AWI will apply to have its common stock listed on a national securities exchange or quoted on a national interdealer quotation system and will use its best efforts to obtain and maintain such listing or quotation. Dissolution of Armstrong Holdings Armstrong Holdings, Inc., is the parent company of Armstrong World Industries, Inc. Holdings became the publicly held holding company of AWI on May 1, 2000. Stock certificates that formerly represented shares of AWI were automatically converted into certificates representing shares of Holdings. Holdings has no significant assets or operations apart from its equity interest in AWI. In connection with the implementation of AWI's Plan, the dissolution and winding up of Holdings will be proposed for approval by Holdings' shareholders. If Holdings' shareholders approve the Holdings Plan of Liquidation before the first anniversary of the Effective Date, the New Warrants will be delivered to Holdings for distribution pursuant to the Holdings Plan of Liquidation. AWI's Plan of Division On or as soon as practicable after the Effective Date, AWI intends to effect a division under a the Plan of Division through which Reorganized AWI will divide into four or more Entities organized under the laws of Pennsylvania and/or of other jurisdictions permitting such a division, with Reorganized AWI surviving as the parent holding company of all the other entities. The actions to be taken by Reorganized AWI in furtherance of the Plan of Division will include: * Certain wholly owned, non-operating subsidiaries of AWI will merge with and into AWI on or as soon as practicable after the Effective Date. * AWI will file the Amended and Restated Articles of Incorporation with the Secretary of State for the Commonwealth of Pennsylvania. * AWI will divide into the AWI Progeny. However, AWI has not yet identified these Progeny, nor described the business purposes and functions for each. All assets and certain Administrative Expenses, executory agreements and unexpired leases to be assumed by Reorganized AWI under the Plan, and all post-petition AWI contracts will be allocated among or in common with the AWI Progeny through the Plan of Division in accordance with the terms of the Plan. Following the Division, each employee of AWI as of the Effective Date will become an employee of one of the AWI Progeny. One or more of the AWI Progeny will convert from a corporation to a limited liability company. Corporate Reorganization Actions On or as soon as practicable after the Effective Date, Reorganized AWI will, without further action under applicable law, regulation, order, or rule, including any action by the stockholders or directors of AWI or Reorganized AWI, carry out these restructurings: * Reorganized AWI's businesses will be reorganized under the Plan of Division. * The existing AWI Common Stock will be cancelled. * The New Note Indenture will become effective, and the New Common Stock, New Warrants, and the New Notes will be issued. * Reorganized AWI and/or the AWI Progeny will enter into a working capital, or Exit, facility. * Reorganized AWI will enter into the New Management Incentive Plan. For purposes of compliance with the Internal Revenue Code, AWI will seek to include in the Confirmation Order a finding that a majority of the votes cast by Creditors in Classes 6 and 7 of the Plan will constitute a vote of the shareholders of Reorganized AWI on a New Management Incentive Plan. A majority of the votes cast by the holders of Asbestos Personal Injury Claims will determine the vote of the Asbestos PI Trust for these purposes. The Asbestos PI Trust AWI has repeatedly ascribed the necessity of its chapter 11 filing to the numbers and amounts of claims and litigation related to asbestos exposures. The creation and funding of two asbestos-related Trusts are, the Debtors say, the "cornerstone" of AWI's Plan and Disclosure Statement. Effective as of the later of: (i) the date the Asbestos PI Trustees have executed the Asbestos PI Trust Agreement, and (ii) the Effective Date of the Plan, the Asbestos PI Trust will be created. The purposes of the Asbestos PI Trust will be to: (i) assume the liabilities of AWI and its predecessors and successors in interest for all Asbestos Personal Injury Claims, (ii) pursue recoveries from the Asbestos PI Trust Insurance Asset, (iii) direct the processing, liquidation, and payment of all Asbestos Personal Injury Claims in accordance with the Plan, the Asbestos PI Trust Distribution Procedures, and the Confirmation Order in such a way that such holders of Asbestos Personal Injury Claims are treated fairly, equitably, and reasonably in light of the limited assets available to satisfy Asbestos Personal Injury Claims, (iv) preserve, hold, manage, and maximize the assets of the Asbestos PI Trust for use in paying and satisfying valid Asbestos Personal Injury Claims, and (v) otherwise comply in all respects with the requirements of a trust set forth in the Bankruptcy Code. The Trustees On the Confirmation Date, effective as of the Effective Date, Judge Newsome will appoint the trustees from a group of individuals selected jointly by the Asbestos PI Claimants' Committee and the Future Claimants' Representative to serve as the Asbestos PI Trustees for the Asbestos PI Trust; however, any such individual will be appointed after consultation with AWI. The Trustees' Advisory Committee The Asbestos PI Trust Agreement provides for the establishment of a Trustees' Advisory Committee with which the Asbestos PI Trustees are required to consult, and the consent of which is required, on certain matters under the Asbestos PI Trust Agreement. As with the initial Asbestos PI Trustees, the initial members of the TAC will serve staggered terms, with five-year terms thereafter. The identity of the individuals who will serve as the initial TAC members will be disclosed at the Confirmation Hearing. Transfer of Reorganization Consideration On the later of the Effective Date and the date by which all the Asbestos PI Trustees have signed the Asbestos PI Trust Agreement, AWI will transfer to the Asbestos PI Trust the Asbestos PI Insurance Asset and the assets consisting of money, New Common Stock and New Notes as described in the Plan. Asbestos PI Trust Termination Provisions The Asbestos PI Trust will terminate automatically 90 days after the first to occur of these events: (1) the Asbestos PI Trustees decide to terminate the Asbestos PI Trust because: (i) they deem it unlikely that new Asbestos Personal Injury Claims will be filed against the Asbestos PI Trust; (ii) all Asbestos Personal Injury Claims duly filed with the Asbestos PI Trust have been liquidated and paid to the extent provided in the Asbestos PI Trust Agreement and the Asbestos PI Trust Distribution Procedures or disallowed by a final, non-applicable order, to the extent possible based upon the funds available through the Plan, and (iii) 12 consecutive months have elapsed during which no new Asbestos Personal Injury Claim has been filed with the Asbestos PI Trust; or (2) if the Asbestos PI Trustees have procured and have in place irrevocable insurance policies and have established claims handling agreements and other necessary arrangements with suitable third parties adequate to discharge all expected remaining obligations and expenses of the Asbestos PI Trust in a manner consistent with the Asbestos PI Trust Agreement and the Asbestos PI Trust Distribution Procedures, the date on which the Bankruptcy Court enters an order approving such insurance and other arrangements and such order becomes a Final Order; or (3) to the extent that any rule against perpetuities is deemed applicable to the Asbestos PI Trust, 21 years less 91 days pass after the death of the last survivor of all of the descendants of the late Joseph P. Kennedy, Sr., father of the late President John F. Kennedy, living on the date the Trust is created. Compliance with IRS QSF Regulations AWI promises it will timely seek a private letter ruling from the IRS substantially to the effect that, among other things, the Asbestos PI Trust will be a "qualified settlement fund" within the meaning of section 468B of the Internal Revenue Code and the Treasury Regulations thereunder, or AWI will receive an opinion of counsel with respect to the tax status of the Asbestos PI Trust as a "qualified settlement fund" reasonably satisfactory to AWI, the Asbestos PI Claimants' Committee, the Future Claimants' Representative, and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee. The Asbestos PD Trust AWI has always claimed that there are no colorable claims against it for property damage related to asbestos. Nonetheless, to put these disputes behind it, AWI includes an Asbestos PD Trust which is created and functions on the same terms as the Asbestos PI Trust, with these exceptions: The purposes of the Asbestos PD Trust will be to: (i) direct the processing, liquidation, and payment of all Asbestos Property Damage Claims in accordance with the Plan, the Asbestos PD Claims Resolution Procedures, and the Confirmation Order, and (ii) preserve, hold, manage, and maximize the assets of the Asbestos PD Trust for use in paying and satisfying Asbestos Property Damage Claims. The Asbestos PD Trustees If Class 4 votes to accept the Plan, the Asbestos PD Trustees will be selected by the Asbestos PD Committee. If Class 4 votes to reject the Plan, a single individual, who will be identified by AWI before or at the Confirmation Hearing, will be selected to serve as the Asbestos PD Trustee. Asbestos PD Claims Resolution Procedures If Class 4 votes to accept the Plan, the Asbestos PD Trustees will develop procedures governing the allowance and payment of Asbestos Property Damage Claims. If Class 4 votes to reject the Plan, the Asbestos PD Trustee will be bound to use the Asbestos PD Claims Resolution Procedures written by AWI to determine the allowance and payment of Asbestos Property Damage Claims. Under AWI's Asbestos PD Claims Resolution Procedures, to qualify for compensation, the holder of an Asbestos Property Damage Claim must submit: (i) evidence of asbestos content of the material for which a claim is made, whether already removed or in place, and (ii) evidence of friable material releasing fibers into the air in excess of the OSHA PEL. A holder of an Asbestos Property Damage Contribution Claim must demonstrate all the evidence that the underlying claimant would be required to prove, as well as demonstrate that it has made payment to the claimant in satisfaction of such claimant's claim against AWI. Discharge of Asbestos Property Damage Claims AWI is not seeking a channeling or other injunction with respect to Asbestos Property Damage Claims. Instead, AWI will rely upon the general discharge and injunction against the assertion of pre-confirmation claims that the Bankruptcy Code makes applicable to all Claims, whatever their nature. No Asbestos PD Claim Trading Injunction AWI does include the same type of Claims Trading Injunction against the holders of Asbestos PD Claims, staying each of them from, directly or indirectly, purchasing, selling, transferring, assigning, conveying, pledging, or otherwise acquiring or disposing of their respective Asbestos Property Damage Claim. AWI includes the same exceptions for inheritance and other required dispositions, and provides the same voiding language, as that applied to PI Claims. (Armstrong Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARTEMIS ASSOCIATES: Case Summary & 13 Largest Unsec. Creditors -------------------------------------------------------------- Debtor: Artemis Associates, L.L.C. 1400 Smith Street Houston, Texas 77002 Bankruptcy Case No.: 02-16441 Type of Business: The Debtor is a holding company for ownership of Enron Facility Services, Inc. Chapter 11 Petition Date: December 23, 2002 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 212-310-8602 Fax: 212-310-8007 -and- Melanie Gray, Esq. Weil, Gotshal & Manges LLP 700 Louisiana, Suite 1600 Houston, Texas 77002 Telephone: (713) 546-5000 Total Assets: $1,138,082,725 Total Debts: $1,018,179,728 Debtor's 13 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Enterprise Solutions Div. Trade debt $3,785 PCPC Incorporated Trade debt $3,279 Future Computing Solutions, Trade debt $2,337 Inc. Netview Technologies, Inc. Trade debt $1,448 United Computing Group Trade debt $456 Verizon Midwest Trade debt $356 AT&T Trade debt $329 Bowne Business Solutions Trade debt $301 Worldcom, Inc. Trade debt $258 Verizon Communications, Trade debt $83 Inc. Worldcom, Inc. Trade debt $51 Verizon Trade debt $45 MCI Trade debt $9 ASIA GLOBAL CROSSING: All Bids to Acquire Assets Due by Jan. 9 -------------------------------------------------------------- Judge Bernstein sets the Bid Deadline on January 9, 2003 at 4:00 p.m. (prevailing Eastern Time). If Asia Global Crossing Ltd., and its debtor-affiliates receive one or more Qualified Bids from Qualified Bidders on or before the Bid Deadline, the Debtors are authorized and directed to conduct the Auction in respect of the Acquired Assets at the offices of Kasowitz, Benson, Torres & Friedman LLP, 1633 Broadway in New York, New York 10019, on January 16, 2003 commencing at 10:00 a.m. (prevailing Eastern Time), or at any other location or time as may be timely disclosed by AGX to Qualified Bidders. (Global Crossing Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) AVANTAGE LINK: Raymond Chabot Appointed Receiver to Sell Assets --------------------------------------------------------------- The Board of Directors of AVANTAGE LINK INC., (TSX Venture:AVK) has filed with the Quebec Superior Court a motion to authorize the sale of its assets to 4123654 Canada Inc. The sale was authorized by the Court on December 18, 2002 and will generate proceeds of $415,000 for the benefit of secured and ordinary creditors. Consequently Raymond Chabot Inc., was appointed as interim receiver with the power to sell the assets. Also, Mr. Jean-Luc Landry of the Board of Directors has resigned from the Board as of Friday, December 13th ,2002. AVANTAGE LINK -- http://www.avantagelink.com-- is a publicly traded Canadian company listed on the TSX Venture exchange under the symbol AVK. AVAYA INC: Names Louis J. D'Ambrosio to Lead Services Business -------------------------------------------------------------- Avaya Inc. (NYSE: AV), a leading global provider of communications networks and services to businesses, has named Louis J. D'Ambrosio, group vice president, worldwide services, reporting to Don Peterson, Avaya chairman and CEO. D'Ambrosio will be responsible for sales, marketing, product development and operations for Avaya Services, an organization of more than 8,000 professionals worldwide that design, build and manage communications networks for businesses. Avaya Services, with $2 billion in annual revenues, provides the most comprehensive full life-cycle services in the industry including network consulting and assessment; multi-vendor services; security; integration; and implementation as well as maintenance and management. Avaya Services supports customers in more than 90 countries through 30 network operations centers worldwide. D'Ambrosio joins Avaya after a 16-year career at IBM where he held senior executive positions in Software, Customer Units, and Global Services. Most recently, he was vice president, Worldwide Marketing, Sales, and Operations for IBM's profitable, $11 billion software business. In that capacity, he led a 12,000-person team --- across sales, services, brand management, advertising, channels, and operations - to industry leading growth and market share gains. Prior to this, D'Ambrosio held other key leadership roles including vice president, Marketing Development and Execution, where he led the optimization of IBM's go-to-market model; general manager of a 20-country industry unit in Asia Pacific based in Tokyo; and director of worldwide strategy for Global Services when it was formed, where he led the original strategy and execution plan to integrate and grow IBM services to $20 billion. D'Ambrosio was a member of IBM's worldwide management committee, comprised of the company's top executives. "Services is at the core of our value proposition to the marketplace and critical to our growth," said Don Peterson, chairman and CEO of Avaya. "We are fortunate to have Lou D'Ambrosio join our team. Lou's leadership, strategic and analytical thinking, and proven track record in building profitable, growth-oriented businesses will be essential as we accelerate our plans to expand Avaya's voice and data management services business." "I am delighted to join the Avaya team and excited about the impact Avaya could have in the marketplace," said D'Ambrosio. "Avaya is in an enviable position of having one million customers and an outstanding technology and services portfolio. I believe Avaya is uniquely positioned to deliver communications-driven services and solutions to help enterprises reduce costs and win in the marketplace." D'Ambrosio received a Bachelor of Science from Pennsylvania State University, summa cum laude and valedictorian, and M.B.A. from Harvard Business School. Avaya Inc., designs, builds and manages communications networks for more than 1 million businesses worldwide, including 90 percent of the FORTUNE 500(R). Focused on businesses large to small, Avaya is a world leader in secure and reliable Internet Protocol telephony systems and communications software applications and services. Driving the convergence of voice and data communications with business applications -- and distinguished by comprehensive worldwide services -- Avaya helps customers leverage existing and new networks to achieve superior business results. For more information, visit the Avaya Web site at http://www.avaya.com * * * As previously reported in Troubled Company Reporter, Standard & Poor's Ratings Services lowered its corporate credit rating on enterprise communications equipment and services provider Avaya Inc., to double-'B'-minus from double-'B'-plus, lowered its senior secured debt rating to single-'B'-plus from double-'B'- minus, and lowered its senior unsecured debt rating to single- 'B' from double-'B'-minus. At the same time, Standard & Poor's removed the ratings from CreditWatch, where they were placed on July 31, 2002. The outlook is negative. BETHLEHEM STEEL: Court Approves Columbus Restructuring Loan Pact ---------------------------------------------------------------- Under the Restructuring Loan, the Court grants Bethlehem Steel Corporation, and its debtor-affiliates the authority: (a) as of the closing of the Restructuring Loan, to contribute to Columbus Coatings the sum of $2,000,000, or a lesser amount as necessary, together with the proceeds of the Restructuring Loan, to repay the Modernization Loan in full. This constitutes a contribution by Bethlehem to the Columbus Coatings' equity capital; (b) to cause Columbus Coatings to use the contribution to equity and the proceeds of the Restructuring Loan to repay existing loans of Columbus including, without limitation, the Modernization Loan. The Debtors are further authorized, prior to and after the closing of the Restructuring Loan, to continue providing additional cash to Columbus Coatings and Columbus Processing as may be required to support their respective debt service and working capital requirements, which will constitute capital contributions to Columbus Coatings and Columbus Process, respectively; (c) to cause Columbus Coatings, Columbus Process, Buckeye Coatings and Buckeye Steel to provide guaranties with respect to the DIP Credit Agreement and to grant security interests in, and liens on, their assets in favor of the DIP Agent on behalf of the DIP Lenders, subject to applicable non-bankruptcy law, including the July 23, 1999 Hot-Dip Galvanized Steel Tolling Agreement between Bethlehem and Columbus Coatings. With respect to all of the obligations and indebtedness of: (a) Alliance and Ohio Steel arising under the Restructuring Loan and the Financing Documents, the Restructuring Agent and the Restructuring Lenders are granted allowed claims against Alliance and Ohio Steel with priority over any and all administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code, subject to the DIP Order Carve-Out; and (b) the Debtors, other than Alliance and Ohio Steel, arising under the Restructuring Loan and the Financing Documents, the Restructuring Agent and the Restructuring Lenders are granted allowed claims against the Debtors having priority over any and all administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code, subject to the DIP Order Carve-Out. The Debtors' allowed claims are further subject to allowed claims granted to the DIP Agent, Chase Manhattan Bank and the Inventory Agent pursuant to paragraphs 10 and 19(a) of the DIP Order and the allowed claims granted to the CCR Agent and the CCR Lenders pursuant to the CCR Order. Except as provided in the DIP Order and the CCR Order, no other claim having a priority superior to or pari passu with that granted by this Order to the Restructuring Agent or the Restructuring Lenders will be granted while any portion of the Restructuring Loan or the commitment remains outstanding. As security for all of the Debtors' obligations and indebtedness owing to the Restructuring Agent and the Restructuring Lenders under the Financing Documents, the Restructuring Agent, on behalf of the Restructuring Lenders, Judge Lifland grants, effective on the closing of the Restructuring Loan and without the necessity of the execution by the Debtors of mortgages, security agreements or otherwise, subject to the priority scheme, fully perfected security interests in and liens on all existing and after-acquired real and personal, tangible and intangible assets of the Debtors, including without limitation, all cash, cash equivalents, bank accounts, accounts, other receivables, chattel paper, contract rights, inventory, instruments, documents, securities, equipment, fixtures, real property interests, franchise rights, patents, trade names, trademarks, copyrights, intellectual property, general intangibles, investment property and all substitutions, accessions and proceeds of the foregoing. The security interests and liens granted under the Financing Documents will have these respective priorities: (a) The security interests and liens granted to the Restructuring Lenders in these provisions and under the Financing Documents with respect to all of the Debtors' property will be valid and perfected security interests junior only to: (i) valid, perfected and non-avoidable liens in existence on the date of the filing of each of the Cases or to valid and non-avoidable liens in existence on the Commencement Date that were perfected subsequent to the Commencement Date as permitted by Section 546(b) of the Bankruptcy Code; (ii) the liens on the assets of the Debtors granted pursuant to the DIP Order, including without limitation the liens granted to the DIP Agent, Chase Manhattan and the Inventory Agent, all of which liens which will have the respective priorities set forth in the DIP Order; and (iii) the liens on the assets of CCR granted pursuant to the Final Order Regarding Use of Cash Collateral by CCR and Providing Adequate Protection and Other Relief, including the liens granted to the Chicago Cold Agent and the Chicago Cold Lenders. On the other hand, the security interests and liens granted to the Restructuring Lenders in these provisions and under the Financing Documents with respect to all of Debtors' direct and indirect equity interests in Columbus Coatings and Columbus Process, including all of: (i) Bethlehem's equity interest in Alliance; (ii) Alliance's equity interest in Columbus Coatings; (iii) Bethlehem's equity interest in Ohio Steel; (iv) Ohio Steel's equity interest in Columbus Process; (v) Bethlehem's equity interest in Buckeye Coatings; and (vi) Bethlehem's equity interest in Buckeye Steel; as well as with respect to all other assets of Alliance and Ohio Steel will be valid, perfected, first priority security interests subject only to the Existing Liens. The DIP Agent, on behalf of the DIP Lenders, will have, and, to the extent applicable, is granted, valid and perfected security interests, junior only to the Existing Liens and the liens of the Restructuring Lenders, in the Equity Collateral. The security interests and liens granted to the Restructuring Lenders and under the Financing Documents with respect to "Martin Tower," the Debtors' headquarters building in Bethlehem, Pennsylvania, will be valid and perfected security interests subject only to: (i) Existing Liens, including the Chicago Cold Rollings Martin Tower Lien and Permitted Encumbrances; and (ii) liens granted pursuant to the DIP Order, including without limitation the liens granted to CMB and the Inventory Agent, other than the liens granted to the DIP Agent. Notwithstanding any other provisions, all liens granted pursuant to this Order will be at all times junior and subordinate to the liens of RZB Finance LLC on the RZB Collateral and the Post- Petition RZB Collateral. The security interests and liens granted in these provisions and under the Financing Documents to the Restructuring Agent on behalf of itself and the Restructuring Lenders will not be: (i) subject to any lien or security interest which is avoided and preserved for the benefit of the Debtors' estates under Section 551 of the Bankruptcy Code; or (ii) except as provided, subordinated to or made pari passu with any other lien or security interest under Section 364(c) or (d) of the Bankruptcy Code. The Court makes it clear that the Debtors' Collateral will not include any of the Debtors' avoidance actions under Sections 544 through 549 of the Bankruptcy Code. The Debtors' Collateral will also be limited, solely to the extent provided in the Restructuring Credit Agreement, in the case of an entity that is a controlled foreign corporation under Section 957 of the Internal Revenue Code, to 66% of the voting stock of the entity. To the extent that any Debtor makes aggregate payments to the Restructuring Lenders in excess of the Debtor's pro-rata share of the aggregate amount of all loans and advances received by Columbus Coatings from the Restructuring Lenders during the pendency of the Cases, then the Debtor, after the payment in full of all obligations of Columbus Coatings in respect of the Restructuring Loan and the DIP Financing and the termination of the Restructuring Loan and the DIP Financing, will be entitled to a claim under Section 364(c)(1) of the Bankruptcy Code against each other Debtor, in the amount as may be determined by the Court taking into account the relative benefits received by each Debtor. The claims of the Debtors are deemed subordinate and junior in all respects both to the liens and superpriority claims of the Restructuring Agent, the Restructuring Lenders, the DIP Agent, the DIP Lenders, the CCR Agent, the CCR Lenders, Chase Manhattan Bank, the Inventory Agent and the Inventory Lenders provided for hereunder and in the DIP Order and the CCR Order. Prior to the Commencement Date, the Debtors granted a lien, the "CCR Martin Tower Lien," on Martin Tower to the CCR Agent to secure Bethlehem's prepetition guaranty of CCR's obligations to the CCR Agent and the CCR Lenders under the CCR Credit Agreement. As of the repayment in full of the Modernization Loan, the CCR Martin Tower Lien will automatically be deemed, without further action by the Court, a first priority lien on Martin Tower, senior to all other liens with respect to Martin Tower. Each of the Debtors and CCR is authorized to: (i) enter into the: (a) Amendment to Rollings Services Agreement between CCR and Bethlehem; (b) Agreement among Chicago Cold Rolling, Bethlehem and the CCR Agent; and (c) Agreement between Bethlehem and the CCR Agent -- the "CCR Mortgage Agreement" and, together with the CCR Services Amendment and the CCR Interest Rate Agreement, the "New CCR Agreements"; and (ii) engage in other actions and enter into other agreements incident to the New CCR Agreements. Nothing in these provisions or in the New CCR Agreements will constitute the assumption or rejection by Bethlehem or CCR of the RSA as an executory contract, all rights in respect of which are expressly reserved. The CCR Order is hereby amended solely to include the: (i) CCR Services Amendment in the definition of the term "RSA," as used in the CCR Order; and (ii) CCR Interest Rate Agreement in the definition of the term "Loan Documents," as used in the CCR Order. None of the Restructuring Agent, the Restructuring Lenders, the DIP Agent, the DIP Lenders, Chase Manhattan Bank, the Inventory Agent, the Inventory Lenders, the Chicago Cold Rollings Agent or the CCR Lenders will be required to file or record financing statements, mortgages, notices of lien or similar instruments in any jurisdiction or take any other action in order to validate and perfect the security interests and liens granted to them pursuant to this Order. If any party, will, in its business judgment, choose to file financing statements, mortgages, notices of lien or similar instruments or otherwise confirm perfection of security interests and liens, all documents will be deemed to have been filed or recorded at the time and on the date of entry of this Order, but subject in all respects to the priorities set forth in this Order and the DIP Order. Each of the Debtors is authorized and directed to do and perform all acts, to make, execute and deliver all instruments and documents, including, without limitation, the execution of security agreements, mortgages and financing statements, and to pay fees, which may be reasonably required or necessary for the Debtors' performance under the Restructuring Loan, including: (i) the execution of the Financing Documents; and (ii) the execution of one or more amendments to the Restructuring Credit Agreement for the purpose of adding additional financial institutions as Restructuring Lenders and reallocating the commitment for the Restructuring Loan among the Restructuring Lenders, in each case in a form as the Debtors, the Restructuring Agent and the respective financial institutions may agree. (Bethlehem Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) Bethlehem Steel Corp.'s 10.375% bonds due 2003 (BS03USR1) are trading at about 2 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BS03USR1for real-time bond pricing. CELLSTAR CORP: Completes Mandatory Conversion of 5% Senior Notes ---------------------------------------------------------------- On November 30, 2002, CellStar Corporation (Nasdaq: CLST), a value-added wireless logistics services leader, completed the mandatory conversion of its 5% Senior Subordinated Convertible Notes. The Notes were convertible into shares of CellStar common stock at a ratio of 200 shares for each $1,000 in principal amount of the Notes. The conversion increased the total shares outstanding to 20,354,365 from 12,623,765. Nasdaq.com incorrectly reflects the old number of shares outstanding. CellStar has requested Nasdaq.com to correct its Web site to accurately reflect CellStar's total shares outstanding. CellStar Corporation is a leading global provider of distribution and value-added logistics services to the wireless communications industry, with operations in Asia-Pacific, North America, Latin America and Europe. CellStar facilitates the effective and efficient distribution of handsets, related accessories and other wireless products from leading manufacturers to network operators, agents, resellers, dealers and retailers. In many of its markets, CellStar provides activation services that generate new subscribers for its wireless carrier customers. For the year ended November 30, 2001, CellStar generated revenues of $2.4 billion. Additional information about CellStar may be found on its Web site at http://www.cellstar.com * * * As previously reported in Troubled Company Reporter, Standard & Poor's lowered its corporate credit rating on CellStar Corp., to 'SD' (selective default) from 'CCC-' and removed its ratings from CreditWatch, where they had been placed with negative implications on Sept. 6, 2001. At the same time, Standard & Poor's lowered its rating on the subordinated debt to 'D' for the distributor of wireless communications products. As of Aug. 31, 2001, total outstanding debt was about $200 million. CENDANT CORP: SEC Completes Review of 2001 Annual Report -------------------------------------------------------- Cendant Corporation (NYSE: CD) announced the completion of the review of the Company's 2001 Form 10-K by the Division of Corporation Finance of the U.S. Securities and Exchange Commission. The SEC required no change to the Company's reported or adjusted earnings per share in connection with such review. The Company had previously announced the review in August 2002 as part of the SEC's review of all Fortune 500 companies. As a result of such review, the Company has filed amendments to its Form 10-K for the year ended December 31, 2001 and its Form 10-Q for the quarter ended September 30, 2002 reflecting certain modifications and expanded disclosures. The Company has made available on its Web site, at http://www.cendant.com marked versions of its Form 10-K/A and its Form 10-Q/A, which reflect the modifications from the most recently filed forms. Cendant Corporation is primarily a provider of travel and residential real estate services. With approximately 90,000 employees, New York City-based Cendant provides these services to business and consumers in over 100 countries. More information about Cendant, its companies, brands and current SEC filings may be obtained by visiting the Company's Web site at http://www.cendant.com At September 30, 2002, Cendant's balance sheet shows that total current liabilities exceeded total current assets by about $1.3 billion. CHESAPEAKE ENERGY: Board Declares Common and Preferred Dividends ---------------------------------------------------------------- Chesapeake Energy Corporation (NYSE: CHK) announced that its Board of Directors has declared a $0.03 per share quarterly dividend that will be paid on January 15, 2003 to common shareholders of record on January 2, 2003. Chesapeake has approximately 190 million common shares outstanding. In addition, Chesapeake's Board has declared a quarterly cash dividend on Chesapeake's 6.75% Cumulative Convertible Preferred Stock, par value $.01. The dividend for the preferred stock is payable on February 17, 2003, to preferred shareholders of record on February 3, 2002, at the quarterly rate of $0.84375 per share. Chesapeake has 2.998 million shares of preferred stock outstanding with a liquidation value of $150 million. Chesapeake Energy Corporation is one of the largest independent natural gas producers in the U.S. Headquartered in Oklahoma City, the company's operations are focused on developmental drilling and property acquisitions in the Mid-Continent region of the United States. The company's Internet address is http://www.chkenergy.com * * * As reported in Troubled Company Reporter's December 9, 2002 edition, Fitch Ratings affirmed the 'BB-' rating of Chesapeake Energy's senior unsecured notes. Fitch also affirms the 'BB+' rating on Chesapeake's senior secured bank facility and the 'B' rating on the convertible preferred stock. The Rating Outlook for Chesapeake is Stable. Chesapeake previously announced that it had agreed to acquire $300 million of Mid-Continent gas assets through an acquisition of a wholly-owned subsidiary of Tulsa-based ONEOK. Chesapeake will fund the transaction with $150 million of equity and upon completion of that component it will issue $150 million of debt. The ONEOK acquisition fits well with CHK's existing Mid- Continent assets and with Chesapeake's business strategy of creating value by acquiring and developing low-cost, long-lived natural gas assets in the Mid-Continent region of the U.S. This transaction will increase its proved reserves by 8% to almost 2.5 tcfe and its production by 12% to over 565,000 mcfe per day. Since Dec. 31, 2001, CHK has increased its reserve base by approximately 40%. The ratings reflect the conservative nature in which the transaction is being funded, Chesapeake's long-lived, focused natural gas reserve base and its modest credit profile. Chesapeake's proved reserves, pro forma for the latest acquisition are nearly 2.5 Tcfe, which provide a reserve life of close to 11 years. Additionally, approximately 90% of Chesapeake's proved reserves are natural gas and are primarily located in the very familiar Mid Continent region. Fitch expects Chesapeake to achieve synergies through its recent acquisition and to expand upon the current production from those properties. CLARENT CORPORATION: Voluntary Chapter 11 Case Summary ------------------------------------------------------ Debtor: Clarent Corporation dba ACT Networks, Inc., and Jones dba Peak Software Solutions 700 Chesapeake Drive Redwood City, California 94063 Bankruptcy Case No.: 02-33504 Type of Business: Provider of voice solutions for next generation networks. Chapter 11 Petition Date: December 13, 2002 Court: Northern District of California (SanFrancisco) Judge: Thomas E. Carlson Debtor's Counsel: Debra I. Grassgreen, Esq. Pachulski, Stang, Ziehl, Young & Jones 3 Embarcadero Center #1020 San Francisco, CA 94111 Tel: 415-263-7000 Total Assets: $402,393,000 (as of June 30, 2001) Total Debts: $101,539,000 (as of June 30, 2001) CMS ENERGY: Inks Pact to Sell Panhandle Companies for $1.8 Bill. ---------------------------------------------------------------- Southern Union Company (NYSE: SUG) along with AIG Highstar Capital, L.P., a private equity fund sponsored by American International Group, Inc., (NYSE: AIG) have reached a definitive agreement with CMS Energy Corporation (NYSE: CMS) to acquire the CMS Panhandle Companies. The agreement calls for a newly formed entity, Southern Union Panhandle Corporation, owned by Southern Union and AIG Highstar to pay approximately $1.8 billion, which includes $1.166 billion in gross debt. The transaction has been approved by the boards of directors of all companies and will close following clearance by the Federal Trade Commission under the Hart-Scott-Rodino Act and certain state regulatory approvals. "We are extremely pleased to be acquiring CMS Panhandle," said George L. Lindemann, Southern Union's Chairman and CEO. "This acquisition further delivers on our stated strategy to re-deploy our assets and capitalize on opportunities in the energy market." Thomas Karam, President and COO of Southern Union, added, "CMS Panhandle is a well run and stable business, which will be accretive to our earnings in the first year. We expect to execute a smooth and seamless transition. We welcome the chance to work with the Panhandle's dedicated and experienced management team." AIG Highstar's Managing Partner Christopher H. Lee stated, "Investment in Southern Union Panhandle will be an excellent addition to AIG Highstar's portfolio of energy infrastructure assets, which include power transmission and generation and natural gas storage and transportation." The CMS Panhandle Companies include CMS Panhandle Eastern Pipe Line Company, CMS Trunkline Gas Company, CMS Trunkline LNG Company, which operates an LNG terminal complex at Lake Charles, La., and CMS Sea Robin Pipeline Company. The CMS Panhandle Companies operate almost 11,000 miles of mainline natural gas pipeline extending from the Gulf of Mexico to the Midwest and Canada. These pipelines access the major natural gas supply regions of the Louisiana and Texas Gulf Coasts as well as the Midcontinent and Rocky Mountains. The pipelines have a combined peak day delivery capacity of 5.4 billion cubic feet per day, 88 billion cubic feet of underground storage capacity and 6.3 billion cubic feet of above ground LNG storage facilities. Southern Union recently announced plans to sell its Southern Union Gas division and related Texas assets to ONEOK, Inc., for $420 million in cash. The transaction is expected to close in early January. Proceeds from the Texas assets sale and other funds, including the AIG Highstar investment, will fund the equity purchase price of the CMS Panhandle Companies. Berenson Minella and Lehman Brothers acted as financial advisors to the buyer in this transaction. CMS Energy Corporation -- whose senior unsecured debt is currently rated by Fitch at B+ -- is an integrated energy company, which has as its primary business operations in electric and natural gas utilities, natural gas pipeline systems and independent power generation. AIG Highstar Capital, L.P., is a private equity fund sponsored by American International Group, Inc. to make structured equity investments in infrastructure-related projects and operating companies. Southern Union Company is an international energy distribution company serving approximately 1.5 million customers through its natural gas operating divisions in Texas, Missouri, Pennsylvania, Rhode Island, Massachusetts and Mexico. In addition to controlling several intrastate natural gas pipelines in Texas, Southern Union also owns and operates electric generating facilities in Pennsylvania. For further information, visit http://www.southernunionco.com COMMUNICATION DYNAMICS: Gets Go-Signal to Hire AlixPartners ----------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved the appointment of AlixPartners, LLC, as claims, noticing and balloting agent for the chapter 11 cases of Communication Dynamics, Inc., and its debtor-affiliates As claims, noticing and balloting agent, AlixPartners will: (a) relieve the Clerk's Office of all noticing under any applicable rule of bankruptcy procedure; (b) file with the Clerk's Office a certificate of service, within 10 days after each service, which includes a copy of the notice, a list of persons to whom it was mailed (in alphabetical order), and the date mailed; (c) maintain an up-to-date mailing list of all entities that have requested service of pleadings in these cases and a master service list of creditors and other parties in interest, which lists shall be available upon request of the Clerk's Office; (d) comply with applicable state, municipal and local laws and rules, orders, regulations and requirements of Federal Government Departments and Bureaus; (e) relieve the Clerk's Office of all noticing under any applicable rule of bankruptcy procedure relating to the institution of a claims bar date and the processing of claims; (f) at any time, upon request, satisfy the Court that it has the capability to efficiently and effectively notice, docket and maintain proofs of claim; (g) furnish a notice of bar date approved by the Court for the filing of a proof of claim (including the coordination of publication, if necessary) and a form for filing a proof of claim to each creditor notified of the filing; maintaining all proofs of claim filed; maintaining an official claims register by docketing ail proofs of claim on a register containing certain information; (l) maintain an up-to-date mailing list for all entities that have filed a proof of claim, which list shall be available upon request of a party in interest or the Clerk's Office; (m) be open to the public for examination of the original proofs of claim without charge during regular business hours; (n) record all transfers of claims pursuant to Bankruptcy Rule 3001(e) and provide notice of the transfer as required by Bankruptcy Rule 3001(e); (o) record court orders concerning claims resolution; (p) making all original documents available to the Clerk's Office on an expedited, immediate basis; (q) promptly comply with such further conditions and requirements as the Clerk's Office may hereafter prescribe; and (r) provide balloting services in connection with the solicitation process for any chapter 11 plan to which a disclosure statement has been approved by the Court. (s) assist the Debtors with the preparation of their schedules and statements of financial affairs. The hourly billing rates for AlixPartners professionals are: Principal $365 per hour Senior Associate $285 per hour Associate $245 per hour Consultant $200 per hour Analyst $145 per hour Paraprofessional $90 per hour 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. COVANTA ENERGY: Wins Nod to Renew & Modify AIG Insurance Program ---------------------------------------------------------------- Covanta Energy Corporation and non-debtor affiliate Covanta Energy Group, Inc. -- Insured Parties -- obtained Judge Blackshear's permission to renew and modify their insurance arrangement with American International Group and its affiliates to provide primary casualty insurance covering their potential casualty liabilities, including, among other things, workers' compensation liability. Specifically, the Renewal Insurance Program provides that: 1. The Renewal Insurance Program will be effective from October 20, 2002 to October 20, 2003; 2. The Renewal Insurance Program covers "primary casualty" liabilities related to the Debtors' energy businesses. The primary casualty liabilities comprise of workers' compensation, general liability, products and completed operations liability, and automobile liability; 3. The premium due and payable under the Renewal Insurance Program is $3,629,375. Covanta has complied with the requirements set forth in the Renewal Insurance Program with respect to the timing of the premium payments; 4. Covanta is required to provide collateral totaling $4,600,000 in the form of cash or letter of credit using AIG's approved format and approved banks. The collateral secures the Insured Parties' obligations to pay to AIG the self-insured retention provided under the policy. Covanta has complied with the requirements set forth in the Renewal Insurance Program with respect to the substance and timing of the collateral payment by making a $2,000,000 cash payment to AIG and obtaining a $2,000,000 letter of credit; 5. Self-insured retentions at $250,000 per accident apply to each claim under the Renewal Insurance Program; and 6. The Renewal Insurance Program is contingent on the Court's approval pursuant to an order satisfactory to American Home Assurance Company -- an AIG affiliate -- on or before December 4, 2002. (Covanta Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., 609/392-0900) CTC COMMS: Gets Final Court Nod to Use Lenders' Cash Collateral --------------------------------------------------------------- CTC Communications Group, Inc., and CTC Communications Corp., obtained approval from the U.S. Bankruptcy Court for the District of Delaware to use their Lenders' Cash Collateral and grant the Lenders adequate protection of the prepetition liens securing the Debtors' obligations. Prior to the Petition Date, the Debtors owed $225,000,000 under a credit agreement with Toronto Dominion (Texas), Inc., as administrative agent, Lehman Brothers, Inc., Credit Suisse First Boston and TD Securities (USA) Inc. The Debtors agree to limit their use of the Lenders' cash collateral to expenses itemized in a Budget that will be delivered to the Lenders. The Debtors argue that they need to use Cash Collateral to maintain the value of the Prepetition Collateral and to provide the working capital necessary to maintain operation of their business. Absent the use of Cash Collateral, the value of the Lenders' and other creditors' collateral will be seriously diminished. CTC Communications Group, Inc., a source provider of voice, data, and Internet Communications services to medium and larger sized business customers, filed for chapter 11 protection on October 3, 2002. Pauline K. Morgan, Esq., at Young, Conaway, Stargatt & Taylor, represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $306,857,985 in total assets and $394,059,938 in total debts. DANA CORP: Completes Sale of FTE Brake & Clutch Actuation Assets ---------------------------------------------------------------- Dana Corporation (NYSE: DCN) -- whose new $250 million debt issue has been rated by Standard & Poor's at 'BB' -- has completed the sale of its FTE brake and clutch actuation systems operations to HgCapital, a European private equity finance company. The transaction included FTE's five manufacturing facilities in Germany, Mexico, and Brazil, as well as its 14 sales offices. The Ebern, Germany-based FTE operations employ approximately 2,850 people. Net cash proceeds for the transaction total approximately $150 million. Dana will record an after-tax gain of approximately $24 million in the fourth quarter of 2002 related to the transaction. Dana Chairman and CEO Joe Magliochetti said, "FTE is a respected business with solid product and brand reputation. But in the larger view, this move reinforces our desire to focus Dana's energies on core businesses and technologies, which are more central to our strategy of growth through innovation." FTE's primary brake products include master cylinders, wheel cylinders, brake boosters and hoses, and anti-lock brake modules and systems. Its major clutch products include master cylinders, slave cylinders, concentric slave cylinders, hoses and lines, pipe assemblies, and servos. The investment banking firm of Deutsche Bank advised Dana on the transaction. Dana Corporation is one of the world's largest suppliers of components, modules and complete systems to global vehicle manufacturers and their related aftermarkets. Founded in 1904 and based in Toledo, Ohio, the company operates some 300 major facilities in 34 countries and employs approximately 70,000 people. The company reported sales of $10.3 billion in 2001. Dana's Internet address is http://www.dana.com DLJ MORTGAGE: S&P Junks Class B-2 Note Rating at CCC ---------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on classes B-1 and B-2 of DLJ Mortgage Acceptance Corp.'s commercial mortgage pass-through certificates series 1997-CF1. Concurrently, the ratings on classes A-1A, A-1B, A-2, and A-3 are affirmed. The lowered ratings are due to anticipated deterioration in credit enhancement levels upon the eventual liquidation of the specially serviced assets, and the susceptibility of both classes to interest shortfalls. The affirmations reflect credit enhancement levels that should adequately support the current ratings upon liquidation of the specially serviced assets and the pools weighted average debt service coverage of 1.53x. The weighted average DSC was reported by the master servicer, GMAC Commercial Mortgage Corp. The DSC is based upon available preceding fiscal year financial data, primarily year-end 2001. There are nine specially serviced assets. Seven are REO with a combined balance of $17.2 million and a total exposure of $24.5 million. $13 million of the $17 million balance is represented by limited service hotels, all of which have been experiencing occupancy problems. According to discussions with the special servicer, all but one of the lodging properties had occupancy levels below 40% during September or October 2002, and average daily rates that were under $50.00. Appraisal reduction amounts of $7.5 million have been realized against the lodging assets. According to the special servicer, five of the six assets may be liquated by Spring 2003. The remaining REO asset is secured by a mixed-use industrial/warehouse property formerly tenanted by Roberds. The asset has been REO since June 2000 and has a balance of $4.7 million. An appraisal reduction of $4.6 million has been realized against the asset. The remaining specially serviced assets are two 90-plus day delinquent loans with a combined balance of $7.3 million. The loans have a total combined exposure of $7.8 million. Appraisal reductions of $2.3 million have been realized against the 90-plus day delinquent assets, one of which is a multifamily property in Dayton, Ohio, and the other is a limited service hotel in Beafort, South Carolina. No other loans are specially serviced. The remaining loans in the pool are current, with the exception of two crossed loans tenanted by Kmart, which are 30 days delinquent. The loans have a combined principal balance of $6.10 million. In addition to the specially serviced assets, Standard & Poor's is concerned about the performance of two of the top 10 assets. The first is the fifth largest loan in the pool ($8.6 million), which reported a 0.72x DSC for the first six months of 2002. September 2002 occupancy was reported at 73.3%. The loan is secured by a property consisting of 10 buildings, five of which contain 157 apartment units, and five buildings contain 531 quad units (common kitchen and bath). The property is experiencing decreased demand due to newer multifamily product in the area, as well as dependency on declining student enrollments at the nearby University of Oregon. Concerns also exist regarding the ninth largest loan in the pool ($6.7 million), which is secured by a 300-unit apartment complex in Austin, Texas, which reported a DSC of 0.74x for the first six months of 2002. Occupancy at Sept. 25, 2002 was 81%. The property, which is located close to University of Texas, has largely been converted to student housing. There are 101 loans in the pool with an aggregate balance of $354.2 million, down from 118 loans with a balance of $448 million at issuance. Significant property concentrations include multifamily (49%); retail (27%); lodging (11%); and office (10%). The lodging exposure consists of 12 loans, six of which are REO and one that is 90-plus days delinquent. The properties are located in 23 states with significant concentrations in Texas (19%), California (15%), and Georgia (12%). To date, nine assets have been liquated. Losses expressed as a percentage of principal balance at the time of liquation ranged from 71% to 100%. Based on available information, various loss scenarios were considered, which resulted in the lowered ratings due to anticipated credit support deterioration. While the credit enhancement levels of classes senior to the B-1 also experienced deterioration under the loss scenarios, they still supported the existing ratings. Ratings Lowered DLJ Mortgage Acceptance Corp. Commercial mortgage pass-thru certs series 1997-CF1 Class Rating Credit Support (%) B-1 BB+ BBB- 12.03 B-2 CCC B 8.86 Ratings Affirmed DLJ Mortgage Acceptance Corp. Commercial mortgage pass-thru certs series 1997-CF1 Class Rating Credit Support (%) A-1A AAA 35.43 A-1B AAA 35.43 A-2 AA 28.46 A-3 A 19.62 Ratings Previously Lowered To 'D' DLJ Mortgage Acceptance Corp. Commercial mortgage pass-thru certs series 1997-CF1 Class Rating Credit Support (%) B-3 D 1.92 B-4 D 0.00 EL PASO: Closes Over $3.6-Billion in Sales Transactions in 2002 --------------------------------------------------------------- El Paso Corporation (NYSE: EP) provided an update on its liquidity, asset sales program, and business plans. The collateral requirements associated with the recent ratings actions on El Paso's debt have been consistent with expectations, and the company's liquidity remains strong. As of December 18, 2002, El Paso had $3.4 billion of available liquidity. Sources ($ billions) Available cash $1.3 364-day bank facility 3.0 Multi-year bank facility 1.0 Subtotal sources $5.3 Uses Commercial paper outstanding ($0.0) 364-day facility outstanding (1.5) Multi-year facility letters of credit (0.4) Subtotal uses ($1.9) Net available liquidity $3.4 El Paso continues to make excellent progress on asset sales, having closed more than $3.6 billion in sales transactions thus far in 2002. The company expects to close approximately $1.4 billion of additional non-core asset sales by the end of the first quarter 2003, with another approximate $1 billion of asset sales expected to close during the remainder of 2003. All of these sales are part of El Paso's strategy to sell non-core assets to reduce debt and enhance liquidity. The company's core businesses -- pipeline, production, midstream, and non-merchant power -- continue to perform well. In addition, the strengthening natural gas price environment and growing need for new infrastructure provide a solid base for these businesses in 2003 and beyond, and highlight El Paso's position as North America's leading provider of natural gas services. The company is implementing its plan to exit the trading business and will adopt the new accounting rules for that business in the fourth quarter. Additionally, El Paso is reviewing its other businesses as it rationalizes its non-core holdings. The analysis of the financial impact of these changes on trading and other businesses in the fourth quarter 2002 and full-year 2003 is ongoing. In February 2003, El Paso will provide an update on its capital investment program, asset sale progress, financing plan, and 2003 earnings and cash flow outlook. El Paso Corporation is North America's leading provider of natural gas services. The company has core businesses in natural gas production, gathering and processing, and transmission, as well as liquefied natural gas transport and receiving, petroleum logistics, power generation, and merchant energy services. El Paso Corporation, rich in assets and fully integrated across the natural gas value chain, is committed to developing new supplies and technologies to deliver energy to communities around the world. For more information, visit http://www.elpaso.com As reported in Troubled Company Reporter's December 3, 2002 edition, Standard & Poor's lowered its long-term corporate credit rating on energy company El Paso Corp., and its subsidiaries to 'BB' from 'BBB'. Standard & Poor's also lowered its senior unsecured debt rating at the pipeline operating companies to 'BB' from 'BBB' and the senior unsecured rating on El Paso to 'BB-' from 'BBB-', reflecting structural subordination relative to the operating companies. All commercial paper ratings were withdrawn. All ratings on El Paso and its subsidiaries remain on CreditWatch with negative implications, where they were placed September 23, 2002. ENCOMPASS SERVICES: Honoring Obligations to Critical Vendors ------------------------------------------------------------ Judge Greendyke authorizes Encompass Services Corporation and its debtor-affiliates to satisfy Critical Vendor Claims on an interim basis. The Debtors are authorized to use available funds, when feasible and appropriate in their sole and absolute discretion, based on the liquidity available to them. By accepting the payment under these terms, Judge Greendyke makes it clear that each Critical Vendor accepting payment agrees to continue extending credit and supplying materials, equipment, goods and services to the Debtors under the ordinary and acceptable terms and conditions that are at least as favorable or better than those provided to the Debtors 120 days before Petition Date. * * * Encompass Services estimates they owe roughly $180,000,000 in trade accounts payable and that of these outstanding accounts payable, approximately $160,000,000 is owed to Critical Vendors -- suppliers of materials, equipment, goods and services with whom the Debtors continue to do business and whose materials, equipment, goods and services are essential and critical to the Debtors' reorganization. (Encompass Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Court Approves Proposed Overhead Allocation Formula --------------------------------------------------------------- Subject to these provisions, Judge Gonzalez approves Enron Corporation's proposed overhead allocation formula: 1. With respect to ENA and any other economic entity in which ENA has the primary economic interest, for the period between the Petition Date through November 25, 2002, to the extent Enron Corp. has incurred direct expenditures and direct and indirect allocable overhead expenses on behalf of ENA Group, the funding will be re-paid by ENA to Enron Corp. by reducing the amount of the ENA Loan; 2. With respect to the ENA Group, for the period after November 25, 2002, to the extent Enron Corp. has incurred direct expenditures only on behalf of the ENA Group, the funding will be re-paid in cash directly to Enron Corp. by ENA on its own behalf and on behalf of any subsidiary in the ENA Group which cannot fund its own allocation of overhead or other expenses; and any subsidiary in the ENA Group, which can fund its own allocation of overhead or other expense will make the payments in cash directly to Enron Corp.; 3. With respect to the ENA Group, for the period after November 25, 2002, to the extent Enron Corp. has incurred or will incur expenditures for overhead costs that are directly and indirectly allocable to the ENA Group, the funding will be re-paid by reducing the amount of the ENA Loan, until the ENA Loan has been paid in full; 4. In the event a determination of whether ENA has a primary economic interest in a particular entity cannot be made in a reasonable time, Enron Corp. will fund the allocation obligation until the Debtors, in their business judgment and in consultation with the Creditors' Committee and the ENA Examiner, are able to make the determination; 5. As an additional source of cash to fund allocations and other expenses of the Debtors' estates, Enron Corp. is authorized to borrow $250,000,000 from the New Energy Trading Company; provided, however, that NETCO is granted a Junior Reimbursement Claim as provided in the Amended CMS Order; 6. In the event a Non-Debtor is unable to fund its allocation of overhead or other expenses, including, without limitation, the Dissolution Expenses, Enron Corp. and ENA are authorized to fund the allocation pursuant to the Allocation Formula on behalf of the Non-Debtor and the Amended CMS Order is modified to that extent so that the funding of the allocation will not be in violation or contravention of any provision of the Amended CMS Order, including, without limitation the solvency tests and Intercompany Loan limits of the Amended CMS Order; provided, however, the funding of the allocation will result in Intercompany Loans payable by the Non-Debtor to Enron Corp. or ENA; 7. In the event a Debtor is unable to fund its allocation of overhead or other expenses, including, without limitation, the Dissolution Expenses, Enron Corp. and ENA are authorized to fund the allocation pursuant to the Allocation Formula on behalf of the Debtor and the Amended CMS Order is modified to that extent so that the funding of the allocation will not be in violation or contravention of any provision of the Amended CMS Order, including, without limitation, of the Amended CMS Order; provided, however, the funding of any allocation will result in Junior Reimbursement Claims held by Enron Corp. or ENA against that Debtor as provided by the Amended CMS Order; 8. The Debtors are authorized to pay up to $5,500,000 in respect of the Dissolution Expenses; and the Debtors may pay amounts above $5,500,000 in respect of Dissolution Expenses without seeking further Court approval; provided, however, the Debtors obtain the written agreement of the Creditors' Committee and the ENA Examiner; and 9. The Debtors, in consultation with the ENA Examiner and the Creditors' Committee, will revisit the allocation of vacant space in their Houston headquarters building once 25% of the currently occupied space is vacated. * * * Enron Corporation and its debtor-affiliates, in compliance with the Amended Cash Management System Order, proposed to implement the Allocation Formula, for allocation of shared overhead and other expenses among the Debtors and Non-Debtors from and after the Petition Date. The Amended Cash Management System Order, the Debtors were directed to develop a formula to allocate shared overhead expenses. Thus, in consultation with the Creditors' Committee and the ENA Examiner, the Debtors and their professionals, developed certain principles to guide their efforts in formulating the most appropriate method of shared overhead allocation. These principles include, without limitation: -- developing a flexible, simplified and streamlined allocation process; -- providing for the allocation of clearly defined expenses to the respected beneficiary entities; -- identifying Enron Corp. staff positions 100% dedicated to the Debtors' Chapter 11 reorganization process; -- using Cost Accounting Standard 403 of the Federal Cost Accounting Standards as a guide for allocating shared overhead expenses; and -- providing procedures for monitoring and modification of allocations due to changes in circumstances. Under the Allocation Formula, shared overhead expenses include, but not limited to: salaries and benefits, employee expenses, outside services, payroll taxes, depreciation and general business expenses like supplies, rents and computer related costs. The Allocation Formula also provides for the allocation of other expenses not directly related to overhead, including expenses for professional services, employee-related expenses and expenses related to the dissolution or wind-down of certain of the Enron Companies. Allocation Methodologies Each month, the Debtors will calculate an amount for each Department based on the last known month's actual results and adjusted for any expected material differences. The methodology for allocation of Department Overhead Expense varies from one Department to another, depending on whether the expense may be categorized as an indirect expense or direct expense. A. Allocation of indirect overhead expenses The methodology for allocating the Department Overhead Expense in this category to a particular entity requires a determination of that entity's average assets and revenues and, if the entity is a Debtor, also that entity's average assets and liabilities. AAR is determined by calculating the average of: (a) the percentage of assets held by the particular legal entity at a given month's end as compared to all legal entities to receive allocations; and (b) the percentage of the average absolute value of revenues generated by a particular legal entity over the trailing three months from the date the allocation factor is set as compared to all legal entities to receive allocations over the same trailing three months. AAL is determined by calculating the average of: (a) the percentage of assets held by a particular Debtor at a given month's end as compared to all Debtors in the same month; and (b) the percentage of liabilities owed by a particular Debtor at a given month's end as compared to all Debtors in the same month. For a Department consisting of indirect expenses, the Department Overhead Expense is made up of: (a) expenses associated with Enron staff positions identified as 100% dedicated to the Debtors' Chapter 11 cases -- Dedicated Bankruptcy Expenses; and (b) all other expenses -- Net Department Expenses. The allocable amount of the Department Overhead Expense for a particular legal entity depends on whether it is a Debtor or Non-Debtor. If a legal entity is a Debtor, the allocable amount of the Department Overhead Expense is calculated by adding the product of the Debtors entity's AAL and the Dedicated Bankruptcy Expense. If the legal entity is a Non- Debtor, then the allocable amount of the Department Overhead Expenses is calculated by multiplying the Non-Debtor entity's AAR times the Net Department Expense. B. Allocation of direct overhead expenses Direct expenses are those related to the use or benefit of some corporate service by a legal entity and are allocated directly to that legal entity based on use or benefit. Similarly, Risk Management property insurance premiums will be directly allocated to the entity holding the property. C. Allocation of professional services expenses Professional services expenses relate to costs incurred by retained legal and other professionals and are allocated by utilizing AAL. With respect to expenses for professional services directly attributable to a legal entity whether Debtor or Non-Debtor, the expense will be allocated directly to the entity. With respect to expenses for professional services not directly attributable to one particular entity: (a) expenses attributable to more than one Debtor will be allocated based on an average of the percentage of assets and liabilities of the attributable Debtors; (b) expenses attributable to more than one Non-Debtor will be allocated based on an average of the percentage of assets and liabilities of the attributable Non-Debtors; or (c) expenses that cannot be split between the Debtors and Non-Debtors will be allocated to all attributable Debtors and Non-Debtors based on the overall proportional split of all other expenses in that period by each entity. D. Allocation of employee-related expenses Retention expenses for employees of Enron Corp., ENW and EPSC will be charged to the department to which the person is assigned; these expenses will then be allocated based on the department's proposed allocation process. Retention payments to all other Enron employees will be charged directly to the entity that picks up the expenses for that employee. Similarly, severance expenses relating to employees of Enron Corp., ENW and EPSC will be allocated to the department incurring the severance expenses, then allocated based on the proposed methodology. Certain payroll expenses of ENW are indirect and will be allocated to the Enron Companies' wholesale and retail businesses, as they relate solely to those businesses, based on the AAR/AAL methodology. E. Allocation of dissolution or wind-down expenses The Dissolution Expenses for subsidiaries of ENA will be allocated directly to ENA; and the Dissolution Expenses for all other subsidiaries will be allocated directly to Enron Corp. The Debtors estimate that the maximum aggregate amount of the Dissolution Expenses is $5,500,000 through the end of 2003. Funding and Monitoring of Allocations For the provision of funds for allocation with respect to monthly cash settlements of allocated overhead: (a) escrowed amounts will be available to fund overhead allocated to the entity holding the escrow account; (b) as an additional source of cash to fund allocations and operations of the estate, Enron Corp. will borrow $250,000,000 from the New Energy Trading Company; (c) generally, all entities will fund their own allocation to the extent they are able give these criteria: -- insolvency and liquidity constraints; -- regulation and rate base constraints; -- repatriation restrictions for foreign subsidiaries; -- absence of contractual right to charge entities not wholly owned; (d) ENA will fund in lieu of ENA subsidiaries that are unable to meet their allocation obligations, and Enron Corp., will fund in lieu of all other subsidiaries that are unable to meet their allocation obligations; (e) ENA-specific provisions: -- With respect to ENA, its subsidiaries, Enron Power Marketing Inc. and Enron Natural Gas Marketing Corp, and ENA subsidiaries unable to fund their own allocation obligations, for the period between the Petition Date through July 31, 2002, to the extent Enron Corp. has incurred direct expenditures and direct and indirect allocable overhead expenses on behalf of ENA, EPMI, ENGM or the ENA Non-Funding Subs, the funding will be re-paid by ENA to Enron Corp., by reducing the amount of the ENA Loan; -- With respect to ENA, EPMI, ENGM, and the ENA-Non- Funding-Subs, for the period following July 31, 2002, to the extent Enron Corp. has incurred direct expenditures (only) on behalf of ENA, EPMI, ENGM or the ENA-Non-Funding-Subs the funding will be re-paid in cash by ENA, EPMI and/or ENGM to Enron Corp.; and -- With respect to ENA, EPMI, ENGM, and the ENA-Non- Funding-Subs, for the period following July 31, 2002, to the extent Enron Corp. has incurred or will incur expenditures for directly and indirectly allocable overhead expenses on behalf of ENA, EPMI, ENGM or the ENA-Non-Funding-Subs, such funding will be re-paid by reducing the amount of the ENA Loan, until such Loan has been paid in full. Thereafter, the amounts will be paid in cash by ENA. Furthermore, the Debtors will institute a monitoring process involving the Creditors' Committee and the ENA Examiner to ensure that the proposed Allocation Formula protects the rights and interests of the Debtors, Non-Debtors and their respective creditors. The Debtors will continue to work with the Creditors' Committee and the ENA Examiner to oversee and evaluate the allocation of shared overhead and other expenses, and verify data accuracy and application of the allocation methodology. In addition, a quarterly review of the Allocation Formula and the application thereof will be conducted by the Debtors, in consultation with the Creditors' Committee and the ENA Examiner, to assess and determine the need for modification. (Enron Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 609/392-0900) Enron Corp.'s 9.875% bonds due 2003 (ENRN03USR3), DebtTraders reports, are trading at about 13 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR3 for real-time bond pricing. EOTT ENERGY: Intends to Assume 2 Premium Financing Agreements ------------------------------------------------------------- One of the U.S. Trustee's requirements is that EOTT Energy Partners, L.P., and its debtor-affiliates must maintain insurance customary in their business as well as casualty insurance, workers' compensation insurance, general liability insurance and product liability insurance, and make all premium payments on these insurance when due. Prior to the Petition Date, Robert D. Albergotti, Esq., at Haynes and Boone LLP, in Dallas, Texas, relates, the Debtors financed their general liability, property and casualty, and workers' compensation insurance premiums through Imperial A.I. Credit Companies and Cananwill, Inc. Accordingly, the Debtors seek the Court's authority to assume the Premium Financing Agreements to give Imperial and Cananwill the assurances they need to continue doing business with them. Mr. Albergotti contends that the assumption is necessary because pursuant to the terms of the Premium Financing Agreements, in the event the Debtors default, Imperial or Cananwill may cancel the policies and may receive and apply the unearned or return premiums to the Debtors' account. In the event monies still remain due to Imperial or Cananwill, the deficiency will be recognized as an administrative expense claim pursuant to Section 503(b) of the Bankruptcy Code. Moreover, Mr. Albergotti asserts, the assumption of the Premium Financing Agreement is based on valid business justifications: (a) this method of financing insurance policy premiums is ordinary and customary in the Debtors' industry; (b) the Debtors are required to maintain insurance by the U.S. Trustee and make payments of the insurance premiums; and (c) the Premium Financing Agreements obviate the Debtors' need to pay the entire premium for each policy at one time, enabling them to better manage their use of cash. The Debtors may be required during these Chapter 11 cases to enter into similar premium financing agreements on new policies to renew or replace existing policies. Thus, the Debtors further seek the Court's authority to enter into new premium financing agreements from time to time, as appropriate, without further Court order. Mr. Albergotti proposes that instead of filing a new motion to the Court, the Debtors will notify the U.S. Trustee, the Official Committee of Unsecured Creditors and secured lenders in writing of their intention to enter into a new premium financing agreement. If no objection is received within five business days after notice, the Debtors will enter into the new premium financing agreement without further Court order. Otherwise, the Debtors will file a motion with the Court requesting authority to enter into the new premium financing agreement. Mr. Albergotti contends that this procedure provides sufficient safeguard to the Debtors' creditors while permitting the Debtors freedom to enter into new premium financing agreement without the expense of filing and serving motions for approval of premium financing agreements. (EOTT Energy Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) EXTREME NETWORKS: S&P Junks $200MM 3.5% Conv. Sub. Note Rating -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' corporate credit rating and stable outlook to Extreme Networks Inc. At the same time, Standard & Poor's assigned its 'CCC+' rating to the company's $200 million 3.5% convertible subordinated notes due 2006. Santa Clara, California-based Extreme Networks makes data networking switches for enterprise customers and metropolitan- area networks, using the Ethernet technology originally designed for local-area networks. The company had $227 million of debt outstanding at September 30, 2002. Extreme Networks holds a second-tier position in the networking switch industry and has adequate financial flexibility, offset by very aggressive industry conditions, weak profitability, and constrained free cash flows. "Competitive marketplace challenges are substantial, while growth in the company's target market could well be substantially delayed," said Standard & Poor's credit analyst Bruce Hyman. "Still, the company is expected to retain sufficient financial flexibility to continue product development over the intermediate term." Extreme competes against a number of networking companies, some of which have far greater financial flexibility. In addition, a number of companies in adjacent markets have the technologies and resources to enter the enterprise Ethernet market, potentially further challenging the company's prospects. FEDERAL-MOGUL: Signs-Up DoveBid as Lighting Business Auctioneer --------------------------------------------------------------- Two years ago, Federal-Mogul Corporation and its debtor- affiliates began implementing an investment strategy initiative that focused on their core competencies. As part of that process, the Debtors marketed non-core businesses, including their lighting business, and closed plants that formerly housed the lighting business. One of the plants the Debtors closed is the lighting facility located in Franklin Park, Illinois. The Franklin Park Facility formerly produced lighting products for General Motors. However, GM has contracted with Samlip America, Inc., to produce those products in the future. The equipment at the Franklin Park Facility falls into roughly two categories: 1. Those equipment relevant to the work that the Debtors did for GM. At the onset of their Chapter 11 cases, the Debtors sold the equipment as de minimis assets to Samlip for $162,300 since Samlip would be performing the work for GM, in their place; and 2. The remaining lighting equipment suited for general industry use. This equipment have not been sold. By this application, the Debtors seek the Court's authority to employ DoveBid, Inc. to act as their auctioneer in connection with the sale of the remaining lighting equipment. James E. O'Neill, Esq., at Pachulski Stang Ziehl Young & Jones, P.C., tells Judge Newsome that DoveBid was selected from a pool of a half-dozen different auctioneers who made proposals to sell the equipment. The Debtors chose DoveBid because it has extensive experience and expertise in marketing and selling industrial equipment and was able to provide high quality services at a price that is in line with what the other auctioneers were offering. As auctioneer, DoveBid will render these services: (a) Consult with the Debtors and their advisors to create and implement an appropriate strategy to sell the equipment; (b) Prepare, advertise and conduct public auctions of the equipment -- in person and through the use of internet resources; (c) Collect the sale proceeds and applicable taxes from the purchasers of the equipment and remit those proceeds, less the allowed compensation and expenses, to the Debtors. Based on the estimates by DoveBid and other auctioneers, the Debtors could sell the remaining lighting equipment for between $300,000 and $400,000. Mr. O'Neill relates that DoveBid has specialized in sales and auctions to businesses worldwide. Having spent 63 years in the business, DoveBid is the global leader in the disposition of idle, surplus and obsolete capital assets. Mr. O'Neill also states that DoveBid's wide-ranging experience also extends to transactions involving financially troubled assets, including numerous transactions within the confines of chapter 11 and its Canadian equivalent. Its professionals enjoy an excellent reputation for the services that they have rendered in large and complex chapter 11 cases throughout the United States. DoveBid also maintains a sophisticated Internet website enabling it to market assets to millions of individuals who otherwise may not have had access to those assets and conduct both live auction and broadcast auction over the internet to encompass a broader audience of buyers than a conventional auction. Among others, DoveBid has conducted auctions and private asset sales on behalf of AT&T, Boeing, DaimlerChrysler, Hewlett-Packard, Levi Strauss, Lockheed Martin and Warner Brothers. On December 10, 2002, the Debtors and DoveBid held an auction for the lighting equipment at the Franklin Park Facility and over the Internet. Pursuant to an Exclusive Auction Agreement dated November 13, 2002, Mr. O'Neill reports that DoveBid retained the proceeds of the auction in a client trust account until both parties have accounted for all sales and sales proceeds. Once DoveBid has collected all of the sales proceeds, and the Bankruptcy Court has authorized its employment, DoveBid will remit the net proceeds of the auction to the Debtors. The parties also agreed that, rather than having the Debtors pay DoveBid a commission on the equipment sold, the successful purchasers of equipment would pay a "Buyer's Premium" directly to DoveBid equal to 15% of the successful bid price, 1% of Buyer's premium, however, will go to the Debtors. The Buyer's Premium is further subject to: * a 3% reduction if the buyer pays in cash, cashier's check, company check or wire transfer; and * an additional 2% reduction if the buyer bids in person rather than over the Internet. The Debtors will reimburse DoveBid up to $36,200 for marketing expenses, labor and travel expenses. James Sklar, Associate General Counsel of DoveBid, discloses that certain parties-in-interest in the Debtors' proceedings invest or hold equity interests in DoveBid: GE Capital, Comdisco, DataStream, GoneTrader, TradeOut, Sun Microsystems, and Ford Motor Credit. However, Mr. Sklar assures the Court that DoveBid: -- is not and was not a creditor, equity security holder or insider of the Debtors; -- is not and was not an investment banker for any outstanding security of the Debtors; -- is not and was not, within three years before the Petition Date, an investment banker for a security of the Debtors, or an attorney for any investment banker in connection with the offer, sale or issuance of any security of the Debtors; -- is not and was not, within two years before the Petition Date, a director, officer or employee or of any investment banker for any security of the Debtors; and -- has no interest materially adverse to the interest of the Debtors' estates or of any class of creditors or equity security holders. (Federal-Mogul Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) FLOWER FOODS: Fitch Expects Company to be Cash Flow Neutral ----------------------------------------------------------- Flowers Foods, Inc.'s announcement that Mrs. Smith's Bakeries' fourth quarter earnings will be significantly below plan and that the board approved a share repurchase plan for five million shares does not have rating implications, according to Fitch Ratings. Fitch rates Flowers' senior secured credit facilities 'BB+'. The Rating Outlook is Positive, reflecting expectations for improving cash flow and stable debt levels. Although Mrs. Smith's Bakeries' earnings were below plan, the division's performance has improved significantly from prior years and is expected to be cash flow neutral. Additionally, Fitch anticipates that the share repurchase program, which is expected to cost about $100 million and be implemented over 3 years, will be funded with internally generated cash flow and will not have a significant impact on Flowers' credit statistics. Total debt at Oct. 5, 2002, was $245 million, a reduction of $87 million since the March 2001 spin-off of Flowers. For the latest twelve months ended Oct. 5, 2002, total debt-to-EBITDA improved modestly to 2.0 times from 2.2x for the year ended Dec. 29, 2001 and EBITDA-to-interest incurred grew to 5.4x from 3.2x. FONIX CORP: Limited Capital Raises Going Concern Doubt ------------------------------------------------------ Fonix Corporation's revenues increased from $132,713 for the three months ended March 31, 2001, to $298,785 for the three months ended March 31, 2002. However, the Company has incurred significant losses since inception, including a loss of $5,244,640 for the three months ended March 31, 2002. The Company incurred negative cash flows from operating activities of $4,810,053 during the three months ended March 31, 2002. Sales of products and revenue from licenses based on the Company's technologies have not been sufficient to finance ongoing operations. As of March 31, 2002, the Company had negative working capital of $4,611,713 and an accumulated deficit of $179,353,995. The Company has limited capital available under its equity lines of credit. These matters raise substantial doubt about the Company's ability to continue as a going concern. The Company's continued existence is dependent upon several factors, including the Company's success in (1) increasing license, royalty and services revenues, (2) raising sufficient additional funding and (3) minimizing operating costs. Since inception, Fonix has devoted substantially all of its resources to research, development and acquisition of software technologies that enable intuitive human interaction with computers, consumer electronics, and other intelligent devices. Through March 31, 2002, the Company has incurred significant cumulative losses, and losses are expected to continue until the effects of recent marketing and sales efforts begin to take effect, if ever. The Company has experienced slower development of markets for speech applications than had been anticipated due to several factors. First, the limited resources with which the Company has been operating (due to the delay in accessing funds from the third equity line) have hampered the Company's ability to aggressively support marketing and sales as originally anticipated. Additionally, time and resources required to develop certain applications have been greater than originally anticipated, and, with limited resources available, the Company has not been able to expedite such development. Further, the ongoing U.S. economic slowdown has slowed customer acceptance in target markets, especially in the telecommunications sector where previously expected recovery has yet to materialize, but has deteriorated further. Each of these factors had a significant impact on the Company's ability to achieve significant growth in the markets it has chosen to develop. The occurence of these conditions has caused the Company to (i) reduce its emphasis on consumer applications because of the significant resources required to develop retail markets, (ii) reduce its development and marketing efforts in the computer telephony and server-based markets, and (iii) increase its emphasis and focus on mobile and wireless applications, automotive speech interface solutions and assistive markets, where management believes the Company enjoys the greatest technological and market advantage. The Company must raise additional funds to be able to satisfy its cash requirements during the next 12 months. Research and development, corporate operations and marketing expenses will continue to require additional capital. Because the Company presently has only limited revenue from operations, the Company intends to continue to rely primarily on financing through the sale of its equity and debt securities to satisfy future capital requirements until such time as the Company is able to enter into additional third-party licensing, collaboration or co- marketing arrangements such that it will be able to finance ongoing operations from license, royalty and services revenues. There can be no assurance that the Company will be able to enter into such agreements. Furthermore, the issuance of equity or debt securities which are or may become convertible into equity securities of the Company in connection with such financing could result in substantial additional dilution to the stockholders of the Company. At March 31, 2002, the Company had $2,000,000 available to draw under its equity lines of credit. FRIEDE GOLDMAN: Court Approves Offshore Division Asset Sale ----------------------------------------------------------- Friede Goldman Halter, Inc., (OTCBB: FGHLQ) has received approval from the United States Bankruptcy Court for the Southern District of Mississippi, Southern Division, for the sale of substantially all of the assets of the Friede Goldman Offshore Division based in Pascagoula, Mississippi, and in Orange and Port Arthur, Texas, to ACON Offshore Partners, LP and its affiliates. The sale to ACON, which is expected to close in early January 2003, includes US$18 million in cash and the assumption of US$43 million in debt. "We greatly appreciate the cooperation of the secured lenders, GE Capital Public Finance and the US Maritime Administration in agreeing to the assumption of their secured claims by ACON," said Jim Decker, Director of Houlihan Lokey Howard & Zukin, the Financial Advisor to FGHLQ who arranged the asset sale. "We are pleased and expect that ACON will offer employment to substantial numbers of former employees of the Friede Goldman Offshore Division. We expect that ACON will be a significant player in the offshore industry," Decker said. The new company will operate its acquired assets in Pascagoula, Miss. and Port Arthur, Texas under the name of Signal International, LLC. Signal will provide new construction, upgrade and repair of all types of offshore drilling rigs, floating production units, and inland and offshore drilling and derrick barges. Friede Goldman Halter has been advised by ACON Investments that ACON is an international private equity investment firm, which manages investments in the United States, Europe and Latin America. ACON's partnerships typically include sophisticated institutional investors from the U.S., Europe and Latin America. Among its activities, ACON is affiliated with Texas Pacific Group. TPG manages over $5.7 billion worldwide. Friede Goldman Halter is further informed that ACON typically utilizes a thematic investment approach to identify investments at times of inflection points and that ACON's investment philosophy is to identify opportunities in industries with attractive dynamics and to pursue those opportunities in partnership with established management teams. "We are about to bring to a close a very challenging period in our company's history," said Ron Schnoor, President of Friede Goldman Offshore, who will continue as a member of Signal's senior management team. Schnoor continued, "We are very excited about the opportunities that the new company, Signal International, will have upon exiting the bankruptcy. I am confident we will return this very committed and talented organization to its pre-eminent position in our industry." Having received Bankruptcy Court approval of the sale of the Offshore Division, Friede Goldman Halter intends to turn now to promulgation of a plan of reorganization. The Company expects to file its plan early in the first quarter of 2003. As previously reported, the company does not expect that existing equity security holders will receive any recovery under the plan. GENUITY INC: Turning to Lazard Freres for Financial Advice ---------------------------------------------------------- Genuity Inc., and its debtor-affiliates ask the Bankruptcy Court for permission to employ and retain Lazard Freres & Co., LLC as their financial advisors and investment bankers. The Debtors agree, under the terms of an engagement letter dated July 25, 2002, to pay Lazard roughly $9,000,000 for its expert advice. According to Lazard Managing Director Barry Ridings, the Firm was founded in New Orleans, Louisiana, in 1848 and is a private investment banking firm with 2,700 employees, and 25 offices in 16 countries, including U.S. offices in New York, Chicago and San Francisco. Lazard's focus is on providing financial and investment banking advice and transaction execution on behalf of its clients. Lazard's broad range of corporate advisory services includes services pertaining to: -- general financial advice; -- domestic and cross-border mergers and acquisitions; -- divestitures; -- privatization; -- special committee assignments; -- takeover defenses; -- corporate restructurings; and -- strategic partnerships/joint ventures. In addition, Lazard maintains a presence in capital markets and has a significant asset management business. Lazard is a registered broker-dealer and an investment adviser with the United States Securities and Exchange Commission and is also a member of the New York, American and Chicago Stock Exchanges, the National Association of Securities Dealers and the SIPC. J. Gregory Milmoe, Esq., at Skadden Arps Slate Meagher & Flom LLP, in New York, explains that the Debtors seek to retain Lazard as their financial advisors and investment bankers because the Firm and its senior professionals have an excellent reputation for providing high quality financial advisory and investment banking services to debtors and creditors in bankruptcy reorganizations and other debt restructures, and its knowledge of the Debtors' financial and business operations. Specifically, Lazard has developed its knowledge of the Debtors' financial and business operations in connection with its assistance to the Debtors in preparing for the commencement of these proceedings, including: A. Advise and meet with management, the Board of Directors and its committees with respect to various financial matters; B. Assist the Debtors and their counsel in evaluating their businesses, assets and operations; C. Assist the Debtors in negotiating and communicating with the holders of the Debtors' various debt issues with respect to various matters. In addition to Lazard's understanding of the Debtors' financial history and business operations and the telecommunications and Internet industries, Lazard and its senior professionals have extensive experience in the reorganization and restructuring of troubled companies, both out-of-court and in Chapter 11 proceedings. Lazard's employees have advised debtors, creditors, equity constituencies and government agencies in many complex financial reorganizations. Since 1990, these professionals have been involved in over 200 restructurings, representing over $300,000,000,000 in restructured debt. Mr. Milmoe points out that the professionals of Lazard have been employed as financial advisors and investment bankers in a number of troubled company situations, including the Chapter 11 cases of Adelphia Communications, Hayes Lemmerz, Kaiser Aluminum, Metrocall, 360networks, Exodus Communications, Teleglobe, National Steel, Formica, Owens Corning, Fruit of the Loom, Vlasic Foods International, Armstrong Worldwide Industries, Loews Cineplex, American Pad & Paper, Stone & Webster, Safety-Kleen, Inc and WorldCom, Inc. Mr. Milmoe believes that Lazard is familiar with the Debtors' business and financial affairs and is well-qualified to provide the services required. Prior to the Petition Date, the Debtors engaged Lazard to provide advice in connection with the preparation for the commencement of these cases. In providing prepetition services to the Debtors in connection with these matters, Lazard's professionals have worked closely with the Debtors' management and other professionals and have become well-acquainted with the Debtors' operations, debt structure, business and operations and related matters. Accordingly, Lazard has developed significant relevant experience and expertise regarding the Debtors that will assist it in providing effective and efficient services in these cases. Mr. Milmoe believes that the resources, capabilities, and experience of Lazard in advising the Debtors are crucial to the Debtors' successful restructuring. An experienced financial advisor like Lazard fulfills a critical need that complements the services offered by the Debtors' other restructuring professionals. Lazard will concentrate its efforts on: -- formulating strategic alternatives; -- negotiating with the Debtors' banks, bondholders, and other creditor constituencies; and -- assisting the Debtors to formulate and implement a viable Chapter 11 reorganization plan. Neither law firms nor accounting firms have the experience or resources to do this kind of work. Prior to retaining Lazard, Mr. Milmoe tells the Court that the Debtors' senior management interviewed senior personnel of, and considered proposals from, other financial advisory and investment banking firms. The Debtors evaluated each firm on a number of criteria, including: -- the overall restructuring experience of each firm and their professionals; -- the overall financial advisory and investment banking capabilities of the firm; -- the firm's experience in advising large companies in Chapter 11; -- the likely attention of the senior personnel of the firm; and -- the compensation to be charged. After due consideration of these criteria, the Debtors concluded that Lazard was best qualified to provide financial advisory and investment banking services to the Debtors at a reasonable level of compensation. Specifically, Lazard will: A. Review and analyze the Debtors' business, operations and financial projections; B. Evaluate the Debtors' potential debt capacity in light of its projected cash flows; C. Assist in the determination of a capital structure for the Debtors; D. Determine a range of values for the Debtors on a going concern basis; E. Advise the Debtors on tactics and strategies for negotiating with the holders of the Existing Obligations; F. Render financial advice to the Debtors and participating in meetings or negotiations with the Stakeholders and rating agencies or other appropriate parties in connection with any restructuring, modification or refinancing of the Debtors' Existing Obligations; G. Advise the Debtors on the timing, nature, and terms of new securities, other consideration or other inducements to be offered pursuant to the Restructuring; H. Assist the Debtors in preparing documentation within their expertise required in connection with the Restructuring; I. Advise and attend meetings of the Debtors' Boards of Directors and their committees; J. Provide testimony, as necessary, in any proceeding before the Bankruptcy Court; K. Provide the Debtors with other general restructuring Advice; L. Assist the Debtors in the preparation of a liquidation analysis in connection with a proposed Chapter 11 plan of reorganization; and M. Assist the Debtors in finding bidders for all or part of the Debtor's business. Mr. Ridings assures the Court that neither Lazard nor any professional employee of Lazard has any connection with or holds any interest adverse to, the Debtors, their significant creditors, or any other party-in-interest, or their attorneys or accountants, or the Office of the United States Trustee or any person employed in the Office of the United States Trustee, in the matters for which Lazard is proposed to be retained. In addition, Lazard is a "disinterested person," as defined in Section 101(14) of the Bankruptcy Code. However, Lazard currently represents or in the past has represented in unrelated matters these parties: Arthur Andersen LLP, Chase Manhattan Bank, Citicorp USA Inc., Credit Suisse First Boston, Bank of New York, SBC, Comdisco, State Street bank, CAP Gemini, Philippe Dauman, Sita Foundation, WorldCom, AOL Time Warner, KPNQwest, Nortel Networks, AT&T, Cisco Systems, Prudential Plaza Associates, RREEF USA Fund-II, and Robertson Stephens. Pursuant to the Engagement Letter, Mr. Ridings relates that the Debtors paid $1,250,000 to Lazard in monthly advisory fees -- the Monthly Advisory Fee of $250,000 for five months from July 25, 2002 through November 25, 2002. The Debtors also paid Lazard a $25,000 retainer which is to be credited against any unpaid prepetition invoices and unbilled fees, charges, and disbursements. The unused portion of the retainer will be held by Lazard and applied against any of the fee applications filed and approved by the Court. During the prepetition period, the Debtors paid Lazard in full for all prepetition fees and billed expenses. The Debtors have agreed that fees for the services rendered in these cases will be: A. A monthly fee of $250,000, payable in advance of each month's service, the first payment of which will be due on the 25th day of each month thereafter until the earlier of the completion of the Restructuring or the termination of Lazard's engagement; and B. A cash fee equal to $9,000,000 payable on the final consummation of a Restructuring, provided, however, that commencing with the payment due on November 25, 2002, any monthly fees will be credited against any Restructuring Fee, provided, further, that in no event will the Debtors be required to pay the Restructuring Fee more than once. As part of the overall compensation payable to Lazard under the terms of the Engagement Letter, the Debtors have agreed to certain indemnification and contribution obligations as described in the Indemnification Letter. Lazard and the Debtors believe that these provisions are customary and reasonable for financial advisory and investment banking engagements, both out- of-court and in Chapter 11. The Debtors acknowledge and agree that Lazard's restructuring expertise, as well as its capital markets knowledge, financing skills and mergers and acquisitions capabilities, some or all of which may be required by the Debtors during the term of Lazard's engagement, were important factors in determining the amount the Monthly Advisory Fees and the Restructuring Fee, and that the ultimate benefit to the Debtors of Lazard's services likely could not be measured merely by reference to the number of hours to be expended by Lazard's professionals in the performance of these services. According to Mr. Milmoe, the contingent Restructuring Fee has been agreed on by the parties in anticipation that a substantial commitment of professional time and effort will be required of Lazard and its professionals, and in light of the fact that this commitment may foreclose other opportunities for Lazard and that the actual time and commitment required of Lazard and its professionals to perform services may vary substantially from week to week or month to month, creating "peak load" issues for the firm. The Debtors believe that the fee structure and indemnification provisions set forth in the Engagement Letter and Indemnification Letter are reasonable terms and conditions of employment and should be approved under Bankruptcy Code Section 328(a). The fee structure and indemnification provisions appropriately reflect: -- the nature of the services to be provided by Lazard; and -- the fee structures and indemnification provisions typically utilized by Lazard and other leading financial advisory and investment banking firms, which do not bill their clients on an hourly basis and generally are compensated on a transactional basis. In particular, the Debtors believe that the proposed fee structure creates a proper balance between fixed, monthly fees and contingency fees based on the successful consummation of the Restructuring. The Debtors submit that the fee structure and indemnification provisions are reasonable terms and conditions of employment in light of: -- industry practice; -- market rates charged for comparable services both in and out of the Chapter 11 context; -- Lazard's substantial experience with respect to financial advisory and investment banking services; and -- the nature and scope of work already performed by Lazard prior to the Petition Date and to be performed by Lazard in these Chapter 11 cases. (Genuity Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Wants Go-Signal to Dissolve Two UK Subsidiaries ---------------------------------------------------------------- Global Crossing Ltd., and its debtor-affiliates seek the Court's authority to dissolve certain foreign Global Crossing entities and to enter into related transactions pursuant to Section 363 of the Bankruptcy Code. Michael F. Walsh, Esq., at Weil Gotshal & Manges LLP, in New York, explains that the GX Debtors seek this relief because the affiliates they are seeking to dissolve -- debtor Global Crossing Holdings UK Limited and non-debtor Global Crossing Marketing (UK) Ltd. -- were unable to file their "Statutory Accounts," as required by the laws of the United Kingdom. "Statutory Accounts" refer to the accounts that must be filed with the Companies House -- the corporate regulatory agency for England and Wales -- annually. Each company must prepare a profit and loss account and a balance sheet. Where a company has subsidiaries, the accounts must also be prepared on a consolidated basis. The accounts are filed along with reports from the directors and the auditors of the company confirming their accuracy. Filing of Statutory Accounts is required under laws of the United Kingdom. The "Companies House" is an entity in the United Kingdom similar to the Securities and Exchange Commission. The Companies House monitors the activities of corporations and companies in the United Kingdom. Failure to file Statutory Accounts could result in fines, penalties and even criminal liability for the directors. A director may be banned from serving as a director of another company for as long as five years as punishment for failing to file. The directors of all 20 Global Crossing UK subsidiaries, including Holdings UK and Marketing UK are, with few exceptions, identical. Because of the ongoing threat of civil and criminal liability for failure to file Statutory Accounts, Mr. Walsh relates that the Debtors filed an application to "strike Holdings UK and Marketing UK off the register." Essentially, this filing means that the GX Debtors are seeking to dissolve Holdings UK and Marketing UK and remove these entities from their corporate structure. A result of this dissolution, if approved by this Court, will be to relieve the directors of Holdings UK and Marketing UK of any potential liability resulting from failure to file Statutory Accounts. According to Mr. Walsh, an application to strike a company off the record requires a 3-month notice period after the Companies House provides publication notice of the application before the company is stricken off the list of registered companies. Any time prior to the terminations of the three-month period, an application to strike off can be withdrawn. For Global Crossing, the three-month notice period terminates for Holdings UK and Marketing UK on January 1 and January 8, 2003. Mr. Walsh contends that the GC UK Subsidiaries are under considerable pressure to dissolve Holdings UK and Marketing UK. Absent the dissolution of Holdings UK and Marketing UK, some or all of the directors of the GC UK Subsidiaries may resign, creating uncertainty for the Debtors' UK operations. The dissolution will protect current directors of the GC UK Subsidiaries from the threat of sanctions for failure to file Statutory Accounts on behalf of Marketing UK and Holdings UK. Protecting these directors in this way will stabilize the Debtors' operations in the United Kingdom. (Global Crossing Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) HAYES LEMMERZ: Plan's Classification and Treatment of Claims ------------------------------------------------------------ Hayes Lemmerz International, Inc., and its debtor-affiliates present this table summarizing the classification and treatment of the principal prepetition Claims and Interests under the proposed Chapter 11 Plan and in each case reflects the amount and form of consideration that will be distributed in exchange for these Claims and Interests and in full satisfaction, settlement, release and discharge of these Claims and Interests: Class Description Treatment ----- --------------------- ---------------------------------- 1 Other Priority Claims On the first Periodic Distribution Date occurring after the later of the date an Other Priority Claim becomes an Allowed Other Priority Claim or the date an Other Priority Claim becomes payable, the holder of an Allowed Other Priority Claim will receive: -- Cash equal to the amount of the Allowed Other Priority Claim; or -- any other treatment as to which the applicable Debtor and the Claimholder will have agreed in writing. 2 Administrative On the first Periodic Distribution Convenience Claims Date occurring after the later of the date an Administrative Convenience Claim becomes an Allowed Admin. Convenience Claim or the date an Admin. Convenience Claim becomes payable pursuant to any agreement between a Debtor and the holder of the Claim, the holder of an Allowed Admin. Convenience Claim will receive, cash equal to: -- the amount of the Allowed Administrative Convenience Claim if the amount is less than or equal to $1,500; or -- $1,500 if the amount of the Allowed Administrative Convenience Claim is greater than $1,500. 3 Prepetition Credit On the Effective Date or as soon Facility Secured as practicable after it becomes an Claims Allowed Claim, each holder of an Allowed Prepetition Credit Facility Secured Claim will Receive: -- a portion of the New Senior Notes with each Claimholders' percentage distribution of New Senior Notes to be determined by the relation of its Allowed Prepetition Credit Facility Secured Claim to all Allowed Prepetition Credit Facility Secured Claims; and -- a distribution of shares of New Common Stock with a value equal to the difference between the Claimholders' Allowed Prepetition Credit Facility Secured Claim less the amount of the New Senior Notes to be distributed to the Claimholder. 4a BMO Synthetic Lease On the Effective Date, the holder Secured Claims of an Allowed BMO Synthetic Lease Secured Claim will: -- receive deferred cash payments totaling at least the allowed amount of the Allowed BMO Synthetic Lease Secured Claim; -- after abandonment by the Debtors, receive the BMO Synthetic Lease Properties; -- receive payments or liens amounting to the indubitable equivalent of the value of the Claimholder's interest in the Estates' interest in the BMO Synthetic Lease Properties; -- be Reinstated; or -- receive any other treatment as the Debtors and the Claimholder will have agreed in writing as announced at or prior to the Confirmation Hearing. 4b CBL Synthetic Lease On the Effective Date, the holder Secured Claims of an Allowed CBL Synthetic Lease Secured Claim will: -- receive deferred cash payments totaling at least the allowed amount of the Allowed CBL Synthetic Lease Secured Claim; -- after abandonment by the Debtors, receive the CBL Synthetic Lease Properties; -- receive payments or liens amounting to the indubitable equivalent of the value of the Claimholder's interest in the Estates' interest in the CBL Synthetic Lease Properties; -- be Reinstated; or -- receive any other treatment as the Debtors and the Claimholder will have agreed on in writing as announced at or prior to the Confirmation Hearing. 4c Dresdner Synthetic On the Effective Date, the holder Lease Secured Claims of an Allowed Dresdner Synthetic Lease Secured Claim will: -- receive deferred cash payments totaling at least the allowed amount of the Allowed Dresdner Synthetic Lease Secured Claim; -- after abandonment by the Debtors, receive the Dresdner Synthetic Lease Properties; -- receive payments or liens amounting to the indubitable equivalent of the value of the Claimholder's interest in the Estates' interest in the Dresdner Synthetic Lease Properties; -- be Reinstated; or -- receive any other treatment as the Debtors and the Claimholder will have agreed on in writing as announced at or prior to the Confirmation Hearing. 5 Miscellaneous Secured The legal, equitable, and Claims contractual rights of Allowed Miscellaneous Secured Claimholders will be reinstated. 6 Senior Note Claims On the first Periodic Distribution Date occurring after the later of the date a Senior Note Claim becomes an Allowed Senior Note Claim or the date a Senior Note Claim becomes payable pursuant to any agreement between a Debtor and the holder of the Senior Note Claim, the Disbursing Agent will deliver to the Claimholder: -- a portion of the remaining New Common Stock available for distribution to creditors on the Effective Date after deduction the shares of New Common Stock reserved to be distributed in respect of the Prepetition Credit Facility Secured Claims; and -- the right to receive a portion of the distributions from the HLI Creditor Trust. The amount of each of the distributions to the holder of a Senior Note Claim of the Plan will be determined by the Allowed amount of the Claimholders' Senior Note Claim in relation to the sum of the Allowed amounts of all Senior Note Claims, Subordinate Note Claims and General Unsecured Claims. 7 Subordinated Note On the first Periodic Distribution Claims Date occurring after the later of the date a Subordinated Note Claim becomes an Allowed Subordinated Note Claim or the date a Subordinated Note Claim becomes payable pursuant to any agreement between a Debtor and the holder of the Subordinated Note Claim, the Disbursing Agent will deliver to the Claimholder: -- a portion of the Remaining New Common Stock; and -- the right to receive a portion of the distributions from the HLI Creditor Trust. The amount of each of the distributions to the holder of a Subordinated Note Claim will be determined by the Allowed amount of the Claimholders' Subordinated Note Claim in relation to the sum of the Allowed amounts of all Senior Note Claims, Subordinated Note Claims and General Unsecured Claims. In addition, assuming that Class 7 Subordinated Note Claims votes to accept the Plan, each Claimholder will receive a portion of the Warrants with the amount of the Claimholders' distribution to be determined by the Allowed amount of the Claimholder's Subordinated Note Claim in relation to all Allowed Subordinated Note Claims. 8 General Unsecured On the first Periodic Distribution Claims Date occurring after the later of the date a General Unsecured Claim becomes an Allowed General Unsecured Claim or the date a General Unsecured Claim becomes payable pursuant to any agreement between a Debtor and the holder of the General Unsecured Claim, the Disbursing Agent will deliver to the Allowed General Unsecured Claimholder: -- a portion of the Remaining New Common Stock; and -- the right to receive a portion of the distributions from the HLI Creditor Trust. The amount of each of the distributions to the holder of a General Unsecured Claim will be determined by the Allowed amount of the Claimholder's General Unsecured Claim in relation to the sum of the amounts of all Allowed Senior Note Claims, subordinated Note Claims and General Unsecured Claims. 9 Subordinated These claims will be cancelled, Securities Claims released and extinguished, and holders of these claims will receive no distributions under the Plan. 10 Interests These claims will be cancelled, released and extinguished, and holders of these claims will receive no distributions under the Plan. (Hayes Lemmerz Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) Hayes Lemmerz Intl Inc.'s 11.875% bonds due 2006 (HLMM06USS1) are trading at 54 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=HLMM06USS1 for real-time bond pricing. HERCULES INC: Consummates $200-Mill. Credit Facility Refinancing ---------------------------------------------------------------- Hercules Incorporated (NYSE:HPC) has successfully completed the refinancing of its existing $200 million senior secured revolving credit facility with a new senior secured credit facility consisting of a 4-year $125 million revolving credit facility and a 4-1/2-year $200 million term loan. Consistent with previously disclosed financing objectives, the proceeds from this financing will be used to satisfy the company's obligations under the $125 million principal amount of the 6.625% senior notes due June 1, 2003, as well as to fund working capital and provide ongoing liquidity. Credit Suisse First Boston and Wachovia Securities served as joint lead arrangers for the syndication of the refinancing. Hercules manufactures and markets chemical specialties globally for making a variety of products for home, office and industrial markets. For more information, visit the Hercules Web site at http://www.herc.com * * * As reported in Troubled Company Reporter's December 9, 2002 edition, Standard & Poor's assigned its 'BB' bank loan rating to specialty chemical producer Hercules Inc.'s proposed $350 million senior secured credit facilities. Standard & Poor's said that at the same time, it has affirmed its 'BB' corporate credit rating on the company. The outlook remains positive. INTEGRATED TELECOM: Unsecured Claims To Be Paid in Full ------------------------------------------------------- Integrated Telecom Express, Inc., tells the U.S. Bankruptcy Court for the District of Delaware it continues to anticipate there will be sufficient funds to pay all unsecured claims in full and to make a distribution to its stockholders as well. Accordingly, the Debtor anticipates that it will solicit votes from its stockholders in connection with the acceptance or rejection of any liquidating plan proposed by the Debtor. In the Bankruptcy Case, the Company has proposed a plan to liquidate and dissolve the Company. The Chapter 11 Plan is subject to approval by eligible voting parties, including unsecured creditors and stockholders of the Company, and confirmation by the Bankruptcy Court. Integrated Telecom Express, Inc., provides integrated circuit and software products to the broadband access communications equipment industry. On October 8, 2002, the Company filed a voluntary chapter 11 petition in the United States Bankruptcy Court for the District of Delaware (Bankr. Case No. 02-12945 (PJW)). When the Debtor filed for protection from its creditors, it listed $115,969,000 in total assets and $4,321,000 in total debts. Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young & Jones represents Integrated Telecom in its chapter 11 proceeding. INTEGRATED TELECOM: Signs-Up BSI as Claims and Noticing Agent ------------------------------------------------------------- Integrated Telecom Express, Inc., asks the U.S. Bankruptcy Court for the District of Delaware to appoint Bankruptcy Services LLC as its notice, claims, and balloting agent. The Debtor's creditor matrix filed with its voluntary petition contains approximately 590 potential creditors. The Debtor believes that it is best to appoint an outside agent to take charge of all noticing, claims processing, and balloting. Specifically, BSI will: a. prepare and serve required notices in this chapter 11 case, including: (1) notice of the initial meeting of creditors under section 341(a) of the Bankruptcy Code; (2) notice of the claims bar date; (3) notice of objections to claims; (4) notice of any hearings on a disclosure statement and confirmation of a plan of reorganization; and (5) other miscellaneous notices to any entities, as the Debtor or the Court may deem necessary or appropriate for the orderly administration of this chapter 11 case; b. after the mailing of a particular notice, file with the Clerk's Office a certificate or affidavit of service that includes a copy of the notice involved, an alphabetical list of persons to whom the notice was mailed and the date and manner of mailing; c. maintain copies of all proofs of claim and proofs of interest filed; d. maintain official claims registers, including: (1) the name and address of the claimant and any agent thereof, if the proof of claim or proof of interest was filed by an agent; (2) the date received; (3) the claim number assigned; and (4) the asserted amount and classification of the claim; e. implement necessary security measures to ensure the completeness and integrity of the claims registers; f. transmit to the Clerk's Office a copy of the claims registers on a weekly basis, unless requested by the Clerk's Office on a more or less frequent basis; g. maintain an up-to-date mailing list for all entities that have filed a proof of claim or proof of interest, which list shall be available upon request of a party in interest or the Clerk's Office; h. provide access to the public for examination of copies of the proofs of claim or interest without charge during regular business hours; i. record all transfers of claims pursuant to Bankruptcy Rule 3001(e) and provide notice of such transfers as required by Bankruptcy Rule 3001(e); j. comply with applicable federal, state, municipal, and local statutes, ordinances, rules, regulations, orders, and other requirements; k. provide temporary employees to process claims, as necessary; l. receive, record and tabulate any votes solicited by the Debtor in connection with a chapter 11 plan and provide an affidavit in connection with such tabulation services and results; m. provide such other claims processing, noticing, balloting, and related administrative services as may be requested from time to time by the Debtor; and n. promptly comply with such further conditions and requirements as the Clerk's Office or the Court may at any time prescribe. BSI will charge its regular rates for its services. For any additional professional services, BSI's hourly rates are: Kathy Gerber $195 per hour Senior Consultants $175 per hour Programmer $125 - $150 per hour Associate $125 per hour Data Entry/Clerical $40 - $60 per hour Integrated Telecom Express, Inc., provides integrated circuit and software products to the broadband access communications equipment industry. On October 8, 2002, the Company filed a voluntary chapter 11 petition in the United States Bankruptcy Court for the District of Delaware (Bankr. Case No. 02-12945 (PJW)). When the Debtor filed for protection from its creditors, it listed $115,969,000 in total assets and $4,321,000 in total debts. Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young & Jones represents Integrated Telecom in its chapter 11 proceeding. KEMPER INSURANCE: S&P Hatchets Sub. Debt Rating to BB from BBB+ --------------------------------------------------------------- Standard & Poor's Ratings Services removed from CreditWatch its counterparty credit and financial strength ratings on the members of Kemper Insurance Cos. Intercompany Pool and lowered them to 'BBB-' from 'A' based on the good business position of Lumbermens, the pool's lead insurer. Standard & Poor's also said that it removed from CreditWatch and lowered its subordinated debt rating on Lumbermens Mutual Casualty Co.'s $700 million surplus notes to 'BB' from 'BBB+'. The outlook on all these companies is stable. The members of the Illinois-based property/casualty pool are Lumbermens Mutual Casualty Co. (77%), American Motorists Insurance Co. (15%), and American Manufacturers Mutual Insurance Co. (8%). Lumbermens is one of the top 10 players in the U.S. workers' compensation market. "Kemper remains committed to maintaining balance-sheet strength, customer focus, and a strong workers' compensation franchise," said Standard & Poor's credit analyst Frederic A. Sklow. The company is exposed to execution risk as it exits business units that account for a significant part of its book. In 2001 and into 2002, Kemper continued to report weak operating results despite management's ongoing efforts to realign the book of business to focus on bottom-line profitability in recent years. Capital adequacy is at the 'BBB+' level, which reflects a continual decline in policyholders' surplus since year-end 1999. Standard & Poor's expects that capital will be further reduced by year-end 2002 as it continues to address the challenges associated with a restructured book of business. KMART CORP: Secures Okay to Transfer $2 Million to S.F.P.R. Inc. ---------------------------------------------------------------- Kmart Corporation and its debtor-affiliates obtained the Court's authority: -- to transfer $2,000,000 to S.F.P.R. Inc.; and -- for S.F.P.R. to ultimately pay the fine. To recall, the Debtors entered into a Plea Agreement with the U.S. Government, as a result of U.S. Attorney's investigation with regard to the Debtors' casualty loss, the actions of the employees in determining damages as a result of the loss, and the ensuing insurance claims arising from Hurricane Georges. Pursuant to the Plea Agreement, on October 28, 2002, Debtor S.F.P.R. Inc., pled guilty in the U.S. District Court of Puerto Rico to mail fraud in violation of 18 U.S.C. Sections 1341 and 1342. On the same date, the Puerto Rico District Court sentenced S.F.P.R. to the agreed upon and recommended fine of $2,000,000, plus a 3-year probation period. As part of the Plea Agreement, S.F.P.R. agreed to pay the $2,000,000 fine. Kmart Corporation also agreed to transfer the funds necessary for S.F.P.R. to pay the fine. (Kmart Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Kmart Corp.'s 9.0% bonds due 2003 (KM03USR6) are trading at about 14 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for real-time bond pricing. LTV: LTV Steel Wins Nod to Pay Covington on Contingency Basis ------------------------------------------------------------- LTV Steel Company, Inc., obtained Judge Bodoh's approval of the contingency terms of compensation for Covington & Burling as special counsel in seeking to secure a negotiated resolution of the Debtor's claims for coverage of environmental liabilities under LTV Steel's Youngstown line of coverage. To recall, LTV Steel and Covington had initially agreed that the Firm was to be paid 75% of its customary hourly rates, plus an incentive payment if the results of its settlement-related efforts exceed a performance threshold. With respect to the Firm's other insurance-related work for the Debtors, their prior agreement directed payment at Covington's customary hourly rates. Because LTV Steel lacked the necessary funding to pay for Covington's services on an hourly or modified hourly basis, Covington agreed to charge less than its usual rates. Thereafter, in an effort to continue to obtain Covington's assistance in their ongoing effort to realize the value of its insurance coverage for environmental and other liabilities, LTV Steel asked whether Covington would be willing to modify the original fee arrangement and instead perform its services on a straight contingency fee basis for much of the remaining work. To this end, LTV Steel and Covington negotiated a revised fee and expense agreement, effective June 1, 2002 . This revised fee agreement only affects services by Covington in: -- representing the Debtors in their joint effort with ISG to secure a negotiated resolution of insurance coverage for environmental and other liabilities; and -- advising the Debtors regarding their rights and obligations under the June 2002 settlement agreement with The Travelers Indemnity Company and Travelers Casualty and Surety Company, and any negotiations in connection with that settlement. Covington will have a first-priority lien and security interest in the settlement proceeds in an amount equal to the unpaid amount of its contingency fee. Under the Revised Fee Agreement, Covington is entitled to a fee for representing the Debtors and ISG on or after June 1, 2002, as a contingency of 30% of the gross proceeds of all settlement entered into as a result of the Settlement Project, regardless of when those proceeds are recovered. Covington will pay its own expenses, including any consultants. If there are no proceeds as a result of the Settlement Project, Covington will receive no payment or reimbursement of expenses. (LTV Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-00900) METROMEDIA INT'L: John Kluge Steps Down from Board of Directors --------------------------------------------------------------- Metromedia International Group, Inc., AMEX:MMG) the owner of various interests in communications and media businesses in Eastern Europe, the Commonwealth of Independent States and other emerging markets, announced that John W. Kluge, Chairman of Metromedia Company, had resigned from the Board of Directors of MIG. Metromedia International Group, Inc., is a global communications and media company. Through its wholly owned subsidiaries and its business ventures, the Company owns and operates communications and media businesses in Eastern Europe, the Commonwealth of Independent States and other emerging markets. These include a variety of telephony businesses including cellular operators, providers of local, long distance and international services over fiber-optic and satellite-based networks, international toll calling, fixed wireless local loop, wireless and wired cable television networks and broadband networks and FM radio stations. * * * As previously reported, the Company continues to hold negotiations with representatives of holders of its Senior Discount Notes in an attempt to reach an agreement on a restructuring of its indebtedness in conjunction with proposed asset sales and restructuring alternatives. To date, the Company and representatives of note holders have not reached an agreement on terms of a restructuring. The Company cannot make any assurance that it will be successful in raising additional cash through asset sales or through cash repatriations from its business ventures, nor can it make any assurance regarding the successful restructuring of its indebtedness. MIRANT: Reports Year-to-Date Net Loss Topping $227 Million ---------------------------------------------------------- Mirant (NYSE: MIR) reported a net loss of $1 million, or less than one cent per diluted share for the quarter. The company's third quarter adjusted earnings were $149 million, or 33 cents per diluted share. These adjusted earnings exclude the following: -- $204 million in pre-tax write-downs related to cancelled projects in Norway and Korea, and the loss on the sale of Mirant's gas production company; -- $10 million of pre-tax write-downs on minority-owned affiliates; -- $8 million of pre-tax, operational restructuring costs incurred during the quarter, primarily due to employee reductions; and, -- $10 million of deferred income tax expense associated with the announced sale of Mirant's interest in Shajiao C in China. The net after-tax impact of these charges was $150 million. Mirant reported a year-to-date net loss of $227 million. Adjusting for significant operational restructuring and asset- sale related charges taken during the nine-month period, year- to-date adjusted earnings were $412 million or 98 cents per diluted share. Mirant reported $330 million in net cash from operating activities during the third quarter for a total of $683 million through the nine-months ended Sept. 30. Mirant has adopted the provisions of the Financial Accounting Standards Board's Emerging Issues Task Force Issue 02-03 with respect to netting revenues and expenses on energy trading contracts. The reclassification, required upon adoption, reduced both revenues and the cost of fuel, electricity and other products by approximately $7 billion for the third quarter, and by approximately $17 billion through the nine-months ended Sept. 30. The adoption of the new accounting provisions did not change Mirant's gross margin or results from operations. Quarterly Review of Operations by Business Segment North America -- reported net income of $123 million, and adjusted earnings of $191 million; -- earned gross margins of $578 million from assets; and, -- earned gross margins of $77 million from energy marketing and risk management activities. International -- reported a net loss of $72 million, and adjusted earnings of $13 million; and, -- ceased international greenfield power plant development projects in Italy, Norway and Korea. "We had a solid quarter despite poor market conditions and made excellent progress in further strengthening Mirant," said Marce Fuller, president and chief executive officer, Mirant. "We brought more than 1,100 megawatts of generation on-line, moved aggressively to preserve liquidity, reduced trading and marketing activity, and eliminated rating triggers during the quarter. Since then, we negotiated a bilateral agreement with the Philippine government that affirmed our existing power contracts, and we resolved insurance requirements associated with our Philippines businesses. These actions continue to position us well for the future." Liquidity Mirant ended the third quarter with liquidity of $1.9 billion. The company's current liquidity is $1.3 billion and it projects ending the year at approximately $1.4 billion. The year-end liquidity estimate reflects the following approximate figures for the fourth quarter: -- $400 million in capital expenditures, including $200 million related to turbine cancellations; -- $250 million in collateral, resulting from the recent credit downgrades; -- $50 million for debt repayment; and, -- $200 million in expected proceeds from asset sales. The company's collateral posted to support trading and marketing activity is approximately $850 million, reflecting recent rating agency downgrades that were offset to some extent by collateral reductions accomplished during the third and fourth quarters. Mirant expects to continue reducing its collateral position during 2003 by further scaling back its gas marketing activities. Mirant anticipates using the proceeds from the sale of its Shajiao C interest in China (expected to close by year-end) to eliminate a $254 million loan at its Asia holding company. This action would remove a previously disclosed dividend block from Mirant's Philippine businesses. Guidance: Lowered for 2002 Mirant is lowering its guidance for 2002 as a result of ongoing adverse market conditions in North America (which include significantly reduced market liquidity), a reduction in its gas business to decrease collateral requirements, and a higher effective-tax rate on the earnings of its Asia businesses. The company now expects full-year adjusted earnings of $1.00 to $1.05 per diluted share. This guidance implies fourth quarter adjusted earnings per share of five to ten cents, and takes into account the dilutive effects of the company's convertible offering in July 2002. Adjusted earnings for the fourth quarter do not reflect charges related to asset sales or restructuring activity that will be finalized by the time the company reports its full-year results. Form 10-Q Filings Mirant will file its third quarter Form 10-Q and quarterly filings for its subsidiaries, Mirant Americas Generation, LLC and Mirant Mid-Atlantic, LLC, after 6:00 p.m. EST, Dec. 20, 2002. These filings will be available at http://www.mirant.com The subsidiary filings consist of second and third quarter Forms 10-Q, and amended, first-quarter Forms10-Q/A. Mirant notes that these filings represent the conclusion of the quarterly reviews conducted by its independent auditors for the first, second and third quarters of 2002. Analyst Call Information Mirant will host a call for analysts on January 10, 2003 to provide a general business update. The time of the call, and other associated details, will be made public in the near future. * * * As reported in Troubled Company Reporter's October 23, 2002 edition, Standard & Poor's lowered its corporate credit and senior unsecured ratings on energy merchant Mirant Corp., and its subsidiaries to 'BB' from 'BBB-', and its preferred stock rating to 'B' from 'BB'. The outlook is negative. Standard & Poor's assigned the same ratings to Mirant, Mirant Americas Generation Inc., Mirant Americas Energy Marketing L.P., and Mirant Mid-Atlantic LLC, given the lack of bankruptcy-remote structures between the entities and the intermingled cash flow operations. MUTUAL RISK: Files Proposed Creditors' Arrangement in Bermuda ------------------------------------------------------------- Mutual Risk Management Ltd., filed a proposed Scheme of Arrangement with creditors on December 16, 2002 with the Supreme Court of Bermuda. On December 19, 2002, the Bermuda Court gave directions for the holding of meetings of Scheme creditors in Bermuda on February 5, 2003 for the purpose of considering and, if thought fit, approving the proposed Scheme. Assuming a positive vote, MRM will then apply to the Supreme Court for an Order approving the Scheme. The principle purpose of the Scheme is to restructure MRM's senior debt. The principal amount of the debt is approximately $198 million, comprised of approximately $110 million owing under the Company's credit facility and approximately $88 million owing to holders of the Company's 9-3/8% debentures. Under the proposed restructuring, the senior debt holders would exchange their existing debt for cash, preferred stock and warrants to purchase 15% of the common stock of the Company on a fully diluted basis as well as debt, preferred stock and 74.7% of the common stock, on a fully diluted basis, of the Company's subsidiary, MRM Services Ltd. MRM Services (currently doing business as IAS Park and soon to be renamed IAS Park Ltd.) holds the Company's fee-based businesses. IAS Park has approximately 300 employees with the major units in the group being the captive management division, which will operate under the IAS banner, and the insurance/reinsurance broking division, which will operate under the Park banner. The Group will be headquartered in Bermuda where some 150 staff are located and will also have offices in the U.K., the U.S., Cayman Islands, Amsterdam, Guernsey and Barbados. MYRIENT INC: Delays Filing SEC Form 10-K for Fiscal Year 2002 ------------------------------------------------------------- Myrient (OTCBB:MYNTE), an Outsourced IT solutions provider, has not filed its form 10-K Annual Report for the fiscal year ended 8/31/2002 with the Securities and Exchange Commission within the required time period, and may not be able to timely file it within the appropriate extended deadlines, according to Bryan Turbow, its President and CTO. Turbow said, "It is well known that our resources are severely limited during this time of thorough corporate restructure. Understandably, our auditors did not agree to take a credit risk with respect to getting paid for their year-end audit, which forced us to chose between: (1) keeping current with our reporting requirements or (2) completing the restructuring of our product line. Of course, we will do everything we can to complete the audit and file as soon as finances allow", Turbow added. With respect to the company's significant liabilities, Turbow said, "In the last four months especially, we have made significant progress in reducing our debt-load and litigation costs through across-the-board negotiations with our major creditors. These efforts resulted in settlement agreements which generally provide for: (1) significant compromise of the debt amounts; (2) no payment requirements generally for a year or more; (3) a long-term payment schedule starting with minimal quarterly payments that increase each year thereafter and (4) mutual, full releases to cut litigation costs and the possibility of additional future litigation." He added, "It is gratifying to have seen the co-operation we received from most of our creditors during this restructure period, which enabled us to: (1) avoid bankruptcy, (2) downsize the company in an orderly manner, (3) extricate ourselves from most long term, unprofitable contracts and most importantly, (4) start a restructuring of our product line to serve as the foundation for potential future profitability. Myrient is an Outsourced IT solutions provider that enables customers to outsource all of their IT infrastructure needs, while ensuring the highest level of security and reliability. Myrient offers unparalleled value through proprietary network design and enabling technologies, which efficiently leverage its partners' network capacity. Founded on principles of integrity and excellence, Myrient has developed a reputation for uncompromised quality and service. By focusing on solving real business problems, Myrient's success is dependent on helping clients become more successful. NATIONAL STEEL: St. Paul Wants to File Late Proof of Claim ---------------------------------------------------------- St. Paul Insurance Company asks the Court for permission to file a late proof of claim against National Steel Corporation's estates. St. Paul explains that it was not able to fail a claim by the General Bar Date because it did not receive any Bar Date notice from the Debtors. The Debtors also failed to list St. Paul as a creditor on any of their schedules. T. Scott Leo, Esq., in Chicago, Illinois, asserts that the Debtors are very much aware of St. Paul's contingent claim, since: 1. before the Petition Date, St. Paul issued six surety bonds aggregating $49,800,000 to National Steel Corporation, as principal, to satisfy various financial requirements imposed on National Steel by St. Paul's obligees. The issued bonds remain outstanding as of the Petition Date; 2. before the Petition Date, National Steel executed a general agreement of indemnity in favor of St. Paul for any surety bonds including the prepetition bonds whenever issued at National Steel's request, its subsidiaries or affiliates. The National Steel Indemnity Agreement requires the Debtors to pay St. Paul: (a) all loss and expense, including reasonable attorney fees, St. Paul incurred by reason of having executed the prepetition bonds or on account of National Steel's breach of the National Steel Indemnity Agreements; (b) an amount sufficient to discharge any claim made against St. Paul on the prepetition bonds; and (c) all premiums due for the prepetition bonds until the time as St. Paul is discharged from any liability under the prepetition bonds; and 3. on May 20, 2002, the Court approved an Agreed Order authorizing the surety credit program between the Debtors and St. Paul as well as extending the secured surety credit and granting St. Paul liens and superpriority administrative expense claim with respect to its interests in the issued bonds. Mr. Leo relates that St. Paul only learned of the Claims Bar Date though random inquiry of the bankruptcy court docket in this case on October 28, 2002. If St. Paul is denied permission to file a late proof claim, Mr. Leo proposes that the Court extends the Claims Bar Date as to St. Paul so it may file its claim. Debtors Respond The Debtors acknowledge that they did not serve a copy of the bar date notice directly to St. Paul or on its counsel. They also acknowledge having entered into the Agreed Order continuing the surety credit program. Given that, the Debtors consent to St. Paul's filing of a late claim. Mark P. Naughton, Esq., at Piper Marbury Rudnick & Wolfe, however, emphasizes that the Debtors consent is limited to the timing of the filing of the proof of claim and not to the merits of the issue. In that regard, the Debtors reserve all rights to object to St. Paul's claim on any grounds except for timeliness. (National Steel Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., 609/392-0900) National Steel Corp.'s 9.875% bonds due 2009 (NSTL09USR1) are trading at about 40 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NSTL09USR1 for real-time bond pricing. NATIONSLINK: S&P Affirms Low-B Ratings on Four Classes of Notes --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the B, C, and D classes of NationsLink Funding Corp.'s commercial mortgage pass-through certificates series 1998-2. At the same time, ratings are affirmed on the remaining classes from the same transaction. The rating actions reflect the improved overall operating performance and increased subordination levels since issuance. Standard & Poor's has determined that the weighted average coverage for the pool has increased to 1.68x from 1.48x at issuance. Financial reports supplied by Midland Loan Services Inc. (Midland/Strong ranking), the master servicer, includes 2001 year-end information for 90% of the pool. Seven specially serviced mortgages totaling $46.7 million (3.0% of pool) offset the performance of the pool. Two of these mortgages ($23.6 million) are identified as REO. Lennar Partners Inc., (Lennar/Strong ranking) services the seven specially serviced mortgages in the pool. Midland has advanced a total of $796,000. The REO loans are as follows: -- A $15.6 million office mortgage located in Santa Clara, California, which is in the Silicon Valley. Santa Clara, and the surrounding area, is experiencing a severe market depression. Vacancy rates in the area are hovering around 22% (as of June 2002), up from 7.4% during the same time last year. The office is 100% vacant, due to the fact that Advanced Micro Devices, the sole tenant, moved out in January 2001. Lennar has applied appraisal reductions of $8.0 million, based on a March 2002 appraisal valuing the property at $9.25 million. -- An $8.0 million mortgage secured by a 221-multifamily property located in New Orleans, La. The mortgage became delinquent in January 2001. Lennar has been marketing the property for sale at an asking price of $6.1 million, with no prospective interest. In response, Lennar obtained a permit from the City of New Orleans for "Conditional Use" with intent to convert the building into a hotel, which could improve the appeal of the property. The special servicer has applied appraisal reductions of $5.2 million, based on a February 2001 appraisal valuing the property at $5.5 million. The remaining specially serviced loans are current. They are with the specially servicer for the following reasons: two for technical default; two for loan restructuring; and one is reaching the final stages of its rehabilitation period. The largest is an $11.9 million multifamily mortgage, whose property is located in Las Vegas, Nevada, which has a debt service coverage ratio of 0.95x. The borrower violated the loan documents by selling the property without lender consent. Lennar has retained legal counsel to resolve the matter. The next largest loans are two mortgages totaling $5.7 million, which are cross-collateralized and cross-defaulted. Each is secured by two multifamily properties located in Dalton, Alabama with DSCRs of 1.01x ($3.6 million) and 1.35x ($2.1 million). The borrower is negotiating possibly restructuring the mortgages with Lennar. There are 10 mortgages on the watchlist, which total $62.8 million. Of particular concern are four mortgages totaling $45.7 million. First is a $25.5 million industrial property located in Durham, N.C. The property, totaling 631,252 net rentable square feet, has experienced a significant decline in occupancy to 25.1% from 85% following IBM Corp.'s decision to vacate the premises. However, IBM continues to make partial rental payments, resulting in a DSCR of 1.05x. Second are two mortgages secured by nursing homes that total $9.3 million. Each mortgage is cross-collateralized and cross-defaulted, and both are located in the state of Texas ($5.8 million): one in Atlanta, Texas ($3.5 million) and the other in Quitman, Texas. Both nursing homes are Medicaid payor dominated, which has experienced severe federal reimbursement cuts during the past few years, resulting in DSCRs of 0.99x and 1.40x, respectively. Third is an $8.9 million industrial mortgage located in Hawthorne, California. A major tenant who comprised 42% of the net rentable area has declared bankruptcy, leaving an occupancy level of 57% with a DSCR of 0.69x. The borrower is marketing the property for sale. Fourth is a $2.0 million retail mortgage located in Cayce, California. The owner of the property has been 30-days delinquent for the past few months because of a property tax dispute. Appearing on the watchlist, but expecting to be removed in the short term, is the Gateway Commerce Center I. Combined, the Gateway Commerce Center I and II mortgages total $60 million (4.1% of the pool), and are secured by industrial properties located in Columbia, Maryland. The borrowers are related, but the loans are not crossed. Gateway I has experienced fluctuating occupancy levels during the past year, resulting in year-end 2001 DSCR of 1.06x. Occupancy has improved more recently, resulting in a DSCR of 1.36x as of June 2002. Gateway II maintained stable performance with a current occupancy level of 100%, resulting in a DSCR of 1.21x. Realized losses total $3.0 million. The losses are the result of the disposition of an assisted living care facility located in Tampa, Florida. The disposition resulted in a loss severity of 75%. As of November 2002, the pool consisted of 373 fixed-rate mortgages with an outstanding pool balance of $1.456 million, compared to 376 mortgages with an outstanding pool balance of $1.581 million at issuance. The pool has changed little since issuance, and only three mortgages have been paid off. The pool's property type concentration remains multifamily (33.8%), retail (28.8%), office (14.8%), industrial (12.4%), lodging (4.5%), and an assortment of other property types (5.8%). Geographically diverse, this pool includes 35 states, with a concentration in excess of 10% only in California (28.2%). Ratings Raised NationsLink Funding Corp. Commercial Mortgage Securities Series 1998-2 Rating Class To From Credit Support (%) B AA+ AA 27.03 C A+ A 20.49 D BBB+ BBB 14.77 Ratings Affirmed NationsLink Funding Corp. Commercial mortgage securities series 1998-2 Class Rating Credit Support (%) A-1 AAA 32.47 A-2 AAA 32.47 E BBB- 12.32 F BB 6.33 G BB- 5.51 H B 3.34 J B- 2.79 NATIONSRENT: Asks Court to Deem CIT Master Pact Not True Leases --------------------------------------------------------------- NationsRent Inc., and its debtor-affiliates ask Judge Walsh to declare that a Master Agreement and four related equipment schedules with CIT Group/Equipment Financing, Inc., are actually financing agreements that created a security interest and not "true leases." The Debtors also seek a declaration that they are the sole owner of, and hold all rights, title and interest in the scheduled equipment, subject to perfected security interest. While labeled a "lease," Joanne P. Pinckney, Esq., at Bouchard, Margules & Friedlander, in Wilmington, Delaware, argues that the Master Agreement and the schedules are a secured financing agreement within the meaning of the Uniform Commercial Code Section 1-201(37) because, among other reasons, the Debtors are economically compelled to purchase the scheduled equipment at the conclusion of the term for each applicable schedule. Ms. Pinckney explains that, under the Uniform Commercial Code, as adopted in the State of Maryland, determining whether a transaction is a true lease or a financing arrangement requires a review of the economic realities of the transaction. In this case, she points out that the Master Agreement obligates the Debtors to pay CIT Group the total amount of rent due for the entire term of the applicable schedule, making the lease non- cancelable. The Agreement also requires them to maintain and return the leased equipment in the same operating condition as when originally delivered. The Debtors must also pay all the costs of redelivery of the scheduled equipment to places CIT Group specified. According to Ms. Pinckney, Rider No. 1 of the Master Agreement requires the Debtors to either exercise the option to purchase at the end of the lease term -- and any renewal term -- or return all of the scheduled equipment. On the expiration of the original term of each schedule, the Debtors may: (a) elect to purchase the equipment for the greater of 25% of its original invoice cost or its then fair market value; or (b) choose to return the equipment at their own expense. If they return the equipment, the Debtors must refurbish it by steam-cleaning and de-greasing, painting excessive corrosion and replacing any tires, transmissions, engines, brakes, etc. In addition, the Debtors must pay a return fee to CIT Group equaling: -- 15% of the original invoice cost of the equipment for schedules 3, 7, and 48; and -- 7.33% of the original invoice cost of the equipment for schedule B-2. Ms. Pinckney contends that refurbishing, assembling and then transporting four entire schedules of equipment would be very costly and would impair and disrupt the Debtors' business. By returning the scheduled equipment, the Debtors also would be forced to acquire replacement equipment so as to assure an adequate inventory of equipment to satisfy their customers' rental needs and demands. "By its terms the Master Agreement compels NationsRent to exercise the option to purchase the equipment," Ms. Pinckney points out. She further notes that, "The costs associated with performing all of the obligations required by the Master Agreement in the event of the return of the scheduled equipment . . . is more costly than exercising the option to purchase, making the purchase option price "nominal" under Maryland's Commercial Code." With respect to the purchase option, section 1-201(37)(c)(1) of the Maryland Commercial Code provides that, "[a]dditional consideration is nominal if it is less than the lessee's reasonably predictable cost of performing under the lease agreement if the option is not exercised." The Debtors also ask Judge Walsh to direct CIT Group to disgorge all payments they made under the Master Agreement and schedules since the Petition Date. (NationsRent Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) NRG ENERGY: Contests Rogue Ex-Executives' Involuntary Petition -------------------------------------------------------------- Adam P. Merrill, Esq., at Kirkland & Ellis in Chicago, tells the U.S. Bankruptcy Court for the District of Minnesota that the involuntary petition filed against NRG Energy, Inc., smacks of bad faith and should be dismissed. In the alternative, the "rogue group of disgruntled executives" filing the Involuntary Petition should be required to post a $10 million bond, pursuant to 11 U.S.C. Sec. 303(e), to "protect NRG and its creditors from the damage that has been caused and could be caused if these proceedings continue." Since late last summer, Mr. Merrill relates, NRG has been developing and negotiating a comprehensive restructuring with the holders of approximately $7 billion of bank debt and bond obligations. This effort is particularly complicated and time consuming because of the complex and capital intensive nature of NRG's business. Restructuring negotiations are ongoing among NRG, its parent company, Xcel Energy Inc. and ad-hoc committees of NRG's lenders and noteholders, Scott J. Davido, Esq., NRG's Senior Vice President and General Counsel relates. Specifically, NRG is holding regular meetings with: * an ad hoc committee of parent company noteholders represented by: -- Bingham McCutchen LLP and -- Houlihan, Lokey, Howard & Zulkin; * an ad hoc committee of project level bondholders represented by: -- Akin Gump Strauss Hauer & Feld LLP and -- Ernst & Young Corporate Finance LLC; and * its bank group represented by: -- Simpson Thatcher & Bartlett and -- FTI Consulting/Policano & Manzo. The negotiations with these holders of approximately $7 billion of debt, Mr. Merrill continues, have intensified and accelerated in recent weeks. Recently, NRG and Xcel Energy, Inc. (NRG's parent company) proposed a comprehensive restructuring proposal. A counter proposal is currently under consideration. At present, it is not clear whether it will be necessary for NRG to commence a chapter 11 case in order to consummate the yet to be agreed upon restructuring. Nevertheless, NRG does not believe that the commencement of a reorganization case at this time will enhance the likelihood of a successful reorganization. During the summer, NRG determined that it needed to undertake a financial restructuring and operational reorganization, Consequently, NRG dismissed a number of the officers that formulated and implemented the strategy that led to NRG's current difficulties. On October 3, 2002, six of these former executives sued NRG for severance and other benefits. NRG refused to pay the alleged benefits pending a complete investigation of alleged mismanagement and misconduct by the former executives. Just seven weeks later, five of these former executives filed an involuntary chapter 11 petition against NRG. The petitioners allege just $23.5 million in claims against NRG, compared with $7 billion in total outstanding debt. No other creditors have joined the petition, Mr. Merrill notes. Until NRG and its major creditor constituencies complete their restructuring discussions and determine a means for implementation, Mr. Merrill argues, a reorganization case is not in the best interests of NRG or its creditors. In fact, Mr. Merrill says, the commencement of a chapter 11 case by or against NRG without the support of its major creditor constituencies and access to the additional working capital required to operate its business as a debtor in possession, likely would cause substantial harm to NRG's business. Thus, the present petition should be dismissed pursuant to Bankruptcy Code Section 305(a)(1). Mr. Merrill urges the Minnesota court to look at the petitioners' motives for filing the petition -- which courts have held are relevant to a 305(a)(1) analysis. Those motives "do not appear to be pure," Mr. Merrill says. In conversations with the media, for example, petitioners have asserted that they filed the petitions out of "frustration," to insert the court into the out-of-court restructuring process currently underway, and to wrest the decision of whether and when to commence a chapter 11 case away from NRG and its other creditors. In view of these reported comments, NRG charges that the petitioners' conduct smacks of bad faith and abuse of section 303 of the Bankruptcy Code. The petition should be dismissed so that NRG and its creditors can fully explore how best to restructure. Then, if a Chapter 11 filing is appropriate, NRG and its creditors as a whole - not some rogue group of disgruntled former executives -- can decide when and where to file it. NSI GLOBAL: Unit Files for Assignment in Bankruptcy in Canada ------------------------------------------------------------- NSI Global Inc. (TSX: NGL), a global provider of satellite-based communications systems, said that the Board of Directors of its wholly owned broadband networks subsidiary, NSI Communication Systems Inc., has authorized the filing of an assignment in bankruptcy under the Canadian Bankruptcy and Insolvency Act (BIA). NSI Global plans to make arrangements for the support of the Broadband division's customer base and deployed networks, and is in discussion with several organizations to this effect. NSI Communication Systems sells specialized satellite terminals (known as Very Small Aperture Terminals or VSATs) that allow corporate and government customers to securely communicate (voice, data, video) with branch locations anywhere in the world. "This filing has no direct effect on NSI Global's Mobile Data operations, which have grown to become the largest part of our business with the greatest potential for growth and profitability," said David Ben-David, President and Chief Executive Officer of NSI Global. "NSI Communication Systems' decision to file for bankruptcy is regrettable but reflects the reality of the extremely competitive and difficult market conditions that have developed during the past couple of years and that show no encouraging signs of improving in the near term." The decision to exit the broadband business will mean the termination by NSI Communication Systems of its 130 employees, of which 105 are located in Montreal and the remainder are in international offices. The financial impact on NSI Global, including write-offs, will be recorded in the fourth-quarter 2002 financial results. The total amount depends on what will be recovered from the realization of NSI Communication Systems' assets. To achieve profitability for Mobile Data in 2003, NSI Global will transfer the Mobile Data division's North American network operations from Virginia to its facilities in Ottawa as well as take other cost-reduction measures. Following a restructuring charge of $1.1 million for severance, lease termination, and other costs in the fourth-quarter 2002, Mobile Data will benefit from an annual cost reduction of $3 million. In addition, NSI Global's customers will benefit from stronger customer support capability due to the resulting proximity of the Mobile Data engineering team to network operations. "We believe that the tough decision to withdraw from the broadband business will prove a positive one for NSI Global," said Mr. Ben-David. "It enables us to focus all our attention and resources on a growing business with considerable potential to create value for our shareholders." NSI Global's Mobile Data (Vistar) division sells satellite-based wireless systems and equipment that permit customers to remotely monitor and manage assets, such as trucks, trailers, boats, oil and gas well head and pipeline facilities, chemical storage tanks, and intermodal containers. Vistar's Datacom unit sells GlobalWave MT2000 data terminals directly to customers and through Value-Added Resellers and collects airtime revenues from operating the GlobalWave satellite-based wireless network in North and Central America. Vistar also has licensed the GlobalWave technology to service providers outside of North America. Headquartered in Montreal, NSI's common shares are traded on the Toronto Stock Exchange under the symbol NGL. Additional information about NSI is available on the company's Web site at http://www.nsiglobal.com OM GROUP: Realigns Corporate and Management Structures ------------------------------------------------------ OM Group, Inc., (NYSE: OMG) announced that, in conjunction with the restructuring program it unveiled on December 12, the Company has realigned its corporate and management structure. Effective immediately, the Company will consist of three business units -- Cobalt, Nickel, and Precious Metals -- which will be run by Todd Romance, Mark Bak and Rick Adante, respectively, who were named global vice presidents of the Company. Each will have full responsibility for the operating, marketing and financial functions of their business units and will report directly to James P. Mooney, OMG's chairman and chief executive officer. Steve Dunmead will continue to oversee the Company's Research and Development function and Bill Lohman will continue to run the Company's Metals Management operation. Both will now also report directly to Mooney. "Realigning our corporate structure and management team will allow us to streamline our organization and further enhance our performance accountability," Mooney said. According to Mooney, the Company also has reduced the size of its executive committee from four members to two -- himself and Thomas R. Miklich, the Company's chief financial officer -- to further simplify the corporate structure. "Tom Miklich will play a critical role in our strategic evolution and will have influence well beyond that of a typical CFO," said Mooney. "In addition to overseeing the Company's finance function, Tom will be responsible for our legal, human resources, information technology and communications departments." Biographical Information Romance has served as vice president - global sales and marketing, for OM Group's nickel products unit since April 2000. He joined the Company in 1984 as Midwest sales representative. During his tenure with the Company, he has held a variety of positions, including national sales manager; business manager - Americas; vice president - Americas; and vice president - global sales & marketing, metal carboxylates. Romance attended the University of Wisconsin, where he graduated with a BBA in marketing, finance and economics. Since 1997, Bak has served as the director of operations for OMG Americas, overseeing the operations at all four of the Company's North American production facilities. He joined the Company in 1993 after holding various positions with Sachem, Inc. Bak began his career as a sale representative for Inco Alloys. He holds a BS in chemical engineering from Case Western Reserve University and earned his Executive MBA from the Weatherhead School of Management. Adante has been OMG's vice president of operations since June 2000, responsible for the Company's corporate information systems, process engineering, strategic planning and its carboxylates and specialty chemicals manufacturing facilities. Prior to joining OMG, he held various positions with the Goodyear Tire and Rubber Company, ultimately serving as its vice president, materials management, North America tires. Adante earned his BS in industrial management from Akron University. Dunmead, OMG's vice president of technology, is responsible for setting the Company's strategic direction for new product development, applied technology, innovation and intellectual property. He joined the Company in 1998 as its director of research and development when OMG acquired his then employer, the Advanced Materials Laboratory of The Dow Chemical Company. Dunmead graduated Summa Cum Laude with BS and MS degrees in ceramic engineering from The Ohio State University. He earned his Ph.D. in materials sciences and engineering, with minors in thermodynamics/kinetics and applied statistics from the University of California, Davis. Lohman joined the Company as group vice president, metals management in February 2002 after serving as a consultant to various corporations in materials supply strategies and general management. A graduate of New York University with an MBA in finance, Lohman also holds a BS in math. OM Group, Inc., through its operating subsidiaries, is a leading, vertically integrated international producer and marketer of value-added, metal-based specialty chemicals and related materials. OMG is a recognized leader in manufacturing products from base and precious metals and managing metals procurement related to these activities. The Company supplies more than 1,700 customers in 50 countries with more than 3,000 product offerings. Headquartered in Cleveland, Ohio, OMG operates manufacturing facilities in the Americas, Europe, Asia, Africa and Australia. For more information on OMG, visit the Company's Web site at http://www.omgi.com * * * As reported in Troubled Company Reporter's November 18, 2002 edition, Standard & Poor's lowered its corporate credit rating on metal-based specialty chemical and refined metal products producer OM Group Inc., to 'B+' from 'BB-' based on an expected diminished business profile following management's announcement that it is exploring strategic alternatives for its precious metals operations. Standard & Poor's said that its ratings on OM Group remain on CreditWatch with negative implications where they were placed October 31, 2002. Cleveland, Ohio-based OM Group has about $1.2 billion of debt outstanding. OWENS CORNING: Obtains Okay to Restructure Chinese JVs' Debts ------------------------------------------------------------- Owens Corning and its debtor-affiliates obtained the Court's approval: A. of the Standstill and Amendment Agreement by and among Owens Corning, Owens-Corning (Guangzhou) Fiberglas Co. Ltd., Owens- Corning (Shanghai) Fiberglas Co., Ltd., and certain lenders consisting of Standard Chartered Bank, Societe Generale and KBC Bank NV; B. of the consummation of the transactions and the execution of the agreements contemplated in the Standstill Agreement; and C. to grant the Lenders an allowed, prepetition general unsecured claim against the Debtors for $22,000,000, conditioned on the closing of the Standstill Agreement. (Owens Corning Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Gets OK to Procure Power to Meet Year 2003 Shortage ---------------------------------------------------------------- Pacific Gas and Electric Company sought and obtained the Court's authority to enter into power procurement transactions for year 2003, including procurement to meet the Residual Net Short Position of its retail customers and power, procurement-related services. To successfully exit bankruptcy, Julie B. Landau, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin, PC, argues that PG&E will need to have the financial strength to support power procurement for its customers, among other things. PG&E's Plan of Reorganization addresses this central concern by identifying five requirements for its resumption of the procurement function. The first is the requirement that PG&E return to an investment grade credit rating before it starts procuring power for its customers again. Ms. Landau, however, notes that PG&E will not regain an investment grade credit rating by January 1, 2003, when the CPUC has ordered it to resume procurement. But under current and forecast 2003 conditions, PG&E anticipates that it can resume the procurement function on an interim basis. Ms. Landau maintains that PG&E's ability to resume the power procurement function and to meet the Residual Net Short Position is based on: (i) the recent California Senate Bill 1976 that requires the California Public Utilities Commission to implement timely rate recovery mechanisms and eliminate after-the-fact reasonableness reviews associated with power procurement; (ii) the present conditions that indicate the Residual Net Short Position will be small and wholesale prices will remain relatively stable during 2003, consistent with the current conditions; (iii) the adoption by the CPUC of PG&E's procurement plan or a plan that otherwise fully complies with and implements SB 1976 and the continuing effectiveness of the various elements of the procurement plan; (iv) the limited procurement-related collateral requirements in order to protect against any adverse impact to PG&E and its estate; and (v) the transactions limited to calendar year 2003 only. Ms. Landau explains that the 2003 Residual Net Short Position is expected to be small, unlike the substantially larger net short position in 2000 and 2001. Also, wholesale power prices are at much lower levels than California experienced during the height of the energy crisis in 2000 and 2001. On October 24, 2002, the CPUC issued Decision 02-10-062 which requires PG&E and the other investor-owned utilities to resume power procurement responsibilities, including procurement of the Residual Net Short Position, effective January 1, 2003. This is regardless of whether PG&E has regained an investment-grade credit rating, by posting collateral or providing letters of credit with the California Independent System Operator and suppliers where required. The October 24 Decision sets forth requirements for PG&E and the other IOUs' future procurement activities and requires each utility to file a short-term procurement plan for 2003 on November 12, 2002 for the CPUC's review and approval. PG&E expects that the CPUC will act on its procurement plan no later than December 19, 2002. PG&E's Procurement Plan consists of various elements, including: (1) a risk management; (2) identification of the types of products to be procured, and types and quantities of transactions proposed to meet the Residual Net Short Position and to offset the Residual Net Long Position; (3) an assessment of price risks across the utility portfolio; (4) use of a competitive bid system for new power contracts; and (5) standards and criteria to guide procurement transaction cost recovery. "With the operational allocation to PG&E of the DWR Contracts, PG&E's existing power resources, and the new power procurement contracts obtained in connection with the CPUC's August 22 Decision -- with the California Department of Water Resources having legal and financial responsibility until PG&E regains its investment-grade credit rating -- PG&E anticipates that it will have sufficient energy to satisfy the bulk of its customers' power needs in 2003," Ms. Landau says. "For some time periods in 2003, however, a Residual Net Short Position is likely to remain, primarily during peak periods . . . Depending on actual conditions during the year, at times PG&E will likely have a Residual Net Long Position and be in a position to dispose of surplus power." Ms. Landau lists the assumptions and conditions critical to PG&E's ability to resume and continue procurement on an interim basis, including meeting the Residual Net Short Position and managing the Residual Net Long Position: (a) Procurement Limited to 2003 Since PG&E does not have an investment-grade credit rating, it does not have the access to external credit needed to support long-term procurement contracts and new facility projects. Thus, PG&E is seeking authority to procure power solely for 2003. PG&E will not be entering into any long- term procurement contracts beyond 2003; (b) Timely Cost Recovery and Prospective Reasonableness Standards PG&E's resumption of procurement is based on the assumption that the CPUC will timely and fully comply with SB 1976 and will approve its Procurement Plan or otherwise approve a procurement plan that fully complies with and implements SB 1976, which includes: -- timely cost recovery, including both revenue requirements and rate adjustments to enable PG&E to collect its generation and power procurement costs from ratepayers on a timely basis; and -- clear, up-front, achievable standards to determine the acceptability and eligibility for rate recovery of the costs of the proposed transactions, including no after- the-fact reasonableness review except as allowed by SB 1976 to verify compliance with contract terms and reasonable resolution of contract disputes. Consistent with SB 1976, PG&E's resumption of procurement must be pursuant to a CPUC-approved procurement plan so that: * PG&E's actions may be in compliance with the approved procurement plan; and * the CPUC can determine if a feature or mechanism of the procurement plan would impair PG&E's restoration to creditworthiness. PG&E's Procurement Plan incorporates the necessary elements to ensure implementation of timely cost recovery consistent with the requirements of SB 1976. It is critical that the CPUC order approving PG&E's Procurement Plan authorizes and implements, effective on January 1, 2003, a ratemaking cost recovery mechanism that satisfies the requirements of SB 1976, including, without limitation, the "trigger" mechanism that requires the CPUC to adjust rates to the extent that current revenues are inadequate to recover actual procurement costs. Ms. Landau contends that if the CPUC deviates from any material aspect of the Procurement Plan, PG&E will need to carefully consider whether the decision satisfies SB 1976 and other conditions necessary to protect the bankruptcy estate and to support its return to an investment grade credit rating; (c) Limited Residual Net Short Position and Market Stability PG&E's current forecast of power resources and customer loads produces a relatively small Residual Net Short Position of no greater than 2% of its total load requirements based on current assumptions and projections. PG&E is also assuming that the power market will remain relatively stable through 2003, both as to supply availability and price; and (d) Limited Collateral Requirements PG&E anticipates that its collateral requirements will not exceed $150,000,000. Pursuant to the Procurement Plan, PG&E will enter into these types of transactions: 1. Purchases and Sales through CPUC-Approved Markets PG&E intends to balance its Residual Net Short and Residual Net Long Positions with these types of transactions: -- purchases and sales of day-ahead and hour-ahead spot energy and gas, and electric and gas transmission rights; -- purchases and sales of forward contracts for electricity and gas, and electric and gas transmission rights; and -- purchase of electricity and gas options and swaps. Examples of the types of markets contemplated include bilateral contracts done through brokers or individual negotiations, or transactions executed via transaction processing services or electronic exchanges like the Automatic Power Exchange or the Intercontinental Exchange. Examples of an option may include either a physical or financial option; a physical option would give PG&E the right but not the obligation to take physical delivery of electricity or gas at a fixed price, while a financial option would provide for an equivalent cash flow without the need for physical delivery; 2. Transactions, Purchases and Sales through the ISO Since PG&E lost its investment grade credit rating, DWR has been the creditworthy party transacting with the ISO to secure services under the ISO's Federal Energy Regulatory Commission approved tariffs that are necessary for the transmission of power to serve PG&E's retail customers and to meet its wholesale obligations. Beginning January 1, 2003, DWR will cease to procure the ISO services to support PG&E's customers and wholesale obligations. Instead, PG&E anticipates resuming the responsibility for obtaining the ISO services to serve all its customer load, including but not limited to the Residual Net Short Position. PG&E also expects purchasing and selling limited amounts of real time energy through the ISO daily markets. However, PG&E will satisfy its ancillary service needs through its own resources; 3. Inter-Utility Exchanges Any exchanges between utilities may be used to swap power resources to each utility's benefit. The exchanges of peak for off-peak, or seasonal peak for peak exchanges may be executed by PG&E if a suitable exchange counter-party can be secured and the exchange provides cost/benefit ratios consistent with the Procurement Plan; and 4. Purchases through Contracts with Suppliers for Gas & Electricity PG&E anticipates entering into contracts with suppliers and other counter parties through the process of competitive bidding in order to purchase or sell power, gas or related services for transactions where delivery will begin more than six months from the competitive bidding solicitation date; PG&E also sought and obtained the Court's permission to post collateral to secure its obligations in connection with the procurement. PG&E estimates that up to $150,000,000 in cash may be utilized during 2003 for purposes of posting collateral with the ISO and with counterparties to contracts. PG&E expects to fund its collateral requirements from revenues generated on and after January 1, 2003 and, therefore, funds needed for implementation of the reorganization plan should not be jeopardized. The only exception to the use of going-forward revenues will be for any cash deposits to be made with the ISO to cover transactions for January 2003 only. (Pacific Gas Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFICARE HEALTH: Selling $10MM of 3% Conv. Subordinated Notes --------------------------------------------------------------- PacifiCare Health Systems Inc., (Nasdaq:PHSY) announced the sale of $10 million aggregate principal amount of 3% convertible subordinated debentures due 2032 in connection with the exercise in part by the initial purchasers for PacifiCare's recent private placement of $125 million aggregate principal amount of such debentures of their option to purchase additional debentures. The debentures, which are convertible into shares of PacifiCare's common stock, will be due in October 2032. PacifiCare intends to use a portion of the estimated net proceeds of this sale of debentures to permanently repay indebtedness under its senior credit facility and the remainder for general corporate purposes. As reported in Troubled Company Reporter's December 4, 2002 edition, Standard & Poor's assigned its 'B' rating to PacifiCare Health Systems Inc.'s $125 million 3% convertible subordinated debentures, which are due in 2032 and are being issued under SEC Rule 144A with registration rights. Standard & Poor's also said that it revised its outlook on PacifiCare to stable from negative. "The rating is based on PacifiCare's good business position as a regional managed care organization and improved earnings performance," said Standard & Poor's credit analyst Phillip C. Tsang. "Offsetting these strengths are PacifiCare's marginal capitalization and high percentage of goodwill in its capital." PacifiCare expects to use the net proceeds from the issue to permanently repay indebtedness under its senior credit facility, with the remainder for general corporate purposes. PEGASUS COMMS: Won't Pay Dividend on 12-3/4% Preferred Shares ------------------------------------------------------------- Pegasus Communications Corporation (NASDAQ:PGTV) announced that its subsidiary, Pegasus Satellite Communications, Inc., is not declaring the semiannual dividend payable January 1, 2003 with respect to Pegasus Satellite Communications' 12-3/4% Series A Cumulative Exchangeable Preferred Stock and 12-3/4% Series B Cumulative Exchangeable Preferred Stock. In accordance with the terms of the 12-3/4% Preferred Stock's Certificate of Designation, the declaration and payment of the dividend is subject to the discretion of Pegasus Satellite Communications' Board of Directors. Pegasus Communications Corporation -- http://www.pgtv.com-- provides digital satellite television to rural households throughout the United States. Pegasus owns and/or operates television stations affiliated with CBS, FOX, UPN and The WB networks. PERMAGRAIN PRODUCTS: Voluntary Chapter 11 Case Summary ------------------------------------------------------ Debtor: Permagrain Products, Inc. 4789 West Chester Pike Newtown Square, Pennsylvania 19073 Bankruptcy Case No.: 02-37895 Type of Business: Operated a flooring manufacturing business and used radioactive cobalt-60 to mold plastics with wood to harden and extend the life of commercial flooring. The company ceased operations November 11, 2002. Chapter 11 Petition Date: December 17, 2002 Court: Eastern District of Pennsylvania (Philadelphia) Judge: Diane W. Sigmund Debtor's Counsel: Jeffrey Kurtzman, Esq. Klehr, Harrison, Harvey, Branzburg & Ellers 260 South Broad Street 4th Floor Philadelphia, PA 19102 Tel: (215) 568-6060 PERSONALCARE: AM Best Says B+ Rating Unaffected by Asset Sale ------------------------------------------------------------- A.M. Best Co., announced that the financial strength ratings of PersonalCare Insurance of Illinois (Champaign, IL) and Coventry Health Care, Inc., (NYSE:CVH) (Bethesda, MD) are unaffected by a recent acquisition announcement. A.M. Best Co., views the proposed acquisition of PersonalCare Health Management, Inc., by Coventry as an opportunity to provide synergies for both companies. The acquisition is expected to be paid for entirely in cash. Pending regulatory approval, the transaction is likely to close in the first quarter 2003 and is anticipated to be accretive to earnings in 2003. For Coventry, the expansion into the Central/Southern Illinois region is an extension of its existing market in neighboring Missouri. For PersonalCare, Coventry's system and administrative efficiencies along with its pricing discipline should help to lower expenses and improve operating performance. PersonalCare serves approximately 78,000 members via its HMO, PPO and POS networks. The acquisition is consistent with Coventry's strategy for growth, which has been the acquisition of HMOs with poor performance and restoring their profitability over the next 18 to 24 months. A.M. Best expects the earnings from the PersonalCare operations to improve as the business is integrated into Coventry's systems and changes are rapidly implemented to increase profitability. PersonalCare has a financial strength rating of B+ (Very Good), and Coventry's members carry financial strength ratings of B++ (Very Good) and B+. PETROLEUM GEO-SERVICES: Deferring Distributions on Preferreds ------------------------------------------------------------- Petroleum Geo-Services ASA (NYSE:PGO) (OSE:PGS) is deferring distribution payments on the preferred securities issued by its wholly owned trust subsidiary PGS Trust I (PGO PrA), commencing with the December 31, 2002 distribution payment. Under the terms of the securities, PGS has the option to defer distributions for up to 20 consecutive quarterly periods without causing a default. Petroleum Geo-Services is a technologically focused oilfield service company principally involved in two businesses: Geophysical Operations and Production Operations. PGS acquires, processes and markets 3D, time-lapse and multi-component seismic data. These data are used by oil and gas companies in the exploration for new reserves, the development of existing reservoirs, and the management of producing oil and gas fields. PGS' advanced geophysical technologies allow oil and gas companies to better characterize and monitor their reservoirs in order to enhance production and ultimate recovery of hydrocarbons. In its Production Operations business, PGS owns four floating production, storage and offloading systems. FPSOs permit oil and gas companies to produce from offshore fields more quickly and cost effectively. PGS operates on a worldwide basis with headquarters in Oslo, Norway. * * * Capital Resources and Liquidity In its report for the quarter ended September 30, 2002, the Company stated: "As a result of our current financial situation, we are highly dependent on our current cash and cash equivalent ($86.8 million at September 30, 2002), improved cash flow and proceeds from assets sales to meet our financial obligations. "[W]e have engaged financial advisors to assist us with evaluating our financial condition and making recommendations to our Board of Directors regarding alternatives for enhancing or preserving value to our stakeholders. These financial advisors are also expected to assist us with the possible extension of our upcoming debt maturities and/or other restructuring alternatives. We have approximately $1.1 billion of debt and other contractual obligations maturing in 2003. In connection with the one-time impairment charges described above, we are currently in violation of certain financial covenants in various bank credit and leasing agreements and have commenced discussions with various creditors to obtain waivers of such financial covenant defaults. There can be no assurance that any such extension of debt maturities or required waivers will be obtained. The Company notes that the breaches that have been triggered are restricted to certain financial creditors only and these breaches of themselves will not cross default contracts with other financial creditors. The Company is current on all payment obligations under its indebtedness. "During November 2002, Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., downgraded our corporate credit rating, as well as our rated obligations, to CCC. The ratings have been removed from credit watch with developing implications (where they were placed during September 2002) and the outlook is negative. "During November 2002, Moody's Investor Service, Inc., downgraded our issuer rating to Caa1 and our senior unsecured debt rating to Caa3, stating that the credit rating outlook was negative. "Also during November 2002, Fitch IBCA, Duff & Phelps downgraded our senior unsecured debt rating to CCC. "If one or more of these rating agencies continue to rate our debt or trust preferred securities below investment grade, we may have difficulty obtaining, and we may not be able to obtain, financing and our cost of obtaining any additional financing or refinancing existing debt will likely be increased significantly. Additionally, since our credit ratings are below investment grade, we are obligated to provide up to 35.7 million pounds (approximately $56.0 million) in collateral/credit support to the lessors under existing UK leasing arrangements. Based on recent discussions with these UK lessors, we currently do not believe that cash collateral will be required." PHILLIPS-VAN HEUSEN: S&P Affirms BB Rating over CKI Acquisition --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' corporate credit rating on Phillips-Van Heusen Corp., following the company's December 17, 2002 announcement that it plans to acquire Calvin Klein Inc., for total considerations of between $550 million and $600 million. The outlook is stable. New York, New York-based Phillips-Van Heusen is a vertically integrated manufacturer, marketer, and retailer of men's and women's apparel and footwear. Principal brands include Van Heusen, Arrow, Izod, Geoffrey Beene, and Bass. "We believe the acquisition of CKI represents a unique opportunity for Phillips-Van Heusen and that credit measures will be restored within a year of the acquisition," said Standard & Poor's credit analyst Diane Shand. "In recent years, Phillips-Van Heusen has been successful at developing acquired brands by leveraging its strong position in dress shirts to expand its penetration in department stores and utilizing its good infastructure (sourcing, information technology, logistics, and warehousing). Phillips-Van Heusen should be able to grow CKI's existing business and has plans to launch better men's and women's sportswear and accessories lines under the Calvin Klein name." Standard & Poor's also said that the company's operating performance should remain relatively stable due to the streamlining of operations during the past few years, which has kept cash flow protection measures satisfactory for the rating. Nevertheless, the company remains vulnerable to the competitive specialty retail market, the U.S. economy, and integration risk related to the CKI acquisition, which could hamper performance. CKI is a licensing and design company with a small wholesale business and a chain of four full priced retail stores in the U.S. and abroad. CKI, together with its network of licensing partners, generates over $3 billion in annual retail sales worldwide, and the royalty stream is estimated to be $120 million. PILLOWTEX: Receives Waiver of Compliance from Term Loan Lenders --------------------------------------------------------------- Pillowtex Corporation (OTC Bulletin Board: PWTX) has received a waiver of compliance from its term loan lenders with the interest coverage ratio and leverage ratio covenants contained in its term loan agreement for the fiscal quarter ending December 28, 2002. The agreement entered into with the term loan lenders also extends through the end of the first fiscal quarter of 2003 the effectiveness of the asset coverage ratio test and the minimum availability requirement, which were two additional financial covenants that were added to the term loan in September 2002. Pillowtex's President Michael T. Gannaway stated, "We are pleased that our term loan lenders have approved this amendment, and as we go into 2003, we remain focused on our core business and on aligning our business strategies with our retail partners." Pillowtex Corporation, with corporate offices in Kannapolis, N.C., is one of America's leading producers and marketers of household textiles including towels, sheets, rugs, blankets, pillows, mattress pads, feather beds, comforters and decorative bedroom and bath accessories. The Company's brands include Cannon, Fieldcrest, Royal Velvet, Charisma and private labels. Pillowtex currently employs approximately 8,000 people in its network of manufacturing and distribution facilities in the United States and Canada. Pillowtex Corp.'s 10% bonds due 2006 (PWTX06USR1), DebtTraders reports, are trading at about a penny on the dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=PWTX06USR1 for real-time bond pricing. POLYONE CORP: Selling Majority Stake in Techmer to TPM Holdings --------------------------------------------------------------- PolyOne Corporation (NYSE: POL), a leading global polymer services company, and TPM Holdings, LP, a limited partnership, have reached an agreement for PolyOne to sell to TPM Holdings its majority interest in the joint venture company Techmer PM, LLC. Under the agreement -- which concludes an arbitration filed by TPM Holdings, PolyOne will sell its 51 percent position no later than January 31, 2003. Specific terms of the agreement and the purchase price were not disclosed. TPM Holdings, which owns the remaining 49 percent of Techmer PM, is headed by John R. Manuck, who will continue as manager and president. Techmer PM , LLC has production facilities in California, Tennessee, Georgia and Kansas, where it produces high-quality color and additive concentrates. Its proprietary dispersions are particularly well suited to the fiber and value-added films markets. PolyOne and Techmer PM stressed that no customer disruptions will result from PolyOne's divestiture. Both companies will continue to serve their respective customers. Their relationship dates to 1997 when TPM Holdings (then known as Techmer PM, LP) and M.A. Hanna Company, which is now part of PolyOne, formed Techmer PM, LLC as a joint venture limited- liability company. PolyOne reported financial results from Techmer PM, LLC within its Plastic Compounds and Colors segment. 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 Techmer PM, LLC operates five manufacturing facilities in North America. It designs and produces colorant and additive concentrates with a focus on high-performance applications where quality, technical support and problem solving are critical. The 500 employees of Techmer PM, LLC service customers in market segments of the plastic industry that fabricate everything from thin films and fibers to extrusions and moldings. Information on Techmer PM, LLC's products and services can be found at http://www.techmerpm.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. PROVIDIAN FINANCIAL: Completes $750-Million Term Securitization --------------------------------------------------------------- Providian Financial Corporation (NYSE: PVN) announced that on December 17, 2002, Providian National Bank completed the previously announced sale of $750 million in three-year Series 2002-B floating rate class A asset backed certificates issued by the Providian Gateway Master Trust. In addition, the Company announced that Providian National Bank has received commitments for additional funding of $1.15 billion under the Series 2002-A variable funding facility issued by the Providian Gateway Master Trust. These commitments are in addition to the initial $1 billion in commitments obtained when the Series 2002-A facility was established in October 2002. In connection with the October closing, $500 million of Series 2002-A certificates were funded by investors. The Providian Gateway Master Trust certificates described above have not been and will not be registered under the Securities Act of 1933 or any state securities law and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. San Francisco-based Providian Financial is a leading provider of credit cards and deposit products to customers throughout the U.S. One of America's largest bankcard issuers, Providian has over $19 billion in managed receivables and more than 12 million customer relationships. As previously reported, Moody's Investors Service confirmed the ratings of Providian Financial Corporation and its unit Providian National Bank. Outlook is stable. Ratings Confirmed: * Providian Financial Corporation - senior unsecured debt rating of B2. * Providian Capital I - the preferred stock rating of Caa1. * Providian National Bank - bank rating for long-term deposits of Ba2 - ratings on senior bank notes and other senior long-term obligations of Ba3; - issuer rating of Ba3; - subordinated bank notes rating of B1, and - bank financial strength rating of D. The ratings confirmation reflects the numerous measures the company has taken just to strengthen its financial position, including portfolio sales, facility closings, and the implementation of conservative underwriting and marketing plans. Providian Financial's 3.25% bonds due 2005 are currently trading at about 73 cents-on-the-dollar. PUBLIC SERVICE: Enters into New 3-Year $350MM Credit Facility ------------------------------------------------------------- Public Service Enterprise Group has entered into a new three- year revolving credit facility for $350 million, replacing the five-year $150 million facility set to expire on December 22. The new facility will expire on December 19, 2005. "This new facility enhances PSEG's already strong financial profile and improves our overall liquidity position," said Thomas O'Flynn, PSEG's chief financial officer. "The credit facilities available to PSEG and its subsidiaries now add up to $2.47 billion, of which approximately $2.0 billion is currently available to support the operations of the companies." O'Flynn added: "We are pleased that we were able to upsize this facility for a three-year period on terms consistent with our prior transactions." J.P. Morgan Securities and Salomon Smith Barney were the lead arrangers on the transaction, which involved a total of nine banks. PSEG (NYSE: PEG), a diversified energy holding company with more than $25 billion in assets has its headquarters in Newark, NJ. PSEG's primary subsidiaries are Public Service Electric and Gas Company (PSE&G), New Jersey's largest electric and gas distribution utility; PSEG Power, one of the nation's leading independent energy producers; and PSEG Energy Holdings which operates PSEG's other non-regulated businesses. At September 30, 2002, Public Service Enterprise's balance sheet shows that total current liabilities exceeded total current assets by about $1.4 billion. REGENERATION TECHNOLOGIES: Inks $15-Mill. BofA Credit Agreement --------------------------------------------------------------- Regeneration Technologies, Inc. (Nasdaq: RTIX) (RTI), the Florida-based processor of precision-tooled orthopedic allografts, has signed a $15.1 million credit agreement with Bank of America. The one-year term loan, which is fully collateralized by cash and investments, will be used to pay off current mortgage loans outstanding to Bank of America, including $12.6 million under a construction loan and $2.5 million under a term loan. RTI will continue pursue longer term financing alternatives. "This financial flexibility will allow us to continue to focus our efforts on our core business of developing innovative technologies and products while continuing to provide high- quality service to our partners," said Thomas F. Rose, chief financial officer of RTI. As previously disclosed in October 2002, RTI entered into a 90- day extension of its forbearance agreement and the maturity date of its loans with its commercial lender, Bank of America, which was set to expire December 31, 2002. All obligations under the forbearance agreement have been satisfied with the proceeds from the new credit agreement. RTI processes allograft tissue into shaped implants for use in orthopedic and other surgeries. By processing allograft tissue into forms that can be used in many types of surgical procedures (orthopedic, urologic, craniofacial and cardiovascular surgery), RTI enables patients to benefit from the gift of donated tissues. Allografts processed by RTI include the patented MD- Series(TM) threaded bone dowels, Cornerstone-SR(TM) blocks, Opteform(R) and Optefil(TM) allograft pastes, Osteofil/Regenafil(TM) injectable bone paste, FasLata(TM) fascia lata tissue, and cortical bone pins and interference screws. RTI also holds the patent on the BioCleanse(TM) process, the only proven tissue sterilization process validated to eliminate viruses, bacteria, fungi and spores from tissue without impacting the structural or biomechanical integrity of the allograft. RFS ECUSTA: Delaware Court Fixes February 7 as Claims Bar Date -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware orders that February 7, 2003, is the deadline by which all creditors of RFS Ecusta Inc., and RFS US Inc., who wish to assert a claim against the estates, must file a proof of claim or be forever barred from asserting that claim. Any creditor whose claim has been previously allowed or paid by order of the Court, need not file proofs of claim in these cases, and holders of the Debtors' equity securities need not file a proof of that interest. All original proofs of claim must be received on or before 4:00 p.m. on the Bar Date at: Delaware Claims Agency, LLC RFS Ecusta Inc. and RFS US Inc. Claims Agent P.O. Box 515 Wilmington, DE 19899 RFS Ecusta Inc., and RFS US Inc., were leading manufacturers of high quality premium paper products for the tobacco and specialty and printing paper products. The Company filed for chapter 11 protection on October 23, 2002. Christopher A. Ward, Esq., at The Bayard Firm and Joel H. Levitin, Esq., at Dechert, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed estimated debts and assets of more than $10 million each. RIVIERA TOOL: Deloitte & Touche Expresses Going Concern Doubt ------------------------------------------------------------- Riviera Tool Company is a designer and manufacturer of large scale, complex stamping die systems used to form sheet metal parts. Most of the stamping die systems sold by the Company are used in the production of automobile and truck body parts such as roofs, hoods, fenders, doors, door frames, structural components and bumpers. Major customers are, DaimlerChrysler, Ford Motor Company and General Motors Corporation. During 2002, the Company sustained a loss from operations of $2,289,114 and a net loss of $3,001,557. This loss resulted in an accumulated deficit of $3,305,059 as of August 31, 2002. Also during 2002, the Company was not in compliance with certain covenants of its long-term loan agreement causing a significant portion of the Company's debt to be classified as current in the financial statements. The Company's agreement expired September 1, 2002 and has been renewed monthly thereafter. Management believes the Company will be able to refinance the debt as the Company has completed negotiations with its current bank and another lender to obtain long-term financing. The Company has received Commitment Letters from these financial institutions, however, such commitments are subject to conditions yet to be fulfilled. Management believes that such conditions should be fulfilled within sixty days. Additionally, Riviera Tool has a backlog of $21 million, is anticipating other significant long-term contracts with customers, and believes this backlog and projected cash flow from operations together with the anticipated debt financing will be sufficient to finance the Company's operations in 2003. Riviera Tool's independent auditors, Deloitte & Touche, LLP, said, in the December 9, 2002 comment on Note 2 in the Company's current financial statements: "The accompanying financial statements have been prepared assuming that Riviera Tool Company will continue as a going concern...[T]he Company was not in compliance with certain covenants of its long-term loan agreement. The Company is negotiating with its bank and another lender to obtain long-term financing. The Company's difficulties in meeting its loan agreement covenants and obtaining financing as discussed in Note 2 raise substantial doubt about its ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty." ROHN INDUSTRIES: Wins Major Shareholder's Approval of Asset Sale ---------------------------------------------------------------- ROHN Industries (Nasdaq: ROHN), a provider of infrastructure equipment for the telecommunications industry, announced that its majority stockholder, the UNR Asbestos-Disease Claims Trust, has executed a written consent to the previously announced sale of substantially all of the Company's assets to an affiliate of Platinum Equity LLC, a Los Angeles-based private equity firm. The Trust's consent is subject to the satisfaction of various conditions, including the execution of documentation providing for the payment to ROHN's stockholders of an aggregate of $3.5 million, or approximately 8 cents per share, of the proceeds from the sale of assets to Platinum Equity and the tax refund the Company expects to receive as a result of the transaction. Although the Company expects that this condition, as well as the other conditions to the Trust's consent, will be satisfied, there can be no assurance that the transaction will be consummated. Even if the transaction is consummated, there can be no assurance as to the total amount and timing of any payments to the Company's stockholders. There are ongoing discussions among the Company, the Trust and the Company's bank lenders regarding these matters. ROHN has entered into an amendment to its bank credit facility. Under this amendment, the bank lenders have increased the availability under the revolving portion of the credit facility from $18 million to $21 million for the period from December 17, 2002 through December 31, 2002. In addition, the bank lenders have agreed to permit $750,000 of the proceeds from the expected sale of the Company's facilities located in Casa Grande, Arizona to be used to repay outstanding revolving loans rather than term loans, which will have the effect of preserving that amount of availability under the revolving portion of the credit facility. The bank lenders have also agreed to defer until December 31, 2002 a $1.5 million principal payment that would have been due on December 1, 2002. ROHN Industries, Inc., is a manufacturer and installer of telecommunications infrastructure equipment for the wireless industry. Its products are used in cellular, PCS, radio and television broadcast markets. The company's products and services include towers, design and construction, poles and antennae mounts. ROHN has ongoing manufacturing locations in Peoria, Illinois and Frankfort, Indiana along with a sales office in Mexico City, Mexico. * * * As reported in Troubled Company Reporter's November 13, 2002 edition, the Company is experiencing significant liquidity and cash flow issues which have made it difficult for the Company to meet its obligations to its trade creditors in a timely fashion. The Company expects to continue to experience difficulty in meeting its future financial obligations. At September 30, 2002, the Company's balance sheet shows a working capital deficit of about $1 million. On November 7, 2002, the Company entered into an amendment to its credit and forbearance agreements with its bank lenders. The amendment to the credit agreement, among other things, further limits the Company's borrowing capacity by modifying the definition of the borrowing base to decrease the amount of inventory included in the borrowing base. Additionally, the amendment modifies the definition of the borrowing base to provide additional borrowing capacity of varying amounts during this period. The amendments also provide for a series of reductions in the Company's revolving credit facility that reduce the availability under that facility from $23 million currently to $16 million on and after December 31, 2002. In addition, the amendment also provides for additional term loan payments through January 1, 2003. Furthermore, the amendment provides for additional bank fees, some of which will be waived if the Company achieves a significant reduction in the aggregate loan balance at December 31, 2002. Finally, the current amendment also includes covenants measuring revenues, cash collections and cash disbursements. Under the amendment to the forbearance agreement, the bank lenders have agreed to extend until January 31, 2003 the period during which they will forbear from enforcing any remedies under the credit agreement arising from ROHN's breach of financial covenants contained in the credit agreement except for the covenants added to the credit agreement as a result of this new amendment. If these financial covenants and related provisions of the credit agreement are not amended by January 31, 2003, and the bank lenders do not waive any defaults by that date, the bank lenders will be able to exercise any and all remedies they may have in the event of a default. The Company continues to experience difficulty in obtaining bonds required to secure a portion of anticipated new contracts. These difficulties are attributable to the Company's continued financial problems and an overall tightening of requirements in the bonding marketplace. The Company intends to continue to work with its current bonding company to resolve its concerns and to explore other opportunities for bonding. SCIENTIFIC GAMES: Completes 2002 Debt Workout Plan's Final Phase ---------------------------------------------------------------- Scientific Games Corporation (Nasdaq: SGMS) -- whose corporate credit rating is maintained by Standard & Poor's at 'double-B- minus' -- completed the final phase of its 2002 debt restructuring plan with the replacement of its existing senior secured credit facility with a new facility consisting of a revolving credit facility due 2006 that is initially $50 million and that can be increased to $70 million and a $290 million Term Loan B due 2008. As of the closing of this transaction, the company is undrawn on the revolver and has approximately $24 million in cash and equivalents. The facility is guaranteed by all current and future, direct and indirect, wholly-owned domestic subsidiaries and is secured by a first priority security interest in all present and future tangible and intangible assets of those subsidiaries. Had this new agreement been in place in 2002, the Company would have saved approximately $10 million in interest. Together with the previously announced repayment of subordinated notes, the Company expects its annual interest cost in 2003 will be approximately $26 million compared to approximately $41 million in 2002. As a result of the debt restructuring, Scientific Games raised its guidance for 2003 for fully diluted earnings per share to between $0.50 and $0.60 on approximately 90 million weighted average shares outstanding. Such guidance is based on a maximum anticipated tax rate of 35% and does not reflect any benefits from the planned acquisition of MDI Entertainment, Inc., which is expected to add at least $.03 per share upon completion of the acquisition. In addition, the Company confirmed its guidance for 2002 of earnings per share per fully diluted share of $0.41 to $0.44, before cash and non-cash debt restructuring charges currently estimated at approximately $25 million, based on an effective tax rate of 12% and on approximately 80 million weighted average shares outstanding. Scientific Games Corporation is the leading integrated supplier of instant tickets, systems and services to lotteries, and the leading supplier of wagering systems and services to pari-mutuel operators. It is also a licensed pari-mutuel gaming operator in Connecticut and the Netherlands and is a leading supplier of prepaid phone cards to telephone companies. Scientific Games' customers are in the United States and more than 60 other countries. For more information about Scientific Games, visit its Web site at http://www.scientificgames.com SEVEN SEAS PETROLEUM: AMEX Will Delist Shares Effective Tomorrow ---------------------------------------------------------------- Seven Seas Petroleum Inc., (Amex: SEV) announced the American Stock Exchange had issued a decision to delist the Company's shares. The Company has until today, December 26, 2002, to appeal the ruling. As previously announced, Seven Seas cannot meet the listing standards and therefore does not expect to appeal the decision. The Company's shares will cease trading on the Amex on December 27, 2002. The Company plans to pursue quotation of shares on the OTC Bulletin Board. Seven Seas Petroleum Inc., is an independent oil and gas exploration and production company operating in Colombia, South America. * * * As previously reported, Seven Seas Petroleum Inc., is in default under its 12-1/2% $110 Million Senior Subordinated Notes due to a failure to make the $6,875,000 semiannual interest payment on November 15, 2002. The full principal plus accrued and unpaid interest will be due and payable immediately upon notice by the Trustee or holders of 25% of the Senior Notes. Also, the Company is currently in default under its 12% Senior Secured $45 Million Notes as a result of cross-default provisions in the governing documents relating to the Company's failure to meet the obligations owed to the Senior Notes. On December 13, 2002, Chesapeake Energy accelerated all amounts owing to Chesapeake Energy, including principal, accrued interest, fees, costs, and expenses, and as a result, such amounts are immediately due and payable. Additionally, under the terms of the $22.5 million CHK Note (one-half of the $45 Million Notes) the rate of interest has been increased from 12% to a default rate of 13%. SHILOH INDUSTRIES: Reports Improved Results for Fourth Quarter -------------------------------------------------------------- Shiloh Industries, Inc., (Nasdaq: SHLO) reported results for the fourth quarter and fiscal year ended October 31, 2002. Fourth Quarter Results For the fourth quarter ended October 31, 2002, the Company had revenues of $173.3 million, an increase of $15.1 million or 9.6% from the same period in fiscal 2001. Reported operating loss for the quarter was $9.4 million, which included a non-cash pretax asset impairment charge of $10.0 million related to a facility leased to Valley City Steel, LLC. Charges of $4.2 million were also taken in the fourth quarter of fiscal 2002 to reflect the increase in defined benefit plan expenses stemming from curtailment charges. The operating loss for the comparable quarter in fiscal 2001 was $39.6 million. Net loss for the fourth quarter ended October 31, 2002 was $18.9 million or $1.28 net loss per share. The $18.9 million net loss includes $21.6 million of pretax non-cash charges as a result of Valley City Steel, LLC filing for protection under Chapter 11 of the United States Bankruptcy Code on November 27, 2002. The fourth quarter 2001 reported net loss per share was $2.12. Year End Results For the year ended October 31, 2002, the Company had revenues of $625.6 million, a decrease of $36.9 million or 5.6% from the prior year, which is primarily due to operations that were divested or closed during the fiscal year. Operating loss for the fiscal year 2002 decreased by $22.4 million to $6.9 million from an operating loss of $29.3 million for the prior year ended October 31, 2001. Net loss for the year improved by $8.7 million to $26.8 million, or a net loss of $1.81 per basic and diluted share, compared to a net loss of $35.5 million, or a net loss of $2.40 per basic and diluted share in fiscal 2001. Changes in Revenues The increase in revenue for the fourth quarter of fiscal 2002 is primarily due to an increase in industry volumes in automotive and heavy truck compared to the fourth quarter of fiscal 2001. The decrease in annual revenues was primarily the result of the Valley City Steel Division transaction in July 2001 and the closures of the Romulus Blanking Division, Wellington Die Division and Canton Die Division during the first quarter of fiscal 2002. Operating Results The operating loss, including the $10.0 million asset impairment charge, improved by $30.1 million for the fourth quarter and by $22.4 million for the year when compared to the similar periods in fiscal 2001. The improvements are a result of continuing operational improvements and cost reductions. "The Company is continuing to identify cost reductions and improve operational efficiencies using our '6 Sigma' disciplines and process characterization/process optimization practices," said Theodore K. Zampetis, President and CEO. Mr. Zampetis added, "Excluding the impact of the Valley City Steel non-cash pretax charges of $21.6 million and defined benefit plan curtailment pretax charges of $4.2 million, the Company has shown significant progress and exceeded our business plan for the year." Impact of Bankruptcy Filing by Valley City Steel, LLC The controlling owner of Valley City Steel, LLC unilaterally filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code on behalf of Valley City Steel, LLC on November 27, 2002. The bankruptcy filing resulted in the Company recording $21.6 million of pretax non-cash fourth quarter charges. The Company recorded a $11.6 million charge to recognize the losses associated with the minority equity investment in Valley City Steel, LLC which is reflected in the Equity in net earnings (losses) of affiliated company line in the Condensed Consolidated Statements of Operations. In addition, a $10.0 million charge was recorded for Shiloh owned land and building that is leased by Valley City Steel, LLC and is encumbered as a result of debt incurred by Valley City Steel, LLC. The $10.0 million is included in the Asset impairment charge (recovery) line in the Condensed Consolidated Statements of Operations. Liquidity The Company ended the year with $209.1 million of borrowings under the revolving line of credit, a reduction of $55.4 million from the $264.5 million outstanding at October 31, 2001. Availability at October 31, 2002 was $47.8 million. "We continue to execute our plan to generate cash from operations and by managing working capital, capital spending and tooling costs," Mr. Zampetis said, "and debt reduction is a priority for the Company." Mr. Zampetis added, "The operating results for the quarter and fiscal year were better than our expectations. We improved our gross margins throughout the year, finishing at 7.4% of revenues compared to 5.1% in fiscal year 2001. We lowered our administrative costs for fiscal 2002 as compared to fiscal 2001 by 2.6% of revenues and reduced our interest expense by $3.9 million. As we look to the future, we continue our focus on cost reductions, process optimization, improving our balance sheet and our commitment to strategically position Shiloh to differentiate ourselves by offering product and process innovation through Leadership, Technology and Process Ownership." Headquartered in Cleveland, Ohio Shiloh Industries is a leading manufacturer of engineered welded blanks, first operation blanks, stamped components and modular assemblies for the automotive and heavy truck industries. The Company has 16 wholly owned subsidiaries at locations in Ohio, Georgia, Michigan, Tennessee and Mexico, and employs approximately 2,800. A conference call to discuss fiscal 2002 fourth quarter results will be held on Thursday, January 9, 2003 at 10:30 a.m. (EST). To listen to the conference call, dial (800) 374-0915 approximately 5 minutes prior to the start time and request the Shiloh Industries Fourth Quarter Conference Call. A replay of the conference call will be available from 2 p.m. (EST), Thursday, January 9, 2003, through 5 p.m. (EST) Thursday, January 16, 2003. To access the replay, call (800) 642-1687 and enter conference code 7324092. * * * As previously reported in Troubled Company Reporter, the international rating agency, Standard & Poor's lowered its ratings on Shiloh Industries Inc. At the same time, the ratings remain on CreditWatch with negative implications, where they had been placed December 12, 2001. According to the report, the rating actions reflect Standard & Poor's increased concern over the company's near-term operating outlook and the belief that the company's financial flexibility has become quite constrained. Ratings Lowered; Remain on CreditWatch Negative Shiloh Industries Inc. TO FROM Corporate credit rating B- BB- Senior secured debt B- BB- SMARTSALES INC: DataMirror Intends to Acquire Certain Assets ------------------------------------------------------------ DataMirror Corporation (Nasdaq:DMCX) (TSX:DMC), a leading provider of enterprise application integration and resiliency solutions, intends to acquire certain assets of SmartSales Inc., from the trustee in bankruptcy of the estate of SmartSales. DataMirror expects to market its family of real-time data integration and resiliency tools to SmartSales' existing CRM software customers. SmartSales' OutSmart CRM software is an effective Sales Force Automation and Pipeline Management tool that is simple to install, intuitive to use and quick to yield results. The solution works within Microsoft(R) Outlook(R), eliminating the steep learning curve associated with new technologies and delivering an ease of use that results in a high rate of user acceptance and requires minimal support resources. SmartSales has over 100 customers who represent immediate potential new market opportunities for DataMirror software. SmartSales customers include The Royal Bank, Rogers, AT&T, Fujitsu and Qunara. Terms of the Transaction Under the terms of the accepted purchase offer, DataMirror will acquire certain assets of SmartSales in a cash transaction and will account for the acquisition under the purchase method. The assets being acquired consist of computer equipment, office furniture, customer lists, accounts receivable, and software and related technology and intellectual property. DataMirror will not be assuming any liabilities or obligations of SmartSales pursuant to the transaction. DataMirror expects the purchase to be of benefit to it, but does not expect the transaction to have a material impact on its financial results or on its business and affairs. The transaction is subject to certain conditions including court approval under the Bankruptcy and Insolvency Act (Canada) and is expected to close in early January. The expected date of closing may be less than 21 days from the date of this press release in order to allow the bankruptcy trustee to minimize the cost of winding up the estate of SmartSales. Related Party Disclosure The President, CEO and Chairman of DataMirror, Mr. Nigel Stokes, is a former director and Chairman of SmartSales and he holds approximately 20% of the common shares of SmartSales. Based on the known liabilities of SmartSales and the amount of the purchase price, DataMirror does not expect that Mr. Stokes will receive any of the proceeds of the sale from the Trustee as a result of his shareholding in SmartSales. The former directors of SmartSales including Mr. Stokes may benefit indirectly from the transaction because the Trustee's use of the proceeds of the sale may reduce certain potential liabilities of the former directors with respect to unpaid taxes. At the request of Mr. Stokes the nature and extent of his interest has been recorded in the minutes of the proceedings of the directors of DataMirror. The terms of the offer and this press release have been reviewed and approved unanimously by the board of directors of DataMirror. The board of directors is of the view that the assets to be acquired and the immediate potential for collecting accounts receivable and generating revenue will benefit DataMirror. DataMirror (Nasdaq: DMCX; TSX: DMC), a leading provider of enterprise application integration and resiliency software, gives companies the power to manage, monitor and protect their corporate data in real-time. DataMirror's comprehensive family of LiveBusiness(TM) solutions enables customers to easily and cost-effectively capture, transform and flow data throughout the enterprise. DataMirror unlocks the experience of now(TM) by providing the instant data access, integration and availability companies require today across all computers in their business. 1,700 companies have gone live with DataMirror software including Debenhams, Energis, GMAC Commercial Mortgage, the London Stock Exchange, OshKosh B'Gosh, Priority Health, Tiffany & Co., and Union Pacific Railroad. DataMirror is headquartered in Toronto, Canada, and has offices around the globe. For more information, visit http://www.datamirror.com TELSCAPE INT'L: Trustee Selling Telereunion Assets to Lambco ------------------------------------------------------------ As previously reported, Telscape International, Inc., a Delaware corporation, together with its affiliated debtors, filed voluntary Petitions for Relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware, Case No. 01-1563 (Jointly Administered), on April 27, 2001. David Neier has been appointed Chapter 11 Trustee for the Debtors. On November 29, 2002, the Trustee, on behalf of the Debtors, Lambco Telecommunications, U.S.A., Inc., and its affiliate, Lambco Telecommunicaciones de Mexico, S.A. de C.V., entered into an asset purchase agreement under which Lambco USA will acquire stock in Telereunion S.A. de C.V., the principal remaining asset of the Debtors, and Lambco Mexico will acquire the assets of Telereunion and related stock of affiliated non-Debtor and Debtor companies. Telereunion and certain of the Telscape Companies operate a fiber optic network and provide telecommunications and other services in Mexico and, through the Debtors, in the United States. The $18,750,000 purchase price for the stock and assets was arrived at through arms-length negotiations between the parties. In addition, pursuant to a Secured Debtor In Possession Credit and Security Agreement between the Trustee, on behalf of the Debtors, and Telereunion, as borrowers and Lambco USA, as lender, the Borrowers seek to obtain up to $8,600,000 in debt financing from Lambco USA. The Purchase Agreement, the DIP Loan Agreement and pleadings concerning these agreements and the sale are publicly available at http://www.deb.uscourts.govor may be obtained by contacting either the United State Bankruptcy Court, 824 Market Street, 6th Floor, Wilmington, DE 19801 or the Trustee, David Neier, Winston & Strawn, 200 Park Avenue, New York, NY 10166; (phone) (212) 294-5318, (fax) (212) 294-4700; email: dneier@winston.com. In connection with the transaction described above, on December 4, 2002, the Trustee, on behalf of the Debtors, filed the following motions with the Bankruptcy Court: (1) Trustee's Motion for an Order Authorizing the Trustee to (a) Sell the Telereunion Assets Free and Clear of All Liens and Encumbrances, and (b) Assume and Assign Certain Executory Contracts and Unexpired Leases; (2) Trustee's Emergency Motion for an Order (a) Approving Bidding Producers and Manner of Notice in Connection with the Sale of the Debtors' Telereunion Assets Free and Clear of All Liens, Claims and Encumbrances and the Assumption and Assignment of Executory Contracts and Unexpired Leases, (b) Approving Payment of Break-Up Fee and Expense Reimbursement in Connection Therewith, Scheduling Date, Time and Place for Auction, and (c) Approving Form of Notice of the Bid Procedures, Sale Hearing and Auction; (3) Trustee's Emergency Motion for Interim and Final Orders Pursuant to 11 U.S.C. ss.ss.105, 361, 362 and 364, (a) Approving Postpetition Financing and Related Relief and (b) Setting Final Hearing Pursuant to Bankruptcy Rule 4001(c); and (4) Motion to Expedite Hearing and to Shorten Notice of Bid Procedures and Interim Debtor-In-Possession Financing Motions. The Sale Motion, Sale Bid Procedure Motion, DIP Financing Motion and Expedited Hearing Motion are publicly available at http://www.deb.uscourts.govor may be obtained by contacting either the United States Bankruptcy Court, 824 Market Street, 6th Floor, Wilmington, DE 19801 or the Trustee, David Neier, Winston & Strawn, 200 Park Avenue, New York, NY 10166; (phone) (212) 294-5318, (fax) (212) 294-4700; email: dneier@winston.com. TESORO PETROLEUM: Completes Sale of 23 Retail Outlets to Nella -------------------------------------------------------------- Tesoro Petroleum Corporation (NYSE:TSO) -- whose Corporate Credit Rating has been downgraded by Standard & Poor's to 'double-B-minus' -- company completed the sale of 23 retail outlets in Northern California to Nella Oil Company and Flyers L.L.C., for $23 million, including working capital. This transaction completes the previously announced sale of 70 of the company's Northern California retail outlets for total proceeds of $67 million, of which $33 million will be used to pay down term debt. Tesoro Petroleum Corporation, a Fortune 500 Company, is an independent refiner and marketer of petroleum products and provider of marine logistics services. Tesoro operates six refineries in the western United States with a combined capacity of nearly 560,000 barrels per day. Tesoro's retail-marketing system includes nearly 600 branded retail stations, of which over 200 are company operated under the Tesoro(R) and Mirastar(R) brands. TRICO MARINE: Secures New $50-Million Revolving Credit Facility --------------------------------------------------------------- Trico Marine Services, Inc., (Nasdaq: TMAR) has entered into a new $50 million revolving credit facility to refinance its previous $45 million credit facility. The new facility will mature on December 18, 2005, and is structured as a senior secured revolving credit facility. Proceeds from the facility will be used for working capital needs, capital expenditures and other general corporate purposes. The facility will be secured by mortgages on substantially all of the company's Gulf of Mexico class supply boats and crew boats. The new facility, containing customary terms and conditions, replaces the previous facility, which was scheduled to expire in June 2003. Nordea acted as lead arranger and book runner for the new facility and will serve as administrative agent. Bank of Scotland and Hamburgische Landesbank acted as co-arrangers. Trico Marine provides a broad range of marine support services to the oil and gas industry, primarily in the Gulf of Mexico, the North Sea, Latin America, and West Africa. The services provided by the Company's diversified fleet of vessels include the marine transportation of drilling materials, supplies and crews, and support for the construction, installation, maintenance and removal of offshore facilities. Trico has principal offices in Houma, Louisiana, and Houston, Texas. * * * As previously reported in Troubled Company Reporter, Standard & Poor's affirmed its single-'B'-plus corporate credit rating on Trico Marine Services Inc., and at the same time, assigned its single-'B' debt rating to the company's proposed $250 million senior unsecured notes issue. The ratings on Trico Marine reflect the company's participation in the volatile offshore support segment of the petroleum industry and aggressive financial leverage. Trico Marine operates 85 offshore support vessels stationed in the Gulf of Mexico, the North Sea, South America, and West Africa drilling markets. Roughly half of the company's revenues are derived from the Gulf of Mexico, a market that typically operates on short- term contracts. The recent weakness of the Gulf of Mexico market has been tempered by the company's exposure to the relatively stable international markets. Cash flow stability is underpinned by the contract position of the company's international fleet; a high percentage of the company's 2002 projected revenue is under contract. TXU: Inks Pact to Provide Energy Services to Rio Grande Electric ---------------------------------------------------------------- TXU Energy, a subsidiary of TXU (NYSE: TXU), has signed a multi- year contract, effective Jan. 1, 2003, to provide energy and related services to Rio Grande Electric Cooperative Inc. Under the agreement, TXU Energy will expand an existing relationship to provide wholesale power services to Rio Grande in the Electric Reliability Council of Texas region. "By using TXU Energy's services, we're able to enhance service, manage our risk and provide energy cost savings to our members," said Dan Laws, general manager and chief executive officer, Rio Grande. Peter Greenberg, vice president of origination, TXU Energy, added: "We look forward to continuing our longstanding relationship with Rio Grande, and are pleased that they have chosen TXU Energy as a supplier in the ERCOT region." Rio Grande Electric Cooperative has in excess of 5,000 members, and serves a diverse customer base in 18 West Texas counties and two New Mexico counties, including residential, small commercial and industrial consumers, as well as a large number of agricultural operations. Rio Grande's service area spans more than 27,000 square miles, roughly one tenth of the state land mass, as it follows the river, from which it gets its name, for some 750 miles. For more information on Rio Grande Electric Cooperative, go to http://www.riogrande.coop TXU is a major energy company with operations in North America and Australia. TXU's energy business in North America is the largest power generator and electricity retailer in Texas with 19,000 megawatts of competitive generation and 2.7 million electric customers. TXU also has the largest electricity and natural gas utilities in Texas, delivering over 100 million megawatt hours of electricity and over 140 billion cubic feet of natural gas annually. TXU's business in Australia includes both electricity and natural gas delivery and energy operations with 1,280 megawatts of generation and almost 1 million electricity and natural gas customers. TXU serves over five million electricity and natural gas customers in North America and Australia. Visit http://www.txu.comfor more information about TXU. * * * As reported in Troubled Company Reporter's December 16, 2002 edition, Fitch downgrades TXU Corp.'s senior notes to 'BBB-', preference stock 'BB+', and commercial paper to 'F3' from 'BBB', 'BBB-', and 'F2', respectively. Also downgraded were the outstanding ratings on TXU US Holdings, Oncor Electric Delivery Co., TXU Energy Co. LLC, TXU Gas Co., Pinnacle One Partners, L.P., TXU Australia Holdings Limited Partnership and TXU Electricity Limited as outlined below. The Rating Outlook of all the companies listed above has been revised to Stable from Negative. The downgrade of the parent, TXU, takes into account TXU's already high leverage and the increased debt burden resulting from recent borrowings under new financing arrangements and existing credit facilities to maintain liquidity for potential collateral calls or accelerated repayment of debt associated with Pinnacle One Partners, and the related increase in interest expense. Fitch expects that TXU will have to maintain large cash reserves for an extended period as a precaution against potential collateral calls or accelerated maturities, pushing up the cost of capital and potentially delaying a needed reduction in debt leverage. The Stable Outlook for TXU and the maintenance of investment grade ratings recognize the existence of sufficient liquidity to meet expected refinancing and potential collateral requirements, after the painful but necessary decision to terminate support for TXU Europe, resulting in the ailing subsidiary going into administration. The Stable Outlook for TXU also factors in Fitch's view that TXU Corp. will not have a material liability for TXU Europe obligations. DebtTraders reports that TXU Corp.'s 6.375% bonds due 2006 (TXU06USR1) are trading at about 90 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=TXU06USR1for real-time bond pricing. UNITED AIRLINES: Appoints Executive Leadership Team --------------------------------------------------- UAL Corp., (NYSE: UAL) announced its leadership team as the company moves to transform itself into a more competitive, customer-focused airline. The leadership team reports directly to Chairman, President and Chief Executive Officer Glenn Tilton. "This leadership structure gives a clear line of sight to accountability and responsibility, and I have every confidence that this is the right team for the job," Tilton said. "As the leadership team, we will focus on outstanding customer service, operational excellence and strategy innovation - built on the firm foundation of a cost base that is competitive in the marketplace. We will manage the process and work of Chapter 11 separately and we will deliver superior functional support to the entire organization." The leadership team reporting to Glenn Tilton includes the following individuals: Operational and Customer Service Excellence. Pete McDonald, executive vice president-Operations, has responsibility for Maintenance and Engineering, Flight Operations, Onboard Service, System Operations Control, Airport Operations and Safety. McDonald is leading United's efforts to deliver outstanding customer service, consistent reliability and safe and on-time performance. Innovative Strategic Planning. Doug Hacker, executive vice president-Strategy, has responsibility for corporate strategy and revenue-producing functions, including Corporate Strategic Development, Network Development (Planning), Project and Cost Management, United Loyalty Services, Cargo, and Information Systems. Hacker is directing the development of short- and long-term strategies that will ensure United's long-term success in meeting the needs of customers and the demands of the marketplace. Innovative Sales and Marketing. An external search is under way to find an executive vice president-Customer who will have responsibility for Marketing, Sales and Reservations, International and Alliances. This person will focus United on attracting customers and building loyalty. Doug Hacker temporarily is leading this effort. Successfully Emerging from Chapter 11. Jake Brace, executive vice president and chief financial officer, will lead and have primary responsibility for our successful navigation of the process and work of Chapter 11, and the critical financial restructuring of the company. He also will continue to oversee the company's financial functions. Employee Support and Development. Sara Fields, senior vice president-People Services, has responsibility for Human Resources and Labor Relations. She is directing the company's organization redesign and the transitions in the workforce during Chapter 11. Longer term, Fields also will focus on employee training and development necessary to succeed in United. Legal Expertise and Guidance. Fran Maher, senior vice president, general counsel and corporate secretary, has responsibility for all of United's and UAL's legal affairs. In the Chapter 11 process, she works closely with Brace, who has overall responsibility, and oversees the development and execution of the complex legal strategies to accomplish the company's short- and long-term business objectives. Effective Communication. Rosemary Moore, senior vice president-Corporate and Government Affairs, has responsibility for open communications with employees, including providing timely information about the company's progress in Chapter 11. Externally, she manages the reputation of the company and supports business objectives through communications with key external audiences, and interaction with governmental, international and regulatory organizations. "The experience of the past months and our current situation have left me in no doubt of what it will take to succeed in the year ahead," Tilton said. "This leadership team understands what we need to do to work our way through the challenges immediately ahead and to establish a strong foundation for the future. But make no mistake, in addition to committed leadership, this will need the participation and support of our entire organization." News releases and other information about United Airlines can be found at the company's Web site at http://www.united.com UNITED AIR: Realigns Responsibilities in Revenue-Producing Divs. ---------------------------------------------------------------- United Airlines (NYSE:UAL) announced a realignment of responsibilities within its revenue-producing divisions supporting the corporate-wide effort to transform United into a more resilient and competitive airline. Doug Hacker, who recently was named executive vice president- Strategy, said, "The new organizational alignment will sharpen the airline's focus in key marketing areas while gaining efficiency by eliminating two officer-level positions." The marketing organization reports to Hacker temporarily until a vacant position of executive vice president-Customer is filled. An external search is under way. Hacker announced these new responsibilities: Scott Praven will become senior vice president-Marketing. He will be responsible for advertising and promotions, brand management and marketing programs. Praven has been chief operating officer of UAL Loyalty Services, responsible for united.com(R) and the operations of Mileage Plus(R). Since joining United in 1979, Praven has served in a variety of management positions in pricing, interline marketing and sales planning, as well as in brand and product development. Chris Bowers will be senior vice president-Sales and Reservations and will focus on selling United's services and communicating its policies directly with United's corporate customers and travel agents. Previously senior vice president- Marketing and Sales, Bowers has been with United since 1973 and has served the company in various capacities including senior vice president-North America and senior vice president- International. Dan Walsh will assume the responsibilities of vice president- Sales. Walsh had been vice president-North American Sales-East for United based in New York, a position that has been eliminated under the new, streamlined organization. He will report to Bowers and will be responsible for United's sales organization in the United States and accountable for more than $10 billion in annual revenue generation. Also reporting to Bowers will be Tony Bedalov, director of reservations sales. As a result of the restructuring, Frank Kent, vice president- North America Sales, has elected to take early retirement. The position held by Sean Donahue, vice president-North America Sales-West, has been eliminated, and he will be leaving the company. "Frank has been an invaluable contributor to United during his 35-year career and a real force in the industry," said Hacker. "Sean has held a variety of positions in management during his 18 years with the company, and has made his mark in both sales and operations. We thank Frank and Sean for their dedicated service to United, and we wish them well." Rick Poulton was named president of UAL Loyalty Services, the wholly owned subsidiary of UAL Corp., taking the position vacated by Hacker's recent elevation. As president, and as a United vice president, Poulton will be responsible for the development and administration of loyalty programs including Mileage Plus(R), Silver Wings(R) and MyPoints.com(R). ULS also manages united.com(R), United Vacations(R), United Cruise4Miles, and many of United's media assets. Poulton has been chief financial officer at ULS since August of 2000 and has been responsible for its strategic direction as well as all financial functions of the company. News releases and other information about United Airlines can be found at the company's Web site at http://www.united.com UNITED AIRLINES: Hires Rothschild Inc. as Investment Banker ----------------------------------------------------------- At a cost of $225,000 per month for the first 12 months following the Petition Date and $200,000 per month thereafter, plus payment of a $15,000,000 Completion Fee if a Transaction (confirmation of a chapter 11 plan, a merger, or a sale of substantially all of the company's assets) is completed within 24 months, UAL Corporation/United Airlines Inc., asks the Court for permission to hire Rothschild, Inc., as its Investment Banker. Rothschild will credit all Monthly Fees paid after seven months of bankruptcy against the Completion Fee. After eighteen months, either the Debtors or Rothschild may initiate talks about additional credit for monthly fees paid. Executive Vice President and Chief Financial Officer Frederic F. Brace tells the Court that Rothschild has a wealth of experience in providing investment banking services in reorganization proceedings and has an excellent reputation for the services it has rendered in Chapter 11 cases on behalf of debtors and creditors. Rothschild is recognized for its expertise because it has served as investment banker in several cases including Trans World Airlines, FINOVA Group and Federal-Mogul Corporation, to name a few. Rothschild's rendered investment banking services to the Debtors in connection with their restructuring efforts, pursuant to an engagement letter dated August 16, 2002. Since that time, Rothschild has become familiar with the Debtors' operations. Specifically, Rothschild will: a) identify and/or initiate potential Transactions; b) review and analyze the Debtors' assets and the operating and financial strategies of the Debtors; c) review and analyze the Debtors business plans and financial projections by testing assumptions and comparing them to historical data and industry trends; d) evaluate the Debtors' debt capacity in light of projected cash flows and assist in determining an appropriate capital structure; e) review the terms of any proposed Transaction and evaluate alternative proposals; f) determine a range of values for the Debtors and any securities offered by the Debtors in a Transaction or otherwise; g) advise Debtors on the risks and benefits of a Transaction and other strategic alternatives to maximize the business enterprise value; h) review and analyze proposals the Debtors receive from third parties, including proposals for debtor- in-possession financing; i) assist in negotiations with parties in interest including creditors and/or shareholders; j) advise and attend meetings of the Debtors Board of Directors, creditor groups, official constituencies and other interested parties; k) participate in hearings before the Bankruptcy Court and provide testimony with miscellaneous matters or in connection with a proposed Plan; and l) render other investment banking services as agreed upon by Debtors and Rothschild. Rothschild may provide additional services at the Debtors' request. Rothschild has agreed to assist the Debtors in preparing and presenting testimony on financial matters, the feasibility of a plan of reorganization, the value of reorganization securities and other matters. The Debtors agree to indemnify all persons affiliated with Rothschild from and against any losses, claims or proceedings arising out of its investment banking services. Todd R. Snyder, a Rothschild Managing Director based in New York, Additionally, Mr. Snyder assures the Court that Rothschild is a "disinterested person" as that term is used in 11 U.S.C. Sec. 101(14). Out of an abundance of caution, Mr. Snyder discloses six relationships: (a) Rothschild provided services to Trans World Airlines in connection with its Chapter 11 case, including with respect to the sale by TWA of substantially all of its assets to American Airlines. That sale closed on April 9, 2001, and the plan of reorganization in that case was confirmed on June 15, 2002. Rothschild's engagement terminated upon the effective date of that plan. Rothschild does not currently provide financial advisory or investment banking services to TWA. (b) Rothschild is currently providing services to BP Amoco with respect to the sale of assets in the Republic of Singapore. Additionally, Rothschild provided services to BP Amoco with respect to the sale of certain refining facilities. However, Rothschild's involvement in that matter has ended. None of the services Rothschild currently provides to BP Amoco relate to these Chapter 11 cases. (c) Prior to commencement of these cases, Rothschild rendered pre-petition services to the Debtors. (d) Rothschild is a large investment banking firm and has likely provided services unrelated to the Debtors for companies and individuals that have conducted business in the past and/or currently conduct business with the Debtors, and who may be creditors of the Debtors. "To the best of my knowledge, information and belief," Mr. Snyder says, "Rothschild's services to these parties were and are wholly unrelated to the Debtors, their estates and these Chapter 11 cases." (e) As part of its practice, Rothschild appears in numerous cases, proceedings and transactions involving many different professionals, some of which may represent claimants and parties in interest in the Debtors' Chapter 11 cases. Furthermore, Rothschild has in the past and will likely in the future be working with or against other professionals involved in these cases in matters unrelated to these cases. "Based on my current knowledge of the professionals involved, and to the best of my knowledge and information, none of these business relationships represents an interest materially adverse to [United]," Mr. Snyder says. (f) Rothschild, through the equity owners of its parent company, Rothschild North America Inc., has indirect affiliate relationships with numerous investment banking institutions located worldwide "However, none of the Affiliated Entities is being retained in connection with this engagement and none of the professionals or employees of the Affiliated Entities will provide services to the Debtors in connection with this engagement," Mr. Snyder says. "None of the professionals or employees of Rothschild has discussed or will discuss the Debtors' cases with any professional or employee of the Affiliated Entities. Thus, there has not been and will not be any flow of information between Rothschild and any Affiliated Entity with respect to any matter pertaining to the Debtors or their Chapter 11 cases. Rothschild can make no representation as to the disinterestedness of the professionals or employees of the Affiliated Entities in respect of the Debtors' Chapter 11 cases." Mr. Snyder discloses that within the one-year period prior to the petition date, Rothschild received $1,462,898 from the Debtors. (United Airlines Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) United Airlines' 9.0% bonds due 2003 (UAL03USR1) are trading at about 9 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL03USR1for real-time bond pricing. UNITED AUSTRALIA: Castle Harlan Sponsors Plan of Reorganization --------------------------------------------------------------- Australian private-equity investment firm Castle Harlan Australian Mezzanine Partners Pty. Ltd., is sponsoring, on behalf of the CHAMP I funds, a plan of reorganization for United Australia Pacific, Inc., which was filed Sunday in U.S. Bankruptcy Court in New York. If approved, the plan would make CHAMP beneficially the largest shareholder in publicly traded Austar United Communications Ltd. (ASX: AUN.AX). Austar is the only provider of satellite pay TV in non-urban Australia, with more than 400,000 subscribers, and has exclusive pay television rights in all but the major Australian cities (i.e. excluding Sydney, Melbourne, Adelaide, Brisbane and Perth, in addition to all of the sparsely settled state of Western Australia). Austar reported A$241.0 million in revenue for the nine months ended September 30, 2002. Under the plan, CHAMP is offering US$34.5 million (approximately A$61 million) for UAP's majority interest in United Austar, Inc. (a Colorado company that beneficially owns 80.7 percent of Austar). The offer represents approximately seven percent of the face value of UAP's outstanding bonds. The plan has been recommended by the UAP secured creditors' committee. It is expected that a creditors' vote on the plan will occur in late February 2003. The plan's acceptance is subject to approval by Australia's Foreign Investment Review Board and by Austar's bank lenders. "Assuming the UAP plan is approved, CHAMP and UnitedGlobalCom, Inc. (Nasdaq: UCOMA), a publicly traded U.S. firm and the other major beneficial shareholder in Austar, will then together beneficially own 80.7 percent of Austar. The balance of Austar will still be owned by the public," CHAMP Chairman Bill Ferris said. Following acceptance of the UAP plan of reorganization, CHAMP will appoint representatives to the Austar board. John Porter will continue as Austar's chief executive officer. As a condition of its approval for the transaction, the Australian Securities and Investments Commission has required that, following approval of the UAP plan, probably in early March 2003, CHAMP make a follow-on offer for the remainder of Austar that is publicly owned. The follow-on offer price will be equivalent to the price CHAMP will have paid to UAP bondholders for the Austar shares they control. At today's exchange rate, that price would be A$0.17 per share. After completion of the follow-on offer to shareholders, CHAMP and UnitedGlobalCom will fully underwrite an Austar equity rights issue of A$63.5 million, also priced at the follow-on price referred to above. Austar will use the proceeds for working capital. CHAMP manages and advises more than A$830 million in private- equity capital in several funds available for investment in LBO's, growth and development opportunities and venture capital in Australia, New Zealand and the broader Australasian region. The CHAMP I Funds have approximately A$550 million for investment in larger buyouts. CHAMP is one of Australia's oldest and most successful private- equity firms. It is 50 percent owned by Castle Harlan, Inc., the New York merchant bank, and 50 percent by the founders of CHAMP's predecessor firm. Since the final closing of the CHAMP I Funds in mid-2000, its Australian acquisitions have included Australian Pacific Paper Products, a leading Australian maker of diapers and adult incontinence products; Penrice Soda Products, the only Australian manufacturer of soda ash and sodium bicarbonate; Sheridan Australia, the leading Australian manufacturer, designer and marketer of bed and bath linens; and Bradken, Australia's leading manufacturer of ground-engaging tools used by the mining and construction sectors and also Australia's largest producer of bogey systems for railway freight cars. Castle Harlan was founded in 1987 by John K. Castle, former president and chief executive officer of Donaldson, Lufkin & Jenrette, the investment banking firm, and Leonard M. Harlan, founder and former chairman of The Harlan Company. Since its inception, Castle Harlan has completed acquisitions exceeding US$5 billion. It is currently raising its fourth investment fund, targeted at US$1.25 billion. US AIRWAYS: Flight Attendants Agree to Cost-Cutting Plan -------------------------------------------------------- The Association of Flight Attendants, representing more than 7,500 US Airways flight attendants, reached a tentative agreement on cost-cutting measures to support the company's restructuring and planned emergence from bankruptcy. The agreement requires ratification by AFA's membership, with a vote expected by Jan. 10, 2003. "Our flight attendant leadership again has demonstrated that it is resolute in its commitment to US Airways and we commend them for their foresight in reaching this agreement," said Jerry A. Glass, US Airways senior vice president of employee relations. The Air Line Pilots Association's Master Executive Council last week ratified its cost-cutting agreement and on Wednesday, the Communications Workers of America -- reservations sales representatives and airport ticket counter and gate agents, and the Transport Workers Union -- dispatchers and simulator engineers, reached tentative agreements on the restructuring. Yesterday, the TWU's flight crew training instructors also reached tentative agreements with US Airways on cost savings and today, tentative agreements were reached with the International Association of Machinists -- mechanics and related and fleet service workers. US AIRWAYS: Machinists Agree to Cost-Cutting Plan ------------------------------------------------- US Airways and the International Association of Machinists, Districts 141 and 141-M, representing approximately 6,200 mechanics and related employees and 4,900 fleet service workers, reached tentative agreements on new cost-cutting measures to support the company's restructuring. Both tentative agreements require ratification by the IAM's membership. "The IAM leadership met this challenge head on and worked vigorously with us to hammer out agreements to support our restructuring plan. We are grateful for their enormous contributions," said Jerry A. Glass, US Airways senior vice president of employee relations. US Airways' Air Line Pilots Association Master Executive Council last week ratified their agreement. The company currently has agreements in place with the Communications Workers of America -- reservations sale representatives and airport ticket counter and gate agents; Transport Workers Union -- dispatchers, simulator engineers, flight crew training instructors; and Association of Flight Attendants. U.S.I. HOLDINGS: Names Thomas O'Neil as VP & Chief Ops. Officer --------------------------------------------------------------- David L. Eslick, Chairman, President, and CEO of U.S.I. Holdings Corporation (Nasdaq: USIH) announced that the Board of Directors has named Thomas E. O'Neil Senior Vice President and Chief Operating Officer and Jeffrey L. Jones Senior Vice President and Chief Marketing Officer. As Chief Operating Officer, Mr. O'Neil will be responsible for all of USI's operating companies and USI's Regional CEOs and Regional Presidents will now report to him. Most recently, Mr. O'Neil served as Regional CEO, USI Northeast Region, where he developed USI's regional operation integration strategy. He has over 22 years of industry experience, and he joined USI in 1996. As USI's Chief Marketing Officer, Mr. Jones will be responsible for the company's sales and marketing efforts including sales, sales management, strategic relationships, cross-selling strategies, and recruiting sales professionals. Most recently, Mr. Jones served as Regional CEO, USI West Coast Region. He has over 25 years of industry experience, and he joined USI in 1994. Commenting on the promotions, Mr. Eslick said, "Tom and Jeff have made significant contributions to USI's growth and development. Tom has been a leader in driving USI's regional integration strategy and has developed the Northeast into not only USI's largest region but also its most profitable. He will now be able to dedicate his time to implementing those same strategies throughout USI's other regions. Jeff has been a leader in the development of USI's 'best practices' for sales management, cross selling, and strategic marketing partnerships, which has enabled the West Coast Region to deliver USI's highest level of organic revenue growth." With these promotions USI has also promoted James M. Butler to President of the Northeast Region and Kevin P. Mencarelli to President of the West Coast Region. Most recently, Mr. Butler has been CEO, USI New York. In his new role as President of the Northeast Region, he will be responsible for USI's retail operations throughout New York, New England, Pennsylvania, Connecticut and New Jersey. Mr. Butler has over 15 years of industry experience in banking and insurance, and he joined USI in 1997. Mr. Mencarelli has been President, USI Northern California. In his new role as President of the West Coast Region, he will be responsible for USI's retail operations in California, Washington, and Oregon. He has over 14 years of industry experience, and he joined USI in 1998. Commenting on Mr. Butler and Mr. Mencarelli's promotions, Mr. Eslick said, "For the past three years, Jim and Kevin have been participants on USI's Leader Team, which is a program for identifying and mentoring future leaders. They have shown strong performance capabilities and have earned the opportunity to accept additional management responsibilities. As USI moves forward, we expect to continue to develop additional opportunities for other members of our Management and Leader Team." Founded in 1994, USI is a leading distributor of insurance and financial products and services to small and mid-sized businesses throughout the United States. USI is headquartered in San Francisco and operates out of 58 offices in 20 states. As previously reported, Standard & Poor's Ratings Services removed from CreditWatch and affirmed its single-'B'-plus ratings on USI Holdings Corp., after the company successfully completed its IPO, selling 9 million shares for total gross proceeds of $90 million. Standard & Poor's also said that the outlook on USI is positive. At September 30, 2002, the Company's balance sheet shows a working capital deficit of about $12 million. VIASYSTEMS: Gets Final Nod to Obtain $37.5 Million DIP Financing ---------------------------------------------------------------- The Honorable Allan L. Gropper of the U.S. Bankruptcy Court for the Southern District of New York gave his final nod of approval to Viasystems Group, Inc., and its debtor-affiliates' motion to enter into a Postpetition Financing arrangement and continue using their Lenders' Cash Collateral to fund day-to-day expenses. The Court gave the Debtors authority to obtain up to $37,500,000 of Postpetition Financing from JPMorgan Chase Bank and Deutsche Bank Trust Company Americas, including a $10,000,000 letter of credit subfacility. The Court finds that: (a) the Debtors have an immediate need to obtain financing and use the Cash Collateral to permit, among other things, the orderly continuation of the operation of their business, to maintain business relationships with vendors and suppliers, to make certain strategic capital expenditures and to satisfy other working capital needs; (b) the Debtors are unable to obtain adequate unsecured credit allowable under Section 503(b)(1) of the Code as an administrative expense; (c) a facility in the amount provided by the DIP Financing is unavailable to the Debtors without the Debtors granting to the DIP Agent and the DIP Lenders super priority claim status; (d) the ability of the Debtors to obtain sufficient working capital and liquidity through the incurrence of new indebtedness for borrowed money and other financial accommodations and the use of the Cash Collateral is vital to the Debtors; and (e) the preservation and maintenance of the going concern values of the Debtors is integral to a successful reorganization of the Debtors pursuant to the provisions of Chapter 11 of the Code. The Debtors relate that they owe the Prepetition Lenders, J.P. Morgan Chase Bank Canada and J.P. Morgan Europe Limited in the aggregate principal amount of $525,219,821.51 (plus $1,462,083 interest accrued and unpaid. Additionally, the Debtors was contingently liable to the Prepetition Lenders in the aggregate amount of approximately $9,000,000 in respect of letters of credit issued pursuant to the Pre-Petition Credit Agreement and which remained undrawn and outstanding as of the Petition Date. 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. VISKASE COMPANIES: Illinois Court Confirms Prepackaged Plan ----------------------------------------------------------- Viskase Companies, Inc., said that Judge John D. Schwartz of the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division, confirmed Viskase's Prepackaged Plan of Reorganization as Modified. Viskase expects to consummate the Prepackaged Plan of Reorganization during January 2003 subject to finalization of a post-confirmation credit facility. F. Edward Gustafson, Chairman of the Board, President and Chief Executive Officer of Viskase stated, "Viskase is pleased that its Prepackaged Plan of Reorganization was confirmed by the Bankruptcy Court so quickly. We look forward to building upon our excellent relationships with our customers and suppliers and to continuing our long-standing commitment to the meat and poultry industry." Viskase Companies, Inc., has its major interests in food packaging. Principal products manufactured are cellulosic and nylon casings used in the preparation and packaging of processed meat products. Harold L. Kaplan, Esq., and Jeffrey M. Schwartz, Esq., at Gardner, Carton, & Douglas in Chicago, and Allan S. Brilliant, Esq., at Milbank, Tweed, Hadley & McCloy LLP, represent Viskase. The Plan compromises $163 million of bond debt by swapping that old debt for a basket of New Senior Notes and New Common Stock. Old shareholders receive warrants to purchase the new shares at a nominal $0.20 per share exercise price. WARNACO GROUP: Obtains Approval of Speedo Settlement Agreement -------------------------------------------------------------- The Warnaco Group, Inc., and its debtor-affiliates obtained the Court's approval of the Settlement Agreement by and among Authentic Fitness Corporation, Authentic Fitness Products, Inc., Warnaco, Inc., The Warnaco Group, Inc., and Speedo International Limited; and to assume the Amended License Agreements. AFC uses the Speedo trademarks through certain license agreements with Speedo. The current license agreements were entered into on May 10, 1990 and amended at various times subsequently. More than half of AFC's revenue comes from Speedo-branded products. The principal terms of the Settlement Agreement are: (a) Speedo will withdraw all pending claims, objections and actions, and dismiss with prejudice all litigation, against AFC, Warnaco Group and Warnaco, Inc., including the District Court Action. The Parties will be bound by mutual general releases; (b) AFC will pay Speedo $2,057,866 to resolve all royalty and other claims relating to the Speedo Licenses to and through June 30, 2002; (c) AFC will reimburse Speedo $500,000 in legal fees; (d) AFC will assign to Speedo its SPEEDO.com and other Speedo domain names. AFC will, after a reasonable transition period, rename its web sites to another Speedo derivative. Speedo will provide "a hot link" from its new SPEEDO.com site to AFC's renamed web site; (e) Effective July 2003, the percentage royalty rate on New Sales under the Speedo Licenses will increase by 0.5% on New Sales exceeding $125,000,000; (f) AFC will be granted the right to sell fashion swimwear under its Ralph Lauren and Anne Cole brands and to sell non-Speedo apparel, accessories and other products in its Speedo Authentic Fitness Retail Stores; (g) The License Amendments will amend the Speedo Licenses to, inter alia, clarify certain rights and obligations and implement certain procedures to avoid future controversies including, among other things, changing the governing law of the Speedo License for the law of New South Wales, Australia and other specified jurisdictions to New York law; and (h) AFC will assume the Speedo Licenses, as amended, and supplemented by the License Amendments, and Speedo will not object to the assumption. (Warnaco Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) WARREN ELECTRIC: Signs-Up Littler Mendelson as Special Counsel -------------------------------------------------------------- Warren Electric Group, Ltd., asks for permission from the U.S. Bankruptcy Court for the Southern District of Texas to employ Littler Mendelson, P.C., as Special Litigation Counsel. The Debtor tells the Court that it requires the advice and services of Special Litigation Counsel to defend it in connection with three lawsuits: a. Dina Gallegos v. Warren Electric Group, Ltd., in the 189th Judicial District Court, Harris County, Texas; b. Mike Regitz v. Warren Electric Group, Ltd., d/b/a Warren Electric Group, in the County Civil Court at Law No. 4 of Harris County, Texas; and c. Douglas B. Clements v. Warren Electric Group, Ltd., in the 159/217th Judicial District Court of Angelina County, Texas. The Debtor selected Littler Mendelson, P.C., because the Firm possesses substantial experience in matters of this nature. Linda Ottinger Headley, Esq., is the attorney in charge. Ms. Headley's billing rate is $245 per hour. However, the Debtors and the Firm agree that Ms. Headley's rate for the defense of a fourth lawsuit brought by Michael J. Valentine against Warren will be $200 an hour and will be billed to Warren's Insurance carrier, Lexington Insurance Company. The rates for lawyers and paralegals range from $70 to $325 per hour. Warren Electric Group, Ltd., filed for chapter 11 protection on September 27, 2002. Harlin C. Womble, Jr., Esq., at Jordan Hyden Womble and Culbreth, represents 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. WICKES INC: Commences Exchange Offer for 11-5/8% Senior Notes ------------------------------------------------------------- Wickes Inc., (NASDAQSC: WIKS) a leading distributor of building materials and manufacturer of value-added building components, has commenced an offer to exchange an equal principal amount of its new Senior Secured Notes due July 29, 2005, for any and all of its $63,956,000 aggregate principal amount of outstanding 11-5/8 percent Senior Subordinated Notes due December 15, 2003. The Exchange Offer, which is being made to holders of the existing Subordinated Notes pursuant to an Offering Memorandum and Solicitation of Consents, is not subject to any minimum amount of Subordinated Notes being exchanged. In addition, the Exchange Offer contemplates a $4.98 million mandatory redemption in cash scheduled for the new Senior Secured Notes' first interest payment date, March 17, 2003, as a result of the previously announced Lanoga sale proceeds. The mandatory redemption proceeds, which will be applied to the new Senior Secured Notes based upon the 85 percent applicable optional redemption price, will be shared pro-rata based on the aggregate principal amount of Senior Subordinated Notes exchanged. The closing of the Exchange Offer, however, is subject to the Company obtaining the consent of its senior lenders or the refinancing of its senior debt with a new senior lender who consents to the Exchange Offer. There can be no assurance that such consent or refinancing will be obtained, although discussions have commenced with a potential new senior lender to refinance the senior debt. Wickes will accept for exchange any and all Subordinated Notes validly tendered and not withdrawn prior to the expiration date. The expiration date of the Exchange Offer is 5:00 p.m., Eastern Standard Time, on Wednesday, January 22, 2003, unless extended. The new Senior Secured Notes will be the Company's general senior obligations and will rank equally with the Company's revolving credit agreement and will rank senior to the Subordinated Notes. The new Senior Secured Notes will be secured by liens on the Company's owned real estate and equipment, subject to the priority of the liens to the Company's senior lenders. The new Senior Secured Notes will bear interest at 11-5/8 percent per annum from the date of issuance through December 15, 2003 and at 18 percent per annum thereafter. Interest at 11-5/8 percent will be paid currently in cash, and the balance will be paid currently in cash to the extent the Company has excess cash flow, as defined in the indenture governing the new Senior Secured Notes, and will accrue to the extent not paid in cash. The Company is also soliciting, pursuant to the Offering Memorandum, consents from holders of the Subordinated Notes to amendments to the indenture governing the Subordinated Notes to eliminate most of the covenants contained therein. The three largest holders, representing approximately 40 percent of the outstanding Subordinated Notes, have agreed to exchange their notes pursuant to the Exchange Offer and to consent to such amendments. In order for such amendments to become effective, consents must be obtained from the holders of a majority of the outstanding Subordinated Notes. Wickes Inc., is a leading distributor of building materials and manufacturer of value-added building components in the United States, serving primarily building and remodeling professionals. The Company distributes materials nationally and internationally, operating building centers in the Midwest, Northeast and South. The Company's building component manufacturing facilities produce value-added products such as roof trusses, floor systems, framed wall panels, pre-hung door units and window assemblies. Wickes Inc.'s Web site, http://www.wickes.comoffers a full range of valuable services about the building materials and construction industry. * * * As reported in Troubled Company Reporter's November 6, 2002 edition, Standard & Poor's lowered its corporate credit rating on Wickes Inc., to triple-'C' from triple-'C'-plus. The downgrade was based on the company's weak liquidity and Standard & Poor's concern that Wickes will be challenged to improve operations and liquidity significantly after it completes the sale of its Wisconsin and Northern Michigan operations. WORLDCOM INC: Gets Green Light to Reject 30 Circuits with 4 LECs ---------------------------------------------------------------- Bankruptcy Court Judge Arthur Gonzalez authorizes Worldcom Inc., and its debtor-affiliates to reject the Service Orders effective as of November 1, 2002. However, with respect to the Verizon Service Orders, the effective date of rejection will be deemed the effective date of the disconnection orders submitted for the Verizon Service Orders. In addition, with respect to the Service Orders for the purchase of circuits by the Debtors from Qwest Corporation, the effective date of rejection for the Service Order related to the OC-192 circuit will be November 22, 2002 and the effective date of rejection for the Service Order related to the OC-12 circuit will be December 15, 2002; provided, however, that the Debtors will be required to submit a disconnection order for the OC-12 circuit on or before December 5, 2002. * * * To recall, the Debtors purchased certain telecommunications services pursuant to tariffs filed by incumbent and competitive local exchange carriers in accordance with the Telecommunications Act of 1996. Tariffs are schedules of rates, terms and conditions, by which the LECs agree to provide services to their customers. Tariff services are purchased by submitting a contract known as an access service order to the LEC. Since the Petition Date, the Debtors have reviewed the operating capacity of its network, which is an ongoing, integral component of the Debtors' long-range business plan. The Debtors determined that it does not require the capacity relating to 30 circuits purchased through service orders purchased under tariffs. The Circuits and associated Service Orders are with these LECs or their affiliates: No. of Annual Total Circuits Savings Savings -------- ---------- ---------- Southwestern Bell 7 $519,430 $907,420 Verizon 20 709,080 1,862,060 Qwest 2 1,008,000 3,780,000 Bell South 1 582,000 2,183,250 In determining to reject the Service Orders, the Debtors considered network overcapacity, costs, overlap and other inefficiencies, as well as WorldCom's ability to move traffic to alternative circuits in a more cost-effective manner. In the course of reviewing their network capacity needs and costs, the Debtors analyzed the Circuits and determined that that they are no longer of any value or utility to them. By rejecting the Service Orders, the Debtors save the estates $2,800,000 in administrative expenses per annum, or $8,700,000 for the remainder of the terms of the Service Orders for capacity that the Debtors do not need or use. (Worldcom Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) Worldcom Inc.'s 8.0% bonds due 2006 (WCOM06USN1), DebtTraders reports, are trading at about 23 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOM06USN1 for real-time bond pricing. WYNDHAM INT'L: Completes Sale Transaction with Sunstone Hotels -------------------------------------------------------------- Wyndham International Inc., (AMEX:WBR) has closed the sale of two properties for $102.7 million to Sunstone Hotels and Westbrook Hotel Partners IV, LLC. The closing completes the agreement reached by the two parties in September that outlined the sale of 12 non-proprietary assets and one Wyndham-branded asset, which will retain the Wyndham flag pursuant to a ten-year franchise agreement, for approximately $447 million. On Dec. 5, Wyndham announced the closing of 11 of the 13 properties for $344.7 million. The company said it would use the net proceeds from the sales to pay down debt. "We are pleased that we have completed this transaction as it continues our strategic plan to become a proprietary branded hotel operating company. We intend to continue our strategy to sell the remaining 34 non-strategic assets as we enter the New Year," stated Fred J. Kleisner, chairman and chief executive officer of Wyndham International Inc. The two properties sold in this transaction include: Embassy Suites Chicago Wyndham Greenspoint Houston All 13 properties will be managed or asset managed by Sunstone Hotel Investors, LLC. Sunstone currently operates 61 upscale and mid-scale hotels with 14,838 rooms throughout the United States with approximately 90 percent being full-service hotels. Westbrook Hotel Partners IV, LLC is a newly formed entity of Westbrook Partners Real Estate Fund IV. Bear, Stearns & Co. Inc., and J.P. Morgan Securities Inc., served as financial advisors to Wyndham in connection with the transaction. Wyndham International Inc., offers upscale and luxury hotel and resort accommodations through proprietary lodging brands and a management services division. Based in Dallas, Wyndham International owns, leases, manages and franchises hotels and resorts in the United States, Canada, Mexico, the Caribbean and Europe. For more information, visit http://www.wyndham.com As previously reported, Standard & Poor's assigned a B- rating to Wyndham's $750 million debentures and B corporate credit rating. * 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 0 Freeport-McMoran 7.5% due 2006 92 - 94 +2 Global Crossing Hldgs9 .5% due 2009 3 - 4 +1 Globalstar 11.375% due 2004 8.5 - 9.5 +0.5 Lucent Technologies 6.45% due 2029 43 - 45 +1 Polaroid Corporation 6.75% due 2002 3 - 5 0 Terra Industries 10.5% due 2005 90 - 92 0 Westpoint Stevens 7.875% due 2005 29 - 31 +4 Xerox Corporation 8.0% due 2027 55 - 57 0 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. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***