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544(b) further ignores Second Circuit precedent and upsets the equitable balance struck by a holistic reading of the bankruptcy code, Chief Judge Shiff opines. The Bankruptcy Code has traditionally served as a fulcrum to balance competing economic interests. On the one hand, those who extend credit seek the preservation of their collateral in order to enforce the benefit of their bargain. On the other, a broader public policy, recognizing the social benefits of providing a fresh economic start to financially distressed debtors, encourages, in the context of chapter 11, rehabilitation by providing a reasonable opportunity for a successful reorganization within a reasonable time. A basic assumption that underlies American bankruptcy law is that it is often preferable to encourage and facilitate rehabilitation of businesses in financial trouble instead of providing for liquidation only. From a broad perspective, rehabilitation is better for the economy because it minimizes unemployment and waste of business assets. It is much more productive to use assets in the industry for which they were designed instead of selling them as distressed merchandise in liquidation sales. Also, rehabilitating a business is in the best long-term interest of creditors and shareholders. The core objectives of bankruptcy cannot be achieved if those who would otherwise be exposed to transfer avoidance actions, e.g., 11 U.S.C. Secs. 544, 547, 548, and 549, are insulated by the reluctance or inability of a debtor-in-possession to commence and prosecute such actions. The derivative standing of an Official Committee of Unsecured Creditors fills that void where, as here, there is a reasonable basis for the action. Stanwich Financial Services Corp., filed for chapter 11 protection on June 25, 2001, in the U.S. Bankruptcy Court for the District of Connecticut (Bankr. Case No. 01-50831). Robert U. Sattin, Esq., at Reid and Riege, PC, in Hartford, represents the Debtor. The Committee, represented by Diedre A. Martini, Esq., and Pamela B. Corrie, Esq., at Ivey Barnum & O'Mara, in Greenwich, commenced an adversary proceeding (Adv. Pro. No. 02-05023) against a long list of alleged recipients of fraudulent transfers on May 3, 2002. STUDENT ADVANTAGE: Reservoir Capital Forgives About $6MM of Debt ---------------------------------------------------------------- Student Advantage, Inc., (Nasdaq: STAD) closed a series of transactions that will reduce its total debt obligation to Reservoir Capital Partners by approximately $6 million. John Katzman, formerly a director of the company, has agreed to pledge assets to Reservoir to secure $9.5 million of the current indebtedness, and will receive a $1 million fee from the company for the guaranty. Simultaneously, to avoid potential future conflicts, Katzman resigned from the company's Board of Directors as of the closing of the loan. The Reservoir lenders have agreed to lend the company an additional $2 million and have capped the prior debt at $9.5 million, forgiving $6.2 million of current debt. The company's total indebtedness to Reservoir prior to these transactions was $15.7 million. Subsequent to the transactions, the company's total indebtedness to Reservoir is $11.5 million including the new $2 million loan. The company's obligations to the Reservoir lenders and to Katzman will bear interest at 12% annually, and will be due as follows: $3.5 million is due on January 31, 2003, $4 million is due on March 31, 2003 and the remainder is due on the July 1, 2003 maturity date. Recent Events As previously announced, the company received determinations from the Nasdaq Staff indicating that it fails to comply with the market value of publicly-held shares requirement for continued Nasdaq National Market listing, and that its securities are subject to delisting from the Nasdaq National Market. The company also received notice on November 21, 2002 from the Staff that the company did not comply with the minimum $10 million stockholders' equity requirement for continued inclusion in the Nasdaq National Market. The company has appealed the Staff's determination to the Nasdaq Listing Qualifications Panel and a hearing before the Panel is scheduled for Friday, January 10, 2003. There can be no assurance of the results of the hearing. The company is continuing discussions with a group of existing stockholders including its president and chief executive officer regarding a possible acquisition of the company or assets of the company. The company is also pursuing other strategic alternatives. Student Advantage, Inc., (Nasdaq: STAD) is a leading integrated media and commerce company focused on the higher education market. Student Advantage works with more than 1,000 colleges, universities and campus organizations, and more than 15,000 merchant locations to develop products and services that enable students to make purchases less expensively and more conveniently on and around campus. The company's university and business relationships allow it to sell campus-specific consumer products and licensed collegiate sports memorabilia directly to parents, students and alumni. The company reaches its consumer base offline through the Student Advantage Membership and Campus Services and online through its highly-trafficked Web sites http://www.studentadvantage.com http://www.CollegeClub.comand http://www.CollegeSports.comthe hub site for its Official College Sports Network. TANDYCRAFTS INC: Completes Asset Sale Transaction with Newcastle ---------------------------------------------------------------- Tandycrafts, Inc., (OTC Pink Sheets: TACR) together with its wholly owned subsidiaries Tandyarts, Inc., and TAC Holdings, Inc., a leading manufacturer and distributor of photo frames, wall decor and other accents for the home decor market, consummated the sale of substantially all of its assets (together with the assumption of certain liabilities), under Section 363 of the Bankruptcy Code, to an affiliate of Newcastle Partners, L.P., a Dallas based investment fund. The purchase price for the sale of the assets, which was approved in mid- December by the Delaware Bankruptcy Court administering Tandycrafts' chapter 11 cases, was $22,650,000 (plus assumed liabilities). Approximately $20,400,000 was paid to satisfy obligations of certain pre-petition secured creditors of Tandycrafts. The New Company will operate the business under the name of Pinnacle Frames and Accents, Inc. With the completion of the sale, Tandycrafts expects to file shortly with the Bankruptcy Court a chapter 11 plan of liquidation that will distribute remaining sale proceeds (after appropriate holdbacks for ongoing costs of administering the chapter 11 cases) and any other remaining estate assets to creditors in accordance with the requirements of the Bankruptcy Code. It is expected that there will be no distributions to Tandycrafts' common stockholders under such plan and that all such common stock will be cancelled. Michael J. Walsh, the Chairman and Chief Executive Officer of Tandycrafts who will lead the operations of Pinnacle as its President and Chief Executive Officer, said: "We are extremely pleased to have consummated this sale with Newcastle Partners. We would like to acknowledge the support and loyalty of our customers, vendors and fellow associates during Tandycrafts' chapter 11 cases without which this sale would not have been possible." TELEGLOBE INC: BCE Transfers Teleglobe Shares to E&Y Subsidiary --------------------------------------------------------------- BCE Inc., (TSX, NYSE: BCE) transferred all of the issued and outstanding shares in Teleglobe Inc., to 6038441 Canada Inc., a wholly owned subsidiary of Ernst & Young Inc. The shares, being 255,188,014 common shares and 40,000,000 fourth series preferred shares in the capital of Teleglobe, were sold by BCE and certain affiliates for nominal consideration on December 31, 2002. The sale was approved by the Ontario Superior Court of Justice on November 25, 2002. Ernst & Young Inc., is the court appointed Monitor with respect to the proceedings relating to Teleglobe under the "Companies' Creditors Arrangement Act". BCE is Canada's largest communications company. It has 25 million customer connections through the wireline, wireless, data/Internet and satellite services it provides, largely under the Bell brand. BCE leverages those connections with extensive content creation capabilities through Bell Globemedia which features some of the strongest brands in the industry - CTV, Canada's leading private broadcaster, The Globe and Mail, the leading Canadian daily national newspaper and Sympatico.ca, a leading Canadian Internet portal. As well, BCE has extensive e- commerce capabilities provided under the BCE Emergis brand. BCE shares are listed in Canada, the United States and Europe. TELEPANEL SYSTEMS: Net Capital Deficit Widens to C$14 Million ------------------------------------------------------------- Telepanel Systems Inc. (OTCBB:TLSXF) (TSX:TLS), a world leader in electronic shelf label systems for retail stores, announced financial results for the third quarter ended October 31, 2002 (all results are stated in Canadian Dollars). For the nine months ended October 31, 2002, revenue decreased to $1,887,390 as compared to $2,319,213 over the same period last year, while the contribution from sales increased to $1,051,687 from $949,107. For the nine month period ended October 31, 2002, the loss before amortization, interest and under noted items decreased to $641,931 from $1,488,508 for the comparative period last year and decreased to $221,192 from $277,651 for the three- month period ended October 31, 2002 and 2001. The lower loss and the increased contribution from sales reflects the proactive undertaking to streamline and make the organization more efficient, as well as a focus on higher margin products. The loss for the nine-month period ended October 31, 2002, was $3,059,797 as compared to a loss of $4,356,402 for the corresponding period in 2001. At October 31, 2002, Telepanel Systems' balance sheet shows a total shareholders' equity deficit of about $14 million. "Despite the drop in sales, we have increased the contribution from sales and decreased our loss from operations before interest and depreciation in the nine month period ended by almost $850,000 and the quarterly operating loss before interest and depreciation by over $50,000." stated Garry Wallace, President and CEO of Telepanel Systems Inc. Wallace added, "The reduction in our loss for these periods is attributable to the action we took to restructure the company, to focus on higher margin products and to enhance our own capabilities by engaging more resellers and business partners. We are continuing our business strategy of sizing the company to better fit the current opportunities and remain committed to opening the potential of this huge ESL market." Telepanel is a leader in developing wireless electronic shelf labelling systems for retail stores. Telepanel ESLs are placed on the edge of store shelves to show a product's price and other information. Prices are changed by a radio communications link from the store's product database, to provide rapid, accurate pricing updates. Telepanel's systems are integrated with the leading 2.4 GHz RF LANs which allows retailers to take advantage of their investment in IEEE-standard in-store RF networks and extend their use to electronic shelf labels. Telepanel wireless ESLs are installed throughout the United States, Canada, and Europe, with such premier supermarket chains as Adam's Super Food Stores, A & P, Stop & Shop, Big Y, Reasor's, Doll's, Brown's, Stew Leonard's, Grand Union, Wakefern, Berks, Ellington, Port Richmond, Champion, Leclerc, Intermarche, SPAR, and Super U, and at Universal Studios, Hollywood. THOMAS STANLEY: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Thomas Stanley Grading & Hauling, Inc. 1201 NC Highway 68 Stokesdale, North Carolina 27357 Bankruptcy Case No.: 02-13835 Type of Business: Construction management company Chapter 11 Petition Date: December 12, 2002 Court: Middle District of North Carolina (Greensboro) Judge: William L. Stocks Debtor's Counsel: Dirk W. Siegmund, Esq. Ivey, McClellan, Gatton & Talcott, LLP 121-B S. Elm St. P.O. Box 3324 Greensboro, North Carolina 27402-3324 Tel: 336-274-4658 Estimated Assets: $1 to $10 Million Estimated Debts: $1 to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Mainline Supply Co., LLC $175,760 Vulcan Materials Company $97,587 Gastown Oil Company, Inc. $68,819 APAC-Carolina, Inc. $53,919 Carolina Tractor, Inc. $51,916 Senn, Dunn, Marsh & Roland, Inc. $47,794 Hydro Conduit, Inc. $42,794 Unicorn Concrete, LLC $38,715 Tindall Corporation, Inc. $36,500 Erie Insurance Group $35,449 Blue Ridge Drilling, Inc. $30,000 LB Smith, Inc. $29,707 Carolina PreCast Concrete, Inc. $27,643 Loflin Concrete Co., Inc. $26,229 Greensboro Pipe Company, Inc. $21,133 MBNA America $20,847 Martin Marietta, Inc. $19,818 CA Woods Grading & Paving $15,173 Chandler Concrete Company, Inc. $13,773 PSI, Inc. $11,291 TRI-STATE OUTDOOR: Georgia Court Confirms Amended Reorg. Plan ------------------------------------------------------------- On April 25, 2002, certain holders of Tri-State's 11% Notes due 2000, filed an involuntary bankruptcy petition against the Company in the United States Bankruptcy Court for the Middle District of Georgia, Case No. 02-70596, pursuant to Section 303 of the Bankruptcy Code. On April 26, 2002, Tri-State Outdoor Media Group consented to the entry of an order for relief. On or about May 14, 2002, the United States Trustee appointed an official committee of unsecured creditors pursuant to Bankruptcy Code Section 1102. During the period of reorganization, the Company has continued to operate its business and manage its properties as a debtor-in-possession. On November 13, 2002, the Creditors' Committee submitted an Amended Disclosure Statement for the Amended Plan of Reorganization Proposed by the Official Committee of Unsecured Creditors and also filed the Amended Plan of Reorganization Proposed by the Official Committee of Unsecured Creditors. On October 28, 2002, the Company had filed a competing plan of reorganization and disclosure statement, but decided to forego proceeding with its plan of reorganization. A hearing on the confirmation of the Plan was held on December 19, 2002, and the order confirming the Plan was entered on December 23, 2002. Under the terms of the Confirmation Order, certain conditions precedent, which were set forth in the Plan and the Confirmation Order, existed to the effectiveness of the Plan. As used in the Plan and the Confirmation Order, the term "Effective Date" means the later of (i) twenty (20) days after entry of Confirmation Order or (ii) the first business day following satisfaction of the conditions precedent to the Effective Date specified in Section 13.2 of the Plan, unless otherwise waived as provided in the Plan. Among other things, the Plan will result in the surrender of all instruments evidencing or securing an impaired claim to the Company on the Effective Date, the surrender of all allowed Senior Note Claims (as defined in the Plan), the extinguishment of the Company's common stock existing prior to the Effective Date and the issuance of new shares of common stock of Tri-State Outdoor Media Group, Inc., all as provided in the Plan. UNITED AIRLINES: Asks Court to OK Payment of Prepetition Taxes -------------------------------------------------------------- UAL Corporation and its debtor-affiliates seek the Court's authority to pay Sales and Use Taxes, Transportation Taxes, Fees and Passenger Facility Charges pursuant to Sections 105(a), 507(a)(8) and 541 of the Bankruptcy Code. James H.M. Sprayregen, Esq., at Kirkland & Ellis, explains that in the ordinary course of their businesses, the Debtors collect and pay various sales, use and fuel taxes. Specifically, the Debtors: (a) collect fuel, Value Added Taxes and sales taxes from their customers for various taxing authorities and incur use, liquor, gross receipts and fuel taxes, which must be paid to taxing authorities -- Sales and Use Taxes; (b) collect from their customers, for various taxing authorities, excise taxes on the amount paid for air transportation -- Transportation Taxes; (c) are charged fees, including the Aviation Security Infrastructure Fee, overflight fees and landing and other access fees, licenses, airport performance bond-related obligations (excluding municipal bonds), and other similar charges and assessments by various taxing and licensing authorities and collect customs, immigration, security and inspection fees from their customers; and (d) collect fees on passenger tickets charged by domestic and foreign airports for general passenger facilities at such airports -- Passenger Facility Charges or PFCs. As of October 31, 2002, the Debtors owed approximately $34,400,000 of Sales and Use Taxes incurred or collected from prepetition sales had not yet been paid to the Authorities. The Debtors estimate that the amount of prepetition Transportation Taxes owing to the Authorities as of October 31, 2002, is approximately $130,000,000. Of this approximately $130,000,000, approximately $54,300,000 is for federal transportation taxes (which includes $3,100,000 owed by United Loyalty Services, Inc.), approximately $16,600,000 is for federal segment taxes, approximately $10,900,000 is for federal departure and arrival taxes, approximately $500,000 is for federal freight taxes and approximately $47,700,000 is for foreign transportation and departure taxes. The Debtors estimate that the amount of prepetition fees owing to the Authorities as of October 31, 2002, is approximately $81,000,000, which consists of: $32,400,000 -- landing fees $17,100,000 -- U.S. federal security fees $10,100,000 -- foreign passenger fees $7,300,000 -- U.S. immigration fees $5,100,000 -- overflight charges $3,000,000 -- Aviation Security and Infrastructure Fees $2,200,000 -- federal customs fees $2,200,000 -- foreign airport use charges $1,400,000 -- Animal and Plant Health Inspection Service Fee $200,000 -- foreign customs fees, foreign noise fees, and airport performance-related bonds As of the Petition Date, the Debtors had collected PFCs from prepetition tickets that had not yet been paid to the Authorities. The Debtors estimate that the total amount of prepetition PFCs collected as of October 31, 2002, was approximately $23,000,000. According to Mr. Sprayregen, payment is authorized under Section 105 of the Bankruptcy Code and the Doctrine of Necessity. Section 105(a) provides that: "[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. Section 105(a). The purpose of Section 105(a) is "to assure the Bankruptcy Court's power to take whatever action is appropriate or necessary in aid of the exercise of its jurisdiction." 2 Collier, Bankruptcy Paragraph 105.01, at 105-5-6 (15th ed. 2000). Thus, Section 105 essentially codifies the Court's inherent equitable powers. See Management Tech. Corp. v. Pardo, 56 B.R. 337, 339 (Bankr. D.N.J. 1985) (court's equitable power derived from Section 105 of the Bankruptcy Code). Furthermore, in many states that have laws providing that the Sales and Use Taxes, Transportation Taxes, Fees or PFCs constitute "trust fund" taxes, certain officers and directors of the collecting entity may be held personally liable for the payment of the funds to Authorities. To the extent any accrued Sales and Use Taxes, Transportation Taxes, Fees or PFCs of the Debtors were unpaid as of the Petition Date in the jurisdictions, the Debtors' officers and directors may be subject to lawsuits in the jurisdictions during the pendency of these cases. Potential lawsuits would prove extremely distracting for the Debtors, the named officers and directors whose attention to the Debtors' reorganization process is required, and this Court, which might be asked to entertain various motions seeking injunctions regarding potential state court actions. In addition, the threat of personal liability in a lawsuit could cause the officers and directors to resign. Resignations at this time would be disruptive to the Debtors' reorganization efforts and detrimental to the preservation of the estates. Mr. Sprayregen explains that payment of the Sales and Use Taxes, Transportation Taxes, Fees and PFCs will avoid potential administrative difficulties and the interruption of the Debtors' business activities. If the Debtors do not pay these amounts, the Authorities may attempt to suspend the Debtors' business operations, file liens, seek to lift the automatic stay and pursue other remedies that will harm the estates if the Sales and Use Taxes, Transportation Taxes, Fees and PFCs are not paid in a timely manner. Furthermore, the Debtors believe that some, if not all, of the Authorities will cause the Debtors to be audited if the Debtors do not pay the amounts. Audits will unnecessarily divert the Debtors' attention away from the reorganization process. In addition, at many airports, companies operating an airline are required to post airport performance bonds to secure performance of obligations at the relevant airport. (United Airlines Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports United Airlines' 9.00% bonds due 2003 (UAL03USR1) are trading at about 9 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL03USR1for real-time bond pricing. US AIRWAYS: Training Instructors Ratify Cost-Saving Agreement ------------------------------------------------------------- US Airways' flight crew training instructors, represented by the Transport Workers Union, ratified their agreement on the company's restructuring plan. Tentative agreements for the three TWU groups -- flight crew training instructors, simulator engineers and dispatchers -- were reached in mid- December. The simulator engineers ratified their agreement last Friday and the dispatchers are expected to vote on the tentative agreement by early next week. "This is yet another example of the commitment our employees have to the long-term success of US Airways. Together we have taken another step in the right direction," said Jerry A. Glass, US Airways senior vice president of employee relations. The US Airways Air Line Pilots Association (ALPA) Master Executive Council (MEC), with approximately 4,000 members, ratified their tentative cost-savings agreement on Dec. 14, 2002. Since then, tentative agreements have been reached with all other labor unions. In addition to ALPA and TWU, US Airways employees are represented by the Association of Flight Attendants (AFA), with approximately 7,500 members; the Communications Workers of America (CWA), with approximately 6,300 members (representing reservations sales representatives; airport ticket counter and gate agents); the International Association of Machinists (IAM), with approximately 11,100 members (Locals 141 and 141-M, representing fleet service workers and mechanics and related), and the TWU. All other labor groups are expected to vote on their agreements by Jan. 10, 2003. US Airways Inc.'s 9.625% bonds due 2003 (U03USR1), DebtTraders reports, are trading at about 10 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=U03USR1for real-time bond pricing. WARNACO GROUP: Court Approves Settlement with Banco Nacional ------------------------------------------------------------ Pursuant to Federal Rule 9019(a), The Warnaco Group, Inc., and its debtor-affiliates obtained the Court's authority to enter into a settlement agreement with Banco Nacional de Comercio Exterior, S.N.C., under these terms: (a) The Huejotzingo Lease will be deemed terminated as of April 22, 2002; (b) Warnaco will pay the outstanding rent due under the Huejotzingo Lease in the total amount of $104,487, together with $8,000 for the cost of an engineer's report prepared in connection with Warnaco's exit from the Hujotzingo Facility, and will complete certain required repairs identified in the engineers' report; (c) the Huamantla Lease and the Tetla Lease will be amended to terminate on July 31, 2005 and Warnaco, the Initial Term, at its sole discretion, may extend the Initial Term, in the first instance, for a period of one to three years, and, thereafter, for seven successive renewable three-year terms, provided that Warnaco gives at least 12 months prior written notice of any extension; (d) during the Initial Term, the rent payable under the Huamantla and Tetla Leases will be at a discount of 19.2% less than the rent provided for in the existing Leases, and the rent during any renewable term will be at the rate set forth in the existing Leases; (e) the Warnaco Guaranty will be amended to secure the obligations of Vista de Huamantla, S.A. de C.V. and Centro de Corte de Tetla, S.A. de C.V. under the Amended Leases; (f) Banco Nacional will withdraw the Banco Nacional Claim, and, in exchange of the foregoing, Banco Nacional will have an allowed unsecured claim in the amount of $9,500,000 in Warnaco's Chapter 11 case; and (g) Warnaco and Banco Nacional will exchange mutual releases. As previously reported, Banco Nacional owned three pieces of property and manufacturing facilities in the Mexican municipalities of Huejotzingo, Huamantla and Tetla. In October 1998, Warnaco's non-debtor Mexican subsidiaries, Vista de Pueblo, S.A. de C.V., Vista de Huamantla, S.A. de C.V. and Centro de Corte de Tetla, S.A. de C.V., entered into a lease agreement with Banco Nacional for the three facilities for an initial term of 20 years with options to renew for another ten years. To guaranty the payment of rent, J. Ronald Trost, Esq. at Sidley Austin Brown & Wood, LLP in New York, explains, Warnaco executed a Guaranty in favor of Banco Nacional. Banco Nacional has also entered into a Credit Agreement on November 17, 1998 for the benefit of the Mexican Subsidiaries to finance the construction of the Facilities. Under the Credit Agreement, Mr. Trost continues, amounts paid for rent and other amount due and owing under the Leases were applied to amortize the amounts due and owing under the Credit Agreement. Under the Lease, the rent may be accelerated and become immediately due in the event of default. Banco Nacional will also have the right to terminate all the Leases and forfeit the Facilities. The Warnaco Group, Inc., and its debtor-affiliates defaulted under the Leases, when in late 2000, the Debtors decided to close the Huejotzingo Facility and on June 11, 2001, the Debtors filed Chapter 11 protection, thus, triggering the Warnaco Guaranty. Accordingly, on January 4, 2002, Banco Nacional filed a proof of claim, Claim No. 01846, in the amount of $473,760,649 plus $1,000,000 in attorneys' fees. However, the Debtors believe that, at least of the next several years, the Huamantla and Tetla Facilities are crucial to the Debtors' business operation. (Warnaco Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) WHEELING-PITTSBURGH: Seeks Fifth Lease Decision Period Extension ---------------------------------------------------------------- Wheeling-Pittsburgh and its debtor-affiliates, represented by Karen A. Visocan, Esq., at Calfee Halter & Griswold LLP, in Cleveland, Ohio, ask Judge Bodoh to further extend their deadline to assume, reject, or assume and assign unexpired leases of non-residential real property to and including May 7, 2003. Under the provisions of the Bankruptcy Code, debtors must cure any defaults that exist under the leases for Leased Properties, at the time of any assumption thereof, which requirement has obvious significant financial consequences as to the amount of administrative expenses incurred or to be incurred by Debtors' estates. Since the Petition Date, the Debtors have been dealing with a multitude of complex supply, employee and contract issues that typically arise in large and complicated Chapter 11 cases. Simultaneously, the Debtors have been stabilizing operations and working towards the ultimate goal of constructing a plan of reorganization by working diligently to determine whether any third parties have an interest in acquiring all or a part of the Debtors or their facilities and investigating thoroughly various possible reconfigurations of the Debtors' business that would support continued operation as a stand alone business. Since the last extension was granted, the Debtors have made substantial progress toward a reorganization of their businesses, citing as a specific example the Debtors' motion to amend and perform under Amendment No. 8 to the Debtor-in- Possession Credit Agreement. Furthermore, the Debtors point out that they have filed a Plan and Disclosure Statement on December 20, 2002, and expect to consummate that plan on or before March 20, 2003. Accordingly, as the next four months are critical months in terms of the success or failure of the Debtors' reorganization, Ms. Visocan concludes that the Debtors need more time to decide whether to assume or reject unexpired leases in a manner that is consistent with their reorganization plans. The sheer size and volume of these Chapter 11 cases and the complex nature of the reorganization issues involved justify a further extension of the period to assume or reject an unexpired lease of nonresidential property for "cause" because: (i) the decision to assume or reject the Leased Properties is central to the Debtors' plan or plans of reorganization; (ii) the Debtors have not had the time necessary to intelligently appraise their financial situation and the potential value of their assets in terms of the formulation of a plan of reorganization; (iii) the Leased Properties constitute a number of business properties and Debtors need additional time to determine whether to assume or reject these leases; and (iv) the Debtors have complied with all their postpetition obligations under the leases for the Leased Properties in accordance with the Bankruptcy Code. Furthermore, the Debtors are paying their postpetition debts as they become due, are negotiating in good faith with their creditors, have kept the Official Committees fully apprised of their work and progress towards reorganization, and are not seeking the extension to pressure creditors into accepting an unsatisfactory plan. SunTrust Bank's Limited Objection SunTrust Bank is the successor-in-interest to Crestar Bank as Indenture Trustee. SunTrust Bank wants to clarify that, to the extent that its lease involved in the industrial development revenue bond funding, which SunTrust as Indenture Trustee is a party, constitutes a true lease and not a secured financing, the Debtors have not complied with all of their postpetition obligations. According to Victoria E. Powers, Esq., and Eric M. Stoller, Esq., at Schottenstein Zox & Dunn Co., LPA, in Columbus, Ohio, SunTrust serves as Indenture Trustee under an Indenture dated September 1, 1999, between the Director of the State of Nevada Department of Business and Industry, and the Indenture Trustee, relating to the issuance of $3,100,000 Industrial Development Revenue Bonds (Wheeling-Pittsburgh Steel Corporation Project) Series 1999A, and $400,000 Industrial Development Revenue Bonds (Wheeling-Pittsburgh Steel Corporation Project) Taxable Series 1999B. The proceeds of these Bonds were loaned by the Director to FBW Leasecorp, Inc., a Maryland corporation, under a Financing Agreement dated September 1, 1999, between the Director and FBW. By the terms of the Financing Agreement, FBW agreed to lease a project consisting of the acquisition, construction, improvement and equipping of a manufacturing facility in Churchill County, Nevada, to the Debtors as users of the Project. Under the Lease, the Debtors are required to make monthly rental payments consisting of payments required to service debt on the Bonds. This Lease appears to be included in the Debtors' Extension Request. While the Indenture Trustee has sought this clarification before, the Court has granted the extensions, but has included a clarification in response to SunTrust's objection, and SunTrust wants to continue that tradition. The Indenture Trustee does not otherwise object to the extension requested. First Union Bank Also Seeks Clarification First Union National Bank as Indenture Trustee is also represented by Ms. Powers and Mr. Stoller. First Union makes a limited objection to the Debtors' requested extension on the same basis as that of SunTrust. Like SunTrust, First Union is an Indenture Trustee under an Indenture dated as of April 1, 1999, between the Industrial Development Authority of Greensville County, Virginia, and the Indenture Trustee, relating to the issuance of $4,500,000 Industrial Development Revenue Bonds (Wheeling-Pittsburgh Steel Corporation Project) Series 1999A, and $180,000 Industrial Development Revenue Bonds (Wheeling- Pittsburgh Steel Corporation Project) Taxable Series 1999B. These bonds were issued primarily to finance and refinance the acquisition of real property in the County of Greenville, Virginia, and the acquisition, construction and equipping of a facility for the manufacturing of corrugated steel products on the Site. The Facility and Site were leased to the Debtors under a Lease Agreement dated August 17, 1998, between the Authority and the Debtors. To the extent that its lease constitutes a true lease and not a secured financing, First Union asserts that the Debtors have not complied with all of their postpetition obligations. (Wheeling- Pittsburgh Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) WIRE ROPE: ERISA Terminations Allow 43.5% Dividend to Unsecureds ---------------------------------------------------------------- Wire Rope Corporation of America, Incorporated, maintains three employee retirement plans covering 1,758 current and former employees pursuant to provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Wire Rope tells the U.S. Bankruptcy Court for the Western District of Missouri that it will be unable to successfully reorganize under Chapter 11 of the Bankruptcy Code and will be unable to continue in business outside the Chapter 11 reorganization process if the retirement plans are not terminated. The Official Committee of Unsecured Creditors supports the Debtor's request, as does HSBC Business Credit (USA), Inc., (as agent for itself, National Bank of Canada, and GMAC Canada Ltd.) the Debtor's primary pre-petition secured lender and the lender providing the Debtor's post-petition debtor-in-possession financing. John P. (Jack) Barclay, the largest shareholder of the company and a major creditor, initially filed written Objections to the Motion but at hearing last month announced that he would not oppose the Motion. The Pension Benefit Guaranty Corporation ("PBGC") filed a written Response in which it did not oppose the distress termination of the retirement plans, but asked the Court to require the Debtor to present evidence of the factual and legal grounds for termination so as to enable the Court to make the necessary determinations to meet ERISA's strict criteria for distress terminations. United Steelworkers of America Locals 5783 and 1303, the unions that represent the Debtor's organized employees, did not file any responsive pleadings and stated that they did not oppose the termination of the retirement plans. The Court held a hearing on the Motion in Kansas City, Missouri, on December 6, 2002. Only the Debtor presented evidence. Because of the potential that substantial additional liabilities will be incurred if the retirement plans are not terminated before the end of 2002, the Debtor, the Creditors' Committee, and HSBC urged the Court to rule the Motion before December 31, 2002. After hearing the evidence and the statements of counsel, the Court took the matter under advisement. Judge Venters says that he is firmly convinced that the Debtor cannot reorganize in Chapter 11 and cannot continue to operate successfully outside Chapter 11 unless the retirement plans are terminated, as requested by the Debtor and provided by ERISA. Therefore, the Court will grant the Debtor's Motion, thereby allowing the Debtor to proceed with termination of the retirement plans effective on December 31, 2002, pursuant to the PBGC's guidelines and criteria. Patrice Beckham, the consulting actuary for the Plans for the last 12 years, calculated the potential termination shortfall. Based on total Plan assets of $45.1 million on November 22, 2002, Ms. Beckham estimated the Plans' liabilities on December 31, 2002, are underfunded by no less than $6.3 million using a 10% discount rate, $21.8 million using a 7% discount rate, and $37 million using the published PBGC discount of 5.30% for the first 25 years and 4.25% for all additional years. Next, and more important to the Court's decision, Ms. Beckham projected the cash contributions that would be required to meet statutory minimum funding requirements through 2006 should the Debtor continue with the Retirement Plans (i.e., if they are not terminated). Assuming a midpoint investment return of 7.1% for 2003 through 2005, and making other assumptions that generally assume the continuation of the Plans without change, Ms. Beckham projected that the Debtor would be required to make cash contributions to the Plans totaling $20.7 million through the year 2006. Ira Glazer, an outside consultant who has served as the Debtor's chief restructuring officer and chief executive officer during the bankruptcy proceedings, testified that this projected $20.7 million minimum funding requirement over the next four years would prevent the Debtor from attracting long-term financing to enable it to exit from Chapter 11, would effectively prohibit the Debtor from attracting necessary equity investors, and would prevent the company from surviving outside bankruptcy, even assuming it could attract the financing and equity investments necessary to enable it to obtain confirmation of a reorganization plan and emerge from the bankruptcy process. Mr. Glazer testified that, based on his experience in this and other similar cases, the uncertainty of the Debtor's liability for the Retirement Plans would prevent the Debtor from obtaining necessary financing and equity investment because the minimum funding contributions -- whether $20.7 million or some greater or lesser amount -- will have to be paid over the next four years if the Plans are not terminated now. Douglas Bury, the loan officer who has handled the Debtor's loan for HSBC, the Debtor's primary pre- and post-petition secured lender, testified that HSBC will not continue financing the Debtor unless the Retirement Plans are terminated. HSBC is not a candidate to provide long-term financing for the Debtor post- confirmation. Mr. Bury testified that, in his opinion, the Debtor will not be able to obtain other financing unless the Retirement Plans are terminated. Likewise, potential equity investors are not willing to consider a recapitalization of the Debtor unless the Plans are terminated. Mr. Glazer testified that, in order to successfully reorganize, the Debtor will have to have a minimum equity investment of $10 million. The managing partner of one entity interested in a possible equity investment wrote that "the potential uncertainty around these liabilities would make it impossible for us to proceed with a definitive proposal to recapitalize" the Debtor. Another equity investor took a similar position. Even assuming the Debtor could obtain new long-term financing and the necessary $10 million equity infusion, Mr. Glazer testified that the company's earnings would be insufficient to enable the Debtor to meet the minimum funding requirements for the Plan. In drafting a plan of reorganization, Mr. Glazer has projected "free cash flow" -- that amount remaining after debt service required by the proposed plan -- at: For the Calendar Year Projected Free Cash Flow --------------------- ------------------------ 2003 $2,746,010 2004 $3,447,606 2005 $4,585,775 These free cash flow calculations will fund payments of $1 million a year for each of the next 10 years to pay general unsecured creditors' claims under the Debtor's current draft plan. The final draft may deliver some type of equity interest in the company to unsecured creditors at the end of the 10 years, though that feature of the plan has not yet been finally determined. Mr. Glazer estimated at the Dec. 6 hearing that the general unsecured claims, including an estimated termination liability of $8 million to the PBGC, will be $23 million. Thus, the plan would propose to pay the general unsecured creditors, including the PBGC, approximately 43.5% of the amount of their claims. The Debtor's Plan of Reorganization presently is due to be filed by February 10, 2003. Wire Rope Corporation of America, Incorporated's chapter 11 proceeding pends before the United States Bankruptcy Court for the Western District of Missouri (Bankr. Case No. 02-50493-JWV). WORLD WIDE WIRELESS: Fails to Beat SEC Form 10-K Filing Deadline ---------------------------------------------------------------- World Wide Wireless Communications, Inc., has advised the SEC of a delay in the filing of its year end financial statements. The Company has cited as reason that due to a recent change in holdings in the subsidiary and a lack of cooperation of the subsidiary's management, completion of the year end closing and audit has taken longer than anticipated. As a result, the filing could not be made within the prescribed time period. The Company anticipates that the annual report will be filed on or before the fifteenth calendar day following the prescribed due date. At June 30, 2002, World Wide Wireless' balance sheet shows a total shareholders' equity deficit of about $9 million. WORLDCOM INC: Pulling Plug on 36 Telecommunications Circuits ------------------------------------------------------------ Worldcom Inc., and its debtor-affiliates sought and obtained authority from the Court to reject Service Orders associated with Telecommunications Circuits from these Service Providers: No. of Service Provider Circuits ---------------- -------- Progress Telecom 4 TWC 24 Universal Access 4 NTS 1 MBO Video 1 Norlight 2 Lori R. Fife, Esq., at Weil Gotshal & Manges LLP, in New York, informs the Court that the Debtors purchase certain telecommunications services pursuant to various master service agreements entered into with certain competitive access providers. These services are purchased by entering into a contract known as a service order. The service orders provide point-to-point long haul capacity or intra-LATA capacity. Since the Petition Date, Ms. Fife states that the Debtors have reviewed the operating capacity of its network. This network rationalization process is an ongoing, integral component of the Debtors' long-range business plan. The Debtors determined that it does not require the capacity relating to 36 circuits purchased through service orders under the MSAs. In determining to reject the Service Orders, the Debtors considered network overcapacity, costs, overlap and other inefficiencies, as well as its' 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. Ms. Fife admits that The Debtors currently have no traffic on the Circuits purchased under the Service Orders. The Service Orders have monthly charges of $785,000. Thus, the Circuits provided under the Service Orders are unnecessary and costly to the Debtors' estates. By rejecting the Service Orders, the Debtors save the estates $9,400,000 in administrative expense per annum, or $21,000,000 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. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) Worldcom Inc.'s 7.875% bonds due 2003 (WCOE03USR1), DebtTraders reports, are trading at about 24 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOE03USR1 for real-time bond pricing. WORLDWIDE MEDICAL: Postpones Shareholders' Meeting Indefinitely --------------------------------------------------------------- Worldwide Medical Corp., (OTC BB:WMED) -- http://www.wwmed.com -- the exclusive manufacturer and marketer of First Check(TM) branded home self-screening tests for drugs of abuse, alcohol, cholesterol and colorectal disease, announced today that its Annual Shareholders Meeting previously scheduled for Jan. 15, 2003 has been postponed indefinitely. G. Wendell Birkhofer, acting CEO of Worldwide, explained: "In November, after the announcement of our intention to hold the Annual Shareholders Meeting in January 2003, our CEO and two of our directors resigned for personal reasons. "The remaining members of the board of directors would like extra time to review candidates for the open board seats, and to strategize about the company's management team in general. As a result, they have decided to postpone the meeting until the Spring of 2003 and will announce a new firm date as soon as reasonably possible." The company further announced that Daniel McGuire, who resigned in November as president and CEO of the company, was removed from the board of directors on Dec. 26, 2002, due to conflicts of interest with existing creditors. Worldwide Medical Corp.'s September 30, 2002 balance sheet shows that total liabilities exceeded its total assets by about $634,000. * BOOK REVIEW: Jacob Fugger the Rich: Merchant and Banker of Augsburg, 1459-1525 -------------------------------------------------------------- Author: Jacob Streider Publisher: Beard Books Hardcover: 227 pages List Price: $34.95 Review by Gail Owens Hoelscher Buy a copy for yourself and one for a colleague on-line at http://amazon.com/exec/obidos/ASIN/1587981092/internetbankrupt Quick, can you work out how much $75 million in sixteenth century dollars would be worth today? Well, move over Croesus, Gates, Rockefeller, and Getty, because that's what Jacob Fugger was worth. Jacob Fugger was the chief embodiment of early German capitalistic enterprise and rose to a great position of power in European economic life. Jacob Fugger the Rich is more than just a fascinating biography of a powerful and successful businessman, however. It is an economic history of a golden age in German commercial history that began in the fifteenth century. When the book was first published, in 1931, The Boston Transcript said that the author "has not tried to make an exhaustive biography of his subject but rather has aimed to let the story of Jacob Fugger the Rich illustrate the early sixteenth century development of economic history in which he was a leader." Jacob Fugger's family was one of the foremost family in Augsburg when he was born in 1459. They got their start by importing raw cotton, by mule, from Mediterranean ports. They later moved into silk and herbs and, for a long while, controlled much of Europe's pepper market. Jacob Fugger diversified into copper mining in Hungary and transported the product to English Channel and North Sea ports in his own ships. A stroke of luck led to increased mining opportunities. Fugger lent money to the Holy Roman Emperor Maximilian I to help fund a war with France and Italy. Mining concessions were put up as collateral. The war dragged on, the Emperor defaulted, and Fugger found himself with a European monopoly on copper. Fugger used his extensive business network in service of the Pope. His branches all over Europe collected payments due the Vatican and issued letters of credit that were taken to Rome by papal agents. Fugger is credited with creating the first business newsletter. He collected news of evolving business climate as well as current events from his agents all across Europe and distributed them to all his branches. Fugger's endeavors wee not universally applauded. The sin of usury was still hotly debated, and Fugger committed it wholesale. He was sued over his monopoly on copper. He was involved in some messy bribes in bringing Charles V to the throne. And, his lucrative role as banker in the sale of indulgences, those chits that absolve the buyer of sin, raised the ire of Martin Luther himself. Luther referred to Fugger specifically in his Open Letter to the Christian Nobility of the German nation Concerning the Reform of the Christian Estate just before being excommunicated in 1521. Fugger went on, however, to fund Charles V's war on Protestanism and became even richer. Fugger built many churches and buildings in Augsburg. He was generous to the poor and designed the world's first housing project. These buildings and lovely gardens, called the Fuggerei, are still in use today. A New York Times reviewer said that Jacob Fugger the Rich, a book "concerned with the most famous, most capable, and most interesting of all [the members of the Fugger family] will be as interesting for the general reader as for the special student of business history." This observation is just as true today as in 1931, when first made. Jacob Streider was a professor of economic history at the University of Munich. ********* 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 2003. 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 $675 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 ***