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/raid1/www/Hosts/bankrupt/TCR_Public/030211.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, February 11, 2003, Vol. 7, No. 29 Headlines A NOVO BROADBAND: Wants Lease Decision Period Extended to May 19 ADELPHIA BUSINESS: Exclusive Period Hearing Continues on Feb. 28 ADELPHIA COMMS: Wants Okay to Sign-Up Pearl Meyer as Consultants ADVANCED TISSUE: Files Plan and Disclosure Statement in Calif. AGILENT TECH: S&P Cuts Corp. Credit & Senior Note Ratings to BB AGRILINK FOODS: Changes Name to Birds Eye Foods Effective Feb 10 AIR CANADA: Operating Losses Spur S&P to Cut Credit Rating to B AK STEEL: Has No Plan to Suspend Shipments to General Motors ALLEGHENY ENERGY: Bank Lenders Extend Waivers to Feb. 14 AMERICAN COMMERCIAL: Hires Richard Weingarten for Fin'l Advice AMERICAN MEDIA: Reports Several Executive Promotions at Weider ANNTAYLOR STORES: Total Net Sales Slide-Down 3.7% in January APPLIED DIGITAL SOLUTIONS: Prepares Prospectus for 50MM Shares ASARCO INC: Fitch Cuts Debt Ratings to DDD over Missed Payment ATSI COMMS: Two Operating Units File for Chapter 11 Protection ATSI COMMS: Case Summary & 20 Largest Unsecured Creditors ATSI COMMS: Board Approves Planned Merger with CCC GlobalCom BCE INC: Regains Full Ownership of Sympatico.ca Portal B/E AEROSPACE: Moody's Junks Three Senior Subordinated Notes BETHLEHEM STEEL: Board Approves Asset Sale to Int'l Steel Group BETHLEHEM STEEL: Intends to Terminate Retiree Insurance Benefits BETHLEHEM STEEL: USWA Condemns Retiree Benefit Termination BROADWING INC: Tinkers with Certain Executive Employment Pacts BUDGET GROUP: Wants Plan Filing Exclusivity Extended to June 2 CANNONDALE CORP: Nasdaq Knocking-Off Shares Effective Today CANNONDALE CORP: Creditors' Meeting Scheduled for March 3, 2003 CHARMING SHOPPES: Comparable Store Sales Down by 1% in January CITGO PETROLEUM: Fitch Hatchets Ratings over Liquidity Concerns CONSECO FINANCE: Seeks Approval of Proposed Lift Stay Procedures CONSECO INC: TOPrS Committee Hires Saul Ewing as Primary Counsel CORNING INC: Foresees Profitability Return by Third Quarter CORNING INC: Expects Continued Strong Growth in Glass Business CREST 2003-1: S&P Rates $180-Mill. Preferred Share Issue at BB- DELTRONIC CRYSTAL: Case Summary & Largest Unsecured Creditors DOANE PET CARE: Updates Q4 and Fiscal 2002 Earnings Guidance EL PASO CORP: S&P Lowers L-T Corp. Credit Rating to B+ from BB ENCOMPASS SERVICES: Earns Final Nod for $60-Mill. DIP Financing ENRON CORP: Exclusivity Extension Hearing Slated for February 20 ETHYL CORP: Meets Earnings and Debt Reduction Targets in 2002 FARMLAND: Marketing Pact with Mississippi Chemical Terminated FIRST INT'L: Fitch Cuts Notes' Ratings to Low-B & Junk Levels FIRST-UNION LEHMAN: S&P Hatchets Ratings on Classes K & L Notes FORT WASHINGTON: S&P Puts BB 2nd Priority Sr Notes on Watch Neg. GALEY & LORD: Court Stretches Plan Exclusivity through March 31 GENTEK INC: Wants Plan Filing Exclusivity Stretched Until May 9 GENUITY INC: Court Okays Lazard Freres to Render Fin'l Advice GLIMCHER REALTY: Closes Community Center Asset Sale for $9 Mill. GLOBAL CROSSING: Selling Arizona Property to Food for the Hungry ICO INC: Fiscal First Quarter 2003 Net Loss Tops $2.8 Million INTEGRATED HEALTH: Wins Okay to Close Rotech Subsidiary Cases INTERWAVE COMMS: Delays Reverse Split Decision Indefinitely J. CREW GROUP: Comp Store Sales Plummet 19% in January MACKIE DESIGNS: Expects to Close Sun Capital Deal by Friday LA PETITE: Seeking Covenant Violation Waiver Under Credit Pact LYONDELL CHEMICAL: Board Declares Regular Quarterly Dividend METROPOLITAN ASSET: Fitch Drops Class B-1 Note Rating to D NASH FINCH: Seeking SEC Concurrence with Accounting Approach NASH FINCH: Deloitte's Resignation Prompts S&P to Cut Ratings NATIONAL CENTURY: Cash Collateral Pact in Place through May 2 NATIONAL STEEL: Earns Approval of Russell Settlement Agreement NATIONSRENT: UST Says Disclosure Statement Lacks Information NAVIGATOR GAS: Wants to Honor Foreign Creditors' Claims NORTH STREET: Fitch Hatchets Low B- & Junk-Rated Notes' Ratings NORTHWEST AIRLINES: Aircraft Mechanics Cite Past Broken Promises ORBITAL IMAGING: Promotes 2 Senior Staff to Vice Pres. Positions PANACO INC: Robert McMillan Steps Down from Board of Directors QWEST COMMS: Applauds Court's Decision on Milberg Weiss' Request RAILAMERICA INC: Initiates $100-Mill. Asset Rationalization Plan ROWECOM INC: Case Summary & 30 Largest Unsecured Creditors SIMON TRANS: Secures Nod to Hire Logan & Company as Ballot Agent SPECTRASCIENCE INC: Court Approves Conversion to Chapter 11 Case SUN HEALTHCARE: Pursuing Major Lease Restructuring Initiative TECSTAR INC: Wants Plan Filing Exclusivity Stretched to April 4 TOKHEIM CORP: Danaher & First Reserve Pitch Best Bids at Auction TRENWICK: James F. Billett, Jr. Resigns as Officer & Director UNITED AIRLINES: Traffic Up 5.8% as Load Factor Rises to 70.9% UNITED AIRLINES: U.S. Trustee Amends Unsecured Creditors' Panel US AIRWAYS: Wants to Undertake Pilot Plan Distress Termination USG CORP: Asks Court to Move Lease Decision Deadline to Aug. 29 WESTAR: Fitch Calls Financial Plan a Constructive Credit Event WHEELING-PITTSBURGH: Wants Solicitation Exclusivity Extension WORLDCOM INC: Wins Court Nod for $9.8-Mill. BCT & Savannah Sale Z-TEL TECHNOLOGIES: Fails to Maintain Nasdaq Listing Standards * It's Now Pachulski, Stang, Ziehl, Young, Jones & Weintraub * Leading Silicon Valley Lawyers to Join O'Melveny & Myers * Large Companies with Insolvent Balance Sheets ********* A NOVO BROADBAND: Wants Lease Decision Period Extended to May 19 ---------------------------------------------------------------- A Novo Broadband, Inc., asks the U.S. Bankruptcy Court for the District of Delaware to extend its deadline to make lease disposition decisions. The Debtor asks the Court to extend the deadline through May 19, 2003. The Debtor tells the Court that it has moved swiftly to reject unexpired nonresidential real property leases for sites that are no longer necessary for its operations. However, to date, the Debtor has not been able to fully evaluate each of its Unexpired Leases. Accordingly, an extension of time to determine whether to assume, assume and assign, or reject the Unexpired Leases, is necessary to preserve the status quo with respect to the Debtor's estate and to allow the Debtor to make decision with respect to the Unexpired Leases in the context of either a sale of the business or a stand-alone reorganization. The value of the Debtor's business may jeopardized if the Debtor loses the right to assume and assign any of the remaining Unexpired Leases. A Novo Broadband, Inc., a business engaged primarily in the repair and servicing of broadband equipment for equipment manufacturers and operators of cable and other broadband systems in North America, filed a chapter 11 petition on December 18, 2002 (Bankr. Del. Case No. 02-13708). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., at Young, Conaway, Stargatt & Taylor represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $12,356,533 in total assets and $10,577,977 in total debts. ADELPHIA BUSINESS: Exclusive Period Hearing Continues on Feb. 28 ---------------------------------------------------------------- The hearing on Adelphia Business Solutions, Inc., and its debtor-affiliates' request for more time to propose a plan of reorganization has been continued to February 28, 2003 at 9:45 a.m. Accordingly, the ABIZ Debtors' exclusive period to file a plan without interference from other parties-in-interest under 11 U.S.C. Sec. 1121 is extended until the conclusion of that hearing. As previously reported, Adelphia Business Solutions, Inc., and its debtor-affiliates asked the Court for an extension of the deadlines to (A) file a plan of reorganization to May 31, 2003; and (B) solicit acceptances of that plan to July 31, 2003. (Adelphia Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADELPHIA COMMS: Wants Okay to Sign-Up Pearl Meyer as Consultants ---------------------------------------------------------------- Myron Trepper, Esq., at Willkie Farr & Gallagher, in New York, recounts that on January 16, 2003, after an exhaustive six-month search process, the Adelphia Communications Debtors' Board of Directors approved the appointment of William Schleyer as Chairman of the Board and Chief Executive Officer and Ronald Cooper as President and Chief Operating Officer. Messrs. Schleyer and Cooper are to be employed pursuant to the terms of employment agreements, which are the result of substantial arm's-length negotiations between each of them and the ACOM Debtors. These negotiations involved substantial participation from the major parties-in-interest in these cases. Among other factors and considerations, the Board sought the advice and assistance of Pearl Meyer & Partners, Inc., a highly respected compensation consulting firm, in connection with its deliberations. Thus, the ACOM Debtors seek the Court's authority to employ Pearl Meyer to continue to assist them as executive compensation consultants in these Chapter 11 cases. The ACOM Debtors intend to utilize Pearl Meyer to advise them and the Board in connection with these matters: A. Employment Agreements; B. preparation of an expert report and testimony as to the reasonableness of certain of the Debtors' directors or officers' compensation; C. development of a key employee retention plan and long- term incentive plan for certain of the Debtors' employees; D. compensation programs for the Board; E. company-wide salary and incentive policies; F. employment and compensation of any new members of the Debtors' senior management team and ACC's Board; and G. litigation in connection with any of these issues. Mr. Trepper informs the Court that Pearl Meyer is one of the leading executive compensation consulting firms, specializing in the creation of innovative compensation programs to attract, retain, motivate and reward key employees and directors. Founded in 1989, Pearl Meyer has been a leader in executive compensation consulting and has provided counsel to the senior management and boards of directors of dozens of public and private companies on matters of executive compensation, performance and organization, including numerous Fortune 500 companies in the United States and abroad. Pearl Meyer frequently serves as an outside consultant to board compensation committees in the discharge of their fiduciary duties. Mr. Trepper relates that Pearl Meyer has pioneered major innovations in compensation design, particularly in the area of equity incentives, including omnibus stock plans, long-term performance incentives, career shares, equity options, performance management systems, stock grants for directors, protection of unfunded executive benefits, and certain deferred compensation arrangements. If necessary, Pearl Meyer could easily be qualified by the Court as an expert on matters of executive compensation as its comprehensive annual surveys of trends in executive pay, board compensation and use of corporate equity are widely cited, and the firm is regularly quoted by the general and business media including The New York Times. Pearl Meyer will seek compensation for its services at its standard hourly rates: Partners $600 - 900 Consultants $125 - 550 Additionally, Pearl Meyer will seek reimbursement of out-of- pocket expenses incurred in performing services for the Debtors. The professionals who primarily will render services in these cases are: Pearl Meyer, Partner $900/hour Joseph Sorrentino, Consultant $450/hour On January 3, 2003, Willkie Farr, on the Debtors' behalf, remitted a $10,000 retainer to Pearl Meyer. Pearl Meyer will apply its retainer consistent with the applicable provisions of the Interim Compensation Procedures Order. The Debtors have agreed to indemnify and hold harmless Pearl Meyer and its directors, officers, employees, affiliates, agents and controlling persons during the pendency of these cases pursuant to the provisions of the indemnification letter dated January 21, 2003. Pearl Meyer, Chairman of Pearl Meyer & Partners, assures the Court that the firm has not represented and has no relationship with the Debtors, their major creditors or equity security holders, or any other significant parties-in-interest in these cases, in any matter relating to these cases. In addition, Pearl Meyer's principals and professionals: -- do not have any connection with the Debtors, their major creditors and equity holders, or any party-in-interest, or their attorneys; -- do not hold or represent an interest adverse to the estates; and -- are "disinterested persons" within the meaning of Section 101(14) of the Bankruptcy Code. However, Mr. Meyer discloses that the firm was an executive compensation consultant to MacKay Shields LLC, ABN Amro Bank N.V., Bankers Trust Company, CIBC, Deutsche Bank AG, Bank of America N.A., Goldman Sachs & Co., J.P. Morgan Chase & Co., and The Walt Disney Co. None of the consulting provided to these clients related to bankruptcy or litigation, nor did the consulting relate to the Debtors. (Adelphia Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) Adelphia Communications' 10.875% bonds due 2010 (ADEL10USR1) are trading at about 42 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL10USR1 for real-time bond pricing. ADVANCED TISSUE: Files Plan and Disclosure Statement in Calif. -------------------------------------------------------------- Advanced Tissue Sciences, Inc., (OTC BB: ATISQ) has filed a proposed Liquidating Plan of Reorganization and accompanying Disclosure Statement with the United States Bankruptcy Court for the Southern District of California. The Plan and Disclosure Statement were filed within the 120-day period in which Advanced Tissue Sciences has the exclusive right to file a Plan. The company now has the exclusive right for an additional 60 days to obtain confirmation of the Plan. The key provisions of the Plan include the following: -- All secured and unsecured creditors with allowed claims will be paid in full with interest. -- The proposed effective date of the plan is March 31, 2003. At the close of business on that date, the stock of Advanced Tissue Sciences, Inc., will immediately and permanently cease to trade, and all of the shares of the company's stock will be cancelled and converted into interests in a liquidating trust. After such date, the company intends to terminate its registration under the Exchange Act. -- A liquidating trust will be formed to distribute cash from the liquidation of the remaining assets. Holders of the company's stock at the time of the effective date of the Plan will receive a non-trading, non-transferable interest in the liquidating trust equal to the pro rata interest they previously held in the common stock of the company. If cash is available for distribution to stockholders, the initial distribution by the trust to former stockholders will occur not later than 60 days after the effective date. Further distributions, if any, will follow as funds are collected and/or assets are sold. -- The Disclosure Statement filed includes a list of assumptions and a projected potential distribution calculation. There is no assurance that the assumptions used to estimate the distributions to stockholders will prove valid. These projections are neither predictions nor forecasts of future events or of expected results. Because of the complexity of the estate and the number of sales that remain to be undertaken, management expects that the actual results will differ from these projections. The direction and amount of the difference between the actual results and these assumptions and projections cannot be estimated. Based on the assumptions and projections as discussed in the Disclosure Statement, it is projected that the distribution to stockholders will be made as follows: * an initial distribution to former stockholders of approximately $.10 (ten cents) per share following Plan effectiveness. * one or more subsequent distributions that are currently projected to total $.20 (twenty cents) per share, projected through the end of 2005. * The company does not guarantee that the above results will be achieved. -- The Liquidating Trust will not be required to make any distribution to former shareholders where the value is less than $200 unless the distribution is a final distribution of the Liquidating Trust. -- Since the company expects creditors will be paid in full, stockholders will receive their pro rata interest in the remaining value of Advanced Tissue Sciences' assets, if any, via the liquidating trust, and there are no junior classes to stockholders, the company believes that the Plan may be confirmed by the Court even if the stockholders were to vote against the Plan. Therefore, the company is asking the Court to approve the Disclosure Statement and confirm the Plan at a single hearing in an effort to save the time and money that would otherwise have to be spent in a solicitation of votes. The foregoing provisions, including the assumptions integral to the projections, and other information important to stockholders and creditors are discussed more fully in the Plan and Disclosure Statement. Shareholders and creditors are urged to read the Plan and Disclosure Statement in their entirety. The Plan and Disclosure Statement will be promptly filed with the Securities and Exchange Commission as attachments to a Form 8-K. This will allow stockholders and creditors to view the documents via the SEC's Internet site at http://www.sec.gov Stockholders and creditors or other interested parties may also request, at no cost, a written copy of the Disclosure Statement and Liquidating Plan of Reorganization by contacting Lillian L. Ton, Gibson, Dunn & Crutcher LLP, 4 Park Plaza, Suite 1400, Irvine, California 92614-8557, (949) 451-3800. The hearing for the combined approval of the Disclosure Statement and confirmation of the Plan is scheduled for 10:00 a.m. PST on March 19, 2003. If the plan is confirmed at that time as submitted, it will become effective at 5:00 p.m. eastern time on March 31, 2003. Any oppositions to confirmation of the Plan or objections to the adequacy of the Disclosure Statement must be served and filed no later than Friday, March 7, 2003. Oppositions to confirmation of the Plan or objections to the adequacy of the Disclosure Statement must be served on counsel for the company: Craig H. Millet, Esq. Eric J. Fromme, Esq. Gibson, Dunn & Crutcher LLP 4 Park Plaza, Suite 1400 Irvine, CA 92614-8557 and the United States Trustee: Tiffany L. Carroll Office of the United States Trustee 402 W. Broadway, Suite 600 San Diego, CA 92101 An original and one copy of any opposition to confirmation of the Plan or objection to the adequacy of the Disclosure Statement, together with any supporting exhibits or declarations and a certificate of service, must also be filed with the Clerk of the Bankruptcy Court: United States Bankruptcy Court Jacob Weinberger United States Courthouse 325 West "F" Street San Diego, CA 92101 AGILENT TECH: S&P Cuts Corp. Credit & Senior Note Ratings to BB --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior note ratings on Agilent Technologies to 'BB' from 'BBB-'. At the same time, the existing bank loan rating was withdrawn. The ratings downgrade is based on subpar operating performance and weakening credit measures. The rating outlook is negative on Palo Alto, California-based Agilent, which serves the communications, electronics, and life science markets with test, measurement, and monitoring instruments, as well as semiconductor components. Total rated debt is $1.15 billion. Agilent will report a substantial operating loss for the fiscal first quarter ended January 2003, as sales were almost 20% lower than in the fiscal fourth quarter of 2002. This was the company's seventh consecutive quarterly loss. "Ratings could be lowered unless operating performance stabilizes and there is meaningful sequential progress toward returning to profitability," said Standard & Poor's ratings analyst Andrew Watt. Standard & Poor's believes end-market conditions are likely to remain difficult over the near term, challenging management efforts to improve operating performance. Therefore, despite considerable restructuring actions over the past year, the timing of the company's return to sustained profitability is uncertain. Management expects to reach profitability at sales levels of $1.6 billion per quarter. It expects to report that sales for the 2003 first fiscal quarter were $1.35 billion-$1.45 billion. AGRILINK FOODS: Changes Name to Birds Eye Foods Effective Feb 10 ---------------------------------------------------------------- Agrilink Foods, the country's largest manufacturer and marketer of frozen vegetables and a major processor of other food products, reported its second quarter results. Pretax income from continuing operations for the second quarter of fiscal 2003 increased 3.3 percent or approximately $0.8 million, to $24.9 million from $24.1 million in the prior year. The Company's results were positively impacted by actions taken throughout the last year to reduce operating costs and interest expense. Interest expense was approximately $4.0 million lower than the prior year, reflecting the $140 million reduction in net debt from Vestar Capital Partners' August 19, 2002, equity investment, reduced working capital borrowings, and a lower overall interest rate environment. These improvements more than offset an increase in marketing costs related to the Company's new frozen soup offering, Birds Eye Hearty Spoonfuls, and an increase in production costs due to lower volumes in the Company's facilities. Lower production volumes were driven by management's efforts to reduce inventory levels and by lower than anticipated crop intake from unfavorable weather conditions. Net sales for the second quarter of fiscal 2003 were approximately $274.4 million, which represented a decline of $15.8 million or 5.4 percent. The majority of this decline can be attributed to the vegetable segment where net sales declined $10.9 million primarily in the Company's non-branded product lines. The non-branded decline is largely a result of the Company's prior decisions to exit low margin businesses. While branded net sales remained consistent with the prior year, they were positively impacted by improvements in the core Birds Eye product lines and Birds Eye Hearty Spoonfuls. However, these improvements were offset by category declines and increased pressures in the skillet meal segment. Pretax income from continuing operations for the six-month period ended December 28, 2002 increased 34.9 percent, or approximately $7.4 million, to $28.4 million from $21.0 million in the prior period. Net sales for the six- month period were $482.5 million compared to $533.8 million in the prior period. Of this decline, $24.4 million was associated with the planned reduction in co-pack agreements and the reduction in other non- branded sales. Agrilink also announced that it plans to close six frozen vegetable processing facilities over the next several months and will consolidate production from these locations into other Agrilink facilities. This consolidation will allow for more efficient operations while having no negative effect on the Company's ability to serve its customers. Production facilities scheduled to close include: Barker, New York; Bridgeville, Delaware; Green Bay, Wisconsin; Oxnard, California; Uvalde, Texas and Montezuma, Georgia. Production from these facilities will move to Darien, Wisconsin; Oakfield, New York; and Watsonville, California. Although there will be additional employment opportunities at the consolidated facilities, the closings will result in layoffs of approximately 260 people. "We are pleased to see improvements in our core Birds Eye line," said Dennis Mullen, Agrilink Foods chairman, president and CEO. "Our ongoing focus," he continued, "is to grow our brands, while balancing these efforts with an aggressive commitment to being a low cost producer. That focus sometimes brings with it difficult decisions such as the closings announced today. "We are excited about our upcoming name change to Birds Eye Foods," Mullen added, "which [became] effective on Monday, February 10th. Birds Eye is a widely recognizable and respected brand name in the frozen vegetable marketplace and, as the nation's largest processor of frozen vegetables, it makes perfect sense for us to carry this prestigious name." Rochester-based Agrilink Foods, with sales of approximately $1.0 billion annually and whose corporate credit rating has been affirmed by Standard & Poor's at B+, processes fruits and vegetables in 30 facilities across the country. Familiar brands in the frozen aisle include Birds Eye, Birds Eye Voila!, Birds Eye Simply Grillin,' Birds Eye Hearty Spoonfuls, Freshlike and McKenzie's. Other processed foods marketed by Agrilink Foods include canned vegetables (Freshlike and Veg-All); pie fillings (Comstock and Wilderness); chili and chili ingredients (Nalley and Brooks); salad dressings (Bernstein's and Nalley) and snacks (Tim's, Snyder of Berlin and Husman's). Agrilink Foods also produces many of these products for the private label, food service and industrial markets. AIR CANADA: Operating Losses Spur S&P to Cut Credit Rating to B --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Air Canada to 'B' from 'B+'. At the same time, the ratings on Canada's largest airline were placed on CreditWatch with negative implications, reflecting higher- than-expected operating losses and diminishing sources of backup liquidity from available collateral. In addition, the company faces difficult prospects for 2003 due to strong domestic competition, increased fuel costs, and the near-term prospect of a war between the U.S. and its allies against Iraq. Montreal, Quebec-based Air Canada yesterday reported an operating loss of C$288 million in the fourth quarter of 2002, a decline from the C$308 million operating loss in fourth-quarter 2001, and a full-year 2002 operating loss of C$218 million, a decrease from the C$731 million operating loss in 2001. "The ratings actions stem from Air Canada's continuing operating losses, the gradual reduction of its sources of backup liquidity, and the increasingly competitive dynamics in the domestic market," said Standard & Poor's credit analyst Kenton Freitag. "Although near-term cash liquidity remains adequate, the company faces substantial debt maturities in 2003 and 2004, and the ability to maintain the current liquidity position through continued asset sales or improved operating cash flow is uncertain in this environment," Mr. Freitag continued. Air Canada is in talks with its unions about efforts to reduce labor costs. A war between the U.S. and Iraq, a prospect that has already raised airline fuel prices, likely would cause an erosion of revenues, potentially widening the company's losses. Standard & Poor's will review Air Canada's financial and liquidity outlook, and its ongoing measures to face the challenging operating environment, to resolve the CreditWatch placement. DebtTraders reports that Air Canada's 10.250% bonds due 2011 (AC11CAR1) are trading at about 54 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AC11CAR1for real-time bond pricing. AK STEEL: Has No Plan to Suspend Shipments to General Motors ------------------------------------------------------------ AK Steel (NYSE: AKS) said in response to published news reports about litigation between AK Steel and General Motors, that it has no intention of suspending shipments of steel products to General Motors. AK Steel confirmed that it is engaged in litigation over interpretation of terms of the supply contract between it and General Motors. That litigation involves a claim by AK Steel that General Motors has failed to satisfy its obligation under the parties' contract to reimburse AK Steel for its increased costs attributable to changes by General Motors in the scope of work covered by the contract. Reports that have suggested that AK Steel is seeking in that litigation, or otherwise, to suspend shipments to General Motors are incorrect. To the contrary, in a letter AK Steel sent to General Motors prior to commencing its litigation, AK Steel stated "we do not intend to suspend our performance under the contract as a result of our disagreement over the application of the equitable adjustment clause of the contract." AK Steel said it and its predecessor companies have served General Motors for more than 90 years. GM has awarded AK Steel its coveted Supplier of the Year award twice in recent years. Notwithstanding the litigation, AK Steel said it anticipates that it will continue its long and mutually beneficial relationship with GM for many years to come. "Even in good relationships, disputes sometimes arise which the parties themselves cannot initially resolve," said Richard M. Wardrop, Jr., chairman and CEO of AK Steel. "I am confident, however, that the strength of our longstanding partnership with GM will enable us to bring this matter to an equitable resolution. We look forward to continuing to supply GM with the highest quality steels available." Headquartered in Middletown, Ohio, AK Steel produces flat-rolled carbon, stainless and electrical steel products for automotive, appliance, construction and manufacturing markets, as well as tubular steel products. The company operates steel producing and finishing facilities in Ohio, Kentucky, Pennsylvania and Indiana. Additional information about AK Steel is available on the company's Web site at http://www.aksteel.com * * * As previously reported, Standard & Poor's assigned its double- 'B' rating to integrated steel producer, AK Steel Corp.'s $550 million senior unsecured notes due 2012. Standard & Poor's also affirmed its existing ratings on AK Steel Corp., and parent company AK Steel Holding Corp. The outlook is stable. AK Steel is based in Middletown, Ohio and has total debt of about $1.4 billion. The ratings on AK Steel Holding Corp., reflect its fair business position as a midsize, value-added, integrated steel maker with high exposure to the automotive market, low sensitivity to spot prices, and burdensome legacy costs totaling $1.4 billion. ALLEGHENY ENERGY: Bank Lenders Extend Waivers to Feb. 14 -------------------------------------------------------- Allegheny Energy, Inc., (NYSE: AYE) announced that, based on continuing negotiations with lenders, its subsidiaries, Allegheny Energy Supply Company, LLC, and Allegheny Generating Company, have sought and received extensions on waivers from bank lenders under their credit agreements. The Company previously announced that these subsidiaries had received waivers, which extended through February 7, 2003, from their bank lenders with regard to certain covenants contained in their credit agreements. These waivers have now been extended through February 14, 2003. Allegheny Energy and its subsidiaries are continuing discussions with bank lenders under these and other facilities, as well as with other lenders and trading counterparties, regarding outstanding defaults, required amendments to existing facilities, and additional secured financing. As the Company noted in previous news releases, if it is unable to successfully complete negotiations with these lenders, including arrangements with respect to inter-creditor issues, it would likely be obliged to seek bankruptcy protection. With headquarters in Hagerstown, Md., Allegheny Energy is an integrated energy company with a balanced portfolio of businesses, including Allegheny Energy Supply, which owns and operates electric generating facilities and supplies energy and energy-related commodities in selected domestic retail and wholesale markets; Allegheny Power, which delivers low-cost, reliable electric and natural gas service to about three million people in Maryland, Ohio, Pennsylvania, Virginia, and West Virginia; and a business offering fiber-optic and data services. More information about the Company is available at http://www.alleghenyenergy.com AMERICAN COMMERCIAL: Hires Richard Weingarten for Fin'l Advice -------------------------------------------------------------- American Commercial Lines LLC, and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of Indiana for permission to hire Richard Weingarten & Company, Inc., as their Financial Advisor. Prior to filing for chapter 11 protection, the Debtors engaged Richard Weingarten as their financial advisor to work closely with: (i) Debtors' management and other financial consultants; (ii) the board of directors and officers of Danielson Holding Corporation, Debtors' ultimate parent, and certain special committees established by DHC and (iii) Debtors' senior lenders and note holders. to develop a timely operating plan and preliminary restructuring plan for the Debtors and to communicate, negotiate and facilitate a timely implementation and consummation of that plan. The Debtors say that Richard Weingarten has sufficient knowledge of the Debtors business operations to be uniquely qualified to provide the necessary service. The Debtors agree to compensate Richard Weingarten: i) a $55,000 monthly retainer; ii) a $420,000 success fee upon satisfaction of certain conditions; and iii) reimbursement of all reasonable, out-of-pocket expenses. American Commercial Lines LLC, an integrated marine transportation and service company transporting more than 70 million tons of freight annually using 5,000 barges and 200 towboats in North and South American inland waterways, filed for chapter 11 protection on January 31, 2003 (Bankr. S.D. Ind. Case No. 03-90305). American Commercial is a wholly owned subsidiary of Danielson Holding Corporation (Amex: DHC). Suzette E. Bewley, Esq., at Baker & Daniels represents the Debtors in their restructuring efforts. As of September 27, 2002, the Debtors listed total assets of $838,878,000 and total debts of $770,217,000. AMERICAN MEDIA: Reports Several Executive Promotions at Weider -------------------------------------------------------------- David J. Pecker, Chairman and CEO of American Media, Inc., announced the promotions of several executives to top positions at AMI's Weider Publications Active Lifestyle and Enthusiast Groups of Magazines. AMI acquired Weider Publications and its related properties last November. Carolyn Bekkedahl was promoted to Executive Vice President of AMI and Publishing Director of the Weider Active Lifestyle Group and Barbara S. Harris was promoted to Executive Vice President of AMI and Editorial Director of the Weider Active Lifestyle Group. Ms. Harris has appointed Anne M. Russell to replace her as Editor In Chief of Shape Magazine. The titles in the Weider Active Lifestyle Group are Shape, Fit Pregnancy and Natural Health, and represent the leading publications in the women's active lifestyle, pre & postnatal fitness and self-care categories. These titles have a readership in excess of 9 million, with Shape the market leader in both circulation and advertising. The promotions are effective immediately. Ms. Bekkedahl and Ms. Harris will report directly to Mr. Pecker, with Ms. Russell reporting to Ms. Harris. "Barbara and Carolyn have played key roles at the Weider Active Lifestyle Group," Mr. Pecker said. "There are few editors in America that command the respect Barbara Harris does and few publishers that can claim the sales success that Carolyn has had. I know they will both continue to make significant contributions to realizing our future goals as we move forward." Ms. Harris has been SHAPE Magazine's Editor in Chief for the past 15 years. During her leadership, SHAPE has won over 60 editorial awards and has launched successful magazine spin-offs including Fit Pregnancy. She is a winner of the Healthy American Fitness Leader award and has served as adviser to the California Governor's Council on Physical Fitness and Sports. On her new role, Ms. Harris said, "I look forward to continuing my involvement with Shape and my working relationship with Anne as we maintain our leadership position in the women's active lifestyle category. With a change in direction, Natural Health will shake up the general lifestyle and women's health market and we also have plans to strengthen the unique position of Fit Pregnancy as well." Ms. Bekkedahl joined Weider Publications in 1999. She was named a Senior Vice President of Weider and Publishing Director of the Active Lifestyle Group in 2000. Ms. Bekkedahl had a 10-year career in sales and publishing at Hachette Filipacchi Magazines before joining Weider. "The active lifestyle market is booming, "commented Ms. Bekkedahl. "Shape, Fit Pregnancy and Natural Health are well-established leaders in their fields. And with AMI behind us, we have so many more resources available that the potential for growth is limitless." Ms. Russell has served as Editorial Director of Shape under Ms. Harris since April 2001. Prior to that, she was Editorial Director of Fox TV's Health Network and has also been Editor In Chief of Folio, Living Fit and Vegetarian Times. As to her plans for Shape, Ms. Russell said she "hoped to build on the tremendous success Shape has realized to date." Mr. Pecker also announced the promotion of Thomas C. Deters to Executive Vice President of AMI and Publishing Director of the Weider Publications Enthusiast Group. At the same time, Mr. Pecker said that Senior Vice President & Enthusiast Group Editorial Director Vincent Scalisi has renewed his contract. AMI's Weider Enthusiast Group consists of Muscle & Fitness, Flex, Muscle & Fitness Hers and Men's Fitness. Total readership is more than 15 million. The promotion is effective immediately and Mr. Deters will report directly to Mr. Pecker. Mr. Scalisi will continue to report to Mr. Deters. "Tom has done an unbelievable job in expanding the reach of these titles to a new generation of fitness enthusiasts," commented Mr. Pecker, " while broadening their appeal to new categories of advertisers. And Vince has been with him every step of the way." Mr. Deters has been with Weider for over 14 years, most recently serving as the Group Publisher of the Enthusiast Group as well as Editor In Chief of Muscle & Fitness. Mr. Deters holds a degree in sociology and is also a Doctor of Chiropractic. He is one of the sought after speakers in the world on fitness and nutrition, has been a competitive bodybuilder and consults with the Navy SEALS. Regarding his new role, Mr. Deters said "David Pecker and his team have provided a huge opportunity for our titles to grow and reach a larger audience of advertisers and readers. The Weider brands are strong, primed and ready to move forward in a big way." Mr. Scalisi joined Weider as the Editor of Muscle & Fitness in 1986. Prior to that, he served as Brand Manager of Weider Nutrition Inc.'s line of sports nutrition products, and earlier served as Advertising Director for high-tech entertainment company Iwerks Entertainment. American Media, Inc., is one of the largest media companies in the U.S. The company publishes six of the 14 best selling weekly magazines, including the #2 and #4 titles, the National Enquirer and Star. The company also publishes the best selling country music magazines, Country Weekly and Country Music, a Latino entertainment magazine, Mira!, a mass market automotive magazine, AMI's Auto World, more than 200 Mini-Mags and Digests, and recently launched its own book division. Besides print properties, American Media owns Distribution Services, Inc., the country's #1 in-store magazine merchandising company. As reported in Troubled Company Reporter's January 9, 2003 edition, Standard & Poor's affirmed its 'B+' corporate credit rating for publisher American Media Operations Inc., following the company's pending acquisition of Weider Publications LLC for $350 million. In addition, Standard & Poor's assigned its 'B+' senior secured rating to American Media Operations Inc.'s $140 million tranche C-1 term loan, and 'B-' rating to the company's $150 million subordinated notes due 2011. The Boca Raton, Florida-based company has pro forma total debt of $1.02 billion as of September 23, 2002. The outlook is stable. "Standard & Poor's expects that the transaction, while largely debt-financed, will not materially alter credit measures over the near term due to potential operating synergies and cost- saving opportunities through the leveraging of American Media's existing infrastructure," said Standard & Poor's credit analyst Hal Diamond. ANNTAYLOR STORES: Total Net Sales Slide-Down 3.7% in January ------------------------------------------------------------ AnnTaylor Stores Corporation (NYSE: ANN) announced that total net sales for the four week period ended February 1, 2003 decreased 3.7 percent to $81,903,000, from total net sales of $85,037,000 for the four week period ended February 2, 2002. Comparable store sales for the fiscal 2002 January period decreased 10.3 percent, compared to a comparable store sales increase of 14.6 percent for the same four-week period last year. By division, comparable store sales were down 9.6 percent for Ann Taylor compared to a 16.2 percent increase last year, and down 12.2 percent for Ann Taylor Loft compared to an 11.8 percent increase last year. For the fiscal quarter ended February 1, 2003, the Company's net sales totaled $352,213,000, down 5.2 percent from $371,386,000 in the fourth quarter of fiscal 2001. Comparable store sales for the fourth quarter of fiscal 2002 decreased 12.3 percent, compared to a comparable store sales increase of 2.1 percent in the fourth quarter of fiscal 2001. By division, comparable store sales were down 14.6 percent for Ann Taylor compared to flat last year and down 7.1 percent for Ann Taylor Loft compared to an 8.1 percent increase last year. Ann Taylor Chairman J. Patrick Spainhour said, "We expect to report strong earnings performance with fourth quarter earnings per share on a diluted basis between $0.34 - $0.35 and full year earnings per share on a diluted basis between $1.71 - $1.72. Our ability to deliver these results despite a continuing soft retail environment reflects excellent controls on operations and costs, inventory management, and our success selling more product at or near full price." Mr. Spainhour continued, "Sales were affected by lower levels of traffic stemming from economic uncertainty for the entire month of January and extreme cold temperatures throughout the eastern and central regions of the country during the last two weeks of the month. Additionally, at Loft, we did not anniversary our end of season 50 percent off already reduced prices promotion in January. In spite of the difficult sales climate, we continued to experience gross margin improvement in January, with an approximate 600 basis point improvement over last year. In addition, we had a favorable gross margin pick-up at both divisions due to the results of our year-end physical inventory." "While sales throughout the year were adversely affected by the sluggish economic environment and other factors, our ability to maximize the profitability of those sales on our bottom line contributed to our record 2002 earnings." "We expect to follow a similar formula in the coming year. At present, we believe that the consumer will take a very cautious approach to apparel purchases. Thus, we will concentrate on providing the customer with 'must have' fashion and seek to sell that merchandise at full price. We will continue to manage our expenses and our inventories carefully, and, as a result, hope to deliver another year of record results." Inventory levels at the end of January were down approximately 9 percent on a per square foot basis compared to last year. This follows an approximate 15 percent decrease in inventory levels on a per square foot basis at the end of fiscal December. Both comparisons exclude inventory attributable to Ann Taylor Global Sourcing. For fiscal year 2003 the Company expects inventory levels to be down in the mid-single digit negative range compared to last year. For the 2003 Spring season, the Company currently expects to achieve comparable store sales flat to last year, with first quarter comparable store sales projected to be in the low single digit negative to flat range and the second quarter comparable store sales projected to be in the low single digit positive range. For Fall 2003, the Company is projecting comparable store sales in the low single digit positive range. In 2003, the Company projects a modest improvement in gross margin and a slight decrease in selling, general and administrative expenses as a percentage of sales for the full year. For the first quarter the Company expects continued improvement in gross margin and an increase in selling, general and administrative expenses as a percentage of sales. The Company plans to open approximately 75 - 80 stores during fiscal 2003, comprised of approximately 10 - 15 Ann Taylor stores and approximately 60 - 65 Ann Taylor Loft stores. Total Company square footage increase for the fiscal 2003 year is projected to be approximately 12 percent. This represents an approximate 4 percent divisional square footage increase for Ann Taylor, and an approximate 28 percent divisional square footage increase for Ann Taylor Loft. In the first quarter of fiscal 2003, the Company plans to open 1 new Ann Taylor store and 12 new Ann Taylor Loft stores. During the second quarter of 2003, the Company plans to open 1 new Ann Taylor store and 7 new Ann Taylor Loft stores. Capital expenditures for 2003 are planned at $85 million, which includes costs for new store build outs, existing store renovations and warehouse and information system initiatives. Based on the above financial assumptions and planned store growth, the Company projects earnings per share on a diluted basis for the 2003 fiscal year to be between $1.90 and $2.00. The Company projects earnings per share on a diluted basis for the first and second quarters in the range of $0.45 - $0.47 and $0.44 - $0.46, respectively and in the range of $1.01 - $1.07 for the fall season. During the month of January, the Company opened 1 Ann Taylor Loft store and closed 1 Ann Taylor store and 1 Ann Taylor Factory store. The total store count at the end of fiscal year 2002 was 584, comprised of 350 Ann Taylor stores, 207 Ann Taylor Loft stores and 27 Ann Taylor Factory stores. Total store square footage increased 8.1 percent over the same period last year. For the fiscal year 2002 ended February 1, 2003, the Company's net sales totaled $1,380,966,000, up 6.3 percent from $1,299,573,000 in fiscal 2001. Comparable store sales for fiscal 2002 decreased 3.9 percent from the same period last year. Comparable sales by division were down 5.3 percent for Ann Taylor, and down 1.0 percent for Ann Taylor Loft. Ann Taylor is one of the country's leading women's specialty retailers, operating 584 stores in 42 states, the District of Columbia and Puerto Rico, and also an Online Store at http://www.anntaylor.com AnnTaylor Stores' 0.550% bonds due 2019 are currently trading at about 62 cents-on-the-dollar. APPLIED DIGITAL SOLUTIONS: Prepares Prospectus for 50MM Shares -------------------------------------------------------------- Applied Digital Solutions, Inc., is distributing a prospectus under which it may offer up to 50,000,000 shares of its common stock, par value $.001 per share, utilizing a self-underwritten, best efforts offering of its shares, through the efforts of its officers and directors. This means it is offering its shares of common stock directly to qualified investors. In the event that the Company retains a broker dealer to assist in the offer and sale of the shares, the Company will file a post-effective amendment to its registration statement. Applied Digital reserves the right to offer warrants exercisable for shares of its common stock to potential purchasers and will provide a prospectus supplement or amendment, if necessary, to add, update or change the information contained in the current prospectus. The Company is offering the shares in one or more transactions at an estimated offering price of $0.50 per share. There is no minimum offering of shares that must be sold. The Company's shares are included in the Nasdaq SmallCap Market under the symbol "ADSX." On February 3, 2003, the last reported sale price of the common stock was $0.38 per share. Applied Digital Solutions, whose September 30, 2002 balance sheet shows a working capital deficit of about $90 million, is an advanced digital technologydevelopment company that focuses on a range of early warning alert, miniaturized power sources and security monitoring systems combined with the comprehensive data management services required to support them. Through its Advanced Wireless unit, the Company specializes in security- related data collection, value-added data intelligence and complex data delivery systems for a wide variety of end users including commercial operations, government agencies and consumers. ASARCO INC: Fitch Cuts Debt Ratings to DDD over Missed Payment -------------------------------------------------------------- Fitch Ratings has downgraded the ratings of Asarco Inc.'s notes due in 2003 to 'DDD' from 'C'. This rating action is a result of the company's failure to make a $100 million principal payment due on February 3, 2003 for the 2003 notes. Asarco has recently reached an agreement with the United States Justice Department that eliminates litigation between the two parties over the proposed sale of Asarco's stake in Southern Peru Copper Corporation to Americas Mining Corporation. Once the sale of SPCC is completed, Fitch expects the holders of Asarco's 2003 notes to be paid in full. ATSI COMMS: Two Operating Units File for Chapter 11 Protection -------------------------------------------------------------- ATSI Communications, Inc., (AMEX:AI) said that in addition to its previously announced planned merger with CCC GlobalCom, its two Texas operating subsidiaries ATSI Communications, Inc., (a Texas corporation) and Telespan, Inc. (a Texas corporation), had filed for reorganization under Chapter 11 bankruptcy protection. Raymond Romero, ATSI's Interim Chief Executive Officer and General Counsel said, "The Chapter 11 filing does not affect ATSI Communications, Inc., the Delaware incorporated holding company, its current operations or any of its other operating subsidiaries." ATSI Communications, Inc., is an emerging international carrier serving the rapidly expanding niche markets in and between Latin America and the United States, primarily Mexico. The Company's borderless strategy includes the deployment of a "next generation" network for more efficient and cost effective service offerings of domestic and international voice, data and Internet. ATSI has clear advantages over the competition through its corporate framework consisting of unique licenses, interconnection and service agreements, network footprint, and extensive retail distribution. ATSI Communications' April 30, 2002 balance sheet shows a working capital deficit of about $9 million, and a total shareholders' equity deficit of about $818,000, which is down from $6.2 million at July 31, 2001. ATSI COMMS: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: ATSI Communications, Inc 6000 Northwest Parkway, #110 San Antonio, TX 78249 fka American Telesource International, Inc. Bankruptcy Case No.: 03-50753 Type of Business: Telecommunications Chapter 11 Petition Date: February 4, 2003 Court: Western District of Texas (San Antonio) Judge: Leif M. Clark Debtor's Counsel: Martin Warren Seidler, Esq. Law Offices Of Martin Seidler 11107 Wurzbach Road, #504 San Antonio, TX 78230 Tel: (210) 694-0300 Estimated Assets: $10 to $50 Million Estimated Debts: $1 to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ IBM Corporation Mexico equipment $3,000,000 P.O. Box 841953 Dallas, TX 75284-1593 Nortel Networks security interest $1,250,000 2375 N. Glenville Dr., #B Value: $1,000 Richardson, TX 75082 GE Capital security agreement $851,000 P.O. Box 676013 Value: $125,000 Dallas, TX 75267-6013 Universal Service Admin. goods and services $549,794 Co. purchased on credit P.O. Box 371719 Pittsburgh, PA 15251-7719 IBM Corporation AS400 & PC's $500,457 P.O. Box 841953 Dallas, TX 75284-1593 Tax Assessor/Collector taxes $300,000 Attn: David Childs P.O. Box 62008 Dallas, TX 75262-0088 Tax Assessor/Collector taxes $260,000 Attn: David Childs P.O. Box 62008 Dallas, TX 75262-0088 Qwest Wholesale goods and services $222,059 purchased on credit Sylvia S. Romo, CPA Taxes $200,000 C.E.S. International goods and services $90,000 purchased on credit ACLT San Antonio landlord $90,000 Sweeny, Thomas III rent $69,501 COX & SMITH, INC. legal services $55,268 Ping Wen Wang back rent $39,000 Time Warner Telecom goods and services $38,894 purchased on credit Tax Assessor Collector Taxes $26,778 Worldcom goods and services $20,136 purchased on credit CEA, LLC goods and services $20,000 purchased on credit Worldcom Technologies, Inc. goods and services $19,577 purchased on credit WorldCom goods and services $16,822 purchased on credit ATSI COMMS: Board Approves Planned Merger with CCC GlobalCom ------------------------------------------------------------ ATSI Communications, Inc., (AMEX:AI) announced that its Board of Directors has approved a strategic merger with CCC GlobalCom of Houston, TX (OTCBB:CCGC). John R. Fleming, ATSI's Interim Chairman of the Board remarked, "A combination with CCC GlobalCom provides significant synergy for the merged entity. Both companies focus on the Hispanic market. CCC GlobalCom, through its wholly owned subsidiary, Ciera Network Systems, has a strong customer Latino base of individuals and small businesses in the United States. It's a perfect fit for ATSI's infrastructure and operations in Mexico. The merger will create an international telecommunications company with a leadership position in serving the paired-market between the U.S. and Mexico at a time when Mexico has surpassed Canada and become the most frequently dialed country in the world by Americans." Under the terms of the preliminary Letter of Intent, CCC GlobalCom and ATSI would sign a Joint Management Services Agreement to operate ATSI's wholesale network. As part of its commitment, CCGC would provide interim financing while the merger is in process and provide letters of credit for ATSI to restart its recently idled wholesale customer network. ATSI's network will provide a lower cost of long distance transport for Ciera's existing customer base. The combined entity will be listed as ATSI Communications, Inc. and expects to continue to be traded on the American Stock Exchange under the symbol of AI. The merger would likely result in a change of control thereby triggering an additional listing standard under Section 341 and subjecting the combined entity to American Stock Exchange's original listing standards. The transaction is subject to shareholder approval. In addition, ATSI announced, Stephen M. Wagner, President, Chief Executive Officer and Director had resigned to pursue other business opportunities. John R. Fleming, Interim Chairman of the Board stated, "Steve has done a great job working on this merger and other strategic moves for ATSI. We wish him well." In addition, Darrel Kirkland and Carlos Kauachi have resigned from ATSI's Board of Directors. The Board of Directors has appointed Raymond G. Romero to serve as Interim Chief Executive Officer effective immediately. CCC GlobalCom Corporation is an Integrated Communications Provider headquartered in Houston, TX. The Company offers a full range of communications services to commercial and residential customers while providing a single point of contact through bundled billing services. CCC GlobalCom Corporation provides local, long distance, high-speed data, Internet, paging and other enhanced communications services in the United States. In addition, CCC GlobalCom Corporation has franchise operations in Colombia, South America. CCC GlobalCom Corporation actively seeks opportunities to acquire existing telecommunication service providers, customer bases and major telecommunication switching equipment to be deployed in its target markets. ATSI Communications, Inc., is an emerging international carrier serving the rapidly expanding niche markets in and between Latin America and the United States, primarily Mexico. The Company's borderless strategy includes the deployment of a "next generation" network for more efficient and cost effective service offerings of domestic and international voice, data and Internet. ATSI has clear advantages over the competition through its corporate framework consisting of unique licenses, interconnection and service agreements, network footprint, and extensive retail distribution. ATSI Communications' April 30, 2002 balance sheet shows a working capital deficit of about $9 million, and a total shareholders' equity deficit of about $818,000, which is down from $6.2 million at July 31, 2001. BCE INC: Regains Full Ownership of Sympatico.ca Portal ------------------------------------------------------ BCE Inc., regained full ownership of the Sympatico.ca portal which will be transferred from Bell Globemedia into Bell Canada. As a result of this and other transactions announced today, BCE will reduce its ownership level in Bell Globemedia from 70 per cent to 68.5 per cent. "The Sympatico.ca portal is a key component of Bell Canada's Internet offering," said Michael Sabia, CEO of BCE Inc. and Bell Canada. "As the role of a portal evolves from one of providing search functions to one of providing integrated, easy-to-use communication tools it is critical that continued development and ongoing management of the Sympatico.ca portal be more closely tied to our Sympatico access services." Bell's high-speed Internet service now has more than 1.1 million customers while the Sympatico.ca portal is currently the most popular Canadian Web destination for Canadians, welcoming some 6 million unique users per month. "The combination of Canada's leading portal with the Internet access services provided by Bell is an important differentiator in our strategy to successfully compete in the highly competitive race for broadband services to the home. The portal and access services together can more simply provide customers with the applications they want and the customer support they need from a single trusted source," said Mr. Sabia. Bell Globemedia will continue to provide content services to the Sympatico site under commercial agreements. BCE and Woodbridge will each invest a total of $50 million in new common equity of Bell Globemedia in order to provide a stable financial base from which it can operate autonomously. Half of this equity, $25 million each, will be from the conversion of shareholder advances made in 2002. The remaining $25 million of equity per shareholder will be in the form of cash contributions. As a result of the transfer of the portal into Bell Canada and the additional equity invested by the two shareholders, BCE's ownership will be reduced to 68.5 per cent. Mr. Sabia concluded, "With the changes announced today, Bell Globemedia's focus is clearly on its two primary businesses, print and broadcast, and on driving performance and improving profitability in these operations." 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's media interests are held by Bell Globemedia, which features some of the strongest brands in the industry - CTV, Canada's leading private broadcaster, and The Globe and Mail, the leading Canadian daily national newspaper. 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. As of September 30, 2002, BCE reported a working capital deficit of about $247 million. B/E AEROSPACE: Moody's Junks Three Senior Subordinated Notes ------------------------------------------------------------ Moody's Investors Service lowered its ratings for B/E Aerospace, Inc.: Rating Actions To From * $250 million 8.875% senior subordinated Caa2 B3 notes, due 2011 * $250 million 8% senior subordinated Caa2 B3 notes, due 2008 * $200 million 9.5% senior subordinated Caa2 B3 notes, due 2008 * Senior implied rating B2 B1 * Issuer rating B3 B2 Outlook is stable. The ratings downgrade mirrors B/E's ongoing poor financial performance, deteriorating debt protection measures, and present corporate restructuring, plus the constant challenges faced by the airline industry. The stable outlook reflects the company's recently amended senior secured credit facilities and the likelihood of increased profitability after the restructuring. B/E Aerospace, Inc., based in Wellington, Florida, is the world's largest manufacturer of commercial and general aviation cabin interior products and a major independent distributor of aerospace fasteners. BETHLEHEM STEEL: Board Approves Asset Sale to Int'l Steel Group --------------------------------------------------------------- The board of directors of Bethlehem Steel Corporation voted this afternoon to sell substantially all of the company's assets to the International Steel Group, which has headquarters in Cleveland, Ohio. "Following the board's affirmative vote this afternoon, Bethlehem will move quickly to finalize the asset purchase agreement with ISG to complete this sale early in the second quarter of this year," said Robert S. Miller, Bethlehem's chairman and chief executive officer. "This sale will provide a new beginning for our employees and our operations, which will continue without interruption during the change of ownership. ISG highly values Bethlehem's assets, which is good news for our employees, customers, suppliers and communities. "The domestic steel industry is changing rapidly as several transactions are underway to consolidate the nation's firms and make them more internationally competitive. The sale of Bethlehem to ISG will create North America's largest steel company and will help our operations remain a vibrant part of a reinvigorated steel industry. "With this change of ownership also comes some sadness. Bethlehem can no longer pay the health care and life insurance benefits for its retirees. Regrettably, expectations of life- long benefits were made during an era when health care costs were lower and the company's financial condition was stronger. Bethlehem continued to honor that commitment for the past 16 months after the corporation filed for Chapter 11 bankruptcy court protection. Since then, Bethlehem paid retiree health bills of more than $300 million -- benefits that many companies shed immediately after declaring bankruptcy. In either reorganization scenario of a stand-alone company or a sale, Bethlehem's retired population would lose their health care and life insurance benefits. As we are concluding our bankruptcy process, it is the appropriate time to terminate these benefits," Mr. Miller concluded. Bethlehem Steel Corp.'s 10.375% bonds due 2003 (BS03USR1) are trading at about 3 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BS03USR1for real-time bond pricing. BETHLEHEM STEEL: Intends to Terminate Retiree Insurance Benefits ---------------------------------------------------------------- Through the Section 1114 process of the Bankruptcy Code, Bethlehem Steel Corporation is seeking to eliminate health and life insurance benefits for substantially all of its retired workforce and their eligible dependents. By letter, dated February 6, 2003, Bethlehem made a proposal to the Section 1114 Committees to terminate such benefits on March 31, 2003. Bethlehem is seeking the termination of such benefits for about 95,000 persons "because we cannot pay the obligations for retiree health and life insurance now or in the future. Due to our financial situation and our impending sale of substantially all of our assets to International Steel Group, we must seek the court's approval to terminate these benefits. We find this decision extremely difficult, but unavoidable, and sincerely regret that circumstances have led us to this decision," said Robert S. Miller, chairman and chief executive officer. While Bethlehem Steel is seeking to eliminate retiree welfare benefits through the bankruptcy process, it is also working with the Section 1114 Committee to arrange for access to affordable health and life insurance coverage for its retirees. If such coverage can be arranged, it will be available to current and future retirees who have eligibility for coverage based on their company service. Currently, Bethlehem Steel is speaking with several health care vendors to solicit proposals for voluntary, 100-percent contributory insurance programs for our eligible retired populations. After the current coverages are terminated, Bethlehem "hopes to provide access to affordable medical and life insurance to eligible persons. Although Bethlehem will not be contributing any monies to such new coverages, we believe the size of our retiree population will help us find affordable rates for those persons interested in purchasing those plans," Mr. Miller said. Bethlehem Steel's executive management and financial advisers agreed on February 4 to recommend the sale of substantially all of Bethlehem's assets, both ongoing and surplus, to International Steel Group, Cleveland, Ohio. Bethlehem's board will consider that sale in a vote on February 8. If approved, Bethlehem and ISG will then complete an asset purchase agreement, which is expected to be submitted to Bethlehem's bankruptcy judge in about one to two weeks. As part of the agreement to sell Bethlehem's assets to ISG, neither party will assume retiree health or life insurance obligations, which averaged more than $19 million each month in 2002. Although most Bethlehem retirees pay a portion of the cost of their post-retirement health care benefits, the vast majority of the costs associated with the benefits are borne by Bethlehem. The corporation's aggregate actuarial obligations for all future retiree welfare benefits for its current retirees and eligible dependents is about $3 billion. BETHLEHEM STEEL: USWA Condemns Retiree Benefit Termination ---------------------------------------------------------- The United Steelworkers of America strongly condemned Bethlehem Steel's planned termination the health and life insurance benefits of some 95,000 workers as a "morally callous act." "For a bankrupt company that is doling out millions in golden parachutes to top executives to say that it must cut off the health care benefits of people who worked a lifetime in the mills is a disgrace," said USWA International President Leo W. Gerard. Gerard said the Union has fought for years to win protection of these benefits through federal legislation, but has been resisted by the Bush Administration and its allies in Congress. "That fight will be re-doubled now," he said, "as will our efforts to negotiate a Benefit Trust for these Bethlehem retirees in the new labor agreement being bargained with the International Steel Group. The USWA has -- for the first time in history -- negotiated a Benefit Trust with ISG for the retirees of LTV and Acme Steel, whose assets were purchased by ISG. The Benefit Trust will be used to restore a measure of the health care benefits lost by those retirees. The Union anticipates securing a similar Benefit Trust with ISG for the retirees of Bethlehem Steel. In announcing its final offer to purchase Bethlehem Steel earlier this week, ISG Chairman Wilbur H. Ross said he believed his company has a "moral obligation" to provide a measure of relief to retirees who have been "stranded," adding that the federal government has an obligation to address these needs. Gerard said that the USWA "will negotiate with ISG to address the moral obligation that Bethlehem's executives have so callously abandoned. "We'll also be calling upon the executives of the American steel industry to join us in our call for the federal government to implement universal health care coverage, so that no workers will ever again be victimized like this through no fault of their own. "The health of workers -- retired or otherwise -- should never have to depend on the health of the companies they work for." BROADWING INC: Tinkers with Certain Executive Employment Pacts -------------------------------------------------------------- On February 3, 2003 Broadwing Inc., entered into amended employment agreements with its Chief Executive Officer, Kevin W. Mooney, its Chief Financial Officer, Thomas L. Schilling, its Chief Human Resources Officer, General Counsel and Corporate Secretary, Jeffrey C. Smith and its Senior Vice President of Corporate Development, Michael W. Callaghan. The contract amendments provide incentives for the employees to sell the broadband business of Broadwing Communications Inc., and to amend the Company's credit facility, as well as provide for their retention through the period of the Company's restructuring. To provide a clear focus on the restructuring efforts and an equal attention to ongoing operations, with Mr. Mooney's consent, the Chief Operating Officer of Broadwing Inc., Jack Cassidy, will report directly to the Board of Directors effective February 3, 2003. Broadwing Inc., (NYSE:BRW) is an integrated communications company comprised of Broadwing Communications and Cincinnati Bell. Broadwing Communications is an industry leader as the world's first intelligent, all-optical, switched network provider and offers businesses nationwide a competitive advantage by providing data, voice and Internet solutions that are flexible, reliable and innovative on its 18,500-mile optical network and its award-winning IP backbone. Cincinnati Bell is one of the nation's most respected and best performing local exchange and wireless providers with a legacy of unparalleled customer service excellence. For the second year in a row, Cincinnati Bell was ranked number one in customer satisfaction by J.D. Power and Associates for local residential telephone service and residential long distance among mainstream users. It also received the number one ranking in wireless customer satisfaction in its Cincinnati market. Cincinnati Bell provides a wide range of telecommunications products and services to residential and business customers in Ohio, Kentucky and Indiana. Broadwing Inc., is headquartered in Cincinnati, Ohio. For more information, visit http://www.broadwing.com * * * As reported in Troubled Company Reporter's December 10, 2002 edition, Standard & Poor's lowered its corporate credit and bank loan ratings of integrated telecommunications services provider Broadwing Inc., to 'B-' from 'BB'. The downgrade reflects a potential liquidity shortfall starting in the second half of 2003 and the increased risk of bank covenant violation if the company's long-haul data subsidiary, Broadwing Communications Inc., continues to perform below expectations in the absence of an amendment to Broadwing's bank credit agreement. The ratings on Broadwing and its subsidiaries remain on CreditWatch with negative implications. At the end of September 2002, the Cincinnati, Ohio-based company's total debt was about $2.5 billion. BUDGET GROUP: Wants Plan Filing Exclusivity Extended to June 2 -------------------------------------------------------------- Budget Group Inc., and its debtor-affiliates ask the Court to extend the period under Section 1121(d) of the Bankruptcy Code during which they have the exclusive right to file a Chapter 11 plan or plans of reorganization to June 2, 2003, and to solicit acceptances of that plan to July 30, 2003. Joseph A. Malfitano, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, relates that the Debtors have been in Chapter 11 for over 180 days. During that 180-day period, the Debtors have: -- negotiated and received approval for three highly complex postpetition financing facilities providing for $2,000,000,000 of financing; -- negotiated and consummated the North American Sale, including the assumption and assignment of more than 7,000 contracts; -- negotiated and received approval for a complicated and critical settlement with their surety bond provider; -- stabilized their business in Europe, the Middle East and Africa and explored value maximizing alternatives for these businesses; -- managed critical vendor relationships with airports and other critical vendors; and -- performed all the tasks required by the Chapter 11 process including noticing and reporting. Specifically, in the period since the First Exclusivity Order, the Debtors have: -- negotiated and obtained partial approval of a sale of substantially all of the Debtors' remaining assets relating to its operations in Europe, the Middle East and Africa; -- negotiated and obtained interim approval for a debtor-in- possession financing facility in connection the proposed sale of the EMEA Operations; and -- coordinated and managed the various post-closing issues related to the North American Sale, including overseeing the transition of the Debtors' going forward business into the new purchasing entity. The Debtors are currently in the process of marketing the remaining EMEA Operations to potential purchasers to ensure that they receive the highest and best offer for the Purchased Assets. Since closing of the North American Sale on November 22, 2002, Mr. Malfitano relates that the Debtors have been involved with resolving various issues arising in connection with the transfer of substantially all of the Debtors' assets to Cherokee. Specifically, the Debtors have prepared and filed motions seeking either the assumption and assignment or rejection of various executory contracts and unexpired leases not identified in the Asset and Stock Purchase Agreement. In addition, the Debtors continue to manage and resolve the myriad corporate and bankruptcy issues that have accompanied the going concern sale of the Debtors' multi-billion dollar operations to Cherokee on an expedited basis. These post-closing issues included: -- negotiating and executing various agreements and associated documentation relating to the transition of the Debtors' ongoing business, management and personnel into a new entity; -- satisfying the various state and federal regulatory requirements relating to a change of control in the Debtors' operations; -- addressing matters not originally contemplated by the ASPA, including assumption of certain liabilities and payment of certain obligations asserted against the Debtors' estates; and -- working to resolve the remaining objections asserted by parties to those contracts the Debtors assumed and assigned pursuant to the ASPA. Mr. Malfitano tells the Court that the Debtors can now devote all of their efforts towards consummating the EMEA Sale, analyzing the remaining claims, asset and allocation issues involving the Debtors' estates, and proposing a plan of reorganization that will permit prompt distributions to creditors. Mr. Malfitano assures the Court that the requested extension will not prejudice the legitimate interests of any creditor as the Debtors continue to make timely payment on all of their postpetition obligations. A hearing on the Debtors' request is scheduled on February 18, 2003. By application of the Local Bankruptcy Rules in Delaware, the exclusive filing period is automatically extended through the conclusion of that hearing. (Budget Group Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) CANNONDALE CORP: Nasdaq Knocking-Off Shares Effective Today ----------------------------------------------------------- Cannondale Corporation (Nasdaq: BIKE) has been notified by Nasdaq that, in accordance with Nasdaq's Marketplace Rules 4300 and 4450(f), the Company's common stock will be delisted from the Nasdaq National Market effective as of the opening of business on February 11, 2003. The Nasdaq staff's determination to delist the Company's common stock was based on concerns relating to Cannondale's bankruptcy proceedings. Cannondale expects its common stock to trade on the Pink Sheets. CANNONDALE CORP: Creditors' Meeting Scheduled for March 3, 2003 --------------------------------------------------------------- The United States Trustee for Region 2 will convene a meeting of Cannondale Corp.'s creditors on March 3, 2003 at 1:00 a.m., at the Office of the U.S. Trustee in 265 Church Street, Suite 1103, in New Haven, Connecticut. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Cannondale Corp., a manufacturer and distributor of high performance bicycles, all-terrain vehicles, motorcycles and bicycling and motorsports accessories and equipment, filed for chapter 11 protection on January 29, 2003 in the U.S. Bankruptcy Court for the District of Connecticut (Bankr. Case No. 03-50117). James Berman, Esq., at Zeisler and Zeisler represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $114,813,725 in total assets and $105,245,084 in total debts. CHARMING SHOPPES: Comparable Store Sales Down by 1% in January -------------------------------------------------------------- Charming Shoppes, Inc., (Nasdaq: CHRS), the retail apparel chain specializing in women's plus-size apparel, reported that total sales for the four weeks ended February 1, 2003 decreased 6% to $125,300,000 from $133,700,000 for the four weeks ended February 2, 2002. Comparable store sales for Charming Shoppes, Inc., decreased 1% for the four weeks ended February 1, 2003. During the fifty-two weeks ended February 1, 2003, the Company opened 60, relocated 33, converted 41 and closed 253 stores. Sales for the fifty-two weeks ended February 1, 2003 increased 20% percent to $2,382,500,000 from $1,978,500,000 for the comparable period ended February 2, 2002. The current period's total sales include sales from Lane Bryant, which was acquired August 16, 2001. Comparable store sales for Charming Shoppes, Inc. decreased 2% for the fifty-two weeks ended February 1, 2003. Charming Shoppes, Inc., whose $130 million Senior Unsecured Notes are currently rated by Standard & Poor's at 'BB-', operates 2,248 stores in 48 states under the names LANE BRYANT(R), FASHION BUG(R), FASHION BUG PLUS(R), CATHERINE'S PLUS SIZES(R), MONSOON and ACCESSORIZE. Monsoon and Accessorize are registered trademarks of Monsoon Accessorize Ltd. Please visit http://www.charmingshoppes.comfor additional information about Charming Shoppes, Inc. CITGO PETROLEUM: Fitch Hatchets Ratings over Liquidity Concerns --------------------------------------------------------------- Fitch Ratings lowered the senior unsecured debt rating of CITGO Petroleum Corporation to 'B+' from 'BB-'. Fitch Ratings also assigned the senior unsecured debt rating of 'B+' to the proposed $550 million bond offering by CITGO. Fitch rates the senior notes of PDV America, Inc. 'B-'. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A., the state-owned oil company of Venezuela. The debt of CITGO and PDV America remains on Rating Watch Negative. The downgrade reflects Fitch's concerns with the potential use of proceeds from the proposed bond offering to help pay the maturity of PDV America's $500 million of senior notes in August 2003. The rating action also reflects the continued tight liquidity position of CITGO and potential for further dividend payments to PDV America and ultimately PDVSA. Under the proposed bond offering, CITGO can upstream dividends to PDV America towards the August maturity subject to a post- dividend liquidity of $350 million. The indentures of the proposed offering will include a limit on future dividend payments of 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) beginning Jan. 1, 2003. The financial flexibility of both CITGO and PDV America has been weakened by the oil sector strike in Venezuela, which has severely disrupted the country's hydrocarbon exports. As a result of the labor action, CITGO has been forced to find alternate sources for some of the crude supplied by PDVSA. CITGO typically purchases approximately 50% of its crude needs from PDVSA under long-term contracts. CITGO has been successful acquiring alternate crudes and other feedstocks to maintain refinery operations. Although crude supply from Venezuela has improved (CITGO received 86% of contractual volumes in January), spot market terms have increased working capital requirements. Given the lowered credit ratings of CITGO related entities, additional working capital requirements are possible. The proposed offering will significantly improve near term liquidity for CITGO. The company is also in the process of replacing its accounts receivable program with a new $200 million facility as well as negotiating the sale of its pipeline fill inventory in the Colonial Pipeline for an estimated $100 million. CITGO is also considering a $200 million secured loan for its interest in the Colonial Pipeline. In mid-December, CITGO entered into a new $520 million credit facility, split into a $260 million three year facility and a $260 million 364- day revolver. The CITGO and PDV America ratings are also based on the deteriorating creditworthiness of PDVSA and Venezuela. The $500 million of senior notes mature in August 2003 and are supported by Mirror Notes issued by PDVSA and held by PDV America. The senior notes and Mirror Notes have identical terms and conditions such that the interest income PDV America receives from PDVSA on the mirror notes pays the interest on the senior notes. In an absence of a return to normal oil operations, Fitch has significant concerns with the ultimate parent's ability and willingness to pay the maturity of the notes. The situation in Venezuela remains highly volatile. Although Fitch expects CITGO to maintain operations, further deterioration in CITGO's financial position or the ultimate shareholders credit quality could result in additional downgrades. CITGO is one of the largest independent crude oil refiners in the United States with three modern, highly complex crude oil refineries and two asphalt refineries with a combined capacity of 756,000 barrels per day. The company also owns approximately 41% interest in LYONDELL-CITGO Refining L.P., a limited liability company that owns and operates a 265,000-barrel per day crude oil refinery in Houston, Texas. CITGO markets refined products through approximately 13,400 independently owned and operated retail sites. CONSECO FINANCE: Seeks Approval of Proposed Lift Stay Procedures ---------------------------------------------------------------- Conseco Finance Corporation and its debtor-affiliates originate and service home equity and home improvement loans to consumers. In exchange, the borrower grants to the CFC Debtor a security interest in the property that is the subject of the loan. In many cases, property is already mortgaged to a senior lienholder and the CFC Debtors' security interest is a junior lien. Due to the size of their operations, the CFC Debtors anticipate that they will be inundated with motions, foreclosure notices and other actions by borrowers and lenders seeking to enforce their rights and interests in the mortgaged properties. At least 14 Motions have already been filed. Therefore, the CFC Debtors require a procedure to protect the interest of their estates in the liens on those properties. James H.M. Sprayregen, Esq., at Kirkland & Ellis, notes that numerous motions for relief from the automatic stay would be burdensome to this Court's calendar and docket and cumbersome to individual borrowers and lienholders. By this motion, the CFC Debtors propose to establish procedures for modifying the automatic stay where they have an interest. This will save the Court time, docket space and service costs. The CFC Debtors suggest these procedures: (a) A party asserting its rights to a mortgage on a property where their exists a CFC Debtor lien, must provide documentation; (1) indicating the status of the foreclosure action, including location, date, time and details of the potential sale; (2) as evidence of the fair market value of the property, senior lien and position and value of other known liens; and (3) of papers filed in any court connected to the foreclosure; and (b) Written documentation must be provided to: Dryden J. Little, Esq. Kirkland & Ellis Citigroup Center 153 East 53rd Street New York, New York 10022 Daminic Baglio & Shannon Schaefer Conseco Home Equity & Home Improvement Divisions 7360 S. Kyrene Road Tempe, Arizona 85283 Brian F. Corey, Esq. General Counsel Conseco Finance Corp. 1100 Landmark Towers 345 St. Peter Street Saint Paul, MN 55102 Becker & Poliakoff, P.A. 3111 Sterling Road Fort Lauderdale, FL 33312-6566 Attn: Ivan J. Rich Mr. Sprayregen maintains that the CFC Debtors will need 45 days from receipt to adequately protect their interests. For example, they will need: -- a valuation of the property, -- evidence of the value of the senior lienholder's interest, -- details of liens with priority over the CFC Debtors' interest, -- a foreclosure recovery equity analysis, and -- management approval to participate in the foreclosure sale, and prepare check and bid instructions for the sale. Thus, the CFC Debtors also ask the Court to extend for 45 days the automatic stay period beyond the 30-day period specified in Section 362(e) of the Bankruptcy Code. If the CFC Debtors do not object to the proposed foreclosure within the 45-day period, the automatic stay will be deemed vacated. (Conseco Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392- 0900) CONSECO INC: TOPrS Committee Hires Saul Ewing as Primary Counsel ---------------------------------------------------------------- To prosecute their interest in these cases, the Trust Originated Preferred Debt Holders Committee, appointed in the chapter 11 cases involving Conseco Inc., and debtor-affiliates, tells the Court that it needs bankruptcy lawyers. In this regard, the TOPrS Committee has selected Saul Ewing as its primary counsel and Jenner & Block to serve as co-counsel. Thus, the TOPrS Committee seeks the Court's authority to retain Saul Ewing. The Committee explains that Saul Ewing has extensive experience and knowledge in the areas of law relevant to these cases and is familiar with the Debtors and the key issues. Saul Ewing is expected to: (a) provide legal advice on the TOPrS Committee's rights, powers and duties; (b) prepare necessary or appropriate applications, motions, answers, responses, objections, orders and other legal papers; (c) represent the TOPrS Committee in matters involving disputes or issues with the Debtors, alleged secured creditors and other third parties; (d) assist the TOPrS Committee in its investigation and analyses of the Debtors and the operations of their businesses; (e) assist the TOPrS Committee in negotiations regarding a Chapter 11 plan and litigation arising out of confirmation proceedings; (f) preserve causes of action against third parties that may provide additional sources of recovery for creditors, particularly those represented by the TOPrS Committee; and (g) perform all other legal services for the TOPrS Committee which may be necessary or desirable in these cases. Pursuant to the parties' arrangement, Saul Ewing will be compensated in accordance with its standard hourly rates. The professionals primarily responsible for these proceedings and their hourly rates are: Professional Hourly Rate ------------ ----------- Irving E. Walker $350 Robert M. Greenbaum 345 Donald J. Detweiler 275 John F. Stoviak 505 Saul Ewing has advised the TOPrS Committee that, from time to time, it may seek the services of its other professionals and staff. Saul Ewing's general hourly rates are: Professional Hourly Rate ------------ ----------- Attorneys $505 - 165 Paralegals 135 - 115 Case Management Clerks 65 Donald J. Detweiler, Esq., a Saul Ewing attorney, assures Judge Doyle that his firm does not hold or represent any interest adverse to the TOPrS Committee. Saul Ewing is a "disinterested person" pursuant to Section 101(14) of the Bankruptcy Code. (Conseco Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Conseco Inc.'s 10.750% bonds due 2008 (CNC08USR1) are trading at about 13 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CNC08USR1for real-time bond pricing. CORNING INC: Foresees Profitability Return by Third Quarter ----------------------------------------------------------- "Our plan to restore profitability is set and we expect to be profitable in the third quarter of this year," Corning Incorporated's (NYSE:GLW) Vice Chairman and Chief Financial Officer James B. Flaws told investors Friday during Corning's annual investor conference in New York City. Flaws said that the company expected to reach profitability despite anticipated weak performance in its Telecommunications segment this year. Corning provided financial guidance for the first quarter of 2003, anticipating revenues in the range of $700 to $730 million, and a net loss in the range of $0.01 to $0.04 per share, excluding gains on debt repurchases and restructuring charges discussed below. Flaws told investors that Corning planned to recognize equity earnings from Dow Corning, beginning in the first quarter. "However, our plan to return to profitability by the third quarter of this year is not dependent on Dow Corning earnings," Flaws said. In opening the conference, James R. Houghton, chairman and chief executive officer, told investors that Corning "is not merely a telecommunications company. Rather, we are a technology company with the materials and process expertise to create life-changing products." He unveiled a new quality initiative for the organization, central to each business' operating plan. "I believe passionately that the companies dedicated to quality, to performance, to integrity, to their people, and to their values are the only companies that will survive and thrive in this increasingly complex business world. Corning is one of these companies." Restoring Profitability Wendell P. Weeks, Corning's president and chief operating officer, cited four key elements of the company's 2003 plan to restore profitability, including stable sales volume in optical fiber and cable, significant cost reduction benefit from its 2002 restructuring actions primarily in its Telecommunications segment, continued growth in the Corning Technologies segment, and reduced corporate operating expenses. "Our restructuring actions from last year will be substantially complete in the first quarter and we expect to see a year-to- year bottom-line benefit in the range of $300 to $330 million in our telecommunications segment. Improvements to the bottom-line in the range of $100 to $120 million in the technologies segment will be driven by revenue growth in several key businesses and productivity improvements," Weeks told investors. "We have not built our plan on a market recovery in optical fiber and cable. While there is some evidence that these markets are stabilizing, we are anticipating flat year-to-year volume and positive cash flow, before restructuring costs, from these businesses." Additionally, he told investors that the company continues to narrow its photonics product line while it explores alternatives for the business. Weeks announced that further exits of product lines could result in a pre-tax charge of $20 to $30 million in the company's first quarter results. Corning will maintain a leadership position in optical amplification and dispersion compensation products. Weeks reiterated that the company is actively considering all options for this business, including partnerships, further product reductions or exiting the photonics market entirely. He told investors that the company would reach a decision on the future of its photonics business by mid-year. Weeks reviewed plans to continue reducing costs in 2003 by centralizing and standardizing a number of administrative processes, and by reducing its research, development and engineering spending to 10% of sales. He also said that the company's research and development focus will align with its current growth opportunities while maintaining its superior research capability. Technologies Weeks told investors that the company's Technologies segment presents significant opportunity for growth, to be led by expected strong sales of flat-panel glass for liquid crystal displays, a potential recovery in the semiconductor materials segment and continued increases in sales of catalytic substrates for gasoline and diesel engines. "We believe we are entering the golden age of growth for our LCD business," Weeks said, "we expect to see annual revenue growth of at least 20% to 40% over the next several years." Telecommunications Corning ultimately expects renewed growth in the telecommunications segment, but Weeks told investors that the industry must address three major structural issues before it occurs. These are changes in public policy, the improvement of telecommunications carriers' balance sheets to spur capital investment and the emergence of profitable broadband business models. "We believe the potential for the telecommunications market remains significant. Bandwidth demand is growing and will continue to grow. Telecommunications networks are still in the early stages of a long technology substitution cycle. Optical remains a transcendent technology and will continue to penetrate networks around the world," he told analysts. Corning believes that worldwide demand for internet bandwidth traffic will grow at 60% to 80% annually, and that increases in broadband subscribers and the potential multi-billion dollar market in optical fiber replacement for copper cable installations will eventually drive a market recovery. However, Weeks pointed out that the current U.S. regulatory environment provides little incentive for telecommunications investments and serves as a significant economic barrier to Fiber-to-the-Home investment. Financial Outlook Flaws addressed the company's renewed governance standards, cash flow, the impact of Dow Corning equity earnings and Corning's debt ratings. He told investors that Corning met all the new requirements from the New York Stock Exchange, Securities and Exchange Commission and Sarbanes-Oxley legislation, and that Corning had $2.1 billion in cash and short-term investments and access to a $2 billion line of credit at the end of 2002. Flaws reminded investors that Corning had already used approximately $160 million in cash to repurchase debt in the first quarter. This will result in pre-tax gains in the range of $25 to $30 million. Flaws also pointed out that the company anticipated making a $60 million voluntary contribution to its pension plan this year, and expected to continue annual contributions at this level, unless market conditions improve. In an unrelated action, Corning announced that Catherine A. Rein, president and chief executive officer of Metropolitan Property and Casualty Insurance Company, resigned from Corning's Board of Directors on Feb. 5, 2003 after 12 years of service. Corning's board will appoint Ms. Rein as a director emerita in honor of her distinguished service. The board will be reduced from 14 to 13 members. Established in 1851, Corning Incorporated -- http://www.corning.com-- creates leading-edge technologies that offer growth opportunities in markets that fuel the world's economy. Corning manufactures optical fiber, cable and photonic products in its Telecommunications segment. Corning's Technologies segment manufactures high-performance display glass, and products for the environmental, life sciences and semiconductor markets. * * * As previously reported in the Troubled Company Reporter, Standard & Poor's lowered its ratings on two synthetic transactions related to Corning Inc., to double-'B'-plus from triple-'B'-minus. The lowered ratings follow the lowering of Corning Inc.'s long- term corporate credit and senior unsecured debt ratings on July 29, 2002. The two deals are both swap independent synthetic transactions that are weak-linked to the underlying collateral, Corning Inc.'s debt. The lowered ratings reflect the credit quality of the underlying securities issued by Corning Inc. RATINGS LOWERED Corporate Backed Trust Certificates Corning Debenture-Backed Series 2001-28 Trust $12.843 million corning debenture-backed series 2001-28 Rating Class To From A-1 BB+ BBB- Corporate Backed Trust Certificates Corning Debenture-Backed Series 2001-35 Trust $25.2 million corning debenture-backed series 2001-35 Rating Class To From A-1 BB+ BBB- CORNING INC: Expects Continued Strong Growth in Glass Business -------------------------------------------------------------- Corning Incorporated (NYSE:GLW) told investors Friday that it expects 20% to 40% annual revenue growth for its display technologies business through 2006. Peter F. Volanakis, president of Corning Technologies, cited a dramatic increase in the market penetration of liquid crystal display desktop monitors, continuing growth of notebook computers and the emergence of LCD television as drivers of the growth. Volanakis made the comments during the company's annual investment conference in New York City. Volanakis told investors that Corning expects over 70% of all desktop computer monitors to be LCD by 2006. The popularity of LCD monitors on the desktop will reach 40% this year, compared to 28% in 2002. Additionally, he explained that notebook computers, all of which have LCD screens, continue to appeal to more users and should grow to represent 25% of all new PCs sold this year. "All of this is good news for our revenues, requiring us to add manufacturing capacity this year. We are the acknowledged technology leader with the most advanced and reliable fusion manufacturing process, producing glass that requires no polishing and has the industry's best surface characteristics," he explained. In November 2002, Corning announced it had begun a major expansion of its Taiwan LCD glass manufacturing facility to install the company's proprietary fusion technology. This milestone makes Corning's Taiwan facility its fourth fully- integrated plant in Asia, including two Samsung Corning Precision (SCP) plants in South Korea. The company also plans to have additional capacity running at both its Shizuoka, Japan, and Harrodsburg, Ky., plants this year. Volanakis told analysts that LCD televisions currently represent only 1% of the color television market, but the anticipation of significant price declines and introduction of new, larger screen sizes could drive market penetration to near 10% by 2006. He noted that while current worldwide glass demand for all LCD applications is about 200 million square feet per year, the increasing popularity and larger sizes in LCD televisions and desktop monitors could result in the quadrupling of that volume by the end of the decade. "A gain of only one diagonal inch in a 15-inch LCD screen results in a 15% increase in glass consumption. A 25-inch LCD-TV will require three times the glass of a 15-inch desktop monitor," he will tell investors. Environmental Technologies Volanakis also told investors that Corning anticipated the diesel emissions control market would double each year through 2008, and that this will provide a strong opportunity for growth of the company's diesel filter and substrates business. He added that the company's emissions control business for automobiles would continue to grow, and when combined with the diesel opportunity, Corning's Environmental Technologies businesses could reach $1 billion in sales by 2008. Semiconductor Materials and Life Sciences Volanakis also discussed Corning's growth opportunity in its Semiconductor Materials business, where it is a leader in optical components for microlithography, providing enabling technologies for the semiconductor industry. Volanakis said the company expected the Semiconductor Materials business to triple in size by 2008. Volanakis added that the company expected its Life Sciences business to grow over 10% a year through 2008. Corning's Life Sciences business provides precision disposable scientific laboratory tools for the fast growing drug discovery market and for general scientific use. Established in 1851, Corning Incorporated -- http://www.corning.com-- creates leading-edge technologies that offer growth opportunities in markets that fuel the world's economy. Corning manufactures optical fiber, cable and photonic products in its Telecommunications segment. Corning's Technologies segment manufactures high-performance display glass, and products for the environmental, life sciences and semiconductor markets. * * * As previously reported in the Troubled Company Reporter, Standard & Poor's lowered its ratings on two synthetic transactions related to Corning Inc., to double-'B'-plus from triple-'B'-minus. The lowered ratings follow the lowering of Corning Inc.'s long- term corporate credit and senior unsecured debt ratings on July 29, 2002. The two deals are both swap independent synthetic transactions that are weak-linked to the underlying collateral, Corning Inc.'s debt. The lowered ratings reflect the credit quality of the underlying securities issued by Corning Inc. RATINGS LOWERED Corporate Backed Trust Certificates Corning Debenture-Backed Series 2001-28 Trust $12.843 million corning debenture-backed series 2001-28 Rating Class To From A-1 BB+ BBB- Corporate Backed Trust Certificates Corning Debenture-Backed Series 2001-35 Trust $25.2 million corning debenture-backed series 2001-35 Rating Class To From A-1 BB+ BBB- CREST 2003-1: S&P Rates $180-Mill. Preferred Share Issue at BB- --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to CREST 2003-1 Ltd./CREST 2003-1 Corp.'s $600 million floating- and fixed-rate notes and preferred shares. The preliminary ratings are based on information as of Feb. 7, 2003. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes and by the preference shares and overcollateralization; -- The cash flow structure, which is subject to various stresses requested by Standard & Poor's; -- The experience of the collateral administrator and disposition consultant; -- The coverage of interest rate risks through hedge agreements; and -- The legal structure of the transaction, which includes the bankruptcy remoteness of the issuer. CREST 2003-1 Ltd./CREST 2003-1 Corp., is the eighth cash flow arbitrage CDO on which Structured Credit Partners LLC serves as the collateral administrator or sub-advisor. It is the fourth cash flow arbitrage CDO on which A.C. Corp. serves as the disposition consultant. Preliminary Ratings Assigned Class Rating Amount (Mil. $) A AAA 222 B AA 51 C A- 78 D BBB 69 Preferred shares BB- 180 DELTRONIC CRYSTAL: Case Summary & Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Deltronic Crystal Industries, Inc., d/b/a Crystaline Optics and Isowave 60 Harding Avenue Dover, New Jersey 7801 Tel: 973-328-7000 Bankruptcy Case No.: 03-13218 Type of Business: Deltronic Crystal Industries, provides vertically integrated optical component solutions to the communications and laser photonics industries, utilizing its crystal growth experience. Chapter 11 Petition Date: January 31, 2003 Court: District of New Jersey (Newark) Judge: Morris Stern Debtor's Counsel: David Edelberg, Esq. Nowell Amoroso Klein Bierman, P.A. 155 Polifly Road Hackensack, NJ 07601 Tel: (201) 343-5001 Fax: 201-343-5181 Total Assets: $7,691,899 Total Debts: $2,103,921 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Bank of America, N.A. $962,100 CLSC-Private Bank NC1-014-13-02 100 South Charles Street Baltimore, MD Corning Incorporated $495,320 HP-CB-02 Corning, NY 14831 Elizabeth Samuelson $251,000 12 Fox Run Road Califon, New Jersey 07830 Bank of America, N.A. $182,800 Hale & Dorr $10,277 Pennwell $9,367 Yeagle Technology, Inc. $5,750 PHOTOTRONICS, Inc. $5,727 Karl Lambrecht Corporation $5,538 Diamond Lease $5,157 HC Starck, Inc. $3,630 Lakeland Bank $3,187 UPS $2,686 Miller Systems $2,000 Cutting Edge Tech $2,000 KEMA-Registered Quality Inc. $1,962 Northrup Grumman $1,708 Englehard $1,161 Zircar Zirconia, Inc $686 NAMIKI Precision $479 DOANE PET CARE: Updates Q4 and Fiscal 2002 Earnings Guidance ------------------------------------------------------------ Doane Pet Care Company updated its earnings guidance for its fourth quarter and fiscal year ended December 28, 2002 and provided guidance for fiscal 2003. Results for the 2002 fourth quarter and fiscal year are subject to final review and audit. The Company said that it expects to report net sales for the 2002 fourth quarter of approximately $246 million and Adjusted EBITDA of approximately $28 million to $29 million. Net sales and Adjusted EBITDA for the 2001 fourth quarter were $221.5 million and $24.7 million, respectively. For fiscal 2002, the Company expects to report net sales of approximately $887 million. Net sales for fiscal 2001 were $895.8 million, which included $16.6 million of net sales from the Deep Run and Perham businesses prior to their divestitures. Although net sales for fiscal 2002 were relatively flat as compared to fiscal 2001, primarily due to the Project Focus initiatives, the Company did experience second half growth of approximately 8% as compared to the second half of 2001 as a result of the previously announced business awards of Ol' Roy Meaty Chunks N' Gravy and Meow Mix. For fiscal 2002, the Company expects to report Adjusted EBITDA of approximately $107 million to $108 million. The Company's Adjusted EBITDA for fiscal 2001 was $89.8 million, which included net losses of $2.6 million related to the Deep Run and Perham businesses. The gain in Adjusted EBITDA for 2002 resulted from a substantial performance improvement in the Company's European operations, lower natural gas costs and additional cost reductions and margin improvements resulting from the Company's Project Focus initiatives. In fiscal 2002, the Company invested approximately $23.7 million in capital expenditures, a 37% increase from $17.3 million in fiscal 2001. The Company also said that it ended fiscal 2002 with total debt of approximately $554 million, a reduction of approximately $34 million from $588 million at year end 2001. For fiscal 2003, the Company anticipates net sales growth of approximately 7% to 8% and Adjusted EBITDA of approximately $105 million, reflecting the Company's current expectation of the impact of an overall higher commodity cost environment and other assumptions discussed below in "Adjusted EBITDA Discussion and Analysis." Doug Cahill, the Company's President and CEO, said, "We are very pleased with anticipated results for both the fourth quarter and full year 2002. This performance clearly demonstrates the terrific job our associates around the world have done, the success of our Project Focus initiatives and our continuing drive to be the trusted partner of choice for our customers' brands. We are optimistic about our prospects for delivering sustainable earnings in 2003 and beyond, but we are cautious as we move into the first half of the year because of the potential for volatility in commodities, particularly corn and natural gas. We will continue our risk management strategies to seek to mitigate the impact of rising commodity prices throughout the balance of 2003." On October 15, 2002, the Company announced that it was reviewing the potential sale of its European pet food business. The Company said that it is no longer pursuing a sale of its business in Europe. Pension Plans The Company maintains a non-contributory pension plan covering hourly and salaried workers of a predecessor company. The plan was frozen in 1998 and, as a result, future benefits no longer accumulate and the Company's annual service cost ceased as of that date. The Company's only active plan covers 41 union employees at one facility. Due to a decline in the market value of these plans' assets in 2002, and the decline of interest rates used in discounting benefit liabilities, the pension assets at the end of 2002 were approximately $1 million less than the accumulated benefit obligations. Under SFAS 87, the Company was required to record a balance sheet adjustment during the fourth quarter of 2002 for the additional minimum liability in accordance with SFAS 87 accounting rules. The non-cash adjustment was recorded as an after-tax reduction of approximately $6 million in stockholders' equity. Under ERISA rules, the Company was not required to make any cash contributions to the inactive plan in the prior three years and does not expect to make any cash contribution in 2003. The Company's contributions to the active plan in the prior three years were less than $0.1 million per year and the Company expects to contribute less than $0.1 million in 2003. The non- cash adjustment has no impact on the Company's earnings, cash flow or bank debt covenants. Doane Pet Care Company, based in Brentwood, Tennessee, is the largest manufacturer of private label pet food and the second largest manufacturer of dry pet food overall in the United States. The Company sells to over 600 customers around the world and serves many of the top pet food retailers in the United States, Europe and Japan. The Company offers its customers a full range of pet food products for both dogs and cats, including dry, semi-moist, wet, treats and dog biscuits. * * * As previously reported in Troubled Company Reporter, Standard & Poor's said its ratings on pet food manufacturer Doane Pet Care Co., remain on CreditWatch with negative implications, where they were placed April 3, 2002. The CreditWatch listing reflects credit protection measures that have fallen below Standard & Poor's expectations and Doane's limited cushion under its bank loan financial covenants. At the same time, Standard & Poor's assigned its single-'B'- minus rating to Doane's proposed $200 million senior unsecured notes due 2008. This rating is not on CreditWatch. The net proceeds of the issue will be used to repay a portion of the company's outstanding indebtedness. Brentwood, Tennessee-based Doane had about $555 million of total debt outstanding as of March 31, 2002. EL PASO CORP: S&P Lowers L-T Corp. Credit Rating to B+ from BB -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on energy company El Paso Corp., and its subsidiaries to 'B+' from 'BB'. Standard & Poor's also lowered its senior unsecured debt rating at the pipeline operating companies to 'B+' from 'BB' and the senior unsecured rating on El Paso to 'B' from 'BB-', reflecting structural subordination relative to the operating companies. All ratings on El Paso and its subsidiaries were removed from CreditWatch, where they were placed Sept. 23, 2002. The outlook is negative. Houston, Texas-based El Paso, North America's biggest natural gas pipeline operator, has about $17 billion of on-balance sheet debt. "The rating actions reflect continued reductions in cash flow estimates, heightened refinancing risk, the inability to successfully meet debt reductions goals, and a deterioration in the company's liquidity position," said Standard & Poor's credit analyst William Ferara. Reduced cash flow expectations is mainly due to lower capital spending at the exploration and production unit, while at the same time the company's financial improvement has been prolonged by the need to use cash to fulfill collateral and margin posting requirements versus paying down debt. Continued deterioration in El Paso's cash flow to interest coverage measures are foreseen due to higher current and anticipated borrowing rates for all El Paso entities. Of paramount importance to the company's ability to persevere current conditions is renegotiating its credit facilities and regaining access to capital markets at the holding company level. El Paso's ability to refinance its obligations will most likely be delayed until the FERC's ongoing investigation into market manipulation in California is resolved. Absent such access, the company will be severely challenged to repay nearly $2.5 billion of borrowings in 2003 and $3.5 billion in 2004 (assuming current borrowings of $1.5 billion are termed out). Thus, executing on planned asset sales (targeted at $2.9 billion in 2003) is crucial to meeting debt maturities and accounting for the continued shortfall in cash flow (expected at about $2.5 billion in 2003) versus capital spending ($2.6 billion) and dividend requirements ($200 million) in 2003. The company, whose severe dividend cut saves only a modest amount of cash relative to near-term maturities, continues to exit higher-risk businesses that have been key to the company's strategy (most recently the LNG business) and further restrains discretionary capital spending. This exemplifies the need for the company to stabilize its liquidity position and reduce debt so as to avoid any significant usage of its high-return core assets to stave off further financial deterioration. Current ratings assume resolution of the FERC matter in such a way that will be credit neutral for El Paso. Resolution in such a manner could be perceived as an important first step toward staunching negative investor sentiment and a key building block toward ratings stability. The negative outlook reflects significant hurdles the company has regarding regaining access to capital markets, halting the continued decline in cash flow, and resolving the FERC matter in a manner that is credit neutral to El Paso. Successful execution could lead to ratings stability and upward credit momentum. ENCOMPASS SERVICES: Earns Final Nod for $60-Mill. DIP Financing --------------------------------------------------------------- U.S. Bankruptcy Judge William Greendyke enters a Final DIP Financing Order authorizing Encompass Services Corporation and its debtor-affiliates to borrow and re-borrow funds from its Postpetition Lenders of up to $60,000,000. The Court also orders that the net proceeds from any sales of any of the Debtors' assets, including stock sales will be paid to Bank of America, will be applied: (a) as payment of the fees and expenses of Bank of America, as Postpetition Agent, including attorneys' fees and fees for consultants; (b) as payment of outstanding fees, costs and expenses of the Postpetition Lenders; (c) as reduction of outstanding balances under the Tranche B Revolving Credit Facility that are not collateralized by Tranche B Cash Proceeds; (d) to a blocked account at Bank of America as collateral for the Tranche A Revolving Credit Facility until the amount of Eligible Tranche A Cash Proceeds reaches $31,578,947; (e) to the Blocked Account as collateral for the Tranche B Revolving Credit Facility until the aggregate amount of Tranche A Cash Proceeds and Tranche B Cash Proceeds reaches $63,157,895; and (f) to the obligations of the Prepetition Lenders on a pro rata basis, but after an Event of Default subject to the Carve-Out, as determined by Prepetition Credit Agreement. The Court also enjoins and prohibits the Debtors from granting liens in the Prepetition Collateral, the Postpetition Collateral to any other parties, which liens are senior, on a parity with, or junior to the liens of the Prepetition Agents or the Prepetition Lenders or the Postpetition Agents or the Postpetition Lenders. (Encompass Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Exclusivity Extension Hearing Slated for February 20 ---------------------------------------------------------------- Enron Corporation and its debtor-affiliates ask the Court to extend their exclusive period to file a plan through April 30, 2003 and their exclusive period to solicit acceptances of that plan until June 29, 2003. Martin J. Bienenstock, Esq., at Weil, Gotshal & Manges LLP, in New York, recounts that since the Petition Date, the Debtors have: (a) marketed all its major businesses around the world so creditors can decide between selling and retaining each one of them; (b) sorted out the assets and liabilities of over 70 Debtors' estates subject to certain litigation claims; (c) investigated and analyzed substantive consolidation and intercompany claims; (d) sold more than $1,700,000,000 of non-core assets; (e) developed Chapter 11 plan models applicable to all Debtors and negotiated a plan consensus with the statutory creditors' committee that can now be negotiated with major creditors not having committee memberships; (f) accommodated two examiner investigations and 18 governmental investigations; (g) reviewed over 18,000 filed claims for over $400,000,000,000, in addition to approximately 5,000 contingent and unliquidated claims, for purposes of developing estimate methods and completing Chapter 11 plans; and (h) developed and settled or propounded numerous avoidance actions to recover potentially billions of dollars. However, despite these achievements, Mr. Bienenstock points out, certain issues have to be resolved before a meaningful plan can be proposed, among them: -- substantive consolidation must be resolved before the Debtors can know whether it needs one plan or multiple plans; -- the amount, priority and allowability of intercompany claims must be resolved because they are pervasive and are also subject to disallowance due to avoidance actions; -- efficient claims estimation methods must be developed to enable plan distributions to be made; and -- the result of the Debtors' marketing of its major businesses are only recently known to Enron and the Creditors' Committee, and decisions on whether to retain or sell major businesses impacts the Chapter 11 plans. Accordingly, Mr. Bienenstock asserts, the exclusive periods extension is warranted pursuant to Section 1121 of the Bankruptcy Code, specially that: (a) given the scope and complexity of the Debtors' business operations currently necessitating huge time, expense and litigation to maximize the value of its estates, it is not possible to resolve all the issues necessary for formation of a confirmable plan in the current exclusivity period; (b) although substantial progress has been made and continues to be made, a multitude of issues, including claims resolution, prosecution or settlement of litigation actions, asset sale and the wind down of the trading book, continue to require the Debtors' attention and efforts to resolve the issues before a confirmable Chapter 11 plan can be proposed; and (c) the exclusivity periods extension will not harm the Debtors' creditors but rather afford the Debtors and other parties-in-interest an opportunity to develop fully a consensual plan while minimizing the need for lengthy and expensive litigation over competing plans. * * * In a Bridge Order, Judge Gonzalez extends the exclusive plan filing period until the conclusion of the hearing on February 20, 2003 at 10:00 a.m. (Enron Bankruptcy News, Issue No. 56; Bankruptcy Creditors' Service, Inc., 609/392-0900) ETHYL CORP: Meets Earnings and Debt Reduction Targets in 2002 ------------------------------------------------------------- Ethyl Corporation President and Chief Executive Officer, Thomas E. (Teddy) Gottwald released this earnings report for the year and fourth quarter 2002 and an update of the company's operations: To Our Shareholders: "We are pleased to report to you that in 2002 we met our goals of improving our profits and reducing our debt. We are very proud that in addition to meeting these financial targets, we reached our safety goal of being in the top 10% of all chemical companies in safety performance. "Earnings from continuing operations excluding nonrecurring items for the year 2002 were $12 million, or 72 cents per share, a significant improvement over earnings on the same basis for last year of $7.5 million or 45 cents per share. This improvement in earnings is even more noteworthy considering it includes the impact of pension expense included in the current year's results while 2001 results included the benefit of pension income. This change in pension earnings reduced income 33 cents per share for the year compared with 2001. On the same basis, earnings for the fourth quarter 2002 were $1.0 million or 6 cents per share compared with earnings of $2.9 million or 17 cents per share for last year's fourth quarter. "Net income for the year and fourth quarter for 2002 and 2001 include significant nonrecurring items not included above. These nonrecurring items are included in the summary of earnings chart at the end of this press release. "During the year 2002 we continued our focus on improving profits, reducing debt and managing cost while providing our customers with top quality products. "We are pleased with the continuing improvement in our petroleum additives operating profits. For the year, we stabilized our business base in the important engine oil additives area and grew sales 12 percent in the other petroleum additives businesses compared to last year. Operating profit for continuing operations of the petroleum additives segment excluding nonrecurring items increased 60 percent over last year and represents this segment's best earnings results for a year since 1999. Petroleum additives profits for the year improved in all of our major product lines compared with last year. "The improved petroleum additives profits reflect the benefits of improved asset utilization, more efficient research and development spending and other cost controls. As expected, continuing petroleum additives profits for the fourth quarter were lower than fourth quarter 2001 and lower than our very strong performance in the third quarter 2002. Our fourth quarter 2002 numbers reflect the impact of scheduled plant maintenance, planned reductions in inventory, increasing raw material costs, and our normal pattern of lower sales in the latter part of the year. "TEL earnings for the year 2002, as well as the fourth quarter, were lower, as expected, compared to the same periods last year. This reduction in earnings compared with last year reflects both the continuing decline in the market for this product as well as certain costs incurred in the current year, while 2001 included the benefit of certain sales to Octel. This product continues to supply the Company with strong cash flows. "Earnings have also benefited from lower interest expense as we continued to make excellent progress on debt reduction. During the year 2002, we reduced debt $45.9 million and ended the year with $290MM in debt. In addition to paying down debt, we also made payments totaling $19.2 million related to the required funding associated with the amendment of our TEL marketing agreements. "On January 21, 2003, we completed the sale of our phenolic antioxidant business to Albemarle Corporation (NYSE: ALB). Following an extensive assessment, we concluded this business was not part of our future core business or growth goals. This is another strategic step in fulfilling our goals of reducing debt, strengthening our balance sheet and allowing us to focus more closely on our core businesses. The earnings results of the phenolic antioxidant business is, therefore, being reported as discontinued operations. "Our improved performance has allowed us to meet all of the debt exposure reduction requirements necessary to extend our current loan facility to March 31, 2004. By the terms of the agreement the extension will not be granted until March 1, 2003. Consequently, most of the bank debt shown as "current" in this release, will be reclassified to "long term" when we file our 10-K in March following the granting of the extension. "We expect to see significant quarterly variations in our 2003 earnings. It is the nature of our businesses. While we remain concerned about certain aspects of the global economy, for the full year 2003, our current view is that we expect earnings, excluding nonrecurring items and discontinued operations, to be above our 2002 results. "The company, through its dedicated employees, continues to provide our customers with the best products and service in the industry while improving profits, managing cost and achieving excellent progress in reducing debt. Our safety record is a tribute to that dedication. In 2002, our recordable injury rate - a common measure of safety performance - was 0.76, our lowest (best) ever. This compares to a chemical industry average of approximately 4.0 and a general industry average of around 5. Our employees have made a personal commitment to working safely. While we're proud of what this means for our employees and their families, we submit to you that the same commitment to excellence and attention to detail is being applied to all that we do - from quality improvement and customer service to product development. "I thank all our employees for their performance and dedication. I thank our customers for their confidence in us by allowing us the opportunity to provide the goods and services integral to their businesses. And I also express my appreciation to our shareholders for your continued support." Sincerely, Teddy Gottwald * * * At December 31, 2002, Ethyl Corp.'s balance sheet shows that total current liabilities exceeded total current assets by about $83 million. FARMLAND: Marketing Pact with Mississippi Chemical Terminated ------------------------------------------------------------- Mississippi Chemical Corporation (NYSE: GRO) terminated the agreement with Farmland Industries, Inc., of Kansas City, Mo., to jointly market and sell their respective interests in Farmland MissChem Limited. This agreement had envisioned that Farmland MissChem Limited would be sold in connection with Farmland's Chapter 11 bankruptcy reorganization proceedings. Mississippi Chemical believes that terminating the arrangement at this time will best serve the interests of Mississippi Chemical and its stakeholders. Mississippi Chemical will separately market its 50% interest in Farmland MissChem Limited. Farmland MissChem Limited operates an 1850 metric-ton-per-day ammonia production facility located in the Point Lisas Industrial Estate in The Republic of Trinidad and Tobago. Mississippi Chemical Corporation, through its wholly owned subsidiaries, produces and markets all three primary crop nutrients. Nitrogen, phosphorus and potassium-based products are produced at facilities in Mississippi, Louisiana and New Mexico, and through a joint venture in The Republic of Trinidad and Tobago. FIRST INT'L: Fitch Cuts Notes' Ratings to Low-B & Junk Levels ------------------------------------------------------------- Fitch Ratings downgrades the following classes of securities. FNBNE Business Loan Notes, Series 1998-A --Class A notes to 'AA' from 'AAA'; --Class M-1 notes to 'BBB' from 'A'; --Class M-2 notes to 'BB' from 'BBB'. FIB Business Loan Notes, Series 1999-A --Class A notes to 'AA' from 'AAA'; --Class M-1 notes to 'BBB' from 'A'; --Class M-2 notes to 'BB' from 'BBB'. FIB Business Loan Notes, Series 2000-A --Class A notes to 'BBB' from 'AA'; --Class M-1 notes to 'B' from 'BBB'; --Class M-2 notes to 'CCC' from 'BB'; --Class B notes to 'CC' from 'B'. FIB SBA Loan-Backed Adjustable Rate Certificates, Series 1999-1 --Class A notes to 'A' from 'AAA'; --Class M notes to 'BB' from 'A'. --Class B notes to 'B' from 'BBB'. FIB SBA Loan-Backed Adjustable Rate Certificates, Series 2000-1 --Class A notes to 'A' from 'AAA'; --Class M notes to 'BB' from 'A'. FIB SBA Loan-Backed Adjustable Rate Certificates, Series 2000-2 --Class A notes to 'A' from 'AAA'; --Class M notes to 'BB' from 'A'. All of the above First International Bank transactions remain on Rating Watch Negative and were originally placed on Rating Watch Negative on November 5, 2002. These rating actions reflect the deterioration in credit quality and adverse collateral performance within the securitizations, and the resulting decline in credit enhancement available in each transaction. Delinquencies continue to be significantly higher than historical levels and loans to borrowers in the manufacturing, metals/steel mill, and millwork/textile industries are particularly problematic in all of the aforementioned transactions. Sector-specific delinquencies combined with the general economic downturn have contributed to the securitizations' higher than expected delinquencies and losses outside of Fitch's initial base case expectations. Fitch is particularly concerned about each securitization's high delinquency levels because of the related impact on excess spread and credit enhancement. Excess spread in the FIB transactions is used to absorb losses and constitutes a large component of overall enhancement. The FIB securitizations are structured with a mechanism that traps additional excess spread on all delinquent loan amounts that are 180-720 days past due. As a result, the higher than expected delinquency rates have significantly reduced the amount of excess spread that is generated each month. Delinquent loans have also reduced the amount of excess spread that is available to absorb losses, as well as the amount of excess spread needed to build the reserve accounts to their required levels based on each securitization's 180-720 day delinquencies. Fitch analyzed expected losses and recoveries for each transaction based on delinquencies and the enhancement that would be available to cover those losses for each class of notes. This analysis encompassed a review of the collateral behind all delinquent loans over 90 days past due and an assessment of expected recoveries on that collateral. To estimate future enhancement levels, Fitch defaulted all loans over 90 days past due in each transaction and based its recovery expectations on the specific collateral supporting each loan. Specifically, Fitch considered collateral type (i.e. machinery and equipment, real estate and/or accounts receivable), appraised values, FIB's lien position, historical recovery rates and FIB's own expected recovery rates. Fitch's review also took into consideration certain top borrower concentrations in each transaction relative to current and expected credit enhancement levels. All classes remain on Rating Watch Negative due to the long length of time needed to realize recoveries on defaults and to recognize losses on loans in the 180-720 day delinquency buckets. In addition, Fitch is concerned that the transactions will experience additional delinquencies that may ultimately result in future losses. Securitization-specifc performance measures as of the December 2002 servicer reports are as follow: FNBNE Business Loan Notes, Series 1998-A --pool factor of 30% and cumulative net losses of 4.97% --the 90-720 day delinquency rate is 15.08% and the 180-720 day delinquency rate is 10.92%. FIB Business Loan Notes, Series 1999-A --pool factor of 47% and cumulative net losses of 9.25% --the 90-720 day delinquency rate is 13.37% and the 180-720 day delinquency rate is 9.07%. FIB Business Loan Notes, Series 2000-A --pool factor of 52% and cumulative net losses of 10.17% --the 90-720 day delinquency rate is 26.29% and the 180-720 day delinquency rate is 23.53%. FIB SBA Loan-Backed Adjustable Rate Certificates, Series 1999-1 --pool factor of 52% and cumulative net losses of 4.88%. --the 90-720 day delinquency rate is 22.15% and the 180-720 day delinquency rate is 15.62%. FIB SBA Loan-Backed Adjustable Rate Certificates, Series 2000-1 --pool factor of 65% and cumulative net losses of 8.65% --the 90-720 day delinquency rate is 24.02% and the 180-720 day delinquency rate is 13.76%. FIB SBA Loan-Backed Adjustable Rate Certificates, Series 2000-2 --pool factor of 84% and cumulative net losses of 1.35% --the 90-720 day delinquency rate is 16.13% and the 180-720 day delinquency rate is 14.96%. Fitch will continue to closely monitor these transactions and may take additional rating action in the event of further deterioration. FIB, formerly First National Bank of New England, is a Connecticut Bank and Trust Company organized in 1955 and headquartered in Hartford, Connecticut. Prior to August 2001, FIB was a wholly owned subsidiary of First International Bancorp, Inc., a Delaware Corporation. United Parcel Service, headquartered in Atlanta, GA, purchased FIB in August 2001. FIRST-UNION LEHMAN: S&P Hatchets Ratings on Classes K & L Notes --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on two classes of First-Union Lehman Brothers Commercial Mortgage Trust's commercial mortgage pass-through certificates series 1997-C2. The lowered ratings reflect the appraisal reductions and special servicing fees taken to date and the resultant interest shortfalls that are occurring on class L. The rating on class L is lowered to 'D' from 'CCC-', as interest shortfalls has accumulated since May 2000, and are expected to continue without any near term recovery expected. The class K, although currently receiving timely interest payments, has an increased likelihood of being shorted interest in the near future; consequently, its rating is lowered to 'CCC-' from 'CCC+'. As of January 2003, six delinquent and two REO loans accounted for 2.79% of total principal balance. To date, four of the six delinquent loans and the two REO loans are responsible for appraisal reductions totaling approximately $7.49 million. In addition, the special servicer, CRIIMI MAE Services L.P., advised Standard & Poor's of another appraisal reduction that will occur in the near future. To date, three loans have cumulative realized losses of $7.285 million. The greatest concerns to Standard & Poor's are the three delinquent loans with the largest total exposure: -- The loan that is triggering the largest monthly appraisal subordinated entitlement reduction (ASER) is a $7.1 million loan (total exposure $11.2 million) secured by FEL Lab Facility located in Farmingdale, New Jersey Although CRIIMI recently received a favorable court verdict pertaining to the lawsuit it initiated against the originator in October 2001 to repurchase this loan due to pre-existing environmental conditions, the originator has filed an appeal. If the court's decision stands, the originator would repurchase the loan and pay all servicing advanced fees. Otherwise, CRIIMI estimates a loss of approximately $3.7 million; -- A $16.8 million loan (total exposure $19.0 million), secured by a Sheraton Hotel located in Maitland, Florida, is being specially serviced due to the borrower's February 2002 bankruptcy filing. The court has appointed a receiver to operate the property, while CRIIMI is currently considering an offer to purchase the property. CRIIMI estimates a loss of about $5.6 million; and -- A $12.8 million loan (total exposure $13.7 million), secured by a retail center located in Brandon, Florida, with two dark anchors. CRIIMI is currently reviewing a loan assumption, and estimates a loss of about $2.5 million. As of January 2003, CRIIMI's watchlist included 147 loans totaling $696.5 million, or 38.68%, of the pool's principal balance. Of the 147 loans, 28 ($114.8 million, 6.4%) recently reported a debt service coverage ratio less than 1.0x. Furthermore, four loans ($37.8 million, 2.1%) are secured by retail properties where Kmart is an anchor tenant. These four stores are not currently scheduled to close due to Kmart Corp.'s bankruptcy proceedings. Four loans ($21.6 million, 1.2%) are secured by retail centers that included Ames as a major tenant before Ames liquidated its stores in connection with its bankruptcy proceedings. Lastly, the fifth largest loan ($27.9, 1.5%), secured by multifamily property located in Westborough, Massachusetts, was placed on the watchlist due to a decline in occupancy and DSCR (most recent 1.03x). Ratings Lowered First-Union Lehman Brothers Commercial Mortgage Trust Commercial mortgage pass-thru certs series 1997-C2 Rating Class To From Credit Support (%) K CCC- CCC+ 2.04 L D CCC- 0.51 FORT WASHINGTON: S&P Puts BB 2nd Priority Sr Notes on Watch Neg. ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on the senior and second priority senior notes issued by Fort Washington CBO I, an arbitrage high-yield CBO transaction originated in December 1998, on CreditWatch with negative implications. The ratings on the senior and second priority senior notes were previously lowered on Oct. 22, 2002. The current CreditWatch placements reflect factors that have negatively affected the credit enhancement available to support the notes since the previous rating action in October 2002. These factors include continuing par erosion of the collateral pool securing the rated notes and a negative migration in the overall credit quality of the assets within the collateral pool. Since the October 2002 rating action, $5.2 million in new asset defaults have occurred. According to the most recent monthly report (Jan. 24, 2003), the senior par value test remains marginally in compliance at 117.3% versus its minimum required ratio of 117%. This compares to a ratio of 127.9% at the time the transaction was originated. As a result of a $4.245 million paydown to the senior secured notes on the Dec. 10, 2002 payment date, the senior par value test has improved from a value of 116.8% as of the previous rating action. The second priority par value test is currently at 107.6% versus the minimum required ratio of 111%, compared to a ratio of 117.9% at close. The credit quality of the collateral pool has deteriorated since the October 2002 rating action. Including defaulted assets, 28.70% of the assets in the portfolio currently come from obligors with Standard & Poor's ratings of 'CCC+' or below, compared to a maximum allowable percentage of 5%. In addition, 14.66% of the performing assets within the collateral pool come from obligors with ratings on CreditWatch negative. Furthermore, Standard & Poor's Trading Model test, a measure of the amount of credit quality in the current portfolio to support the ratings assigned to the liabilities, is currently out of compliance. Standard & Poor's will remain in close contact with Fort Washington Investment Advisors Inc., and will be reviewing the results of current cash flow runs generated for Fort Washington CBO I to determine the level of future defaults the rated tranches can withstand under various stressed default timing and interest rate scenarios, while still paying all of the rated interest and principal due on the notes. The results of these cash flow runs will be compared with the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the notes remain consistent with the amount of credit enhancement available. Ratings Placed on Creditwatch with Negative Implications Fort Washington CBO I Rating Balance (Mil. $) Class To From Current Original Senior A+/Watch Neg A+ 179.285 192.500 2nd Priority Senior BB/Watch Neg BB 16.250 16.250 GALEY & LORD: Court Stretches Plan Exclusivity through March 31 --------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the Southern District of New York, Galey & Lord, Inc., and its debtor-affiliates obtained an extension of their exclusive periods. The Court gives the Debtors, until March 31, 2003, the exclusive right to file their plan of reorganization, and until June 2, 2003, to solicit acceptances of that Plan from their creditors. Galey & Lord, a leading global manufacturer of textiles for sportswear, including cotton casuals, denim, and corduroy, and is a major international manufacturer of workwear fabrics, filed for chapter 11 protection on February 19, 2002 together with its affiliates (Bankr. S.D.N.Y. Case No. 02-40445). When the Company filed for protection from its creditors, it listed $694,362,000 in total assets and $715,093,000 in total debts. Joel H. Levitin, Esq., Esq., at Dechert represents the Debtors and Michael J. Sage, Esq., at Stroock & Stroock & Lavan LLP, represents the Official Committee of Unsecured Creditors. Galey & Lord Inc.'s 9.125% bonds due 2008 (GYLD08USR1) are trading at about 8 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=GYLD08USR1 for real-time bond pricing. GENTEK INC: Wants Plan Filing Exclusivity Stretched Until May 9 --------------------------------------------------------------- Section 1121(b) of the Bankruptcy Code provides for an initial period of 120 days after the commencement of a Chapter 11 case during which a debtor has the exclusive right to propose a plan of reorganization. In addition, Section 1121(c)(3) provides that if a debtor proposes a plan within the Exclusive Proposal Period, it has the balance of 180 days after the commencement of the Chapter 11 case to solicit acceptances of that plan. During the Exclusive Proposal Period and the Exclusive Solicitation Period, plans may not be proposed by any party-in-interest other than the debtor. According to Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in Wilmington, Delaware, a premature termination of the exclusive plan-filing period and solicitation period would deny GenTek Inc., and its debtor-affiliates a meaningful opportunity to negotiate and propose a confirmable reorganization plan. To give the Debtors additional time to develop, negotiate and propose more reorganization plans, the Debtors need an extension each of their Exclusive Periods. In this regard, the Debtors ask the Court to extend their initial exclusive periods for proposing and obtaining acceptances of one or more reorganization plans for another 90 days. Specifically, the Debtors propose to extend their Exclusive Proposal Period through and including May 9, 2003 and their Exclusive Solicitation Period through and including July 8, 2003. Section 1121(d) provides that the Court may extend the Exclusive Periods for cause. Mr. Chehi maintains that a 90-day extension is fully justified considering the Debtors' worldwide businesses and large and complex cases. Mr. Chehi points out that there are 65,000 creditors and other parties-in-interest in these cases. The Debtors' financial structure also consists of: (i) secured bank debt, involving $750,000,000 in loans owed under a prepetition credit facility; (ii) public bond debt, consisting of one issue, in the aggregate amount of $200,000,000; (iii) trade, litigation and other general unsecured liabilities; and (iv) publicly held equity securities at the parent level. Mr. Chehi relates that GenTek, a publicly owned Delaware corporation, is the ultimate parent of a group of 76 companies located in the United States, Canada, and other foreign countries. There are 31 debtors in these cases. The Debtors' workforce consists of 3,500 employees not counting 4,284 persons employed by 45 non-debtor affiliates worldwide. Mr. Chehi asserts that the Debtors and their major creditor constituencies have had ongoing, progressive discussions aimed at advancing the plan process. The Debtors also have made other significant progress this early in their Chapter 11 cases: (a) The Debtors' management focused on stabilizing the businesses and responding to the many demands that inevitably accompany the commencement of a Chapter 11 case, including responding to inquiries from vendors, taxing authorities, utilities, customers, professionals, the banking group, the official committee and other parties-in-interest; (b) The Debtors have complied with the reporting requirements imposed by the U.S. Trustee, including the submission of initial and monthly reports, and have prepared and filed statements of financial affairs and schedules of assets, liabilities and contracts consistent with the Bankruptcy Code and Bankruptcy Rules; (c) The Debtors have sought and obtained Court approval under Section 365 of the Bankruptcy Code to extend the time period for assuming or rejecting unexpired leases of real property, and have also sought and obtained Court approval to reject several unnecessary real property leases; (d) The Debtors have commenced review of their remaining executory contracts and unexpired leases to determine whether the rejection or assumption and assignment of the agreements is in the best interests of their respective estates. In that regard, the Debtors have sough Court approval to reject several contracts and personal property leases; (e) The Debtors are in the process of seeking Court approval of procedures for providing mail and publication notice of the bar date in these cases; and (f) The Debtors have developed an initial business plan, which is in the process of being reviewed by their bank group and the official committee. The business plan will provide the foundation for any reorganization plan. Mr. Chehi tells Judge Walrath that the requested extension will not prejudice the legitimate interests of any creditor or equity security holder. "The Court should consider whether the Debtors have reasonable opportunity to negotiate an acceptable plan with various interested parties and to prepare adequate financial and non-financial information and disclosures concerning the results of any proposed plan," Mr. Chehi says. Moreover, Mr. Chehi contends that the Debtors deserve and should be afforded a full and fair opportunity to negotiate, propose and seek acceptances of a Chapter 11 plan that builds on the significant negotiations and reorganization progress made to date. Judge Walrath will convene a hearing on February 18, 2003 to consider the Debtors' request. By application of Del.Bankr.LR 9006-2, the Debtors' Exclusive Plan Filing Deadline is automatically extended through the conclusion of that hearing. (GenTek Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENUITY INC: Court Okays Lazard Freres to Render Fin'l Advice ------------------------------------------------------------- Genuity Inc., and its debtor-affiliates obtained permission from the Bankruptcy Court 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. 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. Lazard's 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. (Genuity Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLIMCHER REALTY: Closes Community Center Asset Sale for $9 Mill. ---------------------------------------------------------------- Glimcher Realty Trust, (NYSE: GRT), one of the country's premier retail REITs, reported the sale of a community center asset, in keeping with its strategy to reduce debt through non-strategic asset sales. On February 6, 2003, the Company sold Southside Plaza, a 172,293 square foot community center in Sanford, NC, for $9.25 million. The property was unencumbered at the time of the sale and net proceeds were used to repay down short-term borrowings under the Company's line of credit. As of February 6, 2003, the Company's 23 regional malls represent 19.8 million square feet of gross leasable area and the Company's total portfolio includes 72 properties consisting of 25.5 million square feet of GLA. Glimcher Realty Trust -- a real estate investment trust whose corporate credit and preferred stock ratings are rated by Standard & Poor's at BB and B, respectively -- is a recognized leader in the ownership, management, acquisition and development of enclosed regional and super-regional malls, and community shopping centers. Glimcher Realty Trust's common shares are listed on the New York Stock Exchange under the symbol "GRT." Glimcher Realty Trust is a component of both the Russell 2000(R) Index, representing small cap stocks, and the Russell 3000(R) Index, representing the broader market. Visit Glimcher at: http://www.glimcher.com GLOBAL CROSSING: Selling Arizona Property to Food for the Hungry ---------------------------------------------------------------- Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York, informs the Court that Global Crossing Telecommunications, Inc. is the fee owner of certain buildings and land located at 1212, 1220 and 1224 East Washington in Phoenix, Arizona. The GX Debtors used the Arizona Property as office space from 1997 to 2001. However, the contraction of the telecommunications industry and the GX Debtors' businesses has reduced their need for office space and eliminated their need for the Arizona Property. Despite the efforts to sublease, the Arizona Property has been and remains vacant. Mr. Basta tells the Court that the GX Debtors, with the assistance of Cushman & Wakefield of California, Inc., have marketed the Arizona Property extensively. By agreement dated August 2, 2000, Cushman & Wakefield was employed by the GX Debtors for the limited purpose of marketing and selling the Arizona Property. Toward that end, Cushman & Wakefield conducted an extensive direct mail campaign in the Phoenix, Arizona real estate market. Mr. Basta reports that Cushman & Wakefield mailed fliers to over 650 brokers in the Phoenix area advertising the Arizona Property for $975,000. In addition, Cushman & Wakefield distributed full marketing packages to over 50 interested parties who registered with them in response to the direct mail campaign. Thereafter, the Arizona Property was shown to over 20 interested parties. Additionally, Cushman & Wakefield listed the Arizona Property on commercial real property Web sites http://www.loopnet.comand http://www.costar.com As a result of these extensive marketing efforts, Cushman & Wakefield received three offers from potential qualified buyers for the Arizona Property, including Food for the Hungry, Inc. After carefully reviewing the offers received, the Debtors, in consultation with Cushman & Wakefield, determined that the offer by Food for the Hungry, amounting to $1,050,000, was the highest and best offer received for the Arizona Property. After extensive, arm's-length negotiations, the Debtors and Food for the Hungry agreed on the terms of the Purchase Agreement. The salient provisions of the agreement are: A. General Terms: The Debtors will sell and convey the Arizona Property to Food for the Hungry and Food for the Hungry agrees to purchase the Arizona Property from the Debtors; B. Deposit And Purchase Price: The Purchase Price for the Arizona Property is $1,050,000. After signing the Purchase Agreement, Food for the Hungry will pay a $100,000 deposit to First American Title Insurance Company, as escrow agent for the transaction. After termination of the due diligence period, the deposit is non-refundable. Food for the Hungry will pay the balance of the purchase price at Closing; C. Due Diligence Period: Food for the Hungry may inspect the Arizona Property for 45 days after the effective date of the Purchase Agreement; D. Closing: The Closing will take place no later than 15 days after the expiration of the due diligence period; and E. Default: In the event that either party does not complete and timely perform their obligations under the Purchase Agreement, at or before Closing and after at least three business days notice and opportunity to cure has been given to the defaulting party, the non-defaulting party may elect to cancel the Purchase Agreement by written notice given to the defaulting party. If the Purchase Agreement is canceled, and Food for the Hungry is the non-defaulting party, Seller will promptly deliver the deposit to Food for the Hungry. If Food for the Hungry is party in default, and the Purchase Agreement is terminated, the Debtors will retain the deposit. The Debtors assert that sufficient business justifications exist to support the sale of the Arizona Property to Food for the Hungry. Mr. Basta points out that the Purchase Agreement represents substantial value to the Debtors' estates as it provides cash consideration totaling $1,050,000. Moreover, consummation of the sale would relieve the Debtors from the burden of the continuing maintenance costs in connection with the now vacant Arizona Property and provides them with additional working capital to assist in their reorganization. According to Mr. Basta, the contraction in the economy in 2000 and 2001 directly accounted for the downsizing of businesses across the country, leading to the existence of excess lease space in Phoenix, Arizona. As a result, excess commercial space was pushed back into the market and tenants searching for leasing options had an abundance of lease and sublease alternatives. The confluence of these factors made it difficult for the Debtors to sublease the Arizona Property and realize a profit. Despite the Debtors' leasing efforts, the space remains vacant. As a result, the Debtors are not receiving any income from the Arizona Property and the property has become a wasting asset and a cash drain. Mr. Basta contends that consummation of the sale of the Arizona Property following the satisfaction of the due diligence and other conditions in the Purchase Agreement will eliminate the price risk associated with the commercial property lease market and realize the value on the Arizona Property before it depreciates beyond a saleable level. By selling the Arizona Property to Food for the Hungry now, the Debtors will realize more than the asking price. Mr. Basta insists that the Purchase Agreement is the product of arm's-length, good faith negotiations between the Debtors and Food for the Hungry. The purchase price is fair, reasonable and commensurate with its market value. The Debtors and Cushman & Wakefield have extensively marketed the Arizona Property, have thoroughly evaluated the bids, and have determined that Food for the Hungry has provided the highest and best offer that will yield the most value to the Debtors' estates. After the closing of a sale of the Arizona Property, Mr. Basta informs the Court that the Sales Agent Agreement provides that the Debtors will pay Cushman & Wakefield 6% of the applicable purchase price or $63,000. This amount will be shared equally by Cushman & Wakefield and Colliers Classic Inc., the procuring broker, in accordance with the Sales Agent Agreement. This payment is reasonable and appropriate for the brokerage services rendered by Cushman & Wakefield, which were instrumental in the Debtors' success in selling and marketing the Arizona Property. Accordingly, the GX Debtors sought and obtained the Court's authority to sell the Arizona Property to Food for the Hungry, free and clear of liens, claims and encumbrances and exempt from any and all transfer taxes. The Court also permits the Debtors to compensate Cushman & Wakefield for services rendered in connection with the sale of the Arizona Property. (Global Crossing Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) ICO INC: Fiscal First Quarter 2003 Net Loss Tops $2.8 Million ------------------------------------------------------------- ICO, Inc., (Nasdaq: ICOC) announced first quarter fiscal year 2003 financial results. For the quarter, ICO reported revenues of $45,248,000, an EBITDA (defined as earnings before interest expense, taxes, depreciation, amortization, other income expenses and cumulative effect of accounting change) loss from continuing operations of $766,000 and an operating loss from continuing operations of $2,980,000. Net loss from continuing operations was $2,834,000. Net loss including results from discontinued operations and the cumulative effect of an accounting change was $31,181,000 during the quarter. The cumulative effect of accounting change consisted of a $28,863,000 charge to write off goodwill and was the result of the Company's adoption of SFAS 142 "Goodwill and Intangible Assets" effective October 1, 2002. Revenues increased $2,378,000 or 6% to $45,248,000 during the first quarter of fiscal 2003 compared to the first quarter of fiscal 2002. The improvement was due to an increase in product sales volumes and the strengthening of the Euro and other foreign currencies relative to the U.S. Dollar, offset by lower toll processing revenues and lower sales and service revenues generated by ICO's concentrate manufacturing operation, Bayshore Industrial. Management is encouraged by the continuing growth of the Company's ICORENE(TM) product line of rotational molding powders. During the first quarter of fiscal 2003, rotational molding product sales increased 29% compared to the same quarter last year. Gross margins during the quarter were 16.2%, down compared to 16.8% for the same quarter last year. Gross margins declined due to the further erosion of toll processing volumes and lower Bayshore gross margins due to weak customer demand. The detrimental gross margin impact of these factors was partially offset by improving product sales volumes during the quarter. Despite the decline in gross margins, gross profit improved modestly up $103,000 or 1% to $7,320,000 during the quarter. Sales, general and administrative expenses increased $1,364,000 or 20% to $8,086,000 during the first quarter of fiscal 2003. As a percentage of revenues, sales, general and administrative expenses increased to 17.9% of revenue compared to 15.7% for the same quarter last year. The increase in sales, general and administrative expenses was primarily due to an increase in sales and marketing expenses (increased $525,000) and the impact of the Euro and other foreign currencies (approximately a $350,000 effect) relative to the U.S. Dollar. Operating loss increased year-over-year from a loss of $2,037,000 last year to a loss of $2,980,000 during the first quarter of fiscal 2003. Compared to the quarter ended September 30, 2002, revenues declined $4,545,000 or 9%. The decline was due in large part to typical seasonal factors, particularly in Europe, as both product and toll service volumes declined. Bayshore volumes also declined sequentially due to seasonal factors and weaker customer demand. Lower volumes resulted in the loss of operating leverage and caused gross margins to fall from 16.6% during the fourth quarter of fiscal year 2002 to 16.2%, during the first quarter of fiscal 2003. Lower gross margins on lower revenues produced lower gross profit which declined $946,000 or 11% to $7,320,000 during the first quarter. Due to the impairment, restructuring and other costs of $1,386,000 recognized during the quarter ended September 30, 2002, operating loss decreased $645,000 or 18% to a loss of $2,980,000. During the quarter, the Company's cash position declined $122,294,000 primarily due to the repayment of $104,480,000 of the 10-3/8% Senior Notes due 2007 and related accrued interest of $5,277,000. Currently, $10,095,000 of 10-3/8% Senior Notes remain outstanding. While interest expense declined during the quarter, the full effect of the debt repayment during the quarter ended December 31, 2002 will be reflected in the Company's second fiscal quarter results. Through its ICO Polymers, Inc. subsidiary, ICO, Inc., engineers and produces specialty polymer powders for the rotational molding industry, produces specialty concentrates for the film industry, and provides other polymer processing services. ICO Polymers operates from 21 locations in ten countries worldwide. As previously reported, Standard & Poor's withdrew its 'B+' corporate credit and 'B-' senior unsecured debt rating on ICO Inc., at the company's request. INTEGRATED HEALTH: Wins Okay to Close Rotech Subsidiary Cases ------------------------------------------------------------- Judge Mary S. Walrath authorizes Rotech Medical Corporation, Rotech Healthcare, Inc., and its direct and indirect subsidiaries to close the subsidiary cases effective December 30, 2002. The Lead Case of Rotech Medical will remain open until further order of the Court. (Integrated Health Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTERWAVE COMMS: Delays Reverse Split Decision Indefinitely ----------------------------------------------------------- InterWAVE(R) Communications International, Ltd. (Nasdaq: IWAV), a pioneer in compact wireless voice communications systems, announced the Company's board of directors has decided to indefinitely delay a decision to effect the reverse stock split approved by shareholders in a Special General Meeting on January 24, 2003. The decision was reached due to an extension granted by Nasdaq to interWAVE, as well as the proposed extension of the minimum bid price rule compliance periods for all Nasdaq National Market and Nasdaq Small Cap issuers announced by Nasdaq January 30. More information on this proposed rule change can be found at http://www.nasdaqnews.com On February 6, 2003, Nasdaq notified interWAVE that it could continue to operate under an exception to the minimum bid price rule pending approval of the proposed rule change by the Securities and Exchange Commission. Accordingly, interWAVE now has until at least April 7, 2003, to regain compliance with the minimum bid price rule. Once approved by the SEC, however, the proposed rule change will lengthen the grace period for Nasdaq National Market companies that do not meet the minimum bid price requirement from 90 to 180 days, and allow companies that meet various core initial listing criteria a second 180-day grace period. Nasdaq has informed interWAVE that it appears to qualify for the second 180-day grace period, which would last until July 28, 2003. There can be no assurance that the SEC will approve the proposed rule change or that the Company will be able to meet the minimum bid price requirement in the future. In the event that the Company does not achieve compliance with the minimum bid price requirement of the Nasdaq National Market, the Company's board of directors will consider implementing the approved reverse stock split, and, if necessary, may apply for transfer to the Nasdaq Small Cap Market. interWAVE Communications International, Ltd., (Nasdaq: IWAV) is a global provider of compact network solutions and services that offer innovative, cost-effective and scalable networks allowing operators to "reach the unreached." interWAVE solutions provide economical, distributed networks that minimize capital expenditures while accelerating customers' revenue generation. These solutions feature a product suite for the rapid and simple deployment of end-to-end compact cellular systems and broadband wireless data networks that deliver scalable IP, ATM broadband networks. interWAVE's highly portable, mobile cellular networks and broadband wireless solutions provide vital and reliable wireless communications capabilities for customers in over 50 countries. The Company's U.S. subsidiary is headquartered at 312 Constitution Drive, Menlo Park, California, and can be contacted at http://www.iwv.com * * * Liquidity and Capital Resources In its Form 10-K filed with the Securities and Exchange Commission on September 30, 2002, interWAVE stated: "Net cash used in operating activities in 2002, 2001 and 2000 was primarily a result of net operating losses. Net cash used in operating activities for 2002 was primarily attributable to net loss from operations, decreases in accounts payable and accrued expenses and other liabilities, offset by non-cash depreciation and amortization and losses on asset impairments and sales, as well as decreases in inventory and trade receivables and increases in deferred revenue. For 2001, net cash used in operating activities was primarily attributable to net loss from operations, increases in inventory and decreases in accounts payable, offset by non-cash depreciation and amortization and losses on asset impairments and sales, as well as decreases in trade receivables and increases in accrued expenses and other current liabilities and deferred revenue. For 2000, net cash used in operating activities were primarily attributable to net loss from operations and increases in trade receivables, offset by increases in accounts payable. "Investing Activities. For 2002, the primary source of cash in investing activities was the sale of short-term investments. For 2001, our investing activities consisted primarily of the sale of short-term investments offset by cash used in acquisitions for $18.5 million. Other uses of cash in investing activities consisted of purchases of $8.2 million in capital equipment and intangible assets. We expect that capital expenditures will decrease due to our continued cost-cutting efforts and conservation of cash resources. For 2000, the primary use of cash in investing activities were the purchases of short-term investments and capital equipment. "Financing Activities. During 2002, we raised $2.5 million from the sale of shares and the exercise of warrants, options and ESPPs. In 2001, the primary use of cash in financing activities were principal payments on notes payable net of receipts on our issuance of notes receivable to several of our customers. In January 2000, we completed our initial public offering, which raised $116.3 million net of costs. "Commitments. We lease all of our facilities under operating leases that expire at various dates through 2006. As of June 30, 2002, we had $7.1 million in future operating lease commitments. In August 2002, we signed a new lease for 2,300 square feet of facility with Hong Kong Technology Centre. We moved into the new office at the end of August 2002. The new lease expires in August 2004. In the future we expect to continue to finance the acquisition of computer and network equipment through additional equipment financing arrangements. "As of June 30, 2002, we have two capital leases with GE Capital. Aggregate future lease payments are $0.5 million, $0.5 million and $0.3 million for fiscal years 2003, 2004 and 2005, respectively. "Summary of Liquidity. There can be no assurances as to whether our existing cash and cash equivalents plus short-term investments will be sufficient to meet our liquidity requirements. We have had recurring net losses, including net losses of $64.3 million, $94.1 million and $28.4 million for the years ended June 30, 2002, 2001 and 2000, respectively, and we have used cash in operations of $28.8 million, $49.4 million, and $21.8 million for the years ended June 30, 2002, 2001 and 2000, respectively. Management is currently forming and attempting to execute plans to address these matters. These plans include achieving revenues and margins that will sustain levels of spending, reducing levels of spending, raising additional amounts of cash through the issuance of debt, equity or through other means such as customer prepayments. If additional funds are raised through the issuance of preferred equity or debt securities, these securities could have rights, preferences and privileges senior to holders of common stock, and the terms of any debt could impose restrictions on our operations. The sale of additional equity or convertible debt securities could result in additional dilution to our stockholders, and we may not be able to obtain additional financing on acceptable terms, if at all. If we are unable to successfully execute such plans, we may be required to reduce the scope of our planned operations, which could harm our business, or we may even need to cease operations. In this regard, our independent auditor's report contains a paragraph expressing substantial doubt regarding our ability to continue as a going concern. We cannot assure you that we will be successful in the execution of our plans." J. CREW GROUP: Comp Store Sales Plummet 19% in January ------------------------------------------------------ J. Crew Group, Inc.'s revenues for the four weeks ended February 1, 2003 were $33.7 million compared to $35.9 million for the four weeks ended February 2, 2002, a decrease of 6.1%. Comparable store sales for the Retail division declined 19.0% for the four weeks ended February 1, 2003 versus the comparable period last year. Net sales for the Direct division decreased 4.5% for the comparable four week period. For the 13 weeks ended February 1, 2003 revenues were $241.7 million versus $246.7 million for the 13 weeks ended February 2, 2002. Comparable store sales for the Retail division declined 7.5% and net sales for the Direct division decreased 6.2% for the comparable 13 week period. For the 52 weeks ended February 1, 2003, revenues were $766.3 million versus $778.0 million for the 52 weeks ended February 2, 2002, a decrease of 1.5%. Comparable store sales for the Retail division declined 10.4% for the 52 weeks ended February 1, 2003 versus the comparable period last year. Net sales for the Direct division decreased 4.0% for the comparable 52 week period. Commenting on the results, Scott Rosen, Chief Financial Officer, noted, "Given the difficult economic environment this year, which resulted in less store traffic, we maintained tight control over inventories and expenses, mitigating our negative comp store sales trend. Our January results reflect deeper discounts to clear inventories. At year-end, total inventories were down approximately 18% and comp store inventories were down 35%. We expect full year EBITDA to be in line with our previous guidance, before severance charges and other one-time employment related costs of approximately $13 million." J. Crew Group, Inc., is a leading retailer of men's and women's apparel, shoes and accessories. As of February 1, 2003, the Company operated 152 retail stores, the J. Crew catalog business, jcrew.com, and 43 factory outlet stores. * * * As previously reported, Standard & Poor's lowered its corporate credit rating on J. Crew Group Inc., to single-'B'-minus from single-'B' based on the company's poor operating performance over the past 16 months and weakening credit protection measures. The outlook's negative. In late January, Ex-Gap CEO Mickey Drexler climbed aboard as J. Crew's new Chairman and CEO. MACKIE DESIGNS: Expects to Close Sun Capital Deal by Friday ----------------------------------------------------------- Mackie Designs Inc., said its transaction with Sun Capital is currently anticipated to close on or before February 14, 2003. The Company also noted that, as previously announced, it had applied for voluntarily delisting from the Nasdaq Stock Market in connection with the Sun transaction. In accordance with that application, effective February 7, 2003, Mackie's common shares will cease trading on the Nasdaq Stock Market. An application has been filed with the National Association of Securities Dealers' Over-the-Counter Bulletin Board for quotation of Mackie Designs' shares. The Company is awaiting final approval from the National Association of Securities Dealers for quotation of its common stock on the OTC Bulletin Board. Mackie Designs is a leading designer, manufacturer and marketer of professional audio equipment. The Company sells audio mixers, mixer systems, power amplifiers, and professional loudspeakers. For more information, visit http://www.mackie.com * * * Liquidity and Capital Resources In its SEC Form 10-Q file on November 14, 2002, the Company reported: "At September 30, 2002, we were out of compliance with certain of the financial covenants of our credit agreement with the U.S. bank. We were out of compliance with certain of these covenants in 2001 and the first quarter of 2002 but were able to restructure the covenants and receive waivers for these violations. The lender can declare an event of default, which would allow it to accelerate payment of all amounts due under the credit agreement. Additionally, this non-compliance may result in higher interest costs and/or other fees. We are highly leveraged and would be unable to pay the accelerated amounts that would become immediately due and payable if a default is declared. As a result of this non-compliance, the total of Term Loans A and B is classified as a current liability under the caption, 'Long-term debt callable under covenant provisions.' "We have taken various actions to ensure our ongoing ability to cover scheduled debt servicing payments. In the third and fourth quarters of 2001 we laid off some of our personnel and closed certain facilities. There have been additional headcount reductions in the third quarter of 2002 and we expect more to be incurred in the remainder of the year. Throughout 2002, we have maintained close controls over capital expenditures. Finally, we are pursuing a variety of alternative financing sources, including loan restructuring, possible equity investment and/or divestiture of certain operating assets. "If management controls over spending are successful and costs of sales and overhead costs reduced to levels consistent with our sales, we believe that our cash and available credit facilities, along with cash generated from operations will be sufficient to provide working capital to fund operations over the next twelve months. Although there is no assurance, additional credit facilities may be available from our existing lender or from other sources." LA PETITE: Seeking Covenant Violation Waiver Under Credit Pact -------------------------------------------------------------- As previously disclosed, LaPetite Academy Inc., was not in compliance with certain of the financial covenants contained in its Credit Agreement for the third quarter ended April 6, 2002 and had received limited waivers thereunder on May 20, 2002 and August 15, 2002, through the periods ended August 15, 2002 and September 30, 2002, respectively. In addition, the Company was not in compliance with certain of the financial and informational covenants contained in the Credit Agreement for the fourth quarter ended June 29, 2002. On September 30, 2002, the Company and its parent, LPA Holding Corp., received a limited waiver of noncompliance with such financial and informational covenants through the period ended November 1, 2002. On November 1, 2002, the Company obtained an extension of the September 30, 2002 waiver. On November 15, 2002, the Company obtained a second extension of the September 30, 2002 waiver. On December 2, 2002, the Company obtained a third extension of the September 30, 2002 waiver. On December 6, 2002, the Company obtained a fourth extension of the September 30, 2002 waiver. In addition, the Company was not in compliance with certain of the financial and informational covenants contained in the Credit Agreement for the first quarter ended September 30, 2002. On December 16, 2002, the Company and its parent, LPA Holding Corp., received a limited waiver of noncompliance with the foregoing financial and informational covenants. The limited waiver received on December 16, 2002 provides that the lenders will not exercise their rights and remedies under the Credit Agreement with respect to such non-compliance during the period through January 30, 2003. In addition, the Company expects that it will not be able to comply with certain of the financial covenants contained in the Credit Agreement for the second quarter of fiscal 2003. On January 30, 2003, the Company obtained an extension of the December 16, 2002 limited waiver. The extension received on January 30, 2003, provides that the lenders will not exercise their rights and remedies under the Credit Agreement with respect to such non-compliance during the period through February 7, 2003. The Company and LPA Holding Corp., expect to continue discussions with the lenders under the Credit Agreement (a) to obtain a permanent waiver of the financial covenant non- compliance for the quarterly periods ending April 6, 2002, June 29, 2002, and October 19, 2002, (b) to obtain a permanent waiver of the covenant non-compliance occurring in connection with the Company's restatement of its financial statements for prior periods, (c) to obtain a permanent waiver of the informational covenant non-compliance, and (d) to amend its financial and other covenants, commencing with the quarterly period ending on January 11, 2003, based on the Company's current operating conditions and projections. There can be no assurance that the Company will be able to obtain such a permanent waiver and/or amendment to the Credit Agreement. The failure to do so would have a material adverse effect on the Company. LYONDELL CHEMICAL: Board Declares Regular Quarterly Dividend ------------------------------------------------------------ On Feb. 7, 2003, the Board of Directors of Lyondell Chemical Company (NYSE: LYO) declared a regular quarterly dividend of $0.225 per share of common stock to stockholders of record as of the close of business on Feb. 25, 2003. Lyondell has two series of common stock outstanding: Common Stock and Series B Common Stock. The regular quarterly dividend on each share of outstanding Common Stock is payable in cash on March 17, 2003. Lyondell has elected to pay the regular quarterly dividend on each share of outstanding Series B Common Stock in kind in the form of additional shares of Series B Common Stock on March 31, 2003. Lyondell Chemical Company -- http://www.lyondell.com-- headquartered in Houston, Texas, is a leading producer of: propylene oxide (PO); PO derivatives, including toluene diisocyanate (TDI), propylene glycol (PG), butanediol (BDO) and propylene glycol ether (PGE); and styrene monomer and MTBE as co-products of PO production. Through its 70.5% interest in Equistar Chemicals, LP, Lyondell also is one of the largest producers of ethylene, propylene and polyethylene in North America and a leading producer of ethylene oxide, ethylene glycol, high value-added specialty polymers and polymeric powder. Through its 58.75% interest in LYONDELL-CITGO Refining LP, Lyondell is one of the largest refiners in the United States, principally processing extra heavy Venezuelan crude oil to produce gasoline, low sulfur diesel and jet fuel. As previously reported in Troubled Company Reporter, Standard & Poor's placed its ratings, including its 'BB' corporate credit rating, on Lyondell Chemical Co., on CreditWatch with negative implications based on concerns about the reliability of crude oil deliveries from Venezuela to one of its affiliates. "The CreditWatch placement reflects elevated concerns related to 58.75%-owned LYONDELL-CITGO Refining LP, and the potential that recent operating disruptions caused by the lack of crude oil deliveries from Venezuela, if not resolved soon, could negatively affect credit quality at Lyondell", said Standard & Poor's credit analyst Kyle Loughlin. LCR reportedly has reduced its production by almost half in response to a general strike against the Chavez administration and related disruptions at the state-owned oil company, PDVSA. METROPOLITAN ASSET: Fitch Drops Class B-1 Note Rating to D ---------------------------------------------------------- Fitch Ratings performed a review of the Metropolitan Asset Funding transactions. Based on the review, the following actions have been taken: Series 2000-A --Classes A-2 - A-4 affirmed at 'AAA'; --Class M-1 affirmed at 'AA'; --Class M-2 downgraded to 'BBB-' from 'A' and placed on Rating Watch Negative; --Class B-1 downgraded to 'D' from 'BBB'. Series 2000-B --Classes A-1-A & A-1-F affirmed at 'AAA'; --Class M-1 affirmed at 'AA'; --Class M-2 affirmed at 'A'; --Class B-1 affirmed at 'BBB'. The actions taken on series 2000-A reflect the poor performance of the underlying collateral in the transaction. Higher than expected losses have resulted in the depletion of overcollateralization and the write down of the B-1 class. The structure does not allow for any class to be written back. As of the January 25 distribution, the class M-2 credit enhancement was $4,316,488 or 6.23%. In addition, there was approximately 1.25% in excess cash. Because of the sizeable amount of loans remaining in the delinquency pipeline, including approximately 6% in foreclosure and 5% in real estate owned, the M-2 class is downgraded to 'BBB-' and is placed on Rating Watch Negative. Cumulative losses to date are 3.01% for series 2000-A, with an average loss over the last twelve months of approximately $300,000. Ocwen is servicing this transaction. As of the Jan. 25, 2003 remittance date, series 2000-B has $4,533,284 or 2.88% in o/c. In addition, there was approximately 2.50% in excess cash. Fitch believes that the current level of o/c provides sufficient credit enhancement to maintain the ratings of the certificates despite the level of loans in the pipeline. As of the Jan. 25 distribution date, the pipeline includes approximately 5.50% in foreclosure and approximately 5% in REO. Cumulative losses to date are 2.56% for series 2000-B with an average loss over the last twelve months of approximately $550,000. Ocwen is servicing this transaction. NASH FINCH: Seeking SEC Concurrence with Accounting Approach ------------------------------------------------------------ Nash Finch Company (Nasdaq:NAFCE) has provided the staff of the Office of the Chief Accountant of the Securities and Exchange Commission with a written communication seeking OCA concurrence with the Company's conclusion that Count-Recount charges were properly accounted for in accordance with generally accepted accounting principles. The Company's letter also requests a meeting with the OCA at which the Company's accounting for Count-Recount charges can be discussed and confirmed. As previously disclosed, the Company's treatment of Count-Recount charges was the subject of the Commission's informal inquiry commenced in October 2002, with which the Company has been cooperating. The amount of these charges during the Company's most recent three fiscal years, on a pre-tax dollar basis, were approximately $6.7 million in fiscal year 2000, $8.6 million in fiscal year 2001, and $3.8 million through the second quarter of fiscal year 2002, and were recorded as reductions in cost of sales, representing .19%, .24% and .23% of cost of sales for those respective time periods. Pre-tax income in the same periods was $27.5 million, $36.3 million, and $23.2 million, and net cash provided by operating activities for the same periods was $85.5 million, $89.5 million, and $49.4 million. "As we previously reported, an internal investigation of the Company's practices and procedures with respect to Count-Recount charges was commenced when we received the Commission's inquiry. This was done in conjunction with our Audit Committee and special outside counsel. The Company has submitted its position to the OCA explaining in detail our views that our accounting has been correct," said Ron Marshall, Chief Executive Officer. "We look forward to presenting our views in person and hope that the OCA will provide the necessary reassurance so we can move forward with the release of our financial results." In addition, as previously disclosed in a Form 8-K filed with the Commission on February 4, 2003, Deloitte & Touche LLP resigned on January 28, 2003 as the independent public accountants of the Company. That filing is available on the Company's Web site http://www.nashfinch.com The Company has not yet engaged a successor auditor, but is in the process of attempting to do so. The Company also disclosed in the same filing that it was notified on February 4, 2003 by the staff of the Division of Enforcement of the Commission that the Commission has approved a formal order of investigation of the Company. The Company is advised that it is not unusual for SEC informal inquiries to proceed to the formal order stage. A formal order of investigation, among other things, permits the SEC to subpoena documents and testimony. The order directs a private investigation relating to whether the Company violated various provisions of the federal securities laws and rules thereunder, including the duty to file truthful and accurate reports, keep accurate books and records, and make truthful statements with respect to the purchase, sale or offering of securities. The Company intends to work actively with the Commission to bring this matter to a favorable conclusion. In the event that the Office of the Chief Accountant does not concur with the Company's position that it has properly accounted for Count-Recount charges, or the Division of Enforcement of the Commission recommends other action against the Company, or in the event that the Company is unable to engage a successor auditor in a timely fashion and make all required filings with the Commission and Nasdaq in a timely and compliant manner, such events may result in material adverse consequences to the Company, which may include breaches of loan covenants, liquidity issues and the delisting of the Company's securities from the Nasdaq National Market. Nash Finch Company is a Fortune 500 company and one of the leading food retail and distribution companies in the United States with approximately $4 billion in annual revenues. Nash Finch owns and operates 112 stores in the Upper Midwest, principally supermarkets under the AVANZA(R), Buy n Save(R), Econofoods(R), Sun Mart(R) and Family Thrift Center(R) trade names. In addition to its retail operations, Nash Finch's food distribution business serves independent retailers and military commissaries in 28 states, the District of Columbia and Europe. Further information is available on the Company's Web site at http://www.nashfinch.com NASH FINCH: Deloitte's Resignation Prompts S&P to Cut Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Nash Finch Co., to 'B+' from 'BB'. The rating remains on CreditWatch with negative implications. Approximately $327 million of the Minneapolis, Minnesota-based company's debt is affected by this action. The downgrade reflects Standard & Poor's concern regarding the January 28, 2003 resignation of Deloitte & Touche LLP as Nash Finch's independent auditor and the SEC's order for a formal investigation into count-recount charges assessed to the company's vendors. "Due to the ongoing SEC investigation, Nash Finch has yet to file its third quarter 2002 financial statements. As Nash Finch has not obtained formal waivers from its bank group and bondholders, we believe that meaningful delays in resolving these issues could significantly pressure the company's liquidity," said Standard & Poor's credit analyst Patrick Jeffrey. On October 30, 2002, Nash Finch postponed its third quarter 2002 earnings release due to the SEC commencing an informal inquiry into certain practices and procedures related to promotional allowances from vendors that reduce cost of goods sold. Standard & Poor's will continue to follow the developments of these issues. Resolution of the CreditWatch listing will be based on their impact on the company's credit protection measures and an updated assessment of Nash Finch's operations. Ratings List To From Nash Finch Co. Corporate credit rating B+/Watch Neg BB/Watch Neg Senior secured bank loan B+/Watch Neg BB/Watch Neg Subordinated debt B-/Watch Neg B+/Watch Neg NATIONAL CENTURY: Cash Collateral Pact in Place through May 2 ------------------------------------------------------------- Alvarez & Marsal prepared and delivered to the Court two sets of cash flow forecasts titled: * National Century Financial Enterprises, Inc., Thirteen Week Projected Cash Flow report (updated January 8, 2003) for the period from January 10 to April 4, 2003, available at no charge at http://bankrupt.com/misc/NC030404.pdfand * National Century Financial Enterprises, Inc., Sixteen Week Projected Cash Flow report (updated January 21, 2003) for the period from January 17 to May 2, 2003, available at no charge at http://bankrupt.com/misc/NC030502.pdf Objections 1. U.S. Trustee Saul Eisen, the U.S. Trustee for Region 9, objects to the Debtors' motion on these grounds: A. Reservation of Rights Period Should Be Extended The proposed order provides that "Creditors Committee will have 60 days from the date of entry of the Order to challenge the validity, priority and extend of the prepetition liens and security interests of the Indenture Trustee . . ." Dean Wyman, Esq., in Cleveland, Ohio, argues that the review period should not be limited to 60 days. In many ways, this case resembles a liquidation under Chapter 7 of the Bankruptcy Code where the Indenture Trustees are not providing new financing. The Debtors are not operating and the expenses that are to be paid out of the cash collateral are directed toward collection of the Debtors' accounts receivable and assets. These are the very assets in which the Indenture Trustees assert interests. Mr. Wyman notes that the interests of the Indenture Trustees in this case are very valid. Therefore, the time limit for objecting to the interests of the Indenture Trustees should be extended to more than 60 days. B. All Parties-In-Interest Should Have Standing To Object Mr. Wyman asserts that any trustee, any creditor, any party- in-interest should have the full opportunity to investigate and attack any interest asserted by the Indenture Trustees. Therefore, all parties-in-interest should be afforded the chance to challenge the Indenture Trustees' interest. C. Adequate Protection Should Be Limited To The Reduction In The Value Of Collateral During The Period That The Automatic Stay Applies Secured creditors are entitled to adequate protection to protect against the reduction of the value of their interests in estate assets during the period the automatic stay applies. Mr. Wyman notes that the proposed order does not calibrate adequate protection to the decline of the cash collateral caused by the automatic stay, or to the extent that the cash collateral is reduced. Rather the order provides: "In order to provide the respective Indenture Trustees with adequate protection with respect to any decrease in the value of their interest in the Prepetition Collateral and the Cash Collateral resulting from the stay imposed under Section 362 of the Bankruptcy Code, or the use of such property by the Debtors, the Indenture Trustees will have and hereby are granted, a lien against and security interest in all presently owned and hereafter-acquired property, assets and rights, of any kind or nature, of the Debtors, wherever located, including any case of action of the Debtors' estates arising under Chapter 5 of the Bankruptcy Code . . ." Although the first clause of the first sentence refers to the decrease in the value of collateral resulting from the imposition of the automatic stay, the remainder of the sentence grants the Indenture Trustees additional collateral without qualifications. This additional collateral is comprehensive. It is include all estate assets, including fraudulent conveyance actions. Mr. Wyman argues that this provides the Indenture Trustees with more than adequate protection. Moreover, granting the Indenture Trustees additional collateral is not supported by the Debtors' request. The Debtors have not demonstrated that the automatic stay has resulted in any decline in the value of the collateral of the Indenture Trustees. The use of the cash collateral is directed toward preserving estate assets in which the Indenture Trustees have interest. The range of actions taken by the Debtors in the case at bar suggests that they are protecting the Indenture Trustees' interests. Therefore, the Debtors have not shown that the Indenture Trustees have been denied of adequate protection of their interests. Furthermore, Mr. Wyman adds, it is unacceptable to grant the Indenture Trustees comprehensive estate assets. The Indenture Trustees are entitled to adequate protection. They should not be granted rights to additional collateral that would permit them to improve their positions. The proposed cash collateral order should preserve positions. It should not be the vehicle to transfer valuable interests to the Indenture Trustees not supported by the principles of adequate protection. D. Section 507(b) Protections The Indenture Trustees have rights pursuant to Section 507(b) of the Bankruptcy Code which are self-explanatory. They should not be classified as a superpriority administrative expense. E. Waiver of Section 506(c) Charges The proposed order defines the "Carve-Out" but is not clear which expenses are included in it. The proposed order suggests that the Indenture Trustees are releasing collateral to pay all professional fees until there is a termination event. However, the majority of expenses related to this case are closely related to the Indenture Trustees' interests. Therefore, there is no basis to limit the scope of Section 506(c) of the Bankruptcy Code. F. Relationship Between The Directors Of The NCFE And JPMorgan Two of the three members of the NCFE Board of Directors are associated with the JPMorgan Firm. JPMorgan is the Indenture Trustee for NPF VI. These relationships, Mr. Wyman says, require that the terms of the proposed order be reviewed strictly. G. Monthly Payment to Professionals The budget attached to the proposed order details periodic payments to the Jones Day law firm, the Bricker law firm, and American Express Healthcare. The U.S. Trustee objects to the Debtors' request to make monthly payments to professionals. In conclusion, the Indenture Trustees should be provided adequate protection, but they should not be granted additional rights beyond the adequate protection of their interests. Thus, the U.S. Trustee asks the Court to consider these grounds and grant relief as may be appropriate. 2. Amedisys, Inc., et al. Stephen E. Chappelear, Esq., at Hahn, Loeser, & Parks, in Columbus, Ohio, recounts that nearly four years ago, Amedisys, Inc., America Home Health, Inc. of Georgia, Healthfield Services of Middle Georgia, Clinical Arts Home Care Services, Inc., Central Home Health Care, Tugaloo Home Health Agency, North Georgia Home Health Agency, Coosa Valley Home Health, Amedisys Louisiana, Amedisys North Carolina LLC, Amedisys Oklahoma, LLC, Amedisys Tennessee, LLC, America Home Health Inc. of Virginia, Amedisys Northwest, LLC, Amedisys Specialized Medical Services, Inc., America Home Health Inc. of South Carolina, Amedisys Quality Oklahoma, LLC and Home Health of Alexandria, Inc., each entered into a contractual relationship with the NCFE entities as a means of financing its ongoing business operations through its accounts receivable. Each Amedisys entity entered into a separate Sale and Subservicing Agreement with NPF VI and NPFS on December 10, 1998. Under the terms of the Sales Agreements, NPF VI agreed to purchase certain accounts receivable from Amedisys at certain designated times. NPF VI established accounts with the corporate trust department of JPMorgan Chase. Collections of both the Purchased Receivables and the Non-Purchased Receivables were deposited into one or more of these accounts. Under the Sale Agreements, NPF VI and NPFS acknowledge that certain amounts deposited with JPMorgan Chase related to Non-Purchased Receivables and notwithstanding their deposit into the JPMorgan Chase accounts, the amounts are owned by Amedisys. Moreover, NPFS is obligated by JPMorgan Chase to return all of these amounts to Amedisys. On November 7, 2002, NCFS delivered to JPMorgan Chase to release to Amedisys $7,339,583 under the terms of the Sale Agreements. However, JPMorgan refused. Consequently, Amedisys filed a complaint demanding the release of the Collection Amount relating to Non-Purchased Receivables for $7,737,569, as of October 30, 2002. On November 13, 2002, JPMorgan Chase acknowledged its obligation to return to Amedisys any amounts that relate to the Non- Purchased Receivables. However, in order to properly account for the amounts, JPMorgan announced that it would take an undetermined, but apparently substantial, amount of time to perform an accounting of its accounts related to the Debtors to determine the exact amounts it holds that belong to the various parties who have claims against those accounts. In summary, Mr. Chappelear notes, JPMorgan Chase cannot account for the beneficial ownership of the funds in its possession and refuses to verify the existence of, and turnover to Amedisys not less than $7,339,583 owned pending an accounting of an undetermined duration. One or more of the Debtors, Mr. Chappelear points out, have acknowledged that the funds belong to Amedisys and are not property of any of the Debtors. Thus, Mr. Chappelear contends, the Debtors are not authorized to use the funds and any order concerning the use of the cash or cash collateral must prohibit use of any of the funds in the JPMorgan Chase's possession until: -- the funds are returned to Amedisys, or, in the alternative, -- adequate protection is provided to Amedisys by virtue of the escrow of not less than $7,339,538 in an interest- bearing federally-insured account. 3. Provident Bank Yvette A. Cox, Esq., at Arter & Hadden, in Columbus, Ohio, argues that it is impossible to determine the impact of the benefits awarded to NPF VI and NPF XII under the proposed Cash Collateral Order. The Debtors allegedly need immediate access to fund to continue their business operations "in the ordinary course." However, Ms. Cox argues, the Debtors are not continuing those business operations in the ordinary course postpetition. No new accounts receivable or medical receivables are being generated, purchased or financed by the Debtors. No new capital loans are being made and no new leases are being entered into. It is virtually a certainty that use of cash collateral will diminish the estates of NPF VI, NPF XII or NCFE. Provident also speculates that there is a very real possibility that assets of the possibly solvent estate of NPF X would be used for the benefit of the estates of NPF VI and NPF XII. Depleting the assets of the estate of one Debtor to the detriment of its creditors for the benefit of the estates of other Debtors is simply not appropriate. Moreover, a waiver of the Section 506(c) rights is not adequate protection; rather, it is a direct waiver of rights of this estate and any subsequent trustee to properly administer and liquidate the assets NPF VI and NPF XII and for the estates of NPF VI and NPF XII to pay their "fair share" in the liquidation. Accordingly, Provident asks the Court to deny the Debtors' request or, alternatively, condition any order granting the Debtors a right to use cash collateral to address its concerns raised in this Objection. * * * After due deliberation, the Court permits the Debtors to use the Cash Collateral until May 2, 2003. However, Judge Calhoun emphasizes that the Cash Collateral may not be used to make loans, purchase receivables or provide any form of financing to health care providers without the consent of the Indenture Trustees, the NPF XII and NPF VI subcommittees and upon further Court order. The Court rules that the Cash Collateral located in the Lockbox Accounts will be transferred to the Debtors for use as Cash Collateral and no funds will be used from any NPF VI or NPF XII accounts, including, without limitation, any NPF VI or NPF XII reserve account; provided, however, that no funds in the Lockbox Accounts or other accounts of or claimed or controlled by the Debtors, including funds consisting of proceeds of accounts receivable purchased from, generated by or of: (a) Amedisys, Inc., and its affiliates, (b) Greater Southeast Community Hospital Corporation I and its debtor-affiliates -- the DCHC Debtors, (c) International Philanthropic Hospital Foundation doing business as Granada Hills Community Hospital, or (d) Baltimore Emergency Services II, LLC and its debtor-affiliates will be transferred to the Debtors for use as Cash Collateral. Judge Calhoun orders the Debtors to provide accountings of all funds on hand as of, or collected since, the Petition Date and continuing for so long as the Debtors continue to receive funds representing proceeds of accounts receivable and other receipts or funds generated by, of, or in connection with the operations of the businesses of Amedisys, the DCHC Debtors, Granada Hills and the BES Debtors. The Court directs the Debtors to promptly turn over to the DCHC Debtors or the BES Debtors their Cash Collections, in accordance with the terms of the cash collateral orders entered in the pending Chapter 11 bankruptcy cases of the DCHC Debtors and the BES Debtors. The Creditors' Committee will have until May 29, 2003 to initiate an avoidance action or other action for re-characterization or subordination. The maximum amount of Cash Collateral that may be used to fund the Creditors' Committee's investigation of whether to bring Avoidance Action will be limited and capped at $150,000, and no Cash Collateral may be used to file or prosecute any Avoidance Action. The Indenture Trustees, the Committee, the Subcommittees and their agents will be given access to the books, records and documents of the Debtors including, without limitation, the check registers, general ledgers, journal entries, payroll journals, cash activity reports, aged accounts receivable, aged accounts payable, bank reconciliation, canceled checks, bank debit and credit advices, bank statements, leases and contracts. The Debtors are directed to provide weekly written reports to the Indenture Trustees and to the members of the Creditors' Committee, which reports will contain: (a) receivables and advance balances, on a per provider basis including affiliates, for all providers; (b) separate lists for: -- all providers that have filed for bankruptcy relief, and -- all providers that have not filed for bankruptcy relief; (c) identification, nature, location and status of any receivables collections that the Debtors have reason to believe may have been diverted at any time from the various lockbox accounts maintained by the Debtors in respect of the NPF VI and NPF XII facilities; (d) the cash collateral needs, for the succeeding week, asserted by each provider that has filed for bankruptcy relief, and a copy of any and all reports provided to the Debtors pursuant to cash collateral orders entered by bankruptcy courts in the providers' bankruptcy cases; (e) a credit analysis with respect to each provider, as these: -- all available credit analyses will be supplied by January 15, 2003; -- following the submission of the initial report, each succeeding weekly report will include no fewer than 5 additional credit analyses until credit analyses have been supplied for all providers; and -- to the extent reasonably practicable, each credit analysis so provided will be updated quarterly; (f) nature and status of all discussions with the providers that are in bankruptcy with respect to their efforts to obtain debtor in possession financing, with the report updated weekly until final debtor in possession financing for the provider is in effect pursuant to an order of the applicable Bankruptcy Court, and the material terms of any debtor in possession financing so obtained; (g) status report with respect to all material discussions with providers regarding any potential settlements and/or buyouts relating to the NPF VI and NPF XII facilities; and (h) identification, nature, location and status of any and all assets that may be collateral of the Noteholders under the NPF VI and NPF XII facilities, including assets held by insiders, affiliates or agents of the Debtors. (National Century Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONAL STEEL: Earns Approval of Russell Settlement Agreement -------------------------------------------------------------- National Steel Corporation, together with its debtor-affiliates Obtained the Court's approval of their settlement agreement with Robert E. Russell, Molten Steel Products, Inc., and Steel Services & Specialties, Inc., which compromises their claims against the Russell Parties. The pertinent terms of the Settlement Agreement include: -- The Russell Parties will cause to be paid by wire transfer to National Steel in immediately available funds the sum of $2,200,000 to be paid in three installments: (1) $1,000,000 was paid on December 13, 2002 as the first installment; (2) $750,000 will be paid on January 31, 2003 as second installment; and (3) $450,000 will be due by May 31, 2003 as final installment. The Settlement Amount will be reduced to $2,175,000 if the Russell Parties make their final payment by January 31, 2003; -- Any payments will be held in an interest-bearing trust account by Williams & Connolly LLB, National Steel's counsel pending Bankruptcy Court Approval; -- Within five business days after receiving the full payment of each of the Second and Third Installments, National Steel will return to the Russell Parties' counsel a letter of credit securing the installment for which the payment was made; -- The Russell Parties will cooperate fully with National Steel in any litigation to the subject matter of Mr. Russell's guilty plea. The Russell Parties also waive any and all claims against National Steel; and -- National Steel will not seek further restitution from any Russell Party relating to the subject matter of the Plea. As previously reported, the claims arise out of Mr. Russell's entry of a guilty plea on July 23, 2002 before the U.S. District Court for the Southern District of Illinois to one count of mail fraud and one count of false tax return, in connection with a bribery scheme against National Steel. In pleading guilty, Mr. Russell, whose companies supplied raw materials to National Steel, confessed that he paid a high-ranking officer at National Steel $991,763 in bribes between 1994 and 1999 to help secure National Steel business for the Russell Parties. National Steel had urged the U.S. Attorney's Office and the U.S. Probation Office to seek $3,553,742 in criminal restitution for National Steel from Mr. Russell. The restitution charges consist of three categories of damages: (a) $991,763 for the illegal kickbacks bestowed on the National Steel employee, which National Steel would otherwise have obtained in the form of a discount on the materials it purchased from the Russell Parties; (b) $1,374,719 for cost incurred to employ the NSC officer during his years of disloyalty; and (c) $1,187,260 for the Debtors' cost of lost use of funds as a result of the bribery scheme. Russell vigorously opposed the restitution claim, arguing that: (1) the claims for the cost the Debtors incurred as a result of the employment of the disloyal officer and the cost of lost use of funds as a result of the bribery scheme were not appropriate under restitution statutes; (2) he is entitled to set off the Debtors' claims for the illegal kickbacks based on his prepetition and administrative claims against NSC; and (3) he is entitled to a further set-off as a result of the Debtors' January 2001 settlement, worth at least $3,000,000, with the officer receiving the bribes. Based on the arguments presented by the National Steel and the Russell Parties, the Probation Office subsequently informed the sentencing court that it recommended $991,773 in criminal restitution to National Steel and that it was not aware of statutory authority to support the rest of National Steel's claims for damages. (National Steel Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) National Steel Corp.'s 9.875% bonds due 2009 (NSTL09USR1) are trading at about 78 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NSTL09USR1 for real-time bond pricing. NATIONSRENT: UST Says Disclosure Statement Lacks Information ------------------------------------------------------------ Donald F. Walton, Acting United States Trustee for Region 3, asserts that NationsRent Inc., and its debtor-affiliates' proposed Disclosure Statement does not provide "adequate information" to creditors on these subjects: (a) Compensation of the Reorganized NationsRent's Directors The compensation to be paid to the Reorganized NationsRent's directors will be disclosed in a filing made no later than ten days before the Confirmation Hearing. In other words, that filing may occur after the Voting Deadline has passed and ballots have been tabulated. The U.S. Trustee asserts that the Debtors should be required to disclose the required information no later than 10 days before the Voting Deadline and to make that information publicly available on the World Wide Web. If those parties eligible to vote on the plan do not have that information before the Voting Deadline, the U.S. Trustee points out that the disclosure requirement of Section 1129(a)(5)(B) of the Bankruptcy Code is rendered superfluous. (b) Compensation of the Reorganized NationsRent's Officers There is also a need to disclose the proposed compensation of the Reorganized Nationsrent's officers post-emergence. The U.S. Trustee contends that the information contained in the Disclosure Statement -- total compensation for 1999-2001 -- is stale. (c) Disclosure of Insider Claims While there is some discussion of existing indemnity obligations, the U.S. Trustee contends that all claims held by insiders should be identified and discussed in a separate section of the Disclosure Statement. (NationsRent Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 609/392-0900) NAVIGATOR GAS: Wants to Honor Foreign Creditors' Claims ------------------------------------------------------- Navigator Gas Transport PLC and its debtor-affiliates ask for authority from the U.S. Bankruptcy Court for the Southern District of New York to pay the prepetition claims of foreign creditors. Pursuant to section 362 of the Bankruptcy Code, the commencement of the Debtors' cases automatically triggered a stay against any act by any of the Debtors' creditors to collect on their claims against the Debtors or to exercise control over any property belonging to the Debtors. The automatic stay is limited to: (a) creditors that are subject to the jurisdiction of the United States bankruptcy courts, or (b) creditors in jurisdictions which have agreed to give effect, by comity or treaty, to the bankruptcy laws of the United States. The Debtors relate that substantially all of the Debtors' creditors are based in foreign countries with little or no connection to the United States. The Debtors estimate that they currently hold prepetition invoices from foreign creditors in the aggregate amount of $550,000. Moreover, the Debtors anticipate that additional invoices for prepetition services may be received from foreign creditors after the Petition Date, which the Debtors believe will aggregate less than $200,000. The Debtors are not aware of any treaty with any of the foreign countries listed above which give effect to U.S. law, particularly U.S. bankruptcy law. Furthermore, the Debtors believe that it would be unlikely that a foreign court, in a timely fashion, would decide, on the basis of comity, to impose the automatic stay on a creditor over which that court has jurisdiction. In any event, were the Debtors to commence such litigation, it would be expensive and distracting and would likely engender ill will with the Debtors' foreign suppliers and could very well jeopardize the Debtors' reorganization proceedings. Consequently, the Debtors' Vessels abroad are subject to arrest by foreign creditors who have not been paid by the Debtors. More likely, the revenue to be generated through the charter agreements would be curtailed, the Vessels' schedules would be adversely affected, and the charter agreements themselves might be found to have been breached with resultant damage claims levied against the Debtors. In view of these circumstances, the Debtors believe that it would be prudent and a sound exercise of their business judgment to pay the prepetition claims of any foreign creditors up to an aggregate amount of $750,000. Navigator Gas Transport PLC's business consists of the transport by sea of liquefied petroleum gases and petrochemical gases between ports throughout the world. The Company filed for chapter 11 protection on January 27, 2003 (Bankr. S.D.N.Y. Case No. 03-10471). Adam L. Shiff, Esq., at Kasowitz, Benson, Torres & Friedman LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $197,243,082 in assets and $384,314,744 in liabilities. NORTH STREET: Fitch Hatchets Low B- & Junk-Rated Notes' Ratings --------------------------------------------------------------- Fitch Ratings has downgraded 12 classes of notes from North Street Referenced Linked Notes 2000-1, Ltd., and North Street Referenced Linked Notes 2000-2, Ltd. Both transactions are partially funded synthetic CDOs created to enter into credit default swaps with UBS Warburg referencing portfolios of investment grade corporate bonds and asset-backed securities. Fitch has downgraded and removed from Rating Watch Negative the following liabilities: North Street 2000-1 --$36,000,000 Class A Floating Rate Notes to 'AA' from 'AAA'; --$40,000,000 Class B Floating Rate Notes to 'A-' from 'AA'; --$31,000,000 Class C Floating Rate Notes to 'BBB-' from 'A-'; --$14,000,000 Class D-1 Floating Rate Notes to 'B-' from 'BBB-'; --$20,000,000 Class D-2 Fixed Rate Notes to 'B-' from 'BBB-'; --Fixed Rate Income Notes to 'C' from 'B'. North Street 2000-2 --$60,800,000 Class A Floating Rate Notes to 'AA-' from 'AAA'; --$32,600,000 Class B Floating Rate Notes to 'A-' from 'AA'; --$29,000,000 Class C Floating Rate Notes to 'BBB' from 'A-'; --$7,500,000 Class D Fixed Rate Notes to 'BBB-' from 'BBB+'; --$36,100,000 Class E Fixed Rate Notes to 'CCC' from 'BBB-'; --Fixed Rate Income Notes to 'C' from 'CCC'. These downgrades are a result of credit deterioration within the portfolio, the protection payments paid on NRG Energy, Inc., and the expectation of additional credit events. NRG Energy, Inc. was the second credit event in each portfolio. Fitch has reviewed both transactions in detail and will continue to monitor their performance. NORTHWEST AIRLINES: Aircraft Mechanics Cite Past Broken Promises ---------------------------------------------------------------- The Aircraft Mechanics Fraternal Association voiced strong concerns about Northwest Airlines' past broken promises as the company once again contemplates restructuring labor costs. "In 1993, we accepted substantial wage cuts to save Northwest from bankruptcy, and Northwest promised to make it up to us as soon as times got better. Northwest soon entered an era of unprecedented profitability, with huge executive salaries and bonuses, but to this day they have not made good on all those promises they made to us," said Jeff Mathews, Airline Contract Administration Coordinator with AMFA National. "As always, we are willing to listen to what Northwest management has to say," he added, "but it's hard to forget this company's failure to make good on earlier promises they could easily have kept." "This time around, Northwest bases the need for re-examining labor contracts on the company's belief that ``the airline business has changed forever.' We're not sure how they can see out quite that far," Mathews said. "We have endured massive job eliminations since September 11 and are painfully aware of the fragile health of the airline industry. Publicly and privately, we have urged our members to do everything possible to support Northwest and the other airlines we serve during this difficult time," he said. "Based on past experience in other difficult times, however, we will also continue to safeguard the interests of our members against unreasonable requests." As reported in Troubled Company Reporter's January 23, 2003 edition, Standard & Poor's lowered its ratings on Northwest Airlines Corp.'s NWA Trust No. 1, Class A, to 'BB' from 'BBB-' and on the Class B to 'B+' from 'BB'. The BB-/Negative/-- corporate credit ratings of Northwest Airlines Corp. and its Northwest Airlines Inc. subsidiary are affirmed. The rating actions reflected substantial deterioration in collateral coverage for NWA Trust No. 1, the first enhanced equipment trust certificate, which is secured by six B747-200 and four B757-200 aircraft. Northwest Airlines Corp.'s $488 million fourth quarter 2002 net loss, reported today, included $366 million of pretax charges to write down B747-200 and DC10-30 aircraft whose retirement is being accelerated. Eagan, Minnesota-based Northwest has rated debt of about $7.6 billion. It posted a fourth-quarter net loss, $178 million before special charges, which was less than the net loss of $256 million the prior year, in line with expectations, and somewhat better than average among results anticipated from large U.S. airlines. Still, the continuing significant losses, without a clear path to profitability, indicate, according to management, a permanent change in the airline industry's revenue environment. Separately, Northwest Airlines Inc., Delta Air Lines Inc. (BB/Negative/--), and Continental Airlines Inc. (B+/Negative/--) announced that they would proceed with their proposed code share and marketing alliance, with minor revisions sought by the U.S. Department of Justice but not incorporating much more far- reaching changes sought by the U.S. Department of Transportation. ORBITAL IMAGING: Promotes 2 Senior Staff to Vice Pres. Positions ---------------------------------------------------------------- Orbital Imaging Corporation announced the promotion of two senior executives. Mr. Gary Adkins has been appointed Vice President of Federal Sales and National Security Programs, and Mr. Tony Anzilotti has been appointed Vice President, Finance and Controller. Mr. Adkins joined ORBIMAGE in April of 2002 as the Senior Director for Federal Sales. An experienced veteran with a proven track record in the geospatial information industry, Mr. Adkins joins ORBIMAGE's executive team to lead the company's marketing efforts and sales of its satellite imagery products and value- added services to the Federal and National Security government sectors. "We are pleased to appoint Gary to our executive team." said Timothy J. Puckorius, Senior Vice President for Worldwide Marketing and Sales. "Gary's impressive track record and extensive background in marketing geospatial information products and services to Federal and National Security customers will significantly help ORBIMAGE to further expand its existing sales and market share." Prior to joining ORBIMAGE, Mr. Adkins built a strong record of success serving as the Director of Federal Sales for Space Imaging Corporation and in senior business development and executive management positions at Laser-Scan Inc. and Geodynamics Corporation after completing a distinguished 20-year career with the United States Air Force. Mr. Anzilotti joined ORBIMAGE in June 2000 as Corporate Controller. Previously, he worked for over 10 years with Lockheed Martin Corporation in the Corporate Accounting division of its headquarters in Bethesda, MD. As Vice President of Finance and Controller, Tony will be responsible for finance and administration for ORBIMAGE, including oversight and management of ORBIMAGE's accounting, human resources, and contract administration functions and will continue to report to Armand Mancini, ORBIMAGE's Executive Vice President and Chief Financial Officer. "We are very pleased to announce the promotions of two very talented and dedicated members of the ORBIMAGE team and welcome the added contributions their positions will bring," said Matt O'Connell, ORBIMAGE's CEO. "As our company continues to prepare for the launch of OrbView-3 in late April and our emergence from bankruptcy this spring, Gary and Tony both will play instrumental roles in our expansion and success." ORBIMAGE is a leading global provider of Earth imagery products and services, with a planned constellation of four digital remote sensing satellites. The company currently provides mapping and related geospatial production services to the National Imagery Mapping Agency and operates the OrbView-1 atmospheric imaging satellite launched in 1995, the OrbView-2 ocean and land multispectral imaging satellite launched in 1997, and a worldwide integrated image receiving, processing and distribution network. Currently under development, ORBIMAGE's OrbView-3 high-resolution satellite will offer one-meter panchromatic and four-meter multispectral digital imagery on a global basis. ORBIMAGE is also the exclusive U.S. distributor of worldwide imagery from the Canadian RADARSAT-2 satellite. More information about ORBIMAGE can be found at http://www.orbimage.com Orbital Imaging filed for Chapter 11 protection on April 5, 2002, in the U.S. Bankruptcy Court for the Eastern District of Virginia, Alexandria Division (Bankr. Va. Case No. 02-81661). Geoffrey A. Manne, Esq., Shari Siegel, Esq., and William Warren, Esq., at Latham & Watkins represent the Debtor in this case. PANACO INC: Robert McMillan Steps Down from Board of Directors -------------------------------------------------------------- PANACO, Inc., (Amex: PNO), an oil and gas exploration and production company, announced that Robert McMillan has resigned from its Board of Directors and that Michele Paige has been elected to its Board. The Company is very pleased to announce that Michele Paige, who currently serves as a senior investment professional of Icahn Associates Corp., has been elected to the Board. Ms. Paige received her MBA from Harvard Business School and her J.D. from Yale Law School. She formerly served as a research associate at the Conference Board, an economic think-tank, where she specialized in mergers and acquisitions. PANACO, Inc., is an independent oil and gas exploration and production Company focused primarily on the Gulf of Mexico and the Gulf Coast Region. The Company acquires producing properties with a view toward further exploitation and development, capitalizing on state-of-the-art 3-D seismic and advanced directional drilling technology to recover reserves that were bypassed or previously overlooked. Emphasis is also placed on pipeline and other infrastructure to provide transportation, processing and tieback services to neighboring operators. PANACO's strategy is to systematically grow reserves, production, cash flow and earnings through acquisitions and mergers, exploitation and development of acquired properties, marketing of existing infrastructure, and a selective exploration program. PANACO Inc. filed for Chapter 11 reorganization on July 16, 2002 in the U.S. Bankruptcy Court for the Southern District of Texas (Houston) (Bankr. Tx. Case No. 02-37811). Monica Susan Blacker, Esq., at Neligan Stricklin LLP represents the Debtor in this case. QWEST COMMS: Applauds Court's Decision on Milberg Weiss' Request ---------------------------------------------------------------- Qwest Communications International Inc., (NYSE: Q) issued the following statement regarding a ruling in Colorado U.S. District Court which denied a motion filed by Milberg Weiss Bershad Hynes & Lerach LLP requesting a preliminary injunction to hold the sales proceeds of the QwestDex directory publishing business exclusively for the benefit of Milberg Weiss' clients. "As we have said all along, we believed the motion was completely without merit, and we're pleased the court agreed and ruled in our favor. We look forward to closing the second phase of our QwestDex sale in 2003 and using the proceeds to help strengthen the company's balance sheet." Qwest Communications International Inc., (NYSE: Q) is a leading provider of voice, video and data services to more than 25 million customers. The company's 53,000-plus employees are committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. For more information, please visit the Qwest Web site at http://www.qwest.com Qwest Communications' 7.500% bonds due 2008 (Q08USR3) are trading at about 82 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=Q08USR3for real-time bond pricing. RAILAMERICA INC: Initiates $100-Mill. Asset Rationalization Plan ---------------------------------------------------------------- RailAmerica, Inc., (NYSE: RRA) as part of its long-term strategic plan to reduce debt, improve margins and enhance earnings, announced its plan to sell more than $100 million in non-strategic/non-core/non-operating assets by year-end 2004. The Company stated that its target is to reduce net debt-to- capital levels to the current railroad industry average of approximately 50% by year-end 2004. RailAmerica's $100 million asset rationalization plan includes the previously announced proposed sale of its 55% interest in its Chilean railroad, as well as the sale of several small non- strategic railroads, non-operating real estate and other non- core assets in North America and Australia. The Company recently announced that it has executed an engagement letter with the investment banking group of Credit Lyonnais Securities (USA) Inc., to complete the Chilean sale. Anticipated benefits of the Company's plan include: * Reduced balance sheet leverage * Greater financial liquidity * Enhanced free cash flow * Focus on core North American and Australian railroad operations * Increased corporate/operational flexibility * Improved return on invested capital * Stronger credit statistics * Accretion to shareholders "This strategic plan puts us on track to further reduce leverage, enhance our capital structure, increase free cash flow and focus on maximizing the performance of our core rail portfolio," said Gary O. Marino, Chairman, President & CEO of RailAmerica. "Although we have made great strides in reducing financial leverage over the past few years, in these uncertain economic times we feel that it is prudent to operate with a conservative capital structure. We have identified more than $100 million in assets for potential sale, the proceeds of which will be used to pay down long-term institutional debt. We believe that the market for completing these transactions is robust. This new plan is similar to our highly successful asset rationalization plan of 2000/2001, where we were able to significantly reduce acquisition debt related to our purchase of RailTex, Inc., in early 2000. In that plan, we exceeded our then-stated goal of $100 million in sales by more than $25 million. Of course, there is no assurance that we will achieve the same kind of results in the current plan." Mike Howe, Senior Vice President & CFO, added, "Our plan to divest our Chilean operation, which accounts for only five percent of our total revenue, will allow us to focus on growing our core North American and Australian operations. We expect that the proceeds from this divestiture, combined with the additional asset sale proceeds, will be used to significantly improve our capital structure, including reducing our net debt- to-capital ratio from 63% currently to approximately 50%. This lower leverage, which should be viewed favorably by the capital markets, is expected to provide enhanced liquidity and increased financial flexibility for future growth, including accomplishing accretive acquisitions in a non-leveraged manner. Further, we anticipate that our shareholders should benefit from an improved equity value." RailAmerica, Inc., (NYSE: RRA) is the world's largest short line and regional railroad operator with 49 railroads operating over 12,800 miles in the United States, Canada, Australia and Chile. In Australia and Argentina, an additional 4,300 miles are operated under track access arrangements. The Company is a member of the Russell 2000(R) Index. For more information, visit http://www.railamerica.com * * * As previously reported in Troubled Company Reporter, Standard & Poor's raised its long-term corporate credit rating on RailAmerica Inc., citing the rail operator's improved financial flexibility. The senior secured debt rating was raised to 'BB' from 'BB-', and the subordinated debt rating was raised to 'B' from 'B-'. Standard & Poor's also assigned its 'BB' rating to $475 million in senior secured credit facilities issued by RailAmerica Transportation Corp. and guaranteed by RailAmerica Inc. Local and Foreign Currency Ratings are assigned at 'BB-' and 'BB+' respectively. Ratings outlook is stable. The rating actions reflected the company's successful expansion of operations and improved financial profile. Nevertheless, debt leverage remains elevated, in the 70% debt to capital area, and management's active acquisition strategy carries potential for additional debt financing. ROWECOM INC: Case Summary & 30 Largest Unsecured Creditors ---------------------------------------------------------- Lead Debtor: Rowecom, Inc. 15 Southwest Park Westwood, Massachusetts 02090 Bankruptcy Case No.: 03-10668 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Dawson Inc. 03-10670 The Faxon Company Inc. 03-10671 Turner Subscription Agency Inc. 03-10672 McGregor Subscription Service Inc. 03-10674 Dawson Information Quest Inc. 03-10675 Corporate Subscription Services Inc. 03-10676 Type of Business: RoweCom Inc., offers content sources and innovative technologies and provides information specialists, particularly in the library, with complete solutions serving all their information needs, in print or electronic format. Chapter 11 Petition Date: January 27, 2003 Court: District of Massachusetts Eastern Division Judge: Joan N. Feeney Debtors' Counsel: Stephen E. Garcia, Esq. Mindy D. Cohn, Esq. Kaye Scholer LLC Three First National Plaza 70 West Madison Street Suite 4100 Chicago, IL 60602 Tel: (312) 583-2300 Fax: (312) 583-2360 -and- Jeffrey D. Sternklar, Esq. Jennifer L. Hertz, Esq. Duane Morris, LLP 470 Atlantic Avenue Suite 500 Boston, MA 02210 Tel: (617) 289-9200 Fax: (617) 289-9201 Estimated Assets: $50 to $100 Million Estimated Debts: $50 to $100 Million Debtor's 30 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Natl Institute of Health Trade Debt $2,413,823 Library Margaret Kunz Bldg. 10, Room 1-L-13 10 Center Drive, MSC 1150 Bethesda, MD 20892 Tel: 301-594-6470 Fax: 301-496-8422 VPI & State University Trade Debt $1,551,440 Ladd brown PO Box 33101 St. Paul, MN 55133 Tel: 540-231-6736 Fax: 540-231-3694 3M Company Trade Debt $1,264,405 Thea Walsh PO Box 33101 St. Paul, MN 55133 Tel: 651-736-0100 Fax: 651-733-2110 Lawrence Livermore Trade Debt $1,234,075 Nat'l Labs Kathy Balhorn 7000 East Ave. Livermore, CA 94551 Tel: 925-422-5292 Fax: 925-424-6770 SUNY Buffalo Trade Debt $1,170,455 Serials Dept. Susan Davis Buffalo, NY 14260 Tel: 716-645-2784 Fax: 716-645-5955 Milner Library-Illinois Trade Debt $1,134,479 State Univ. James Castellon 201 N. School St. Normal, IL 61761 Tel: 309-438-3445 Fax: 309-438-3676 Ohio University Alden Trade Debt $1,014,265 Library Anita Baird 30 park Place Athens, OH 45701 Tel: 740-593-2685 Fax: 740-593-2692 Boston University Library Trade Debt $942,192 Craig Brown 771 Commonwealth Ave Boston, MA 02215 Tel: 617-353-2134 Fax: 617-353-2084 Serials Acquisitions Trade Debt $931,229 Univ. of So. Florida Larry Helios 4202 E. Fowler Ave. Tampa, FL 33620 Tel: 813-974-4496 Fax: 813-974-2296 University Library at Trade Debt $828,223 IUPUI Glenda Armstrong 755 West Michigan St. Indianapolis, IN 46202 Tel: 317-279-2320 Fax: 317-279-0368 Emory University Trade Debt $740,870 Linda Garr-Marwell 1462 Clifton Road Atlanta, GA 30322 Tel: 404-616-3293 Fax: 404-727-8469 Marquette University Trade Debt $710,993 Serials Dept. Alice Gromley 1415 W. Wisconsin Ave. Milwaukee, WI 53201 Tel: 414-288-7252 Fax: 414-288-2123 Tufts University Trade Debt $689,523 Liz Eaton 145 Harrison Ave. Boston, MA 02111 Tel: 617-636-2481 Fax: 617-636-4039 McFarlin Library Trade Debt $682,519 University of Tulsa Francine Fisk 2933 E. 6th St. Tulsa, OK 74104 Tel: 918-631-2495 Fax: 918-631-3791 Thomas Jefferson Univ. Trade Debt $634,721 Scott Library Edward Tawyen PO Box 1585 Philadelphia, PA 19105 Tel: 215-955-8848 Fax: 215-955-7642 John Hopkins University Trade Debt $595,589 Welch Library Barbara Kochler 1900 E. Monument St. Baltimore, MD 21205 Tel: 410-614-2786 Fax: 410-955-4695 University of Iowa Trade Debt $585,564 Nancy Baker 101 Main Library, Madison & Washington Iowa City, IA 52243 Tel: 319-335-5867 Fax: 319-335-5900 Houston Public Library Trade Debt $573,710 Diane Reedy 500 McKinney Ave. Houston, TX 77002 Tel: 505-646-1508 Fax: 505-646-7477 New Mexico State Univ. Trade Debt $565,016 Elizabeth Titus Frenger & Williams Las Cruces, NM 88003 Tel: 505-646-1508 Fax: 505-646-7477 Western Illinois Univ. Trade Debt $504,465 University Library James Hoesman Macomb, IL 61455 Tel: 309-298-2762 Fax: 309-298-2791 University of New Orleans Trade Debt $500,686 Lakefront Marilyn Hankel New Orleans, LA 70148 Tel: 504-286-6556 Fax: 504-280-7277 Stephen F. Austin Trade Debt $480,958 State Univ. Al Gage Lib Serials Unit 1936 North St. Nacogdoches, TX 75962 Tel: 409-468-4101 Fax: 409-468-4117 Syracuse Univ. Trade Debt $458,075 Pamela Whiteley McLaughlin 222 Waverly Avenue Syracuse, NY 13244 Tel: 315-443-9788 Fax: 315-443-9401 College of Williams Trade Debt $454,405 & Mary James Deffenbaugh PO Box 8794 Williamsburg, VA 23187 Tel: 757-221-3057 Fax: 757-221-2635 Vassar College Library Trade Debt $375,078 Ellis Otkay 124 Raymond Avenue Poughkeepsie, NY 12604 Tel: 914-437-7577 Fax: 914-727-5864 Kresge Library, Trade Debt $370,046 Oakland University Barbara McDowell 2200 N. Squirrel Road Rochester, MI 48309 Tel: 248-370-2470 Fax: 248-370-2458 University of Alaska - Trade Debt $352,595 Anchorage Patti Thorne 3211 Providence Dr. Anchorage, AK 99508 Tel: 907-786-4627 Fax: 907-786-6050 Eastman Chemical Co. Trade Debt $343,208 Michael Ubaldini Building 1508 PO Box 1972 Kingsport, TN 37762 Tel: 423-229-6110 Fax: 423-229-6114 IBM Watson Research Trade Debt $325,799 Library Nilda Rivera PO Box 218 Room 16-244 Yorktown Heights, NY 37662 Tel: 914-945-1415 Fax: 914-945-4144 Truman State University Trade Debt $312,169 Rihard Coughlin 100 E. Normal St. Kirkswille, MO 63501 Tel: 660-785-4540 Fax: 660-785-4538 SIMON TRANS: Secures Nod to Hire Logan & Company as Ballot Agent ---------------------------------------------------------------- Simon Transportation Services Inc., and its debtor-affiliates sought and obtained approval form the U.S. Bankruptcy Court for the District of Utah to employ Logan & Company, Inc., as their Balloting Agent to mail, receive and tabulate creditors' votes to accept or reject the Company's chapter 11 plan. The Debtors tell the Court that they require the services of an experienced balloting agent to assist them in their Chapter 11 proceeding. The Debtors disclose that generally, Logan & Company will: a. produce and mail Plan Ballot (and update mailing addresses upon receipt of new address information); b. file Affidavits of Service with the Bankruptcy Court; c. tabulate the ballots; and d. provide additional services as deemed necessary and appropriate by the Court and Debtors' counsel. The Debtors will compensate Logan & Company at its customary rates for work performed: Database Creation/Ballot Notice: One-Time Set Up Fee $5,000 Ballot Notice $4,000 Postage $4,625 Hourly Fees: Principal (Kate Logan) $450 per hour Account Executive $165 per hour Programming Support $100 per hour Project Coordinator $105 per hour Data Entry $ 55 per hour Clerical $ 35 per hour Simon Transportation Services Inc., a truckload carrier providing nationwide, predominantly temperature-controlled transportation services for major shippers, field for Chapter 11 protection on February 25, 2002 (Bankr. Utah Case No. 02-22906). Scott J. Goldstein, Esq., at Spencer Fane Britt & Browne LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $132,242,081 in assets and $135,898,793 in liabilities. SPECTRASCIENCE INC: Court Approves Conversion to Chapter 11 Case ---------------------------------------------------------------- SpectraScience, Inc., (Pink Sheets:SPSIQ) announced that the joint motion of Timothy D. Moratzka, its Chapter 7 Trustee, and GDBA Investments, LLLP to (i) convert its bankruptcy case (BKY Case No. 02-42904) from Chapter 7 to Chapter 11 and (ii) appoint Timothy D. Moratzka as Trustee-In-Possession, as filed on January 15, 2003, was granted by the United States Bankruptcy Court for the District of Minnesota on February 5, 2003. SpectraScience is uncertain whether any plan of reorganization it proposes under Chapter 11 of the U.S. Bankruptcy Code will be confirmed by the Bankruptcy Court. Furthermore, SpectraScience is uncertain whether any current equity holder of SpectraScience will receive any assets, value or equity under such plan of reorganization. SUN HEALTHCARE: Pursuing Major Lease Restructuring Initiative ------------------------------------------------------------- Sun Healthcare Group, Inc., (OTC Bulletin Board: SUHG) has opened dialogue with many of its landlords concerning the portfolio of properties leased to Sun and various of its consolidated subsidiaries. The Company is seeking a rent moratorium and/or rent concessions with respect to certain of its facilities and is seeking to transition its operations of certain facilities to new operators while retaining others. As the Company previously said, adverse conditions in long-term care, including recent reductions in government support for long-term care givers, such as the failure of Congress to restore Medicare funding to the levels existing prior to October 1, 2002 and severe proposed cuts in Medicaid payments under numerous state budgets, have obliged Sun to make the hard decisions required to maintain quality patient care while reducing costs wherever possible. Richard K. Matros, Chairman and Chief Executive Officer of Sun Healthcare Group, Inc., stated, "We regret that the ongoing cuts in reimbursement have compelled us to transition away from the operation of certain of the Company's facilities. We hope to work with our landlords in a cooperative process. Such cooperation both avoids unnecessary expense and continues care without disruption to residents. Proceeding in that manner also will maintain the greatest possible economic value of each facility for the landlords. When we complete our restructuring of the lease portfolio, we anticipate that the Company will remain a significant provider of skilled nursing and other long- term care services. The Company's commitment to its employees and the patients entrusted to its care remains unchanged as our top priority." The Company has been encouraged by its preliminary discussions with some of its major landlords, although those discussions are still at a relatively early stage. The Company is hopeful that its landlords will be responsive and cooperative; however, no assurance can be given that negotiations will result in rent reductions and transition of leases sufficient for Sun to meet its ongoing funding requirements without further action. If landlords seek to assert leasehold or other damages and are successful in doing so, those damages will have a serious adverse impact upon the financial condition of the Company. Mr. Matros stated, "The Company remains firmly committed to the ongoing operation of a restructured portfolio, comprised of a significant number of our current facilities, allowing for ongoing profitability under the current operating environment." As previously reported, Sun and its subsidiaries continue to receive ongoing funding under its revolving loan agreement although the Company is in covenant default under that agreement. Headquartered in Irvine, California, Sun Healthcare Group, Inc. owns many of the country's leading healthcare providers. Through its wholly-owned SunBridge Healthcare Corporation subsidiary and its affiliated companies, Sun's affiliates together operate more than 235 long-term and postacute care facilities in 25 states. In addition, the Sun Healthcare Group family of companies provides high-quality therapy, pharmacy, home care and other ancillary services for the healthcare industry. More information is available on the Company's Web site at http://www.sunh.com TECSTAR INC: Wants Plan Filing Exclusivity Stretched to April 4 --------------------------------------------------------------- Don Julian, Inc., and 15251 Don Julian, Inc., formerly known as Tecstar, Inc., and Tecstar Power Systems, Inc., ask the U.S. Bankruptcy Court for the District of Delaware to extend their exclusive periods under 11 U.S.C. Sec. 1121. The Debtors want the Court to stretch the time period within which only the Debtors have the right to file a Chapter 11 Plan through April 4, 2003, and until June 3, 2003, to solicit acceptances of that plan from their creditors. The Debtors say that cause exists for an extension of the Exclusive Periods in this case. The Debtors have been diligently working to preserve the value of their assets through the use of cash collateral, retention of professionals and the development of a plan to maximize recovery through the liquidation of the Debtors' assets. Additionally, the Debtors have maintained communication with the Secured Lenders and the Committee and have reached consensus on almost all of the key issues. The Debtors have drafted a proposed disclosure statement and plan, which they anticipate will be completed and filed within the requested extension. The Debtors will be in a better position to complete the plan only after reaching full agreement with the Secured Lenders and the Committee relative to the terms of the plan. Any competing plan proposed prior to this time would needlessly deflect the attention of the Debtors and other interested constituencies. The Debtors further explain that the extension of the Exclusivity Period is necessary and appropriate to enable the Debtors to finalize a plan with the approval of the Secured Lenders and the Committee. The requested extension of the Exclusivity Period will allow the Debtors to formulate a plan to fairly and efficiently treat the Debtors' creditors. Tecstar, Inc., n/k/a Don Julian, Inc., manufactures high- efficiency solar cells that are primarily used in the construction of spacecraft and satellite. The Company filed for chapter 11 protection on February 07, 2002 (Bankr. Del. Case No. 02-10378). Tobey M. Daluz, Esq., at Ballard Spahr Andrews & Ingersoll LLP and Jeffrey M. Reisner, Esq., at Irell & Manella LLP, represent the Debtors in their restructuring efforts. When the company filed for protection from its creditors, it listed assets of over $10 million and debts of over $50 million. TOKHEIM CORP: Danaher & First Reserve Pitch Best Bids at Auction ---------------------------------------------------------------- Tokheim Corporation completed the auction of its North American assets -- including the Tokheim North America, MSI and Gasboy operating segments -- in accordance with the procedures required by the United States Bankruptcy Code. The auction was conducted pursuant to a bidding procedures order issued by the United States Bankruptcy Court for the District of Delaware. Upon the advice of its legal and financial advisors, and in consultation with its lenders and the Creditors' Committee, Tokheim concluded that the bid submitted by Danaher Corporation represented the highest or otherwise best offer for the Gasboy operating segment and that the bid submitted by First Reserve Fund IX, L.P., represented the highest or otherwise best offer for the Tokheim North America and MSI operating segments. The successful bids remain subject to approval by the United States Bankruptcy Court for the District of Delaware at a sale hearing scheduled to take place on February 25, 2003. Additionally, the contemplated transactions remain subject to other customary conditions. Tokheim does not believe its shareholders will receive any distribution upon confirmation of a plan of reorganization. TRENWICK: James F. Billett, Jr. Resigns as Officer & Director ------------------------------------------------------------- Trenwick Group Ltd., (NYSE: TWK) said that James F. Billett, Jr., has retired from his positions as an officer and director of Trenwick and its subsidiaries, effective immediately. On August 27, 2002, Trenwick announced that Mr. Billett would be taking a leave of absence from his positions for health reasons. W. Marston Becker will continue to serve as Acting Chairman and Acting Chief Executive Officer of the Company. Trenwick is a Bermuda-based specialty insurance and reinsurance underwriting organization with two principal businesses operating through its subsidiaries located in the United States, the United Kingdom and Bermuda. Trenwick's reinsurance business provides treaty reinsurance to insurers of property and casualty risks from offices in the United States and Bermuda. Trenwick's operations at Lloyd's of London underwrite specialty insurance as well as treaty and facultative reinsurance on a worldwide basis. As reported in Troubled Company Reporter's Thursday Edition, Fitch Ratings lowered its long-term rating and senior debt ratings on Trenwick Group. Ltd., and its subsidiaries, to 'C' from 'CC'. Fitch's ratings on Trenwick's capital securities and preferred stock remain 'C'. Fitch's rating action followed Trenwick's recent announcement that it was taking a $107 million reserve charge. Trenwick has $75 million of senior debt outstanding due April 1, 2003. UNITED AIRLINES: Traffic Up 5.8% as Load Factor Rises to 70.9% -------------------------------------------------------------- United Airlines' (NYSE: UAL) total scheduled revenue passenger miles rose 5.8 percent in January vs. the comparable month in 2002 on a capacity increase of 3.2 percent. The carrier's passenger load factor came in at 70.9 percent, up from 69.1 percent a year ago. United also boarded over 5.2 million passengers in January 2003, up 7.5 percent from the year before. "As we begin 2003 on this strong note, our employees remain dedicated to maintaining United's outstanding on-time performance that we achieved in 2002," said Pete McDonald, executive vice president - operations. United operates nearly 1,700 flights a day on a route network that spans the globe. News releases and other information about United may be found at the company's Web site at http://www.united.com United Airlines' 10.670% bonds due 2004 (UAL04USR1) are trading at about 5 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL04USR1for real-time bond pricing. UNITED AIRLINES: U.S. Trustee Amends Unsecured Creditors' Panel --------------------------------------------------------------- The U.S. Trustee amends the membership of the Official Committee of Unsecured Creditors of United Airlines by replacing Thomas Brichner of the International Association of Machinists, with Michael Peat. 1. Pension Benefit Guaranty Corp. 1200 K St. NW Washington, DC 20005 Attn: Craig Yamaoka 2. Association of Flight Attendants 6400 Shafer Ct. Ste. 250 Rosemont, IL 60018 Attn: Gregory E. Davidowitch 3. Air Line Pilots Association, International 6400 Shafer Ct. Ste. 700 Rosemont, IL 60018 Attn: Geoffrey H. Garrett 4. International Association of Machinists 9000 Machinists Place Ste 118B Upper Marlboro, MD 20772 Attn: Michael Peat 5. The Bank of New York 101 Barclay St. Floor 8W New York, NY 10286 Attn: Gary Bush 6. Airbus North America Holdings 198 Van Buren St. Ste. 300 Herndon, VA 20170 Attn: Renee Martin 7. Pratt & Whitney - A United Tech Division 400 Main St. M/S 133-54 East Hartford, CT 06108 Attn: F. Scott Wilson 8. HSBC Bank USA 425 Fifth Ave. New York, NY 10018 Attn: Robert A. Conrad 9. US Bank N.A. 180 E. 5th St. St. Paul, MN 55101 Attn: Timothy J. Sandell 10. R2 Investments LDC c/o Amalgamated Gadget, LP as Investment Manager 301 Commerce St. Ste. 2975 Fort Worth, TX 76102 Attn: Todd Stein 11. Deutsche Lufthansa AG 1640 Hempstead Turnpike East Meadow, NY 11554 Attn: Arthur Molins 12. Goodrich Corp. 2730 Tyvola Rd. Charlotte, NC 28277 Attn: William Walthall 13. Galileo International, Inc. 9700 W. Higgins Rd. Rosemont, IL 60018 Attn: Thomas DeMay The City of Chicago is authorized to participate as an ex officio member. (United Airlines Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) US AIRWAYS: Wants to Undertake Pilot Plan Distress Termination -------------------------------------------------------------- US Airways Group Inc., and its debtor-affiliates ask the Court to determine that they satisfy the financial requirements for a "distress termination" of the defined benefit Retirement Income Plan for the Pilots of US Airways Group. The Pilot's Plan covers US Airways' ALPA members comprised of 3,700 active participants, 2,100 participants who are furloughed or on leave and 1,100 retirees. Normal retirement age under the Plan is 60. At that age, with 30 years of service, Pilots can receive annual benefit equal to 65% of their final average annual earnings, payable in a lump sum or monthly. John Wm. Butler, Jr., Esq., says that the Debtors have met all the requirements for emerging from Chapter 11 on a fast-track basis, save one: the Debtors must be able to close on final debt financing and equity investment commitments for $1,240,000,000 so they can consummate their reorganization plan and obtain release of the final $200,000,000 tranche of DIP financing from the RSA and the ATSB's $900,000,000 Loan Guarantee. The Debtors will only gain access to these necessary funds when they significantly reduce their operating cost structure and future obligations. The Debtors have chosen to restructure the Pilot's Plan because it represents 68% of all future pension funding requirements. The Debtors ask Judge Mitchell for two forms of relief: (1) the Debtors need the Court's approval to undertake a distress termination of the Pilot's Plan. The Debtors pledge to pursue a legislative solution and if one becomes available prior to termination, the Debtors will curtail the termination process. Even if appropriate legislation is promulgated after termination, the debtors will ask the Pension Benefits Guaranty Corporation to restore the Pilot's Plan. (2) the Debtors ask for authority to implement a supplemental Pilot's Plan to make up for some of the financial shortfall the Pilots are sure to experience. The Debtors can't reorganize with the burden of their existing pension obligations. Airline industry conditions have deteriorated, reducing the projected cash available to meet minimum required pension funding obligations. Stock market returns and interest rates have declined, causing an increase in funding requirements over the 7-year emergence business plan. As a result, the Debtors do not have the requisite level of cash flow to support pension contributions of the necessary magnitude and meet the terms of their business plan at the same time. If the pension plan isn't restructured, the Debtors will not qualify for access to the remaining financing and will not be able to implement their regional jet strategy. Mr. Butler assures the Court that the Debtors explored every legal option to reduce pension costs short of terminating the Pilot's Plan. No other option produces the savings necessary to permit the Debtors to obtain the financing and investment necessary to emerge from Chapter 11. The Debtors propose to provide a defined contribution plan with about $120,000,000 annually during the 7-year emergence period. Neal S. Cohen, Executive Vice President-Finance, and Chief Financial Officer for US Airways Group reminds the Court that the ATSB Loan mandates a final plan of reorganization and disclosure statement by February 27, 2003. He notes that Plans for other employee groups do not have obligations of sufficient size to, by themselves, alleviate the Debtors cash flow deficiencies. Also, since originally formulating the emergence business plan, the Debtors have reduced their revenue estimates by $6,600,000,000 over the seven years. Additionally, US Airways, and the ALPA met with senior IRS officials to encourage the IRS to consider alternative approaches to the minimum funding waiver rules that would alleviate the Pilot's Plan funding requirements. The IRS officials stated that they were unable to adopt any alternative approaches. Mark T. Dungan, an actuary at Towers Perrin and a Fellow of the Society of Actuaries and Member of the American Academy of Actuaries, has served as the enrolled actuary for the Debtors three active defined benefit plans for the last six years. He supervises the annual valuations of the Plans, including calculation of the minimum contributions. Through 2009, Mr. Dungan projects $2,500,000,000 needs to be pumped into the Pilot's Plan: Minimum Potential Funding Year Contributions Obligation ---- ------------- ------------------ 2003 $ 51,000,000 $ 51,000,000 2004 753,000,000 525,000,000 2005 538,000,000 337,000,000 2006 426,000,000 275,000,000 2007 346,000,000 222,000,000 2008 246,000,000 175,000,000 2009 93,000,000 74,000,000 (US Airways Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) USG CORP: Asks Court to Move Lease Decision Deadline to Aug. 29 --------------------------------------------------------------- USG Corporation and its debtor-affiliates still need additional time to review and evaluate their unexpired non-residential real property leases and to determine which leases, if any, they would assume or reject. Hence, the Debtors ask the Court to extend their lease decision deadline through and including August 29, 2003. Paul N. Heath, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, explains that the extension would apply to all of the Debtors' 200 listed real property leases and certain leases inadvertently omitted from the list. Given the importance of the Leases to the Debtors' ongoing operation and the number of leases to be evaluated, Mr. Heath asserts that it would be imprudent to require the Debtors to elect whether to assume or reject the Leases prior to a comprehensive review. "Unless [Judge Newsome grants the Debtors] additional time to make their election regarding the Real Property Leases, the Debtors are at risk of prematurely and improvidently assuming or rejecting the Leases without necessary evaluations, determinations, negotiations and discussions with the relevant landlords and the Debtors' creditor constituencies," Mr. Heath says. Mr. Heath assures the Court that, pending their decision to assume or reject the Leases, the Debtors will perform all of their postpetition obligations in a timely fashion, including payment of postpetition rent due. (USG Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) WESTAR: Fitch Calls Financial Plan a Constructive Credit Event -------------------------------------------------------------- Fitch Ratings believes that Westar Energy's new financial plan and the recent close of the partial sale of WR's Oneok investment are constructive credit events. Notwithstanding the constructive nature of the filing and asset sale, Fitch notes that the plan's goals are ambitious and subject to execution risk. Therefore, it remains unclear, at this juncture, if the resolution of the many challenges facing WR will result in a financial profile that supports the current ratings. Although the plan falls short of the commission's Aug. 1, 2003 deadline to reduce debt to $1.67 billion, the WR plan incorporates many suggested actions by the Kansas Corporation Commission - notably the plan aims to create a stand-alone electric utility through the divestment of all unregulated investments and reduce debt to $1.47 billion by the end of 2004. As part of the plan, WR will reduce its common stock dividend 37%, freeing up an incremental $31 million of annual cash flow that will be used to reduce debt. In addition, WR has implemented initial measures to protect ratepayers from risks associated with its unregulated investments. Fitch plans to meet later this month with management and to resolve the Negative Rating Watch shortly thereafter. Elements that may result in affirmation at the current rating level include: evidence of some flexibility on the part of the KCC with regard to its timeline and structural requirements; and a positive assessment of the commitment and ability of the new management team WR to deliver solid progress as a refocused utility enterprise. WHEELING-PITTSBURGH: Wants Solicitation Exclusivity Extension ------------------------------------------------------------- Pittsburgh-Canfield Corporation and its debtor-affiliates ask Judge Bodoh to extend their exclusive solicitation period until May 9, 2003. The Debtors explain that they are involved in serious, substantial, negotiations with the appropriate constituencies in these cases regarding the confirmation of their Plan. In addition, the Debtors are still in negotiations with the Emergency Steel Loan Guaranty Board regarding their application for a government-guaranteed loan under the Emergency Steel Loan Guaranty Act to provide exit financing for the Plan. (Wheeling- Pittsburgh Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM INC: Wins Court Nod for $9.8-Mill. BCT & Savannah Sale --------------------------------------------------------------- Worldcom Inc., and its debtor-affiliates sought and obtained the Court's authority to give consent and to take all actions necessary or appropriate to consummate the sale of BCT Real Estate LLC and Savannah Yacht and Ship LLC. Sharon Youdelman, Esq., at Weil Gotshal & Manges LLP, in New York, relates that prior to the Petition Date, Bernard Ebbers, WorldCom's former chief executive officer, was the 99.8% controlling member of BCT Holdings LLC, the sole member of BCT Real Estate LLC and Savannah Yacht & Ship LLC. BCT Real Estate and Savannah own and operate the Intermarine Savannah Shipyard in Chatham County, Georgia, which is engaged in new mega yacht construction and ship repair and refit. Pursuant to a prepetition pledge and security agreement, Mr. Ebbers pledged to WorldCom his membership interests in BCT Holdings as partial security for certain prepetition loans made to him by WorldCom. In October 2002, WorldCom acquired ownership of Mr. Ebbers' membership interests in BCT Holdings through the exercise of strict foreclosure under the Pledge and Security Agreement. Ms. Youdelman tells Judge Gonzalez that the Shipyard does not generate any income for BCT Real Estate and Savannah and, with no new yachts available for sale or in process, loses about $450,000 per month for expenses related to insurance and payroll. Accordingly, BCT Real Estate and Savannah marketed the Shipyard for sale. Following the transfer of the pledged membership interests to WorldCom, BCT Real Estate and Savannah, with WorldCom's assistance, contacted 15 parties that might have an interest in purchasing the Shipyard. In addition, the fact that the Shipyard was for sale was widely disclosed in the press, including numerous articles in The Wall Street Journal. Following preliminary indications of interest, Ms. Youdelman relates that three parties were invited to conduct on-site due diligence and to submit a best and final cash bid for the property on a "where is, as is" basis. Palmer Johnson Savannah, Inc. submitted a cash offer on a "where is, as is" basis with no financing contingency and limited closing conditions. BCT and Savannah determined that Palmer Johnson submitted the highest and best offer, and thereafter, entered into negotiations with Palmer Johnson with respect to the terms of the contemplated sale transaction. In that regard, BCT Real Estate, Savannah and Palmer Johnson negotiated and executed a letter of intent with a term sheet and Palmer Johnson tendered into escrow a $1,000,000 deposit. The Debtors expect that, after satisfaction of, or reserve for, BCT & Savannah's obligations to their creditors, net proceeds of the sale, estimated over $7,000,000, will be used by BCT & Savannah to repay a portion of the obligations they owe to WorldCom. Under the contemplated sale transaction, Ms. Youdelman explains that WorldCom, as the controlling member of BCT Holdings, must consent to and cause Holdings as the sole member of BCT & Savannah to approve and authorize the sale transaction, which involves substantially all of the assets. Although the sale is subject to definitive documentation, the general terms of the contemplated transaction are: A. Seller: BCT Real Estate, LLC and Savannah Yacht & Ship, LLC. B. Buyer: Palmer Johnson Savannah, Inc. C. Purchased Assets: All tangible and certain intangible assets of Sellers, including the real estate, machinery and equipment, tools, permits, licenses and authorizations -- to the extent transferable, comprising assets of the business commonly known as Intermarine Savannah in Chatham County, Georgia, including the three partially completed hulls located on the premises and all existing design and engineering drawings and work for completion of the three yachts, but specifically excluding cash, cash equivalents, accounts receivable -- inclusive of payment rights for work in progress performed but not yet invoiced, all refunds, rebates, credits and payment rights associated with any insurance contract, the 120' substantially completed motor yacht located on the premises, and any right to use the name "Intermarine." "Purchased Assets" will include contracts, leases and repair orders that the Buyer designates expressly as "Included Contracts." D. Assumed Liabilities: -- all obligations of the Sellers under the agreements, contracts, leases, licenses and other arrangements; -- all liabilities relating to the termination of employment of any employee who continues or commences employment with the Buyer following the closing of the sale of the Property to the Buyer; and -- certain other specifically-enumerated liabilities of the Sellers. E. Purchase Price: $9,800,000, together with the assumption of the Assumed Liabilities. F. Bulkhead and Related Repair Reserve: At the Buyer's option: -- the Sellers will repair the portion of the bulkhead, platform dock and graving dock, subject to the limitation that the cost of repair will not exceed $1,500,000 in the aggregate; or -- the Sellers will refund $1,500,000 of the Purchase Price and Buyer will waive the covenant and assume all cost, expense and sole liability for the bulkhead, platform dock and graving dock repair work. G. Damages Limitation: The Sellers will be liable to Buyer for any direct, actual and identifiable damages incurred in connection with a breach of the Sellers' warranty of title and warranty as to knowledge of environmental matters; provided, however, that the aggregate obligations of the Sellers for these damages will not exceed $3,000,000. Ms. Youdelman asserts that the Purchase Price, which is significantly greater than offers by other parties having previously expressed an interest in the Shipyard, is eminently reasonable and represents fair market value for the property. (Worldcom Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Worldcom Inc.'s 7.875% bonds due 2003 (WCOE03USR1) are trading at about 23 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOE03USR1 for real-time bond pricing. Z-TEL TECHNOLOGIES: Fails to Maintain Nasdaq Listing Standards -------------------------------------------------------------- Z-Tel Technologies, Inc., (Nasdaq:ZTEL) on February 4, 2003, received a Nasdaq Staff Determination indicating that the Company failed to comply with $35 million market capitalization requirement for continued listing on the Nasdaq SmallCap Market and is subject to delisting. The Company intends to file a request for a hearing before Nasdaq Listing Qualifications Panel to review the Nasdaq Staff Determination. Pending that hearing, the Company's common shares will continue to trade on the Nasdaq SmallCap Market. There can be no assurance that the Company will prevail at the hearing, and that its common stock will not be delisted from the Nasdaq SmallCap Market. Z-Tel, whose September 30, 2002 balance sheet shows a total shareholders' equity deficit of about $91 million, was founded in the wake of the Telecommunications Act of 1996. With the establishment of the Unbundled Network Element-Platform (UNE-P), competitive telecommunications companies became able to provide telephone service to end-users over the incumbent local telephone providers' network. Z-Tel was formed around UNE-P with the vision of developing technology that would imbue the telephone with "Intelligent Dial Tone," wherein telephone service can be personalized to meet consumers' and businesses' diverse communications needs in an intelligent, intuitive way. Z-Tel offers residential and business customers in 46 states value-added bundled local and long distance phone service with proprietary Internet-accessible calling and messaging features. Z-Tel also makes these services available on a wholesale basis. For more information about Z-Tel's innovative services or about Z-Tel, please visit the Company's Web site at http://www.ztel.com * It's Now Pachulski, Stang, Ziehl, Young, Jones & Weintraub ------------------------------------------------------------ The nation's largest bankruptcy boutique -- California's Pachulski, Stang, Ziehl, Young & Jones P.C. -- has announced that prominent bankruptcy attorney William P. Weintraub will relocate from the San Francisco office to join senior shareholder Robert J. Feinstein in anchoring the firm's New York office. This move expands the scope of the firm's national practice by adding one of the firm's most senior lawyers to its solid East Coast presence. Now named Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., the firm will continue to focus on bankruptcy, litigation and transactions, as well as business reorganizations and workouts nationwide with an enhanced focus on the New York market. "Bill Weintraub founded the firm's San Francisco office seven years ago, and that office has been phenomenally successful," said firm co-founder Richard Pachulski. "We are looking forward to replicating this success in New York. "Bill is highly respected among his peers throughout the nation. He began his career in New York almost 25 years ago and he spent the last 20 years in California. His deep roots on both coasts is a tremendous advantage for us." Weintraub, age 49, began his career with Weil Gotshal & Manges in 1979. After spending several years working with Harvey Miller and others, he moved to San Francisco to join Pat Murphy at Murphy, Weir & Butler. Weintraub was a partner in that firm for almost 10 years. Mr. Weintraub opened the San Francisco office of what was then Pachulski, Stang, Ziehl & Young in 1996. The San Francisco office now has 17 lawyers, including six shareholders. Mr. Weintraub has been lead counsel on several of the firm's largest cases. He was lead debtor's counsel in the TriValley and AgriBioTech cases. He also headed the firm's co- representation of Official Bondholders' Committee in the Excite@Home case, and he and Rob Feinstein are currently representing the Official Creditors' Committee in the Agway case. Mr. Weintraub was named one of the Best Lawyers in America from 1995-2002. He was recently invited to join the American College of Bankruptcy as a Fellow. A graduate of the State University of New York at Albany and the University of Michigan Law School, Mr. Weintraub is admitted to practice in both New York and California. He is a frequent lecturer and author on bankruptcy and related topics. Headquartered in Los Angeles, Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C. -- http://www.pszyjw.com-- numbers 80 attorneys. The firm was founded in 1983 and Mr. Weintraub opened its San Francisco office in 1996. Its Wilmington office was founded by Laura Davis Jones in 2000, and its New York office was founded by Mr. Feinstein in 2001 * Leading Silicon Valley Lawyers to Join O'Melveny & Myers ---------------------------------------------------------- A group of leading Silicon Valley attorneys, led by Warren Lazarow, Timothy R. Curry, David A. Makarechian, William W. Chuang, Sam Zucker and Rahul Kapoor have agreed to join O'Melveny & Myers LLP. "One of our Firm's top strategic goals has been to strengthen our practice in Northern California with the highest quality lawyers possible," said Arthur B. Culvahouse, Jr., Chairman of the firm. "[W]e are pleased to announce our success in that endeavor." "We continue to believe that the Silicon Valley is one of the most important places to be for any major law firm," Culvahouse said. "It is therefore especially significant that we have managed to attract to our firm one of the premier business and technology practice groups in the Valley. For those in the know, this group has an unparalleled reputation for quality, expertise, client service and integrity." Warren Lazarow, a business lawyer with a national reputation, specializes in general corporate representations of emerging growth corporations, public companies, venture capital firms, and investment banks. He has an outstanding record of representing public and private clients in public and private debt and equity offerings, general corporate counseling, and mergers and acquisitions. "O'Melveny & Myers is a great name brand, both nationally and internationally," said Lazarow. "Joining a firm with such a broad range of specialties and a powerful presence in California, New York, Washington, D.C., Asia, and Europe provides us an expansive platform from which to better serve our clients' needs. We are also delighted to be joining a firm that shares our values, and our high standards for client service and quality work." Timothy R. Curry, a general corporate and securities attorney, specializes in the representation of emerging growth and public life sciences and technology companies in public offerings, mergers and acquisitions, venture capital financings, and licensing and partnering transactions. Curry also represents companies and venture capitalists in numerous venture financings. David A. Makarechian, is another well-known Valley corporate lawyer. His practice includes both private and public emerging growth and technology companies, and he also represents venture capital investors, and issuers and underwriters in public offerings. Makarechian is experienced in corporate and securities transactional matters, including venture capital financing, private and public securities offerings, mergers and acquisitions, corporate governance, Securities and Exchange Commission regulatory matters, and general corporate counseling. William W. Chuang, who specializes in intellectual property strategic counseling and complex technology transactions, including joint ventures, corporate alliances, licensing, IT outsourcing, technology transfers, spin-offs, spin-ins, mergers and acquisitions, and patent planning and strategy, also joins as a partner. He counsels clients on the protection of intellectual property assets including patents, copyrights, trademarks and trade secrets. Chuang's broad experience also includes intellectual property litigation and patent prosecution. Sam Zucker is a general corporate and securities lawyer. His practice focuses on the representation of technology, life sciences, and emerging growth companies, including mergers and acquisitions, venture capital financings, public and private securities offerings, Securities and Exchange Commission regulatory matters, and general corporate counseling. Rahul Kapoor, who joins as counsel, specializes in complex intellectual property transactions including strategic alliances, joint ventures, corporate partnering transactions, standards body licensing structures, and advising companies and investors regarding intellectual property issues in mergers, acquisitions, IPOs and financings. Prior to his legal practice, Kapoor worked for six years in various engineering and project management capacities. "Warren, Tim, Dave, Will, Sam and Rahul have been with many of the leading tech company names in the Valley from birth to IPO and after IPO, as significant public companies, and they have developed a tremendous knowledge and client base," said David Krinsky, head of O'Melveny & Myers' Silicon Valley office. "My partners and I are thrilled to combine forces with this team, strengthening our Silicon Valley office and our firm as a whole." O'Melveny & Myers LLP is one of the world's most successful and enterprising law firms. Established in 1885, the firm maintains 14 offices around the world, with more than 900 attorneys. As one of the world's largest law firms, O'Melveny & Myers' capabilities span virtually every area of legal practice, including M&A/Private Equity; Capital Markets; Finance and Restructuring; Entertainment and Media; Intellectual Property and Technology; Trade and International Law; Labor and Employment; Litigation; White Collar and Regulatory Defense; Project Development and Real Estate; Securities; Tax; Transactions; and Bankruptcy. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Actuant Corp ATU (44) 295 18 Advisory Board ABCO (16) 48 (20) Alaris Medical AMI (47) 573 129 Alliance Resource ARLP (46) 288 (16) Amazon.com AMZN (1,355) 1,990 549 Amylin Pharm Inc. AMLN (3) 63 47 Anteon Int'l. Corp. ANT (3) 307 27 Arbitron Inc. ARB (169) 127 17 Avon Products AVP (46) 3,193 428 Campbell Soup Co. CPB (114) 5,721 (1,479) Caremark Rx, Inc. CMX (772) 874 (31) Choice Hotels CHH (64) 321 (28) Dun & Bradstreet DNB (20) 1,431 (82) Echostar Comm DISH (778) 6,520 2,024 Expressjet Holdings XJT (214) 430 52 Gamestop Corp. GME (4) 607 31 Gartner Inc IT (5) 824 18 Hollywood Casino HWD (92) 553 89 Hollywood Entertainment HLYW (113) 718 (271) Imclone Systems IMCL (5) 474 295 Inveresk Research Group IRGI (7) 302 (115) Journal Register JRC (36) 711 (26) Kos Pharmaceuticals KOSP (58) 83 27 Level 3 Comm Inc. LVLT (240) 8,963 581 Medical Staffing MRN (33) 162 55 Mega Blocks Inc. MB (37) 106 56 Moody's Corp. MCO (304) 505 12 Petco Animal PETC (86) 473 68 Playtex Products PYX (44) 1,105 108 Proquest Co. PQE (45) 628 (140) RH Donnelley RHD (111) 296 0 Saul Centers Inc. BFS (24) 346 N.A. Sepracor Inc. SEPR (392) 727 430 United Defense I UDI (166) 912 (55) UST Inc. UST (47) 2,765 828 Valassis Comm. VCI (66) 363 10 Ventas Inc. VTR (91) 942 N.A. Weight Watchers WTW (87) 483 (24) Western Wireless WWCA (274) 2,370 (105) ********* 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 ***