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/raid1/www/Hosts/bankrupt/TCR_Public/030213.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, February 13, 2003, Vol. 7, No. 31 Headlines 3DO COMPANY: December Quarter Results Beat Earnings Guidance ADELPHIA BUSINESS: WorldCom Seeks Stay Relief to Reject Contract ADELPHIA COMM: Union Challenges $45M Exec. Compensation Package AEP INDUSTRIES: Weaker Performance Spurs S&P to Revise Outlook AGERE SYSTEMS: Names John W. Gamble Jr. as New EVP and CFO AIR CANADA: Revenue Passenger Miles Slide-Down 2.1% in January AMAZON.COM: S&P Affirms Low-B Rating & Changes Outlook to Stable APPLIED EXTRUSION: Hosting Q1 Earnings Conference Call Today ASIA GLOBAL CROSSING: Committee Hires Houlihan Lokey for Advice ASPEN GROUP: Continues Talks to Resolve Credit Pact Default ATSI COMMS: First Creditors' Meeting to Convene on March 3, 2003 B/E AEROSPACE: S&P Places BB- Credit Rating on Watch Negative BUDGET GROUP: US Trustee Balks at Latham's Terms of Engagement CABLEVISION SYSTEMS: Reports Improved Fourth Quarter Performance CAMPBELL SOUP: Holding 2nd Quarter 2003 Conference Call Today CANNONDALE: Wants to Pay Common Carriers' Prepetition Claims CHILDTIME LEARNING: Special Shareholders' Meeting Set for Mar 10 COMMUNICATE.COM: Independent Auditors Air Going Concern Doubt CONSECO FINANCE: Earns Nod to Access $25MM of Unsecured Credit CONSECO: Gets Final Nod for Trading Restriction to Preserve NOL CRESCENT REAL ESTATE: Will Publish Q4 Results by February 20 CROWN CORK: Caps $2.1-Billion Sr. Secured Notes Offering Price CS FIRST BOSTON: Fitch Ups Ser. 1995-WF1 Class F Rating to BB+ DENNY'S CORP: Same-Store Sales Climb 1.6% in January 2003 DELTRONIC CRYSTAL: UST Convenes Section 341(a) Meeting on Feb 26 EMAGIN CORP: Extends Travelers' Convertible Note Until Month-End ENCOMPASS SERVICES: Selling Encompass Industrial for $12.5 Mill. ENRON CORP: Gets Final Approval to Pay $4.5 Million to Exxon FIBERMARK INC: Updates Fourth-Quarter and Year-End 2002 Results FREEPORT-MCMORAN: Completes Private Placement of 7% Conv. Notes GENTEK INC: Court Fixes April 14, 2003 as General Bar Date GENUITY INC: Secures Okay to Continue Employee Retention Program GLOBAL CROSSING: Court Clears 3 Firms to Assist in CFIUS Review GRAPHIC PACKAGING: Will Publish Q4 and YE 2002 Results on Tues. HEALTH PLAN SE: Fitch Withdraws Bq Financial Strength Rating HQ GLOBAL: Has Until May 19 to Make Lease-Related Decisions HUNTLEIGH TELECOMMS: Creditors Meeting Scheduled for March 11 J. CREW GROUP: Inks Board Room & Subordinated Loan Agreements KAISER: Gets Go-Signal to Assume Rhodia Purchase & Sale Contract KMART: Wants Lease Decision Time Extended Beyond Effective Date LNR PROPERTY CORP: Fitch Affirms Subordinated Debt Rating at BB- LUBY'S INC: Receives Notice of Default Under Credit Agreement MARINER POST-ACUTE: Asks Court to Move Claims Objection Deadline MCDERMOTT INT'L: Enters Pacts to Refinance Credit Facilities MILACRON INC: Fourth Quarter Operating Results Show Improvement MILACRON INC: Board Declares Quarterly Preferred Share Dividends ML CBO VI: S&P Further Junks Class A Notes' Rating at CC ML CBO VII: S&P Hatchets Class A Note Rating to CC from CCC+ MORGAN STANLEY: S&P Drops Ratings on Classes E & F1 to CCC/D MOTO PHOTO: MOTO Franchise Acquires Substantially All Assets NTL: Maxcor Initiates Suit to Resolve When-Issued Trade Disputes PACIFIC GAS: State Street Bank Discloses 8.90% Equity Stake PRIMUS: Launches Business Cellular Long Distance at Low Rates QUEBECOR: S&P Plucks Ratings Off Watch on Sun Media Refinancing QWEST COMMS: Posts Additional Internal Financial Review Results RADIO ONE: Reports Improved Financial Results in Fourth Quarter RAND MCNALLY: Case Summary & 20 Largest Unsecured Creditors RE-CON BLDG: Creditors' Trustee Grants Cert. of Full Performance RESOURCE AMERICA: Commences Exchange Offer for 12% Senior Notes RIVIERA HOLDINGS: Fourth Quarter Net Loss Widens to $3.9 Million ROWECOM INC: Wants Until Feb. 20 to File Schedules & Statements SHELDAHL: Pensions Plus Hired to Help Terminate 401(k) Plan SIERRA PACIFIC: Issuing $300MM Conv. Debt via Private Placement SMLX TECHNOLOGIES: Assigns All Assets for Benefit of Creditors SONIC FOUNDRY: Will Publish First Quarter Results Tomorrow SUN WORLD INT'L: Creditors' Meeting Scheduled for March 20, 2003 TELEPANEL SYSTEMS: TSX Will Suspend Trading Effective March 10 TRIPATH TECHNOLOGY: Gets More Time to Meet Nasdaq Standards UNITED AIRLINES: Gains Final Nod to Obtain $1.2BB DIP Financing US AIRWAYS: ATSB Clears Application for Federal Loan Guarantees US AIRWAYS: Intends to Assume and Reject North Carolina Leases U.S. INDUSTRIES: Posts Improved Fin'l Results for Dec. Quarter VICWEST CORP: Messrs. Brown and Charnetski Resign from Board WESTPOINT STEVENS: Dec. 31 Net Capital Deficit Widens to $805MM WHEELING-PITTSBURGH: Discl. Statement Hearing Continues Mar. 6 WORLDCOM INC: Look for Schedules and Statements by March 31 * Batchelder & Partners Changes Name to Relational Advisors * DebtTraders' Real-Time Bond Pricing ********* 3DO COMPANY: December Quarter Results Beat Earnings Guidance ------------------------------------------------------------ The 3DO Company (Nasdaq: THDO) reported results for the third fiscal quarter ended December 31, 2002, that are consistent with or better than prior guidance. Net revenues for the second quarter were $4.0 million compared to $15.2 million reported in the same quarter last year. Revenues were reduced as a result of the Company's decision not to release any major new games in the fourth calendar quarter of 2002. As previously announced, the Company is focused on developing a slate of major products planned for release during calendar 2003. Operating loss for the quarter came to $5.0 million versus an expected loss of $6.0 to $7.0 million. Due to non-cash accounting charges of $2.2 million associated with establishing a line of credit and a charge of $0.5 million due to early extinguishment of debt, the net results were a net loss of $7.7 million, compared to a net loss of $27.0 million for the same quarter of the prior year. To comply with accounting requirements the Company also recorded a non-cash beneficial conversion feature charge of $9.7 million to reflect an adjustment to the conversion price of preferred stock issued in 2001, which exhausts any further beneficial conversion feature charges. The founder and chief executive officer, Trip Hawkins, extended further loans to the Company to enable it to meet its short-term liquidity needs, thus having advanced the Company a total of $12.0 million at the time of this press release. The Company also sold common stock to two institutional investors in January 2003, the first new equity investment in the Company since 2001. Operating expenses exclusive of cost of revenues and one-time expense write-offs declined to $7.0 million compared to $14.2 million in the same quarter last year, a reduction of 51%. All spending categories have been reduced, including development spending on unproven technologies, marketing and administration. The Company will continue to exercise tight spending controls. "We are pleased that the quarter turned out to be within and in some instances even beating guidance," said Trip Hawkins, chief executive officer. "We look forward to a strong March 2003 quarter when we begin delivering major new games on a regular basis, led by High Heat Major League Baseball. The PlayStation 2 version has been approved by Sony and will hit the stores around February 20 with the Xbox and PC versions following in the coming weeks. I believe we have made great progress on our strategy all year and we are now well into the start of a promising calendar year 2003. The hardware customer base for our games expanded significantly over the holiday period and we are planning major releases in every quarter." The Company expects strong revenue growth to more than $18 million in the quarter ending March 2003, despite some challenges due to the soft market for the Nintendo GameCubeT system and an increased focus on improving collection policies. The Company still expects to return to profitability due to tight spending controls. In calendar year 2003, revenues are planned to grow to the $80 million level -- more than a 100% improvement over the prior calendar year -- with substantial improvements in net income. For fiscal 2004, ending March 31, 2004, the Company expects revenues at the $90 million level. The 3DO Company, headquartered in Redwood City, Calif., develops, publishes and distributes interactive entertainment software for personal computers, the Internet and advanced entertainment systems such as the PlayStation(R)2 computer entertainment system, and the Nintendo GameCube(TM) and Game Boy(R) Advance systems. 3DO has also been licensed to develop and publish interactive entertainment products compatible with the Xbox(TM) video game system from Microsoft Corp. More information about The 3DO Company and 3DO products may be found on the Internet at http://www.3do.com As previously reported in Troubled Company Reporter in early October, 3DO obtained a conditional waiver from its revolving credit facility lenders (Comerica Bank - California and GE Capital Commercial Services, Inc.) regarding then-existing defaults through October 2002. Thereafter, 3DO struck a deal with its founder and chief executive officer Trip Hawkins to obtain $10 million in fresh financial support, subordinated in right of payment to GE Capital, and in consideration of warrants to purchase 2 million shares of 3DO common stock (and registration rights), exercisable over four years, with an exercise price of $2.52 per share. At Sept. 30, 2002, 3DO's balance sheet showed an accumulated deficit of $254.3 million, raising "substantial doubt about the Company's ability to continue as a going concern," the company said in when it released it's half-year results in a Form 10-Q filed with the SEC on Nov. 14. ADELPHIA BUSINESS: WorldCom Seeks Stay Relief to Reject Contract ---------------------------------------------------------------- UUNET Technologies Inc., a debtor in the WorldCom Bankruptcy Case, entered into a Master Services Agreement with the ABIZ Debtors effective as of July 26, 2000 pursuant to which the parties entered into a Primary Rate Interface Service Schedule also effective as of July 26, 2000. Pursuant to the PRI Service Schedule, UUNET had the right to enter into an agreement for the use of a specific PRI circuit on the Adelphia Business Solutions Debtors' telecommunications network by issuing a service order. UUNET issued a number of service orders for PRI circuits. Specifically, these service orders include service orders for 1,169 PRI circuits which UUNET is no longer utilizing and thus WorldCom has determined provide no benefit to its bankruptcy estates. The total annual cost under the Service Orders is about $4,320,000. According to Thomas R. Califano, Esq., at Piper Rudnick LLP, in New York, UUNET is no longer using the circuit capacity pursuant to the Service Orders. UUNET has re-routed to other systems all the traffic that was previously on the circuits under the Service Orders. Thus, WorldCom expects to have no use in its ongoing business for the Circuits obtained under these specific service orders. The Service Orders is a cash drain on the WorldCom bankruptcy estates. Accordingly, WorldCom asks Judge Gerber for relief from the automatic stay to reject, effective immediately, the Service Orders. By rejecting the Service Orders, Mr. Califano points out that WorldCom will save the WorldCom bankruptcy estates $360,000 per month or $4,320,000 per annum for circuitry that WorldCom deems unnecessary. Mr. Califano asserts that "cause" for relief exists in this proceeding. WorldCom has determined that the Service Orders, which are now a burden to its estates, should be rejected. A debtor's right under Section 365 of the Bankruptcy Code to reject burdensome contracts, which no longer benefit its estate represents a fundamental and vital tool of reorganization under the Bankruptcy Code. Absent the relief, WorldCom will be effectively denied its statutory rights under Section 365 and, as a consequence, will be saddled with a possible administrative burden to the prejudice of its bankruptcy estates and creditors. Mr. Califano assures the Court that there will be no prejudice to the ABIZ Debtors or their creditors if WorldCom is granted the relief. While the Service Orders ultimately may be rejected in the WorldCom Bankruptcy Case, the ABIZ Debtors will recover their capacity to sell to other customers. Furthermore, the contemplated proceeding to reject the Service Orders will not impose a hardship on the ABIZ Debtors since they will not be required to respond or otherwise to participate in the rejection proceeding. Moreover, the ABIZ Debtors' estates will not be unfairly burdened by a modification of the stay to permit WorldCom to reject the Service Orders. (Adelphia Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADELPHIA COMM: Union Challenges $45M Exec. Compensation Package --------------------------------------------------------------- In objections filed with the U.S. Bankruptcy Court for the Southern District of New York, which is overseeing the bankruptcy of Adelphia Communications Corp., the Communications Workers of America criticized Adelphia's proposed $45 million compensation package for two top executives while it seeks to freeze wages and cut health care benefits for frontline workers. CWA, which represents about 500 Adelphia workers, pointed out that the company is unwilling to reach a fair agreement on contracts for frontline workers but is anxious to provide a windfall for the top two executive officers. Adelphia's desire to boost executive compensation contrasts sharply with the tactics the company uses in bargaining with CWA over employee compensation, where it is "not even willing to pay the industry standard of a 3.5 percent wage increase to hourly employees," CWA said. Adelphia "should be striving to preserve employee morale and to depart from the corporate excesses of its past rather than seeking to enrich new executives with inordinate sums," CWA told the court. These multi-million dollar agreements "appear far more generous than the industry standard" and have not been shown to be necessary to preserve the value of the estate, CWA said. Adelphia's failure to consult with frontline employees who are essential to the reorganization effort in proposing this executive pay plan demonstrates a failure to exercise sound business judgment, CWA said, urging the court to deny Adelphia's motion seeking authorization for the $45 million compensation packages. 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. AEP INDUSTRIES: Weaker Performance Spurs S&P to Revise Outlook -------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on AEP Industries Inc., to negative from stable based on the company's weaker-than-expected financial performance. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit rating on the company. South Hackensack, N.J.-based AEP produces various flexible packaging products in the U.S., Europe, and Asia. Total debt outstanding was $256 million as at Oct. 31, 2002. "The outlook revision reflects the company's weaker-than- expected financial performance, which was caused by higher raw material costs, and intensified competition in North America," said Standard & Poor's credit analyst Liley Mehta. "These factors led to a further deterioration in the company's subpar financial profile and eroded its liquidity position." Standard & Poor's ratings on AEP reflect the firm's heavy debt burden, which more than offsets a below-average business risk profile that recognizes solid competitive positions in a number of flexible packaging niches. AGERE SYSTEMS: Names John W. Gamble Jr. as New EVP and CFO ---------------------------------------------------------- Agere Systems named John W. Gamble Jr. as executive vice president and chief financial officer, effective immediately. Gamble, currently the company's senior vice president and business controller, replaces Mark T. Greenquist, who has accepted a position at another company. Gamble will report directly to John Dickson, president and CEO. Gamble joined the company in January 2001 as senior vice president and treasurer. He has been instrumental in establishing and strengthening Agere's financial structure as it became an independent company. "I am very pleased that John will lead Agere's financial operations," said Dickson. "He brings deep expertise to this role through his efforts at Agere as well as his extensive professional experience in similar positions at other companies. "John has played a pivotal role in bolstering our balance sheet, identifying and implementing our restructuring initiatives and laying a solid foundation for profitable growth," added Dickson. "I would like to thank Mark for his significant contributions to Agere, and I look forward to continuing to work with John to build financial momentum in what I expect will be our turnaround year." In prior positions at Agere, Gamble has managed a range of treasury activities, including Agere's investment and debt portfolios and relationships with investment and commercial banks, and credit rating agencies. Gamble has led efforts to improve the company's capital structure, including repayment of Agere's short-term bank credit facility and raising a $410 million convertible debt offering. He also had oversight of Agere's facilities consolidation, which includes centralizing the company's North American manufacturing operations at its Orlando, Fla. facility. "I am pleased with the steps we have taken to put the company on a growth track, and am excited by this opportunity to play a broader role in contributing to Agere's success," said Gamble. "With Agere well on its way to achieving profitability, I believe we are strongly positioned to take advantage of the opportunities ahead of us." Gamble joined Agere from Honeywell International, where he was the vice president and chief financial officer of Honeywell Industrial Controls, based in Phoenix, Arizona. Gamble joined Honeywell, formerly AlliedSignal, in 1996 as Assistant Treasurer, Global Finance. He also served as that company's vice president of Business Planning and Analysis. Prior to joining AlliedSignal, Gamble held a number of positions with General Motors, including treasurer of General Motors of Canada, director of International Acquisitions and Divestitures, manager of Overseas Financing and manager of Investor Relations. Agere Systems, whose $220 million Convertible Notes are rated by Standard & Poor's at 'B', is a premier provider of advanced integrated circuit solutions that access, move and store network information. Agere's access portfolio enables seamless network access and Internet connectivity through its industry-leading WiFi/802.11 solutions for wireless LANs and computing applications, as well as its GPRS offering for data-capable cellular phones. The company also provides custom and standard multi-service networking solutions, such as broadband Ethernet- over-SONET/SDH components and wireless infrastructure chips, to move information across metro, access and enterprise networks. Agere is the market leader in providing integrated circuits such as read-channel chips, preamplifiers and system-on-a-chip solutions for high- density storage applications. Agere's customers include the leading PC manufacturers, wireless terminal providers, network equipment suppliers and hard-disk drive providers. More information about Agere Systems is available from its Web site at http://www.agere.com AIR CANADA: Revenue Passenger Miles Slide-Down 2.1% in January -------------------------------------------------------------- Air Canada mainline flew 2.1 per cent fewer revenue passenger miles in January 2003 than in January 2002, according to preliminary traffic figures. Capacity increased by 1.6 per cent, resulting in a load factor of 70.4 per cent, compared to 73.0 per cent in January 2002; a decrease of 2.6 percentage points. Jazz, Air Canada's regional airline subsidiary, flew 9.9 per cent greater revenue passenger miles in January 2003 than in January 2002, according to preliminary traffic figures. Capacity increased by 2.7 per cent, resulting in a load factor of 53.7 per cent, compared to 50.2 per cent in January 2002; an increase of 3.5 percentage points. "Our North American traffic results continued to be negatively impacted by increased capacity from low-fare domestic carriers, U.S. regional airlines and from hubs of mainline U.S. carriers", said Rob Peterson, Executive Vice President and Chief Financial Officer. "While U.S. transborder traffic rose 0.8 per cent at the mainline, the schedule for January also reflected increased transborder flying by our regional carrier, Jazz. On a combined basis, U.S. transborder traffic increased 2.1 per cent on an improved eastern Seaboard and Florida performance partially offset by the suspension of service from Vancouver to Boston and Washington, and a softer California market. Traffic on the China and Japan services continued to expand rapidly and offset the impact of the suspension of our Vancouver-Taipei route," said Mr. Peterson. As reported in Troubled Company Reporter's Tuesday Edition, Standard & Poor's 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. AMAZON.COM: S&P Affirms Low-B Rating & Changes Outlook to Stable ---------------------------------------------------------------- Standard & Poor's Rating Services affirmed its 'B' corporate credit rating on Amazon.com and revised its outlook on the company to stable from negative. Amazon.com had $2.3 billion of funded debt outstanding as of December 31, 2002. "The outlook revision is based on the company's increased rate of sales growth and improved operating performance during a difficult economic period. Amazon.com's rate of sales growth increased to 26% in 2002 from 13% in 2001 due to its free shipping program, increased product offerings, and continued growth of on-line sales," said Standard & Poor's credit analyst Diane Shand. "Moreover, the company's operating margin increased to 9.9% in 2002 from 4.5% in 2001 as a result of sales leverage and the company's focus on cost improvement." Standard & Poor's also said that the ratings are constrained by Amazon.com's low level of profitability and its sizable debt burden. Support for the ratings is provided by the company's large and growing customer base, improved margins, and substantial cash holdings. Amazon.com has been successful at creating a strong brand, which is critical to the long-term success of any retailer selling goods through the Internet. Its active customer list has grown to 31 million in 2002 and the company has been reporting positive profits since the fourth quarter of 2001 on a pro forma basis. Standard & Poor's believes the company needs to continue to increase its customer base in a very difficult retail environment in order to continue to significantly increase operating income. Amazon.com's Sept. 30, 2002, financial statements show the company's liabilities exceeding assets by more than $1.4 billion and losses of $152 million for the first nine months of 2002. The Washington Service tabulates that Chairman Jeffrey P. Bezos sold 5,000,000 of his shares within the past year at prices ranging from $11 to $22 per share. APPLIED EXTRUSION: Hosting Q1 Earnings Conference Call Today ------------------------------------------------------------ Applied Extrusion Technologies, Inc., (NASDAQ NMS:AETC) intends to hold a conference call today at 9:00 AM to discuss its financial results for the first fiscal quarter ended December 31, 2002. To listen live via the Internet, visit the Investor Relations section of AET's Web site at http://www.aetfilms.com To access the conference call by phone, dial 1-800-230-1092 and reference access code "AET Call". A taped replay of the conference call will also be available from approximately 12:30 PM Eastern Time today until midnight on February 20, 2003. To listen to the replay, dial 1-800-475-6701 from within the U.S. or 320-365-3844 from outside the U.S. and enter access code 674720. Applied Extrusion Technologies, Inc., is a leading North American developer and manufacturer of specialized oriented polypropylene films used primarily in consumer products labeling and flexible packaging applications. * * * As reported in Troubled Company Reporter's October 11, 2002 edition, Standard & Poor's affirmed its single-'B' corporate credit rating on Applied Extrusion Technologies Inc., and removed the rating from CreditWatch, where it was placed on July 8, 2002. The outlook is now negative. The rating reflects the company's below-average business risk profile, very aggressive debt leverage, and limited financial flexibility. The company enjoys a leading share of the OPP market and benefits from a low-cost position. ASIA GLOBAL CROSSING: Committee Hires Houlihan Lokey for Advice --------------------------------------------------------------- The Official Committee of Unsecured Creditors of the Asia Global Crossing Debtors seek the Court's authority to retain Houlihan Lokey Howard & Zukin Capital as its financial advisor, nunc pro tunc to November 25, 2002. Committee Chairman Robert D. Petty, explains that the Committee needs to retain a financial advisor to assist them in the critical tasks associated with analyzing and implementing critical restructuring alternatives, and to help guide them through their reorganization efforts. As a result of their careful deliberations, and through the exercise of their business judgment, the Committee determined that Houlihan Lokey's broad experience, including the considerable experience gained as financial advisor to the Ad Hoc Committee, would best serve the interests of the Committee, its counsel, and the creditors in these cases. According to Mr. Petty, Houlihan Lokey is a nationally recognized investment banking/financial advisory firm with 9 offices worldwide, and more than 300 professionals. Houlihan Lokey provides investment banking and financial advisory services and execution capabilities in a variety of areas, including financial restructuring, where Houlihan Lokey is one of the leading investment bankers and advisors to debtors, bondholder groups, secured and unsecured creditors, acquirers, and other parties-in-interest involved in financially distressed companies, both in and outside of bankruptcy. Houlihan Lokey's Financial Restructuring Group, which has over 80 professionals dedicated to these engagements, will be providing the agreed financial advisory services to the Committee. Mr. Petty points out that Houlihan Lokey has served as a financial advisor in some of the largest and most complex restructuring matters in the United States, including serving as the financial advisor to the debtors in the Chapter 11 proceedings of XO Communications, NII Holdings, Inc. (Nextel International), Covad Communications, Inc., and AmeriServe Food Distribution, Inc., and as the financial advisor to the official creditors' committees in the Chapter 11 proceedings of WorldCom, Inc., Enron Corporation, Williams Communications Group, Inc., Laidlaw, Inc., and The Loewen Group, Inc., to name a few of its representative engagements. In addition, Houlihan Lokey's Financial Restructuring Group has particular expertise in regard to the telecommunications industry, where Houlihan Lokey has provided financial advisory and investment banking services to many telecommunications companies and their creditors throughout the world, including McLeod USA, Impsat Fiber Networks, Inc., Flag Telecom Holdings, Ltd., Global Telesystems, Inc. GST Telecommunications and CTI Mov�l to name a few of its engagements. As financial advisor to the Official Committee of Unsecured Creditors, Houlihan Lokey is expected to: -- evaluate the Debtors' assets and liabilities; -- analyze and review the Debtors' financial and operating statements; -- analyze the Debtors' business plans and forecasts; -- evaluate all aspects of any debtor-in-possession financing, cash collateral usage and adequate protection therefore and any exit financing in connection with any plan of reorganization and any related budgets; -- provide specific valuation or other financial analyses as the Committee may require in connection with the cases; -- help with the claim resolution process and distributions; -- assess the financial issues and options concerning the sale of any assets of the Debtors either in whole or in part, any and all capital raising activities, and the Debtors' plan of reorganization or any other plans of reorganization; -- prepare, analyze and explain the Plan to various constituencies; and -- provide testimony in court on the Committee's behalf, if necessary. Pursuant to the Engagement Letter, Houlihan Lokey will be entitled to receive, as compensation for its services: -- a $150,000 Monthly Fee; -- a fee in the event that a transaction is consummated in an amount equal to 1% of Unsecured Creditor Recoveries; and -- reimbursement of all reasonable out-of-pocket expenses. Mr. Petty relates that the Engagement Letter provides that the Debtors will indemnify and hold Houlihan Lokey harmless against any and all losses, claims, damages or liabilities in connection with the engagement, except to the extent they arise as a result of any gross negligence, willful misconduct, bad faith or self- dealing on the part of Houlihan Lokey in the performance of its services. Pursuant to the agreement it has reached with the Office of the United States Trustee in other engagements in this Court, Houlihan Lokey has agreed to certain modifications of the indemnification provisions. Houlihan Lokey Senior Vice President Christopher DiMauro assures the Court that the firm does not represent any of the Debtors' creditors or other parties to this proceeding, or their attorneys or accountants, in any matter which is adverse to the interests of any of the Debtors as debtors-in-possession, and is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. In addition, Houlihan Lokey does not hold any interest adverse to any of the Debtors as debtors-in-possession or their estates in the matters on which Houlihan Lokey is to be engaged. However, Mr. DiMauro reports that Houlihan Lokey has provided services in unrelated matters to these parties: Wyndham International Inc., Yahoo! Inc., Diamond.com, Starwood Capital Group L.P., Key3media, Christensen Miller Fink & Jacobs, Gibson Dunn & Crutcher, Lazard Freres Real Estate Investors, Perkins Coie LLP, Preston Gates Ellis For Sun Studs, Internet Research Group, Merrill Lynch & Company, Goldman Sachs & Company, and Lehman Brothers Inc. Houlihan Lokey had been retained prior to the Petition Date on the Ad Hoc Committee's behalf. Pursuant to this retention, Mr. DiMauro informs the Court that Houlihan Lokey had been paid $1,513,341 as compensation for its services and reimbursement of expenses for its services. Accordingly, Houlihan Lokey is not a prepetition creditor of the Debtors. * * * Judge Bernstein authorizes the Committee to retain Houlihan Lokey as financial advisors, on an interim basis, pending a final hearing on adequate notice, pursuant to the terms and conditions of the Engagement Letter. As compensation for its services during the Interim Period, Houlihan Lokey will receive: -- a $150,000 Monthly Fee; and -- reimbursement of Houlihan Lokey's reasonable out-of- pocket expenses, which will not be subject to challenge except under the standard of review set forth in Section 328(a) of the Bankruptcy Code. During the Interim Period, Judge Bernstein directs the Debtors to indemnify and hold harmless Houlihan Lokey and their affiliates, and their past, present and future directors, officers, shareholders, employees, agents and controlling persons pursuant to the Engagement Letter but subject to these conditions: -- All requests of Indemnified Persons for payment of indemnity, contribution or otherwise pursuant to the Indemnification and Engagement Letter, will be made by means of an Interim and Final Fee Application and will be subject to the approval of, and review by, the Court to ensure that the payment conforms to the terms of the Indemnification, the Bankruptcy Code, the Bankruptcy Rules, the Local Bankruptcy Rules, and the orders of this Court, and is reasonable based on the circumstances of The litigation or settlement in respect of which the indemnity is sought, provided, however, that in no event will an Indemnified Person be indemnified, or receive contribution in the case of bad-faith, self-dealing, breach of fiduciary duty, if any, gross negligence or willful misconduct on the part of that or any other Indemnified Person; -- In no event will an Indemnified Person be indemnified or receive contribution or other payment under the Indemnification if the Debtors, their estates, or the Committee assert a claim for, and the Court determines by final order that the claim arose out of, bad faith, self dealing, breach of fiduciary duty, if any, gross negligence, or willful misconduct on the part of that or any other Indemnified Person; and -- In the event an Indemnified Person seeks reimbursement for attorneys' fees from the Debtors, the invoices and supporting time records from these attorneys will be annexed to Houlihan Lokey's own Interim and Final Fee Applications, and these invoices and time records will be subject to the U.S. Trustee's guidelines for compensation and reimbursement of expenses and the approval of the Bankruptcy Court under the standards of Section 330 of the Bankruptcy Code without regard to whether the attorney has been retained under Section 327 of the Bankruptcy Code. (Global Crossing Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392- 0900) Asia Global Crossing's 13.375% bonds due 2010 (AGCX10USR1) are trading at about 12 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AGCX10USR1 for real-time bond pricing. ASPEN GROUP: Continues Talks to Resolve Credit Pact Default ----------------------------------------------------------- Aspen Group Resources Corporation (OTCBB:ASPGF) (TSX:ASR) completed a private placement of 12 million Units at $0.14 each for gross proceeds of C$1.68 million. Each Unit is comprised of one common share and one half of one common share purchase warrant with each whole common share purchase warrant exercisable for one common share at a price of $0.18 until August 10, 2004. The Units were issued pursuant to an agency agreement with Dundee Securities Corporation. The common shares and warrants issued will carry a four-month hold period under Canadian securities laws from the date of close. The private placement is a component in management's plan for returning the Company to profitability. Net proceeds from the offering will be used for working capital purposes, including maintenance on the Company's US and Canadian gas producing properties, and used to reduce debt. "We are committed to turning Aspen back into a growing, profitable enterprise," stated Robert Calentine, CEO of Aspen. "Since accepting the position of CEO in October of last year, we have made excellent progress in accessing and addressing the challenges Aspen faces. This infusion of capital is one of the first of several significant steps in the process of turning this company around." In addition to completing the private placement, Aspen is addressing other areas of its operations in order to reduce operating expenses, rationalize its portfolio US and Canadian properties and rejuvenate its drilling and production programs. To date, the Company has taken several steps in this process including: -- Significant staff reductions and the initiation company- wide cost controls including the relocation of the Company's Oklahoma City offices to more efficient, cost effective facilities. The net effect of these reductions will have a small impact on the fourth quarter results, but should become very apparent throughout 2003. -- A thorough review of the Company's operations, assets, and reserves for the purpose of determining the properties, which provide Aspen the highest production and growth potential. The Company has identified several properties that have been deemed non-core and will be sold in order to raise additional capital for re-investment into core areas and further reduction of debt. Through this review, Aspen has also determined that it will focus solely on natural gas which currently accounts for 85 percent of its current production Therefore, management has elected to monetize one of its oil producing assets, which is located in the El Dorado Field in Kansas. -- The Company is currently in advanced negotiations with its lender regarding the default in its credit facility and believes that it can resolve these issues and repair the relationship with this institution. "We are also in the final steps of identifying the right people to aide us in this process. Aspen has some very good internal resources and we will draw on those in order to create a new management team to lead this Company. With their input, we intend to finalize and execute a formal business plan that will provide the best opportunity to make Aspen a sustainable, growing and profitable company once again," added Mr. Calentine. "We look forward to reporting back to our shareholders soon on our progress." Aspen Group Resources Corporation is an independent oil and natural gas producer engaged in the acquisition, exploration, production and development of oil and natural gas properties in the Mid Continent Region in the US and Western Canada. Aspen's shares trade on The Toronto Stock Exchange under the symbol ASR and on the OTCBB under the symbol ASPGF. ATSI COMMS: First Creditors' Meeting to Convene on March 3, 2003 ---------------------------------------------------------------- The United States Trustee for Region VII will convene a meeting of ATSI Communications, Inc.'s creditors on March 3, 2003, at 8:30 a.m., in Room 333 at the U.S. Post Office & Courthouse, located at 615 E. Houston Street in San Antonio, Texas. 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. ATSI Communications, Inc. -- an emerging international carrier serving the rapidly expanding niche markets in and between Latin America and the United States, primarily Mexico -- filed for chapter 11 protection on February 4, 2003 (Bankr. W.D. Tex. Case No. 03-50753). Martin Warren Seidler, Esq., at the Law Offices of Martin Seidler represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed over $10 million in assets and less than $10 million in debts. B/E AEROSPACE: S&P Places BB- Credit Rating on Watch Negative ------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including the 'BB-' corporate credit rating, on B/E Aerospace Inc., on CreditWatch with negative implications. "The action stems from the company's announcement that it will record a charge to earnings of about $30 million, coupled with continued weakness in the airline industry, BE Aerospace's primary market," said Standard & Poor's credit analyst Roman Szuper. The charge will be a write-off of a receivable created in connection with the sale of the firm's in-flight entertainment business to the Thales Group in 1999; that receivable represented the final payment expected from Thales. The charge, which will further weaken BE Aerospace's highly leveraged balance sheet, coincides with poor operating results, due to a very challenging environment of its airline customers, especially in the U.S. That environment is likely to deteriorate further if there is a war with Iraq. Wellington, Florida-based BE Aerospace is the largest participant in the commercial aircraft cabin interior products market, with a leading share of that business on corporate jets. Both markets are currently is a significant downturn. Standard & Poor's will meet with management to assess the impact of recent industry and company-specific developments to determine their effect on credit quality. BUDGET GROUP: US Trustee Balks at Latham's Terms of Engagement -------------------------------------------------------------- Julie L. Compton, Esq., in Wilmington, Delaware, notes that the affidavit submitted by Latham partner Laura A. DeFelice states that "Latham currently represents Yucaipa that is contemplating providing an equity investment in [Budget Group Inc., and its debtor-affiliates." No further disclosure was made regarding this matter. After further inquiry of the Debtors and Latham, the U.S. Trustee learned that beginning in March 2002, and continuing until September 3, 2002, more than a month into the Debtors' bankruptcy, Latham represented Yucaipa Companies LLC in connection with a due diligence review of the Debtors in preparation for a potential equity investment by Yucaipa. The U.S. Trustee learned that prior to the Petition Date: A. Latham's work consisted of extensive due diligence review and investigation of the Debtors' financing documentation, public filings, licensing agreements, environmental compliance, material contracts, change in control provisions and other matters; B. The tax implications of Yucaipa's investment were explored as well as potential bankruptcy filing scenarios; C. Latham met with the Debtors' advisors, accountants and members of management in connection with the due diligence process on Yucaipa's behalf; and D. Latham negotiated and drafted a letter of intent on Yucaipa's behalf to make an equity investment in the Debtors. The U.S. Trustee further learned that subsequent to the Petition Date, Latham: A. continued due diligence on Yucaipa's behalf; B. reviewed the Cendant purchase agreement and worked on a potential bid from Yucaipa with a related motion for filing with the Bankruptcy Court; C. reviewed Yucaipa's legal rights with respect to the proposed sale to Cendant and prepared draft pleadings with respect to the proposed sale, although these pleadings were never filed. Ms. Compton reports that between March 4, 2002 and September 3, 2002, Latham incurred $990,000 in fees in connection with Yucaipa's representation. The facts described were not disclosed to the Court, even after the U.S. Trustee requested additional information and, after receiving it, indicated his continuing concerns about Yucaipa's representation. The information gathered by the U.S. Trustee regarding Latham's representation of Yucaipa with respect to a potential investment in and purchase of the Debtors, concurrent with its representation of the Debtors with respect to the Fleet Financing Program, establishes that Latham is unable to satisfy the requirements of Section 327(e) of the Bankruptcy Code. Ms. Compton relates that by the Debtors' own admission, fleet financing was absolutely necessary for the Debtors to "fleet up" during the peak summer months and the business operations risked severe disruption in the event the Fleet Financing Program was not approved by this Court. Clearly, the Debtors believed that the Fleet Financing Program was vital to the success of its reorganization efforts, which contemplated a sale of the business. Given the importance of the Fleet Financing Program to the Debtors' business and its efforts to sell its assets, Ms. Compton tells the Court it is inconceivable to think that a prospective investor or purchaser would not have a direct interest in the fleet financing as part of its due diligence efforts. Indeed, as part of its due diligence, Latham reviewed and investigated the Debtors' financing documentation; in effect, Latham reviewed on Yucaipa's behalf its own work produced for the Debtors. The U.S. Trustee has not yet obtained Latham's time records for either the Debtors' or Yucaipa's representation, but presumably Latham not only reviewed its own work on Yucaipa's behalf, but it seems likely that Latham was also drafting and structuring the fleet financing at the same time it was representing Yucaipa's interests. Latham represented an interest that was directly adverse with respect to the work Latham performed for the Debtors relating to the fleet financing. Moreover, Ms. Compton adds that Latham continued to represent Yucaipa even after the Debtors had determined to enter into an Asset Purchase Agreement with Cendant. The duties owed by Latham to the Debtors and, by extension, the stalking horse, necessarily conflicted with the duties owed to Yucaipa, another potential purchaser. That Latham represented the Debtors in the capacity of special structured finance counsel as opposed to mergers and acquisition counsel is a distinction that is meaningless in this instance, given the significance of the fleet financing to the business and, hence, the sale. Debtors Respond Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, points out that for two and a half years prior to the Sale, Latham served as the Debtors' counsel with respect to the establishment, development and maintenance of their multi-billion dollar structured automobile fleet financing program. Because of Latham's knowledge base and unique familiarity with the complex Fleet Financing Program, the Debtors sought to retain Latham for the specific purpose of continuing to provide advice in connection with, and act as primary counsel for, the Fleet Financing Program. Mr. Brady asserts that due to Latham's unique position with respect to the Debtors, its institutional knowledge of the Debtors' Fleet Financing Program, and the Debtors' need to obtain the requisite vehicle financing in a short amount of time, the Debtors believed that Latham's services would be in their best interests. Indeed, Latham provided valuable structured finance advice and services to the Debtors that contributed to the closing of the Sale by November 22, 2002. Furthermore, Mr. Brady believes that there is no conflict of interest regarding Latham's concurrent representation of the Debtors as special structured finance counsel and of Yucaipa as a potential equity investor. The Debtors were fully apprised of Latham's Yucaipa engagement and consented to the representation, provided that separate teams of Latham attorneys would work on the engagements. Mr. Brady asserts that the interests of Yucaipa and the Debtors are aligned with respect to the Fleet Financing Program and there is "no conflict of interest concerning the matter at hand." It was in the best interests of the Debtors and Yucaipa to obtain the most favorable terms as possible under the Fleet Financing Program. In fact, since the Debtors were pursuing a strategy to sell substantially all their assets, including the vehicle fleet, for the highest and best offer, it would be beneficial to the Debtors and all interested investors to obtain the best terms under the Debtors' Fleet Financing Program. Since Latham's representation was limited to structured finance issues involving the Fleet Financing Program, its concurrent representation of Yucaipa could not constitute an adverse position with respect to the Debtors or their estates regarding the matter for which Latham is being retained. Latham Airs Its Side Robert J. Rosenberg, Esq., at Latham & Watkins, in New York, informs the Court that Latham's representation of Yucaipa in connection with this potential investment was discussed with the Debtors' officers namely Robert Aprati, General Counsel, and William Johnson, Chief Financial Officer. It was agreed that a separate team of lawyers -- other than those representing the Debtors -- would work on Yucaipa's behalf. The firm's representation of the Debtors was discussed with Yucaipa who also agreed to the terms of the representation. Latham did perform valuable services in connection with the Fleet Financing Program and that its representation of the Debtors was not affected by its concurrent representation of Yucaipa. Moreover, the Debtors believe that Latham acted only in the best interests of their estates with respect to the Fleet Financing Program. Notwithstanding the U.S. Trustee's arguments, which ignore the language of the Bankruptcy Code and case law interpreting it, the Debtors' employment of Latham is proper because Latham meets the statutory criteria set forth in Section 327(e) of the Bankruptcy Code. Ms. Rosenberg argues that the Trustee's irrelevant musings regarding Latham's representation of Yucaipa are insufficient for the Court to find that Latham, in its representation of Yucaipa, represented an interest adverse to the Debtors with respect to the Fleet Financing Program. In fact, assisting Yucaipa in its assessment of the investment was beneficial to the Debtors, as was negotiating and completing the Fleet Financing Program. Mr. Rosenberg observes that in support of the Objection, the U.S. Trustee merely argued that Latham represented a party interested in the Debtors' cases. At no point, however, does the Objection attempt to show, through analogy, citation to case law or otherwise, that Latham's representation of Yucaipa implicated Section 327(e)'s prohibition against Latham "holding or representing an interest adverse to the debtor or the estate with respect to the matter" for which Latham was employed. Whether or not Latham represented an interest adverse to the Debtors or its estate is based on a "common sense divination of adversity" which is to be determined on a case-by-case basis. Mr. Rosenberg adds that the U.S. Trustee also fails to offer any discussion of adversity, let alone a common sense one. The Debtors, which consented to the representation of Yucaipa, did not see any adversity either. The absence of any explanation or discussion of adversity by the U.S. Trustee further amplifies that fact that Latham does not hold or represent an interest adverse to the Debtors on the matters for which it is to be retained. Mr. Rosenberg states that the requirement that special counsel not hold or represent an interest adverse to the estate on the matter which special counsel is to be employed prevents the employment of a special counsel who represents a client that is an opponent of the estate in the matter for which the attorney is to be engaged. Yucaipa was not, at any point, an opponent of the estate with respect to the Fleet Financing Program. Latham did not represent anyone other than the Debtors in connection with the Fleet Financing Program. Also, Latham did not negotiate or advocate a position on Yucaipa's behalf with respect to the Fleet Financing Program. Mr. Rosenberg argues that the Objection is misstating the legal standard by arguing that Latham should be disqualified because it is "inconceivable to think that a prospective purchaser [Yucaipa] would not have a direct interest in the fleet financings as part of its due diligence efforts." This statement demonstrates the misapplication of the legal standard by the U.S. Trustee replacing the requirement of no "adverse interest" with no "direct interest." More relevantly, it is inconceivable that Yucaipa, if it had an interest in the structure or terms of the Fleet Financing Program, that this interest would be adverse to that of the Debtors' interest. Rather, the interests of Yucaipa and the Debtors in the Fleet Financing Program would be aligned. According to Mr. Rosenberg, the Debtors wished to structure the Fleet Financing Program on terms as favorable as possible to them. Yucaipa, as a potential equity investor in the Debtors, would want the Debtors to enter into a favorable transaction to make its potential investment that much more valuable or at least more viable. To think of this issue from the opposite perspective makes this analysis that much more clear. It simply strains credulity to believe that Yucaipa would prefer to have the Debtors enter into a Fleet Financing Program with bad terms. This result would serve no conceivable interest of Yucaipa as a potential equity investor. Mr. Rosenberg assures the Court that Latham, in its representation of Yucaipa, has no residual loyalty to Yucaipa that would affect its ability to objectively advance the interests of the Debtors and their estates in the Fleet Financing Program. Even if Latham were seeking to protect or advance Yucaipa's interest in its capacity as special structured finance counsel which it is not, the advancement of those interests would have best been served by providing the Debtors with a securitization program that maximizes the benefits to the Debtors' business, thus making it a better investment to Yucaipa as a potential purchaser. In sum, Mr. Rosenberg concludes that the U.S. Trustee's assertion that the Debtors' employment of Latham as special counsel is inappropriate under Section 327(e) ignores the facts of this case and would have the effect of rewriting the statute. Yucaipa employed Latham to provide counsel to it in its efforts to make an equity investment in a business that was as strong and healthy as possible through reorganization. Latham's work as special structured finance counsel to the Debtors assisted in the creation of a Fleet Financing Program that was a component in the preservation of the Debtors' business. Because of this arrangement, the interests of Yucaipa and the Debtors were aligned -- both parties desired a Fleet Financing Program that would enhance or maintain the Debtors' business going forward. Thus, the interests of Yucaipa and the Debtors were not adverse and, consequently, Latham's representation of the Debtors is permissible under Section 327(e). (Budget Group Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) CABLEVISION SYSTEMS: Reports Improved Fourth Quarter Performance ---------------------------------------------------------------- Cablevision Systems Corporation (NYSE:CVC) released financial results for the three months ended December 31, 2002. The three and twelve month results and the percentage increases or decreases are presented on a pro forma basis. Pro forma results are presented to provide a better understanding of the company's results and trends from which to measure past performance. Consolidated net income amounted to $517.4 million for the three month 2002 period, compared to a net loss of $281.6 million in the comparable 2001 period. Consolidated fourth quarter results from continuing operations, reflect net revenues of $1.2 billion, a 4% pro forma increase compared to the prior year period, and Adjusted EBITDA of $278.9 million, a 26% pro forma increase from the prior year period. Adjusted EBITDA is defined as operating profit before depreciation and amortization and excludes the effects of long-term incentive and stock plans income or expense and restructuring charges. Telecommunications Services net revenues rose to $617.7 million, an 8% pro forma increase, and Adjusted EBITDA increased to $251.6 million, a 20% pro forma increase over the year-earlier period. Telecommunications Services Adjusted EBITDA margin was 40.7% in the December 2002 quarter compared to 36.8% in the fourth quarter of 2001. The Adjusted EBITDA margin improvement is attributable to continued strong revenue growth from the high-speed data service and commercial telephone businesses, and the effects of cost saving measures implemented in the third and fourth quarters in the Telecommunications Services businesses. Rainbow Media's Core Networks' (consisting of AMC, The Independent Film Channel (IFC), WE: Women's Entertainment (WE), and Consolidated Regional Sports) net revenues rose 27% to $132.1 million and Adjusted EBITDA increased 64% to $43.6 million due to strong growth at AMC, IFC, and WE, resulting from the introduction of advertising during the quarter on AMC and WE as well as strong subscriber gains. Cablevision President and CEO James L. Dolan commented: "Cablevision's cable, Lightpath and high-speed businesses continued to generate solid results in the fourth quarter. An 8% increase in revenue and 20% growth in Adjusted EBITDA were largely fueled by continued strong demand for our high-speed data service and another excellent quarter for Lightpath. Especially noteworthy in the fourth quarter was that our industry-leading digital television service, iO: Interactive Optimum, added 136,000 new customers, an increase of 169% for the quarter, finishing the year with more than 216,000 subscribers." Mr. Dolan continued: "Rainbow Media's national networks reported outstanding results for the fourth quarter as well. Driven largely by an expanding advertising revenue stream and subscriber gains, the core networks reported a 27% increase in revenue and a 64% growth in Adjusted EBITDA." "In the fourth quarter, Cablevision made excellent progress executing its growth plan. The company's accelerated digital rollout doubled the number of homes capable of receiving digital services from 1.6 million to 3.4 million. In addition, Cablevision took a number of steps to reduce expenses dramatically including, most recently, the company's decision to exit the consumer electronics business by the end of the second quarter. The company also moved forward with a number of strategic transactions including, the sale of Bravo network and the participation in Northcoast's agreement to sell 50 of its PCS licenses for $750 million. These important steps, in addition to an investment by Quadrangle Capital Partners, have both strengthened the company's financial position and added flexibility. In 2003, we will continue that progress and feel confident in our guidance that we will achieve free cash flow in 2004," Mr. Dolan concluded. Telecommunications Services Telecommunications Services is comprised of: -- Consumer Services: analog video, digital video, high- speed data (HSD), residential telephony and R&D/Technology, and -- Business Services: Lightpath's commercial telephony, high-speed data and broadband businesses throughout the New York metropolitan area Consumer Services Net revenues for the fourth quarter increased 8% on a pro forma basis over the year-earlier period to $583.4 million. Adjusted EBITDA for the three month period rose 17% on a pro forma basis to $234.5 million, compared to the year-earlier period. Fourth quarter results include: -- 226,000 new HSD and digital service customers - a record quarterly gain -- 216,500 iO: Interactive Optimum SM digital video customers, more than 136,000 new customers added during the quarter - 10,500 per week -- 770,100 HSD customers, more than 90,100 new customers added during the quarter - 6,900 per week -- 20.8% HSD penetration of homes released compared to 17.0% in December 2001 -- HSD revenue per subscriber averaged $36.82 in December 2002, up 21% from $30.48 in the year-earlier period -- Total consumer products revenue per basic video customer for December 2002 increased 10% to $65.13 compared to $59.48 for December 2001 -- A loss of 5,300 cable subscribers in the quarter compared to September 30, 2002 -- Advertising revenue rose 20% compared to the prior year period due to strong election related advertising as well as strong regional and national advertising buys -- Adjusted EBITDA margin of 40.2%, up from 37.1% in December 2001, due to strong HSD revenue growth resulting from significant new customer additions, a HSD service rate increase, and lower departmental expenses as the company implemented its restructuring plan during the third and fourth quarters. At December 31, 3.4 million homes passed were capable of receiving iO, the company's industry-leading digital video offering. This is more than double the 1.6 million digital video capable homes at September 30, 2002. At year-end, digital video service, including video-on-demand and subscription video-on- demand, was available to 77% of the 4.4 million homes passed by the company's broadband network. Business Services Lightpath's businesses throughout the New York metropolitan area achieved a 14% increase in net revenues to $41.9 million and a 65% increase in Adjusted EBITDA to $17.1 million, in each case compared to the prior year period. Highlights include: -- 21% increase in the number of buildings on-net -- 20% increase in access lines -- 40.7% Adjusted EBITDA margin compared to 28.2% at December 31, 2001 due to continued strong revenue growth at Business Optimum Online, strong transmission revenue growth, and workforce expense reductions. Rainbow Rainbow Media Holdings, Inc., a wholly owned subsidiary of the company, includes the following programming businesses: AMC, IFC, WE (each 20% owned by MGM), muchmusic usa and Mag Rack. Rainbow, through its 60% ownership interest in Regional Programming Partners (40% owned by Fox Sports), also owns interests in Madison Square Garden, Radio City Entertainment, and five regional Fox Sports Net channels outside the New York market, and Rainbow owns a 50% interest in the Fox Sports Net national service. Rainbow also includes the five local News 12 Networks operating on Long Island, and in New Jersey, Westchester, Connecticut and the Bronx, as well as three local MetroChannels and Rainbow Advertising Sales Corp. As now required by the FASB's EITF No. 01-09, the company has reclassified the amortization of deferred carriage fees (launch support) as a reduction to revenues versus expensing such costs as operating expenses. Amortization of deferred carriage fees has been reclassified for the 2001 period, with no effect on EBITDA or net income (loss). The revenue impact for Rainbow was $5.7 million for the fourth quarter of 2001 and was $12.7 million for the full year 2001. AMC/IFC/WE AMC/IFC/WE's fourth quarter 2002 net revenues increased 33% to $98.6 million and Adjusted EBITDA grew 95% to $32.1 million, primarily due to strong subscriber growth for each service and the introduction of advertising on AMC and WE on October 1, 2002. Highlights include: -- A 20% increase in IFC's viewing subscribers to 26.2 million -- A 12% increase in WE's viewing subscribers to 42.5 million Consolidated Regional Sports Consolidated Regional Sports is comprised of Fox Sports Net Florida and Fox Sports Net Ohio, both of which are 60% owned by Rainbow. Fourth quarter 2002 net revenues rose 13% to $33.5 million, and Adjusted EBITDA increased 14% to $11.5 million. The strong revenue and Adjusted EBITDA growth were primarily the result of higher affiliate fee revenue and an increase in the number of viewing subscribers at Fox Sports Net Ohio. Non-Consolidated Regional Sports (Fox Sports Net Chicago, Bay Area and New England) For the fourth quarter, net revenues grew 2% to $53.8 million and Adjusted EBITDA declined 32% to $6.2 million, primarily due to contractual rate hikes related to new long-term rights carriage deals with several teams. Viewing subscribers totaled 10.5 million, unchanged from the prior year period. Non-Consolidated Fox Sports Net Fox Sports Net's viewing subscribers totaled 73.4 million at the end of the quarter, unchanged from the prior year period. Developing Programming/Other Developing Programming/Other consists of Mag Rack, muchmusic usa, Rainbow Network Communications, News 12 Networks, MetroChannels, Rainbow Advertising Sales Corp., IFC Films, IFC Productions, and other Rainbow start-up ventures. Fourth quarter net revenues of $59.1 million represented a 14% increase compared to the prior year period. This revenue increase was primarily due to the introduction of home video sales by IFC Films and the distribution of "Y Tu Mama Tambien." The Adjusted EBITDA deficit of $18.1 million for the quarter represented a 39% improvement compared to the year-earlier period. The significant reduction in the Adjusted EBITDA deficit was primarily attributable to the aforementioned revenue gains at IFC Films; strong Metro TV revenue growth due to higher affiliate fee revenue combined with lower programming expenses and marketing expenses; and lower expenses at both Mag Rack and News 12 Networks. Madison Square Garden Madison Square Garden, a subsidiary of Rainbow, includes MSG Network, Fox Sports Net New York, the New York Knicks, the New York Rangers, the New York Liberty, the MSG Arena complex, and Radio City Music Hall. For the fourth quarter 2002, net revenue totaled $312.0 million, a 1% decline from the prior year period. Adjusted EBITDA for the quarter was $37.8 million compared to $59.9 million in the prior year period. The lower Adjusted EBITDA compared to the prior year quarter was primarily due to higher luxury tax expense; the write-off of a portion of a certain player's contract; and higher player compensation related expenses. Retail Electronics For the quarter, THE WIZ recorded a 33% decline in revenue to $77.1 million. The Adjusted EBITDA deficit of $20.8 million was unchanged from the year-earlier period. Other Includes corporate and developmental expenses to support the New York metropolitan area operations. The Adjusted EBITDA deficit for the quarter amounted to $15.2 million, a 40% decrease from the year-earlier period due to corporate workforce reductions associated with the company's restructuring plan. Assets Held For Sale Theatres The operating results of the theatre business have been reported as discontinued operations, net of tax, in the company's condensed consolidated operations data for all periods presented. The company has retained JPMorgan Securities, Inc. as its financial advisor in connection with the sale of the Clearview Cinemas theatre chain. During the quarter, one real estate transaction was completed, netting proceeds of approximately $17 million which were used to reduce the company's bank debt. Restructuring Charge During the third quarter of 2002, the company announced a restructuring plan that included substantial reductions to corporate overhead; reductions in planned capital expenditures; reductions to non-customer contact positions in telecommunications; and reductions at Lightpath, MetroChannels and News 12 Networks. The restructuring plan was implemented during the third and fourth quarters and included workforce reductions totaling 1,400 employees from Consumer Services, Business Services, and Corporate as well as 1,600 employees from THE WIZ. The total restructuring charge recorded in 2002 for continuing operations was $79.3 million. The total cash portion of the restructuring charge, including discontinued operations, was $56.1 million, $30.9 million of which was paid in the fourth quarter. Recent Developments THE WIZ The company announced on February 10, 2003, that it will exit the consumer electronics business by the end of the second quarter. Cablevision is exploring options for its 17 remaining THE WIZ stores, including selling the business or closing all stores. Quadrangle Capital Partners LP Investment On February 5, 2003, Quadrangle Capital Partners LP made a $75 million investment in the company. The investment was made in the form of preferred stock convertible into CVC Class A shares. Steven Rattner, a managing principal of Quadrangle, will join Cablevision's board of directors at the next scheduled board meeting in March. Fox Put On January 17, 2003, Cablevision and News Corporation announced the continuation of their sports partnership, Regional Programming Partners. News Corp. did not exercise its option to put back its interest in RPP. The put option expired on January 17 and is not exercisable again until December 2005. News Corp. will, however, exercise a "sidecar" put option relating only to its separate, directly held 50% interest in Fox Sports Net Chicago and Fox Sports Net Bay Area, with those interests to be purchased by RPP. These businesses will be included in Consolidated Regional Sports financial results upon completion of the acquisition by RPP of Fox Sports' 50% interest in Fox Sports Net Chicago and Fox Sports Net Bay Area (subject to the final determination of the form of payment). The closing is anticipated to take place in the second quarter of 2003. Verizon Wireless to Purchase Northcoast Communications Spectrum Licenses On December 19, 2002, Northcoast Communications announced an agreement to sell its spectrum licenses covering 50 U.S. markets to Verizon Wireless for approximately $750 million in cash. Of the gross proceeds, approximately $60 million will be used to retire the Northcoast FCC related debt. The balance of the proceeds will be distributed to Northcoast's partners. Cablevision plans to use its share, approximately $635 million, to pay down bank debt. The transaction is expected to close in the second quarter of 2003. NBC Completes Acquisition of Bravo In December 2002, the company completed the sale of Bravo to NBC for $1.25 billion, including MGM's 20% interest. In January 2003, Cablevision monetized the 12.5 million shares of GE stock it received in the transaction, resulting in the repayment of $314 million of Cablevision's outstanding bank debt. The sale of Bravo to NBC also resulted in the return of 53.2 million Cablevision Class A common shares effectively owned by NBC, or approximately 16% of Cablevision's common stock on a diluted basis. The total number of Cablevision Class A and B common shares outstanding, following the retirement of NBC's ownership interest, is approximately 280 million. 2003 Outlook The company provides the following full year 2003 guidance estimates: Telecommunications -- Revenue growth between 12% and 14% -- Adjusted EBITDA growth between 18% and 20% (first quarter Adjusted EBITDA is forecasted to increase between 11% and 13%) -- Capital expenditures for Telecommunications and corporate of $725 million -- Basic subscriber growth of .5% -- Optimum Online high-speed data customers at year-end of between 1,000,000 and 1,050,000 -- iO digital video customers at year-end of between 800,000 and 825,000 -- 100% of the network will be built to 750/860 MHz Rainbow Media Core (AMC/IFC/WE/Consolidated Regional Sports) Estimates based on actual 2002 results. -- Revenue growth between 15% and 17% -- Adjusted EBITDA growth between 16% and 18% Estimates below exclude, in the base year, a $15.3 million bad debt charge related to the Adelphia Communications bankruptcy filing recorded in the second quarter of 2002. -- Revenue growth between 11% and 13% -- Adjusted EBITDA growth of 10% Rainbow Developing/Mag Rack/Other -- Adjusted EBITDA losses between $80 million and $85 million -- DBS investment of $80 million to complete and launch the satellite and to maintain and protect the company's FCC license Total Company Estimates based on actual 2002 results (excludes 2002 results for THE WIZ). -- Revenue growth between 10% and 12% -- Adjusted EBITDA growth between 17% and 19% Estimates below exclude, in the base year, a $16.3 million bad debt charge related to the Adelphia Communications bankruptcy filing recorded in the second quarter of 2002 and also excludes 2002 results for THE WIZ. -- Revenue growth between 9% and 11% -- Adjusted EBITDA growth between 16% and 18% For pro forma 2002 quarterly information, please refer to the supplemental schedule on page 13. Cablevision Systems Corporation -- whose corporate credit rating has been downgraded by Standard & Poor's to BB -- is one of the nation's leading entertainment and telecommunications companies. Its cable television operations serve 3 million households located in the New York metropolitan area. The company's advanced telecommunications offerings include its Lightpath integrated business communications services, its Optimum-branded high-speed Internet service and iO: Interactive Optimum, the company's digital television offering. Cablevision's Rainbow Media Holdings, Inc., a wholly-owned subsidiary, operates programming businesses including AMC, The Independent Film Channel, WE: Women's Entertainment, and other national and regional services. In addition, Rainbow is a 50 percent partner in Fox Sports Net. Cablevision also owns a controlling interest and operates Madison Square Garden and its sports teams including the Knicks and Rangers. The company operates New York's famed Radio City Music Hall and owns and operates THE WIZ consumer electronics stores and Clearview Cinemas in the New York metropolitan area. Additional information about Cablevision Systems Corporation is available on the Web at http://www.cablevision.com CAMPBELL SOUP: Holding 2nd Quarter 2003 Conference Call Today ------------------------------------------------------------- Campbell Soup Company (NYSE:CPB) invites interested shareowners, investors and consumers to listen to its Second Quarter 2003 earnings conference call live over the Internet today, February 13, 2003 at 11:00 a.m. Eastern Time. WHAT: Campbell Soup Company Presentation to Securities Analysts, Shareowners and Media WHEN: Thursday, February 13, 2003, 11:00 a.m. Eastern Time WHERE: http://www.campbellsoup.com HOW: Simply log on to the Web at the above address several minutes prior to the start of the call. A replay of this broadcast will be available at the same Web site. Campbell Soup Company is a global manufacturer and marketer of high quality soup, sauces, beverage, biscuits, confectionery and prepared food products. The company owns a portfolio of more than 20 market-leading businesses each with more than $100 million in sales. They include "Campbell's" soups worldwide, "Erasco" soups in Germany and "Liebig" soups in France, "Pepperidge Farm" cookies and crackers, "V8" vegetable juices, "V8 Splash" juice beverages, "Pace" Mexican sauces, "Prego" pasta sauces, "Franco-American" canned pastas and gravies, "Swanson" broths, "Homepride" sauces in the United Kingdom, "Arnott's" biscuits in Australia and "Godiva" chocolates around the world. The company also owns dry soup and sauce businesses in Europe under the "Batchelors," "Oxo," "Lesieur," "Royco," "Liebig," "Heisse Tasse," "Bla Band" and "McDonnells" brands. The company is ably supported by 25,000 employees worldwide. For more information on the company, visit Campbell's Web site on the Internet at http://www.campbellsoup.com * * * Campbell Soup's July 28, 2002 balance sheet shows a working capital deficit of about $1.4 billion. Campbell Soup's Balance Sheet is insolvent with a shareholder deficit topping $100 million. Campbell Soup has $900 million of bond debt coming due this year and next. The notes evidencing those obligations trade slightly above par. Campbell Soup common stock trades north of $20 per share. CANNONDALE: Wants to Pay Common Carriers' Prepetition Claims ------------------------------------------------------------ Cannondale Corporation wants authority from the U.S. Bankruptcy Court for the District of Connecticut to pay its prepetition Common Carriers' claims. The Debtor relates that in the ordinary course of its business, it uses third parties to ship, transport and deliver goods to and from its warehouse and manufacturing facilities and to its customers. The Common Carriers either provide carrier services themselves or out-source those services to other parties. Without the services of the Common Carriers, the Debtor would face delay or interruption in the delivery and sale of the Debtor's products. The Debtor believes that the goods in the possession of these Common Carriers may be subject to possessory liens under applicable state law, if the Common Carriers' claims are not paid. Consequently, the Debtor seeks entry of an order authorizing it to pay, in its sole discretion, the valid prepetition claims of certain of the Common Carriers, that on the ordinary course of the Debtor's business, transport and deliver goods to and from the Debtor, or any portion thereof pursuant to Section 105 of the Bankruptcy Code. The production and sale of top-of-the line bicycles and related merchandise is the essence of the Debtor's business. Any disruption of the delivery of the goods and inventory utilized in the Debtor's business would have an immediate and devastating effect on the Debtor's operations. Because uninterrupted delivery of goods is essential for the Debtor to maintain current operations, and to attract and retain customers, the interests of the Debtor and all parties in interest will be best served by entry of an order allowing the payment of prepetition claims to the Common Carriers. Accordingly, the Debtor has determined that there is about $92,000 owed to Common Carriers that needs immediate payment to avoid potentially significant disruptions in the Debtor's business. Cannondale Corp., a leading 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. Conn. 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. CHILDTIME LEARNING: Special Shareholders' Meeting Set for Mar 10 ---------------------------------------------------------------- A Special Meeting of Shareholders of Childtime Learning Centers, Inc., a Michigan corporation, will be held at the principal executive offices of the Company, 38345 West 10 Mile Road, Suite 100, Farmington Hills, Michigan 48335, on March 10, 2003, at 10:00 a.m., Eastern Standard Time, to consider and act upon the following matter: (1) The approval of an amendment to the Company's Restated Articles of Incorporation to increase the number of authorized shares of the Company's common stock from 20,000,000 shares, no par value, to 40,000,000 shares, no par value. Only shareholders of record at the close of business on February 14, 2003 will be entitled to vote at the meeting. Childtime Learning Centers, Inc., of Farmington Hills, MI acquired Tutor Time Learning Systems, Inc., out of bankruptcy on July 19, 2002 and is now the nation's third largest publicly traded child care provider with operations in 30 states, the District of Columbia and internationally. Childtime Learning Centers, Inc., has over 7,500 employees and provides education and care for over 50,000 children daily in over 450 corporate and franchise centers nationwide. At October 11, 2002, Childtime's balance sheet shows that total current liabilities eclipsed total current assets by about $20 million . . . and recurring losses topping $10 million a quarter. COMMUNICATE.COM: Independent Auditors Air Going Concern Doubt ------------------------------------------------------------- Communicate.com, Inc., through its majority-owned subsidiary, Domain Holdings, Inc. (formerly Communicate.com Inc.), is involved in businesses which exploit commercial uses of the Internet. The Subsidiary markets and licenses a portfolio of approximately 40 domain names, 30 of which generate high amounts of internet traffic because of, among other things, their generic description of a specific product or services category. The Company has focused since the beginning of 2001 on developing revenue streams from its domain names and reducing the debt of the Subsidiary. It generates revenue from leasing domain names, from sales commissions from the sale of third- party products and services utilizing the Internet, from "pay- per-click" revenue and from the sale of domain name assets that Communicate.com believes are not essential to its business. In the third quarter of 2002, the Company recorded income from the utilization of its domain names (consisting primarily of the lease of domain names, commissions on the sales of products where its domain names are utilized, and fees received from third parties calculated on the number of Internet users who visit sites identified with its domain names and gain or loss from domain name sales) of $92,900, an increase of approximately 247% from the third quarter of 2001. The increase primarily resulted from a pay-per-click revenue arrangement that did not generate significant results until the fourth quarter of 2001. The Company recognized approximately $43,000 from this and other Internet pay-per-click arrangement, based on its receiving a fee for successful click-through traffic, in which users navigating to a site associated with a domain name owned by the Company are redirected to a site which sells goods and services associated with the domain name. The Company recorded approximately $15,400 in income from pay-per-click agreements from various different service providers in the third quarter of 2001. Communicate.com's sales also include commission generating arrangements with several of its health-related domains whereby it earns a portion of any revenue generated from customers introduced by its domain names which generated $19,700 during the third quarter of 2002 compared to $15,100 in the third quarter of 2001. These agreements are arranged on a month-to- month basis and there can be no assurance that they will be renewed or, if renewed, that they will continue to generate income on the same basis as in past periods. In 2002, Communicate.com amended its revenue recognition policy on the foregoing web advertising revenue from recording the revenue on a cash basis to recording the revenue when the amount can be determined in advance and collectibility can be reasonably assured. The effect on revenue of this change in revenue recognition policy had the policy been in place in the quarter ended September 30, 2001 would be nil. Additionally, the Company earned lease revenue of $15,000 from a geographic domain name used for travel and also recognized from deferred revenue $12,000 related to the lease of a sports domain name in the third quarter of 2002. As noted in the prior quarter, the lessee of the sports domain has decided not to exercise its option to purchase the property, and the Company has resumed full ownership and administrative control of the sports domain and arranged to redirect the sports domain traffic to a new lessee for the fourth quarter. In the third quarter of 2001, the Company earned leasing revenue of $7,000 from sports and geographic domain properties. In the third quarter of 2002, Communicate.com generated other revenue from the sale of surplus equipment and earned $6,200. No such revenue was generated in the third quarter of 2001. Since 2001, cashflow generated net of monthly cash operating expenses has been applied to reduce debt. At September 30, 2002, Communicate.com had current liabilities in excess of current assets resulting in a working capital deficit of $666,700. During the nine-months ended September 30, 2002, the Company had a net loss of $1,279,200 and an increase in cash of $17,000, compared to a net loss of $171,000 and a decrease in cash of $33,000 for the same nine-month period of last year. Operating activities generated cashflows of $303,000 primarily from the sale of two domain names, from net income generated during the quarter and after payments to trade creditors. The cashflows were used to repay a $150,000 loan, other loans and to pay lease obligations, which in aggregate totaled $274,000. The Company has accumulated a deficit of $1,947,183 since inception and has a stockholders' equity of $1,140,253 at September 30, 2002. Due to the working capital deficit, there is substantial doubt about Communicate.com's ability to continue as a going concern. The Company will only be able to continue operations if it raises additional funds, either through operations or outside funding and it is unable to predict whether it will be able to do so. CONSECO FINANCE: Earns Nod to Access $25MM of Unsecured Credit -------------------------------------------------------------- The Conseco Finance Corporation and its debtor-affiliates obtained authorization from the Court to obtain unsecured postpetition financing of $25,000,000 -- a Junior DIP Facility - - with $9,000,000 for working capital needs to be made available on an interim basis pending a final hearing. The funding will be derived from funds pledged to Lehman by Green Tree Financial Corp., pursuant to terms of a $1,200,000,000 credit facility funded by the Lehman Warehouse Facility. (Conseco Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSECO: Gets Final Nod for Trading Restriction to Preserve NOL --------------------------------------------------------------- In her Final Order, Judge Carol A. Doyle allows Conseco Inc., and its debtor-affiliates to restrict Securities Trading to protect their Net Operating Losses. Judge Doyle finds that unrestricted trading in Conseco equity securities prior to the Holding Company Debtors' emergence from Chapter 11 without requisite insurance regulatory approval could cause violations of state insurance holding company statutes. This could limit the Holding Company Debtors' ability to utilize their NOLs for federal income tax purposes. Accordingly, Judge Doyle rules that any entity who currently is or who becomes a Substantial Equity Holder must file with the Court and serve on the Holding Company Debtors and their counsel a status notice after becoming a Substantial Equity Holder. The Holding Company Debtors have 15 calendar days after receipt of a Notice of Proposed Transfer to file with the Court and serve on the Equity Transferor or Equity Transferee an objection to the Proposed Acquisition. A Substantial Equity Holder is any entity that beneficially owns equity securities of Conseco with an aggregate fair market value equal to or greater than 5% of the fair market value of the common stock. This includes any derivative securities like options, warrants, convertible debt or other instruments. (Conseco Bankruptcy News, Issue No. 6; 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. CRESCENT REAL ESTATE: Will Publish Q4 Results by February 20 ------------------------------------------------------------ Crescent Real Estate Equities Company (NYSE:CEI) will release its fourth quarter 2002 earnings results before the market opens on Thursday, February 20, 2003. The Company will also host a conference call and audio webcast, both open to the general public, at 10:00 A.M. Central Time on Thursday, February 20, 2003, to discuss the fourth quarter results and provide a Company update. To participate in the conference call, please dial (800) 818- 4442 domestically or (706) 679-3110 internationally, or you may access the audio webcast on the Company's Web site -- http://www.crescent.comin the Investor Relations section. During the call, reference will be made to a presentation that will also be posted on the Company's Web site. A replay of the conference call will be available through February 26, 2003 by dialing (800) 642-1687 domestically or (706) 645-9291 internationally with a passcode of 7264545. The webcast and presentation will be available on Crescent's Web site for 30 days. Crescent Real Estate Equities Company (NYSE: CEI) is one of the largest publicly held real estate investment trusts in the nation. Through its subsidiaries and joint ventures, Crescent owns and manages a portfolio of 71 premier office buildings totaling 28.3 million square feet and centered in the Southwestern United States, with major concentrations in Dallas, Houston, Austin and Denver. In addition, the company has investments in world-class resorts and spas and upscale residential developments. * * * As previously reported in Troubled Company Reporter, Standard & Poor's affirmed its ratings on Crescent Real Estate Equities Co., and Crescent Real Estate Equities L.P., and removed them from CreditWatch, where they were placed on Jan. 23, 2002. The outlook remains negative. Ratings Affirmed And Removed From CreditWatch Issue To From Crescent Real Estate Equities Co. Corporate credit rating BB BB/Watch Neg $200 million 6-3/4% preferred stock B B/Watch Neg $1.5 billion mixed shelf prelim B/B+ prelim B/B+/Watch Neg Crescent Real Estate Equities L.P. Corporate credit rating BB BB/Watch Neg $150 million 6 5/8% senior unsecured notes due 2002 B+ B+/Watch Neg $250 million 7 1/8% senior unsecured notes due 2007 B+ B+/Watch Neg CROWN CORK: Caps $2.1-Billion Sr. Secured Notes Offering Price -------------------------------------------------------------- Crown Cork & Seal Company, Inc., (NYSE: CCK) has priced $2.1 billion of senior secured notes, which was upsized from an original announced deal size of $1.75 billion. The $2.1 billion consists of $1.085 billion of 9-1/2% second priority senior secured notes due 2011, euro 285 million of 10-1/4% second priority senior secured notes due 2011 and $725 million of 10-7/8% third priority senior secured notes due 2013. The notes will be issued at par by Crown European Holdings SA, a subsidiary of the Company, and will be unconditionally guaranteed by the Company and certain of its subsidiaries. The senior secured notes are part of the Company's previously announced comprehensive refinancing plan which is expected to include a $550 million first priority revolving credit facility and a $500 million first priority term loan B facility. The Company expects to close the offering and complete the refinancing plan on February 26, 2003. The offering and the refinancing plan are subject to a number of conditions including the completion of the $1.05 billion of bank financing. The Company no longer intends to issue convertible notes as part of the refinancing plan. The proceeds from the offering and the refinancing plan will be used to refinance the Company's existing revolving credit facility which has a maturity date of December 8, 2003, and certain of the Company's senior notes as well as to pay fees and expenses associated with the refinancing. As previously announced, the Company has commenced concurrent tender offers for any and all of its outstanding 6.75% Notes due April 2003, 6.75% Notes due December 2003 and 8-3/8% Notes due January 2005. The Company also plans to commence a cash tender offer at par for any and all of the $70 million outstanding aggregate principal amount of the 7.54% Notes due May 2005 issued by the Company's subsidiary, Carnaud Metalbox Investments (USA), Inc. The tender offers are conditioned upon completion of the refinancing plan. The senior secured notes are expected to be issued in a private placement and resold by the initial purchasers to qualified institutional buyers under Rule 144A of the Securities Act of 1933. The senior secured notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This press release does not constitute an offer to sell or the solicitation of an offer to buy any security in any jurisdiction in which such offer or sale would be unlawful. Crown Cork & Seal is a leading supplier of packaging products to consumer marketing companies around the world. World headquarters are located in Philadelphia, Pennsylvania. Crown Cork & Seal's 8.000% bonds due 2023 (CCK23USR1) are trading at about 76 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CCK23USR1for real-time bond pricing. CS FIRST BOSTON: Fitch Ups Ser. 1995-WF1 Class F Rating to BB+ -------------------------------------------------------------- Credit Suisse First Boston Mortgage Securities Corp., Series 1995-WF1 is upgraded as follows: $14.6 million class D to 'AAA' from 'AA+', $19.5 million class E to 'A-' from 'BBB' and $9.8 million class F to 'BB+' from 'BB-'. In addition, the following classes were affirmed, $669,156 class C and interest-only class A-X at 'AAA'. The $7.3 million class G is not rated by Fitch. The upgrades and affirmations follow Fitch's annual review of the transaction which closed in December 1995. The upgrades are primarily due to an increase in subordination caused by the prepayments and refinancing of an additional 6 loans in the pool since Fitch's last review. Wells Fargo, the master servicer, collected year-end 2001 financials for all of the 19 loans remaining in the pool. Based on this information, performance on the underlying loans continues to be strong as evidenced by the weighted-average debt service coverage ratio. The DSCR for the loans has increased from 1.42 times at issuance to 1.71x as of YE 2001. YE 2002 financial information on the loans remaining in the pool is expected mid-2003. As of the January 2003 distribution date, the collateral balance had been reduced 79% from $243.9 million at issuance to $51.9 million. The loans remaining in the transaction are secured by commercial and multifamily properties. Fitch reviewed the mortgage document exception report, which did not reveal anything of concern. The pool continues to outperform expectations with no delinquencies or specially serviced loans. There have also been no realized losses. Fitch continues to have strong concerns over the concentration of retail properties (75%) and the properties located in California (73%). Fitch considered the concentrations and the lack of recent YE 2002 financial information when upgrading the certificates. Fitch will continue to monitor this transaction, as surveillance is on-going. DENNY'S CORP: Same-Store Sales Climb 1.6% in January 2003 --------------------------------------------------------- Denny's Corporation (OTCBB: DNYY) reported same-store sales for its company-owned Denny's restaurants during the four-week period ended January 22, 2003, compared with the same period in fiscal year 2002. Four Weeks Sales: Jan. 2003 ----------------------- ---------- Same-Store Sales 1.6% Guest Check Average 1.4% Guest Counts 0.3% Restaurant Counts: 1/22/03 12/25/02 ----------------------- -------- --------- Company-owned 565 566 Franchised 1,093 1,095 Licensed 15 15 -------- --------- 1,673 1,676 Denny's is America's largest full-service family restaurant chain, operating directly and through franchisees approximately 1,700 Denny's restaurants in the United States, Canada, Costa Rica, Guam, Mexico, New Zealand and Puerto Rico. For further information on the Company, including news releases, links to SEC filings and other financial information, please visit the Denny's Web site at http://www.dennys.com The New Revolving Credit Agreement As reported in the Troubled Company Reporter on December 30, 2002, Standard & Poor's assigned its 'BB-' senior secured bank loan rating to Denny's Corp.'s new $125 million senior secured revolving credit facility. Information obtained from http://www.LoanDataSource.comshows that Denny's, Inc., and Denny's Realty, Inc., as Borrowers, and Denny's Corporation, Denny's Holdings, Inc., and DFO, Inc., as Guarantors, entered into the new $125 million credit agreement (to refinance the Company's prior credit facility which was scheduled to expire in January 2003) on December 16, 2002. The consortium of lenders is comprised of: * JPMorgan Chase Bank, individually and as Administrative Agent, Collateral Agent and Issuing Bank, * Foothill Capital Corporation, individually and as Syndication Agent, * The Foothill Group, Inc., * CIT Group/Business Credit, Inc., * Transamerica Business Capital Corporation, and * Farallon Dining Investors III, LLC, by Farallon Capital Management, L.L.C., The new facility will mature on December 20, 2004, and is structured as a senior secured revolving credit facility of which up to $60 million is available for the issuance of letters of credit. Borrowings under the new facility are generally secured by liens on the same collateral that secured the prior facility as well as first-priority mortgages on 246 owned restaurant properties. Exchange Offer on the Horizon In the new loan documents, the Lenders give their consent to the company launching an Exchange Offer for Denny's Corporation's 11-1/4% Senior Notes due 2008. Those notes carry Standard & Poor's CCC+ and Moody's Caa2 junk ratings. Approximately $441.5 million of the $592 million of Senior Notes issued in Jan. 1998 under the company's confirmed chapter 11 plan of reorganization are outstanding today after two repurchases in exchange for newer 12-3/4% Senior Notes due 2007. Denny's Corp. was formerly known as Advantica Restaurant Group, Inc., and was formerly known as Flagstar Corporation while in bankruptcy. Financial Covenants The Credit Agreement contains four key financial covenants: * Denny's promises that it will not permit the ratio of Consolidated Total Debt to Consolidated EBITDA to exceed: Maximum Total Date Debt-to-EBITDA Ratio ---- -------------------- March 31, 2003 6.25 to 1.00 June 30, 2003 6.25 to 1.00 September 30, 2003 6.25 to 1.00 December 31, 2003 6.25 to 1.00 March 31, 2004 5.90 to 1.00 June 30, 2004 5.90 to 1.00 September 30, 2004 5.75 to 1.00 * Denny's promises that it will not permit the ratio of Consolidated Senior Secured Debt to Consolidated EBITDA to exceed 1.50 to 1.00 on and after March 31, 2003. * Denny's promises that Consolidated EBITDA will not fall below: For the Four Consecutive Fiscal Quarters Ending Minimum EBITDA ------------------ -------------- March 31, 2003 $105,000,000 June 30, 2003 $105,000,000 September 30, 2003 $105,000,000 December 31, 2003 $110,000,000 March 31, 2004 $110,000,000 June 30, 2004 $110,000,000 September 30, 2004 $115,000,000 * Denny's promises that it will not permit the ratio of (a) the sum of (i) Consolidated EBITDA and (ii) Consolidated Lease Expense to (b) the sum of (i) Consolidated Cash Interest Expense and (ii) Consolidated Lease Expense to be less than: Minimum Fixed Date Charge Coverage Ratio ---- -------------------- March 31, 2003 1.25 to 1.00 June 30, 2003 1.25 to 1.00 September 30, 2003 1.25 to 1.00 December 31, 2003 1.25 to 1.00 March 31, 2004 1.30 to 1.00 June 30, 2004 1.30 to 1.00 September 30, 2004 1.35 to 1.00 In December, Standard & Poor's also raised its corporate credit rating on the company to 'B' from 'B-'. The outlook is stable. DELTRONIC CRYSTAL: UST Convenes Section 341(a) Meeting on Feb 26 ---------------------------------------------------------------- The United States Trustee for Region III will convene a meeting of Deltronic Crystal Industries, Inc.'s creditors on February 26, 2003, at 3:00 p.m., at One Newark Center, Suite 1401, Newark, New Jersey. 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. The Court has fixed May 27, 2003 as the last day for all creditors wishing to assert a claim against the Debtors' estates to file their proofs of claim. Deltronic Crystal Industries, Inc., a provider of vertically integrated optical component solutions to the communications and laser photonics industries, utilizing its crystal growth experience, filed for chapter 11 protection on January 31, 2003 (Bankr. N.J. Case No. 03-13218). David Edelberg, Esq., at Nowell Amoroso Klein Bierman, P.A., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $7,691,899 in total assets and: $2,103,921 in total debts. EMAGIN CORP: Extends Travelers' Convertible Note Until Month-End ---------------------------------------------------------------- eMagin Corporation and The Travelers Insurance Company entered into an amendment agreement to amend and extend the maturity date of the Convertible Promissory Note dated August 20, 2001, issued under the Note Purchase Agreement entered into August 20, 2001 between eMagin and Travelers. The amendment agreement extends the maturity date of the Travelers Convertible Note from January 31, 2003 to February 28, 2003. In addition, eMagin and Mr. Mortimer D.A. Sackler entered into a sixth amendment agreement to amend and extend the maturity date of the Secured Promissory Note dated June 20, 2002, issued under the Secured Note Purchase Agreement entered into June 20, 2002, between eMagin and Sackler. Also, eMagin and Sackler entered into a fourth amendment agreement to amend and extend the maturity date of the Secured Convertible Promissory Notes, issued under the Secured Note Purchase Agreement entered into November 27, 2001, between eMagin and Sackler, as amended by the Omnibus Amendment, Waiver and Consent Agreement dated January 14, 2002, and the Subscription Agreements dated January 14, 2002. The amendment agreements extends the maturity date of the Sackler Secured Note and the Sackler Secured Convertible Notes from January 31, 2003 to March 30, 2003. In addition, eMagin and Ginola Limited, an assignee of Rainbow Gate Corporation, entered into a sixth amendment agreement to amend and extend the maturity date of the Secured Convertible Promissory Note dated November 27, 2002, issued under the Secured Note Purchase Agreement entered into November 27, 2001, between eMagin and Rainbow Gate Corporation, as amended by the Omnibus Amendment, Waiver and Consent Agreement dated January 14, 2002. The amendment agreement extends the maturity date of the Ginola Secured Convertible Note from January 31, 2003 to March 30, 2003. Further, eMagin and Mr. Jack Rivkin entered into a sixth amendment agreement to amend and extend the maturity date of the Secured Convertible Promissory Note dated November 27, 2001, issued under the Secured Note Purchase Agreement entered into November 27, 2001 between eMagin and Rivkin. The amendment agreement extends the maturity date of the Rivkin Secured Convertible Note from January 31, 2003 to June 30, 2003. A leading developer of virtual imaging technology, eMagin combines integrated circuits, OLED microdisplays, and optics to create a virtual image similar to the real image of a computer monitor or large screen TV. eMagin provides near-eye microdisplays which can be incorporated in products such as viewfinders, digital cameras, video cameras and personal viewers for cell phones as well as headset-application platforms which include mobile devices such as notebook and sub-notebook computers, wearable computers, portable DVD systems, games and other entertainment. eMagin's corporate headquarters and microdisplay operations are co-located with IBM on its Hudson Valley campus in East Fishkill, N.Y. Wearable and mobile computer headset/viewer system design and full-custom microdisplay system facilities are located at its wholly owned subsidiary, Virtual Vision, Inc., in Redmond, WA. eMagin's September 30, 2002 balance sheet shows a net capital deficit of about $11 million. ENCOMPASS SERVICES: Selling Encompass Industrial for $12.5 Mill. ---------------------------------------------------------------- As part of their reorganization strategy, Encompass Services Corporation and its debtor-affiliates ask the Court to approve the: -- sale of Encompass Industrial Services Southwest, Inc. formerly known as Gulf States, Inc. to GSI Acquisition, Inc. free and clear of liens, claims, encumbrances, and other interests, and -- assumption and assignment of executory contracts and unexpired leases. In August 2002, the Debtors engaged FMI, an investment bank specializing in the sale of companies in the construction industry, to sell the Gulf States assets. Accordingly, FMI conducted its own due diligence and contacted potentially interested parties for the sale of the assets. Several parties expressed initial interest and three submitted initial letters of intent. Of the three letters, Alfredo R. Perez, Esq., in Weil, Gotshal, & Manges LLP, Houston, Texas, reports that the Debtors elected to respond to the best proposal -- that from GSI Acquisition. GSI Acquisition offered $12,500,000 for the assets subject to certain adjustments. The Debtors entered into a letter of intent to sell the assets with GSI. The parties are currently seeking to finalize a draft Asset Purchase Agreement, which will be consistent with the Letter of Intent. The sale cannot be delayed until a plan has been confirmed and implemented since the value of the assets would likely deteriorate during the time necessary to confirm and implement a plan, due to an anticipated loss of customer base and the defection of vendors. Mr. Perez also notes that the Debtors will use the sale proceeds to service their postpetition loans and for general operating expenses that arise in the ordinary course of their business operations. The asset divestiture will assist the Debtors in maximizing the value of their estates. Mr. Perez relates that the proposed dale is the result of extended arm's-length, good-faith negotiations. GSI is a "good- faith" purchaser within the meaning of Section 363(m) of the Bankruptcy Code and should be entitled to its protection. GSI also has the financial capability to close on the purchase of the Assets. Mr. Perez also assures the Court that the sale will not affect or dictate the terms of any future reorganization plan. The sale does not constitute an attempt at a piecemeal reorganization of the Debtors' business. According to Mr. Perez, any monetary defaults under those contracts that the Debtors will assume and assign will be cured after the Court approves the sale. The Debtors have sent notices to the counterparties of the contracts about the proposed sale. (Encompass Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Gets Final Approval to Pay $4.5 Million to Exxon ------------------------------------------------------------ After the second hearing of the motion, Judge Arthur Gonzalez overrules the objections and further approves Enron Corporation and its debtor-affiliates' motion to pay their prepetition obligations on these terms: A. Enron is authorized and directed to pay to Exxon, in immediately available funds from the Retained Bank Accounts, $4,566,746 as full and final satisfaction of any claim which has been or could have been asserted by Exxon in or relating to the funds in the Retained Bank Accounts on account of Check Nos. 527792, 547639, 527811, 527653, 567194, 507207 and 507225; B. Enron is authorized, pursuant to Sections 105, 363 and 541 of the Bankruptcy Code, to forward to AEP payments made into the Retained Bank Accounts on account of Buyer Receivables by customers of the Acquired Companies in accordance with the terms of the Agreement or, as determined by Enron, refund payments to the parties; C. Enron will not disburse any funds from the Retained Bank Accounts without notice to AEP and either: -- the prior written consent of the Creditors' Committee and Bank of America, N.A., or -- further Court order. To the extent that any funds from the Retained Bank Accounts are forwarded or paid to Enron or to any of its affiliates, the funds will be held and neither will be disbursed until the earlier of the Committee's consent or further Court order; and D. This Order should not be deemed to compel Enron to disburse any payment to AEP or any other party. This Order is without prejudice to any claim, right or defense of Enron or Exxon with respect o AEP or any other party. (Enron Bankruptcy News, Issue No. 56; Bankruptcy Creditors' Service, Inc., 609/392-0900) Enron Corp.'s 9.875% bonds due 2003 (ENRN03USR3) are trading at about 14 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR3 for real-time bond pricing. FIBERMARK INC: Updates Fourth-Quarter and Year-End 2002 Results --------------------------------------------------------------- FiberMark, Inc., (NYSE:FMK) reported sales and earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter and year ended December 31, 2002. The company plans to report full financial results for 2002 after the completion of a third-party business appraisal to assess the carrying value of its goodwill. FiberMark expects this valuation will take approximately three to four weeks. Additionally, the company expects to record a valuation allowance against deferred tax benefits related to net operating losses in the U.S. For the fourth quarter ended December 31, 2002, sales were $97.3 million versus $101.0 million for the same period last year, representing a 3.7% decline. For German operations, sales for the fourth quarter were $40.8 million in 2002 compared with $34.4 million in 2001, an 18.6 % increase. Sales in this segment were strong across all product families due to market share growth and higher sales into the Pacific Rim. Sales in North American operations were $56.6 million for fourth quarter 2002 versus $66.6 million for the comparable 2001 period, a decline of 15.0%. A portion of the sales decline, approximately $3.6 million, reflects the September 2001 sale of the company's North American engine filtration business. Additionally, the decline reflects weak worldwide economic conditions, particular impacting the company's technical product lines and those serving the publishing and packaging industries. For the year ended December 31, 2002, sales were $397.2 million in 2002 compared with $394.3 million in 2001, a 0.7% increase. Sales from German operations were $153.1 million in 2002 compared with $135.8 million in 2001, an increase of 12.7%. This improvement related primarily to sales growth in filter media and new business in tape base grades. In North America, 2002 sales were $244.1 million versus $258.5 million for the prior year, a 5.6% decline. Excluding the North American engine filtration business sold in September 2001 and the DSI acquisition (due to its full year benefit), sales were down 1.3%. North American sales were down primarily due to the sale of the company's U.S. engine filtration business, the loss of a large masking tape base customer that took business in-house in August 2001 and general economic weakness. EBITDA for the fourth quarter 2002 were $8.1 million compared with $2.1 million for the same period last year. EBITDA for 2002 were $52.7 million versus $18.3 in 2001. Fourth-quarter and full-year 2002 earnings include a one-time gain of $3.1 million for a business purchase and sale transaction and severance expense of $1.1 million associated with a North American work force reduction. EBITDA levels for 2001 include one-time charges related to facility closures of $13.7 million for the year and $0.6 million for the fourth quarter. Fourth-quarter 2002 results were impacted by the following asset value adjustments: -- Property, plant and equipment write downs of $0.4 million, related to several assets for which the company has no immediate plans for service resumption. -- Inventory valuation adjustments, which added $1.1 million of expense. Additionally, the company shortened the depreciation period on certain fixed assets, which resulted in a $1.2 million increase in depreciation expense for 2002. "Our business levels remain quite mixed, with strong growth from our German operations and weak sales in the U.S.," said Alex Kwader, chairman and chief executive officer. "In the U.S., only office products business sales held virtually even on a quarter- over-quarter basis. The effect of general economic weakness continues to dampen results in our other U.S. businesses. "On the operational side, European productivity reached new heights during the quarter," Kwader said. "Productivity in the U.S. was generally good. In our New Jersey operations, however, we did incur higher than anticipated efficiency losses during start up following an equipment upgrade. Maintenance expenses were also higher during the fourth quarter. Overall, productivity improvements in New Jersey have taken longer than expected to materialize. "As we begin the first quarter, we have seen a slight seasonal uptick in demand in the U.S., but remain frustrated by the lack of a clear, sustainable recovery," Kwader said. "In Germany, we have sufficient visibility to expect continued strength through the first half of the year." The company's Lowville, New York, expansion has progressed ahead of schedule and on budget. "We are on track to fully complete the production transfer from Johnston, Rhode Island, into Lowville by midsummer," Kwader said. FiberMark, headquartered in Brattleboro, Vt., is a leading producer of specialty fiber-based materials meeting industrial and consumer needs worldwide. Products include filter media for transportation, vacuum bag and fast food applications; base materials for specialty tapes, electrical, electronics and graphic arts applications, wallpaper, building materials and sandpaper and cover/decorative materials for office and school supplies, publishing, printing and premium packaging. The company has 12 facilities in the eastern United States and Europe. As reported in Troubled Company Reporter's December 5, 2002 edition, Moody's Investors Service revised its long-term debt ratings on Fibermark downward, while maintaining a stable outlook. Specifically, the ratings on FiberMark's $100 million, 9.375% guaranteed senior notes due October 15, 2006 were lowered to B2 from B1. The company's $230 million, 10.75% guaranteed global notes due April 15, 2011, were also lowered to B2 from B1. Moody's announcement indicated that the downgrade was prompted by FiberMark's recent lower-than-expected financial performance and the impact of a "protracted period of economic weakness, particularly in North America." Current ratings and the stable outlook were influenced by mitigating factors such as the expected cost reductions related to facility consolidation, continued strength in European operations and the company's geographic and product line breadth. FREEPORT-MCMORAN: Completes Private Placement of 7% Conv. Notes --------------------------------------------------------------- Freeport-McMoRan Copper & Gold Inc., (NYSE:FCX) completed its private placement of $575 million of 7% convertible senior notes due 2011. This amount represents a 15 percent increase from the previously announced $500 million as a result of the initial purchaser's exercise of the overallotment option. James R. Moffett, Chairman and CEO, of FCX said, "The success of this $575 million offering and our recently completed $500 million senior note transaction demonstrate the confidence of the financial markets in the strength and reliability of our world class Grasberg mine in Indonesia with its long-lived, low- cost copper and gold reserves. The recent offerings strengthen our financial position and our financial flexibility. The authorization by our Board of Directors of the initiation of a cash dividend on our common stock reflects this improved position and the strong cash flow generating capacity of our business." As previously announced, each $1,000 face value convertible note has an annual interest rate of 7 percent and is convertible into 32.39 shares of FCX common stock equivalent to a conversion price of $30.87 per share, representing a 70 percent premium over the closing price of FCX's common shares on the NYSE on February 5, 2003. The sale of the notes generated net proceeds of approximately $559 million, which will be used to repay all outstanding bank debt, for working capital requirements and general corporate purposes. FCX plans to terminate its existing bank credit facilities and replace these facilities with a new bank credit facility with less restrictive covenants. FCX explores for, develops, mines and processes ore containing copper, gold and silver in Indonesia, and smelts and refines copper concentrates in Spain and Indonesia. As reported in Troubled Company Reporter's Monday Edition, Standard & Poor's assigned its 'B-' rating to Freeport-McMoRan Copper & Gold Inc.'s $500 million of senior convertible notes due 2011. Standard & Poor's also affirmed its ratings, including its 'B' corporate credit rating, on the New Orleans, Louisiana-based company. Proceeds from the offering will be used to repay all outstanding borrowings under the company's bank facilities, which it intends to replace with a new bank credit facility. GENTEK INC: Court Fixes April 14, 2003 as General Bar Date ---------------------------------------------------------- At GenTek Inc., and its debtor-affiliates' request, the Court established April 14, 2003, as the last day for creditors to file proofs of claims. Accordingly, each person or entity that asserts a "claim" against any of the Debtors that arose before the Petition Date, must file an original, written proof of the claim, which substantially conforms to the Official Form No. 10 so as to be received on or before the Bar Date, by mailing the original proof of claim to: GenTek Inc. Claims Center c/o Logan & Company, Inc. 546 Valley Road Upper Montclair, New Jersey 07043. The GenTek Claims Center will not accept proofs of claim sent by facsimile. Proofs of claim are deemed timely filed only if the claims are actually received by the GenTek Claims Center on or before the Bar Date. "The fixing of the Claims Bar Date will enable the Debtors to conduct their analysis of the prepetition claims in a timely and efficient manner." Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, says. Mr. Chehi relates that these persons or entities are not required to file a proof of claim by the Bar Date: (1) Any person or entity that has already properly filed with the Claims Docketing Center or the Clerk of the Court, a proof of claim against the Debtors utilizing a claim form, which substantially conforms to the Proof of Claim or to Official Form No. 10; (2) Any person or entity whose claim is listed on the Schedules, whose claim is not described in the Schedules as "disputed," "contingent," or "unliquidated," and who does not dispute the amount or nature of the claim as indicated in the Schedules; (3) Any person having a claim under Section 507(a) of the Bankruptcy Code as an administrative expense of the Debtors' Chapter 11 cases; (4) Any person or entity whose claim has been paid by the Debtors with Court authorization; (5) Any Debtor in these cases having a claim against another Debtor; (6) Any person or entity seeking to assert a claim for principal and interest due on a bond; (7) Any person or entity seeking to assert stock ownership interests; and (8) Any person or entity that holds a claim that has been allowed by a Court order on or before the Bar Date. Mr. Chehi maintains that the proofs of claim for any rejection damages claims arising during these Chapter 11 cases may be filed by the later of the Bar Date or 30 days after the effective date of rejection of an executory contract or unexpired lease as provided by a Court order or pursuant to a notice under procedures approved by the Court. To conform to the size and complexity of these Chapter 11 cases, Mr. Chehi tells the Court that the Debtors have prepared a proof of claim form, which includes these modifications: * a personalized form to include the name and address of the creditor as shown in the Schedules; * basic information contained in the Schedules as to the creditor's claim is included; * a creditor is required to designate the specific Debtor against which it asserts its claim; * a space for the creditor to correct any incorrect information contained in the name and address portion is included; and * additional instructions are included. Mr. Chehi emphasizes that each filed Proof of Claim must be written in English, be denominated in U.S. currency, and conforms substantially with the Proof of Claim provided or the Official Form No. 10. Any holder of a claim who is required, but fails, to file a proof of claim on or before the Bar Date will be forever barred, estopped, and enjoined from asserting the claim against the Debtors, and the Debtors and their property will be forever discharged from any and all indebtedness or liability with respect to the claim. The claim holder will not be permitted to vote to accept or reject any Chapter 11 plan or participate in any distribution in the Debtors' Chapter 11 cases on account of the claim or to receive further notices regarding the claim. The Debtors will mail the Proof of Claim form plus a notice of the Bar Date Order to: (i) the United States Trustee; (ii) each member of the Official Committee of Unsecured Creditors appointed in these cases and its counsel; (iii) all claim holders listed on the Schedules at the addresses stated; (iv) all record or otherwise readily known bondholders of the Debtors; (v) all record or otherwise readily known stockholders of the Debtors; (vi) all current and recent former employees of the Debtors; (vii) all current and recent former customers of the Debtors; (viii) the District Director of Internal Revenue for the District of Delaware and all taxing authorities for the jurisdictions in which the Debtors do business; (ix) the Securities and Exchange Commission; and (x) all persons and entities requesting notice pursuant to Rule 2002 of the Federal Rules of Bankruptcy Procedures as of February 4, 2003. The Debtors will also send the Bar Date Notice to certain entities with whom the Debtors had done business or who may have asserted a claim against them in the recent past. Mr. Chehi notes that, with respect to proofs of claim filed by bondholders asserting only principal and interest due on bonds, those bondholders need not file proofs of claims for that purpose. The stockholders are also not required to file proofs of equity interest -- and should not file proofs of claim -- to assert their stock ownership interests in the Debtors. The Debtors will start mailing the Notice Package within one week from February 4, 2003. The Court nevertheless permits the Debtors to make supplemental mailings of the Bar Date Notice up to 23 days before the Claims Bar Date. Any supplemental mailings will be deemed timely. To facilitate and coordinate the claims reconciliation and bar date notice functions, the Bar Date Notice will be mailed by Logan & Company, Inc., together with the Proof of Claim form where appropriate. The Debtors will also give notice by publication to potential creditors including: -- those creditors to whom no other notice was sent and who are unknown or not reasonably ascertainable by the Debtors; -- known creditors with addresses unknown by the Debtors; and -- creditors with potential claims unknown by the Debtors. By February 15, 2003, the Debtors will also publish a notice of the Claims Bar Date in the national edition of: * The New York Times; * The Contra Costa Times; * The Philadelphia Inquirer; * The News Journal; * The Chicago Tribune; * The Detroit Free Press and News; and * The Houston Chronicle In addition, the Debtors will publish the Bar Date Notice in both English and French in certain Canadian newspapers as deemed appropriate and subsequently approved by the Canadian Court. Noma anticipates seeking an order from the Ontario Supreme Court of Justice to enforce the Bar Date against the Canadian Creditors. Mr. Chehi further relates that the Debtors will seek permission to establish special bar dates with respect to: (a) creditors whose claims were not previously included in the Schedules but are added by amendment or creditors whose claims were previously included in the Schedules but are prejudicially changed as to amount, status or designation by amendment; (b) any subsequently identified potential claimants who may not be included in the amendments to the Schedules because the Debtors do not believe they owe amounts or otherwise have liability to the claimants but as to which the Debtors do not desire to risk the argument that any claims alleged by those claimants are not barred due to failure to give actual notice of a bar date; and (c) parties who were initially mailed notice of the Bar Date, but as to which a re-mailing or a direct mailing is necessary and cannot be accomplished in time to provide at least 23 days' notice of the Bar Date. (GenTek Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENUITY INC: Secures Okay to Continue Employee Retention Program ---------------------------------------------------------------- Genuity Inc., and its debtor-affiliates seek authority under Sections 105(a) and 363(b)(1) of the Bankruptcy Code to continue an existing employee retention program that provides bonuses to encourage the retention of specific key employees who are essential to the operation of the Chapter 11 cases and implement a severance benefits program for 12 senior executives. Summary of the Modified Retention Program The Retention Program incentive targets are based on each Participant's role in the Company as well as each Participant's expected contribution during the Chapter 11 process: A. the chief executive officer will receive a Retention Program bonus equal to 100% of his annual base compensation; B. executive vice presidents and senior vice presidents will receive a Retention Program bonus equal to 65%-75% of the individual's annual base compensation; C. vice presidents will receive a Retention Program bonus equal to 65%-75% of the individual's annual base compensation; D. directors will receive a Retention Program bonus equal to 50% of the individual's annual base compensation; E. technical participants will receive a Retention Program bonus equal to 45% of the individual's annual base compensation; F. sales participants will receive a Retention Program bonus equal to 30% of the individual's annual base compensation; G. operations participants will receive a Retention Program bonus equal to 30% of the individual's annual base compensation; and H. administrative processes participants will receive a Retention Program bonus equal to 30% of the individual's annual base compensation. The total outstanding cost of the Retention Program will be capped at $11,200,000. Eligibility In order to be eligible to receive any installment under the Retention Program the Participant must, in the sole discretion of the Debtors' management: -- satisfactorily perform all duties of his or her job; and -- keep participation in the Retention Program confidential. Receipt of any payment under the Retention Program also will be conditioned on the execution by Participants of a standard release and waiver of any claims. Payments to Be Made under the Retention Program If the eligibility requirements are met, the Participant will be entitled to receive outstanding payments under the Retention Program. Installments 4 through 7 of the Retention Program bonus will be paid in accordance with this schedule: A. Installment Four: after Court approval of the Retention Program, the Participant will be entitled to receive a lump-sum payment equal to 10% of the Retention Program bonus, with the payment to be made as soon as is administratively practical; B. Installment Five: within 30 days of the Initial Payment Date, the Participant will be entitled to receive a lump- sum payment equal to 15% of the Retention Program bonus, with the payment to be made as soon as is administratively practical; C. Installment Six: within 60 days of the Initial Payment Date, the Participant will be entitled to receive a lump- sum payment equal to 15% of the Retention Bonus, with the payment to be made as soon as is administratively practical; and D. Installment Seven: within 30 days of the close of a sale of all or substantially all of the Debtors' assets or confirmation of the Debtors' Chapter 11 plan, the Debtors will pay the Participant a lump-sum payment equal to 25% of the Retention Bonus; provided, however, that the Debtors may decide, in its sole and exclusive discretion, to extend the date of this payment for a period of up to 90 days. Severance for 11 Senior Executives The chief executive officer and the compensation committee of Genuity Inc.'s board of directors have nominated and the Compensation Committee has approved 12 senior executives to receive Severance Benefits. Senior Executives are classified into three groups and are entitled to receive severance benefits: A. Tier 1 Senior Executives with Agreements are entitled to two times annual base salary plus target bonus and 24 months of continued benefits coverage; B. Tier 2 Senior Executives with Agreements are entitled to one times annual base salary plus target bonus and 12 months of continued benefits coverage; C. There is one additional senior executive who is covered under the Debtors' general severance program, but for the purpose of these proceedings, Genuity has included him in this motion. That senior executive does not have an employment agreement and is entitled to one times his annual base salary and continued benefits coverage. A Senior Executive is entitled to Severance Benefits after involuntary termination other than for Cause, or resignation as a result of: A. a 50-mile change in principal work location; or C. a material reduction in compensation opportunities, including a reduction in annual base salary or target bonus. (Genuity Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Court Clears 3 Firms to Assist in CFIUS Review --------------------------------------------------------------- Global Crossing Ltd., and its debtor-affiliates obtained permission from the Court to employ, to advise them with respect to CFIUS review, these three firms: -- Covington & Burling as special counsel nunc pro tunc to November 1, 2002; -- Skadden Arps Slate Meagher & Flom LLP as special counsel nunc pro tunc to October 22, 2002; and -- Kissinger McLarty Associates as regulatory advisor nunc pro tunc to November 1, 2002. Covington Engagement It is anticipated that Covington will: -- advise the Debtors with respect to the CFIUS approval process and provide the necessary background with respect to the various executive branch agencies that comprise CFIUS; and -- assist the Debtors in the drafting of necessary security agreements and other relevant legal documents involved in obtaining CFIUS approval. The Debtors will compensate Covington on an hourly basis at rates consistent with the rates charged by the firm in matters of this type. Covington's hourly rates are set at a level designed to fairly compensate the firm for the work of its attorneys and legal assistants and to cover fixed and routine overhead expenses. The hourly rates to be charged by Covington in connection with this representation are: Partners $690 - 360 Associates 410 - 170 Paralegals and other personnel 210 - 140 Skadden Engagement To aid the GX Debtors in the CFIUS review process, Skadden Arps Slate Meagher & Flom LLP will act as special regulatory counsel and: -- advise the Debtors with respect to telecommunications policy vis-a-vis the CFIUS review process; -- advise the Debtors with respect to the impact of Congressional oversight on the CFIUS review process as it relates to obtaining the requisite regulatory approvals; and -- draft necessary documents with respect to corporate structures that comply with the demands of the various CFIUS agencies. The Debtors employs Skadden to perform tax services relating to an audit by the United States Internal Revenue Service and planning related to other tax matters. The Debtors will compensate Skadden on an hourly basis at rates charged by the firm in matters of this type. Skadden's hourly rates in connection with this representation are: Partners and "Of Counsel" $725 - 495 Associates and Counsel 485 - 290 Paralegals and other personnel 195 - 80 Kissinger Engagement Kissinger is not a law firm, but a partnership that provides strategic advice to U.S. and multi-national clients in connection with domestic and international matters including receiving U.S. and foreign regulatory approval of certain financial transactions. The individuals at Kissinger who will be advising the Debtors have significant familiarity with the federal government and the processes of obtaining approval from the national security and regulatory agencies that comprise CFIUS. Specifically, the Debtors seek to employ Kissinger to provide: -- consulting services with respect to international strategic advise, particularly with respect to policy, communications coordination, and advice; and -- assistance in connection with the Debtors' interactions with agencies and representatives of foreign governments that have an interest in the transaction. The Debtors will compensate Kissinger on a $30,000 fixed monthly retainer, plus reimbursement of actual and necessary expenses incurred. In addition, Kissinger will be entitled to a $200,000 success fee, payable after obtaining regulatory approval through the CFIUS process. This Success Fee will not be payable in the event that the approval is not obtained. (Global Crossing Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) GRAPHIC PACKAGING: Will Publish Q4 and YE 2002 Results on Tues. --------------------------------------------------------------- Graphic Packaging International Corporation (NYSE: GPK) scheduled to release its fourth quarter 2002 results before the market opens on Tuesday, February 18, 2003. A conference call will be held the same day. What: 2002 Fourth Quarter and Year End Earnings Conference Call When: Tuesday, February 18, 2003 @ 3:00 p.m. EST Where: http://www.firstcallevents.com/service/ajwz372583856gf12.html How: Live over the Internet -- Simply log on to the web at The address above. Contact: Investor Relations, 877-608-2635, ir@graphicpkg.com If you are unable to participate during the live webcast, the call will be archived on the Web site http://www.graphicpackaging.com To access the webcast replay, go to the Investor Relations section. Graphic Packaging, whose corporate credit standing and its $450 million senior secured credit facility are rated by Standard & Poor's at BB, is the leading North American manufacturer of folding cartons, making cartons for the food, beverage and other consumer products markets. The Company has a large recycled paperboard mill and 17 modern converting plants and approximately 4,300 employees in North America. Its customers make some of the most recognizable brand-name products in their markets. HEALTH PLAN SE: Fitch Withdraws Bq Financial Strength Rating ------------------------------------------------------------ Fitch Ratings has withdrawn its 'Bq' quantitative insurer financial strength rating on Health Plan SE, Inc. of Florida. Health Plan SE was acquired by and merged into Vista Health Plans of South FL effective January 1, 2003. Health Plan SE is a Tallahassee, Florida-based for profit HMO that primarily writes group health business. The company reported $92.7 million of premiums for the first nine months of 2002 and statutory capital of $2.8 million as of September 30, 2002. Fitch's quantitative insurer financial strength ratings (Q-IFS ratings) are generated solely based on quantitative analysis of publicly available financial statement data filed by the HMO on a quarterly basis with its state regulator. Although the model's general assumptions are reviewed by Fitch's rating committee, the Q-IFS ratings generated by the model on individual HMOs are not reviewed by the rating committee. HQ GLOBAL: Has Until May 19 to Make Lease-Related Decisions ----------------------------------------------------------- By order of the U.S. Bankruptcy Court for the District of Delaware, HQ Global Holdings, Inc., and its debtor-affiliates obtained an extension of their lease decision period. The Court gives the Debtors until May 19, 2003, to determine whether to assume, assume and assign, or reject their unexpired nonresidential real property leases. As previously reported in the Troubled Company Reporter, the Company's exclusive period to file a chapter 11 plan runs through May 13, 2003, and the Company has the exclusive right to solicit acceptances of that plan from creditors is intact through July 11, 2003. HQ Global Holdings Inc., one of the largest providers of flexible office solutions in the world, filed for chapter 11 protection on March 13, 2002 (Bankr. Del. Case No. 02-10760). Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., and Corinne Ball, Esq., at Jones, Day, Rtavis & Pogue, represent the Debtors in their restructuring efforts. Houlihan, Lokey, Howard & Zukin provides HQ with financial advisory services. When the Company filed for protection from its creditors, it listed estimated assets of more than $100 million. HUNTLEIGH TELECOMMS: Creditors Meeting Scheduled for March 11 ------------------------------------------------------------- The United States Trustee for Region VII will convene a meeting of Huntleigh Telecommunications Group, Inc.'s creditors on March 11, 2003, at 11:15 a.m., in Room 207 at the U.S. Courthouse, 100 E. Wall Street, in Midland, Texas. 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. All creditors wishing to assert a claim against the Debtor's estate must file their proofs of claim on or before May 4, 2003 or be forever barred from asserting that claim. Huntleigh Telecommunications Group, Inc., is a High Speed DSL Internet Service Provider based in El Paso, Texas. The Company filed for chapter 11 protection on February 3, 2003 (Bankr. W.D. Tex. Case No. 03-70097). Wiley France James, III, Esq., at James, Goldman & Haugland, P.C., represents the Debtor in its restructuring efforts. J. CREW GROUP: Inks Board Room & Subordinated Loan Agreements ------------------------------------------------------------- On February 3, 2003, J.Crew Group, Inc., TPG Partners II, L.P., and Emily Woods entered into a Letter Agreement that amends a Stockholders' Agreement among the Company, TPG Partners II, L.P., and Emily Woods, dated October 17, 1997 (as amended by the Letter Agreement between the Company, TPG Partners II, L.P. and Emily Woods, dated June 11, 1998). The Letter Agreement allows for expansion of J. Crew's Board of Directors to 11 seats -- with new Chairman & CEO Millard Drexler naming three of those members and having input about who'll take three additional seats. On February 4, 2003, the Company, J. Crew Operating Corp., and certain subsidiaries thereof, and TPG-MD Investment, LLC entered into a Credit Agreement pursuant to which TPG-MD Investment, LLC will provide a $20.0 million subordinated loan to Operating. The loan will be guaranteed by certain subsidiaries of Operating and may be exchanged into shares of common stock of the Company. Stephen Lindo, Esq., at Willkie, Farr & Gallagher represents TPG-MD Investment, LLC, and Paul J. Shim, Esq., at Cleary, Gottlieb, Steen & Hamilton represents TPG Bacchus II LLC in this financing transaction. 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. KAISER: Gets Go-Signal to Assume Rhodia Purchase & Sale Contract ---------------------------------------------------------------- Kaiser Aluminum Corporation and its debtor-affiliates sought and obtained the Court's permission to assume a purchase and sale agreement with Rhodia Inc. The Debtors entered into the Sale Contract with Rhodia on December 31, 1999. The Debtors wanted to sell to Rhodia a 66.61-acre tract of undeveloped real property located in East Baton Rouge Parish, Louisiana. The purchase price for the real property is $1,350,000, and the original closing date was scheduled to occur by March 31, 2000. However, the closing of the transaction was extended by several letter agreements to give the Debtors more time to complete the removal of solidified red mud from the red mud lake on the real property. Pursuant to the latest letter agreement on March 21, 2002, Rhodia agreed to give the Debtors until the end of January 2003 to complete the removal of the red mud and that the closing of the transaction would occur by the end of February 2003. The Debtors completed the red mud removal on schedule and are ready to close the transaction by February 28, 2003. Paul N. Heath, Esq., at Richards, Layton & Finger, relates that the Debtors have no need for the property in connection with the operation of their business. The assumption of the Sale Contract will provide their estates with $1,296,000 in cash proceeds. In contrast, Mr. Heath points out that, if the Debtors were to reject the Sale Contact, they would: (a) have to renew their efforts to find a buyer, which may take a substantial amount of time and would not likely result in any higher sale price; and (b) most likely face to a rejection damage claim from Rhodia. Debtors Pay Broker Commission As a necessary part of the assumption of the Sale Contract, the Court also authorizes the Debtors to pay a $54,000 broker's commission to Latter & Blum, Inc./Realtors. Latter & Blum was an additional signing party to the Sale Contract and was the broker of the transaction. The Sale Contract provides that Latter & Blum will receive a 4% commission to be paid by the Debtors. The Debtors will pay the commission at the Closing. Debtors Also Pay Prepetition Taxes The Debtors are also authorized to pay the East Baton Rouge Parish $14,072 in real property taxes related to the Real Property for the 2002 tax year. The Debtors will pay the prepetition taxes at the Closing from their general operating funds. According to Mr. Heath, the Sale Contract provides that any taxes assessed against the Real Property that are due and payable at the time of closing must be paid by the Debtors. If not paid, Rhodia will receive a credit against the purchase price equal to the amount owed and any penalties and interest. Under Louisiana law, Mr. Heath maintains that the East Baton Rouge Parish has a statutory lien on the Real Property for the total amount of prepetition taxes and is, therefore, a fully secured creditor. Consequently, the payment of the prepetition taxes will not prejudice other creditors. (Kaiser Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) Kaiser Aluminum's 12.750% bonds due 2003 (KLU03USR1) are trading at about 5 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KLU03USR1for real-time bond pricing. KMART: Wants Lease Decision Time Extended Beyond Effective Date --------------------------------------------------------------- In light of the recent significant developments in their Chapter 11 cases, Kmart Corporation and its 37 debtor affiliates ask the Court for another extension of the deadline to make lease disposition decisions imposed by 11 U.S.C. Sec. 365(d). The Debtors need more time to decide whether to assume, assume and assign, or reject 695 of their unexpired nonresidential real property leases. The Debtors tell the Court that they can't make reasoned decisions this early. The Debtors need to devote their time and resources within the next couple of months to obtaining approval of the Disclosure Statement, soliciting votes accepting the Plan, and obtaining Court approval of the Reorganization Plan. The Debtors propose to extend the lease decision deadline with respect to: * at least 304 store locations that the Debtors intend to close -- Closing Store Leases -- until 270 days after the effective date of a reorganization plan; and * at least 391 unaffected stores -- Go-Forward Leases -- to the effective date of a reorganization plan, but no later than May 31, 2003, to coincide with their planned emergence from Chapter 11. A schedule of the Closing Store Leases is available at: http://bankrupt.com/misc/closing_store_leases.pdf A schedule of the Go-Forward Leases is available at: http://bankrupt.com/misc/go_forward_leases.pdf The Debtors have been working diligently to develop and achieve confirmation of a Plan on a time frame that will allow them to meet their goal of confirming their Plan this April 2003. A major component of the Debtors' restructuring has been and continues to be -- their strategic review of their real estate holdings. Although the Debtors will not make their final decision until the Confirmation Date, they presently expect that most, if not all, of their remaining Go-Forward Leases will be assumed. The Debtors also ask the Court to declare any operating, "go dark" or similar restrictive covenants in the Closing Store Leases as unenforceable during the proposed extension period. The Debtors intend to engage in a multi-faceted marketing process with regards to the Closing Store Leases through these options: (1) direct sales of individual Closing Store Leases to end users; (2) sales of designation rights in individual or packages of Closing Store Leases to purchasers that would in turn seek to sell the rights to end users; (3) agreements with real estate companies to market some Closing Store Leases; or (4) redevelopment of the closing store properties. The Debtors anticipate that they will assume and assign certain Closing Store Leases to a number of potential assignees while rejecting the others. Nevertheless, the Debtors assert that they need adequate time to market the excess real estate to maximize the value of the assets for their estates. The Debtors will need time to formulate an appropriate strategy for each Closing Store Leases, considering that the leases are spread over 44 states and in different retail settings. The Debtors may even have to employ several and varied strategies and approaches for disposing the leases. The landlords will not be prejudiced with the proposed extension. Throughout the course of the bankruptcy proceedings, the Debtors have been current in their administrative obligations, including leasehold obligations. The landlords for the Closing Store Leases will also benefit from the Debtors' marketing efforts and the eventual assignment of the leases to end users. Once the store closing sales are concluded, the stores will "go dark" and remain dormant until and end user can complete an assignment of the underlying lease, remodel and re- fixture the store, and perform necessary tenant improvements. But the landlords will not be affected because the Debtors will continue to pay, or arrange to pay, rent and other monetary obligations under the Closing Store Leases without interruption. The remodeling work also will likely increase the value of the properties. Thus, the landlords will be in a much better position than if the Debtors were simply to reject the Leases. There is no reason to believe that the Debtors will not continue to remain current on their obligations under the Go-Forward and Closing Store Leases. Given their $2,000,000,000 postpetition credit facility, which is soon to be replaced by another $2,000,000,000 exit facility, the Debtors have enough resources to back them. (Kmart Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Kmart Corp.'s 9.000% bonds due 2003 (KM03USR6) are trading at about 13 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for real-time bond pricing. LNR PROPERTY CORP: Fitch Affirms Subordinated Debt Rating at BB- ---------------------------------------------------------------- Fitch Ratings affirms LNR Property Corp.'s subordinated debt rating at 'BB-' and assigns a senior unsecured rating of 'BB+'. The Rating Outlook is Stable. Approximately $800 million of debt obligations are covered by Fitch's action. The ratings reflect LNR's strong operating performance and asset quality, including zero delinquency or loss in its b-note portfolio, a 95% average recovery rate on specially serviced assets and 97% occupancy in developed properties. Fitch believes that these factors are reflective of management's adherence to sound risk management practices. The ratings also reflect the continued evolution of Fitch's rating methodology towards several complex components of LNR's business. Specifically, over time Fitch has increased capital requirements for assets such as developing properties, first loss commercial mortgage-backed securities securities, and equity in and commitments to partnership investments. Despite increased requirements for capital, operating performance, and diversity of funding, LNR continues to meet expectations for its rating category. LNR has improved its balance sheet management. As a result of strong internal capital formation and reduced asset acquisition, consolidated leverage (which consolidates all partnerships and other off balance sheet commitments) has declined to 2.07 times (x) at Aug. 30, 2002 from 2.46x at year-end Nov. 30, 2000. LNR also recently entered the structured finance market via the completion of a collateralized debt obligation of commercial mortgage backed securities (CDO of CMBS). LNR's funding diversity is adequate and has improved in recent years. LNR has used subordinated unsecured bonds, reverse repurchase agreements, secured debt and syndication proceeds. LNR also continues to demonstrate good levels of available liquidity through good cash flow and its revolving credit facility, which was recently renewed and increased to $380 million. Fitch will continue to look for LNR to access the senior unsecured debt markets. Rating concerns center on LNR's large investment in off-balance sheet joint ventures and partnerships. Concerns also focus on the portfolio of repositioning properties that represent about 15% of total assets. While LNR has consistently delivered sound results from this segment, Fitch still considers these activities to bare a significant degree of risk. As such, the ratings reflect the composition of LNR's portfolio relative to other companies focused on real estate investment across the capital structure. In addition, a significant component of LNR's cash flow results from asset sales, which can result in significant volatility over time. Finally, Fitch continues to hold a Negative Outlook for several real estate sectors, including office and apartment buildings, to which LNR has significant exposure. Based in Miami, Florida with roots dating to 1969, LNR underwrites, purchases, and manages real estate and real estate driven investments. LNR has also developed one of the premier CMBS special servicer franchises in the U.S., with a market share of 18% at the end of 2002. LNR primarily seeks investment opportunities where it can purchase assets at a discount and utilize its due diligence, repositioning, asset management and workout expertise to improve cash flows and profitability. Specifically, activities include the development or purchase of office buildings, apartment buildings, affordable housing communities, retail space, investments in subordinated commercial mortgage backed securities, and mortgage and real estate backed loans. LUBY'S INC: Receives Notice of Default Under Credit Agreement ------------------------------------------------------------- Luby's (NYSE: LUB) confirmed it had received written notification of default under its existing credit agreement, which arose from the failure to make an $80 million payment due January 31, 2003. The default, which was previously announced by Luby's, was precipitated by the company's termination of negotiations with a third-party lender because of unacceptable changes in the structure of the proposed loan. The notice was expected, and although the lenders have reserved all rights and remedies they may have as a result of the default, they have advised Luby's that they do not intend to take any immediate action. Luby's management is presently coordinating with these and other potential lenders to explore a variety of financing options. "We are working with our board to finalize an operational plan that will permit the restructuring of Luby's indebtedness in an acceptable manner and ensure a successful future for the company," said Chris Pappas, President and CEO. "The receipt of this formal notice does not mean that we cannot work through the current situation with our existing bank group. As we do so, our highest priority is to fix the problems that have affected performance and return Luby's to profitability." Luby's provides its customers with delicious, home-style food, value pricing, and outstanding customer service at its 193 restaurants in ten states. Luby's stock is traded on the New York Stock Exchange (symbol LUB). MARINER POST-ACUTE: Asks Court to Move Claims Objection Deadline ---------------------------------------------------------------- The Mariner Post-Acute Network, Inc., and Mariner Health Group Debtors ask the Court to further extend their Claims Objections Deadline through and including May 31, 2003. The Debtors relate that they have currently resolved 23,000 of the original 31,000 scheduled and filed claims. To illustrate, the Debtors report that: -- of the 24,036 claims in the MPAN Debtors' cases, No. of claims Status ------------- ------ 21,224 have been resolved 1,150 are subject of pending objections, 1,296 were identified for potential objections 366 are under review -- of the 7,217 filed and scheduled claims in the MHG Debtors' cases, No. of claims Status ------------- ------ 5,933 have been resolved 424 are subject of pending objections 539 were identified for potential objections 321 are under review The Debtors believe that the claims review process and the preparation and filing of objections to the 2,625 claims not already subject to objections can be completed by May 31, 2003. Moreover, the extension of the time period will enable the Debtors to spread these remaining potential claim objections over six additional hearing dates in the proposed extension period. During this same period, the Debtors will be negotiating for, or filing pleadings requesting, "caps" on all the claims that have been filed in "unliquidated" amount, a process essential to make the pro rata calculation necessary for a distribution. If the objections were required to be filed by the February 28, 2003 deadline, the dividend would still not be made until after May 31, 2003 because of the need to obtain maximum claim amount caps on unliquidated claims, the Debtors added. (Mariner Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-0900) MCDERMOTT INT'L: Enters Pacts to Refinance Credit Facilities ------------------------------------------------------------ McDermott International, Inc., (NYSE:MDR) has entered into definitive agreements with its existing lenders providing for a new credit facility to replace its existing J. Ray McDermott and McDermott and BWX Technologies bank credit facilities, which were scheduled to expire on February 21, 2003. The Credit Facility initially provides for borrowings and issuances of letters of credit in an aggregate amount of up to $180 million, with certain sublimits on the amounts available to J. Ray and BWXT. The Company also announced the early repayment of McDermott Incorporated Series "A" Medium Term Notes in the amount of $9.5 million, which were due in four tranches beginning June 26, 2003 through July 2, 2003. The repayment will be made today in the form of an irrevocable deposit to the trustee for the MI Notes. The existing $100 million McDermott and BWXT facility was canceled resulting in the return to the Company of $105 million in cash collateral which will be used, together with $10 million of McDermott cash, to provide J. Ray and BWXT with intercompany loans in the amount of $90 million and $25 million, respectively. J. Ray and BWXT will use the proceeds from those intercompany loans for working capital needs and general corporate purposes. "This refinancing should provide adequate liquidity during the term of the Credit Facility and ample time to develop a permanent capital structure for the Company after the resolution of the Babcock & Wilcox Chapter 11 proceedings," said Francis S. Kalman, Executive Vice President and Chief Financial Officer of McDermott. Terms of the Credit Facility include, among other things, the following: -- The Credit Facility is collateralized by McDermott Incorporated stock, J. Ray stock, J. Ray assets and various intercompany promissory notes. -- Effective May 13, 2003, the maximum amount available under the credit facility will be reduced from $180 million to $166.5 million. -- Proceeds from the Credit Facility may be used by J. Ray and BWXT with sublimits for J. Ray of $100 million for letters of credit and $10 million for cash advances and for BWXT of $60 million for letters of credit and $50 million for cash advances. -- Pricing for cash advances under the Credit Facility is prime plus 3% or Libor plus 4% for BWXT and prime plus 4% or Libor plus 5% for J. Ray. -- The Credit Facility is guaranteed by McDermott and by various subsidiaries of J. Ray. -- The Credit Facility is scheduled to expire on April 30, 2004. McDermott International, Inc., is a leading worldwide energy services company. The Company's subsidiaries provide engineering, fabrication, installation, procurement, research, manufacturing, environmental systems, project management and facilities management services to a variety of customers in the energy industry, including the U.S. Department of Energy. As reported in Troubled Company Reporter's November 11, 2002 edition, Standard & Poor's placed its single-'B' corporate credit rating on McDermott International Inc., and related entities on CreditWatch with negative implications due to operating issues at the firm's J.Ray McDermott S.A., marine construction services subsidiary, weak near-term operating outlook, and potential liquidity concerns. MILACRON INC: Fourth Quarter Operating Results Show Improvement --------------------------------------------------------------- Milacron Inc., (NYSE: MZ) showed significant progress in the fourth quarter of 2002, as improvements in operating efficiency resulted in a modest profit from continuing operations on essentially flat sales compared with a year ago. "Thanks to extraordinary efforts by our employees worldwide, we ended 2002 on a very positive note," said Ronald D. Brown, chairman and chief executive officer. "We saw increasing benefits from our diligent execution of cost-cutting and consolidation efforts of the past year and we entered 2003 with substantially less debt and a stronger balance sheet." Fourth-quarter 2002 earnings from continuing operations before restructuring charges came in at the high end of the range of guidance provided by the company in November. Including losses from discontinued operations and restructuring charges, Milacron posted a significantly smaller net loss compared to the fourth quarter a year ago. Fourth Quarter 2002 Sales of $192 million from continuing operations - plastics technologies and industrial fluids - were effectively even with $187 million in the fourth quarter of 2001 when excluding favorable currency translation effects. In the fourth quarter of 2002 Milacron earned $1.0 million after tax from continuing operations, a $20- million improvement over the year-ago quarter on essentially flat sales. Including losses from discontinued operations, the company recorded a net loss in the quarter of $5.5 million. This compared to a net loss of $21.9 million, in the fourth quarter of 2001, which included $1.2 million in losses from discontinued operations. The quarterly net losses included after-tax restructuring costs of $2.6 million in 2002 and $7.8 million in 2001. In accordance with current accounting rules, amortization of goodwill was excluded from earnings in 2002 but had the effect of increasing the fourth-quarter 2001 loss by $1.8 million after tax. Manufacturing margins excluding restructuring costs were 17.4% in the fourth quarter of 2002, up from 14.4% a year ago. New orders from continuing operations were $186 million, up 7% from $174 million in the fourth quarter of 2001 and 4% from the third quarter of 2002, reflecting slightly improved demand for plastics machinery. Year 2002 Despite an 8% sales volume decline, in 2002 Milacron achieved positive earnings from continuing operations of $0.6 million before interest, taxes and nonrecurring items, compared to an operating loss of $11.0 million in 2001. Sales from continuing operations were $693 million in 2002, down from $755 million a year ago. The company's 2002 net loss was $222.9 million and included on an after-tax basis: a writedown of goodwill of $187.7 million, losses from discontinued operations of $16.8 million, and restructuring charges of $8.8 million. "We made significant progress in 2002," Brown said. "We strengthened our balance sheet by generating cash from operations and making two major divestitures, which allowed us to reduce net debt by over $300 million. We accelerated our implementation of Lean and Six Sigma and cut our primary working capital requirements by $40 million. We also executed restructuring and cost-cutting programs throughout our operations, which helped bring us back into the black on an operating basis in the fourth quarter." Segment Results Machinery Technologies-North America (machinery and related parts and services for injection molding, blow molding and extrusion supplied from North America and India) New orders in the fourth quarter were $88 million, a 10% increase from $80 million a year ago. Sales of $97 million were up 7% from $91 million in the fourth quarter of 2001. Helped by restructuring and other cost-cutting measures implemented over the past several quarters, this segment posted operating earnings (earnings before interest, taxes and restructuring charges) of $5.8 million compared to an operating loss of $4.6 million in the year-ago quarter. For the year 2002, new orders in this segment were $321 million, down from $337 million in 2001. Sales declined year over year to $314 million from $362 million. Operating earnings for 2002 were $8.0 million compared to an operating loss of $13.5 million in 2001. Machinery Technologies-Europe (machinery and related parts and services for injection molding and blow molding supplied from Europe) New orders rose 26% to $34 million from $27 million in the fourth quarter of 2001, with about one-third of the gain coming from favorable currency translation. Sales of $31 million were essentially flat with those of the year-ago quarter when excluding currency effects. This segment reduced its operating loss to $1.5 million from $7.5 million in the fourth quarter of 2001. For the year 2002, new orders in this segment were $122 million, up $8 million from 2001, mostly due to favorable currency translation. Sales of $117 million declined from $123 million in the prior year despite favorable currency effects. For 2002 the segment posted an operating loss of $8.1 million, $1.0 million better than its operating loss of $9.1 million in 2001. Mold Technologies (mold bases and related parts and services, as well as maintenance, repair and operating supplies for injection molding worldwide) Sales in the quarter were $43 million, down from $47 million a year ago, with all of the decline coming from the segment's European operations, as North American operations held up compared to a year ago. Hampered by lower sales volumes and costs and inefficiencies related to the integration and consolidation of European acquisitions, operating earnings declined to $0.1 million including a goodwill writedown of $1.0 million, down from $1.7 million in the year-ago quarter. Sales in this segment for the year were $175 million, down $10 million from 2001. Operating earnings fell to $5.3 million from $12.1 million in the prior year. Industrial Fluids (water-based and oil-based coolants, lubricants and cleaners for metalcutting and metalforming operations worldwide) Sales of $25 million were essentially flat with those of the fourth quarter a year ago after adjusting for currency translation effects. Operating earnings were $3.9 million, compared to $5.0 million in the fourth quarter 2001, which included favorable one-time adjustments. Sales in 2002 for this segment were $96 million, up from $93 million in 2001, as favorable currency translation accounted for about half the increase. The segment's operating earnings were $14.4 million in 2002, down from $18.1 million in 2001, which, as in the fourth quarter, included one-time adjustments. Discontinued Operations In August 2002, Milacron sold its North American metalcutting insert tool business, Valenite, to Sandvik for $175 million, subject to post-closing adjustments, and its European and Indian metalcutting tool businesses, Widia and Werko, to Kennametal Inc. for (EUR)188 million, also subject to post-closing adjustments. Cash costs for divestiture expenses and post- closing adjustments were approximately $7 million in the fourth quarter and are projected to be about $25 million in the first quarter of 2003, all within the reserves established by the company at the time of the closings. In the fourth quarter, Milacron's discontinued round tool and grinding wheel operations had sales of $42 million and after-tax losses of $6.5 million, primarily related to adjustments of the carrying value of these businesses. Charge for Goodwill Impairment In accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," Milacron took a $247 million pre-tax charge for goodwill impairment retroactive to the beginning of 2002 to cover both continuing and discontinued operations. On an after-tax basis, the writedown was $188 million, or $5.61 per share. The charge had no effect on cash flow. Pension Plan Assets Financial market declines in 2002 significantly reduced the asset value of Milacron's primary U.S. defined benefit plan and resulted in a non-cash charge to equity of $95 million after tax in the fourth quarter. The charge had no effect on cash flow or net income. Given the plan's reduced asset value and lower assumptions for return and discount rates, Milacron expects about $1 million in pension expense in 2003, compared to pension income of approximately $9 million in 2002. The plan continues to meet all the funding requirements under ERISA regulations, and at its current funding level, the company will not be required to make any cash contribution before September 2004. Based on current projections, the required 2004 contribution would be less than $10 million. Financial Flexibility Milacron ended the fourth quarter with $122 million in cash, up from $114 million at the beginning of the quarter. The company said that its revolving credit facility has been amended to provide for relaxed covenants through 2003, with an agreement to reduce the commitment gradually from $85 million to $55 million by year-end. At December 31, 2002, the company had drawn $42 million and issued $12 million in letters of credit under this facility. The company also said its accounts receivable liquidity facility has been extended to December 31, 2003. At year-end 2002, the company had sold $41 million of receivables under the program, which is now capped at $45 million. Milacron has no significant debt repayment obligations until March 15, 2004, at which time the company's revolving credit facility and $115 million of 8-3/8% public notes mature. The company is currently considering a variety of available alternatives to refinance its capital structure. Outlook "Three of the market sectors we serve are holding up well during this recession: automotive, packaging and medical," Brown said. "Although there are still no clear signs of recovery in the other sectors, Milacron remains committed to achieving further gains in operating results in 2003. We will do so by focusing on areas we can control, namely cost reductions, efficiency improvements and better working capital management, to compensate for factors beyond our control, such as the economy, increased insurance costs and a decline in pension income, to list a few. Given the seasonality of our business, we believe we are likely to record modest losses in the first half of the year to be offset by comparable or greater earnings in the second half of the year. "Through it all we continue to strengthen our competitive position as a global leader in plastics technologies and industrial fluids. We are enhancing our ability to respond quickly and fully to the upturn whenever it comes, which will help us maximize shareholder value in the long run," he said. First incorporated in 1884, Milacron is a leading global supplier of plastics-processing technologies and industrial fluids, with 4,000 employees and major manufacturing facilities in North America, Europe and Asia. For further information, visit http://www.milacron.com As reported in Troubled Company Reporter's November 22, 2002 edition, Standard & Poor's lowered its corporate credit rating on Milacron Inc., to 'B+' from 'BB-'. The outlook is negative. At the same time, the rating on the company's $110 million senior secured bank facility was lowered to 'B+' from 'BB'. The plastic machinery manufacturer's senior unsecured debt was affirmed at 'B'. The downgrades reflect the impact of weak end markets on the company's financial profile, despite significant asset sales to reduce debt. The affirmation of the senior unsecured rating reflects the substantial reduction in secured debt. Total debt was about $296 million at Sept. 30, 2002, for Cincinnati, Ohio-based Milacron. "The downgrade on Milacron was based upon the deterioration in the company's credit measures and the uncertain timing for a recovery," said Standard & Poor's credit analyst Robert Schulz. MILACRON INC: Board Declares Quarterly Preferred Share Dividends ---------------------------------------------------------------- Milacron Inc., (NYSE:MZ) announced that its board of directors declared quarterly dividends of $.01 per share on common stock and $1.00 per share on preferred stock. To holders of record February 28, 2003, dividends on common stock will be paid on March 12, 2003, and dividends on preferred stock will be paid on March 1, 2003. The same record date, February 28, 2003, was set for determination of shareholders entitled to notice of and to vote at the annual meeting of shareholders, to be held at 9:00 a.m. EDT on Wednesday, April 23, 2003 at the Queen City Club, 331 East Fourth Street, Cincinnati, Ohio, 45202. First incorporated in 1884, Milacron is a leading global supplier of plastics-processing technologies and industrial fluids, with 4,000 employees and major manufacturing facilities in North America, Europe and Asia. As reported in Troubled Company Reporter's November 22, 2002 edition, Standard & Poor's lowered its corporate credit rating on Milacron Inc., to 'B+' from 'BB-'. The outlook is negative. At the same time, the rating on the company's $110 million senior secured bank facility was lowered to 'B+' from 'BB'. The plastic machinery manufacturer's senior unsecured debt was affirmed at 'B'. The downgrades reflect the impact of weak end markets on the company's financial profile, despite significant asset sales to reduce debt. The affirmation of the senior unsecured rating reflects the substantial reduction in secured debt. Total debt was about $296 million at Sept. 30, 2002, for Cincinnati, Ohio-based Milacron. "The downgrade on Milacron was based upon the deterioration in the company's credit measures and the uncertain timing for a recovery," said Standard & Poor's credit analyst Robert Schulz. ML CBO VI: S&P Further Junks Class A Notes' Rating at CC -------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class A notes issued by ML CBO VI 1996-C-2, a high-yield arbitrage CBO transaction originated in October 1996 and managed by Conseco Capital Management. At the same time, the rating is removed from CreditWatch with negative implications, where it was placed on Jan. 24, 2003. The lowered rating and CreditWatch removal reflects factors that have negatively affected the credit enhancement available to support the notes since the time of the last rating action. These factors include continuing par erosion of the collateral pool securing the rated notes, a decline in the interest from the collateral pool available for hedge and interest payments on the liabilities, and a negative migration in the credit quality of the performing assets in the pool. The rating on class A notes was previously lowered in March 2002. The transaction experienced $12.25 million worth of defaults since the last rating action. Standard & Poor's noted that as a result of asset defaults, the overcollateralization ratios for the transaction have suffered. According to the most recent trustee report (January 2003), the class A overcollateralization is at 96.9%, versus the required ratio of 120%, and compared to a ratio of 99.3% at the time of the last rating action. According to the January trustee report, the weighted average coupon has deteriorated to 10.57%, versus the minimum required weighted average coupon of 10.8% and a weighted average coupon of 10.88% at the time of the previous rating action. The transaction continues to fail all of Standard & Poor's issuer rating distribution tests according to the January trustee report. As a part of its analysis, Standard & Poor's reviewed the results of recent cash flow model runs. These runs stressed various parameters that are instrumental in the performance of this transaction, and are used to determine its ability to withstand various levels of default. When the stressed performance of the transaction was then compared to the projected default performance of the current collateral pool, Standard & Poor's found that the projected performance of the class A notes, given the current quality of the collateral pool, was not consistent with the prior rating. Consequently, Standard & Poor's has lowered its rating on these notes to the new level. Standard & Poor's will continue to monitor the performance of the transaction to ensure that the ratings assigned to the rated classes continue to reflect the credit enhancement available to support the notes. Rating Lowered ML CBO VI 1996-C-2 Rating Class To From Current Balance (Mil. $) A CC CCC+/Watch Neg 60.97 ML CBO VII: S&P Hatchets Class A Note Rating to CC from CCC+ ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its rating on the class A notes issued by ML CBO VII 1997-C-3, a high-yield arbitrage CBO transaction originated in March 1997 and managed by Conseco Capital Management. At the same time, the rating is removed from CreditWatch with negative implications, where it was placed on January 24, 2003. The lowered rating and CreditWatch removal reflects factors that have negatively affected the credit enhancement available to support the notes since the time of the last rating action. These factors include continuing par erosion of the collateral pool securing the rated notes, a decline in the interest from the collateral pool available for hedge and interest payments on the liabilities, and a negative migration in the credit quality of the performing assets in the pool. The rating on class A notes was previously lowered in March 2002. The transaction experienced $14.01 million worth of defaults since March 2002. Standard & Poor's noted that as a result of such defaults, the overcollateralization ratios for the transaction have suffered. According to the most recent trustee report (January 2003), the class A overcollateralization is at 91.3%, versus the required ratio of 116%, and compared to a ratio of 98.8% in March 2002. According to the January trustee report, the weighted average coupon has deteriorated to 9.47%, versus the minimum required weighted average coupon of 10.8% and a weighted average coupon of 10.12 % in March 2002. The transaction is currently failing seven out of the nine Standard & Poor's issuer rating distribution tests. As a part of its analysis, Standard & Poor's reviewed the results of recent cash flow model runs. These runs stressed various parameters that are instrumental in the performance of this transaction, and are used to determine its ability to withstand various levels of default. When the stressed performance of the transaction was then compared to the projected default performance of the current collateral pool, Standard & Poor's found that the projected performance of the class A notes, given the current quality of the collateral pool, was not consistent with the prior rating. Consequently, Standard & Poor's has lowered its rating on these notes to the new level. Standard & Poor's will continue to monitor the performance of the transaction to ensure that the ratings assigned to the rated classes continue to reflect the credit enhancement available to support the notes. RATING LOWERED ML CBO VII 1997-C-3 Rating Class To From Current Bal. (Mil. $) A CC CCC+/Watch Neg 86.14 MORGAN STANLEY: S&P Drops Ratings on Classes E & F1 to CCC/D ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on the class C, D, E, and F1 certificates of Morgan Stanley Dean Witter Capital I Inc.'s commercial mortgage securities pass-through certificates series 2000-XLF and removed them from CreditWatch negative, where they were placed on Jan. 30, 2003. In addition, the ratings on classes A, B, F2, and F7 are affirmed. This action stems from the default at maturity of the Market Center loan, which represents 40% of the pool balance, or $160 million out of a current deal balance of $397.3 million. The Market Center loan matured on Feb. 1, 2003 and is secured by a 744,401 square-foot (based upon the most recent survey) office complex at 555 and 575 Market Street in San Francisco. The two office towers are in San Francisco's South Financial District and directly border the South of Market district. The San Francisco office market has seen a dramatic deterioration in rent and occupancy levels. The current market asking rents are approximately $30 per square foot with a current market vacancy rate of approximately 21%. This compares to around $70 to $80 per square foot just two years ago. The current occupancy for the property is 17.3%, and the most recent debt service coverage (DSC) is negative versus 84.5% occupancy and 1.48x DSC at issuance. The borrower, which is a subsidiary of Tishman Speyer/Travelers Real Estate Venture III LLC, has agreed to work closely with Midland Loan Services Inc., the special servicer, to facilitate an immediate sale of the property. The proceeds of the sale will be used to repay the loan. The borrower and Midland expect to announce shortly the selection of a broker to market the property promptly and widely. Any loss to the trust will depend upon what the property sells for. As such, the magnitude of the loss is unknown at this time but Midland notes it has various reserve accounts totaling $56 million that could be used to offset the principal balance. However, a loss is likely even after reserves are applied given the present state of the San Francisco office market. In addition to the Market Center loan, the trust contains three other floating-rate loans: the CenterAmerica Pool, 909 Third Avenue, and Beach Place. The CenterAmerica Pool loan has a current balance of $110.5 million (or 27.8% of the pool) and is secured by 23 community and neighborhood shopping centers. Its most recent DSC, based on net operating income, is 4.47x, with occupancy reported as 89.9%. 909 Third Avenue loan has a current balance of approximately $105.25 million (or 26.5%) and is secured by an office building in New York City. Its most recent NOI DSC is 6.43x, with occupancy reported as 96%. The Beach Place loan has a current balance of $21.5 million (or 5.4%) and is secured by a retail center located in Fort Lauderdale, Florida. Its most recent NOI DSC is 5.02x, with an occupancy reported as 81%. Excluding the Market Center loan, the NOI compares favorably with those at issuance. Based on discussions with Midland, Standard & Poor's stressed various loans in the mortgage pool as part of its analysis. The expected losses and resultant credit levels adequately support the lowered and affirmed ratings. RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Morgan Stanley Dean Witter Capital I Inc. Commercial mortgage pass-through certs series 2000-XLF Rating Class To From C BBB A/Watch Neg D B A-/Watch Neg E CCC BBB/Watch Neg F1 D BBB-/Watch Neg RATINGS AFFIRMED Morgan Stanley Dean Witter Capital I Inc. Commercial mortgage pass-through certs series 2000-XLF Class Rating A AAA B AA F2 BBB- F7 BBB- MOTO PHOTO: MOTO Franchise Acquires Substantially All Assets ------------------------------------------------------------ MOTO Franchise Corporation acquired substantially all of the assets of Moto Photo, Inc., a Dayton, Ohio-based franchisor of retail imaging stores. As a result, MFC has assumed the role of franchisor to a system of 279 MotoPhoto(R) stores. Harry Loyle, the majority shareholder and operating President & CEO of MFC, recently formed the privately-owned Ohio based company along with six other equity partners who are also MotoPhoto(R) franchisees and area developers. According to Loyle, who has been in photography and franchising for over 30 years, "The new digital technology has opened vast opportunities for the photo industry. The digital user continues to go more and more mainstream searching for specialty retail outlets which will service their needs in the areas of quality digital prints and educational needs while offering them unique ways to preserve and share their memories." Loyle continued, "MotoPhoto(R) stores, as full-service imaging retailers, offer the consumer these types of solutions with the caring, commitment and dedication of our owner-operated franchise network. Furthermore, we plan to work closely with our supplier, Eastman Kodak, to expand our digital offerings while at the same time continuing to offer the best products and services to support our core film-based processing business." Loyle also sees MotoPhoto's new digital portrait studios as having tremendous growth opportunities. The studios offer digital previewing and custom portrait enhancements with package delivery time cut significantly. MotoPhoto currently has approximately fifty portrait studios with the new digital technology. Loyle stated, "The new MotoPhoto franchisor, MFC, is excited to be working with a dedicated team of associates focused on supporting its franchisees and capitalizing on the growth opportunities presented by new digital technology." MOTO Franchise Corp., is a Dayton, Ohio-based franchisor of 279 one-hour photofinishing labs and portrait studios in the U.S. and Canada. Further information is available at http://www.motophoto.com MOTO Photo, Inc. filed for Chapter 11 reorganization on November 25, 2002, in the U.S. Bankruptcy Court for the Southern District of Ohio (Dayton) (Bank. S.D. Oh. Case No. 02-38935). Anne M. Frayne, Esq., at Myers & Frayne Co., L.P.A., represent the Debtor in this case. NTL: Maxcor Initiates Suit to Resolve When-Issued Trade Disputes ---------------------------------------------------------------- Maxcor Financial Inc., the U.S. broker-dealer subsidiary of Maxcor Financial Group Inc. (Nasdaq: MAXF), filed suit in the Supreme Court of the State of New York, County of New York, seeking a uniform and permanent resolution of the disputes surrounding the settlement of when-issued trades in NTL Inc., common stock. The settlement of when-issued trades in NTL common stock was thrown into turmoil on January 10th when NTL emerged from bankruptcy under a plan of reorganization providing for the issuance of one-fourth the number of shares as was previously contemplated. Maxcor and other participants in the when-issued trading market expected that when-issued trades would be adjusted to reflect what was effectively a 1-for-4 reverse stock split. Unfortunately, a number of buyers in that market, seizing upon a Nasdaq advisory that it would not cancel the when-issued trades, have instead attempted to claim a windfall and take delivery of shares with a value potentially 4x in excess of what they bargained for. As previously announced, Maxcor and other sellers of when-issued NTL shares sought and obtained preliminary relief on January 16th from the United States Bankruptcy Court for the Southern District of New York. Recognizing that the reverse stock split was supposed to be a ministerial matter that did not adversely affect anyone's rights, the Court's relief allowed all sellers to force settlement of their transactions on an adjusted basis that reflected the reverse stock split. The Court then extended this relief through February 5th pursuant to a second order. Many of Maxcor's counterparties settled their when-issued transactions on an adjusted basis in accordance with the Bankruptcy Court's orders, but others did not. As a result, after the Bankruptcy Court's temporary relief dissolved, Maxcor filed its suit in New York State Supreme Court - a court with broader jurisdictional reach. The suit names all counterparties who traded with Maxcor in when-issued NTL shares. Roger Schwed, General Counsel of Maxcor's parent company, explained: "We principally filed this suit to pursue those parties who are persisting in trying to grab a windfall by refusing to adjust to reflect what was intended by NTL and the Bankruptcy Court to be a neutral transaction with the same effect as a 1-for-4 reverse stock split. However, we felt obliged to name all parties to our trades, whether they had adjusted with us or not, in order to ensure that a consistent result obtains in all instances." A number of industry participants, including several of Maxcor's counterparties who are named in the suit, have privately expressed support for Maxcor's efforts to bring this matter to a close on a consistent basis. Without a single forum in which to seek a uniform resolution, participants in the when-issued market for NTL shares who acted both as buyers and sellers risk being whipsawed by inconsistent results that potentially might force them to deliver, when acting as a seller, four times as many shares as they receive when acting as a buyer. Maxcor cautioned that it could not currently predict with any certainty the ultimate outcome of its lawsuit or of the settlement disputes themselves, the time frame for their resolution, or whether its previously announced estimate of their possible financial impact will be mitigated. Maxcor said, however, that it was currently exploring whether all of the affected parties might have an interest in seeking a speedier, negotiated result through consensual mediation. Maxcor also noted that one party named in its lawsuit, to whom Maxcor was a net seller, has already settled out of it by agreeing to finalize the settlement of all of its trades with Maxcor on a fully-adjusted basis. Maxcor Financial Inc., is an SEC-registered broker-dealer, specializing in institutional sales and trading operations in high-yield and distressed debt, municipal bonds, convertible securities and equities. Through its Euro Brokers division, Maxcor is also a leading domestic and international inter-dealer broker specializing in U.S. Treasury and federal agency bonds and repurchase agreements, emerging market debt products and other fixed income securities. Maxcor is a subsidiary of Maxcor Financial Group Inc. -- http://www.maxf.com-- which employs approximately 500 persons worldwide and maintains principal offices in New York, London and Tokyo. PACIFIC GAS: State Street Bank Discloses 8.90% Equity Stake ----------------------------------------------------------- State Street Bank and Trust Co., acting in various fiduciary capacities beneficially owns 35,961,749 shares of the common stock of Pacific Gas & Electric Company. The holding represents 8.9% of the outstanding common stock shares of PG&E. State Street Bank and Trust has the sole power to vote the entire number of shares held, but holds shared voting power over 24,795,161 such shares. Dispositive power is distributed by sole exercise over 35,929,359 shares and shared dispositive power over 31,810 shares. Pacific Gas and Electric Company, incorporated in California in 1905, is one of the largest combination natural gas and electric utilities in the United States. Based in San Francisco, the utility serves 13 million people throughout a 70,000-square-mile service area in Northern and Central California. Pacific Gas filed for Chapter 11 protection on August 6, 2001, in the U.S. Bankruptcy Court for the Northern District of California (Bankr. N.D. Calif. Case No.: 01-30923). PRIMUS: Launches Business Cellular Long Distance at Low Rates ------------------------------------------------------------- PRIMUS Telecommunications Canada Inc., the wholly-owned subsidiary of PRIMUS Telecommunications Group, Incorporated (Nasdaq: PRTL), a facilities-based total service provider offering an integrated portfolio of voice, data, Internet, and Web hosting services, has launched a new service extending PRIMUS Canada's low long distance rates to business cellular subscribers. The Wireless Access Service delivers savings of up to 50 per cent or more on wireless international calls and up to 25 per cent on wireless North American calls. Wireless long distance calling represents a significant, but hidden expense for many businesses. With the new service, business users can have their cellular long distance billed to their existing PRIMUS long distance bill without the need to change cellular providers. The wireless service provider bills only for local airtime according to the customer's selected plan. "Businesses deserve the same long distance rates whether their call originates on a cell phone or at their desk," said Ted Chislett, President, PRIMUS Canada. "PRIMUS Canada's Wireless Access Service gives cellular customers the ability to choose their long distance provider, just as they have come to expect with traditional phone service. We believe this innovation is long overdue and are very pleased to be the first company in Canada to commercially offer this service." Unlike typical wireless long distance plans, PRIMUS Canada's Wireless Access Service does not require a term commitment and customers are not locked into a minimum amount of long distance usage. Customers simply dial any of PRIMUS Canada's local access numbers throughout Canada - where they are immediately recognized through proprietary authentication technology. They then dial their destination number and their call is connected through PRIMUS's global network. As a promotion and incentive to trial the new service, for a limited time PRIMUS Canada is offering new Wireless Access Service customers 100 free minutes of wireless long distance. "This service has been used successfully by PRIMUS Canada employees for years," Mr. Chislett said. "To meet the customer demand for choice and flexibility in wireless long distance services, we began offering it to our residential customers last year and the response has been extremely positive." PRIMUS offers the service to customers in Canada, France, Italy, Spain, the United Kingdom and the United States. Through the first nine months of 2002, PRIMUS demonstrated its position as a leading global service provider by carrying nearly six billion international and domestic long distance customer minutes. PRIMUS Telecommunications Group, Incorporated (NASDAQ: PRTL) -- with a total shareholders' equity deficit of about $183 million as of September 30, 2002 -- is a global facilities-based Total Service Provider offering bundled voice, data, Internet, digital subscriber line, Web hosting, enhanced application, virtual private network, and other value-added services. PRIMUS owns and operates an extensive global backbone network of owned and leased transmission facilities, including over 300 IP points-of-presence throughout the world, ownership interests in over 23 undersea fiber optic cable systems, 19 international gateway and domestic switches, a satellite earth station and a variety of operating relationships that allow it to deliver traffic worldwide. PRIMUS has been expanding its e-commerce and Internet capabilities with the deployment of a global state-of- the-art broadband fiber optic ATM+IP network. Founded in 1994 and based in McLean, VA, PRIMUS serves corporate, small- and medium-sized businesses, residential and data, ISP and telecommunication carrier customers primarily located in the North America, Europe and Asia Pacific regions of the world. News and information are available at PRIMUS's Web site at http://www.primustel.com QUEBECOR: S&P Plucks Ratings Off Watch on Sun Media Refinancing --------------------------------------------------------------- Standard & Poor's Ratings Services removed its ratings on diversified media company, Quebecor Media Inc., from CreditWatch with negative implications, where they were placed on Sept. 16, 2002, following the completion of Sun Media's refinancing that was carried out largely as expected. In addition, outstanding ratings on Quebecor Media, including the 'B+' long-term corporate credit rating, along with all ratings on subsidiaries Sun Media Corp., and Videotron Ltee, were affirmed. The outlook is stable. At the same time, ratings on Sun Media's US$97.5 million 9.5% senior subordinated notes due February 2007, and US$53.5 million 9.5% senior subordinated notes due May 2007, were withdrawn to reflect Sun Media's intention to call these notes in the near term. "The ratings affirmations reflect improved financial flexibility at Sun Media and Quebecor Media, due to the easing of covenant restrictions on free cash flows and a light amortization schedule following the refinancing," said Standard & Poor's credit analyst Barbara Komjathy. Net proceeds from Sun Media's new US$230 million six-year senior secured term loan B and US$205 million 7.625% senior unsecured notes due 2013, will be used to redeem Sun Media's outstanding senior subordinated notes, its former credit facilities, and pay a C$260 million special dividend to Quebecor Media, of which C$150 million will be used to reduce indebtedness at Videotron. The ratings on Quebecor Media are based on the consolidated group of companies, including Sun Media and Videotron, and reflect the strong market position of its diversified portfolio of media and cable television assets, particularly in the Province of Quebec, steady free cash flow generation at its newspaper operations despite cyclical industry fundamentals, and an improving free cash flow trend at its cable television operations. These factors are offset by competitive industry conditions, both in the newspaper and broadcast distribution industries, and Quebecor Media's aggressive financial policies, including constrained financial flexibility at Videotron in the near term. The stable outlook reflects Standard & Poor's expectation that Quebecor Media will maintain the strong market position of its key assets and will gradually improve financial flexibility at Videotron from free cash flows. Factors that could positively affect the ratings include material increase in financial flexibility at Videotron, either through additional debt reductions or refinancing of its existing bank debt, and a favorable near-term resolution of Videotron's labor dispute. Failure to resolve the ongoing strike would pose a negative dynamic for the consolidated ratings. QWEST COMMS: Posts Additional Internal Financial Review Results --------------------------------------------------------------- Qwest Communications International Inc., (NYSE: Q) announced additional results of its internal review of the 2001 and 2000 financial statements, and the estimated impact of the total financial restatement for those years. Preliminary results of the prior phases of this restatement have been disclosed in a number of prior press releases, which were later filed on Forms 8-K with the United States Securities and Exchange Commission. These press releases provided investors with updates on the status of investigations by regulatory agencies and the company's internal review. Early in 2002, the company and its board of directors began an analysis of, among other things, revenue recognition and accounting treatment for optical capacity asset transactions, the sale of equipment by the company to certain customers, and QwestDex, including the changes in the production schedules and lives of some of its directories. Subsequently, the company and its board of directors expanded this review to include an assessment of internal controls, as well as accounting policies, practices and procedures. In connection with this review, the company has discovered additional restatement entries to the 2001 and 2000 financial statements. In making these restatements, the company has consulted with KPMG LLP. As discussed below, the restatements involve, among other matters, revenue and expense recognition and cost accrual issues for 2001 and 2000. The restated financial statements are subject to audit by KPMG. Qwest believes, but can give no assurances, that such adjustments are final and that all such adjustments necessary to present its financial statements in accordance with generally accepted accounting principles in the United States (GAAP) have been identified. The company has addressed adjustments to Adjusted EBITDA in this release, because it has previously announced the impact of the restatement on the Adjusted EBITDA amounts included in its 2001 Form 10-K. Qwest does not expect, however, to include Adjusted EBITDA amounts in its restated 2001 and 2000 financial statements or in its Amended Form 10-K in compliance with new SEC regulations that become effective March 28, 2003. Adjustments to Previously Disclosed Amounts The adjustments to previously disclosed amounts primarily relate to the accounting for non-recurring equipment sales to certain customers. The company previously announced that it had recorded adjustments during the fourth quarter of 2001 with respect to non-recurring equipment sales to certain customers because the revenue and/or profit was incorrectly recognized up front. The company's previous announcement indicated that it believed the only adjustment required in its planned restatement was to make the required adjustment to the appropriate annual or interim period. In the process of completing the review, Qwest has determined that in one of these cases the company's previously announced position was not appropriate. The initial adjustment to the accounting for the sale of equipment to KMC in 2001 deferred and amortized the profit originally recognized up front. The company has now determined that the revenue was incorrectly recognized up front as well, and the proper adjustment is to reverse the $148 million in revenue originally recognized in the first and second quarters in 2001. Additional Revenue Adjustments Identified Included in additional revenue adjustments are adjustments resulting from billing errors, revenue recognition and/or related timing and other items. * Billing Errors: Billing errors resulted from amounts billed to customers that Qwest subsequently determined to be inappropriate. The company expects that the correction to its previously issued financial statements for these items will result in a decrease in previously reported revenue and Adjusted EBITDA of $32 million and $28 million in the restated 2001 financial statements and $11 million and $11 million in the restated 2000 financial statements, respectively. * Revenue Recognition and/or Related Timing: The company has determined that in certain circumstances it recognized revenue before the sales process was complete. The company expects the correction to its previously issued financial statements for these items will result in a decrease in previously reported revenue of $37 million and an increase in Adjusted EBITDA of $5 million in the restated 2001 financial statements. The company also expects this will result in a decrease in revenue and Adjusted EBITDA of $115 million and $95 million in the restated 2000 financial statements, respectively. * Other Items: Other items include other incorrect applications of accounting principles and other accounting process errors that were individually insignificant. In the aggregate the company expects that these items will result in a decrease in previously reported revenue and Adjusted EBITDA of $57 million and $44 million in the restated 2001 financial statements. The company also expects the correction to its previously issued financial statements for these items will result in a decrease in previously reported revenue of $8 million in the restated 2000 financial statements, with no net impact on Adjusted EBITDA for 2000. Additional Adjusted EBITDA Adjustments Identified Included in the additional Adjusted EBITDA restatement entries are items that result from the under-accrual of expenses, deferral of costs that are non-recoverable and other items. * Under-Accrual of Expenses: Under-accrual of expenses primarily related to employment, benefit and compensation expenses. The company expects that the correction to its previously issued financial statements for these items will result in a decrease in previously reported Adjusted EBITDA of $131 million and $20 million in the restated 2001 and 2000 financial statements, respectively. * Non-Recoverable Costs: Non-recoverable costs represent customer-related expenses that were deferred in anticipation of recovery that ultimately went unrecoverable. The company expects that the correction to its previously issued financial statements for these items will result in a decrease in previously reported Adjusted EBITDA of $17 million and $34 million in the restated 2001 and 2000 financial statements, respectively. * Other Items: Other items include other incorrect applications of accounting principles and other accounting process errors that were individually insignificant. In the aggregate, the company expects the correction to its previously issued financial statements for these items will result in a decrease in previously reported Adjusted EBITDA of $178 million and $95 million in the restated 2001 and 2000 financial statements, respectively. Some amounts previously disclosed have now been updated. The company reiterates that the adjustments to its restated financial statements are subject to audit by KPMG. The company can give no assurances that such aggregate adjustments are final and that all adjustments necessary to present its financial statements in accordance with GAAP have been identified. Certain of the matters addressed above relate to adjustments that are to be made to the Qwest Corporation financial statements. The company plans on announcing its 2002 results on Wednesday, February 19, 2003. 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, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=Q08USR3for real-time bond pricing. RADIO ONE: Reports Improved Financial Results in Fourth Quarter --------------------------------------------------------------- Radio One, Inc., (NASDAQ: ROIAK and ROIA) reported record results for its fourth quarter ended December 31, 2002. Net broadcast revenue was $76.9 million, up 14% from the same period in 2001. Broadcast cash flow was $39.0 million, an increase of 19% from the same period in 2001. EBITDA was $35.7 million, an increase of 20% from the same period in 2001. Net income before preferred stock dividends and cumulative effect of accounting change was $9.6 million, or $0.09 per share, up from a net loss before preferred stock dividends of $15.4 million, or $0.16 loss per share, for the same period in 2001. After-tax cash flow was $18.6 million, or $0.18 per share, up 107% from the same period in 2001. Free cash flow was $15.2 million, an increase of 230% from the same period in 2001. For the quarter, same station results were the same as reported results. Alfred C. Liggins, III, the Company's CEO and President stated, "This quarter showed yet again that Radio One's business model and strategy allow us to grow faster than the radio industry in general, post one of the industry's highest BCF margins and to generate a tremendous amount of free cash flow. This strategy is long-term in its focus, provides consistent results and is, we believe, highly sustainable. Overall, 2002 was the best year in the Company's history. We fully integrated the acquired Blue Chip radio stations, saw significant ratings improvements across the portfolio, grew considerably faster than the industry and significantly de-leveraged our balance sheet. 2003 is off to a great start for us and we are optimistic that, barring world events outside of our control, we should have another record- setting year." Net broadcast revenue increased to approximately $76.9 million for the quarter ended December 31, 2002 from approximately $67.4 million for the quarter ended December 31, 2001 or 14%. Net broadcast revenue increased to approximately $295.9 million for the twelve months ended December 31, 2002 from approximately $243.8 million for the twelve months ended December 31, 2001 or 21%. These increases were the result of broadcast revenue growth in most of the Company's markets, as the Company benefited from historical ratings increases and overall radio industry growth. Additional revenue gains were derived from the Company's August 2001 acquisition of Blue Chip Broadcasting, Inc. and two new stations launched in the Atlanta market within the past 18 months and from the Company's XM Satellite Radio programming operations. Operating expenses excluding depreciation, amortization and non- cash compensation increased to approximately $41.2 million for the quarter ended December 31, 2002 from approximately $37.7 million for the quarter ended December 31, 2001 or 9%. Operating expenses excluding depreciation, amortization and non-cash compensation increased to approximately $156.8 million for the twelve months ended December 31, 2002 from approximately $129.6 million for the twelve months ended December 31, 2001 or 21%. These increases in expenses were related to (1) the Company's expansion within the markets in which it operates, including increased variable costs associated with increased revenue, (2) start-up and expansion expenses in certain markets with new radio stations or new radio station formats, (3) expenses associated with the radio stations the Company has acquired within the past 18 months and (4) higher corporate expenses due to the Company's rapid expansion. Interest expense decreased to approximately $13.1 million for the quarter ended December 31, 2002 from approximately $16.9 million for the quarter ended December 31, 2001 or 22%. Interest expense decreased to approximately $59.1 million for the twelve months ended December 31, 2002 from approximately $63.4 million for the twelve months ended December 31, 2001 or 7%. These decreases related primarily to the Company having reduced outstanding bank debt as a result of proceeds received from the Company's April 2002 equity offering, as well as lower interest rates on that bank debt as a result of declining leverage and lower market interest rates for most of 2002. Income before provision for income taxes, extraordinary item and cumulative effect of an accounting change increased to approximately $17.8 million for the quarter ended December 31, 2002 compared to a loss before benefit for income taxes, extraordinary item and cumulative effect of an accounting change of approximately $22.8 million for the quarter ended December 31, 2001. Income before provision for income taxes, extraordinary item and cumulative effect of an accounting change increased to approximately $62.2 million for the twelve months ended December 31, 2002 compared to a loss before benefit for income taxes, extraordinary item and cumulative effect of an accounting change of approximately $74.6 million for the twelve months ended December 31, 2001. These increases were due primarily to higher operating income due to higher revenue and lower amortization expense due to the adoption of SFAS 142 during the first quarter of 2002. Specifically, for the twelve months ended December 31, 2002, the Company incurred depreciation and amortization expense of approximately $17.6 million compared to approximately $129.7 million for the twelve months ended December 31, 2001. Net income increased to approximately $3.0 million for the quarter ended December 31, 2002 compared to a loss of approximately $15.4 million for the quarter ended December 31, 2001. This increase was due to higher income before provision for income taxes, extraordinary item and cumulative effect of an accounting change, partially offset by a provision for income taxes compared to the previous year's loss before benefit for income taxes, extraordinary item and cumulative effect of accounting change, partially offset by a benefit for income taxes. Assuming the adoption of SFAS 142 "Goodwill and Other Intangibles" had occurred at the beginning of 2001, net income would have been approximately $3.7 million for the fourth quarter of 2001. Net income increased to approximately $7.1 million for the twelve months ended December 31, 2002 compared to a loss of approximately $55.2 million for the twelve months ended December 31, 2001. This increase was due to income before provision for income taxes, extraordinary item and cumulative effect of an accounting change in 2002, partially offset by a provision for income taxes compared to the previous year's loss before benefit for income taxes, extraordinary item and cumulative effect of accounting change, partially offset by a benefit for income taxes. The increase in net income for the 12- month period ending December 31, 2002 was partially offset further by the effect of the adoption of SFAS 142 during 2002 which resulted in a charge of approximately $29.8 million, net of taxes. BCF increased to approximately $39.0 million for the quarter ended December 31, 2002 from approximately $32.9 million for the quarter ended December 31, 2001 or 19%. BCF increased to approximately $151.4 million for the twelve months ended December 31, 2002 from approximately $123.3 million for the twelve months ended December 31, 2001 or 23%. These increases were attributable primarily to the increases in net broadcast revenue partially offset by higher operating expenses as described above. EBITDA increased to approximately $35.7 million for the quarter ended December 31, 2002 from approximately $29.7 million for the quarter ended December 31, 2001 or 20%. EBITDA increased to approximately $139.0 million for the twelve months ended December 31, 2002 from approximately $114.2 million for the twelve months ended December 31, 2001 or 22%. These increases were attributable primarily to the increase in net broadcast revenue partially offset by higher operating expenses and higher corporate expenses associated with the Company's overall growth as described above. ATCF increased to approximately $18.6 million for the quarter ended December 31, 2002 from approximately $9.0 million for the quarter ended December 31, 2001 or 107%. ATCF increased to approximately $64.4 million for the twelve months ended December 31, 2002 from approximately $37.3 million for the twelve months ended December 31, 2001 or 73%. These increases were attributable primarily to the increases in BCF and EBITDA partially offset by higher current taxes (versus a tax benefit in 2001) in 2002 compared to 2001. FCF increased to approximately $15.2 million for the quarter ended December 31, 2002 from approximately $4.6 million for the quarter ended December 31, 2001 or 230%. FCF increased to approximately $53.4 million for the twelve months ended December 31, 2002 from approximately $28.0 million for the twelve months ended December 31, 2001 or 91%. These increases were attributable primarily to the increases in ATCF partially offset by capital expenditures of approximately $3.4 million and $11.0 million for the three month and twelve month periods, respectively, of 2002 compared to approximately $4.5 million and $9.3 million for the three month and twelve month periods, respectively, of 2001. Company Information and Guidance: The Company adopted the transitional rules of SFAS 142 related to the impairment of certain intangible assets during the first quarter of 2002. In accordance with SFAS 142, during the second quarter of 2002, Radio One determined that it had an impairment of goodwill (as defined in SFAS 142) in its Augusta, Georgia market. As required by SFAS 142, the Company calculated the amount of the impairment and recorded a charge (net of tax) of approximately $6.6 million during the fourth quarter of 2002. For the first quarter of 2003, the Company expects to report net broadcast revenue of approximately $64.6 million, BCF of approximately $29.1 million, EBITDA of approximately $25.7 million, ATCF per share of approximately $0.10 and net income per share (before preferred dividends of $0.05 per share and one time and/or extraordinary items, if any) of approximately $0.05. This would represent double-digit growth in same station net revenue and BCF for the quarter. The Company expects capital expenditures for all of 2003 to be approximately $10.5-11.5 million and corporate expenses to be approximately $14-15 million. Radio One, Inc. -- http://www.radio-one.com-- is the nation's seventh largest radio broadcasting company (based on 2001 pro forma revenue) and the largest primarily targeting African- American and urban listeners. Pro forma for all announced acquisitions, the Company owns and/or operates 66 radio stations located in 22 urban markets in the United States and reaches approximately 12.5 million listeners every week. The Company also programs five channels on the XM Satellite Radio Inc. system. As previously reported in Troubled Company Reporter, Standard & Poor's revised its outlook on radio broadcaster Radio One Inc., to positive from stable based on expected financial profile improvements. Standard & Poor's affirmed its ratings, including its single- 'B'-plus corporate credit rating, on the company. Radio One, based in Lanham, Md., had $650 million in total debt outstanding as of June 30, 2002. Standard & Poor's also assigned its preliminary single-'B' senior unsecured and single-'B'-minus subordinated debt ratings to the debt components of Radio One's $500 million mixed shelf registration. Preferred stock issues, if any, will be rated on their own terms. RAND MCNALLY: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Lead Debtor: Rand McNally & Company 8255 North Central Park Avenue Skokie, IL 60076 Bankruptcy Case No.: 03-06087 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- randmcnally.com Inc. 03-06088 Type of Business: The Debtors are providers of geographic and travel information in a variety of formats, including print materials, software products and on the internet. Chapter 11 Petition Date: February 11, 2003 Court: Northern District of Illinois, Eastern Division Judge: Eugene R. Wedoff Debtors' Counsel: Robert E. Richards, Esq. Sonnenschein Nath & Rosenthal 8000 Sears Tower Chicago, IL 60606 Tel: 312-876-8000 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million Debtors' 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ The Bank of Nova Scotia Bank Loan $249,200,000 (as agent for the holders (as of of Credit Agreement Claims) Dec. 2, 2002) Ron Dooley One Liberty Plaza 165 Broadway Avenue, 25th Floor New York, NY 10006 Tel: 212-225-5228 State Street Band & Sr. Sub. Term Loan $114,700,000 Trust Co. (as of (as agent for the holders Dec. 2, 2002) of Sr. Sub. Loan Claims) E. Decker Adams, VP State Street Bank & Trust Co. 2 Avenue de Lafayette Boston, MA 02111 Tel: 617-662-1754 Webcrafters Inc. Trade Debt $1,905,008 Bob Lay Box #78635 Milwaukee, WI 53278-0635 Tel: 608-245-5533 Quebecor World Inc. Trade Debt $1,842,720 Eric Vautrin PO Box 98668 Chicago, IL 60693-8668 Tel: 203-532-3487 Banta Co. Trade Debt $989,950 Bart Alsteen Box 78117 Milwaukee, WI 53278 Tel: 920-751-7771 Ris Paper Company Inc. Trade Debt $536,231 John Rossinni Location 00337 Cincinnati, OH 45264-0337 Tel: 212-244-6400 Prolam Trade Debt $499,441 Kim Rice 2400 Commerce Drive Libertyville, IL 60048 Tel: 847-968-3967 The Dot Printer Trade Debt $453,983 Jim Voss 2424 McGaw Avenue Irvine, CA 92614-5834 Tel: 949-474-1100 Delorme Trade Debt $207,015 Federal Express Corp. Trade Debt $169,410 Stone Container Corp. Trade Debt $148,442 Replogle Globes Trade Debt $143,589 Map Link Trade Debt $134,210 Angel Lithograph Trade Debt $126,782 The Royal Bank of Scotland Trade Debt $125,236 Flying J Inc. Trade Debt $112,349 EMTG LLC Trade Debt $90,000 Consolidated Freightways Trade Debt $87,286 Sony Disc Manufacturing Trade Debt $84,668 Hunter Contract Mfg. Trade Debt $79,085 RE-CON BLDG: Creditors' Trustee Grants Cert. of Full Performance ---------------------------------------------------------------- Re-Con Building Products Inc., has received a "Certificate of Full Performance" from the Trustee for the Company's creditors certifying that the proposal to its creditors, as filed with the official receiver on the 6th day of February, 1998, accepted on February 24, 1998 and further amended on December 8, 1999, has been fully performed as of the 23rd day of January, 2003. "We are very pleased that this has been accomplished and is now behind us" stated P. Louis Clarke, President of the Company. "We would also like to thank all of the unsecured creditors and our many customers who supported us throughout this process." Re-Con Building Products Inc., is an Abbotsford, B.C. based company which manufactures fibre cement roofing products for the North American residential housing market. RESOURCE AMERICA: Commences Exchange Offer for 12% Senior Notes --------------------------------------------------------------- Resource America, Inc., (NASDAQ:REXI) filed a registration statement on Form S-4 relating to a proposed offer to exchange a combination of its new 12% senior notes due 2008 and a pro rata portion of $10 million in cash for each $1,000 principal amount of its outstanding 12% senior notes due August 1, 2004, and a consent solicitation to eliminate and/or amend certain restrictive covenants and other provisions in the indenture governing the original notes. The Company also announced the filing of Form S-3 relating to the proposed issuance in a public offering of up to $30 million of new 12% senior notes due 2008. The notes issued in the exchange offer and consent solicitation and the registered offering will be issued under the same indenture. The exchange offer, consent solicitation and public offering will commence as soon as practicable after the registration statements are declared effective by the Securities and Exchange Commission. Resource America has engaged Bear, Stearns & Co. Inc., and Friedman, Billings, Ramsey & Co., Inc., a subsidiary of Friedman, Billings, Ramsey Group, Inc., as exclusive Dealer Managers for the exchange offer and current solicitation, and as Joint Bookrunners for the public offering. The new 12% senior notes due 2008 will be offered in connection with a distribution by the Company and represent new financing to the Company. Registration statements relating to these securities have been filed with the Securities and Exchange Commission but have not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statements becomes effective. A written prospectus with respect to the exchange offer or the public offering can be obtained from the contact person listed above. Resource America, Inc., is a proprietary asset management company that uses industry-specific expertise to generate and administer investment opportunities for our own account and for outside investors in the energy, real estate and equipment leasing industries. For more information, please visit our Web site at http://www.resourceamerica.com As reported in Troubled Company Reporter's November 28, 2002 edition, Standard & Poor's lowered its rating on Resource America Inc.'s 12% senior notes due 2004 to 'B-' from 'B' following a review of the company's capital structure and the likelihood that high levels of secured bank debt would not be reduced materially in the near-term. The outlook is stable. Standard & Poor's rating criteria requires a one-notch difference between the senior unsecured debt rating and the corporate credit rating when outstanding secured obligations exceed more than 15% of total assets, which now is the case for Resource America. If Resource materially reduces reliance on secured debt on a sustained basis, Resource's senior unsecured debt issue rating could be raised. RIVIERA HOLDINGS: Fourth Quarter Net Loss Widens to $3.9 Million ---------------------------------------------------------------- Riviera Holdings Corporation (Amex: RIV) reported financial results for the fourth quarter ended December 31, 2002. EBITDA, as adjusted (Earnings Before Interest, Income Taxes, Depreciation, Amortization, loss on extinguishment of debt, and other, net) was $7.3 million, up $753,000 or 12 percent from the fourth quarter of 2001. Net revenues for the quarter were $43.3 million, comparable to net revenues of $44.0 million in the fourth quarter of 2001. Income from operations was $2.9 million, up $712,000 or 32 percent from the fourth quarter of 2001. Income from operations varies from EBITDA, as adjusted, due to depreciation. The net loss for the quarter was $3.9 million compared with a net loss of $3.2 million in the fourth quarter of 2001. The company recorded a tax benefit of $1.1 million in the fourth quarter of 2001, while no tax benefits have been recorded in 2002. For the year ended December 31, 2002, EBITDA, as adjusted, was $33.6 million, down 2 percent from $34.2 million in 2001. Net revenues were $188.3 million, down 7 percent from net revenues of $202.0 million a year ago. Income from operations was $15.9 million, down $1.1 million from a year ago. Income from operations varies from EBITDA, as adjusted, due to depreciation. The net loss for the year was $24.7 million compared with a net loss of $6.4 million in 2001. Fiscal 2002 results were affected by the loss on extinguishment of debt totaling $11.2 million or $3.25 per share. The costs included the call premium on the company's refinanced 10 percent bonds and Riviera Black Hawk's refinanced 13 percent bonds, the write off of unamortized deferred loan costs associated with the refinanced bonds and the balance of the original issue discount on the 10 percent bonds. Furthermore, the results were affected by approximately $2.7 million or $0.78 per share of additional interest expense, net incurred as a result of the defeasance / retirement of the debt. Finally, the company recorded a tax benefit of $2.2 million in 2001, while no tax benefits have been recorded in 2002. Fourth Quarter 2002 Highlights -- Consolidated EBITDA, as adjusted, increased by 12 percent to $7.3 million -- Consolidated income form operations increased by 32 percent to $2.9 million -- Riviera Las Vegas EBITDA, as adjusted, increased $531,000 or 13 percent to $4.5 million -- Riviera Las Vegas income from operations increased $604,000 or 37 percent to $1.6 million -- Riviera Las Vegas occupancy was 82 percent compared with 78 percent in the fourth quarter of 2001, ADR (Average Daily Rate) decreased $2.89 to $61.11 -- Riviera Black Hawk contributed $3.4 million in EBITDA, as adjusted, a decrease of $318,000 or 9 percent from the fourth quarter of 2001 -- Riviera Black Hawk contributed $1.9 million of income from operations, a decrease of $432,000 or 18 percent from the fourth quarter of 2001 Riviera Las Vegas Robert Vannucci, President of Riviera Las Vegas said "We are pleased that the positive trend of improving quarterly results beginning in the first quarter of 2002 continued through the fourth quarter, with EBITDA increasing by 13 percent over the fourth quarter of the previous year. Most importantly, we saw an improvement in net revenue in the fourth quarter, the first since 9/11. Net revenues increased by $298,000, 1 percent over prior year. "Slot volume (coin-in) equaled prior year levels. Convention room nights declined 10.9 percent or 4,300 room nights for the quarter compared to the fourth quarter of 2001 due to poor attendance at the November Comdex show. This was more than offset by an increase of 15,700 room nights, 19.7 percent, in leisure room nights. Room occupancy for the fourth quarter was 82.2 percent, up from last years 78.4 percent. The additional leisure room nights reduced our ADR by $2.89. Total room revenue, because of the increase in occupied room nights, equaled last year's. The change in our occupancy mix stimulated increases in entertainment and food and beverage revenues. "The Las Vegas market continues to recover from the impacts of 9/11 and the soft economy. The November 2002 year-to-date Las Vegas Convention and Visitors Authority (LVCVA) report indicates that visitor volumes were equal to 2001 levels. Citywide Hotel occupancy was 89.6 percent compared to 90 percent in 2001. Riviera occupancy for the 11 months ended November 30, 2002 was 91.1 percent compared to 93.6 percent in 2001. Convention attendance is up 3.4 percent; California drive in traffic is up 6.5 percent while air passenger counts are down 1.6 percent. "The new convention space at the Las Vegas and Mandalay Bay Convention centers should attract additional multi-property conventions. The additional capacity will enable the LVCVA to book new conventions that had date and exhibit space conflicts in the past. The Riviera's flexibility of meeting space and proximity to the Las Vegas convention center positions us to capitalize on both the recent growth in small meetings and conventions and future multi hotel conventions that will be booked into the Las Vegas convention center." Riviera Black Hawk Ron Johnson, President of Riviera Black Hawk said, "Net revenues for the fourth quarter were down $929,000 from the fourth quarter of 2001, resulting in a decrease in EBITDA of $318,000. Fourth quarter gaming revenues in the Black Hawk Market increased by 3.1 percent, substantially below the historical growth rate in this market. The supply of gaming machines grew 7.8 percent with the opening of the Hyatt in December of 2001. The Denver area economy continued to show weakness in the fourth quarter. In addition, construction on Highway 119, the main access route to Black Hawk, continues to disrupt traffic on weekdays. In spite of the negative factors affecting this market, we are encouraged that the weakness in the beginning of the fourth quarter was mitigated by positive growth in gaming revenues and EBITDA in December of 2002 compared to December 2001. We believe our recent growth is due to several marketing changes that were implemented in the early part of the quarter. We continue to monitor market conditions and are prepared to make adjustments accordingly." Consolidated Operations and New Venues William L. Westerman, Chairman of the Board and CEO, said, "We are pleased that in the fourth quarter we were able to increase consolidated EBITDA by 12 percent with essentially flat revenues. Also, the fact that we were able to hold our EBITDA decline for the year to 2 percent with a 7 percent decline in revenues is a credit to our management team. "The wisdom of diversifying our earnings base was again illustrated by 2002's second half results when the improvements in Las Vegas more than offset the decline in Black Hawk. We are continuing our efforts to obtain approval of gaming projects in Missouri and New Mexico. "With our $20 million in cash and $30 million line of credit, we are satisfied with our liquidity, our ability to maintain our existing properties in competitive position and to finance our diversification activities." American Stock Exchange Listing The company has been informed that it does not meet certain AMEX listing requirements, (due to among other things, the company's negative equity and losses) and that, consequently, the AMEX intends to initiate steps that could ultimately result in the delisting of the company's common stock from the American Stock Exchange. Riviera Holdings Corporation owns and operates the Riviera Hotel and Casino on the Las Vegas Strip and the Riviera Black Hawk Casino in Black Hawk, Colorado. Riviera is traded on the American Stock Exchange under the symbol RIV. As previously reported, Standard & Poor's assigned its single- 'B'-plus rating to the $210 million senior secured notes due 2010 to be issued by Riviera Holdings Corp. These securities were privately placed under Rule 144A. Proceeds from the notes, along with excess cash balances, were used to defease the company's 10% senior secured notes due 2004 and redeem the 13% senior secured notes due 2005 outstanding at the company's subsidiary, Riviera Black Hawk Inc. (B-/Positive/--). At the same time, Standard & Poor's affirmed Riviera Holdings Corp.'s single-'B'-plus corporate credit and senior secured ratings. The rating on the company's existing senior secured notes will be withdrawn once the refinancing is complete. The outlook remains negative. ROWECOM INC: Wants Until Feb. 20 to File Schedules & Statements --------------------------------------------------------------- RoweCom, Inc., and its debtor-affiliates want more time to complete and file their schedules of assets and liabilities, lists of equity security holders, schedules of executory contracts and unexpired leases, and statements of financial affairs as required by section 521 of the Bankruptcy Code and Bankruptcy Rule 1007. Because of the complexity of their operations, the Debtors anticipate that they will be unable to complete their Schedules and Statements within 15 days, as required under Bankruptcy Rule 1007(c). To prepare the required Schedules and Statements, the Debtors must gather information from books, records, and documents relating to a multitude of transactions. Collection of the necessary information requires an expenditure of substantial time and effort on the part of the Debtors' employees. The Debtors have mobilized their employees to work diligently on the assembly of the necessary information. Given the significant burdens already imposed on the Debtors' management by the commencement of these chapter 11 cases, however, the Debtors request additional time to complete and file the required Schedules and Statements. The Debtors anticipate that they will be able to file their Schedules and Statements, all in the appropriate formats prescribed by the Bankruptcy Code, no later than the earlier of: (a) 45 days after the Filing Date, which is on February 20, 2002, and (b) 24 hours prior to the First Meeting of Creditors mandated by Section 341 of the Bankruptcy Code. 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. The Company, together with six of its affiliates, filed for chapter 11 protection on January 27, 2003 (Bankr. Mass. Case No. 03-10668). Stephen E. Garcia, Esq., Mindy D. Cohn, Esq., at Kaye Scholer LLC and Jeffrey D. Sternklar, Esq., Jennifer L. Hertz, Esq., at Duane Morris, LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets and debts of over $50 million each. SHELDAHL: Pensions Plus Hired to Help Terminate 401(k) Plan ----------------------------------------------------------- Sheldahl, Inc., sought and obtained approval from the U.S. Bankruptcy Court for the District of Minnesota to employ Pensions Plus, Inc., to assist in terminating a 401(k) Savings Plan. The Debtor relates that it maintains a retirement plan known as the ACTWU Local 1481 401(k) Savings Plan. Approximately 176 union employees participate in the plan. In winding up its business operations, following the sale of its business assets, the Debtor wants to terminate the 401(k) Plan. Pensions Plus has offered to assist with that termination. Pensions Plus will undertake several different tasks, two of which are of the type historically paid for from plan assets; and one of which must be paid by the bankruptcy estate: a) Bring 401(k) Plan into compliance with most recent IRS regulations -- estimated cost $1,800. The 401(k) Plan has not been updated recently, and it cannot be terminated until it is in full compliance with exiting IRS regulations. Pensions Plus will amend the plan, for approval by Debtor's board of directors. b) Submit updated plan to IRS for Favorable Determination Letter -- estimated cost $5,000. To ensure that employee accounts can be rolled over into a new employee plan, it is necessary to obtain a favorable determination letter from the IRS regarding past plan operation. Pensions Plus will undertake to prepare the necessary documents to obtain this favorable determination letter. c) Determine and distribute participant funds - estimated cost $17,600 to $20,000 Pensions Plus has agreed to undertake the determination and distribution process, which consists of preparing distribution election forms for each participant, compiling returned forms and distributing plan proceeds, filing the final reporting forms and preparing 1099's for the employee distributions. Sheldahl, Inc., creates and distributes high-density substrates, quality fine-line flexible printed circuitry, and thin, flexible laminates and their derivatives to worldwide markets. The Company filed for chapter 11 protection on April 30, 2002 (Bankr. Minn. Case No. 02-31674). James L. Baillie, Esq., at Fredrikson & Byron, P.A., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $33,764,000 in total assets and $81,930,000 in total debts. SIERRA PACIFIC: Issuing $300MM Conv. Debt via Private Placement --------------------------------------------------------------- Sierra Pacific Resources (NYSE: SRP) has agreed to issue in a private placement $300 million of convertible notes with a coupon of 7.25 percent. The notes mature in 2010 and will be convertible into shares of the company's common stock, and cash, at approximately a 22-percent premium over the $3.75 closing price of the stock. The company anticipates that the transaction will close on February 14, 2003. The issuance of the convertible notes is consistent with Sierra Pacific's strategy to refinance its floating rate notes due April 2003 in advance of their maturity, reduce its cash requirements and strengthen its balance sheet. In addition, the incremental proceeds raised in the transaction will provide approximately $50 million of liquidity for the company. Walter Higgins, chairman, president and chief executive officer of Sierra Pacific Resources, said, "We are especially pleased that the transaction announced this morning was achieved so rapidly because it places us on solid financial footing to continue rebuilding and strengthening our capital structure. Redeeming the notes due this April is a key step in the process of stabilizing our financial position. The flexibility and liquidity created by this transaction allows us to place greater focus on the operational basics of our business so that we can better serve our customers throughout Nevada and the Lake Tahoe region of California and restore our company's financial health." The offering was made only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933. Headquartered in Nevada, Sierra Pacific Resources is a holding company whose principal subsidiaries are Nevada Power Company, the electric utility for most of southern Nevada, and Sierra Pacific Power Company, the electric utility for most of northern Nevada and the Lake Tahoe area of California. Sierra Pacific Power Company also distributes natural gas in the Reno-Sparks area of northern Nevada. Other subsidiaries include the Tuscarora Gas Pipeline Company, which owns 50 percent interest in an interstate natural gas transmission partnership, Sierra Pacific Communications, a telecommunications company, and Sierra Pacific Energy (e-three), an energy conservation services company. * * * As reported in Troubled Company Reporter's October 14, 2002 edition, Standard & Poor's Ratings Services reaffirmed its single-'B'-plus corporate credit ratings on Sierra Pacific Resources and its utility subsidiaries Nevada Power Co., and Sierra Pacific Power Co. Standard & Poor's also affirmed the double-'B' ratings on the senior secured debt at the two utilities. All ratings remain on CreditWatch with negative implications. SMLX TECHNOLOGIES: Assigns All Assets for Benefit of Creditors -------------------------------------------------------------- SMLX Technologies, Inc., (OTC Bulletin Board: SMLX) announced that, with the approval of its Board of Directors, SMLX filed a Form 15 with the Securities and Exchange Commission on February 5, 2003. The filing of the Form 15 will deregister its common stock and suspend reporting obligations under the Securities Exchange Act of 1934. Immediately upon the filing of the Form 15, SMLX will no longer file with the SEC certain reports and forms, including Forms 10- KSB, 10-QSB and 8-K, as well as proxy statements. The deregistration of SMLX's common stock is expected to become effective within 90 days of filing. In addition, the common stock of SMLX will no longer be eligible for quotation on the OTC Bulletin Board. According to management, SMLX is terminating registration in order to reduce the accounting, legal and administrative costs that are associated with being a reporting company under the 34 Act. SMLX recently executed a general assignment for the benefit of creditors, which assigned all of the assets of SMLX and its subsidiary ARETHREE, INC., to a designated assignee for the purpose of liquidation. It is not expected that any assets will be available for the shareholders of SMLX. After careful consideration and in light of such assignment by SMLX, the Board of Directors concluded that for SMLX, the advantages of being a reporting company under the 34 Act do not offset the costs associated with SEC reporting requirements. SMLX's common stock has been thinly traded, there is a lack of analyst coverage and minimal liquidity for SMLX's shareholders. In view of the assignment of all of SMLX's assets for the benefit of creditors, Kenneth H. Robertson, Gerald M. Wochna and Joel M. Marcus have resigned as officers and directors of SMLX effective February 11, 2003. SONIC FOUNDRY: Will Publish First Quarter Results Tomorrow ---------------------------------------------------------- Sonic Foundry(R) Inc. (NASDAQ:SOFO), a leading digital media software solutions company, will release its first-quarter financial results for 2003 on Friday, February 14, after close of the market. Due to closure of the financial markets on Monday, February 17, in honor of President's Day, the Company will host a subsequent conference call with analysts the following Tuesday, February 18, 2003, at 10 a.m. CST/11 a.m. EST. A live Webcast and replay of the conference call can be accessed at http://www.vcall.com Founded in 1991, Sonic Foundry (NASDAQ:SOFO) is a leading provider of desktop and enterprise digital media software solutions. Its complete offering of media tools, systems and services provides a single source for creating, managing, analyzing and enhancing media for government, business, education and entertainment. Sonic Foundry is based in Madison, Wis., with offices in Santa Monica, Toronto and Pittsburgh. For more information about Sonic Foundry, visit the company's Web site at http://www.sonicfoundry.com At September 30, 2002, the Company's balance sheet shows that total current liabilities eclipsed total current assets by about $500,000. Also, the Company's total shareholders' equity narrowed to about $18 million from $61 million recorded a year earlier. SUN WORLD INT'L: Creditors' Meeting Scheduled for March 20, 2003 ---------------------------------------------------------------- The United States Trustee for Region XVI will convene a meeting of Sun World International Inc., and its debtor-affiliates' creditors on March 20, 2003 at 10:00 a.m. in Room 100A at 3420 Twelfth Street in Riverside, California. 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. Sun World International Inc., a leading producer of high value crops and one of California's largest vertically integrated agricultural concerns, filed for chapter 11 protection on January 30, 2003 (Bankr. C.D. Calif. Case No. 03-11370). Mette H. Kurth, Esq., at Klee, Tuchin, Bogdanoff & Stern LLP, represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $148,000,000 in total assets and $158,000,000 in total debts. TELEPANEL SYSTEMS: TSX Will Suspend Trading Effective March 10 -------------------------------------------------------------- Telepanel Systems Inc. (OTC:TLSXF) (TSX:TLS), a world leader in electronic shelf label systems for retail stores, commented on the announcement that the common shares of the company will be suspended from trading by the Toronto Stock Exchange on March 10, 2003. "On February 7, 2003, the Toronto Stock Exchange announced a suspension from trading to take effect on March 10, 2003. This suspension is mainly due to the company not fulfilling certain TSX minimum listing requirements, such as minimum market capitalization requirements and minimum asset thresholds." stated Garry Wallace, President and CEO of Telepanel Systems Inc. Wallace added, "The objective of the company is, and continues to be, to maintain maximum liquidity for its shareholders. The TSX has allowed us to continue to trade for approximately another month on the exchange, so that we can use this time to weigh alternatives, such as moving to the TSX Ventures Exchange, before the suspension takes place, in this manner, we can maintain uninterrupted trading and maximum liquidity for the shareholders. The company's shares continue to be traded on the NASDAQ Over The Counter Bulletin Board and we will announce shortly any plans for additional trading of the stock post the March 10, 2003 timeline. We continue work with Madison Grant Inc. on a financing transaction to provide us with longer term working capital, to close in the near term. Telepanel is a leader in developing wireless electronic shelf labelling systems for retail stores. Telepanel ESLs are placed on the edge of store shelves to show a product's price and other information. Prices are changed by a radio communications link from the store's product database, to provide rapid, accurate pricing updates. Telepanel's systems are integrated with the leading 2.4 GHz RF LANs which allows retailers to take advantage of their investment in IEEE-standard in-store RF networks and extend their use to electronic shelf labels. Telepanel wireless ESLs are installed throughout the United States, Canada, and Europe, with such premier supermarket chains as Adam's Super Food Stores, A & P, Stop & Shop, Big Y, Reasor's, Doll's, Brown's, Stew Leonard's, Grand Union, Wakefern, Berks, Ellington, Port Richmond, Champion, Leclerc, Intermarche, SPAR, and Super U, and at Universal Studios, Hollywood. At October 31, 2002, Telepanel Systems' balance sheet shows a total shareholders' equity deficit of about C$14 million. TRIPATH TECHNOLOGY: Gets More Time to Meet Nasdaq Standards ----------------------------------------------------------- Tripath Technology Inc. (Nasdaq:TRPH), creators of Class-T(TM) advanced 1-bit digital audio amplifiers, has been provided an additional 180 calendar days, or until August 8, 2003, to regain compliance with The Nasdaq SmallCap Market listing requirements. If, at anytime before August 8, 2003, the bid price of the Company's stock closes at $1.00 per share or more for a minimum of 10 consecutive trading days, the Company would be in compliance with The Nasdaq SmallCap Market listing requirements. If the bid price for the Company's stock does not close for a minimum of 10 consecutive trading days in that time period, the Company would be required to obtain from The Nasdaq SmallCap Market an additional grace period to regain compliance. On January 30, 2003, The NASDAQ Stock Market, Inc., announced plans to extend a pilot program governing bid price rules for all NASDAQ National Market and NASDAQ Small Cap issuers. The pilot program will allow issuers that meet core Small Cap initial listing criteria to benefit from extended compliance periods for satisfying minimum bid price requirements. If this term of the pilot program is extended, and if the Company meets the core Small Cap initial listing criteria, it will be eligible to receive an extended compliance period for satisfying the minimum bid price requirements. Based in San Jose, Calif., Tripath Technology is a fabless semiconductor company that focuses on providing highly efficient power amplification to the digital media and electronics markets, DSL markets and RF markets. Tripath has created a patented technology called Digital Power Processing(TM) which combines modern advances in digital signal processing and power processing. Tripath's current customers include consumer electronic and computer companies, such as Sony, Aiwa, Panasonic, Denon, Hitachi, Blaupunkt and Apple Computer; as well as DSL communications equipment providers, such as Alcatel, who use Tripath's power efficient line drivers for central office applications. For more information please visit its Web site at http://www.tripath.com/ * * * Going Concern Uncertainty In its Form 10-Q filed on November 13, 2002, the Company reported: "We have a history of losses, expect future losses and may never achieve or sustain profitability. "As of September 30, 2002, we had an accumulated deficit of $169.5 million. We incurred net losses (before charge for beneficial conversion feature of $14.9 million) of approximately $16.5 million in the nine months ended September 30, 2002, $27.0 million in 2001, $41.3 million in 2000 and $31.7 million in 1999. We expect to continue to incur net losses and these losses may be substantial. Furthermore, we expect to generate significant negative cash flow in the future. We will need to generate substantially higher revenue to achieve and sustain profitability and positive cash flow. Our ability to generate future revenue and achieve profitability will depend on a number of factors, many of which are described throughout this section. If we are unable to achieve or maintain profitability, we will be unable to build a sustainable business. In this event, our share price and the value of your investment would likely decline and the Company might be unable to continue as a going concern. "We may need to raise additional capital to continue to grow our business. "Because we have had losses we have funded our operating activities to date from the sale of securities, including our most recent financing in January 2002. Additionally, in July 2002 we put in place a $10 million revolving line of credit whose availability is dependent on meeting certain loan covenants. We believe that, taking into account our recent financings and cost cutting measures and anticipated future burn rate, our existing cash and cash equivalent balances, together with cash generated by our operations, if any, will be sufficient to fund operations for at least the next twelve months. However, in order to grow our business significantly, we will likely need additional capital. We cannot be certain that any such financing will be available on acceptable terms, or at all. Moreover, additional equity financing, if available, would likely be dilutive to the holders of our common stock, and debt financing, if available, would likely involve restrictive covenants. If we cannot raise sufficient additional capital, it would adversely affect our ability to achieve our business objectives and to continue as a going concern. As a result of these circumstances, our independent accountants' opinion on our 2001 consolidated financial statements includes an explanatory paragraph indicating that these matters raise substantial doubt about our ability to continue as a going concern. "We may not be able to pay our debt and other obligations, which would cause us to be in default under the terms of our credit facility, which would result in harm to our business and financial condition." UNITED AIRLINES: Gains Final Nod to Obtain $1.2BB DIP Financing --------------------------------------------------------------- After due deliberation, Judge Eugene R. Wedoff authorizes the UAL Corporation and its debtor-affiliates to borrow and obtain letters of credit pursuant to the DIP Credit Agreement, up to an aggregate principal amount of $1,200,000,000. Judge Wedoff also approves a Carve-Out for all fees to the Clerk and the U.S. Trustee in an amount not to exceed $35,000,000, if an Event of Default occurs. The Agents are granted a perfected first priority senior security interest in and lien on all the Debtors' property that is not subject to valid, perfected and non-avoidable liens. The objections are overruled. The principal terms of this $1,200,000,000 Debtor-in-Possession Financing Facility at the First Day Hearing: Borrower: United Air Lines, Inc. Guarantors: UAL Corporation and each debtor-subsidiary Co-Administrative Agents: JPMorgan Chase Bank Citicorp USA, Inc. Co-Collateral Agents: JPMorgan Chase Bank Citicorp USA, Inc. Lenders: DIP Lender Commitment ---------- ---------- JPMorgan Chase Bank $300,000,000 Citicorp USA, Inc. $300,000,000 Bank One, N.A. $300,000,000 The CIT Group $300,000,000 Co-Arrangers: Bank One, N.A. The CIT Group/Business Credit, Inc. Joint Lead Arrangers: J.P. Morgan Securities, Inc. Salomon Smith Barney Inc. Joint Book Managers: J.P. Morgan Securities, Inc. Salomon Smith Barney Inc. Facility: A $1,200,000,000 senior secured superpriority debtor-in-possession facility providing United with access to: $600,000,000 of revolving credit; $100,000,000 to back letters of credit; $100,000,000 that must be reserved for collateral maintenance and liquidation expenses and only advanced in the sole discretion of the Initial Lenders; and $400,000,000 in the form of a Term Loan. Borrowing Base: Total borrowings under the DIP Facility are limited to 55% of Eligible Collateral as determined by the DIP Lenders in their sole discretion and on aircraft appraisal data provided to the DIP Lenders by Simat, Helliesen & Eichner, Inc. Availability: Subject to the limitation imposed by the Borrowing Base, the Lenders make a $400,000,000 Term Loan plus $100,000,000 of revolving credit available almost immediately. Stage II access to the next $500,000,000 is conditioned on: (a) United reporting positive cumulative EBITDAR measured from December 1, 2002 and (b) United delivering an updated Business Plan to the Initial Lenders that: (1) the Lenders find acceptable; (2) is not premised on revenue projections lower than those contained in a December 2, 2002 Business Plan delivered to the Initial Lenders; and (3) reflects United has achieved incremental cost savings of no less than $300,000,000 in addition to the aggregate cost savings reflected in the December 2, 2002 Business Plan. Maturity Date: July 1, 2004 Purpose: For general working capital and other corporate purposes, but not for the investigation or prosecution of any claims against the DIP Lenders. Interest Rate: At the Borrower's option: (A) JPMorgan Chase's Alternate Base Rate plus 3.5%; or (B) LIBOR (subject to a 2% floor) plus 4.5%; and in the event of a default, the Interest Rate increases by 200 basis points. Fees: (A) All fees described in a [non-public] Fee Letter; (B) An Unused Line Fee payable as a percentage of every dollar available under the Revolving Facility that is NOT borrowed: If the average amount Applicable of borrowing under the Percentage Revolver is less than ---------- --------------------- 1.00% Less than 1/3 0.75% Less than 2/3 0.50% More than 2/3 (C) 4.5% annual letter of credit fees based on the total amount of outstanding L/Cs; and (D) Reimbursement of all out-of-pocket expenses, including the DIP Lenders' professionals' fees. Priority: All borrowings constitute superpriority administrative claims against the Debtors' estates pursuant to 11 U.S.C. Sec. 364(c)(1), pari passu with Bank One's DIP Financing claims. Postpetition Liens: The Debtors' obligations to repay amounts borrowed are secured, pursuant to 11 U.S.C. Secs. 364(c)(2) and (3), and subject only to the Carve-Out, by perfected first-priority liens on: (A) all unencumbered aircraft, spare engines, and spare parts inventory; (B) accounts receivable; (C) all Pacific and Atlantic routes; (D) slots at LaGuardia Airport and Reagan National Airport; (E) QEC kits; (F) certain flight simulators; (G) airport gate leaseholds; and (H) trademarks, tradenames, and all other property not subject to an existing or permitted lien or pledged to secure repayment of the Bank One DIP Facility. Carve-Out: The DIP Lenders agree, in the event of a default, to a $35,000,000 carve-out from their liens to allow for payment of professionals retained by the Debtors, any Official Committees, and fees imposed by the United States Trustee or the Court Clerk. CapEx Covenant: The Debtors covenant with the DIP Lenders that they will limit their capital expenditures (including capitalized leases) to: For the Fiscal Quarter Ending CapEx Limit ----------------------------- ----------- March 31, 2003 $110,000,000 June 30, 2003 $110,000,000 September 30, 2003 $116,000,000 December 31, 2003 $142,000,000 March 31, 2004 $100,000,000 June 30, 2004 $100,000,000 with the understanding that these amounts can be increased by a 50% roll-forward of unused amounts from the previous quarter. EBIDTAR Covenant: The Debtors covenant that they will not permit EBITDAR -- which means consolidated net income under GAAP plus depreciation, amortization, non-cash charges, taxes, interest, AIRCRAFT RENT EXPENSE, extraordinary losses, and non- recurring charges or restructuring charges -- to fall below: Minimum For the Period Beginning Cumulative December 1, 2002 and ending EBITDAR --------------------------- ----------- February 28, 2003 ($964,000,000) March 31, 2003 ($881,000,000) April 30, 2003 ($849,000,000) May 31, 2003 ($738,000,000) June 30, 2003 ($585,000,000) July 31, 2003 ($448,000,000) August 31, 2003 ($219,000,000) September 30, 2003 ($98,000,000) October 31, 2003 $46,000,000 November 30, 2003 $112,000,000 Minimum For the Rolling 12-Month Cumulative Period Ending EBITDAR ------------------------ ---------- December 31, 2003 $575,000,000 January 31, 2004 $901,000,000 February 28, 2004 $1,084,000,000 March 31, 2004 $1,196,000,000 April 30, 2004 $1,297,000,000 May 31, 2004 $1,383,000,000 Minimum Cash Covenant: The Debtors covenant with the DIP Lenders that they will not permit cash and cash equivalents to fall below $200,000,000 at any time. Operational Covenants: The Debtors agree that certain to-be-agreed and to-be-documented operational defaults will constitute immediate events of default that will cause the DIP Facility to terminate. Assignments: The DIP Facility contemplates syndication and assignment of the DIP Lenders' commitments in minimum $1,000,000 increments to Assignees acceptable to the Agent for which the Agent will collect a $3,500 fee. Lender Consents to Modifications: Material modifications to the DIP require acceptance by Lenders holding varying percentages of the outstanding Commitments: Required Type of Modification Acceptance -------------------- ---------- Release of a material portion of collateral 66-2/3% Modification of the Stage II Borrowing Requirements 90% Waivers of the Financial Covenants 50% Extensions of interest payment dates, fee reductions, maturity date extensions, changes in priority or a release of substantially all of the collateral 100% (United Airlines Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that United Airlines' 10.670% bonds due 2004 (UAL04USR1) are trading at about 5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL04USR1for real-time bond pricing. US AIRWAYS: ATSB Clears Application for Federal Loan Guarantees --------------------------------------------------------------- US Airways President and Chief Executive Officer David Siegel expressed his appreciation following notification by the Air Transportation Stabilization Board that it had unanimously approved its $900 million federal guarantee of a $1 billion loan for the airline. "We are gratified by the ATSB's action [Tues]day, and its vote of confidence in our company's restructuring and prospects for long-term success. The management team has been joined by our employees in making difficult decisions that were necessary to ensure that our airline would not be a victim of September 11, and instead, would be shaped into a vigorous competitor," said Siegel. "We are on track to emerge from Chapter 11 protection by March 31, and while there is still much work to be done, [Tues]day's vote of support from the ATSB is another momentum- building achievement in that effort. We continue to try to demonstrate to our constituencies -- including our employees, our customers, the communities we serve, public officials and the ATSB -- that this airline deserves the opportunity, which this federal loan guarantee affords us, by providing us with resources to restructure, and in the process, save tens of thousands of jobs and air service and competition to 200 communities." A free copy of the ATSB's letter granting conditional approval of the $900 million loan guarantee is available at: http://www.treas.gov/press/releases/reports/usair2.pdf US Airways is the nation's seventh-largest airline, serving 200 communities in the U.S., Canada, Mexico, the Caribbean and Europe. Most of its route network is concentrated in the eastern U.S., where it is the largest air carrier east of the Mississippi. It employs approximately 33,000 people and operates a fleet of 279 mainline jet aircraft. US Airways and its US Airways Express partner carriers operate more than 3,400 flights per day. DebtTraders reports that US Air Inc.'s 10.375% bonds due 2013 (UAWG13USR2) are trading at about 10 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAWG13USR2 for real-time bond pricing. US AIRWAYS: Intends to Assume and Reject North Carolina Leases -------------------------------------------------------------- US Airways Group Inc., and its debtor-affiliates seek Court permission to: * reject two real property leases covering two office buildings and one parking garage; and * assume three real property leases covering three office buildings; all of which are located in Winston-Salem, North Carolina, and leased from Highwoods Properties. As part of their restructuring efforts, the Debtors are rationalizing their facility needs and consolidating their information technology and reservation center operations in Winston-Salem. The Debtors and the Landlord have reached an agreement to reduce the Debtors' lease obligations by rejecting the two Leases and assuming the three Leases. As part of the Agreement, the Landlord has: (a) consented to the rejection of the two Leases; (b) waived any prepetition claims for rejection of the two Leases; (c) permitted the Debtors to continue possession of one of the rejected premises on a month-to-month basis at the current rent until June 30, 2003; (d) waived prepetition default claims under the three Assumed Leases and section 365(b) of the Bankruptcy Code; (e) reduced the rent under one of the Assumed Leases by $600,000 per year; (f) included an early termination option for the Debtors in one Assumed Leases; and (g) permitted the Debtors necessary access to the building systems in premises the Debtors are rejecting. John Wm. Butler, Jr., Esq., assures Judge Mitchell that the Debtors have examined the costs associated with their obligations under the Leases to be rejected and estimate that the annual cost to the Debtors is approximately $3,200,000 and the cost over the remaining life of the Leases is approximately $16,500,000. The Debtors have determined in their business judgment that such costs constitute an unnecessary drain on cash resources. (US Airways Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) U.S. INDUSTRIES: Posts Improved Fin'l Results for Dec. Quarter -------------------------------------------------------------- U.S. Industries, Inc. (NYSE:USI), a leading manufacturer of bath and plumbing products - led by the JACUZZI(R) brand and ZURN(R) family of brand names -- and premium RAINBOW(R) vacuum cleaner systems, announced financial results for its fiscal first quarter ended December 31, 2002. Total sales for the first quarter of fiscal 2003 rose 11% to $281.3 million from $254.4 million for the same period last year, led by higher sales at the Company's Bath & Plumbing segment, offset by slightly lower sales at the Rexair (vacuum cleaner) business segment. Operating income for the first quarter rose 21% to $17.6 million, or 6.3% of total sales, as compared to $14.6 million, or 5.7% of total sales, for the same period last year due to higher sales and improved operating efficiency in our core businesses. Interest expense declined by $4.2 million during the first quarter of fiscal 2003, largely due to lower debt balances resulting from proceeds generated by the completed disposal plan, other asset sales and twelve months of operating cash flow. Pre-tax income of $0.1 million represented a more than $7 million improvement from the prior year period. Net income for the first quarter of fiscal 2003 was $13.7 million, compared to a net loss of $7.0 million for the first quarter of fiscal 2002. Net income for the first quarter of 2003 included a net tax benefit of $13.6 million, which resulted from the resolution of an IRS audit. Bath & Plumbing Sales in the Bath & Plumbing segment increased by $27.4 million, or 12%, to $255.2 million for the first quarter of 2003 from the comparable prior year period. More than half of this sales increase was achieved through strong sales and marketing efforts in place at Jacuzzi and Sundance Spas which caused higher demand domestically for spas, fueled by the early release of the 2003 spa product line. Sales at Zurn increased by $4.0 million, or 7%, to $60.6 million for the fiscal 2003 first quarter. This increase was due primarily to continued expansion of Zurn's product offerings and market share notwithstanding a continued softening in commercial and institutional construction. Furthermore, sales at the Company's U.K. bath and sinks businesses increased as a result of additional sales to home centers through the addition of Homebase, the largest home center chain in the U.K., subsequent to the first quarter of 2002. In addition, firming of the British pound and Euro against the dollar contributed $5.0 million to the increase in sales. Operating income in the Bath & Plumbing segment increased by $1.2 million, or 8%, to $15.4 million in the first quarter of 2003 in comparison with the same period last year. This was primarily due to higher sales, partially offset by increases in certain insurance and retirement benefit costs, as well as one- time costs encountered during the consolidation of several facilities used in the manufacturing of whirlpool baths. These facilities were consolidated into a new manufacturing plant in Chino, California, that became fully operational in the first quarter of 2003. Rexair Sales in the Rexair segment decreased by $0.5 million in the first quarter of 2003 to $26.1 million as compared to the same period last year as a result of decreased unit sales in international markets due to political uncertainty in certain foreign regions. However, domestic sales at Rexair increased by 5% due to promotional programs aimed at increasing the number of distributors and dealers. Operating income in the Rexair segment decreased by $1.6 million to $6.0 million, primarily due to decreased overhead absorption related to an inventory reduction program and lower total sales. The inventory reduction program was initiated in September 2002 and was concluded in December 2002. Continued Debt Reduction and Lower Corporate Costs The Company completed its Disposal Plan with the sale of SiTeco on October 18, 2002. Net proceeds of $103.8 million were applied to reduce the Company's funded and unfunded senior debt, including $34.0 million deposited into escrow accounts for the benefit of the holders of the Company's Senior Notes and certain other creditors. The Company received additional funds totaling $16.6 million during the first quarter of 2003. These funds resulted mostly from the sale of excess real estate and the receipt of an income tax refund and were applied to reduce the Company's funded and unfunded senior debt. In January 2003, the Company received funds totaling $48.3 million related primarily to a federal income tax refund, and in February 2003, the Company received $8.6 million for granting a license for certain technology which was the subject of patent litigation. These funds were also applied to reduce the Company's funded and unfunded senior debt. The proceeds from these transactions satisfy all of the required permanent reductions of the Company's senior debt through maturity. Had these proceeds been received on or prior to December 31, 2002, total debt net of cash in escrow would have been $521.5 million on a pro forma basis. Corporate expenses were $3.4 million lower for the first quarter of 2003, reflecting a $1.7 million decrease in personnel related expenses due to a decrease in staff during the latter half of the prior year, $1.0 million decrease in professional fees and $0.7 million increase in pension income. The decrease in staff was the result of the closing of the Iselin, New Jersey office. The increase in pension income resulted from the retention of excess plan assets following the disposition of a business in January 2002. Outlook for Fiscal 2003 Based on a continuation of current business conditions and expectations, management anticipates revenues to increase by approximately 10% for fiscal 2003 with a similar increase in net income. For fiscal 2002, USI reported net sales of $1.16 billion and net income of $41.6 million. A variety of factors, however, could affect these expectations positively or negatively, including the continued weakness of the world economy, international political uncertainty and the impact of any asset sales. David H. Clarke, Chairman and Chief Executive Officer of USI, said, "Our strategy of developing USI as a focused operating company is beginning to show up positively in our results. We will continue to prioritize debt reduction and cost containment. At the same time, we are aggressively seeking to increase the growth and market share of our brand name products." U.S. Industries owns several major businesses selling branded bath and plumbing products, along with its consumer vacuum cleaner company. The Company's principal brands include JACUZZI(R), ZURN(R), SUNDANCE(R) Spas, ELJER(R), and RAINBOW(R) Vacuum Cleaners. Learn more at http://www.usindustries.com As reported in Troubled Company Reporter's February 7, 2003 edition, Standard & Poor's raised its corporate credit rating on bath and plumbing products manufacturer U.S. Industries Inc., to 'B+' from 'B' because of its strengthening cash flow protection measures. The current outlook is stable. As of early 2003, the West Palm Beach, Florida-based company had total debt of about $565 million. VICWEST CORP: Messrs. Brown and Charnetski Resign from Board ------------------------------------------------------------ Vicwest Corporation announced that effective February 10, 2003, Philip Brown and William Charnetski have resigned as directors of Vicwest. The subordinated notes of Vicwest are listed on the TSX Venture Exchange under the symbol MGT.DB. * * * As previously reported in the Nov. 20, 2003, edition of the Troubled Company Reporter, Vicwest Corporation was engaged in constructive discussions with the lenders under its senior credit facilities and with the holders of approximately 65% of the outstanding principal amount of its senior subordinated notes to provide an overall solution relating to previously announced events of default. Vicwest sought a three month extension of the previously announced waiver of events of default by the lenders under the senior credit facilities and a three month extension of the undertakings of such holders of senior subordinated notes not to support any exercise of remedies in respect of the event of default concerning the notes. WESTPOINT STEVENS: Dec. 31 Net Capital Deficit Widens to $805MM --------------------------------------------------------------- WestPoint Stevens Inc. (OTC Bulletin Board: WSPT) -- http://www.westpointstevens.com-- reported results for the fourth quarter ended December 31, 2002. The Company's net sales for the fourth quarter of 2002 increased 8% to $466.2 million compared with $431.8 million a year ago, with growth in sales of towels, sheets, and accessories. Net income for the fourth quarter of 2002, before charges associated with recently announced restructuring initiatives, was $1.3 million or $0.03 per diluted share compared with a net loss in the fourth quarter of 2001 before charges associated with the Eight-Point Plan of $0.04 per diluted share. During the fourth quarter of 2002, WestPoint Stevens recognized a $1.4 million charge net of taxes for implementation of further restructuring initiatives versus a $0.8 million charge net of taxes last year. Including these charges, net income for the fourth quarter of 2002 was a loss of $0.1 million or $0.00 per diluted share compared with a net loss $0.05 per diluted share for the year ago period. Operating earnings for the fourth quarter of 2002 were $38.1 million or 8.2% of sales compared with $35.0 million or 8.1% of sales for the same period in 2001, before charges associated with further restructuring initiatives of $2.2 million in 2002 and $1.2 million in 2001. The increased fourth-quarter results reflected the impact in 2002 of higher sales, lower raw material costs and a more normalized level of bad debts compared with the impact in the fourth quarter of 2001 of Kmart's bankruptcy filing. This was offset somewhat by the effects of increased promotional activity, increased royalties, a less favorable product mix, increased pension expense and under-absorbed overhead due to production curtailment. At December 31, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $805 million. Holcombe T. Green, Jr., Chairman and CEO of WestPoint Stevens, commented, "We are quite pleased with our performance in 2002. Our sales increased 2.6% for the year despite the challenges of a difficult retail environment. Through aggressive working capital management, which included a $28 million reduction in inventories, and improved sales and margin performance, we generated free cash flow that was used to reduce our total debt by $58 million. WestPoint Stevens has significant liquidity and is comfortable with achieving its financial covenants for 2003." M.L. "Chip" Fontenot, WestPoint Stevens President and COO, added, "Our fourth-quarter results reflect the success of our efforts to strengthen our position with targeted key retail accounts through product innovation and superior servicing as well as lower costs through a combination of internal initiatives and sourcing. For 2002, our sourcing initiatives have resulted in a roughly 60% increase in sourced product, allowing WestPoint Stevens to continue to expand its product offering and increase market share." For 2002, annual sales increased 2.6% to $1,811.4 million versus $1,765.1 million in 2001. Operating earnings before charges for 2002 were $140.5 million or 7.8% of sales compared with $134.0 million or 7.6% of sales before charges associated with the Eight-Point Plan in 2001. Net income for 2002 was a loss of $1.0 million before charges of $11.7 million net of taxes versus a loss of $15.4 million before charges of $11.9 million net of taxes for 2001. The improvement reflects the impact of lower raw material costs and increased sales that more than offset increased promotional activity, increased royalties, increased pension expense, and under-absorbed overhead due to production curtailment. Fully diluted earnings per share increased to a loss of $0.02 in 2002 before charges associated with recent restructuring initiatives versus a loss in 2001 before charges associated with the Eight- Point Plan of $0.31. Including charges associated with recently announced restructuring initiatives, net income increased to a loss of $0.25 per fully diluted share for 2002 versus a loss in 2001 including charges associated with the Eight-Point Plan of $0.55 per fully diluted share. Given increasing difficulty in predicting near-term results and management's belief that providing earnings guidance has resulted in investors focusing more on the short term thus increasing the volatility of its stock, the Company will no longer provide earnings guidance. WestPoint Stevens Inc., is the nation's premier home fashions consumer products marketing company, with a wide range of bed linens, towels, blankets, comforters and accessories marketed under the well-known brand names GRAND PATRICIAN, PATRICIAN, MARTEX, ATELIER MARTEX, BABY MARTEX, UTICA, STEVENS, LADY PEPPERELL, VELLUX and CHATHAM -- all registered trademarks owned by WestPoint Stevens Inc. and its subsidiaries -- and under licensed brands including RALPH LAUREN HOME, DISNEY HOME, SANDERSON, DESIGNERS GUILD, GLYNDA TURLEY and SIMMONS BEAUTYREST. WestPoint Stevens is also a manufacturer of the MARTHA STEWART and JOE BOXER bed and bath lines. WestPoint Stevens can be found on the World Wide Web at http://www.westpointstevens.com WHEELING-PITTSBURGH: Discl. Statement Hearing Continues Mar. 6 -------------------------------------------------------------- Frederick S. Coombs, III, Esq., at Harrington Hoppe & Mitchell, Ltd., in Youngstown, Ohio, tells the Court that Marley Cooling Tower Company objects to Wheeling-Pittsburgh Steel Corp.'s Disclosure Statement because it does not contain adequate information regarding the treatment of claims of mechanic's lien holders to permit an informed decision on the Plan. Marley is a creditor of WPSC, holding a mechanic's lien claim for $808,010.02. Pursuant to the Plan, this claim would be treated as a Class 2 Miscellaneous Secured Claim, and would be unimpaired. However, the Disclosure Statement indicates that, of the $10,900,000 in mechanic's liens against WPSC's property, WPSC is reviewing and challenging liens and believes that the aggregate amount of the allowed claims in Class 2 will be only between $1,000,000 to $5,000,000. Those mechanic's liens which are successfully challenged would then be relegated to the status of a Class 5 Unsecured Claim -- claims which are impaired by the Plan. WPSC did not disclose which mechanic's liens are going to be challenged, and the basis for any challenge, for holders of lien claims, like Marley, to determine their class of claim and determine whether they are entitled to vote on the Plan. Since the purpose of a disclosure statement is to permit creditors to make an informed decision on voting on the plan, a failure to disclose potential adversary claims against creditors is grounds for equitable estopped against any later challenge being brought and for denial of approval of the Disclosure Statement. Other objections to the adequacy of the information in the Disclosure Statement were filed by the Ohio Environmental Protection Agency, Sun Trust Bank, First Union National Bank, the United States on behalf of the Environmental Protection Agency, and Morgan Engineering Systems, Inc. * * * At the Debtors' request, the Court adjourns the Disclosure Statement Hearing to March 6, 2003. The Debtors remind all parties that the hearing on the Disclosure Statement "may be adjourned by the Debtors from time to time without further notice to creditors or parties-in- interest other than by an announcement in Bankruptcy Court of such adjournment on the date scheduled for the hearing." (Wheeling-Pittsburgh Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM INC: Look for Schedules and Statements by March 31 ----------------------------------------------------------- Worldcom Inc., and its debtor-affiliates obtained an extension of their time period within which they must file their schedules of liabilities, schedules of executory contracts and unexpired leases, statements of financial affairs, and lists of equity holders. The Debtors have until March 31, 2003, to filed these documents. (Worldcom Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., 609/392-0900) Worldcom Inc.'s 8.000% bonds due 2006 (WCOE06USR2) are trading at about 23 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOE06USR2 for real-time bond pricing. * Batchelder & Partners Changes Name to Relational Advisors ----------------------------------------------------------- The Principals of Batchelder & Partners, Inc., a firm nationally recognized for its success in providing financial advisory services in some of the nation's most complex merger and acquisition transactions and shareholder matters, have formed Relational Group, incorporating their financial advisory, investment management and private equity services within one organization. As part of the new structure, B&P, founded in 1988, has changed its name to Relational Advisors LLC, adopting the name of its sister company, Relational Investors LLC, the management firm founded by the Group's Principals in 1996 and which currently has $1.7 billion under management. The third entity in the Relational Group is Titan Investment Partners LLC, a private equity fund founded in 1999. Joel L. Reed, a Principal of Relational Advisors, said the new name will help forge a single brand identity for its advisory and investment services while reflecting the organization's culture and philosophy of building long-term relationships. The Relational Principals possess experience in top operating and executive roles in Fortune 500 and closely held companies, have arranged billions of dollars in financing and have helped companies of all sizes create shareholder value. "We have experienced significant growth based on our expertise and hands- on approach," Reed said. "This has been particularly successful in special and distressed situations where Relational Group can draw from its decades of experience to effect positive change." Relational Advisors' recent engagements have included mergers and acquisitions, recapitalizations, corporate restructurings, commercialization strategies, turnarounds, Chapter 11 reorganizations, corporate governance, business planning, proxy battles and financings. Reed said the firm's expertise and approach were brought into play most recently to advise Enron Corporation in its Chapter 11 reorganization. Relational Advisors assisted in developing business strategies designed to maximize the value of Enron's core assets and enhance recovery for its creditors. The firm also advised on bankruptcy and disposition matters. Although a boutique firm that is not based on Wall Street, Relational Advisors has enjoyed major client assignments over the years. Names have included USA Waste Services, Inc., Mac Frugal's Bargains -- Close-Outs Inc., Morrison Knudsen Corporation, Beckman Instruments, Inc., Santa Fe Pacific Gold Corporation, Forest Oil Corporation, and The Titan Corporation. Relational Investors, its sister company, identifies undervalued and under performing public companies, makes minority equity investments and works proactively with management and the boards of directors to address performance issues. The fund has grown from $200 million in 1996 to more than $1.7 billion today. Selected catalyst investments have included Apria Healthcare Group Inc., Dial Corporation, Mattel, Inc., Storage Technology, Tandy Corporation, Tektronix, Inc. and Waste Management, Inc. The third entity, Titan Investment Partners, is a small private equity fund focused on late development stage companies in need of both capital and board or management resources. Principals of the Relational Group are David H. Batchelder, Joel L. Reed, Ralph V. Whitworth, and James J. Zehentbauer. The Relational Group is based in San Diego and has grown consistently since its founding in 1988 based on its philosophy of proactively working with a select number of clients to create value. Relational Advisors Web site is at http://www.relationaladvisors.com the Relational Investors Web site is at http://www.rillc.comand Titan Investment Partners is at http://www.tipfund.com * DebtTraders' Real-Time Bond Pricing ------------------------------------- Issuer Coupon Maturity Bid - Ask Weekly change ------ ------ -------- --------- ------------- Federal-Mogul 7.5% due 2004 15.0 - 16.0 -2.0 Finova Group 7.5% due 2009 35.5 - 37.5 +1.0 Freeport-McMoran 7.5% due 2006 94.5 - 96.5 +0.5 Global Crossing Hldgs 9.5% due 2009 3.5 - 4.0 -0.5 Globalstar 11.375% due 2004 7.5 - 8.5 +1.0 Lucent Technologies 6.45% due 2029 55.0 - 57.0 +2.0 Polaroid Corporation 6.75% due 2002 6.5 - 7.5 +1.0 Terra Industries 10.5% due 2005 90.0 - 92.0 0.0 Westpoint Stevens 7.875% due 2005 33.0 - 35.0 -2.0 Xerox Corporation 8.0% due 2027 65.0 - 67.0 +1.0 Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 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 ***