/raid1/www/Hosts/bankrupt/TCR_Public/030214.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, February 14, 2003, Vol. 7, No. 32
Headlines
A NOVO BROADBAND: Delaware Claims Appointed Court Claims Agent
ABC-NACO INC: Court Fixes March 17, 2003 as Claims Bar Date
ACT MANUFACTURING: Administrative Claims Due by March 3, 2003
AGERE SYSTEMS: Will Webcast 2nd Shareholders' Meeting on Feb. 20
AMERICAN NATIONAL LAWYERS: Receivership Prompts S&P's R Ratings
AMERICREDIT: Increases Net Loss for Quarter Ended Dec. 31, 2002
AMERICREDIT: Takes Actions to Preserve & Strengthen Liquidity
ANC RENTAL: Asks Court to Extend Time to File Creditors' Claims
APPLIED EXTRUSION: Fiscal 2003 Q1 Results Reflect Solid Growth
APTIMUS INC: Reports Improved Fourth Quarter 2002 Performance
ARMSTRONG WORLD: Disclosure Statement Hearing Slated for Feb. 28
AT&T CANADA: Creditors Will Vote on CCAA Plan on Feb. 20
BALLY TOTAL FITNESS: Full-Year 2002 Results Show Improvement
BCE INC: Offering Series AC Preferred Shares to Holders
BRIDGE INFO: Plan Administrator Seeks Nod for Tolling Agreements
BRIDGE TECHNOLOGY: Initiates Restructuring of Operations
BUDGET GROUP: Court Okays Sonnenschein as Committee's Counsel
BURLINGTON: WL Ross Pulls the Pin & Tosses Management a Grenade
CALPINE CORP: Reducing Turbine Capital Commitments by $3.4 Bill.
CANNONDALE CORP: Wants to Sell Substantially All of Its Assets
CHAMPION ENTERPRISES: 4th Quarter Net Loss Climbs to $5.5 Mil.
COLD METAL PRODUCTS: Auctioning Its Assets on February 26, 2003
CONSECO FINANCE: Committee Hires Becker & Poliakoff as Counsel
CONSECO INC: Earns Approval to Bring-In PricewaterhouseCoopers
CORRECTIONS CORP: Full-Year 2002 Net Loss Climbs-Up to $39 Mill.
COX COMMS: Narrows Working Capital Deficit to $110MM at Dec. 31
CRITICAL PATH: Receives Time Extension to Meet Nasdaq Standards
DANA CORPORATION: Declares Dividend Payable on March 14, 2003
DELTA AIR LINES: Pilots Balk Management's Request to Talk
DENNY'S CORP: Dec. 25 Balance Sheet Insolvency Narrows to $280MM
ELOT: Court Confirms Second Amended Joint Plan of Reorganization
ENCOMPASS SERVICES: Secures Nod to Sell 3 Business Units' Assets
ENRON: Committee Sues Kenneth & Linda Lay to Recover Transfers
FAIRFAX FIN'L: S&P Lowers Counterparty Credit Rating Down to BB
GENESIS HEALTH: Board Approves Spin-Off of Eldercare Business
GENTEK INC: Secures Court's Approval to Assume JBD Troy Lease
GLOBAL CROSSING: Asks Court to Approve XO Settlement Agreement
HASBRO INC: Reports 2002 Charge Related to OFT Inquiry in UK
HASBRO INC: Board of Directors Declare Quarterly Cash Dividend
HAYES LEMMERZ: Files Amended Plan and Disclosure Statement
HEXCEL CORP: Sets Special Shareholders' Meeting for March 18
INTEGRATED HEALTH: Premiere Committee Balks at Discl. Statement
JARDINE FLEMING CHINA: Board Seeks Approval of Dissolution Plan
KAISER ALUMINUM: Earns OK to Assume Old Republic Insurance Pact
KATONAH VI LTD: S&P Assigns BB Rating to Classes D-1 & D-2 Notes
KMART CORP: Wants Approval to Pay $15 Mill. Plan Investment Fees
MACKIE DESIGNS: Commences Trading on OTC Bulletin Board
MADGE NETWORKS: Dec. 31 Net Capital Deficit Widens to $10 Mill.
MAGELLAN HEALTH: Tennessee Subsidiary's Regulatory Status Lifted
MAXXIM MEDICAL: S&P Drops Credit Rating to D Due to Bankruptcy
MITEC TELECOM: Secures Additional C$5 Million Refinancing
MONARCH DENTAL: Shareholders OK Proposed Merger with Bright Now!
NATIONAL CENTURY: Court Approves Bricker & Eckler's Engagement
PACIFICARE HEALTH: Fourth Quarter 2002 Performance Swings-Up
PAPER WAREHOUSE: Full-Year Retail Sales Slide-Down 1% to $73.7MM
RECIPROCAL ALLIANCE: S&P Assigns R Rating Due to Receivership
RESOURCE AMERICA: Posts Weaker Operating Results for Fiscal Q1
RICA FOODS: Fitch Places BB Currency Ratings on Watch Negative
ROWECOM: Seeking Okay to Bring-In Duane Morris as Local Counsel
RYERSON TULL: Weak Credit Protection Measures Spurs BB- Rating
SALS 2002-2: S&P Cuts Class E Credit-Linked Notes Rating to BB-
SEA DREAM LEATHER: Files for Chapter 11 Relief in Richmond, Va.
SEA DREAM: Case Summary & 20 Largest Unsecured Creditors
SPINNAKER EXPLORATION: Cuts Working Capital Deficit to $6 Mill.
STANDARD AUTOMOTIVE: Canadian Asset Auction Set for Mar. 5, 2003
SUN WORLD: Look for Schedules and Statements by March 3, 2003
SWIFT ENERGY: Dec. 31 Working Capital Deficit Stands at $17MM
TEEKAY SHIPPING: S&P Rates $125M Sub. Unsec. Equity Units at BB-
TOKHEIM: First Reserve Pitches Best Bid for No. American Assets
TRENWICK GROUP: Will Publish Fourth Quarter Results on Feb. 20
UNIFAB INT'L: Fails to Maintain Nasdaq SmallCap Listing Criteria
UNITED AIRLINES: Ad Hoc Committee Seeking Adequate Protection
USEC: Seeks Regulatory Nod to Operate Centrifuge Demo Facility
WACHOVIA BANK: Fitch Rates Six Note Classes at Lower-B Level
WHEELING-PITTSBURGH: Committees Win Approval to Hire Kroll Zolfo
WORLDCOM INC: Court Approves Kelley Drye as Committee's Counsel
W.R. GRACE: Fresenius Paying $115MM to Settle Asbestos Dispute
* Adolfo R. Garcia Joins Ropes & Gray as Boston Office Partner
* TSYS Debt Management Chairman Richard de Mayo to Retire
* Weil Gotshal Expands Silicon Valley Office with 2 New Partners
* BOOK REVIEW: Land Use Policy in the United States
*********
A NOVO BROADBAND: Delaware Claims Appointed Court Claims Agent
--------------------------------------------------------------
A Novo Broadband, Inc., sought and obtained approval from the
U.S. Bankruptcy Court for the District of Delaware to hire
Delaware Claims Agency, LLC as the official Claims, Noticing and
Balloting Agent of the Court in the Company's on-going chapter
11 case.
Delaware Claims will:
a. Prepare and serve required notices in this chapter 11
case, including:
(i) Notice of bankruptcy filing, of the section 341
meeting of creditors, of the claims bar date, and
of other issues related to the filing in the form
or forms approved by the Clerk, the Office of the
United States Trustee and this Court;
(ii) Notices of objections to claims;
(iii) Notices of any hearings on a disclosure statement
and confirmation of a plan of reorganization or
liquidation; and
(iv) Such other notices as the Debtor or the Court may
deem necessary or appropriate for an orderly
administration of this chapter 11 case.
b. Within 5 business days after the service of a particular
notice, file with the Clerk's Office a declaration of
service that includes:
(i) a copy of the notice served,
(ii) an alphabetical list of persons on whom the notice
was served, along with their addresses, and
(iii) the date and manner of service;
c. Maintain copies of the Debtor's schedules, statements of
financial affairs and master creditor lists, and any
amendments thereto filed in this case and serve as the
official copy service for all parties requesting copies
of such documents;
d. Maintain copies of all proofs of claim and proofs of
interest filed in these cases;
e. Maintain the official claims registers in this case by
docketing all proofs of claim and proofs of interest in
a claims database, which includes the following
information for each claim or interest asserted:
(i) The name and address of the claimant or interest
holder and any agent thereof, if the proof of
claim or proof of interest was filed by an agent;
(ii) The date the proof of claim or proof of interest
was received by DCA and/or the Court;
(iii) The claim number assigned to the proof of claim or
proof of interest;
(iv) The asserted amount and classification of the
claim; and
(v) The Debtor against which a proof of claim or
interest is filed.
f. Implement necessary security measures to ensure the
completeness and integrity of the claims registers;
g. Transmit to the Clerk's Office a copy of the claims
registers as requested by the Clerk's Office;
h. Maintain a current mailing list for all entities that
have filed proofs of claim or proofs of interest and
make such list available upon request to the Clerk's
Office or any party in interest;
i. Provide access to the public for examination of copies
of the proofs of claims or proofs of interest filed in
these cases without charge during regular business
hours, and provide copies of any such proofs of claim
and proofs of interest to members of the public, upon
request, at a cost that is no greater than the per-copy
price that is charged by the Court's third party copy
service;
j. Record all transfers of claims pursuant to Bankruptcy
Rule 3001 (e) and provide notice of such transfers as
required by Bankruptcy Rule 3001(e), and record all
claims filed by a debtor or trustee pursuant to
Bankruptcy Rule 3004 and provide notice of such claims
as required by Bankruptcy Rule 3004;
k. Comply with applicable federal, state, municipal and
local statutes, ordinances, rules, regulations, orders
and other requirements;
l. Provide temporary employees to process claims, as
necessary;
m. Promptly comply with such further conditions and
requirements as the Clerk's Office or the Court may at
any time prescribe;
n. Provide balloting and solicitation services, including
preparing ballots, producing personalized ballots and
tabulating creditor ballots on a daily basis; and
o. Provide such other claims processing, noticing,
balloting and related administrative services as may be
requested from time to time by the Debtor.
Delaware Claims' professional hourly rates are:
Senior Consultants $130 per hour
Technical Consultants $115 per hour
Associate Consultants $100 per hour
Processors and Coordinates $ 50 per hour
A Novo Broadband, Inc., a business engaged primarily in the
repair and servicing of broadband equipment for equipment
manufacturers and operators of cable and other broadband systems
in North America, filed for chapter 11 petition on December 18,
2002 (Bankr. Del. Case No. 02-13708). Brendan Linehan Shannon,
Esq., and M. Blake Cleary, Esq., at Young, Conaway, Stargatt &
Taylor, represent the Debtor in its restructuring efforts. When
the Company filed for protection from its creditors, it listed
$12,356,533 in total assets and $10,577,977 in total debts.
ABC-NACO INC: Court Fixes March 17, 2003 as Claims Bar Date
-----------------------------------------------------------
By Order of the U.S. Bankruptcy Court for the Northern District
of Illinois, Eastern Division, March 17, 2003, is deadline for
creditors of:
* ABC-NACO, Inc., and its debtor-affiliates:
* NACO Inc., a Delaware Corporation,
* National Castings, Inc.,
* NACO Flow Products, Inc.,
* National Engineered Products Co.,
* Buymetalcastings Inc.,
* AIMS Group, Inc., and
* ABC Rail Virgin Islands Corp.,
to file their Proofs of Claim against the Debtors or be forever
barred against asserting such claim.
To be timely received, all proofs of claim must be delivered to
the Bankruptcy Court before 4:00 p.m. Central Time on the Bar
Date.
The Bar Date applies to all prepetition claims asserted by a
creditor or equity security holder except:
1. claims not listed in the Debtors' Schedules
as disputed, unliquidated, or contingent;
2. claims already properly filed with the Court; and
3. claims previously allowed by Order of the Court.
ABC-NACO, Inc., filed for Chapter 11 protection on October 18,
2001 (Bank. N.D. Ill. Case No. 01-36484) (Wedoff, J.) and
completed a sale of its assets to TCF Railco Acquisition Corp.
(owned by owned by Three Cities Funds III, L.P.) in late 2001
for $75 million (subject to certain adjustments and assumption
of certain liabilities). The assets sold included all of the
United States operating assets of the Company's Rail Products,
Track Products and Rail Services units together with the stock
of the Company's subsidiaries in Europe and its joint ventures
in China. The Canadian and Mexican subsidiaries in the Rail
Products Group were not included in the TCF Transaction. Steven
B. Towbin, Esq., and Matthew A. Swanson, Esq., at D'Ancona &
Pflaum, represent the Debtors. Since the Company has senior
secured bank and other debt in excess of $170 million, it is
unlikely that there will be proceeds available to satisfy the
claims of unsecured creditors or to provide any recovery to
shareholders.
ACT MANUFACTURING: Administrative Claims Due by March 3, 2003
-------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Massachusetts
fixes March 3, 2003, as the deadline for creditors holding
certain administrative expense claims and claims arising from
the assumption and rejection of executory contracts against:
* Act Manufacturing, Inc., and its debtor-affiliates:
* CMC Industries, Inc.,
* ACT Manufacturing US Holdings, LLC, and
* ACT Manufacturing Securities Corporation,
to file their proofs of claim against the Debtors or be forever
barred from asserting those claims.
The administrative claims bar date does not apply to claims for
fees and expenses of retained professionals, members of the
Official Committee of Unsecured Creditors, as well as the United
States Trustee a so-called Dimunition Claim asserted by the
Debtors' lenders.
Proofs of Claim and requests for payment of administrative
expense must be filed before 4:30 p.m. on March 3, 2003, and
must be delivered to:
Trumbull Services Company, LLC
PO Box 1098
Windsor, Connecticut 06095
Act Manufacturing, Inc., is a global provider of value-added
electronic manufacturing services to original equipment
manufacturers in the networking and telecommunications, high-end
computer and industrial and medical equipment markets. The
Debtors filed for chapter 11 protection on December 21, 2001
(Bankr. Mass. Case No. 01-47641) (Rosenthal, J.). Richard E.
Mikels, Esq., at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
represents the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$374,160,000 in total assets and $231,214,000 in total debts.
ACT has proposed a chapter 11 plan of reorganization and has the
exclusive right to solicit acceptances of that plan through
June 9, 2003.
AGERE SYSTEMS: Will Webcast 2nd Shareholders' Meeting on Feb. 20
----------------------------------------------------------------
Agere Systems (NYSE: AGR.A, AGR.B) will webcast its second
annual meeting of stockholders on Thursday, February 20, 2003 at
9:00 a.m. EST.
The meeting will be webcast live over the Internet at
http://www.agere.com/webcast Subsequent to the meeting, the
webcast will be available on the Agere Web site until
February 27, 2003 at http://www.agere.com/webcast
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
AMERICAN NATIONAL LAWYERS: Receivership Prompts S&P's R Ratings
---------------------------------------------------------------
Standard & Poor's Ratings Services revised its counterparty
credit and financial strength ratings on American National
Lawyers Insurance Reciprocal Risk Retention Group (American
National Lawyers Insurance) to 'R' from 'Bpi'.
"This rating action was taken after the Tennessee Department of
Commerce and Insurance placed American National Lawyers
Insurance, along with two affiliated insurers, Doctors Insurance
Reciprocal Risk Retention Group and Reciprocal Alliance Risk
Retention Group, under receivership on January 31, 2003," said
Standard & Poor's credit analyst Daryl P. Brooks.
Tennessee insurance regulators cited the insurers' hazardous
financial condition and inability to cover existing claims as
reasons behind the regulatory action. All three insurers were
under risk-sharing arrangements, using reinsurance, with another
affiliate, Virginia-based Reciprocal of America, which was
placed under receivership by Virginia state regulators only two
days earlier.
American National Lawyers Insurance, started in 1993, is a
professional liability insurance company that is completely
owned by its lawyer insureds. It is licensed to do business in
Tennessee and South Carolina, and provides liability coverage
for about 3,100 Tennessee lawyers.
An insurer rated 'R' is under regulatory supervision owing to
its financial condition. During the pendency of the regulatory
supervision, the regulators may have the power to favor one
class of obligations over others or pay some obligations and not
others. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
Ratings with a 'pi' subscript are insurer financial strength
ratings based on an analysis of an insurer's published financial
information and additional information in the public domain.
They do not reflect in-depth meetings with an insurer's
management and are therefore based on less comprehensive
information than ratings without a 'pi' subscript. Ratings with
a 'pi' subscript are reviewed annually based on a new year's
financial statements, but may be reviewed on an interim basis if
a major event that may affect the insurer's financial security
occurs. Ratings with a 'pi' subscript are not subject to
potential CreditWatch listings.
Ratings with a 'pi' subscript generally are not modified with
"plus" or "minus" designations. However, such designations may
be assigned when the insurer's financial strength rating is
constrained by sovereign risk or the credit quality of a parent
company or affiliated group.
AMERICREDIT: Increases Net Loss for Quarter Ended Dec. 31, 2002
---------------------------------------------------------------
AmeriCredit Corp., (NYSE:ACF) revised its net loss for the
quarter ended December 31, 2002, to reflect an additional non-
cash charge of $27.8 million (pre-tax) related to the present
value effect of the expected delay in receiving cash
distributions from FSA-insured securitization trusts.
AmeriCredit anticipates it is probable that targeted net loss
ratios will be exceeded in certain of its FSA-insured
securitizations during calendar year 2003 resulting in cash
being used to build credit enhancement to higher levels prior to
ultimate distribution to the Company. The Company's credit
enhancement assets are carried on its financial statements based
on the present value of future cash distributions from
securitization trusts. The expected delay reduces the present
value of the cash distributions and necessitates the charge.
Prior to its January 16, 2003, release of second quarter
operating results, the Company and its independent accountants
initially determined that the timing of the charge, if any,
would be applicable to future periods. Based on further
consultation, AmeriCredit and its independent accountants
concluded that the charge should be taken in the December 2002
quarter.
The net loss for the December 2002 quarter is now $44.7 million
(compared to $27.6 million, as previously released). The charge
will be reflected on the financial statements to be included in
AmeriCredit's regular quarterly report on Form 10-Q expected to
be filed on February 14, 2003.
AmeriCredit Corp., is the largest independent middle-market auto
finance company in North America. Using its branch network and
strategic alliances with auto groups and banks the company
purchases retail installment contracts entered into by auto
dealers with consumers who are typically unable to obtain
financing from traditional sources. AmeriCredit has more than
one million customers throughout the United States and Canada
and more than $16 billion in managed auto receivables. The
company was founded in 1992 and is headquartered in Fort Worth,
Texas. For more information, visit http://www.americredit.com
As reported in Troubled Company Reporter's February 3, 2003,
Fitch Ratings lowered AmeriCredit Corp.'s senior unsecured
rating to 'B+' from 'BB'. The ratings have been lowered and
removed from Rating Watch Negative where they were placed on
January 17, 2003. The Rating Outlook is now Negative.
Approximately $375 million of senior unsecured debt is affected
by this rating action.
Fitch's rating action reflects deterioration in asset quality
beyond expectations coupled with concerns regarding liquidity
and ongoing access to the asset-backed securities markets.
AmeriCredit is experiencing higher net charge-offs due to lower
than expected recovery rates on repossessed vehicles. Fitch
believes that used car prices will remain pressured due to
continued high incentive financing, which indirectly depresses
used car values. Furthermore, given the weaker economic
environment, consumer defaults will likely remain at elevated
levels over the near to intermediate term. As such, Fitch
believes that AmeriCredit will remain challenged to control
credit quality in an environment where structural changes in the
used car market have negatively impacted the company's operating
performance. Fitch's Negative Rating Outlook reflects this
difficulty.
AMERICREDIT: Takes Actions to Preserve & Strengthen Liquidity
-------------------------------------------------------------
AmeriCredit Corp., (NYSE:ACF) has revised operating plan in an
effort to preserve and strengthen its capital and liquidity
position in light of the difficult business environment. This
plan, which has been approved by the Company's board of
directors, includes revised loan origination targets and expense
reductions. The objective of the plan is to position AmeriCredit
to generate positive cash flow by the June 2003 quarter and
build its liquidity thereafter.
The Company's operating plan includes the following:
-- Reducing loan origination volume to approximately $750
million per quarter by June 2003; origination levels
will continue to fluctuate seasonally.
-- Reducing operating expenses by eliminating
approximately 20% of its workforce by the end of
February, including the closing/consolidation of about
60% of its branch offices.
-- Taking a $40 - $50 million charge for the workforce
reduction, including severance benefits and branch
closing costs.
-- Reiterating the previous outlook for annualized credit
losses to be in the 7% range for the first half of
calendar year 2003 before declining to the 6% range.
-- Assuming an increase in the credit enhancement required
in future securitizations from the current 12% level to
the mid-teens. The Company anticipates an upfront
deposit of 9 - 10%.
-- Assuming all cash receipts from FSA-insured
transactions are delayed through mid-2004 because the
Company expects some trusts to breach performance
triggers in 2003.
AmeriCredit's cash sources for calendar year 2003 will include:
1) excess spread on loans pending securitization, 2) cash
distributions from non-FSA-insured trusts, and 3) servicing and
other fees from securitized loans, including FSA-insured trusts.
Cash uses will include: 1) credit enhancement deposits, 2)
operating expenses, 3) interest expense, and 4) income taxes.
After an expected net use of cash during the March 2003 quarter
as the business is scaled back, AmeriCredit plans to be a net
cash generator, with cash flow accelerating in calendar year
2004.
"We are committed to improving our liquidity position and
providing for the long-term viability of AmeriCredit," said
Chief Executive Officer Michael Barrington. "We will do what it
takes to adapt even if distributions from many of our
securitization trusts are substantially delayed into calendar
year 2004."
Workforce reduction
AmeriCredit's workforce reduction will eliminate approximately
1,000 of its nearly 5,000 jobs and result in the
closing/consolidation of approximately 140 of its 232 branch
offices. The reduction will occur by the end of February and
affect employees at all levels of the Company.
The job eliminations will be concentrated in the
origination/branch platform, as well as in areas that support
that function. These layoffs will not impact the servicing
operation, including the Company's five collection centers that
will continue to focus on collecting AmeriCredit's existing $16
billion portfolio. All displaced employees will receive
severance benefits based on their length of service, as well as
outplacement assistance.
"As we have previously communicated, we are committed to
aligning our loan volume and operating expenses with available
capital resources," Barrington said. "Unfortunately, to do this
we must eliminate a significant number of jobs and branches from
the tremendous team we have developed over the last 10 years.
These were very painful decisions, but necessary to provide for
the Company's long-term viability."
AmeriCredit Corp., is the largest independent middle-market auto
finance company in North America. Using its branch network and
strategic alliances with auto groups and banks the company
purchases retail installment contracts entered into by auto
dealers with consumers who are typically unable to obtain
financing from traditional sources. AmeriCredit has more than
one million customers throughout the United States and Canada
and more than $16 billion in managed auto receivables. The
company was founded in 1992 and is headquartered in Fort Worth,
Texas. For more information, visit http://www.americredit.com
ANC RENTAL: Asks Court to Extend Time to File Creditors' Claims
---------------------------------------------------------------
Pursuant to (rarely used) Rule 3004 of the Federal Rules of
Bankruptcy Procedures, the period within which ANC Rental
Corporation and its debtor-affiliates may file a proof of claim
on a creditor's behalf is set to expire on February 13, 2003.
Thus, the Debtors ask the Court to extend this Rule 3004
deadline to April 14, 2003.
Section 501(c) of the Bankruptcy Code provides that "if a
creditor does not timely file a proof of creditor's claim, the
debtor or the trustee may file a proof of claim." In addition,
Rule 3004 provides that:
"If a creditor fails to file a proof of claim on or before
the first date set for the meeting of creditors called
pursuant to Sec. 341 (a) of the Code, the debtor or trustee
may do so in the name of the creditor, within 30 days after
expiration of the time for filing claims prescribed by Rule
3002(c) or 3003(c), whichever is applicable."
Elio Battista, Jr., Esq., at Blank Rome LLP, in Wilmington,
Delaware, informs the Court that in accordance with the
provisions of the Bar Date Order, the Debtors served the notice
of the Bar Date on over 132,500 potential creditors. As of the
Bar Date, over 8,600 proofs of claim have been filed.
In the brief time since the Bar Date, Mr. Battista tells the
Court that it has been impossible for the Debtors to have
reviewed all the proofs of claims which have been filed to
determine whether there are any creditors for whom the Debtors
believe that a proof of claim should be filed to have the claim
addressed through the plan process.
Thus, the Debtors assert that an extension of the deadline will
give them enough time to assess whether there are existing
creditors on whose behalf claims should be filed.
By application of Del.Bankr.LR 9006-2, the deadline is
automatically extended through the conclusion of the March 6,
2003 hearing. (ANC Rental Bankruptcy News, Issue No. 27;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
APPLIED EXTRUSION: Fiscal 2003 Q1 Results Reflect Solid Growth
--------------------------------------------------------------
Applied Extrusion Technologies, Inc., (NASDAQ NMS - AETC)
announced financial results for its first fiscal quarter ended
December 31, 2002.
First Quarter 2003 Results
Sales for the first quarter of fiscal 2003 of $59,361,000 were
$3,884,000, or 7.0 percent, higher than sales for the first
quarter of fiscal 2002. The 7.0 percent increase was due to a
3.6 percent increase in sales volume and a 3.3 percent increase
in average selling price.
Gross profit for the first quarter of fiscal 2003 was
$12,182,000, or 20.5 percent of sales, compared with
$10,326,000, or 18.6 percent of sales for the same period in the
prior year. The $1,856,000 improvement in gross profit was due
primarily to the increase in volume and price discussed above,
and lower manufacturing costs, which were partially offset by
increased raw material costs and higher depreciation expense.
The Chemical Data, Inc., average cost of polypropylene resin,
AET's primary raw material, increased by 18 percent from the
first quarter of fiscal 2002 to the first quarter of fiscal
2003. Increases in AET's raw material costs over the same period
resulted in an approximate $3,000,000 increase in raw material
costs for the first quarter of fiscal 2003, a portion of which
was offset by lower manufacturing costs. CDI projects further
cost increases over the course of the year.
Operating profit for the first quarter of fiscal 2003 was
$4,021,000 compared with $2,152,000 for the first quarter of
fiscal 2002. Operating expenses in the first quarter of fiscal
2003 included $464,000 of restructuring transition expenses.
For the three months ended December 31, 2002, the Company
generated earnings before interest, taxes, depreciation and
amortization (EBITDA) of $9,782,000, an increase of 34.1 percent
compared with EBITDA of $7,294,000 for the first quarter of
fiscal 2002.
Interest expense of $7,279,000 was $387,000 higher than the
first quarter of fiscal 2002. This was primarily due to lower
interest income and less capitalized interest in the first
quarter of fiscal 2003 compared with the same quarter in the
prior year. Net loss for the first quarter of fiscal 2003 was
$3,258,000, compared with a net loss of $4,740,000 for the first
quarter of fiscal 2002.
Balance Sheet, Cash Flow and Liquidity
At December 31, 2002 the Company had $19,814,000 of cash and
cash equivalents and no borrowings, other than $6,219,000 of
letters of credit, under its revolving credit facility. Net debt
(total debt less cash) at December 31, 2002 was $258,166,000,
representing 82 percent of total capitalization. Capital
expenditures for the first quarter of fiscal 2003 were
$2,988,000 compared with $8,115,000 in the same quarter of 2002.
Restructuring & Reorganization
In September 2002, the Company announced a restructuring and
reorganization aimed at significantly reducing its cost
structure. Since the announcement, the Massachusetts-based
corporate office has been closed, the Company's business units
have been realigned and key roles and responsibilities
companywide have been reorganized. The Company anticipates
annualized cost savings of $5,000,000 of which approximately 80
percent should be realized in the current fiscal year.
Company Comments
"Fiscal 2003 will be a critical year as we break from the past
and establish the Company on a new path aimed at effecting a
turnaround," commented Amin J. Khoury, Chairman and Chief
Executive Officer. "In the short term, our goal is to generate a
sufficient level of EBITDA to cover interest expense and capital
expenditures. This will require substantial growth in EBITDA
compared with fiscal 2002. While our financial results for the
first quarter of 2003 reflect progress in achieving this
objective, market conditions remain challenging, with continued
excess capacity and rising raw material costs. Therefore, it is
even more important that we carefully control capital
expenditures and continuously re-evaluate our cost structure as
we progress through the year. We are keenly focused on executing
a successful turnaround in fiscal 2003, laying the foundation
for solid financial returns beginning in fiscal 2004," concluded
Mr. Khoury.
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 previously reported in Troubled Company Reporter, 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.
APTIMUS INC: Reports Improved Fourth Quarter 2002 Performance
-------------------------------------------------------------
Aptimus, Inc. (Nasdaq: APTM), the leading online direct response
network, achieved record revenues of $823,000 for the fourth
quarter of 2002, up from $379,000 for the fourth quarter of
2001. Revenue for the year increased 56 percent to $2.9 million,
from $1.9 million in 2001. Excluding the Aptimus web site
business, which was discontinued in 2001, network-only revenue
increased more than 350% from $600,000 in 2001.
The net loss for the fourth quarter of 2002 was $721,000 ($0.17
per share, calculated on an average of 4.2 million shares),
compared to a net loss of $1.7 million for the fourth quarter of
2001. For the year ended December 31, 2002, the net loss was
$5.5 million, compared to a net loss for 2001 of $17.9 million.
The Company's fourth quarter EBITDA (Earnings Before Interest,
Taxes, Depreciation and Amortization) was a loss of $500,000,
compared to an EBITDA Loss of $1.3 million for the comparable
period of 2001, and an EBITDA loss of $1.6 million for the third
quarter of 2002. For 2002 as a whole, the Company's EBITDA loss
improved to $4.2 million compared to a $16.2 million EBITDA loss
for 2001. The Company feels that EBITDA is an important
financial metric to measure at this stage in its life cycle, as
many investors use it as an indicator of a company's ability to
generate positive cash from operations.
Aptimus ended the quarter with $717,000 in cash, cash
equivalents and short-term investments. Net accounts receivable
was $530,000 at the end of the quarter and DSOs, or Days sales
outstanding, again continued to remain at a level of less than
60 days indicating the strength and health of the company's
client base.
Fees paid to the Company's distribution partners during the
quarter were $259,000, or 32% of revenues, compared to $149,000,
or 39% of revenues, in the same quarter the previous year and
$184,000, or 34.3% of revenues, in the third quarter of 2002.
For the year, distribution fees paid to partners were $1.0
million, or 34.5% or revenues, compared to $0.3 million in 2001,
or 50% of network-only revenues.
During the quarter the Company continued to grow its base of
clients and distribution partners, expanding the reach and power
of the Aptimus Network. Key new clients included the New York
Times, Home Shopping Network, American Express, IBM, Weight
Watchers, and WebMD. The Company also continued to improve its
technology systems including:
-- Adding support for cost per click pricing to its
AptiMail(TM) one-to-one email delivery system, making it the
only email system today that can simultaneously prioritize and
optimize email campaigns regardless of pricing model, including
cost per click, cost per order, percent of sale, and cost per
lead models;
-- Expanding frequency management to allow each offer to be
presented to individual consumers at the best frequency for the
offer; and
-- Adding follow up options for AptiNet lead generation
orders to increase back-end order conversion rates for clients.
In addition to growing its revenues, Aptimus also continued to
focus on reducing expenses and preserving its cash during the
quarter. Aptimus reduced fixed costs by $385,000 from the third
quarter. It also increased its margins by expanding its system's
services and capabilities and improving its distribution partner
relationships. With continued growth in revenues and margins, as
well as continuing cost controls, the Company hopes to achieve
EBITDA profitability by the end of the current quarter.
"We were very pleased with our performance on all fronts during
the fourth quarter," said Tim Choate, President and CEO of
Aptimus. "Having competing goals of achieving significant
revenue growth and cost reductions at the same time is
challenging. Our team successfully stepped up to that challenge
in the fourth quarter. We plan to continue focusing our efforts
on preserving our cash while prudently growing our business in a
results-based online advertising market that we feel has
enormous growth potential."
Aptimus -- http://www.aptimus.com-- is the leader in online
lead generation and customer acquisition programs for major
consumer marketers. Aptimus presents marketers' offers via a
growing list of distribution partner Web sites and email
channels, generating high volumes of quality leads for major
consumer direct marketers while increasing revenues for
distribution partners. At the core of Aptimus' network platform
is a proprietary, patent-pending technology and direct marketing
approach called Dynamic Revenue Optimization, which
automatically determines on a real-time basis the best marketer
offers for promotion on each distribution partner's Web site and
in each email sent. The technology is designed to optimize
results for Aptimus' marketer clients by placing the right
offers in front of the right customers, while maximizing
revenues for Aptimus and its distribution partners. The
Company's primary offer presentation formats include cross-
marketing promotions at the points of registration, purchase,
login, download, or other transactional activities on web sites,
as well as email campaigns. Aptimus' current clients include
many of the top 500 direct marketers, such as JPMorgan Chase,
General Mills, Gevalia, IBM, MyPoints, and USA Today. Aptimus
has offices in Seattle and San Francisco, and is publicly traded
on Nasdaq under the symbol APTM.
Aptimus Inc.'s December 31, 2002, balance sheet shows that total
shareholders' equity has dwindled to about $1.2 million from
about $6.6 million recorded in the year-ago period.
* * *
In its SEC Form 10-Q filed on November 14, 2002, the Company
stated:
"Our business has been operating at a loss and generating
negative cash flows from operations since inception. As of
September 30, 2002, we had accumulated losses of approximately
$60.8 million. Even with anticipated growth in revenues, we
expect our losses and negative cash flows are likely to
continue during the fiscal year ending December 31, 2002.
"The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. If
the Company is unable to increase revenues or contain operating
expenses as planned it may not have sufficient funds to satisfy
its cash requirements. The Company may be forced to curtail
operations further, dispose of assets or seek additional
funding. Such events would materially and adversely affect the
value of the Company's equity securities. There can be no
assurance that the Company will be able to successfully complete
the steps necessary to continue as a going concern."
ARMSTRONG WORLD: Disclosure Statement Hearing Slated for Feb. 28
----------------------------------------------------------------
Armstrong World Industries, Inc., and its debtor-affiliates, on
November 4, 2002, filed their Plan of Reorganization along with
its accompanying Disclosure Statement in the U.S. Bankruptcy
Court for the District of Delaware.
A hearing to consider the adequacy of the Debtors' Disclosure
Statement will convene on February 28, 2003, at 9:30 a.m.,
before the Honorable Randall J. Newsome.
Responses and objections, if any, to the approval of the
Disclosure Statement must be received before 4:00 p.m. on
Feb. 20, by the Clerk of the Bankruptcy Court. Copies must also
be served on:
1. Attorneys for AWI
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attn: Stephen Karotkin, Esq.
-and-
Richards, Layton & Finger, P.A.
One Rodney Square
PO Box 551
Wilmington, DE 19899
Attn: Mark D. Collins, Esq.
2. Counsel for the Agent for AWI's Prepetition Bank Lenders
Duane, Morris, LLP
1100 North Market Street
Suite 1200
Wilmington, Delaware 19801
Attn: Michael Lastowski, Esq.
3. Counsel for AWI's Postpetition Lenders
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attn: Robert Scheibe, Esq.
-and-
Klett Rooney Lieber & Schorling PC
The Brandywine Building
1000 West Street Suite 1400
PO Box 1397
Wilmington, DE 19899
Attn: Terry Currier, Esq.
4. Counsel for the Official Committee of Unsecured
Creditors
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Attn: Andrew Rosenberg, Esq.
-and-
Cozen & O'Connor
Chase Center Manhattan, Suite 1400
1201 North Market Street
Wilmington, DE 19801
Attn: mark E. Felger, Esq.
5. Counsel for the Official Committee of Asbestos Claimants
Caplin & Drysdale, Chartered
One Thomas Circle, Suite 1100
Washington D.C. 20005
Attn: Peter Van N. Lockwood, Esq.
-and-
Campbell & Levine
1201 Market Street
15th Floor
Wilmington, Delaware 19801
Attn: Aileen Maguire, Esq.
6. Counsel for the Official Committee of Asbestos Property
Damage Claimants
Klehr, Harrison, Harvey, Branzburg & Ellers
919 Market Street, Suite 1000
Wilmington, DE 19801
Attn: Joanne B. Wills, Esq.
7. Counsel for the Future Claimants' Representative
Kaye Scholer LLP
425 Park Avenue
New York, NY 10022
Attn: Michael J. Crames, Esq.
-and-
Young, Conway, Stargatt & Taylor, LLP
The Brandywine Building
1000 West Street, 17th Floor
Wilmington, DE 19801
Attn: James L. Patton, Esq.
8. the United States Trustee for the District of Delaware
844 King Street, Suite 2313
Lockbox 35
Wilmington, DE 19801
Attn: Frank Perch, Esq.
Armstrong World Industries, Inc., a subsidiary of Armstrong
Holdings, Inc., is a global leader in the design and manufacture
of floors, ceilings and cabinets. In 2001, Armstrong's net
sales totaled more than $3 billion. The Debtors filed for
Chapter 11 protection on December 6, 2000 (Bankr. Del. Case Nos.
00-04469 though 00-04471, inclusive). Mark D. Collins, Esq.,
and Rebecca Booth, Esq., at Richards, Layton & Finger and
Stephen Karotkin, Esq., and Debra A. Dandeneau, Esq., at Weil,
Gotshal & Manges LLP, represent the Debtors in their
restructuring efforts.
AT&T CANADA: Creditors Will Vote on CCAA Plan on Feb. 20
--------------------------------------------------------
A meeting of the affected creditors of AT&T Canada Corp., and
its debtor-affiliates will convene for the purpose of
considering the Plan of Arrangement filed with the Canadian
Court. The meeting will begin at 10 a.m. on February 20, 2003,
and will be held at The Fairmont Royal Hotel, Confederation Room
No. 5, 100 Front Street West, Toronto, Ontario.
Affected creditors who are entitled to vote at the meeting but
unable to attend may vote by proxy. In order to be used at the
meeting, a proxy must be deposited at the offices of the Court-
Appointed Monitor, KPMG Inc., on or before Feb. 19 or with the
chair of the meeting prior to the start of the event.
If the Plan is approved at the meeting, a subsequent Sanction
Hearing will commence on Feb. 25, 2003.
As previously reported, AT&T Canada filed its Restructuring Plan
and related Information Circular with the Ontario Superior Court
of Justice in January 2003. Concurrently these materials were
mailed to bondholders and other affected creditors to solicit
their vote of approval. The Restructuring Plan reflects the
agreement in principle reached with the financial and legal
representatives of a steering committee of AT&T Canada's
bondholders announced on October 15, 2002. This Restructuring
Plan has been approved by AT&T Canada's Board of Directors, and
has the support of the Court-Appointed Monitor and the Company's
Restricted Bondholder Committee. The Restricted Bondholder
Committee and its financial and legal advisors support the
Restructuring Plan as a good result for bondholders, and believe
that the implementation of the Restructuring Plan is in the best
interests of bondholders, and recommend that bondholders vote in
favour of the Restructuring Plan.
Under the Restructuring Plan, AT&T Canada's bondholders and
other affected creditors will receive their pro rata share of
cash in an aggregate amount which is estimated to be
approximately $240 million, but which will not be less than $200
million, and 100% of the new equity in the Company, in exchange
for all of AT&T Canada's outstanding public debt and affected
claims. A full-text copy of the Restructuring Plan is available
at no charge at:
http://www.oslerattcanada.com/
Upon approval of the Restructuring Plan by bondholders and other
affected creditors and the Canadian and U.S. Courts, AT&T Canada
expects to emerge from the restructuring process at the end of
the first quarter 2003, generating positive annual free cash
flow, and with no long-term debt. To provide liquidity to its
new shareholders under the Restructuring Plan, and to have the
potential to access the public equity capital markets, the
Company intends to seek a listing on the Toronto Stock Exchange,
and the NASDAQ National Market System.
A new Board of Directors for AT&T Canada will be established
upon completion of the Restructuring. The new Board will include
some of Canada's top business leaders, including Purdy Crawford,
who will continue as Chairman of the Board.
AT&T Canada is Canada's #1 competitive local-exchange carrier,
offering facilities-based data, Internet, and local and long-
distance voice services. With over 18,700 route kilometers of
local and long haul broadband fiber optic network, world class
managed service offerings in data, Internet, voice and IT
Services, AT&T Canada provides a full range of integrated
communications products and services to help Canadian businesses
communicate locally, nationally and globally.
AT&T Canada Corp. sought protection from creditors under the
Companies' Creditors Arrangement Act in the Ontario Superior
Court of Justice (Court File No. 02-CL-4715) and filed a Section
304 petition (Bankr. S.D.N.Y. Case No. 02-15086) on October 15,
2002, in the U.S. Bankruptcy Court for the Southern District of
New York in Manhattan. Lyndon A.J. Barnes, Esq., and Frederick
L. Myers, Esq., at Osler, Hoskins & Harcourt LLP, represent AT&T
Canada. Brian M. Cogan , Esq., at Stroock & Stroock & Lavan
LLP, represents KPMG, Inc., in its role as the Foreign
Representative in the Sec. 304 Proceeding. The Debtors'
December 2002 Balance Sheet shows a $4.4 billion working capital
deficit and a $3.5 billion shareholders' equity deficit.
BALLY TOTAL FITNESS: Full-Year 2002 Results Show Improvement
------------------------------------------------------------
Bally Total Fitness Holding Corporation (NYSE: BFT) reported its
financial results for the year ended December 31, 2002, with net
income before special charges of $58.4 million versus net income
before the net benefit of unusual items of $72.4 million in
2001. Including special charges of $72.2 million for 2002, net
income was $3.5 million versus $80.7 million in 2001 which
included the net benefit of unusual items of $8.3 million. Net
revenues increased 14% to $968.1 million during 2002 from $852.0
million in the prior year, including 9% attributable to the
Crunch Fitness acquisition completed at the end of 2001. Same
club net revenues grew 3%, driven by increases in monthly
membership dues and products and services, offset by a decline
in new member initiation fees. Earnings before interest, taxes,
depreciation and amortization, including finance charges earned
("EBITDA") before special charges were $201.7 million for 2002,
a decline of 2% from the prior year. Cash flows from operations,
on a comparable basis, were $88.2 million in 2002, compared to
$57.7 million in the prior year, a 53% increase.
Net income before special charges for the fourth quarter of 2002
was $10.8 million. Including the special charges of $65.7
million, the Company had a net loss in the fourth quarter of
$39.2 million. Net income in the fourth quarter of 2001 was
$16.3 million. Net revenues for the quarter increased 12%,
including 8% attributable to Crunch Fitness. Same club net
revenues increased 2% during the quarter. EBITDA before special
charges were $46.3 million during the quarter, a 4% decrease
from the prior year fourth quarter.
"The past year produced strong growth in our personal training
business and our membership dues, which were offset by a
disappointing decrease in new member sign-ups at our same
clubs," said Paul Toback, president and CEO, Bally Total
Fitness. "We believe the softness in membership originations was
due, in large part, to the challenging economy and increased
competition. We have already aggressively begun to address these
issues for 2003 through enhanced marketing and advertising
strategies. These strategies are designed to make Bally more
competitive and highlight our key service strengths, such as
providing personal training with more memberships, while
focusing on our new Weight Management Program and the expanded
offering of more flexible membership options. We intend to
leverage these new ideas to grow our core business with improved
new membership sales."
"We remain fully committed to being cash flow positive in 2003,
as we aggressively follow our strategy to lower operating costs,
improve margins and reduce overall capital spending while
keeping maintenance spending levels consistent with last year.
Capital spending for 2003 could be as low as $45 million and
will not exceed $55 million, compared to $93 million in 2002. It
is our present intention to use available free cash to either
reduce debt or pursue stock repurchases depending on the
relative value of each opportunity. We also remain fully
committed to exiting the financing business. While we have
worked at this for some time, I've made this a top priority,"
Toback added.
"Although this has been a challenging year, we enter 2003 with a
strong focus on these key strategies, plus the continued growth
and development of our brand, all of which will prove the
strength of our business and our business model. We have a tough
job ahead of us, but much of the groundwork has already been
laid and we are confident that the results of this plan will be
strong," Toback concluded.
Special charges
In connection with previously disclosed intentions to seek
alternatives for the financing portion of our business model,
management undertook a study to determine the net realizable
values of recent years' sales activity and membership
installment contracts receivable on an accelerated monetization
basis. Previously, the Company's method for estimating the
adequacy of balance sheet reserves did not assume an accelerated
monetization scenario. Given that the receivables portfolio may
be substantially monetized during the next 12 to 18 months,
management has determined, in consultation with its outside
accountants, that strengthening of its receivables reserves was
warranted and a pretax non-cash charge of $55 million ($1.29 per
diluted share) has been provided in the fourth quarter of 2002.
The study showed an historical average loss rate of 41% over the
past several years consistent with the provision for those
years. Therefore, no adjustment is necessary to reduce the value
assigned to deferred revenues in recent years and no plans
presently exist to modify the future use of the 41% provision
rate used by the Company to estimate the value of new sales.
As previously announced, upon the retirement of its former CEO
in December 2002, a fourth quarter 2002 special charge of $7.3
million was recorded to provide for amounts due pursuant to a
separation agreement with the Company. Also in the fourth
quarter, the Company completed the installation of the new club
management system that had been under development for over two
years at a total cost of approximately $20 million. The Company
recorded a $3.4 million write down of inventory to recognize
inventory shortages discovered upon installation of this more
sophisticated in-club computer system. During the third quarter
of 2002, the Company recorded a special charge of $6.5 million
to settle a class action lawsuit arising in the early 1990s.
In the prior year third quarter, the Company recorded a non-
recurring charge of $6.7 million related to costs from
disruptions and shutdowns of various club operations resulting
from the September 11th terrorist attacks and, separately, the
Company's repositioning of in-club retail stores. Additionally
in the third quarter of 2001, in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes, the Company reviewed the likelihood of realizing the
future benefit of its unrecognized tax loss carryforwards. Based
on profitability expectations, the Company reduced its valuation
allowance against tax loss carryforwards resulting in a federal
tax benefit in the prior year third quarter of $15 million.
Comparison of the years ended December 31, 2002 and 2001
Net revenue for 2002 increased by $116.1 million (14%), offset
by a $119.9 million (17%) increase in operating costs and
expenses, excluding special charges, and an increase in
depreciation and amortization of $1.2 million. The 2001 results
included $7.6 million of goodwill amortization which, under
current accounting standards, is no longer amortized. EBITDA,
excluding special charges, was $201.7 million, a decrease of
$3.3 million (2%) from the prior year. The EBITDA margin, before
special charges, was 19% for 2002 compared to 22% in 2001. This
decrease is due, in part, to the continuing trend of lower new
membership originations at mature clubs, the proportion of clubs
open less than five years, and the initially lower margins
attributable to the 19 Crunch Fitness centers acquired at the
end of last year and the seven centers acquired in the Boston
area in April 2002. Contribution from products and services
increased to $76.1 million from $53.6 million in 2001, a 42%
increase (23% related to same clubs), with a margin of 35% in
2002, compared to 37% during the prior year.
The weighted-average number of fitness centers increased to 412
from 385 during 2002, an increase of 7%, including a 56%
increase in the weighted-average number of centers operating
under the Company's upscale brands from 36 to 56, largely
resulting from the acquisition of Crunch Fitness. Total
membership revenue increased 6% over the prior year (a 3%
decline at same clubs), including a 27% increase in dues revenue
(9% related to same clubs) offset by a 5% decline in initiation
fees (10% related to same clubs).
Gross committed membership fees increased 6% compared to the
2001 period. The gross committed monthly membership fees
originated during 2002 averaged $43 versus $40 in 2001, a 7%
increase. This increase results primarily from higher monthly
dues included in memberships originated at our Bally Total
Fitness clubs, the addition of Crunch Fitness with its higher
membership fee structure, and an increase in new memberships
originated which include a personal training component. The
number of new members joining increased 2% during 2002 compared
with a year ago, with a 2% decrease at our Bally Total Fitness
clubs. The average committed duration of memberships originated
during 2002 was 30.4 months versus 31.0 months in the prior
year, a 2% decrease. This decrease results primarily from the
shorter commitment term of memberships offered at Crunch
Fitness, the addition of five new clubs in states and provinces
that limit contract duration to twelve months, and an increase
in the number of shorter commitment membership programs
available at Bally Total Fitness clubs.
Finance charges earned in excess of interest expense totaled
$12.3 million in 2002, an increase of $3.9 million over the
prior year resulting principally from lower interest rates on
the Company's borrowings and higher installment contracts
receivable offset by a decrease in finance rates earned.
At December 31, 2002, for accounting purposes, the Company had
approximately $114 million of unrecognized federal net operating
loss carryforwards. Separately, the Company's alternative
minimum tax net operating loss carryforwards have been
substantially recognized. Therefore, having fully recognized AMT
net operating loss carryforwards for reporting purposes, the
Company's federal income tax rate increased to 20% during the
second quarter of 2002. The 20% rate will remain in effect until
such time as all AMT credits are fully utilized, which is not
currently expected before 2005. In the first quarter of 2002,
the Company reduced its valuation allowance against its net
operating loss carryforwards by approximately $4 million which
offset charges related to its provision for alternative minimum
taxes.
For federal income tax payment purposes, the Company has
available net operating loss carryforwards exceeding $360
million and AMT net operating loss carryforwards in excess of
$210 million. Therefore, the Company currently does not expect
to make any significant federal tax payments earlier than 2004.
At such time, the Company will be required to pay taxes at the
20% AMT rate for periods currently estimated to extend beyond
2005, including those periods benefited by AMT credits.
Comparison of the three months
ended December 31, 2002 and 2001
Net revenue for the fourth quarter of 2002 increased by $26.4
million (12%), offset by a $29.0 million (16%) increase in
operating costs and expenses, excluding special charges, and an
increase in depreciation and amortization of $.3 million.
Included in the prior year period results was $1.9 million of
goodwill amortization. EBITDA, excluding special charges, was
$46.3 million, a decrease of $1.8 million from the prior year
period. The EBITDA margin, before special charges, was 18% in
the fourth quarter of 2002 compared to 21% in the 2001 period.
This decrease is due, in part, to the continuing trend of lower
new membership originations at mature clubs, the proportion of
clubs open less than five years, and the initially lower margins
attributable to the 19 Crunch Fitness centers acquired at the
end of last year and the seven centers acquired in the Boston
area in April 2002. Contribution from products and services
increased to $16.4 million from $12.4 million in the 2001
period, a 32% increase (16% related to same clubs), with a
margin of 30% in the 2002 period, compared to 37% in the prior
year. The fourth quarter 2002 margin was negatively impacted by
discounting of the Bally-branded nutritional line to sell
through on-hand inventories to make way for new product labeling
designed in connection with the expansion of product
distribution through third party retailers.
The weighted-average number of fitness centers increased to 412
from 386 in the fourth quarter of 2001, an increase of 7%,
including a 58% increase in the weighted-average number of
centers operating under the Company's upscale brands from 36 to
57, largely resulting from the acquisition of Crunch Fitness.
Total membership revenue increased 3% over the prior year period
(a 5% decline at same clubs), including a 23% increase in dues
revenue (7% related to same clubs) offset by an 8% decline in
initiation fees (11% related to same clubs).
Gross committed membership fees during the fourth quarter
increased 3%, compared to the 2001 quarter. The gross committed
monthly membership fees originated during the fourth quarter of
2002 averaged $41 versus $39 in the year ago quarter, a 5%
increase. This increase results primarily from higher monthly
dues included in memberships originated at our Bally Total
Fitness clubs, the addition of Crunch Fitness with its higher
membership fee structure, and an increase in new memberships
originated which include a personal training component. The
number of new members joining was unchanged during the fourth
quarter of 2002 compared with the same quarter a year ago, with
a 4% reduction at our Bally Total Fitness clubs. The average
committed duration of memberships originated during the fourth
quarter of 2002 was 30.0 months versus 30.2 months in the prior
year period, a 1% decrease. This decrease results primarily from
the shorter commitment term of memberships offered at Crunch
Fitness, the addition of five new clubs in states and provinces
that limit contract duration to twelve months, and an increase
in the number of shorter commitment membership programs
available at Bally Total Fitness clubs.
Finance charges earned in excess of interest expense totaled
$2.4 million in the fourth quarter of 2002, an increase of $.8
million over the prior year period resulting principally from
lower interest rates on the Company's borrowings, and higher
installment contracts receivable offset by a decrease in finance
rates earned.
Cash Flows
Cash flows from operating activities were $53.5 million in 2002,
compared to $101.8 million in 2001 which included $60.3 million
of net accelerated collections from the sale of installment
contracts receivable. During the first and third quarters of
2001, the Company sold a portion of its installment contracts
receivable portfolio to a major financial institution at net
book value, with combined proceeds of $105 million. During the
fourth quarter of 2002, the Company sold a portion of its
installment contracts receivable portfolio to a major financial
institution at net book value, receiving proceeds of $23.3
million, partially offsetting the effect of the 2001
acceleration on the 2002 collections. Excluding the impact of
the sales of receivables and net of the change in dues
prepayments during the periods, cash flows from operating
activities were $88.2 million in 2002, compared to $57.7 million
in 2001, a $30.5 million (53%) increase.
We presently have no commitments to acquire clubs or real estate
during 2003. Spending on club remodels and expansions is
expected to significantly decline. New club spending is not
expected to exceed $25 million for 2003, and club improvements
should be less than or equal to the 2002 level. Administrative
and systems spending will also decline significantly resulting
from the completion of the new club management system.
As of December 31, 2002, the Company had drawn $49.5 million on
its $90 million revolving credit line and had outstanding
letters of credit totaling $4.6 million.
Bally Total Fitness is the largest and only nationwide,
commercial operator of fitness centers, with approximately four
million members and over 420 facilities located in 29 states,
Canada, Asia and the Caribbean under the Bally Total Fitness(R),
Crunch Fitness(SM), Gorilla Sports(SM), Pinnacle Fitness(R),
Bally Sports Clubs(R) and Sports Clubs of Canada(R) brands. With
more than 150 million annual visits to its clubs, Bally offers a
unique platform for distribution of a wide range of products and
services targeted to active, fitness-conscious adult consumers.
As reported in Troubled Company Reporter's October 24, 2002,
edition, Fitch Ratings affirmed its senior secured bank credit
facility rating on Bally Total Fitness Holdings Corp., of 'BB-'.
The rating on the senior subordinated notes has been downgraded
one notch to 'B' from 'B+' reflecting Fitch's current notching
guidelines which require a two notch differential between senior
secured debt and subordinated debt. Of BFT's total balance
sheet debt of $716 million, approximately $300 million is
affected by the downgrade. The Rating Outlook was changed to
Negative from Stable.
The change in Rating Outlook to Negative from Stable reflects a
more challenging retail and economic environment. BFT's
operating margins have been impacted by slower new member sign-
ups as well as a higher proportion of new clubs which take time
to achieve profitability. Somewhat offsetting these risks is the
company's efforts to improve operating margins via the sale of
ancillary products as well as the steady stream of income from
its mature, dues paying clientele. The Rating Outlook also
considers the company's leveraged balance sheet and the
challenge of attracting new members in the current weak economy.
BCE INC: Offering Series AC Preferred Shares to Holders
-------------------------------------------------------
BCE Inc. (TSX, NYSE: BCE) entered into an agreement with a
syndicate of investment dealers under which the syndicate has
agreed to purchase for resale to the public 6,000,000 Cumulative
Redeemable First Preferred Shares, Series AC at a price of
$25.50 per share. The syndicate consists of RBC Capital Markets
as lead manager and book-runner, Scotia Capital Inc., TD
Securities Inc., BMO Nesbitt Burns Inc., CIBC World Markets
Inc., National Bank Financial Inc. and Merrill Lynch Canada Inc.
BCE may also issue a further 14,000,000 Series AC Preferred
Shares at the same price to the holders of its currently issued
and outstanding 14,000,000 Cumulative Redeemable First Preferred
Shares, Series U, if BCE exercises its option to purchase for
cancellation its Series U Preferred Shares.
The preliminary short form prospectus, covering the issue of the
Series AC Preferred Shares, is expected to be filed on February
12, 2003 with Canadian securities regulatory authorities. The
offering is scheduled to close on or about February 28, 2003.
This news release shall not constitute an offer to sell or the
solicitation of an offer to buy the securities in any
jurisdiction. The Series AC Preferred Shares will not be
registered under the U.S. Securities Act of 1933 and may not be
offered or sold within the United States or to, or for the
account or benefit of, U.S. persons.
BCE is Canada's largest communications company. It has 25
million customer connections through the wireline, wireless,
data/Internet and satellite services it provides, largely under
the Bell brand. As well, BCE has e-commerce capabilities
provided under the BCE Emergis brand. BCE's media interests are
held by Bell Globemedia, including CTV and The Globe and Mail.
BCE shares are listed in Canada, the United States and Europe.
As of September 30, 2002, BCE reported a working capital deficit
of about $247 million.
BRIDGE INFO: Plan Administrator Seeks Nod for Tolling Agreements
----------------------------------------------------------------
Jill L. Murch, Esq., at Foley & Lardner, in Chicago, Illinois,
relates that pursuant to Bridge Information Systems, Inc., and
its debtor-affiliates' Second Amended Joint Plan of Liquidation
and the Plan Administrator Agreement, the Plan Administrator has
authority to avoid and recover preferences under Sections 547
and 550 of the Bankruptcy Code. Accordingly, the Plan
Administrator has made demands with certain individuals and
entities that he believes have received avoidable preferences,
which are recoverable for the benefit of the Debtors' Estates.
The Plan Administrator is currently in negotiations with certain
Potential Preference Defendants.
To prevent the disruption of the negotiations and to avoid
additional expenses in connection with preparing, filling and
litigating adversary actions, the Plan Administrator sought and
obtained the Court's authority to enter into Tolling Agreements
with a limited number of Potential Preference Defendants wherein
the period for him to file preference actions is extended from
February 15, 2003 to and including August 15, 2003.
Salient terms of the Tolling and Waiver Agreement are:
1. Tolling, Suspension, and Waiver of Limitations Periods
The Parties agree that all statute of limitations or repose
and any other applicable limitations periods governing or
relating in any way to the Plan Administrator's Claims,
including, but not limited to, the statute of limitations
set forth by Section 546(a) of the Bankruptcy Code, and any
other defense, doctrine or statute that would bar the
assertion of the Claims based on or relating to the passage
of time or delay, are tolled, suspended, and will cease to
run, and are waived as a defense or bar to the Plan
Administrator's Claims from February 14, 2003, until the
termination date of the Period, or as set forth in any
extension of the Agreement. In any action commenced by the
Plan Administrator prior to the termination of the Tolling
Period, the Potential Preference Defendant agrees not to
plead or otherwise assert as a defense any statute of
limitations, statute of repose, defense of laches, or any
other time-based defense, rule, law or statute, including,
but not limited to, the statute of the party asserting it as
of February 14, 2003. This Agreement is without prejudice
to any defense based on any statute or period of limitations
or repose that may have expired prior to February 14, 2003;
2. Tolling Period
The tolling, suspension, and waiver will remain in effect
from February 14, 2003 until August 15, 2003. The
August 15, 2003 deadline may be extended by further
agreements by the Parties;
3. Calculation of Limitations Period
The Parties agree to exclude the Tolling Period from any
calculation of time in determining the application of any
statutes of limitations or repose, claim of laches, or other
provision of statute, case law, rule, or regulation,
including, but not limited to, the statute of limitations
set by Section 546(a), otherwise limiting the Plan
Administrator's right to preserve and prosecute its Claims
against the Potential Preference Defendant;
4. Commencement of Action by Plan Administrator
The Parties acknowledge that the Plan Administrator may, in
his sole and absolute discretion, at any time during the
operation of this agreement commence a lawsuit against the
Potential Preference Defendant. The lawsuit may assert any
and all Claims and other liabilities the Plan Administrator
may have against the Potential Preference Defendant and the
Parties do not intend, nor will this Agreement be
interpreted to imply, any obligation or agreement to provide
prior notice to the Potential Preference Defendant or any
other party or person of the Plan Administrator's intention
to commence a lawsuit or to pursue any and all Claims;
5. No Admissions
The Parties acknowledge that this Agreement has been
executed in an attempt to facilitate the investigation and
analysis of the Plan Administrator's Claims and that this
Agreement will not be deemed an admission by any party for
any purpose. This Agreement will not be admissible for any
purpose other than to rebut a defense based on or relating
to the passage of time or delay; and
6. Representations and Warranties
Each party represents and warrants to the other Parties
that:
(a) that Party has carefully read this Agreement;
(b) that Party understands that this Agreement contains
binding provisions;
(c) that Party has consulted his or its own legal counsel
regarding the terms of, and the appropriateness of
entering into, this Agreement; and
(d) that Party is entering into this Agreement of his or its
own free will, without any threat, duress, or coercion
whatsoever.
Each party further represents and warrants to the other
Parties that the individual signing this Agreement on that
Party's behalf has been duly authorized to so sign.
Ms. Mulch contends that the extension of the period for filing
preference actions is supported by the law and in the best
interest of the estate since:
(a) Pursuant to Section 105(a) of the Bankruptcy Code, the
Court possesses the requisite power to permit the Plan
Administrator to enter into Tolling Agreements with the
Potential Preference Defendants;
(b) although there is a split of authority among the courts
of appeals pertaining to this matter, the better view
is that the statute of limitations in Section 546(a) is
not jurisdictional in nature. In the case of Smith v.
Mark Twain National Bank, "the two-year limitations
period sets a time frame in which an action brought
under Section 549 may be commenced; it has nothing to do
with the jurisdiction of the United States federal
courts.";
(c) Bankruptcy Courts have approved the use of Section
546(a) in the enforcement of Tolling Agreements; and
(d) Legislative history confirms that the use of Tolling
Agreement is proper. (Bridge Bankruptcy News, Issue No.
40; Bankruptcy Creditors' Service, Inc., 609/392-0900)
BRIDGE TECHNOLOGY: Initiates Restructuring of Operations
--------------------------------------------------------
Bridge Technology, Inc. (Nasdaq Small Cap Market:BRDG), a data
storage and communication components distribution Company,
announced a formal re-structure of the Company.
Mr. James Djen, President and CEO of Bridge Technology, Inc.,
stated that with a view towards returning to overall
profitability, the Company will have its main emphasis directed
towards the channel distribution of computer products, both in
China and United States.
Mr. Djen said, "The Company is now better prepared to seek
outside financing as it de-emphasizes its manufacturing
operations which have generated substantial losses over the past
two years. Our growth and profits in China and the U.S. were not
sufficient to overcome these losses." Mr. Djen stated that the
Company has been restricted to date in its discussions for
outside financing by the lack of interest in the Nasdaq Small
Cap Market System and, in particular, the common stock of Bridge
Technology, Inc., which hopefully will change in the near
future.
Bridge Technology, Inc., recently paid off its equity loan of
$5,000,000 to IBM Global Credit and reduced its General Bank
loan to $1,850,000 by making a payment of $1,050,000. The
General Bank loan is now extended to June 30, 2003.
Mr. Djen also noted that the Nasdaq system has under
consideration an extension of one year, until February 24, 2004,
for Bridge Technology, Inc. and other companies, with their
share price selling below $1.00 per share, to meet the minimum
standard of $1.00 per share.
The Company expects to formally renew its master distribution
contract for China with Hitachi Global Storage Technologies, who
has recently purchased IBM's hard disk drive manufacturing
business. Hitachi, Ltd. (NYSE:HIT)(TSE:6501) has announced that
they have created this new hard drive (HDD) storage company with
the most advanced technology, the most extensive product line,
and the greatest global reach in the industry.
Bridge Technology, Inc., is a "time-to-market" Company that
distributes digital recording, storage, and communication
components and sub-assembly units, primarily to long standing
OEM customers. The Company operates through subsidiaries in the
United States, and Hong Kong. More information on Bridge
Technology, Inc. may be obtained over the Internet at
http://www.bridgeus.com
* * *
In its SEC Form 10-Q filed on November 14, 2002, the Company
reported:
"The [Company's] unaudited consolidated financial statements
have been prepared assuming that the Company will continue as a
going concern. During the year ended December 31, 2001, the
Company incurred a net loss of $2,542,000 and used cash of
$3,635,000 in its operations. Management has undertaken certain
actions in an attempt to improve the Company's liquidity and
return the Company to profitability. On July 24, 2002, the
Company entered into a loan modification and extension agreement
with a commercial bank for its outstanding balance of $4 million
at December 31, 2001, which was reduced by $100,000 payment made
in 2002. Pursuant to the terms of the new agreement, monthly
interest only payments are to be made through maturity, $50,000
was due and paid by September 15, 2002 and no less than
$1,000,000 is due on November 30, 2002. The Company owns 90% of
all issued and outstanding shares in CMS and pledged 65% of all
issued and outstanding shares in CMS against this outstanding
balance and the maturity date of the note has been extended
until November 30, 2002. However, if the Company makes all of
the foregoing payments on a timely basis and has not otherwise
defaulted on the loan, the maturity date for the remaining
unpaid principal balance will be extended until June 30, 2003.
Additionally, the Company's major shareholders have subordinated
the outstanding loans to the Bank debt and have also indicated
an interest in converting their debt to equity along with the
acceptance of additional outside financing.
"Operationally, management's plans include continuing actions to
cut or curb nonessential expenses and focusing on improving
sales of Autec. No assurance can be given that the Company will
be successful in extending or modifying its line of credit or
that the Company will be able to return to profitable
operations.
"Looking for alternatives, the Company is currently seeking a
global financing agreement with a major international bank to
replace existing credit lines in the U.S. and Hong Kong. No
assurance can be given that the alternative funding source will
be available.
"Management of the Company is actively pursuing certain other
action plans, such as selling controlling interest in Autec and
Ningbo and/or selling a portion of its equity interest in CMS in
exchange for cash proceeds to provide working capital and repay
part or all of the outstanding bank loans. At November 14,
2002, no formal binding offers and/or letter of credits have
been received.
"On October 1, 2001, a complaint was filed by a Trustee in U.S.
Bankruptcy Court against the Company for an alleged transfer of
assets, technology, trade secrets, confidential information,
business opportunities from Allied Web, a corporation owned by
the Company's former President and Director, which filed for
liquidation under federal bankruptcy laws on April 6, 2000. At
December 31, 2001, management of the Company was unable to
assess the possibility of incurring future liability and
estimate the reasonable amount of contingent liability.
Therefore, the Company did not record any accrued liability for
this matter. In July 2002, this case was settled in principal
with a major participation by the Company's insurance carrier.
Accordingly, the Company accrued a contingent liability of
approximately $265,000 as of September 30, 2002. On November 8,
2002, the Bankruptcy Judge dismissed this suit for failure to
appear or prosecute. The Company expects the Bankruptcy Judge
will set aside the dismissal and reinstate the action. However,
as of November 14, 2002, Bridge is unaware of whether the
Bankruptcy Judge has so acted. The Bankruptcy Trustee and the
Company have negotiated a tentative settlement, contingent upon
the approval of a prior Officer/Director, another individual and
other active Officers and Directors."
BUDGET GROUP: Court Okays Sonnenschein as Committee's Counsel
-------------------------------------------------------------
The Official Committee of Unsecured Creditors in the Chapter 11
cases of Budget Group Inc., and its debtor-affiliates, obtained
the Court's authority to retain the firm of Sonnenschein Nath &
Rosenthal as its special trademark, license and franchise
counsel, nunc pro tunc to November 5, 2002.
As special trademark, licensing and franchise counsel,
Sonnenschein will provide these services to the Committee:
A. expertise with respect to registration and protection of
the Debtors' trademarks associated with the operations in
Europe, the Middle East and Africa;
B. commercial and licensing law advice in respect of
structuring of the Debtors' operations in Europe, the
Middle East; and
C. expertise with respect to domestic and international
franchise arrangements and related issues.
Sonnenschein will be compensated based on its hourly rates, and
reimbursement of all costs and expenses incurred. The
Sonnenschein professionals who will represent the Committee are:
Rochelle B. Spandorf $375
John R.F. Baer 425
Other Sonnenschein attorneys or paralegals will also, from time
to time, provide legal services on the Committee's behalf. The
firm's hourly rates currently range from:
Partners $225 - 775
Associates 125 - 390
Paralegals 70 - 230
(Budget Group Bankruptcy News, Issue No. 15; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
Budget Group Inc.'s 9.125% bonds due 2006 (BDGP06USR1) are
trading at about 23 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BDGP06USR1
for real-time bond pricing.
BURLINGTON: WL Ross Pulls the Pin & Tosses Management a Grenade
---------------------------------------------------------------
Wilbur Ross, Chairman of WL Ross & Co. LLC, sent the following
letter to the members of the Board of Directors of Burlington
Industries, Inc.:
WL ROSS & CO, LLC
New York -- Seoul -- Tokyo
Manhattan Tower
101 East 52nd Street
New York, NY 10022
Wilbur L. Ross, Jr. Telephone: 21 826-2111
Chairman and Fax: 212-317-4891
Chief Executive Officer E-mail: wlross@wlrossancco.com
February 12, 2003
The Board of Directors
Burlington Industries, Inc.
c/o George Henderson III
3300 West Friendly Avenue
Greensboro, NC 27420
Gentlemen:
Since yesterday's announcement, holders of more than $120
Million of unsecured claims have written to me rejecting the
35 cent offer by Berkshire Hathaway. When you add their
claims to the $81 million owned by Funds under WL Ross & Co.
management, you will see that a majority of your unsecured
creditors oppose the Berkshire deal. The Unsecured Creditor
Committee also has expressed its concerns to you. In view of
the opposition of a majority of the true parties at interest,
the unsecured creditors, and in view of the fact that there
was no professionally organized M&A process conducted prior
to your acceptance of the Buffet bid, there is no
justification for the course of action you have adopted.
The deal you approved yesterday is really a covert plan of
reorganization. I believe that you cannot proceed with it in
the absence of an affirmative vote by the unsecured creditors
who are impaired by it. Since they have articulated their
opposition to it, who is the constituency you believe you are
benefiting by your action? You are the fiduciaries for my
Funds and for the other creditors, but I believe that neither
your conclusion nor the process by which you reached the
decision is consistent with your obligations.
Your press release implies that you rejected my proposal
because it was contingent upon debt financing. Surely this
is specious. The Buffet bid itself proves that the value of
Burlington is vastly greater than the amount of borrowing
proposed. There is no bonafide issue about availability of
funding.
Finally, if you will check with the market makers, you will
see that the bonds are now 37 bid, a premium over the
Berkshire proposal. This is a further articulation of the
investment community's collective judgment regarding the
Berkshire bid.
Please reconsider your decision of yesterday. There still is
time to avoid the litigation that will otherwise ensue.
Yours truly,
/s/ Wilbur L. Ross
Wilbur L. Ross
Documents filed with the Bankruptcy Court in Wilmington disclose
that WL Ross & Co. LLC, submitted a letter dated February 5,
2003, to George W. Henderson III, Chairman of the Board and
Chief Executive Officer of the Company, as amended by letter
dated February 10, 2003, that outlined a formal transaction.
Berkshire Hathaway is aware of this competing proposal and
agrees that Burlington may continue to discuss and negotiate the
WLR Proposal and feed WLR confidential information, so long as
Burlington keeps Berkshire Hathaway promptly informed of the
status and all material information about the WLR Proposal, all
discussions and negotiations of a definitive deal, and promptly
provides Berkshire Hathaway with a copy of any material written
amendment, supplement or other communication related to the Feb.
5 and 10 letters.
Berkshire Hathaway has offered $579 million to buy Burlington
out of chapter 11. R. Gregory Morgan, Esq., at Munger, Tolles &
Olson LLP, in Los Angeles, represents Berkshire Hathaway in this
transaction. David G. Heiman, Esq., at Jones, Day, Reavis &
Pogue, serves as lead counsel to Burlington.
CALPINE CORP: Reducing Turbine Capital Commitments by $3.4 Bill.
----------------------------------------------------------------
Calpine Corporation (NYSE: CPN) entered into restructured
agreements with its major gas and steam turbine manufacturers --
including GE Power Systems, Siemens Westinghouse and Toshiba
International Corporation -- giving Calpine the option to cancel
its existing orders for 87 gas turbines and 44 steam turbines.
The new agreements significantly reduce the company's future
capital commitments by approximately $3.4 billion and provide
greater flexibility to match equipment commitments with
Calpine's revised construction and development program.
"This latest phase of Calpine's restructured turbine program
reflects our continued focus on further reducing future capital
expenditures," stated Calpine Chairman and CEO Peter Cartwright.
"We appreciate our turbine equipment manufacturers' continued
support in meeting our near- and long-term goals. As we enter
2003, Calpine remains determined to strengthen liquidity,
improve our creditworthiness and enhance value -- for our
investors and our customers."
As a result of these restructured agreements on the 87 gas
turbines and 44 steam turbines:
-- Calpine agreed to pay approximately $109 million for the
restructuring of the agreements and cancellations of
certain equipment. To date, approximately $91 million
has been paid. The remaining payments will consist of $9
million in 2003, $6 million in 2004 and $3 million in
2005.
-- If Calpine elects to go forward with a turbine, the
company and the manufacturer will negotiate the purchase
price, and Calpine will receive credit for payments
previously made for that turbine.
-- Calpine can now tailor its turbine program around future
project opportunities and will only incur an additional
capital commitment when a new turbine is required.
Of the 87 gas turbines and 44 steam turbines, the company has
cancelled 11 gas turbines and 2 steam turbines. If Calpine were
to cancel all of the remaining turbines, future turbine capital
commitments would be reduced by $3.4 billion.
Calpine will record a pre-tax charge of approximately $207
million in the quarter ended December 31, 2002, which represents
all costs associated with the potential cancellation of all 87
gas turbines and 44 steam turbines.
Calpine's remaining capital commitment for turbines is now
approximately $594 million, down from approximately $4 billion.
This capital commitment is summarized below:
-- Turbines for projects in operation and construction.
Approximately $131 million. $127 million in 2003 and $4
million in 2004. These amounts are included in the
company's construction capital expenditure guidance.
-- Separate commitments for 38 gas and 9 steam turbines to
be used for future projects. Approximately $445 million.
$285 million in 2003, $143 million in 2004 and $17
million in 2005.
-- The 76 gas turbines and 42 steam turbines remaining under
the restructured agreements. Approximately $18 million
$9 million in 2003, $6 million in 2004 and $3 million in
2005.
Based in San Jose, California, Calpine Corporation is a leading
independent power company that is dedicated to providing
wholesale and industrial customers with clean, efficient,
natural gas-fired power generation. It generates and markets
power from plants it develops, owns, leases and operates in 23
states in the United States, three provinces in Canada and in
the United Kingdom. Calpine is also the world's largest
producer of renewable geothermal energy, and it owns
approximately one trillion cubic feet equivalent of proved
natural gas reserves in Canada and the United States. The
company was founded in 1984 and is publicly traded on the New
York Stock Exchange under the symbol CPN. For more information
about Calpine, visit its Web site at http://www.calpine.com
* * *
As reported in Troubled Company Reporter's December 11, 2002
edition, Calpine Corp.'s senior unsecured debt rating was
downgraded to 'B+' from 'BB' by Fitch Ratings. In addition,
CPN's outstanding convertible trust preferred securities and
High TIDES were lowered to 'B-' from 'B'. The Rating Outlook was
Stable. Approximately $9.3 billion of securities were affected.
DebtTraders says that Calpine Corp.'s 10.500% bonds due 2006
(CPN06USR2) are trading at about 50 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CPN06USR2for
real-time bond pricing.
CANNONDALE CORP: Wants to Sell Substantially All of Its Assets
--------------------------------------------------------------
Cannondale Corporation seeks authority from the U.S. Bankruptcy
Court for the District of Connecticut to sell substantially all
of its assets free and clear of liens, claims, encumbrances and
interests, except for:
(1) the pre-petition liens associated with the assumed
liabilities to CIT Group/Business Credit, Inc., the
Pennsylvania Industrial Development Authority, the
Connecticut Development Authority and the Connecticut
Department of Economic and Community Development and
(ii) the post-petition liens associated with the debtor-in-
possession financing,
to Pegasus Partners II LP, or to any other Qualified Bidder who
submits a bid deemed by the Court to be the highest and best
offer.
The consideration for the sale proposed under the Asset Purchase
Agreement is:
For the Moto Assets:
-- a credit bid of Pegasus' claim under Section 363(k) of
the Bankruptcy Code in the amount of $1,5000,000; and
-- the assumption of the liabilities measured as of the
Closing Date:
(i) the balance of the PIDA pre-petition secured claim
relative to the Debtor's Bedford, Pennsylvania
"moto" facility;
(ii) postpetition administrative expenses reflected on
the books and records of the Debtor arising in the
ordinary course of business, all in accordance
with the approved operating budget, and
(iii) Prepetition cure amounts associated with leases,
contracts, agreements and purchase orders relative
to the "moto" business of the Debtor and
specifically assumed under the Asset Purchase
Agreement.
For the Bicycle Assets:
-- a credit bid of Pegasus' claim under Section 363(k) of
the Bankruptcy Code in the amount of $22,000,000; and
-- the assumption of the liabilities measured as of the
Closing Date:
(i) the balance of the CIT pre-petition secured claim;
(ii) the balance, if any, of Pegasus' pre-petition
secured claim;
(iii) the balance of the DIP Financing amount;
(iv) the balance of the PIDA pre-petition secured claim
relative to the Debtor's Bedford, Pennsylvania
bicycle facility;
(v) the balance of the CDA pre-petition secured claim
relative to the Debtor's Bethel, Connecticut
facility;
(vi) the balance of the DECD pre-petition secured claim
relative to equipment at the Debtor's Bethel,
Connecticut facility;
(vii) postpetition administrative expenses reflected on
the books and records of the bicycle business of
the Debtor, all in accordance with the approved
operating budget;
(viii) prepetition cure amounts associated with leases,
contracts, agreements and purchase orders relative
to the bicycle business of the Debtor and
specifically assumed under the Asset Purchase
Agreement;
(ix) warranty liabilities related to the Bicycle
Assets;
(x) certain health insurance liabilities for employees
rehired by the Proposed Buyer; and
(xi) certain vacation pay claims for employees rehired
by the Proposed Buyer.
The proposed Sale seeks to obtain the going concern value of the
Debtor's Assets and preserve and maintain existing jobs. Prior
to the Petition Date, the Debtor's business operated at
substantial losses. The Debtor reasonably believes that Pegasus
and CIT will not indefinitely fund losing operations. Further,
the Proposed Buyer shall likely extend employment to virtually
all of the Debtor's remaining active employees.
After careful consideration and exercise of sound business
judgment, the Debtor's management has determined that the sale
of its business as a going concern is the only feasible
alternative for the business to emerge as an operating viable
entity and that the likelihood of filing a confirmable Chapter
11 Plan within a reasonable period of time is not possible.
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 (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.
CHAMPION ENTERPRISES: 4th Quarter Net Loss Climbs to $5.5 Mil.
--------------------------------------------------------------
Champion Enterprises, Inc. (NYSE: CHB), the nation's leading
housing manufacturer, reported results for its fourth quarter
and year ended December 28, 2002. For the quarter, Champion had
total revenues of $330 million and a net loss of $5.5 million,
compared to revenues of $366 million and a net loss of $4.8
million in the same quarter a year earlier. For the twelve
months ended December, the company had revenues of $1.4 billion
and a net loss of $256 million in 2002, compared to revenues of
$1.5 billion and a net loss of $28 million a year ago. In 2001
Champion had after tax goodwill amortization expense for the
three and twelve months of $2.2 million and $8.8 million,
respectively.
Included in 2002 results were restructuring charges to close and
consolidate retail sales centers and manufacturing facilities.
For the quarter, these charges totaled $7.5 million pretax,
consisting of losses on inventory liquidation of $4.0 million,
asset impairment charges of $1.4 million, lease termination
costs of $0.9 million and other closing related expenses of $1.2
million. Also included in quarterly results was a $2.3 million
pretax gain from the sale of seven idle homebuilding facilities
and a $1.5 million gain from the settlement of debt related to
development operations. A $14.5 million tax benefit was also
recognized for the quarter resulting from operating losses for
the three-month period and from the completion of the sale or
abandonment of certain acquired businesses and assets.
In the year-to-date period of 2002, pretax closing related
expenses were $55.3 million, including non-cash asset impairment
charges of $28.9 million. In addition, pretax results included
goodwill impairment charges of $97 million and gains from debt
retirement of $7.4 million. The tax provision for the twelve
months ended 2002 included a deferred tax asset valuation
allowance of $102.3 million.
Chairman, President, and Chief Executive Officer, Walter R.
Young, commented, "Results in 2002 were hurt by tough market
conditions, with industry wholesale shipments dropping 24.6% for
the quarter and 12.8% for the year. Wholesale shipments were
168,491 homes in 2002, the lowest level since 1963. Substantial
uncertainty exists as a result of the ongoing lack of affordable
consumer financing and high consumer repossession levels. While
our actions to manage through this cycle had a significant
negative affect on earnings, we substantially strengthened our
liquidity position and operating cash flows. We also
considerably reduced our operating breakeven points and improved
earnings potential."
Operations
Manufacturing- For the three-month period, manufacturing
revenues decreased 17% to $268 million from $323 million one
year earlier. Quarterly manufacturing segment income was $6.5
million excluding the $2.3 million gain on sale of fixed assets,
compared to $19.3 million in the three months ended December
2001. For the year-to-date period, the manufacturing segment had
revenues of $1.2 billion in 2002, down 11% from $1.3 billion in
2001. Excluding restructuring charges of $26.3 million and the
gain on sale of fixed assets, the manufacturing segment reported
income of $26.7 million for the year, compared to $57.4 million
in the year ago period (excluding $3.3 million for impairment
charges related to closed operations).
Champion had unfilled manufacturing orders of $26 million at 37
plants this December, compared to $18 million at 49 plants a
year earlier. Losses related to independent retailer defaults in
2002 dropped to $1.3 million from $3.9 million in 2001. Genesis
sales to builders and developers increased 15% from 2,700 homes
a year ago to 3,100 homes in 2002, representing 10% of
Champion's manufacturing homes sold and an estimated 15% of
manufacturing revenues.
Retail- For the quarter, retail revenues were $95 million and
the segment had a loss of $7.1 million excluding $9.7 million of
expenses to close 26 retail locations. In the fourth quarter of
2001, retail operations had comparable revenues and a loss of
$9.2 million excluding $1.2 million of closing-related expenses.
In the three months ended in 2002, closing-related expenses
consisted of $6.7 million for losses on inventory liquidation,
$0.9 million for non-cash asset impairment charges, $0.9 million
for lease termination costs and $1.2 million for other closing
expenses. Excluding closing related expenses of $28.6 million in
2002 and $5.6 million in 2001, the retail segment reported a
loss of $29.6 million for the year, compared to a loss of $27.6
million one year earlier.
In 2002 fourth quarter same store sales increased 10% from a
year earlier. For the quarter, the average number of new homes
sold per sales location, excluding the wholesale liquidation of
inventory from closed sales centers, increased 46% largely as a
result of closing under performing retail locations and the
liquidation of related inventories. Retail locations reduced
inventories by 800 new homes during the quarter, or by 34%, to
an average of 13.2 new homes per store from 16.3 at the end of
September.
Finance- HomePride Finance Corp., originated $26.1 million of
loans for the quarter and $55.6 million for the year. The
company received $35.6 million of proceeds for $46.8 million of
loans placed in its warehouse funding facility in 2002. As
expected, while HomePride is in its start-up phase of
operations, it reported a pretax loss of $3.3 million and $8.3
million, respectively, for the three- and twelve-month periods.
Corporate Expenses- In 2002 general corporate expenses included
restructuring charges related to development investments of $0.5
million for the quarter and $2.8 million for the year. Corporate
expenses in the year-to- date period also included $0.3 million
of severance costs.
Capital Structure
Champion ended the year with $77.4 million in unrestricted cash
and $52.3 million in restricted cash, primarily serving as
collateral for outstanding letters of credit. In addition, the
company had $16.1 million in cash deposits, which were
classified as other current assets on the balance sheet. During
the three and twelve months ended December 2002, the company
used $1.7 million and $1.5 million, respectively, of cash flow
for operations.
In January 2003 Champion finalized a committed three-year, $75
million revolving credit facility (subject to borrowing base
availability) to be used in support of letters of credit and for
general corporate purposes. As of the end of January 2003, $57.1
million of letters of credit were outstanding on this line,
which is collateralized by accounts receivable, inventories,
property, plant, and equipment and, to a lesser degree, cash and
other assets. Upon issuing these letters of credit, restricted
cash and cash deposits, in the aggregate, were reduced to $27.3
million and, over the next three months, are expected to be
reduced to approximately $15 million.
Champion had total debt outstanding at the end of December of
$359.2 million, including floor plan payable and excluding
warehouse line borrowings in support of its finance operations.
During the fourth quarter of 2002, $15 million of the company's
Series B-1 convertible preferred stock was redeemed for common
stock at the floor redemption price of $5.66 per common share. A
total of 2.65 million common shares were issued in connection
with these redemptions.
Young said, "We will continue to manage our operations with a
primary focus on cash flow. In 2002 net working capital invested
in operations decreased by $50 million, a 33% improvement over
2001. Further, with the addition of our new credit facility, we
realized an immediate improvement in our unrestricted cash
position of $41 million and, over the next several months,
expect to free up an additional $10 million to $15 million of
cash as a result of this line. Finally, while uncertainty always
exists with respect to this process, the company expects to file
its 2002 tax returns for an estimated $60 million tax refund in
the second quarter of this year."
Industry View
The company currently estimates 2003 industry wholesale HUD code
shipments of 165,000 homes, slightly below 2002 levels and
substantially less than the peak of 373,000 shipments in 1998.
This estimate assumes that industry repossessions could increase
from an estimated 90,000 in 2002 to 115,000 homes in 2003, an
estimate which is dependent upon, among other things, the
eventual management of the Conseco Finance portfolio. Such a
high level of repossessions could represent up to 40% of total
consumer demand as opposed to approximately 10% in a more normal
environment. While consumer home-only financing remains tight,
the company believes that cash and real estate loans represent
over 60% of the industry's new home funding, up from 20% during
the industry's peak sales levels.
Outlook
"Despite the progress we've made in reducing our operating
breakeven points and positioning the company for a return to
profitability, we still expect to report a loss in the
seasonally slower first quarter. Industry conditions remain
uncertain, which makes forecasting any further out very
difficult. As we did in 2002, we will continue to carefully
monitor each of our location's results and take prompt actions,
if and where necessary, to maximize our cash and profitability
as this difficult industry cycle continues," Young concluded.
Champion Enterprises, Inc., headquartered in Auburn Hills,
Michigan, is the industry's leading manufacturer and has
produced nearly 1.6 million homes since the company was founded.
The company operates 37 homebuilding facilities in 16 states and
two Canadian provinces and 118 retail locations in 24 states.
Independent retailers, including 657 Champion Home Center
locations, and approximately 600 builders and developers also
sell Champion- built homes. The company also provides financing
for retail purchasers of its homes. Further information can be
found at the company's Web site at http://www.championhomes.net
* * *
As reported in the Troubled Company Reporter's Aug. 20, 2002,
edition, Standard & Poor's Ratings Services placed its ratings
on Champion Enterprises Inc., and its subsidiary, Champion Home
Builders Co., on CreditWatch with negative implications. The
CreditWatch placements follow Champion's announcement
that it will incur significant restructuring charges as it
attempts to further rationalize its operations in the face of a
prolonged recession in the manufactured home building industry.
The manufactured housing industry has entered its fourth year of
a down cycle that was initially caused by poor lending
practices. A previously anticipated recovery continues to be
forestalled by the persistent scarcity of retail consumer
financing. According to the Manufactured Housing Institute,
manufactured home shipments were down another 2.6% during the
first five months of 2002. The Institute's current projections
of relatively flat shipments for the full year 2002 now appear
overly optimistic, given the continued limited availability of
consumer financing, and in particular, the present difficulties
faced by Conseco Inc. ('SD'), the nation's largest supplier of
retail consumer financing for the manufactured housing industry.
Ratings Placed On CreditWatch Negative
Rating
To From
Champion Enterprises Inc.
Corporate Credit Rating BB-/Watch Neg BB-
$200 mil. 7.625% senior unsecured
notes due 2009 B/Watch Neg B
Champion Home Builders Co.
Corporate Credit Rating BB-/Watch Neg BB-
$150 mil. 11.25% senior unsecured
notes due 2007 B/Watch Neg B
COLD METAL PRODUCTS: Auctioning Its Assets on February 26, 2003
---------------------------------------------------------------
U.S. Bankruptcy Court approved a motion for the sale of Cold
Metal Products, Inc. Companies interested in bidding on Cold
Metal's assets must do so by 2 p.m. February 21. An auction will
be conducted at a location to be determined in Cleveland at 10
a.m. February 26.
"Cold Metal is a sound investment," said Raymond P. Torok,
president and CEO. "The active interest of numerous potential
investors validates this thinking. The court's approval of this
motion is a major step forward in getting the company out of
bankruptcy."
In November, Cold Metal hired Resilience Capital Partners, a
Cleveland- based merchant-banking firm, to position Cold Metal
as an attractive purchase to the investment and manufacturing
communities. To date, more than a dozen investors have signed
confidentiality agreements, an initial step for the potential
purchase of the company as a whole or in parts.
Torok noted that hard work and sacrifice by many employees has
been necessary to position Cold Metal Products as an attractive
investment.
"We have significantly cut costs and made the tough decisions,
including layoffs and terminations, to maximize the company's
value and to keep it viable until the sale. Such moves were
difficult yet necessary as we believe that a sale is in the best
interest of the greatest number of stakeholders," he said.
Cold Metal will produce and ship products to its customers
through this transition period and pay in accordance with
suppliers' purchase order terms.
A leading North American intermediate strip steel processor,
Cold Metal Products provides a wide range of steel strip
products to meet the critical requirements of precision parts
manufacturers. Through cold rolling, annealing, normalizing,
edge conditioning, oscillate winding, slitting and cutting to
length, the company provides value-added products to
manufacturers in the automotive, construction, cutting tools,
consumer goods and industrial goods markets. Cold Metal Products
operates plants in Ottawa, Ohio; Detroit, Mich.; Indianapolis,
Ind.; Hamilton, Ontario; and Montreal, Quebec. The company
employs approximately 350 people.
CONSECO FINANCE: Committee Hires Becker & Poliakoff as Counsel
--------------------------------------------------------------
The Official Committee of Unsecured Creditors of the Conseco
Finance Debtors unanimously voted to retain Becker & Poliakoff
as counsel.
Ivan Reich, Esq., and Gary Blum, Esq., will be the primary
attorneys responsible in this engagement. Their hourly rates
are $350. Other Becker attorneys may also assist the Committee
from time to time.
Committee Chairman Walter Morales tells the Court that Becker &
Poliakoff had represented the Unofficial Ad Hoc Committee of B2
Guarantee Holders. That committee ceased to exist once the
Creditors Committee was appointed.
As the Creditors Committee's counsel, Becker & Poliakoff is
expected to:
(a) consult with the Committee, the CFC Debtors, creditors,
bidders and the U.S. Trustee;
(b) investigate the acts, conduct, assets, liabilities and
financial condition of the CFC Debtors, the operation of
their businesses and the desirability of their
continuance;
(c) participate in the plan formulation of a reorganization
plan, advise the unsecured creditors of its
determinations about any plan and collect and file with
the court acceptances or rejections of a plan;
(d) advise the Committee of its rights, obligations, duties
and responsibilities under the Bankruptcy Code;
(e) prepare motions, pleadings, orders, applications,
adversary proceedings and other necessary legal
documents;
(f) protect the Committee's interests;
(g) represent the Committee in negotiations whenever needed;
(h) attend hearings when needed; and
(i) render other services deemed necessary.
Becker & Poliakoff's offices are located in Fort Lauderdale,
Florida.
After conducting a conflicts search of their client database,
Ivan Reich, Esq., of Becker & Poliakoff, discloses that Robert
A. Angueira, Esq., a shareholder of Becker & Poliakoff, has
served as the assistant to the U.S. Trustee for the Southern
District Of Florida from November 1993 through December 2002
before joining the firm this year. Nevertheless, Mr. Reich
attests that Mr. Angueira is not involved in the Debtors' cases
while at the Office of the U.S. Trustee. Otherwise, Mr. Reich
assures the Court that the firm qualifies as a "disinterested
person", within the meaning of Section 101(14) of the Bankruptcy
Code. (Conseco Bankruptcy News, Issue No. 6; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
CONSECO INC: Earns Approval to Bring-In PricewaterhouseCoopers
--------------------------------------------------------------
Conseco Inc., and its debtor-affiliates obtained permission from
the Court to employ PricewaterhouseCoopers as accountants,
auditors and tax advisors in these Chapter 11 cases.
The general nature and extent of services that PwC may
perform for the Debtors include:
(a) auditing and reporting on the consolidated financial
statements of the Debtors and their non-debtor affiliates
for the year ending December 31, 2002, and thereafter;
(b) reviewing quarterly financial information to be included
in reports of the Debtors filed with the United States
Securities and Exchange Commission;
(c) performing agreed upon procedures on the schedule of
taxes collected, withheld, refunded/exchanged and
remitted for the year ending December 31, 2002, and
thereafter;
(d) auditing and reporting on the Debtors' cost structure;
(e) auditing and reporting on the schedule of fees remitted
to the state guaranty funds for the year ending
December 31, 2002, and thereafter;
(f) auditing and reporting on the financial statements of
Conseco and its subsidiaries for the year ending
December 31, 2002, and thereafter;
(g) providing property tax services to assist Conseco in
connection with its property tax costs for its
properties;
(h) providing temporary tax staffing to assist in the
preparation of amended federal and state income tax
returns;
(i) providing expatriate tax and international administration
services, including preparation of federal, state, and
foreign income tax returns; exit and entrance
orientations; tax equalization calculations; tax
noticing; other compliance services; year-end w-2
processing; fiscal year compensation reporting; 2001 tax
equalization processing; post-assignment support
services;
(j) assisting the Debtors in connection with the preparation
and filing of their registration statements required by
the SEC in relation to their debt and equity offerings;
(k) providing other audit, accounting and tax services, as
may be requested by the Debtors and as may be agreed to
PwC; and
(l) as agreed to by PwC and Debtors, attending and
participating in administrative or court appearances
consistent with these services.
The Debtors and PwC estimate that the total fees will be
approximately $4,200,000. To date, $1,300,000 has been paid and
$2,900,000 is owed and will be paid postpetition, along with
out-of-pocket expenses. The customary hourly rates charged by
PwC are:
Partners $640 - 1,235
Managers/Directors 340 - 600
Associates/Senior Associates 145 - 320
Administration/Paraprofessionals 100 - 120
(Conseco Bankruptcy News, Issue No. 6; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
DebtTraders reports that Conseco Inc.'s 10.500% bonds due 2004
(CNC04USR2) are trading at about 37 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CNC04USR2for
real-time bond pricing.
CORRECTIONS CORP: Full-Year 2002 Net Loss Climbs-Up to $39 Mill.
----------------------------------------------------------------
Corrections Corporation of America (NYSE: CXW) announced its
operating results for the three month period and year ended
December 31, 2002.
For the fourth quarter of 2002, the Company reported net income
available to common stockholders of $37.9 million compared with
$25.9 million for the fourth quarter of 2001. Results for the
fourth quarter of 2002 included the following special items:
* A tax benefit of approximately $30.3 million representing
a reduction of the Company's tax valuation allowance arising
primarily as a result of 2002 tax deductions based on a
cumulative effect of accounting change for tax depreciation to
be reported on the Company's 2002 federal income tax return. The
change in tax depreciation results in a 2002 tax loss that will
enable the Company to obtain a refund of approximately $32.1
million, which the Company expects to receive during the second
quarter of 2003; and
* A charge of $4.0 million for success-based professional
fees incurred in connection with the aforementioned tax
strategy.
Results for the fourth quarters of 2002 and 2001 also included:
* A non-cash charge of $0.6 million, or $0.02 per diluted
share, and a non-cash gain of $26.5 million, or $0.74 per
diluted share, respectively, related to the accounting for
certain derivative instruments in accordance with Statement of
Financial Accounting Standards No. 133.
Excluding these transactions, for the quarter ended December 31,
2002, the Company generated net income available to common
stockholders of $12.2 million compared with a net loss available
to common stockholders of $0.6 million for the quarter ended
December 31, 2001.
Consolidated revenues for the fourth quarter of 2002 amounted to
$248.4 million, compared with $235.4 million for the fourth
quarter of 2001. Consolidated EBITDA for the fourth quarter of
2002 was $45.3 million, which was net of the aforementioned $4.0
million success-based professional fees, compared with $47.3
million for the fourth quarter of 2001. Debt service costs for
the quarter, excluding non-cash items, amounted to approximately
$21.7 million during the fourth quarter of 2002, compared with
$25.1 million during the fourth quarter of 2001. Average
compensated occupancy for continuing operations of the Company
for the fourth quarter of 2002 was 91.2%, compared with 87.6%
for the comparable prior year period.
Adjusted free cash flow continued to improve, with $23.1 million
generated during the fourth quarter of 2002, compared with $18.3
million generated during the fourth quarter of 2001,
representing a 22% increase in adjusted free cash flow per
diluted share.
Commenting on the fourth quarter results, President and CEO,
John Ferguson, stated, "The Company was pleased with its results
for the quarter. Earnings after special items grew significantly
to $0.40 per diluted share compared with a loss of $0.02 per
diluted share in the prior year's fourth quarter. In addition to
the increase in earnings, EBITDA grew 4% and adjusted free cash
flow per share increased 41%, after adjusting for the success-
based professional fees."
For the year ended December 31, 2002, the Company reported a net
loss available to common stockholders of $28.9 million, or $0.52
per diluted share, compared with net income available to common
stockholders of $5.7 million, or $0.23 per diluted share, in
2001. In addition to the fourth quarter items discussed above,
results for the year ended December 31, 2002, included the
following special items:
* An extraordinary charge of $36.7 million, or $1.03 per
diluted share, associated with the Company's refinancing of its
senior indebtedness in May 2002;
* A non-cash charge of $80.3 million for the cumulative
effect of a change in accounting for goodwill in accordance with
Statement of Financial Accounting Standards No. 142 (oSFAS
142o); and
* An additional cash income tax benefit of $32.2 million, ,
resulting from an income tax change that was signed into law in
March 2002, which enabled the Company to utilize net operating
losses incurred during 2001 to offset taxable income generated
in 1997 and 1996 to obtain a refund of approximately $32.2
million during April 2002.
Results for the year ended December 31, 2002 and 2001 also
included:
* Non-cash gains of $2.2 million for the year ended
December 31, 2002, and $14.6 million for the year ended December
31, 2001, related to the accounting for certain derivative
instruments in accordance with SFAS 133.
Excluding these transactions, for the year ended December 31,
2002, the Company generated net income available to common
stockholders of $27.4 million compared with a net loss available
to common stockholders of $8.9 million for the year ended
December 31, 2001.
For the year ended December 31, 2002, revenues increased to
$962.8 million compared with $936.4 million for the year ended
December 31, 2001. Consolidated EBITDA, after adding back the
success-based professional fees, declined slightly to $189.1
million from $192.7, while adjusted free cash flow per share,
also adjusted for the non-recurring item, increased
significantly to $2.80 from $2.33 in 2001, an increase of
approximately 20.2%. Average compensated occupancy for
continuing operations of the Company for the year ended December
31, 2002, increased slightly to 89.6% from 88.4% in 2001, while
operating margins remained at 22.9%.
Commenting on the annual results, Mr. Ferguson stated, "Although
revenues and EBITDA remained essentially flat year over year,
the Company did make significant progress on many fronts during
2002. We have consistently stated that earnings growth would
result from a combination of occupancy driven revenue increases,
improving operating margins and the rationalization of our
capital structure." Ferguson continued, "During 2002 we executed
several significant contracts, the economic effects of which
will not be realized until 2003 and beyond. We also stabilized
operating margins and began several initiatives which should
lead to margin improvement over the next several years. Finally,
we completed a significant refinancing during 2002, which
combined with a favorable interest rate environment, drove
substantial earnings and cash flow growth. The improvements in
our capital structure were also recognized by both major ratings
agencies through upgrades of our debt ratings in 2002."
Operating margins increased to $11.85 per compensated man-day in
the fourth quarter of 2002 from $11.20 per compensated man-day
in the prior year, while the operating margin ratio improved to
23.8% from 23.0% for the same period in the prior year. Revenue
per compensated man-day increased to $49.85 during the fourth
quarter of 2002, representing the seventh consecutive quarterly
increase. EBITDA from continuing operations, exclusive of the
aforementioned success-based professional fees and discontinued
operations, increased from $44.5 million for the fourth quarter
of 2001 to $49.4 million during the fourth quarter of 2002.
Purchase of Crowley County Correctional Facility
On January 17, 2003, the Company purchased the Crowley County
Correctional Facility, a 1,200-bed medium security adult male
prison facility located in Olney Springs, Crowley County,
Colorado, for a cash purchase price of approximately $47.5
million. The Company financed the purchase price through $30.0
million in borrowings under its senior bank credit facility
pursuant to an expansion of its existing $565.0 million term
loan B facility, with the balance of the purchase price
satisfied with cash on hand. Upon purchase of the Crowley
facility the Company owns and operates four Colorado facilities
consisting of approximately 3,400 beds.
Tax Settlement
On October 28, 2002, the Company announced that it entered into
a definitive settlement agreement with the IRS in connection
with the previously disclosed IRS audit of the Company's
predecessor's 1997 federal income tax return. Under the terms of
the settlement, in consideration for the IRS's final
determinations with respect to the 1997 tax year, during the
fourth quarter the Company paid $52.2 million to satisfy federal
and state taxes and interest. Pursuant to the terms of the
settlement, the IRS audit adjustments agreed to for the 1997 tax
year will not trigger any additional distribution requirements
by the Company in order to preserve its status as a real estate
investment trust for federal income tax purposes for 1999.
Accounts Receivable From Puerto Rico
At December 31, 2002, accounts receivable included approximately
$13.8 million from the Commonwealth of Puerto Rico, classified
as current assets of discontinued operations due to the
termination of the Company's contracts to manage three
facilities in the Commonwealth of Puerto Rico during the second
and third quarters of 2002. Subsequent to year end, the Company
entered into an agreement with the Commonwealth of Puerto Rico
regarding the payment and resolution of the balance of the
receivable. The agreement specifies payment dates for $11.3
million, of which $4.7 million has been collected, with the
balance to be paid upon reconciliation of invoices presented.
The Company currently expects to collect the balance of the
receivable and, therefore, no allowance for doubtful accounts
has been established for the accounts receivable balance.
However, no assurance can be given as to the timing and ultimate
collectibility of the remaining amounts due.
Contract Update
On December 13, 2002, the State of Florida notified the Company
of its intention to terminate the Company's contract to manage
the 96-bed Okeechobee Juvenile Offender Correctional Center upon
the expiration of a short-term extension to the existing
management contract, which expired in December 2002. This
termination is not expected to have a material effect on the
Company's financial statements. For the year ended December 31,
2002 this facility generated approximately $0.8 million in
EBITDA.
The Company received notice on June 28, 2002 from the
Mississippi Department of Corrections terminating the Company's
contract to manage the 1,016-bed Delta Correctional Facility due
to non-appropriation of funds. The Delta Correctional Facility
was closed by the State of Mississippi on October 6, 2002. The
State of Mississippi has agreed to expand the Company's
management contract at the Wilkinson County Correctional
Facility to accommodate an additional 100 inmates.
On May 30, 2002, the Company announced a contract award from the
Federal Bureau of Prisons, to house 1,524 federal detainees at
the Company's McRae Correctional Facility located in McRae,
Georgia. The initial term of the contract is for three years and
includes seven one-year renewal options. The contract with the
BOP guarantees at least 95% occupancy on a take-or-pay basis,
and the Company began receiving inmates under the contract on
December 1, 2002.
On October 28, 2002, the Company announced a lease of its
Whiteville, Tennessee facility to Hardeman County, Tennessee,
which has contracted with the State of Tennessee to manage up to
1,536 inmates. The Company has contracted with Hardeman County
to manage the inmates housed in the Whiteville facility. The
Company currently manages approximately 775 Tennessee inmates in
the Whiteville facility as a result of this contract.
Commenting on the fourth quarter business development
activities, John Ferguson stated, "The Company completed an
active fourth quarter in which we began receiving inmates under
new contracts at both our Whiteville, Tennessee facility and our
McRae, Georgia facility. During the quarter, we entered into a
contract to purchase the Crowley prison facility in Colorado,
which we closed in January 2003. This acquisition adds 1,200 new
beds to our inventory in a state where projections call for
significant inmate growth over the next several years."
Ferguson continued, "The McRae, Whiteville, and Crowley
transactions, none of which had a material impact on our 2002
results, should favorably impact our earnings in 2003. Looking
forward, we believe the environment for private prison operators
continues to be favorable. We believe that existing prison
overcrowding, combined with the budget difficulties facing many
of our customers, should lead to greater demand for our services
over the coming years."
Income Taxes
Statement of Financial Accounting Standards No. 109 requires the
Company to provide a valuation allowance to reserve its deferred
tax assets until such time as the Company demonstrates a history
and reasonable likelihood of generating future taxable income.
Removal of the valuation allowance, which totaled $111.0 million
at December 31, 2002, in whole or in part would result in a non-
cash income tax benefit. Based upon the requirements of SFAS 109
and the Company's recent history of taxable losses, the Company
does not expect to remove the valuation allowance prior to the
fourth quarter of 2003 or report a recurring provision for
income tax expense during 2003.
Business Outlook
The Company is providing initial EBITDA guidance for the first
quarter and full year 2003 stating that for the full year, the
Company expects EBITDA to increase to a range of between $206
and $210 million. For the first quarter, the Company expects
EBITDA to be in the range of $49 to $51 million.
Supplemental Financial Information
On or about the date the Company furnishes its quarterly and
annual earnings announcements with the Securities and Exchange
Commission, the Company makes available on its website
supplemental financial information and other data. This
information is as of the date or period indicated (or as of the
date posted, as the case may be), and the Company does not
undertake any obligation, and disclaims any duty, to update any
of this information. You may access this information on the
Company's Web site at http://www.correctionscorp.com
The Company is the nation's largest owner and operator of
privatized correctional and detention facilities and one of the
largest prison operators in the United States, behind only the
federal government and four states. The Company currently
operates 61 facilities, including 38 company-owned facilities,
with a total design capacity of approximately 60,000 beds in 21
states and the District of Columbia. The Company specializes in
owning, operating and managing prisons and other correctional
facilities and providing inmate residential and prisoner
transportation services for governmental agencies. In addition
to providing the fundamental residential services relating to
inmates, the Company's facilities offer a variety of
rehabilitation and educational programs, including basic
education, religious services, life skills and employment
training and substance abuse treatment. These services are
intended to reduce recidivism and to prepare inmates for their
successful re-entry into society upon their release. The Company
also provides health care (including medical, dental and
psychiatric services), food services and work and recreational
programs.
* * *
As reported in Troubled Company Reporter's November 25, 2002
edition, Standard & Poor's affirmed its 'B+' corporate credit
rating on private corrections company Corrections Corp., of
America and revised the outlook to positive from stable. The
outlook revision reflects faster than expected progress made by
management to improve CCA's operating performance.
Nashville, Tennessee-based CCA had about $1.1 billion of debt
(including preferred stock) outstanding at September 30, 2002.
"If CCA is able to continue to improve its financial performance
and achieve and maintain stronger credit protection measures,
specifically total debt (adjusted for preferred stock) to EBITDA
of about 4 times and EBITDA interest coverage in the range of
2.5x to 3.0x, the ratings could be raised during the outlook
period," said Standard & Poor's credit analyst Jean C. Stout.
COX COMMS: Narrows Working Capital Deficit to $110MM at Dec. 31
---------------------------------------------------------------
Cox Communications, Inc., (NYSE: COX) reported financial results
for the three months ended December 31, 2002.
"Cox Communications achieved strong growth in the fourth quarter
of 2002, contributing to another year of solid financial and
operating performance," said Jim Robbins, CEO and President of
Cox Communications.
"We grew our total customer base more than 2% in 2002, with
solid growth in basic subscribers and record growth in high-
speed Internet and telephone subscriptions. With total RGUs now
equal to total homes passed, we continue to prove that the
digital bundle is the industry's growth engine. Our 2002 growth
in bundled customers to 1.7 million, an increase of 53% over the
previous year, validates our strategy of a bundled approach to
selling and serving our customers."
"With this momentum, Cox Communications is well poised to
achieve continued strong growth in both operating cash flow and
revenue and realize our goal of being free cash flow positive in
2003."
Fourth Quarter Highlights
During the fourth quarter of 2002, Cox:
-- Ended the quarter with 6.3 million basic customers, up 1% for
the full year 2002.
-- Ended the quarter with 10.2 million total RGUs, up 14% for
the full year 2002, driven by a 44% growth in new-service
RGUs.
-- Added approximately 135,650 high-speed Internet customers,
ending 2002 with 1.4 million customers, representing year-
over-year growth of 59%.
-- Added approximately 67,190 Cox Digital Telephone subscribers,
ending 2002 with 718,420 customers, representing year-over-
year growth of 58%.
-- Achieved Cox Digital Cable net additions of approximately
84,410 customers, ending the year with 1.8 million digital
cable customers. Cox Digital Cable is now available in 97% of
the homes in Cox's service areas with penetration of our
basic customer base exceeding 28%.
-- Generated $85.6 million in free cash flow.
-- Reduced capital expenditures to $500.8 million for the
quarter, down 17% from the fourth quarter of 2001.
2003 Outlook
For 2003, Cox expects revenue to increase by 14% to 15%,
operating cash flow (a non-GAAP measure calculated as operating
income before depreciation, amortization and loss on sale of
cable systems) to increase by 14% to 15% (excluding the impact
of the $9.8 million one-time charge taken in the first quarter
of 2002 related to the continuation of Excite@Home) and capital
expenditures to be approximately $1.6 billion. Basic video
customers are expected to increase approximately 1.0% over 2002
and new-service RGU net additions are expected to be between 1.0
to 1.1 million. In addition, Cox expects to be free cash flow
positive for the full year 2003.
Pro Forma Operating Results
Cox provides pro forma information as an alternative for
understanding its operating results. The pro forma operating
results are not necessarily indicative of operating results that
would have occurred if the circumstances summarized below had
not occurred, and may be different from pro forma measures used
by other companies. In addition, the pro forma operating results
are not necessarily indicative of the results of our future
operations.
The pro forma operating results for the three and twelve months
ended December 31, 2001 exclude a one-time non-recurring net
charge of $148.0 million related to the continuation of
Excite@Home high-speed Internet services. The results also
reflect reclassifications of costs associated with Excite@Home
high-speed Internet service (which had previously been netted
against revenue) to cost of services and selling, general and
administrative expenses, which have been estimated in order to
conform to the manner in which the costs associated with Cox
High Speed Internet service have been presented for the three
and twelve months ended December 31, 2002. Please refer to the
attached Reconciliation of Pro Forma Operating Results schedule
for additional details.
The pro forma operating results for the twelve months ended
December 31, 2002 exclude a one-time non-recurring charge of
$9.8 million related to the continuation of Excite@Home high-
speed Internet services.
Pro forma three months ended December 31, 2002 compared with pro
forma three months ended December 31, 2001
Total pro forma revenues for the fourth quarter of 2002
increased 16% over the fourth quarter of 2001, primarily due to
increased customers in new services (including digital cable,
high-speed Internet access and telephony customers), higher
basic cable rates and a $5 price increase in high-speed Internet
access adopted in certain markets in the fourth quarter of 2002.
Also contributing to the increase were an increase in commercial
broadband customers and a continuing rebound in local and
national advertising sales.
Pro forma cost of services, which includes programming costs,
other direct costs and field service costs, was $558.7 million
for the fourth quarter of 2002, an increase of 16% over the same
period in 2001. This was primarily due to an 11% increase in
programming costs reflecting rate increases, channel additions
and customer growth. The remaining increase reflects increased
labor costs due to the transition from upgrade construction and
new product launches to maintenance and related customer costs
directly associated with the growth of new subscribers.
Pro forma selling, general and administrative expenses was
$290.4 million for the fourth quarter of 2002, an increase of
18% over the comparable period in 2001. This was due to
increased salaries and benefits resulting from an increase in
headcount and compensation, and increased property taxes
resulting from capital expenditures.
Pro forma operating cash flow (operating income before
depreciation, amortization and loss on sale of cable systems)
increased 14% to $491.9 million for the fourth quarter of 2002.
The pro forma operating cash flow margin (pro forma operating
cash flow as a percentage of revenues) for the fourth quarter of
2002 was 36.7%.
Pro forma twelve months ended December 31, 2002
compared with
pro forma twelve months ended December 31, 2001
Total pro forma revenues for the twelve months ended
December 31, 2002 increased 16% over the same period in 2001,
primarily due to increased customers in new services, including
digital cable, high-speed Internet access and telephony
customers, and higher basic cable rates. Also contributing to
the increase was an increase in commercial broadband customers
and a continuing rebound in local and national advertising
sales.
Pro forma cost of services was $2.1 billion for the twelve
months ended December 31, 2002, an increase of 18% over the same
period in 2001. This was primarily due to a 12% increase in
programming costs reflecting rate increases, channel additions
and customer growth. Other costs of services increased 24%,
reflecting increased labor costs due to the transition from
upgrade construction and new product launches to maintenance and
related customer costs directly associated with the growth of
new subscribers.
Pro forma selling, general and administrative expenses for the
twelve months ended December 31, 2002 increased 16% to $1.1
billion due to:
-- a 19% increase in marketing expense related to the promotion
of new services and bundling alternatives; and
-- a 15% increase in general and administrative expenses
relating to increased salaries and benefits resulting from an
increase in headcount and compensation, and increased
property taxes resulting from capital expenditures.
Pro forma operating cash flow increased 14% to $1.8 billion for
the twelve months ended December 31, 2002. The pro forma
operating cash flow margin for the twelve months ended December
31, 2002 was 35.5%.
Historical Operating Results
Total revenues for the fourth quarter of 2002 were $1.3 billion,
an 18% increase over revenues of $1.1 billion for the fourth
quarter of 2001. Operating cash flow increased 73% to $491.9
million for the fourth quarter of 2002, reflecting the one-time
non-recurring net charge of $148.0 million in the fourth quarter
of 2001 related to the continuation of Excite@Home high-speed
Internet services and transition to Cox High Speed Internet
service.
Depreciation and amortization decreased to $351.3 million from
$462.6 million in the fourth quarter of 2001 due to a reduction
in amortization of intangible assets determined to have an
indefinite life, offset by an increase in depreciation from
Cox's continuing investments in its broadband network in order
to deliver additional programming and services. Interest expense
increased to $152.8 million, primarily due to the issuance of
$1.0 billion aggregate principal amount of 7.125% senior notes
in September 2002. The proceeds from this offering were
primarily used to redeem senior notes held by Cox RHINOS Trust,
repurchase Floating Rate MOPPRS/CHEERS and repay Cox's 6.5%
senior notes upon their maturity.
For the fourth quarter of 2002, Cox recorded a $255.2 million
pre-tax gain on derivative instruments due to the following:
-- $290.1 million pre-tax gain resulting from the change in the
fair value of certain derivative instruments embedded in
Cox's exchangeable subordinated debentures and indexed to
shares of Sprint PCS common stock that Cox owns;
-- $37.9 million pre-tax loss resulting from the change in the
fair value of certain derivative instruments embedded in
Cox's zero-coupon debt and indexed to shares of Sprint PCS
common stock that Cox owns; and
-- $3.0 million pre-tax gain resulting from the change in the
fair value of Cox's net settleable warrants.
Net gain on investments of $33.9 million for the fourth quarter
of 2002 was primarily due to a $47.2 million pre-tax gain as a
result of the change in market value of Cox's investment in
Sprint PCS common stock classified as trading.
Included in net gain on investments for the comparable period in
2001 was a pre-tax gain from the sale of 8.6 million shares of
Sprint PCS common stock, offset by a pre-tax loss related to the
change in market value of Cox's investment in Sprint PCS common
stock classified as trading and a decline in the fair value of
certain investments considered to be other than temporary.
Net income for the current quarter was $179.6 million compared
to net loss of $105.2 million for the fourth quarter of 2001.
Historical twelve months ended December 31, 2002 compared with
historical twelve months ended December 31, 2001
Total revenues for the twelve months ended December 31, 2002
were $5.0 billion, an 18% increase over revenues of $4.3 billion
for the twelve months ended December 31, 2001. Operating cash
flow increased 25% to $1.8 billion for the twelve months ended
December 31, 2002, reflecting the one-time non-recurring net
charge of $148.0 million in the fourth quarter of 2001 related
to the continuation of Excite@Home high-speed Internet services
and transition to Cox High Speed Internet service.
Depreciation and amortization decreased to $1.4 billion from
$1.5 billion in the twelve months ended December 31, 2001 due to
a reduction in amortization of intangible assets determined to
have an indefinite life, offset by an increase in depreciation
from Cox's continuing investments in its broadband network in
order to deliver additional programming and services. Interest
expense decreased to $550.6 million, primarily due to interest
savings as a result of Cox's interest rate swap agreements and
repayment of all commercial paper borrowings.
For the twelve months ended December 31, 2002, Cox recorded a
$1.1 billion pre-tax gain on derivative instruments due to the
following:
-- $583.1 million pre-tax gain resulting from the change in the
fair value of certain derivative instruments embedded in
Cox's exchangeable subordinated debentures and indexed to
shares of Sprint PCS common stock that Cox owns;
-- $359.3 million pre-tax gain resulting from the change in the
fair value of certain derivative instruments embedded in
Cox's zero-coupon debt and indexed to shares of Sprint PCS
common stock that Cox owns; and
-- $183.2 million pre-tax gain resulting from the change in the
fair value of certain derivative instruments associated with
Cox's investments, including Sprint PCS, AT&T and AT&T
Wireless.
Net loss on investments of $1.3 billion is primarily due to:
-- $170.4 million pre-tax loss related to the sale of 23.9
million shares of AT&T Wireless common stock;
-- $390.6 million pre-tax loss as a result of the change in
market value of Cox's investment in Sprint PCS common stock
classified as trading; and
-- $807.9 million decline in the fair value of certain
investments, primarily Sprint PCS, considered to be other
than temporary.
Included in net gain on investments for the comparable period in
2001 were pre-tax gains associated with Cox's investment in
Sprint PCS common stock classified as trading, a pre-tax gain
from the sale of 12.8 million shares of Sprint PCS common stock,
a pre-tax gain related to the sale of Cox's interests in Outdoor
Life, Speedvision and Cable Network Services and a pre-tax gain
related to the deemed satisfaction of Cox's Excite@Home right.
Minority interest of $37.3 million primarily represents
distributions on Cox's obligated capital and preferred
securities of subsidiary trusts, referred to as FELINE PRIDES
and RHINOS. In the third quarter of 2002, Cox settled the FELINE
PRIDES with the issuance of common stock and redeemed the RHINOS
with cash. Net loss for the twelve months ended December 31,
2002 was $274.0 million compared to net income of $755.0 million
for the comparable period in 2001.
New Accounting Standards
On January 1, 2002, Cox adopted Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangibles, which requires that goodwill and certain intangible
assets, including those recorded in past business combinations,
no longer be amortized through the statement of operations, but
instead be tested for impairment at least annually.
Also on January 1, 2002, Cox adopted the guidance prescribed in
Emerging Issues Task Force Issue No. 01-14, Income Statement
Characterization of Reimbursements Received for "Out-of-Pocket"
Expenses Incurred, which specifies that the collection and
payment of certain fees must be presented on a gross basis, as
revenue and expense, rather than on a net basis. Retroactive
application of this standard was required. Accordingly,
collection and payment of fees by Cox, primarily franchise fees,
have been reclassified on a gross basis for all periods
presented herein to conform to this new guidance.
Liquidity and Capital Resources
Cox has included Consolidated Statements of Cash Flows for the
twelve months ended December 31, 2002 and 2001 as a means of
providing more detail regarding the liquidity and capital
resources discussion below. In addition, Cox has included a
calculation of free cash flow in the Summary of Operating
Statistics to provide an additional measure of liquidity that
Cox believes will be useful to investors in evaluating Cox's
financial performance. Free cash flow is not a measure of
performance calculated in accordance with generally accepted
accounting principles. For further details, please refer to the
Summary of Operating Statistics.
Significant sources of cash for the twelve months ended
December 31, 2002 consisted of the following:
-- the sale of 25.2 million shares of Sprint PCS common stock
for net proceeds of approximately $238.7 million;
-- the sale of 35.0 million shares of AT&T common stock for net
proceeds of approximately $542.6 million;
-- the sale of 23.9 million shares of AT&T Wireless common stock
for net proceeds of approximately $248.2 million;
-- the termination of all costless equity collar arrangements
with respect to Sprint PCS common stock, AT&T common stock
and AT&T Wireless common stock for aggregate proceeds of
approximately $264.4 million;
-- the issuance of 7.125% senior notes, which mature in
September 2012, for net proceeds of approximately $986.1
million; and
-- the generation of cash from operating activities of
approximately $1.8 billion.
Significant uses of cash for the twelve months ended
December 31, 2002 consisted of the following:
-- the repurchase of $329.1 million aggregate principal amount
at maturity of Cox's convertible senior notes due 2021 that
had been properly tendered and not withdrawn, for aggregate
cash consideration of $232.8 million, which represented the
accreted value of the repurchased notes;
-- the repayment of approximately $727.4 million of commercial
paper borrowings;
-- the redemption of senior notes held by Cox RHINOS Trust for
approximately $502.6 million;
-- the repurchase of $200.0 million aggregate principal amount
of Cox's Floating Rate MOPPRS/CHEERS for cash consideration
of $227.2 million;
-- the repayment of $200.0 million aggregate principal amount of
Cox's 6.5% senior notes upon their maturity; and
-- capital expenditures of approximately $1.9 billion. Please
refer to the Summary of Operating Statistics for a break out
of capital expenditures in accordance with new industry
guidelines.
At December 31, 2002, Cox had approximately $7.3 billion of
outstanding indebtedness (including cumulative derivative
adjustments made in accordance with SFAS No. 133 which reduced
reported indebtedness by approximately $1.4 billion).
At December 31, 2002, the Company's balance sheet shows that
total current liabilities exceeded total current assets by about
$110 million.
Cox Communications (NYSE: COX), a Fortune 500 company, is a
multi-service broadband communications company serving
approximately 6.3 million basic customers nationwide. Cox is the
nation's fourth-largest cable television provider, and offers
both traditional analog video programming under the Cox Cable
brand as well as advanced digital video programming under the
Cox Digital Cable brand. Cox provides an array of other
communications and entertainment services, including local and
long distance telephone under the Cox Digital Telephone brand;
high-speed Internet access under the brands Cox High Speed
Internet and Cox Express; and commercial voice and data services
via Cox Business Services. Cox is an investor in programming
networks including Discovery Channel. More information about Cox
Communications can be accessed on the Internet at
http://www.cox.com
Cox Communications' 3.000% bonds due 2030 are currently at about
41 cents-on-the-dollar.
CRITICAL PATH: Receives Time Extension to Meet Nasdaq Standards
---------------------------------------------------------------
Critical Path, Inc. (Nasdaq:CPTH), a global leader in digital
communications software and services, announced that, in order
to allow for developments in the Nasdaq rulemaking process, it
received a 60-day extension, or until April 11, 2003, to re-
establish compliance with Nasdaq National Markets continued
listing standards, and may be eligible for an additional
extension.
Nasdaq recently announced that its Board of Directors had
proposed certain modifications to the bid price rules. If the
proposed modifications are approved and implemented, the Company
could be eligible for an additional 90 days subsequent to the
initial grace period to satisfy the $1.00 bid price requirement.
Also pursuant to the proposal, the Company would be eligible for
an additional 180-day grace period, through September 15, 2003,
based on the status of certain Company financial metrics. Nasdaq
reserved the right to extend, terminate or otherwise modify the
extension, and exemption of the rule, based on developments in
the rule making process.
On January 27, 2003, Critical Path filed a preliminary proxy
authorizing a shareholder vote on a reverse stock split designed
to remedy its non-compliance with the Nasdaq National Market
minimum bid price requirement. The proxy will remain on file
pending resolution of the proposed rule modifications or until
the Company re-establishes compliance.
Critical Path, Inc. (Nasdaq:CPTH) -- whose December 31, 2002
balance sheet shows a total shareholders' equity deficit of
about $8 million -- is a global leader in digital communications
software and services. The company provides messaging solutions
-- from wireless, secure and unified messaging to basic email
and personal information management -- as well as identity
management solutions that simplify user profile management and
strengthen information security. The standards-based Critical
Path Communications Platform, built to perform reliably at the
scale of public networks, delivers the industry's lowest total
cost of ownership for messaging solutions and lays a solid
foundation for next-generation communications services.
Solutions are available on a hosted or licensed basis. Critical
Path's customers include more than 700 enterprises, 190 carriers
and service providers, eight national postal authorities and 35
government agencies. Critical Path is headquartered in San
Francisco. More information can be found at
http://www.criticalpath.net
DANA CORPORATION: Declares Dividend Payable on March 14, 2003
-------------------------------------------------------------
Dana Corporation (NYSE: DCN) has declared a dividend on its
common stock of 1 cent per share, payable on March 14, 2003, to
shareholders of record on Feb. 28, 2003.
Dana Corporation -- whose new $250 million debt issue is rated
by Standard & Poor's at 'BB' -- is a global leader in the
design, engineering, and manufacture of value-added products and
systems for automotive, commercial, and off-highway vehicle
manufacturers and their related aftermarkets. The company
employs more than 60,000 people worldwide. Founded in 1904 and
based in Toledo, Ohio, Dana operates hundreds of technology,
manufacturing, and customer service facilities in 30 countries.
The company reported 2002 sales of $9.5 billion.
DELTA AIR LINES: Pilots Balk Management's Request to Talk
---------------------------------------------------------
Captain William C. Buergey, Chairman of the Delta Master
Executive Council, a unit of the Air Line Pilots Association,
issued the following statement in response to Delta Air Lines'
senior managements' remarks regarding the pilot contract:
"Management has requested a meeting with union leaders to
discuss possible modifications to the pilots' working agreement.
We have advised management that a meeting for this purpose is
not appropriate at this time. Our pilot working agreement is
not amendable until 2005. Management cannot initiate
discussions for early modifications without making a specific
proposal with detailed justifications. If management makes such
a request, the Delta MEC will analyze the request and decide
whether to engage in negotiations, and if so, on what basis."
The Delta pilots' contract took effect in June 2001.
Delta Air Lines' 10.375% bonds due 2022 are currently trading at
about 69 cents-on-the-dollar.
DENNY'S CORP: Dec. 25 Balance Sheet Insolvency Narrows to $280MM
----------------------------------------------------------------
Denny's Corporation (OTCBB:DNYY), formerly Advantica Restaurant
Group, Inc. (and Flagstar before that), reported results for its
fourth quarter and year ended December 25, 2002. Highlights
included:
Fourth Quarter 2002
-- Same-store sales for the quarter declined 2.1 percent
at company restaurants and declined 3.2 percent at
franchised restaurants.
-- Total revenue decreased $20.0 million to $226.9 million
for the quarter.
-- Despite lower revenue, operating income for the quarter
increased $21.4 million over the same period last year
to $2.4 million while EBITDA (as defined below)
increased $10.0 million to $23.3 million.
-- Denny's reported net income for the quarter of $0.5
million compared with last year's fourth quarter loss of $39.5
million.
-- Net income this quarter included nonoperating income of
$13.7 million resulting from senior note exchange
transactions.
Full Year 2002
-- Same-store sales for the year declined 1.0 percent at
company restaurants and declined 2.1 percent at
franchised restaurants.
-- Total revenue decreased $91.1 million to $948.6 million
for the year.
-- Despite lower revenue, operating income for the year
increased $69.3 million over last year to $49.6 million
while EBITDA increased $28.3 million to $132.8 million.
-- Denny's reported net income for the year of $68.1
million compared with last year's loss of $88.5 million.
-- Net income this year included a $60.6 million gain from
the disposal of discontinued operations as well as
nonoperating income of $32.9 million resulting from
senior note exchange transactions.
Following recent SEC guidance, the Company has changed its
definition of EBITDA to operating income before depreciation and
amortization. Previously, the Company reported EBITDA as
operating income before depreciation and amortization as well as
before charges for restructuring, exit costs and impairment.
Commenting on Denny's results for the fourth quarter and fiscal
year 2002, Nelson J. Marchioli, president and chief executive
officer, said, "This past year was a milestone in the evolution
of Denny's, highlighted by the divestiture of our remaining non-
core restaurant brands and the name change to Denny's
Corporation. Our renewed attention to basic operational
execution and hospitality improvements is beginning to bear
fruit. Our financial results improved during 2002 due to more
efficient cost management in the restaurants, the closure of
underperforming restaurants and reduced corporate spending. Our
consumer ratings indicate significant improvement in the areas
of service, restaurant cleanliness and food quality. We are
working to instill a food and hospitality culture across the
Denny's brand by placing greater focus on food flavor and
preparation, customer service and upgrading the menu to increase
consumer appeal.
"Despite many operational improvements, increasing customer
counts remains our biggest challenge. We were disappointed with
same-store sales in the fourth quarter as the weak economy
contributed to reduced guest traffic. We offset some of the
guest count decline by increasing our average check through less
discounting and promoting higher priced menu items such as our
BBQ Chicken Sandwich and Fabulous French Toast. We have taken
only modest price increases over the last two years in an effort
to maintain Denny's value perception, which is of particular
importance in a tough economy.
"With an improved operational foundation in place, along with a
new marketing team and new advertising agencies, our primary
focus in 2003 will be to drive guest traffic. Denny's has an
exceptionally high consumer awareness level which we intend to
capitalize on with an aggressive food focused media message. The
media campaign launched in January was our first to utilize
national advertising rather than local and regional spot
purchases. We are encouraged that same-store sales at company
stores turned positive in January, increasing 1.6% over last
year," Marchioli concluded.
Fourth Quarter Results
Total revenue for the fourth quarter declined $20.0 million as a
result of 55 fewer company restaurants and lower same-store
sales. Despite lower revenue, EBITDA increased from $13.4
million in last year's fourth quarter to $23.3 million this
year. This increase was attributable primarily to $9.6 million
less in charges for restructuring, exit costs and impairment.
Excluding this impact, EBITDA was basically flat as lower sales
and decreased operating margins were offset by reduced general
and administrative expenses.
During the fourth quarter, company restaurant operations
experienced higher payroll and benefits costs and increased
advertising expenses, partially offset by lower food costs and
decreased repairs and maintenance spending. The increase in
payroll and benefits expense was attributable to higher
restaurant labor costs as well as increased medical insurance
costs.
The Company reported operating income for the fourth quarter of
$2.4 million compared with an operating loss last year of $19.0
million. In addition to the factors noted above, the $21.4
million increase in operating income was due to lower
depreciation and amortization of $11.4 million as the Company no
longer records amortization of goodwill and certain other
intangible assets, in accordance with SFAS 142.
Full Year Results
Total revenue for the year declined $91.1 million as a result of
fewer restaurants and lower same-store sales. Despite lower
revenue, EBITDA increased from $104.6 million last year to
$132.8 million this year. This increase was due primarily to
$22.4 million less in charges for restructuring, exit costs and
impairment. Excluding this impact, EBITDA increased $5.8 million
as lower sales were more than offset by reduced general and
administrative expenses.
During the year, company restaurant operations experienced
higher payroll and benefits costs, offset by lower food costs,
reduced energy costs, decreased repairs and maintenance spending
and the favorable effects of closing underperforming
restaurants.
The Company reported operating income for the year of $49.6
million compared with an operating loss last year of $19.7
million. In addition to the factors noted above, the $69.3
million increase in operating income was due to lower
depreciation and amortization of $41.1 million as the Company no
longer records amortization of goodwill and certain other
intangible assets, in accordance with SFAS 142.
At December 25, 2002, Denny's balance sheet shows a total
shareholders' equity deficit of about $279 million.
Revolving Credit Facility
On December 16, 2002, Denny's Inc. and Denny's Realty, Inc.,
operating subsidiaries of Denny's Corporation, entered into a
new $125.0 million credit agreement to refinance the previous
agreement which was scheduled to expire on January 7, 2003. The
new facility will mature on December 20, 2004 and is structured
as a senior secured revolving credit facility of which up to
$60.0 million is available for the issuance of letters of
credit.
On December 25, 2002, the Company's credit facility had
outstanding revolver advances of $46.7 million compared with
$40.0 million outstanding on September 25, 2002. The Company's
outstanding letters of credit were $48.8 million at year end,
leaving a net availability of $29.5 million.
Exchange Offer Transactions
Effective November 18, 2002, the Company closed the last of a
series of privately negotiated transactions whereby the Company
and its wholly owned subsidiary, Denny's Holdings, Inc., jointly
issued new 12-3/4% senior notes due 2007 in exchange for
existing Denny's Corporation 11-1/4% senior notes due 2008. As a
result, Denny's recorded a gain of approximately $13.7 million
in the fourth quarter, included as a component of nonoperating
income. Including the registered exchange closed in April, the
Company recorded gains totaling $32.9 million from debt exchange
transactions during fiscal 2002. The Company now has $379.0
million aggregate principal amount of 11-1/4% notes outstanding
along with $120.4 million aggregate principal amount of 12-3/4%
notes.
The Board of Directors of Denny's has set Thursday, May 29,
2003, as the date for the 2003 Annual Meeting of Denny's
Shareholders to be held in Atlanta, Georgia.
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.
DOCTORS INSURANCE: S&P Drops Counterparty Rating to R from Bpi
--------------------------------------------------------------
Standard & Poor's Ratings Services revised its counterparty
credit and financial strength ratings on Doctors Insurance
Reciprocal Risk Retention Group to 'R' from 'Bpi'.
"This rating action was taken after the Tennessee Department of
Commerce and Insurance placed Doctors Insurance--along with two
affiliated insurers, American National Lawyers Insurance
Reciprocal RRG and The Reciprocal Alliance Risk Retention Group
-- under receivership on January 31, 2003," said Standard &
Poor's credit analyst Tom E. Thun. Tennessee insurance
regulators cited the insurers' hazardous financial condition and
inability to cover existing claims as reasons behind the
regulatory action. Using reinsurance, all three insurers were
under risk-sharing arrangements, with another affiliate,
Virginia-based Reciprocal of America, which was placed under
receivership by Virginia state regulators only two days earlier.
Doctors Insurance, started in 1990, writes medical malpractice
insurance in Virginia but is also licensed to do business in
Tennessee, South Carolina, and Arizona. Doctors Insurance
provides coverage to about 2,200 doctors in Virginia.
ELOT: Court Confirms Second Amended Joint Plan of Reorganization
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
confirmed eLOT, Inc., and eLOTTERY, Inc.'s Second Amended Plan
of Reorganization, jointly proposed with the Official Committee
of Unsecured Creditors.
The Troubled Company Reporter's July 15, 2002 issue reports that
the Company and the Committee filed with the Court a Consensual
Joint Reorganization Plan. The Court has determined that the
modifications in the Second Amended Joint Plan of Reorganization
are "non-material and do not adversely change the treatment of
the holder of any Claim against or, Equity Interest or Option in
Debtors under the Plan."
The Court finds that the Second Amended Plan complies with each
of the 13 standards set forth in Section 1129 of the Bankruptcy
Code:
(1) the Plan complies with the Bankruptcy Code;
(2) the Debtors have complied with the Bankruptcy Code;
(3) the Plan was proposed in good faith;
(4) all plan-related cost and expense payments are
reasonable;
(5) the Plan identifies the individuals who will serve as
officers and directors post-emergence;
(6) all regulatory approvals that are necessary have been
obtained or are respected;
(7) creditors receive more under the plan than they would
in a chapter 7 liquidation;
(8) all impaired creditors have voted to accept the Plan,
or, if they voted to reject, then the plan complies
with the absolute priority rule;
(9) the Plan provides for full payment of Priority
Claims;
(10) at least one non-insider impaired class voted to
accept the Plan;
(11) the Plan is feasible and confirmation is unlikely to
be followed by a liquidation or need for further
financial reorganization;
(12) all amounts owed to the Clerk and the U.S. Trustee
will be paid; and
(13) the Plan provides for the continuation of all retiree
benefits in compliance with 11 U.S.C. Sec. 1114.
Any executory contracts or unexpired leases, which have not
expired by their own terms, are deemed rejected by the Debtors
on the Effective Date. All executory contracts and unexpired
leases listed in the Schedule of Assumed and Assumed and
Assigned Executory Contracts and Unexpired Leases, are deemed
assumed by the Debtors on the Effective Date.
With respect to each impaired Class of Claims, Equity Interests
and Options, each holder has accepted the Plan or will receive
or retain under the Plan property of a value, as of the
Effective Date, that is not less than the amount that such
holder would receive or retain if the Debtors were liquidated
under chapter 7 of the Bankruptcy Code.
Except to the extent that the holder of a Claim of a kind
specified in section 507(a)(l) or 507(a)(2) of the Bankruptcy
Code has agreed to a different treatment of such Claim, the Plan
provides that on the later of the Effective Date and the date
such Claim becomes an Allowed Claim or as soon as practicable,
the holder of such Claim will receive Cash equal to the full
Allowed amount of such Claim, provided, however, that
Administrative Expense Claims representing liabilities incurred
in the ordinary course of business by the Debtors, shall be paid
in full in the ordinary course of the Reorganized Debtor's
business.
Furthermore, each holder of a Claim of a kind specified in
section 507(a)(3), 507(a)(4), 507(a)(5), 507(a)(6) or 507(a)(7)
of the Bankruptcy Code will receive on account of such Claim
Cash in the full Allowed amount of such Claim.
Holders of a Claim of a kind specified in section 507(a)(8) of
the Bankruptcy Code, will receive, Cash payments in twelve equal
monthly installments beginning one month after the Effective
Date and ending no later than the six years after the date of
assessment of such Claim, at an interest rate of 12% per annum.
On the Effective Date all of the property of the Debtors'
Estates is vested in the Reorganized Debtor. The Reorganized
Debtor shall continue to exist after the Effective Date as a
separate corporate entity with all the powers of a corporation
under the state of incorporation.
eLOT, a provider of web-based retailing and Internet marketing
services to governmental lotteries, filed for chapter 11
protection on October 15, 2001 (Bankr. S.D.N.Y. Case No. 01-
15327). Neil Yahr Siegel, Esq., at Angel & Frankel, P.C.,
represents the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$19,446,000 in assets and $31,055,000 in debts.
ENCOMPASS SERVICES: Secures Nod to Sell 3 Business Units' Assets
----------------------------------------------------------------
Since Petition Date, many of the Encompass Services Debtors'
smaller business units have been experiencing significant
erosion in value. Realizing that time is of the essence in
maximizing value of their businesses, the Debtors engaged in
certain marketing efforts, to sell certain assets in these
business units:
(a) Encompass Omni Mechanical Company
After initial discussions with a limited number of parties
expressing interest in Omni Mechanical Company's assets, the
Debtors decided to enter into a Letter Of Intent To Sell
with Crawford-Beeson Companies, Inc. Crawford-Beeson's
$2,181,219 cash offer was the best bid received for the
assets.
Omni Mechanical is a small business operation. The Debtors
had already anticipated that its sale proceeds will not
fetch more than $5,000,000.
(b) Encompass Mechanical Services Southeast, Inc.
The Debtors want to sell the assets of Mechanical Services
Southeast, which is located in Alabama. The Debtors have
received a $850,000 cash offer from Eugene C. Jones, Jr. and
they want to pursue that deal. The Debtors have entered
into a Letter Of Intent To Sell with Mr. Jones.
(c) Encompass Electrical Technologies, Inc.
The Debtors seek to sell Encompass Electrical Technologies
to Faith Technologies, Inc. for $2,800,000 in cash, subject
to higher and better offers.
The three sale transactions include the Buyers' assumption of
the Debtors' liabilities in each business operation at the time
of Closing, including certain prepetition liabilities. The
Buyers will pay the outstanding trade payables to maintain
satisfactory business relationships with the vendors, which are
valuable to the business operations going forward.
Thus, the Debtors seek the Court's approval to consummate the
sale transactions.
"The assets of the businesses need to be sold quickly to stem
the loss of 'knowledge capital' that resides with the key
employees of these business units and to allow the purchasers,
most of whom are the former owners of these units, to stabilize
their operations going forward," Lydia T. Protopapas, Esq., at
Weil, Gotshal & Manges LLP, in Houston, Texas, explains. Ms.
Protopapas maintains that the relatively quick divestiture of
these smaller business units will enable the Debtors to
streamline their business operations and to focus on the
marketing and sale of some of their larger operations, which
will, among other things, result in significant tax refunds.
Hoar and R&M Object
Hoar Construction LLC and the Robins & Morton Group are general
contractors that entered into prepetition subcontracts with the
Debtors in respect of Mechanical Services Southeast's
operations.
Both Contactors complain that, although the Debtors provided for
the assumption and assignment of executory contracts between R&M
and Hoar, there was no sufficient information identifying the
contracts or purported contracts that the Debtors propose to
assume and assign. It remains unclear whether Hoar's
subcontracts with the Debtors remain implicated. The Debtors
failed to state how they would cure any monetary or non-monetary
defaults in the alleged executory contracts. The Debtors also
failed to provide sufficient information regarding the proposed
assignment, including information establishing adequate
assurance of future performance.
* * *
After due deliberation, Judge Greendyke authorizes the Debtors
to consummate the transactions and sell the assets of:
(a) Omni Mechanical Company to Crawford-Beeson;
(b) Mechanical Services Southeast to Eugene C. Jones, Jr.;
and
(c) Encompass Electrical Technologies to Faith Technologies.
The Debtors are also authorized to assume and assign any
executory contracts related to the businesses to the Buyers.
The sale will be free and clear of any and all liens, claims,
interests and encumbrances. All liens, claims, encumbrances and
interests will attach to the sale proceeds. Any entity holding
liens, claims, encumbrances or other interests against or in the
Debtors or the assets are, permanently enjoined from asserting,
or prosecuting, these against the Buyers, its property,
successors and assigns, or the assets. Judge Greendyke rules
that the proceeds of any consummated sale will be paid in
accordance with any Court order approving the Debtors'
postpetition financing agreement.
The Debtors are presently negotiating the consensual resolution
of Hoar Construction and Robins & Morton's objection. Pending
the settlement, Judge Greendyke orders Bank of America to hold
$230,441 of the sale proceeds as adequate assurance of future
performance for Hoar and R&M. If Mr. Jones default on the Hoar
subcontract, Hoar will be entitled to request on an expedited
basis to collect from Bank of America the holdback amount to the
extent necessary to compensate Hoar for the default. (Encompass
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ENRON: Committee Sues Kenneth & Linda Lay to Recover Transfers
--------------------------------------------------------------
Susheel Kirpalani, Esq., at Milbank, Tweed, Hadley & McCloy LLP,
in New York, recalls that the Court previously authorized the
Official Committee of Unsecured Creditors of Enron Corporation
and its debtor-affiliates to commence and pursue certain claims
in a Texas state court of competent jurisdiction, and reserved
to this Court all claims for turnover, preference and fraudulent
transfers against certain former Enron directors, officers and
employees.
Accordingly, through an expedited motion, the Creditors'
Committee seeks the Court's authority to commence litigation on
behalf of the Debtors' estates against Kenneth L. Lay and Linda
P. Lay and to assert these Causes of Action under Sections 544,
548 and 550 of the Bankruptcy Code, Sections 270 to 281 of the
New York Debtor and Creditor Law and other applicable law to:
(i) recover alleged fraudulent transfers from Mr. Lay of an
amount over $70,000,000 made within the year prior to
Petition Date -- Loan Transfers; and
(ii) recover alleged fraudulent transfers of an amount not
less than $10,000,000 from the Lays made within 90 days
prior to the Petition Date -- Annuity Transfers.
Aside from these allegations, Mr. Kirpalani tells Judge Gonzalez
that the Committee continues to review underlying facts
concerning the causes of actions and therefore, the amounts of
the transfers claimed in any future complaint against the Lays
as may be authorized by this Court may vary from the amount
claimed in this motion. According to Mr. Kirpalani, the Debtors
support the Committee's request.
Mr. Kirpalani asserts that the Committee should be authorized to
bring the Causes of Action against the Lays on the Debtors'
behalf because:
-- it is well settled that Sections 1103(c)(5) and 1109(b) of
the Bankruptcy Code provide a qualified right to
creditors' committees to commence actions in the name of
the debtors with the approval of the Bankruptcy Court;
-- the Causes of Action are meritorious and each represent "a
colorable claim or claims for relief that on appropriate
proof would support a recovery" and pursuing the Causes of
Action will benefit the Debtors' estates;
-- the Committee can amply demonstrate a prima facie case for
each of the Causes of Action;
-- all available evidence indicates that the Loan Transfers
and the Annuity Transfers:
(a) consisted Enron's property;
(b) were made for the Lays' benefit;
(c) were made while Enron was insolvent; and
(d) were made for less than reasonable equivalent value
to Enron; and
-- the Committee believes that the likelihood of success on
the merits and the likelihood of collecting amounts well
in excess of the costs to reduce the Causes of Action to
judgment, justifies the expense of prosecuting the
litigation.
Moreover, Mr. Kirpalani contends, the Committee is well
positioned to pursue the Causes of Action based on its
investigation of these transactions to date, with the Debtors'
encouragement and assistance, and is fully competent to bring
the actions necessary to recover on the Causes of Action. The
resolution of the Causes of Action could potentially result in
significant value for unsecured creditors and its prosecution is
both a necessary and beneficial part of any efficient resolution
to the bankruptcy cases. Hence, Mr. Kirpalani assures the
Court, the Committee is ready to commence litigation and to take
all steps necessary to reduce the Causes of Action to judgment
for the benefit of the Debtors' estates.
* * *
After conducting an expedited hearing, Judge Gonzalez authorizes
the Creditors' Committee to commence and pursue these Claims:
(a) a cause of action seeking to recover alleged fraudulent
transfers from Mr. Lay for over $70,000,000 made within
the year prior to the Petition Date;
(b) a cause of action to recover alleged fraudulent transfers
for an amount not less than $10,000,000 from the Lays made
within 90 days prior to the Petition Date; and
(c) any other causes of action based on the same operative
facts supporting the two causes of action including,
without limitation, if necessary, pursuit of the Loans
Proceeds or the Annuity Proceeds in any judicial or
administrative proceeding pending with respect to the
Proceeds anywhere in the United States.
The Court further rules that any objections to the Committee's
request can still be filed no later than February 20, 2003 at
4:00 p.m., New York time. If an objection is filed timely, a
hearing will be conducted on February 27, 2003 at 10:00 a.m.
(Enron Bankruptcy News, Issue No. 56; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FAIRFAX FIN'L: S&P Lowers Counterparty Credit Rating Down to BB
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its counterparty
credit rating on Fairfax Financial Holdings Ltd., to 'BB' from
'BB+' because of concerns about Fairfax's ability to maintain
adequate liquidity at the holding company.
Standard & Poor's also said that it lowered its counterparty
credit rating on TIG Holdings Inc., which is Fairfax's
subsidiary, to 'BB-' from 'BB'. The outlook on both of these
companies is negative.
These rating actions follow Fairfax's earnings announcement for
the fourth quarter of 2002. The results for the quarter were
mixed: underwriting results (excluding runoff operations)
improved significantly, but there is the potential for liquidity
strain in 2003.
Historically, the counterparty credit and senior debt ratings on
Fairfax enjoyed nonstandard notching because of the significant
cash balances held at the holding company. In the case of
Fairfax, the nonstandard notching resulted in a two-notch
differential between the ratings on the insurance operations and
the holding company. Standard & Poor's has a negative view
on yesterday's announcement that the company will repay, using
the internal cash resources of the holding company, the C$207
million of redeemable hybrid income overnight shares (RHINOS)
maturing Feb. 24, 2003. The subsequent reduction in holding
company liquidity in a year when the company has more than C$400
million of maturing obligations (excluding the RHINOS) is a
concern, especially because access to the public capital
markets appears to be limited for Fairfax at this time.
Fairfax's underwriting results (excluding the runoff business)
for the quarter and full year improved considerably in each of
its core businesses, which should favorably affect the future
earnings, dividend capacity, and capitalization of the insurance
operations--assuming reserves for the continuing operations
develop favorably and underwriting discipline is maintained. In
the earnings call, the company mentioned it had close to $670
million of dividend capacity, the bulk of which was related to
ORC Re and Fairfax's offshore operations. Although the company
does have significant dividend capacity, management's ability to
have full access to those funds is likely to be constrained by
the capital considerations of those operations.
"Standard & Poor's will continue to monitor the company's
progress in underwriting, reserving, and liquidity management,"
said Standard & Poor's credit analyst Matthew T. Coyle. "To the
extent management can demonstrate a sustainable track record of
improvement in these areas, Standard & Poor's will maintain its
current ratings and possibly reconsider its negative outlook on
the organization. Conversely, a material deterioration in any of
these areas would likely result in a downgrade."
GENESIS HEALTH: Board Approves Spin-Off of Eldercare Business
-------------------------------------------------------------
Genesis Health Ventures, Inc.'s (Nasdaq: GHVI) Board of
Directors approved a plan to spin-off its eldercare business in
what is expected to be a tax-free transaction to shareholders.
The transaction is expected to be completed by the end of the
calendar year.
Under this plan, Genesis Health Ventures, the remaining company,
would retain its NeighborCare pharmacy operations and is
expected to operate under the NeighborCare brand. The newly
independent eldercare company would include the Genesis
ElderCare skilled nursing centers, Genesis Rehabilitation
Services, and several ancillary businesses. Each entity
represents approximately one-half of Genesis' current $2.6
billion in annual revenues.
"The Board of Directors has determined that the brightest future
for Genesis Health Ventures and all of its stakeholders is to
create two separate companies which will better align management
incentives with operating performance," said Robert H. Fish,
Chairman and Chief Executive Officer. "As a separate company,
NeighborCare will be better positioned for growth through
investments and acquisitions, and for marketing its services
more effectively without a corporate affiliation to Genesis
ElderCare, its largest long-term care customer. The eldercare
business, operating as a separate company, will be able to
enhance value by improving operating efficiencies, divesting
non-core assets and investing selectively to improve revenue
quality. In addition, each company will be exposed only to the
operating risks inherent in its own business operations."
Each company will have its own board of directors and senior
management team. NeighborCare will continue to be led by Robert
H. Fish. Fish joined Genesis in May of 2002 as the Company's
interim Chief Executive Officer and was named permanent Chairman
and CEO in January 2003. George V. Hager, Jr., currently
Executive Vice President and Chief Financial Officer of Genesis,
will lead the independent eldercare company as its CEO. Hager
joined Genesis in 1992 as Vice President and CFO and has over 20
years experience in the healthcare industry.
NeighborCare, the country's third largest institutional
pharmacy, will remain headquartered in Baltimore, MD.
NeighborCare currently serves 250,000 long-term care beds in 33
states through 60 specialized pharmacies and employs 6,000
people. The eldercare entity will be headquartered in Kennett
Square, PA. Genesis ElderCare currently operates 246 skilled
nursing and assisted living facilities in 14 states, employs
37,400 people and is the largest long-term care provider in the
states of Delaware, Maryland, New Jersey and West Virginia.
NeighborCare will continue to provide pharmacy-related services
to the independent eldercare company under long-term contracts.
Negative corporate and administrative expense synergies are not
anticipated to be material as a result of the spin-off, due to
substantial existing corporate infrastructure of the two
companies. Any negative expenses resulting from the spin-off
are expected to be offset by future savings.
Genesis' total consolidated debt as of December 31, 2002 was
$646 million. Cash and equivalents, excluding restricted
investments, totaled $94 million as of the same date. By the
close of the transaction, total debt, net of cash on hand, is
expected to be significantly reduced from current levels by free
cash flow generated from operations and cash proceeds of
approximately $50 million generated from the previously
completed sale of its Illinois facilities and the potential sale
of its Florida facilities. A greater share of Genesis' long-
term debt, which is expected to be substantially refinanced,
will be allocated to the independent eldercare company, a more
capital-intensive business. This structure will provide
additional debt capacity to support growth opportunities in
NeighborCare.
Genesis expects to submit a private letter ruling request
regarding the tax-free nature of the distribution of shares of
the independent eldercare company to the Internal Revenue
Service during the first calendar quarter of 2003. Genesis also
expects to file with the Securities and Exchange Commission a
registration statement relating to the independent eldercare
company's securities during the second calendar quarter of 2003.
Genesis Health Ventures (Nasdaq: GHVI) provides healthcare
services to America's elders through a network of NeighborCare
pharmacies and Genesis ElderCare skilled nursing and assisted
living facilities. Other Genesis healthcare services include
rehabilitation and respiratory therapy, group purchasing, and
diagnostics. Visit the Company's Web site at http://www.ghv.com
GENTEK INC: Secures Court's Approval to Assume JBD Troy Lease
-------------------------------------------------------------
Defiance Testing and Engineering, Inc., one of the GenTek
Debtors, provides engineering, testing and development services
to the automotive industry and related businesses. DTE operates
testing services facilities on two separate campuses in Troy and
Westland, Michigan. DTE is also the majority equity holder in a
joint venture with Tower Automotive, DTA Development, LLC. The
Tower JV conducts primarily structural testing for Tower
Automotive in one building on the Westland campus.
Current economic conditions affecting the automotive industry
have caused a dramatic decline in outsourcing of engineering and
testing services. Many of the Debtors' customers source more
testing internally or have cancelled testing programs, resulting
in the significant erosion of the Debtors' pricing power and
revenue.
As a result, the Debtors have decided to consolidate its testing
facilities to reduce their facilities from ten -- comprising
236,607 square feet -- to five -- comprising 104,310 square feet
-- during the first two quarters of 2003. With this
consolidation, the Debtors expect to reduce the annual fixed
building costs by $1,200,000, save $800,000 during 2003, and
incur one-time costs of $1,800,000. To provide space for its
consolidation, the Debtors intend to execute a new non-
residential real property lease for an additional building and
relinquish various other facilities on the Troy and Westland
campuses.
Accordingly, the Debtors sought and obtained the Court's
authority to assume an unexpired lease with JBD Troy, LLC for a
non-residential real property located at 1150 Maple Road in
Troy, Michigan. DTE will assume the JBD Lease. DTE also
obtained the Court's permission to enter into another lease with
JBD Troy for a non-residential real property located at 1628
Northwood Road in Troy, Michigan, which is adjacent to the Maple
Road Lease.
GenTek Inc. will guarantee DTE's obligations under the JBD
Leases.
Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom
LLP, in Wilmington, Delaware, relates that without the continued
use of the Maple Road Premises, DTE would have suffered
significant disruption to its business to the detriment of its
estates and creditors. (GenTek Bankruptcy News, Issue No. 9;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
GLOBAL CROSSING: Asks Court to Approve XO Settlement Agreement
--------------------------------------------------------------
According to Michael F. Walsh, Esq., at Weil Gotshal & Manges
LLP, in New York, XO Communications, Inc. and certain of its
affiliates and subsidiaries provide "last mile"
telecommunications services to Global Crossing Ltd., and its
debtor-affiliates. These services enable the GX Debtors'
customers to connect directly to the Network in areas, which
would otherwise be beyond the Network's reach. XO provides
these services to the GX Debtors pursuant to a number of
different agreements, which include tariffs filed by XO with the
Federal Communications Commission and the National Master
Communications Services Agreement.
Mr. Walsh reports that the relationship between the GX Debtors
and XO has been strained since the Petition Date. On that date,
numerous billing issues arose when the GX Debtors sought to
recover amounts outstanding from XO while, simultaneously being
prohibited from paying prepetition amounts owed to XO.
Specifically, the GX Debtors believed that XO owed it more than
$1,600,000 in undisputed amounts for services provided to XO
prior to the Petition Date and at the same time, believed that
they owed XO $1,044,000 for services received during the same
period. However, XO asserted significantly larger claims. When
XO failed to pay its outstanding balances, the GX Debtors
terminated services to XO. In retaliation for the shut down of
its services, on February 29, 2002, XO proceeded to terminate
services to the GX Debtors.
Thereafter, on June 17, 2002, Mr. Walsh recounts that XO
commenced a case under Chapter 11 of the Bankruptcy Code. As
part of its Chapter 11 case, XO rejected all of the agreements
under which it receives services from the Debtors. The Debtors
have asserted claims exceeding $7,200,000 for damages based on
the rejections.
Although no longer providing services to XO, the Debtors want to
continue to receive services from XO. Mr. Walsh tells the Court
that in most areas, absent XO, the Debtors would be forced to
contract directly with local telephone companies who charge
significantly higher rates for comparable services.
Accordingly, termination of the Agreements would dramatically
increase the Debtors' costs of doing business. Nevertheless,
the Debtors wanted to modify the Agreements prior to their
assumption to reduce their obligations for services that were no
longer beneficial to their estates. Accordingly, the parties
entered into negotiations to modify and assume certain of the
Agreements and provide for the final resolution of all disputes,
claims and issues arising from or relating to the relationship
between the parties. After extensive arm's-length negotiations,
the parties agreed to a settlement, which provides for the
modification, restatement, and assumption by the Debtors of
certain agreements, establishment of the cure amount under
Section 365 of the Bankruptcy Code related to the assumption,
and a waiver of all claims between the parties prior to
December 31, 2002.
The terms of the Settlement are set forth in a settlement
agreement dated as of January 9, 200[3] between Global Crossing
Ltd. and all of its subsidiaries and affiliates that are parties
to the Agreements and XO. By this motion, the Debtors ask the
Court to approve the Settlement Agreement. The Settlement
Agreement resolves the parties' disputes under the prepetition
agreements.
The salient terms of the Settlement Agreement are:
A. Modification of the MSA: As part of the settlement, the
Debtors and XO executed the First Amendment to the MSA.
The First Amendment reduces the Debtors' monthly payments
to XO from $1,000,000 to between $180,000 and $280,000;
B. Reduction of Term Commitments On and Termination of Certain
Circuits: Under the First Amendment, the parties
established a one-year term for all circuits purchased by
the Debtors prior to the Petition Date beginning on the
effective date of the First Amendment. In addition, XO
agreed to terminate the reserve capacity systems no longer
required by the Debtors without the incurrence of early
termination penalties;
C. Assumption of the Agreements: The Debtors agreed to assume
the Agreements after the effective date of the Plan. After
assumption, no cure payments will be required in connection
with or arising from the assumption of the Agreements
pursuant to Section 365 of the Bankruptcy Code. Moreover,
XO waives any defaults that existed prior to the effective
date of the Settlement Agreement; and
D. Releases: Pursuant to the Settlement Agreement, the Debtors
and XO exchange mutual releases on any and all claims
against each other for actions occurring prior to
December 31, 2002, provided, however, that the releases do
not affect obligations contained in the Settlement
Agreement.
Mr. Walsh contends that the Settlement Agreement is fair and
equitable and falls well within the range of reasonableness as
the Settlement Agreement avoids potential litigation between the
parties to determine the cure amount required under Section 365
of the Bankruptcy Code prior to the assumption of the
Agreements. (Global Crossing Bankruptcy News, Issue No. 34;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
Global Crossing Ltd.'s 9.125% bonds due 2006 (GBLX06USR1) are
trading at about 3 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX06USR1
for real-time bond pricing.
HASBRO INC: Reports 2002 Charge Related to OFT Inquiry in UK
------------------------------------------------------------
Hasbro, Inc., (NYSE:HAS) reported that although the Office of
Fair Trading in the United Kingdom has yet to issue its final
decision in its case concerning trading arrangements by the
Company's United Kingdom subsidiary with certain of its direct
retail accounts, it has advised the Company that while there may
be a fine assessed in the retailer case, because of its
cooperation in the OFT's investigation, the OFT will not require
the Company to pay any of that fine.
"We are pleased that the OFT has acknowledged our responsible
approach by eliminating any fine which may be applied in the
retailer matter," said Alan G. Hassenfeld, Chairman and CEO of
Hasbro, Inc. "The activities cited by the OFT happened almost
two years ago and involved a small number of employees acting
outside the Company's strict code of corporate conduct."
In light of the recent advisory by the OFT with respect to the
retailer case, and the Company's completion of its analysis of
the OFT's previously announced decision with respect to its
investigation of Hasbro U.K.'s interactions with certain of its
wholesale distributors, the Company announced it is taking a
2002 fourth quarter charge to earnings of approximately GBP4.8
million, or approximately U.S.$7,566,000 at exchange rates as of
December 29, 2002.
Historical Information
On November 29, 2002, the OFT issued a decision in the
wholesaler case, finding that Hasbro U.K. had entered into
agreements with certain distributors to fix prices in violation
of U.K. competition laws. The OFT assessed a fine in that case
of approximately GBP4.95 million. The Company filed an appeal of
this decision on January 29, 2003 with the U.K. Competition
Commission Appeals Tribunal, arguing, among other things, that
the amount of the fine was disproportionate to the offense. On
appeal, the CCAT will have the power to reconsider any factual
findings made by the OFT, and to vary the amount of the fine
imposed by the OFT. No payment of a fine will be required until
the Company's appeal is concluded.
Before receiving the OFT's decision in the wholesaler case and
being advised that there would not be a financial payment
required in the retailer case, the Company had disclosed an
estimated range of aggregate loss for the two cases of
approximately GBP160,000 to GBP26,000,000, and had concluded
that there was no amount within that range that was a better
estimate of the loss than any other amount within the range. As
such, in accordance with the applicable accounting requirements,
in 2001 the Company accrued a charge to earnings of GBP160,000,
equaling the low end of this range.
In light of the OFT's decision in the wholesaler case, the
Company currently believes that the amount of GBP4.95 million is
the best estimate of the expected loss from that case. The
amount of this charge may have to be adjusted up or down in the
future depending on the result of the Company's appeal before
the CCAT. In light of the OFT's decision in the retailer case,
no charge will be taken in connection with that case.
Hasbro is a worldwide leader in children's and family leisure
time entertainment products and services, including the design,
manufacture and marketing of games and toys ranging from
traditional to high-tech. Both internationally and in the U.S.,
its PLAYSKOOL, TONKA, MILTON BRADLEY, PARKER BROTHERS, TIGER and
WIZARDS OF THE COAST brands and products provide the highest
quality and most recognizable play experiences in the world.
* * *
As previously reported, Fitch Ratings affirmed Hasbro, Inc.'s
'BB' senior unsecured debt rating. In addition, the company's
new $380 million secured bank credit facility was rated 'BB+'.
The new facility, which replaced its previous 'BB+' rated
$650 million facility, continues to be secured by receivables,
inventories and intellectual property.
The ratings reflect the company's strong market presence and its
diverse portfolio of brands balanced against the cyclical and
shifting nature of the toy industry. The ratings also consider
the challenges the company continues to face in refocusing its
strategy on its core brands and its weak financial profile. The
Negative Outlook reflects uncertainty as to the company's
ability to successfully execute its strategy and its ability to
achieve revenue targets for its core brands as well as Star Wars
in 2002.
HASBRO INC: Board of Directors Declare Quarterly Cash Dividend
--------------------------------------------------------------
Hasbro, Inc.'s (NYSE:HAS) Board of Directors has declared a
quarterly cash dividend of $0.03 per common share. The dividend
will be payable on May 15, 2003 to shareholders of record at the
close of business on May 1, 2003.
Hasbro is a worldwide leader in children's and family leisure
time entertainment products and services, including the design,
manufacture and marketing of games and toys ranging from
traditional to high-tech. Both internationally and in the U.S.,
its PLAYSKOOL, TONKA, MILTON BRADLEY, PARKER BROTHERS, TIGER,
and WIZARDS OF THE COAST brands and products provide the highest
quality and most recognizable play experiences in the world.
* * *
As previously reported, Fitch Ratings affirmed Hasbro, Inc.'s
'BB' senior unsecured debt rating. In addition, the company's
new $380 million secured bank credit facility was rated 'BB+'.
The new facility, which replaced its previous 'BB+' rated
$650 million facility, continues to be secured by receivables,
inventories and intellectual property.
The ratings reflect the company's strong market presence and its
diverse portfolio of brands balanced against the cyclical and
shifting nature of the toy industry. The ratings also consider
the challenges the company continues to face in refocusing its
strategy on its core brands and its weak financial profile. The
Negative Outlook reflects uncertainty as to the company's
ability to successfully execute its strategy and its ability to
achieve revenue targets for its core brands as well as Star Wars
in 2002.
HAYES LEMMERZ: Files Amended Plan and Disclosure Statement
----------------------------------------------------------
Hayes Lemmerz International, Inc., and its debtor-affiliates
present their First Amended Plan of Reorganization and
Disclosure Statement dated February 5, 2003 to the U.S.
Bankruptcy Court for the District of Delaware. The Plan
constitutes a separate plan of reorganization for each of the
Debtors, except for HLI-Funding Corporation and HLI-Funding,
LLC, whose Chapter 11 Cases will be dismissed on the Effective
Date.
The Amended Plan embodies a compromise and settlement of various
claims and causes of action among certain of the creditors that
substantially enhances the distributions made to the holders of
General Unsecured Claims against the Debtors. For example,
obligations owed to the Prepetition Lenders under the
Prepetition Credit Facility are secured by a first priority lien
on substantially all of the assets of the Debtors and all of its
domestic Subsidiaries, and are guaranteed by all of the Debtors'
domestic Subsidiaries. Obligations under the Prepetition Credit
Facility also are secured by a pledge of 100% of the shares of
the Debtors' domestic Subsidiaries and 65% of the shares of
certain of its foreign Subsidiaries, including Hayes Lemmerz
Fabricated Holdings B.V., the holding company for all of the
Debtors' operations outside of North America. The Debtors and
its domestic Subsidiaries have also guaranteed repayment of the
Senior Notes and the Subordinated Notes.
The remaining 35% of the shares of these foreign Subsidiaries,
including Fabricated Holdings, are unencumbered. Accordingly,
65% of the proceeds from the liquidation of the non-Debtor
Subsidiaries outside of North America may be applied to satisfy
secured claims under the Prepetition Credit Facility, and the
remaining 35% of these proceeds are available to satisfy the
general unsecured claims of HLI (Europe), Ltd. and Hayes Lemmerz
International-California, Inc. HLI (Europe) owns 60% of the
shares of Fabricated Holdings while HLI-California owns the
remaining 40%.
Pursuant to the DIP Financing Order, the Debtors stipulated that
they would not challenge the liens and security interests
granted to the Prepetition Lenders and that these liens and
security interests were valid, binding, perfected, enforceable,
first-priority liens and security interests. Assuming that the
Prepetition Lenders' liens and security interests are valid and
based on the Debtors' value, the Prepetition Lenders would be
entitled to payment in full of the principal amount of their
$749,000,000 claim together with interest and fees accruing
subsequent to the Petition Date with accrued interest totaling
$80,000,000 as of April 30, 2003. Because substantially all of
the Debtors are obligated with respect to the obligations owed
to the Prepetition Lenders, little value is available after
satisfaction of these claims to pay other Claimholders against
any of the Debtors. Moreover, in light of the fact that most of
the Debtors are also obligated with respect to the Senior Note
Claims and the Subordinated Note Claims aggregating
$1,200,000,000 and relatively few General Unsecured Claims are
assertable against HLI Europe and HLI California, there is
little possibility for recoveries to any Claimholders other than
the Prepetition Lenders and the Senior Noteholders absent the
compromises contemplated.
It is possible that the Creditors' Committee will commence a
Lien Challenge with respect to the liens and security interests
securing the Prepetition Lenders' claims. However, it is
expected that any Lien Challenge would deal primarily with
whether or not the Prepetition Lenders' liens and security
interests in the European Stock were perfected. Even if a Lien
Challenge with respect to the European Stock were upheld, the
primary beneficiaries would be the holders of Senior Notes and
the Subordinated Notes who are the only significant creditors of
the two entities that own the European Stock. Moreover, the
Prepetition Lenders would still receive a substantial recovery
because they would still participate as general unsecured
creditors of HLI Europe and HLI California.
Because the obligations owed by the Debtors greatly exceed the
Debtors' value, little, if any, distributions would be made to
Claimholders other than the Prepetition Lenders and Senior
Noteholders absent the compromises set forth. Pursuant to the
compromise and settlement proposed, the Prepetition Lenders are
agreeing to forego a portion of the postpetition interest they
claim is due and owing to them amounting to $41,000,000 and the
Senior Noteholders agree to permit distributions to Claimholders
who are either contractually or structurally subordinate to
them. Specifically, in satisfaction of the various claims and
issues regarding potential Lien Challenges, the holders of
General Unsecured Claims will receive a portion of the New
Common Stock and a right to distributions from the HLI Creditor
Trust and the holders of Subordinated Notes will receive the
Warrants.
The recoveries are based on a total enterprise value for the
Debtors as agreed to by the Prepetition Agent and certain
holders of the Senior Notes when structuring the compromise
embodied in the Plan. This compromise enterprise value exceeds
the total enterprise value ascribed to the Debtors by their
investment banker by $25,000,000 to $30,000,000; however, it is
within the range of possible values as determined by the
Debtors' investment bank. Additionally, these values do not
reflect the issuance of New Common Stock pursuant to the
Employee Retention Plan, the Long Term Incentive Plan and the
Warrants.
The Plan is also contingent on receiving a senior secured post-
Effective Date credit facility, which may include a high yield
securities offering, that is adequate to fund working capital
requirements of the Reorganized Debtors and other requirements
as of the Effective Date. The Debtors believe that this
facility will be available.
Full-text copies of the Debtors' First Amended Reorganization
Plan and Disclosure Statement are available for free at:
http://bankrupt.com/misc/1936_1stAmendedDisclosureStatement.pdf
and
http://bankrupt.com/misc/1937_1stAmendedPlan.pdf
(Hayes Lemmerz Bankruptcy News, Issue No. 26; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
Hayes Lemmerz' 11.875% bonds due 2006 (HLMM06USS1) are trading
at about 60 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=HLMM06USS1
for real-time bond pricing.
HEXCEL CORP: Sets Special Shareholders' Meeting for March 18
------------------------------------------------------------
Hexcel Corporation (NYSE/PCX: HXL) announced that a special
meeting of stockholders will be held at 10:30 a.m. at the
Stamford Marriott Hotel in Stamford, Connecticut, at which
stockholders will be asked to vote upon, among other things, the
previously announced proposed sale of convertible preferred
stock for gross proceeds of $125 million in cash.
Stockholders of record at the close of business Wednesday,
February 12, will receive the proxy statement and proxy card
being mailed on Friday, February 14, relating to the matters to
be voted on at the special meeting, and will be entitled to vote
at the special meeting.
Hexcel Corporation and certain persons may be deemed to be
participants in the solicitation of proxies relating to the
proposed transaction among the Company, Berkshire Partners LLC
and Greenbriar Equity Group LLC and the proposed transaction
among the Company and affiliates of Goldman Sachs Group, Inc.
(together, the "Transactions"). The participants in such
solicitation may include the Company's executive officers and
directors. Information concerning such participants is contained
in the Company's amended preliminary proxy statement filed with
the Securities and Exchange Commission on January 31, 2003 on
Schedule 14A in connection with such solicitation, and
information concerning such participants will be contained in
the Company's definitive proxy statement that will be filed with
the Securities and Exchange Commission in connection with such
solicitation.
Hexcel Corporation, whose December 31, 2002 balance sheet shows
a total shareholders' equity deficit of about $127 million, is
the world's leading advanced structural materials company. It
designs, manufactures and markets lightweight, high performance
reinforcement products, composite materials and composite
structures for use in commercial aerospace, space and defense,
electronics, general industrial, and recreation applications.
INTEGRATED HEALTH: Premiere Committee Balks at Discl. Statement
---------------------------------------------------------------
Anthony M. Saccullo, Esq., at The Bayard Firm, in Wilmington,
Delaware, tells the Court that Integrated Health Services,
Inc.'s Disclosure Statement contains very little, if any, that
helps Premiere Creditors make informed judgments concerning the
harm that'll be inflicted on them if they vote to accept a plan
that calls for a substantive consolidation of the estates. The
Debtors say "there is an ample factual basis for the substantive
consolidation of the Debtors." If this assertion is true, then
the Debtors should disclose those facts.
Mr. Saccullo notes that the first set of "facts" on which the
Debtors rely is that it is the primary obligor under the Senior
Lender Agreements and "all the other Debtors are guarantors."
The Disclosure Statement does not inform the reader of the facts
that form the basis of the Premiere Committee's argument that
the Guaranty should be avoided. The Disclosure Statement does
not even acknowledge that the Adversary Proceeding Motion is
pending before this Court, which could result in avoidance of
the Guaranty as to the Premiere Group Debtors. Whether the
Debtors agree with the Premiere Committee's conclusions or not,
the facts underlying the Premiere Committee's arguments should
be disclosed in order that the creditor being asked to cast a
ballot accepting the Plan can make an informed decision. In due
time, this Court, not the Debtors, will determine whether the
Premiere Group debtors ultimately are among the Debtors that
guaranteed the Senior Lender Agreements.
The Debtors' second justification for substantive consolidation
is that their affairs are entangled but disclose no facts
showing an entanglement sufficient to justify substantive
consolidation. Mr. Saccullo contends that the facts in the
Disclosure Statement do not demonstrate the level of
entanglement required for substantive consolidation. Even
assuming Debtors' assets and liabilities are entangled, the
Disclosure Statement includes no financial information that
shows that the untangling of Debtors' assets and liabilities is
impossible, or that the cost of an attempt to unscramble them is
so substantial as to threaten the realization of any net assets
for creditors. Moreover, the Disclosure Statement contains no
information from which a creditor could determine that no
accurate identification and allocation of assets is possible.
In fact, a chief flaw in the Disclosure Statement is that it
contains virtually no allocation of assets or liabilities
among the various Debtors. Without these allocations, a
creditor cannot make an informed judgment concerning the Plan.
According to Mr. Saccullo, the Debtors represented to the Court
in the Cash Management Motion that intercompany balances would
be retained, and that transfers in the cash management system
had been, and would continue to be, coded and tracked. The
Debtors elected to file consolidated schedules of assets and
liabilities, but the Disclosure Statement does not assert that
each debtor's assets and liabilities are unidentifiable.
Alternatively, if in fact the Debtors believe that they cannot
identify each debtor's assets, liabilities, and intercompany
balances, those facts are necessary for creditors to make an
informed judgment concerning the Plan, and those facts should be
disclosed in the Disclosure Statement.
That Debtors provide four types of health services from numerous
locations does not show that Debtors' financial affairs are
hopelessly entangled, to the extent that disentangling their
would be cost prohibitive. Mr. Saccullo states that the
Debtors' proposed Plan would belie any assertion as the "Long-
Term Care Division" and the "Therapy Division" have already been
separated for purposes of the Sale to THI, or other purchaser.
On information and belief, the Debtors' financial advisor was
able to provide prospective purchasers with a facility-by-
facility breakdown of EBITDA and uninsured tort liability. That
breakdown would necessarily be based on the separate financial
records of each Debtor.
Without disclosing how Debtors arrive at the conclusion, the
Disclosure Statement asserts that it is "very difficult for
creditors to ascertain which Debtors they have a claim against."
Mr. Saccullo points out that at least 320 unsecured creditors,
holding claims in excess of $27,000,000, knew to file their
claims against the Premiere Group Debtors. Had the Debtors not
unilaterally decided to file their statement of financial
affairs, schedules of assets and liabilities, and schedules of
executory contracts and unexpired leases on a consolidated
basis, sorting out which creditors have claims against which
Debtors would be less difficult. Notably, the Disclosure
Statement is silent concerning whether the Claims Agent could
provide an allocation of the claims filed in each Debtor's case.
Upon information and belief, the Claims Agent sent prospective
creditors a proof of claim form along with an alphabetical list
of Debtors and the corresponding case number. Given this
procedure, and the information requested by the proof of claim
form, the Debtors should be able to ascertain which claims are
filed against each Debtor. These relevant facts, however, are
not set forth in the Disclosure Statement.
Finally, the Debtors assert as a basis for substantive
consolidation that their centralized cash management system
would make it extremely difficult to confirm a plan of
reorganization for individual Debtors. In the Disclosure
Statement, the Debtors do not set forth any facts to refute the
representations the Debtors made to the Court in the Cash
Management Motion. This absence of facts is even more peculiar
in light of the Court's order requiring that "all postpetition
transfers and transactions shall be adequately and promptly
documented in, and readily ascertainable from, their books and
records."
The Debtors summarily conclude that "creditors would not be
materially prejudiced, if at all, by the deemed consolidation."
Mr. Saccullo contends that each creditor should make that
determination, based on financial information and other factual
background provided by the Debtors in the Disclosure Statement.
However, the information provided in the Disclosure Statement is
inadequate to enable a creditor to compare the treatment of
unsecured creditors under a substantively consolidated plan, on
the one hand, with the treatment of unsecured creditors under
separate plans. Absent adequate information from which
comparison can be made by the affected creditors, creditors
cannot make an informed decision on substantive consolidation --
the most critical and potentially prejudicial aspect of the
Debtors' proposed Plan.
Mr. Saccullo insists that the Disclosure Statement lacks the
most fundamental financial information needed for the
"hypothetical investor" test. The important financial
information which is, or should be, readily available, and which
should, but is not, provided in the Disclosure Statement,
includes:
A. the nature and amount of the intercompany claims involving
the Premiere Group Debtors that will be eliminated by
virtue of substantive consolidation;
B. any allocation, let alone a rational allocation, of the
millions in administrative expenses that will eliminate all
separate value of the Premiere Group Debtors' assets;
C. an allocation of third-party overpayments and
underpayments. The Disclosure Statement does not disclose
whether, or the extent to which, underpayments owed by
Medicare to the Premiere Facilities will be used to offset
overpayments by Medicare to non-Premiere Facilities.
Absent this information, the Premiere Creditors cannot
determine the benefit the Premiere Group Debtors'
bankruptcy estates would enjoy if substantive consolidation
did not take place;
D. an allocation of lease rejection claims between the
Premiere Group Debtors and the other Debtors;
E. an allocation among the Premiere Group Debtors and the
other Debtors of the $181,000,000 United States Claims,
determined by the amount of these claims, if any, asserted
against the Premiere Group Debtors. The Debtors admit that
the Department of Justice has claims against "certain" IHS
Debtors, but the Disclosure Statement does not disclose
which of the Debtors those claims are asserted against;
F. an allocation of the $50,000,000-$100,000,000 "enterprise"
value among the Premiere Group Debtors and the non-Premiere
Debtors;
G. an allocation of the $600,000,000 to $1,000,000,000 in
unsecured claims between the Premiere Group Debtors and the
non-Premiere Debtors;
H. an allocation of the $15,000,000 priority tax claim between
the Premiere Group Debtors and the non-Premiere Debtors;
I. an allocation of the $6,300,000 Other Priority Claims
between the Premiere Group Debtors and the non-Premiere
Debtors;
J. an allocation of the Secured Synthetic Lease Claims between
the Premiere Group Debtors and the non-Premiere Debtors,
assuming that any of the Premiere Group Debtors are liable
for the Synthetic Lease claims to begin with;
K. a comparison of the 2.5% to 3.8% distribution under the
substantively consolidated Plans, to the amount the
Premiere Creditors would service under a separate plan or
plans;
L. financial projections separating the Premiere Group Debtors
from the non-Premiere Debtors. If the Debtors have
employed a "detailed, bottom-up budgeting approach," this
information is not only essential to an informed decision,
but should be readily available;
M. an allocation of PL/GL Claims among the Premiere Group
Debtors of whose facilities are located in Georgia, and the
other Debtors, whose facilities are located in high-risk
states like Texas;
N. the Liquidation Analysis does not provide information from
which Premiere Creditors can determine whether the proposed
Plan satisfies the "best interest of creditors" test. The
Liquidation Analysis should contain a break-down of the
assets, liabilities, administrative claims, and unsecured
claims attributable to the Premiere Group Debtors; and
O. exhibit F to the Disclosure Statement does not disclose
that the Debtors are not including the Avoidance Action or
the Premiere Committee's action on behalf of the Debtors
against former officers and directors of the Premiere Group
as an Excluded Asset.
In addition to the important financial information omitted from
the Disclosure Statement, which is necessary for the Premiere
Creditors to make an informed decision concerning substantive
consolidation, these information is necessary to an unsecured
creditor's informed decision concerning the Plan:
A. an adequate description of the exit financing under the
Stand Alone Plan;
B. the Disclosure Statement does not address Debtors' attempt,
if any, to market the Premiere Group Debtors' stock or
assets separate from substantially all of the Debtors'
assets. The Disclosure Statement does not disclose that,
until required by the Court on December 26, 2002, the
Debtors never considered offers only for the Premiere Group
Debtors' stock or assets in any prior marketing efforts;
C. the Debtors do not disclose that the Premiere Committee has
had no input whatsoever into the Disclosure Statement or
proposed Plan, and that the Premiere Committee was not
included in the process of formulating the contents of
either the Disclosure Statement or the proposed Plan; and
D. the Disclosure Statement does not disclose the effect on
the Premiere Creditors if the Avoidance Action is
ultimately successful and the Guaranty is avoided as to the
Premiere Group Debtors.
From the Petition Date, if not before, Mr. Saccullo alleges that
the Debtors apparently determined to substantively consolidate
these cases. Although fully aware that administrative
consolidation did not mean substantive consolidation, the
Debtors appear to have treated these cases as if they were
substantively consolidated from the Petition Date. The Debtors
chose to file consolidated schedules. That choice did not
release the Debtors from the obligation to account for the
assets and liabilities of each Debtor, or to disclose the
allocation of assets and liabilities among the Debtors in the
Disclosure Statement. If the Debtors also chose not to allocate
professional fees and other administrative costs between each
Debtor, or each set of Debtors, that choice should not be used
now to justify substantive consolidation that harms the
interests of a discrete group of creditors like the Premiere
Creditors. Mr. Saccullo contends that the Debtors have known
from the time the Motion to Reconsider was filed in February,
2000 that at least some Premiere Creditors would oppose
substantive consolidation. Having made the choice to scramble
the reorganization eggs, the Debtors now seek substantive
consolidation on the basis that unscrambling the reorganization
eggs is inconvenient. The eggs never should have been scrambled
in the first place -- administrative consolidation was not a
license to merge all of the Debtors' postpetition operations to
the detriment of the Premiere Creditors. At a minimum, the
Debtors must provide in the Disclosure Statement financial
information that enables the Premiere Creditors, and this Court,
to determine:
-- the necessity of consolidation due to the interrelationship
among the debtors;
-- whether the benefits of consolidation outweigh the harm to
creditors; and
-- prejudice resulting from not consolidating the debtors.
(Integrated Health Bankruptcy News, Issue No. 52;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
JARDINE FLEMING CHINA: Board Seeks Approval of Dissolution Plan
---------------------------------------------------------------
The Jardine Fleming China Region Fund, Inc., announces that the
Board of Directors unanimously adopted a resolution declaring
that the dissolution of the Fund is advisable.
A proposal will be presented to shareholders at the Fund's
annual general meeting (currently scheduled for May 8, 2003) to
approve a plan for the liquidation of the Fund.
If the proposal is approved by shareholders and if all other
conditions contained in the plan of liquidation are satisfied,
the Fund will cease doing business, all of its assets will be
liquidated, the Fund's liabilities will be paid and the Fund's
remaining assets will be distributed to shareholders in one or
more payments.
The Fund will distribute written information about this proposal
to shareholders in advance of the annual meeting, and
shareholders should carefully consider these materials in
deciding how to vote on the proposal.
The Jardine Fleming China Region Fund, Inc., a closed-end
investment company, is managed by JF International Management,
Inc., an indirect subsidiary of JPMorgan Chase. The Fund's
shares are traded on the New York Stock Exchange under the
symbol JFC.
KAISER ALUMINUM: Earns OK to Assume Old Republic Insurance Pact
---------------------------------------------------------------
Old Republic Insurance Company issues workers' compensation,
automobile liability and general liability insurance coverage
for Kaiser Aluminum Corporation and its debtor-affiliates under
a program agreement dated October 14, 1996. With respect to the
workers' compensation component of the Program Agreement,
Patrick M. Leathem, Esq., at Richards, Layton & Finger, reports
that the Debtors maintain workers' compensation coverage for:
(a) their current employees in 22 states; and
(b) their longshore and harbor worker employees.
For the Longshore Workers and the employees in 19 states, Mr.
Leathem relates that the Debtors maintain high-deductible
workers' compensation and employers' liability policies in which
the insurance coverage is provided for workers' compensation
claims for losses of up to the applicable statutory workers'
compensation liability limit, with a $1,000,000 deductible per
occurrence. These states include: Arizona, California,
Delaware, Florida Georgia, Illinois, Indiana, Kansas, Kentucky,
Michigan, Missouri, New Jersey, North Carolina, Oklahoma,
Pennsylvania, South Carolina, Tennessee, Texas, and Virginia.
In Louisiana, Ohio and Washington, the Debtors currently operate
as self-insured employers and Old Republic issues separate high-
retention excess workers' compensation and employers' liability
policies to them. According to Mr. Leathem, these policies
provide that after a $1,000,000 per occurrence retention, the
insurance coverage is afforded for losses of up to the
applicable statutory workers' compensation liability limit.
Old Republic also provides insurance coverage for automobile
liability claims of up to a $1,000,000 policy liability limit,
with a $1,000,000 deductible per occurrence. Old Republic also
grants insurance coverage for general liability claims up to
$1,000,000 in policy limits, with a $1,000,000 deductible per
occurrence and applicable aggregate limits.
To secure the payment of their obligations under the Program
Agreement, the Debtors provided Old Republic with certain
collateral, including but not limited to, a letter of credit
from Bank of America, NA for $3,320,000. The Debtors believe
that the BA Letter of Credit will approximate the estimated
amount of covered claims, with any shortfall being of no
material amount.
Old Republic will shortly issue new workers' compensation,
automobile liability and general liability insurance coverage,
which will maintain insurance coverage through October 14, 2003.
However, in the course of the parties' discussions regarding the
potential issuance of the New Policies, Old Republic informed
the Debtors that it was unwilling to issue the New Policies
without the Debtors' assumption of the Program Agreement and the
issuance of an additional letter of credit in an amount to be
mutually agreed on, but not to exceed $4,500,000.
Mr. Leathem points out that any interruption in the Debtors'
insurance coverage would have severe and adverse effects on
their ability to retain employees and maintain their business
operations. Mr. Leathem notes that under the laws of most
states in which the Debtors operate, they are required to
provide evidence that they have secured workers' compensation
insurance for the employees. If the workers' compensation
coverage is not maintained:
-- the Debtors' employees could bring lawsuits for damages;
-- the Debtors' ongoing business operation in certain states
could be enjoined; and
-- the Debtors' officers could be subject to criminal
prosecution.
Accordingly, the Debtors sought and obtained Judge Fitzgerald's
consent to assume the Program Agreement and Policies.
Parties Enter Into Further Agreement
As a further condition to the continuance of the New Policies,
the Debtors and Old Republic also entered into a stipulation,
which the Court approved.
Mr. Leathem explains that the stipulation will permit the
Debtors to maintain their workers' compensation, general
liability and automobile liability insurance for the upcoming
year at rates and on terms that the Debtors believe will be
favorable to their estates. The Debtors solicited quotes for
workers' compensation, automobile liability and general
liability insurance coverage from various insurance carriers.
Of the insurance companies contacted, Old Republic submitted the
most attractive rates for the coverage required.
The salient terms of the Stipulation are:
(a) The Debtors will assume the Program Agreement and the
Policies;
(b) Old Republic will be entitled to an unliquidated
administrative claim against the Debtors for:
(i) the Debtors' failure to make premium payments or pay
any other amounts due with respect to the Program
Agreement or the Policies;
(ii) the Debtors' failure to make payments within the
deductible layer of the Policies for those
deductibles relating to or on account of the
occurrences that give rise to claims covered by the
Policies; or
(iii) the Debtors' failure to make payments to the third-
party administrator -- TPA -- which is currently
administering the covered claims;
(c) Unless a confirmed reorganization plan for the Debtors
provides for their complete liquidation -- in which event
Old Republic's administrative claim against the Debtors
will be estimated or adjudicated by the Court, as
appropriate and paid when allowed by the Court -- Old
Republic's administrative claims are:
(i) to survive the confirmation of the Debtors' Plan;
(ii) not to be liquidated or adjudicated by the Court;
and
(iii) not to be payable on the Plan effective date.
In the event these cases are converted to Chapter 7, Old
Republic's administrative claim against the Debtors will
also be estimated or adjudicated by the Court, as
appropriate, and paid when the Court allows;
(d) The Debtors will not to seek to recover from Old Republic
before October 14, 2006, any excess draws on the Existing
Letters of Credit or the Additional Letter of Credit, if
drawn upon by Old Republic, unless otherwise agreed to by
the parties;
(e) The Debtors will procure the Additional Letter of Credit;
and
(f) Old Republic is entitled -- without obtaining relief from
the automatic stay, only after providing the Debtors,
Creditors' Committee and Asbestos Committee with no less
than 20 business days' prior written notice -- to exercise
its state law rights, if any, to cancel the New Policies
in the event the Debtors:
(i) do not post the Additional Letter of Credit;
(ii) do not make all required premium payments owed on
account of the New Policies;
(iii) do not make all required deductible payments on
account of the claims covered by the Policies; or
(iv) fail to pay amounts owed to the TPA.
The Cancellation Notice will be served via overnight mail
and facsimile to:
The Company:
John M. Dorman, Esq.
Deputy General Counsel
Kaiser Aluminum & Chemical Corporation
5847 San Felipe, Suite 2500
Houston, Texas 77057
Facsimile: (713) 332-4605
Mr. Kerry A. Shiba
Vice President and Treasurer
Kaiser Aluminum & Chemical Corporation
5847 San Felipe, Suite 2500
Houston, Texas 77057
Facsimile: (713) 332-4702
Debtors' Counsel:
Gregory M. Gordon, Esq.
David G. Adams, Esq.
Jones, Day, Reavis & Pogue
2727 N. Harwood Street
Dallas, Texas 75201
Facsimile: (214) 969-5100
Unsecured Creditors' Committee:
Lisa G. Beckerman, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Facsimile: (212) 872-8162
Asbestos Committee:
Marla Eskin, Esq.
Campbell & Levine LLC
800 North King, Suite 300
Wilmington, Delaware 19801
Facsimile: (302) 426-9947
(Kaiser Bankruptcy News, Issue No. 22; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
KATONAH VI LTD: S&P Assigns BB Rating to Classes D-1 & D-2 Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Katonah IV Ltd./Katonah IV Inc.'s class A, B, C, and
D floating- and fixed-rate notes.
The preliminary ratings are based on information as of Feb. 12,
2003. Subsequent information may result in the assignment of
final ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
-- The expected commensurate level of credit support in the
form of subordination to be provided by the notes junior
to the respective classes and by the preferred shares
and overcollateralization;
-- The cash flow structure, which is subject to various
stresses requested by Standard & Poor's;
-- The experience of the collateral manager;
-- The coverage of interest rate risks through hedge
agreements; and
-- The legal structure of the transaction, which includes
the bankruptcy remoteness of the issuer.
Katonah IV Ltd./Katonah IV Inc., is the fourth cash flow
arbitrage CLO brought to market by Katonah Capital LLC.
Preliminary Ratings Assigned
Class Rating Amount ($000s)
A AAA 265,000
B A- 32,750
C BBB 14,000
D-1 BB 2,250
D-2 BB 4,500
E N.R. 5,250
Preferred shares N.R. 26,250
KMART CORP: Wants Approval to Pay $15 Mill. Plan Investment Fees
----------------------------------------------------------------
Kmart Corporation and its debtor-affiliates discloses that there
are certain fees payable to ESL Investment Inc., and Third
Avenue Trust under the Investment Agreement.
Mark A. McDermott, Esq., at Skadden, Arps, Slate, Meagher &
Flom, relates that the Investment Agreement obligates the
Debtors to pay to ESL a $10,000,000 commitment fee on the
earlier of:
(i) May 30, 2003, the effective date of the reorganization
plan; and
(ii) the date the Investment Agreement is terminated as a
result of an alternate investment transaction between the
Debtor and a third party.
The Commitment Fee will be payable unless the Plan Investors
breach their obligations under the Investment Agreement or
choose to terminate their commitment pursuant to certain
circumstances provided under the Investment Agreement. The Plan
Investors agree that ESL will recover 87.8% of the Commitment
Fee and that Third Avenue will receive the other 12.2%.
The Debtors are also required to reimburse ESL for up to
$5,000,000 of its reasonable out-of-pocket costs and expenses
incurred in the evaluation, due diligence, negotiation, and
consummation of the Debtors' Reorganization Plan, the Investment
Agreement, the Debtors' restructuring, and certain other
contemplated transactions. Mr. McDermott notes that up to
$2,000,000 of the expenses will be payable on February 28, 2003,
the hearing date for this Motion. The remainder will be payable
on the Effective Date of the Plan. However, ESL will refund the
payments in the event it breaches its obligations under the
Investment Agreement.
To ensure the Plan Investors' continued commitment to fund the
reorganization plan, the Debtors now seek the Court's authority
to pay the Commitment Fee and reimburse ESL's expenses. The
Debtors also ask the Court to treat the Commitment Fee and the
reimbursement as administrative priority expenses, as required
under the Investment Agreement.
The Debtors believe that making the necessary payments will
further their efforts to emerge from Chapter 11. The payments
constitute a material inducement for, and a condition of, the
Plan Investors' entry into the Investment Agreement. Mr.
McDermott explains that the restructuring contemplated by the
Investment Agreement maximizes the value of the Debtors, their
estates, their creditors, and all other parties-in-interest and
best positions the Debtors to emerge from Chapter 11 as a
financially strong and competitive business. The investment,
along with the exit financing facility, form the basis of a plan
that will allow the Debtors to emerge from Chapter 11 during the
second quarter of 2003. (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.
MACKIE DESIGNS: Commences Trading on OTC Bulletin Board
-------------------------------------------------------
Mackie Designs Inc., (OTCBB:MKIE) announced that the National
Association of Securities Dealers has approved Mackie's
application for quotation of its common stock on the NASD's
Over-the-Counter Bulletin Board. Mackie's common stock now
trades on the OTC Bulletin Board under the symbol MKIE.
Mackie Designs is a leading designer, manufacturer and marketer
of professional audio equipment. The Company sells audio mixers,
mixer systems, power amplifiers, and professional loudspeakers.
For more information, visit http://www.MackieDesigns.com
* * *
Liquidity and Capital Resources
In its SEC Form 10-Q file on November 14, 2002, the Company
reported:
"At September 30, 2002, we were out of compliance with certain
of the financial covenants of our credit agreement with the U.S.
bank. We were out of compliance with certain of these covenants
in 2001 and the first quarter of 2002 but were able to
restructure the covenants and receive waivers for these
violations. The lender can declare an event of default, which
would allow it to accelerate payment of all amounts due under
the credit agreement. Additionally, this non-compliance may
result in higher interest costs and/or other fees. We are highly
leveraged and would be unable to pay the accelerated amounts
that would become immediately due and payable if a default is
declared. As a result of this non-compliance, the total of Term
Loans A and B is classified as a current liability under the
caption, 'Long-term debt callable under covenant provisions.'
"We have taken various actions to ensure our ongoing ability to
cover scheduled debt servicing payments. In the third and fourth
quarters of 2001 we laid off some of our personnel and closed
certain facilities. There have been additional headcount
reductions in the third quarter of 2002 and we expect more to be
incurred in the remainder of the year. Throughout 2002, we have
maintained close controls over capital expenditures. Finally, we
are pursuing a variety of alternative financing sources,
including loan restructuring, possible equity investment and/or
divestiture of certain operating assets.
"If management controls over spending are successful and costs
of sales and overhead costs reduced to levels consistent with
our sales, we believe that our cash and available credit
facilities, along with cash generated from operations will be
sufficient to provide working capital to fund operations over
the next twelve months. Although there is no assurance,
additional credit facilities may be available from our existing
lender or from other sources."
MADGE NETWORKS: Dec. 31 Net Capital Deficit Widens to $10 Mill.
---------------------------------------------------------------
Madge Networks N.V. (NASDAQ: MADGF), a global supplier of
advanced wired and wireless networking product solutions,
announced results for its fourth fiscal quarter and full
financial year ended December 31, 2002.
Madge Networks revenues for the fourth quarter were US$7.1
million, compared to third quarter 2002 revenues of $7.6 million
and fourth quarter 2001 revenues of $12.1 million. Net income
from continuing operations for the fourth quarter was $0.1
million, with earnings per share just above breakeven. This
compares to breakeven net income from continuing operations and
just above breakeven earnings per share for the previous quarter
and a net income from continuing operations of $3.1 million for
the fourth quarter of 2001. Including discontinued operations,
the net loss for fourth quarter 2002 was $0.1 million, with
earnings per share just below breakeven.
For the fiscal year 2002 Madge reported revenues of $34.2
million, compared to revenues of $70.3 million for the 2001
fiscal year. For the year ended December 31, 2002 net loss was
$2.3 million compared to net income of $18.5 million for the
year ended December 31, 2001. The loss for the 2002 period
included a loss of $2.1 million related to a special charge for
discontinued operations. Net income for the 2001 period included
special gains of $13.1 million partially offset by a loss from
associate Red-M of $1.5 million and a loss from discontinued
operations of $3.5 million.
Gross margin for the fourth quarter increased to 75.8% compared
to 67.6% for the previous quarter, and 54.4% for the fourth
quarter of 2001. The margins for the fourth quarter 2002 and for
the previous quarter were positively affected by releases of
specific provisions. In the fourth quarter 2002 these provisions
related to warranty and inventory obsolescence. Without this
release the gross margin would have been 59.2%, compared to
58.5% for the third quarter 2002.
Accounts receivable, net of reserves were $2.5 M at the end of
the fourth quarter or 33 days outstanding, compared to $2.9 M at
the end of the previous quarter or 34 days outstanding.
Inventories, net of reserves, were $2.5 M compared to $2.6 M at
September 30, 2002.
The Company ended the fourth quarter with $7.2 million in cash,
of which $4.6 million was not restricted. The Company continues
its focus on working capital management.
At December 31, 2002, the Company's balance sheet shows a total
shareholders' equity deficit of about $10 million, and a working
capital deficit of about $6 million.
"Q4 continued as another challenging quarter. Ongoing weak
demand in Germany and a lack of new demand in the United States
further illustrated the spending downturn in the IT industry
generally. Cost control and margin improvement have contributed
to allowing us to break even in these difficult circumstances,"
said Martin Malina, CEO Madge Networks. "Our new Wireless
product range and the very different external environment for
our traditional token ring products required significant changes
in the skills and capabilities of our sales force," continued
Martin Malina. "We have made good progress in restructuring our
sales organization to meet these challenges and hope to see the
benefit from this in future quarters."
During the fourth quarter the Company also announced the
software only version of its Wireless network management and
security software called Smart Wireless Enterprise Access
Server. This new version now allows highly scalable deployment
of large Wireless installations in enterprise environments on
industry standard Intel based servers. The Company's customers
and resellers have reacted favorably to its Wireless products.
The first customer installations are now well beyond the initial
pilot phase. The Company continues to shift resources to the
sale and support of Wireless products, as the management
continue to believe that this area is the best opportunity of
revenue growth for the Company.
"2002 has been a year when Madge Networks has had to adapt to
declining revenues in the token ring market, whilst launching a
new products range in one of the most promising market segments
in the industry," concluded Martin Malina. "We continue to have
challenges to manage historic liabilities, and to absorb the
cost of these historic liabilities in the context of the reduced
size of the overall business, but we are pleased with the
progress we have made to date. We are hopeful for the prospects
of our new Wireless products."
Management Comments
As in the previous quarter the Company has produced a document
entitled "Management's Comments on fourth quarter and full
financial year 2002 results" instead of holding a conference
call. This document discusses the results for the fourth quarter
and full financial year 2002 in detail and can be found on the
Investor Relations section of the Company's Web site.
Madge Networks N.V., (NASDAQ: MADGF) is a global supplier of
advanced wired and wireless networking product solutions to
large enterprises, and is the market leader in Token Ring. Madge
Networks is pioneering next generation networking solutions,
which enable the painless deployment of Wireless and also
100Mbps and Gigabit speed IP-based applications within existing
corporate networks while protecting customers' investments in
Token Ring. Madge Networks also has an associate company, Red-
M(TM), a market leader in Wireless networking solutions. Madge
Networks' main business centers are located in Wexham Springs,
United Kingdom and New York. Information about Madge Networks'
complete range of products and services can be accessed at
http://www.madge.com
MAGELLAN HEALTH: Tennessee Subsidiary's Regulatory Status Lifted
----------------------------------------------------------------
Magellan Health Services, Inc., (OCBB:MGLH) announced an
agreement with the Tennessee Department of Commerce and
Insurance under which the seizure order that had been placed on
Tennessee Behavioral Health, a wholly owned subsidiary of
Magellan, has been lifted. Tennessee Behavioral Health, which
contracts to provide services under the State's TennCare
program, has continuously operated, and will continue to
operate, in the normal course of business, managing services for
TennCare members and paying providers on a timely basis.
Under the agreement, Tennessee Behavioral Health will operate
under an agreed notice of supervision and the lawsuit brought by
the State to commence the seizure order has been dismissed. Both
the State of Tennessee and Magellan acknowledge that Tennessee
Behavioral Health is now and has been continuously compliant
with the State's net worth requirements.
"Tennessee Behavioral Health has continued to serve TennCare
members as usual and will continue to do so under the new
agreement with the State," said Jay J. Levin, president of
Magellan Health Services. "We are pleased that we were able to
work cooperatively to address the State's concerns and pleased
that the State recognizes Magellan's and Tennessee Behavioral
Health's commitment to serving members and providers without
interruption now and in the future."
Headquartered in Columbia, Md., Magellan Health Services, Inc.
(OCBB:MGLH), is the country's leading behavioral managed care
organization, with approximately 68 million covered lives. Its
customers include health plans, government agencies, unions, and
corporations.
At Sept. 30, 2002, Magellan's balance sheet shows $1 billion in
assets and $1.5 billion in liabilities. Magellan's net loss in
Fiscal 2002 topped $700 million on $1.7 billion in revenues.
Magellan Health Services' 9.375% bonds due 2007 (MGL07USA1) are
trading at about 81 cents-on-the-dollar, DebtTraders says. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=MGL07USA1for
real-time bond pricing.
MAXXIM MEDICAL: S&P Drops Credit Rating to D Due to Bankruptcy
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
and senior secured bank loan ratings on Maxxim Medical Group
Inc., to 'D' from 'B-' after Maxxim filed for Chapter 11
bankruptcy protection from creditors on February 11, 2003.
Standard & Poor's also lowered its subordinated debt rating on
Maxxim to 'D' from 'CCC'. All ratings have been removed from
CreditWatch, where they were placed December 19, 2002.
Waltham, Massachusetts-based Maxxim is a supplier of custom-
procedure trays, non-latex examination gloves, and other single-
use products.
"The company's significant debt burden and weak operating
performance drastically limited its financial flexibility," said
Standard & Poor's credit analyst Jordan C. Grant.
MITEC TELECOM: Secures Additional C$5 Million Refinancing
--------------------------------------------------------
Further to its announcement of December 20th, 2002, Mitec
Telecom Inc. (TSX: MTM), a leading designer and manufacturer of
wireless network products, has secured a loan in the amount of
C$3.75 million and a loan guarantee in the amount of C$1.25
million from La Financiere du Quebec, a subsidiary of
Investissement Quebec. This follows the closing of the Company's
C$6.1 million unit offering, announced on February 5, 2003.
"This agreement with La Financiere du Quebec caps off an
extremely significant and eventful period for us," said Rajiv
Pancholy, Mitec's President and Chief Executive Officer. "Aside
from concluding our successful unit offering, we were also just
awarded a contract valued at C$8 million from a major network
provider. In the past week, our lenders, investors and customers
have all expressed their confidence in Mitec. With these key
financing initiatives in place, we can now focus our efforts on
returning the Company to profitability."
La Financiere du Quebec, a subsidiary of Investissement Quebec,
was formed to help Quebec SMEs obtain financing. As a unique
type of merchant bank, La Financiere provides companies in every
region of Quebec with a full range of financial products,
including direct loans. For more information, visit
http://www.investquebec.com
MITEC Telecom is a leading designer and manufacturer of products
for the telecommunications industry. The Company sells its
products worldwide to network providers for incorporation into
high-performing wireless networks used in voice and
data/Internet communications. Additionally, the Company
provides value-added services from design to final assembly and
maintains test facilities covering a range from DC to 60 GHz.
Headquartered in Montreal, Canada, the Company also operates
facilities in the United States, Sweden, United Kingdom, China
and Thailand.
Mitec Telecom Inc., is listed on the Toronto Stock Exchange
under the symbol MTM. On-line information about Mitec is
available at http://www.mitectelecom.com
The company's working capital deficit tops C$7 million at
October 31, 2002.
MONARCH DENTAL: Shareholders OK Proposed Merger with Bright Now!
----------------------------------------------------------------
Monarch Dental Corporation (Nasdaq:MDDS) announced that its
stockholders have approved the proposed merger between the
Company and an affiliate of Bright Now! Dental, Inc. In
connection with the merger, stockholders of the Company will
receive $5.75 per share in cash. The parties currently expect
the merger to be completed by the end of February. Completion of
the merger remains subject to certain closing conditions,
including the receipt by Bright Now! Dental of the proceeds of
its financing commitments.
Monarch Dental Corporation (Nasdaq:MDDS) --
http://www.monarchdental.com-- based in Dallas, Texas, provides
business support services to 152 dental offices serving 17
markets in 13 states. Monarch Dental offices offer a wide range
of general dental services, including preventive care,
restorative services, and cosmetic services. In addition, many
practices offer specialty services such as orthodontics,
periodontics, oral surgery, endodontics and pediatric dentistry.
* * *
As previously announced, the Company is in default under its
credit facility and, as a result, the Company's bank group has
exercised its right of set-off and applied approximately $1.18
million from the Company's cash accounts to offset a portion of
the unpaid interest under the credit facility and certain
professional fees. The $1.18 million aggregate amount
represented unpaid interest at the lead lender's prime rate,
plus the then outstanding professional fees of the bank group.
The set-off of this amount by the bank group may have a
significant adverse impact on the liquidity of the Company. In
connection with the Company's negotiations with its bank group,
the Company has requested a forbearance with respect to the
exercise by the bank group of any other remedies under the
credit agreement.
NATIONAL CENTURY: Court Approves Bricker & Eckler's Engagement
--------------------------------------------------------------
Judge Donald E. Calhoun, Jr. approves National Century Financial
Enterprises, Inc., and its debtor-affiliates' application to
employ Bricker & Eckler as special litigation counsel. The
objections raised by U.S. Trustee are resolved on these terms:
(a) The Debtors are authorized to retain and employ Bricker &
Eckler as special litigation counsel in these Chapter 11
Cases on the terms and conditions set forth in the
Application, nunc pro tunc as of November 8, 2002;
(b) Bricker & Eckler is authorized to perform litigation
services for the Debtors that are necessary or appropriate
in connection with these Chapter 11 cases, provided that:
(i) the Debtors will direct the services to be performed by
Bricker & Eckler and the efforts of Bricker & Eckler
will be coordinated in consultation with the Debtors'
general bankruptcy counsel to avoid duplicative or
redundant work; and
(ii) Bricker & Eckler's services will be limited to:
(1) those matters in which they represented the Debtors
prepetition, which are the matters of NPF XII, Inc.,
et al. v. PhyAmerica Physicians Group, Inc., et al.,
Court of Common Pleas of Franklin County, Ohio, In
re Boston Regional Medical Center, Inc., United
States Bankruptcy Court, Eastern District of
Massachusetts, and NPF XII, Inc. v. Racciato, et
al., United States District Court, Southern District
of Ohio, Anderson v. Pine South Capital, United
States District Court, Western District of Kentucky
in Louisville, In re Ravenwood Healthcare Inc.,
United States Bankruptcy Court for the District of
Maryland (Baltimore Division), NPF XII, Inc. v.
Cranford L. Scott, M.D., Inc., et al. United States
District Court for the Southern District of Ohio,
and Columbia/HCA Healthcare Corn. v. Medshares
Consolidated Corp., et al., Chancery Court for
Davidson County, Tennessee,
(2) matters in which the Debtors' general bankruptcy
counsel has a conflict of interest, including
adverse matters relating to Mid Atlantic Home
Healthcare Network, Inc., and its subsidiaries,
(3) responding to the motion for relief from stay filed
in these proceedings by Brea Community Hospital,
(4) contempt proceedings relating to National Century
Financial Enterprises. Inc., et al., v. Lincoln
Hospital Medical Center. Inc., et al., Adversary
Proceeding No. 02-2526 or enforcement of the
automatic stay, and
(5) providing transitional information to the Debtors'
counsel relating to prepetition litigation matters
and issues relating to enforcement and defense of
the sale and subservicing agreements entered into
by the Debtors;
(c) Bricker & Eckler has identified payments it received in
November 2002 from the debtor or debtors. The U.S. Trustee
asserts that some of these payments may be preferential.
Bricker & Eckler will provide full information concerning
the payments to the official creditors' committee and any
party in interest upon request. The information will
include accounting records and billing statements as
requested;
(d) Bricker & Eckler will investigate whether any adverse
parties in actions in which Bricker & Eckler represents the
Debtors are owned, in whole or in part, by Mr. Lance Poulsen
or any relatives of Mr. Poulsen. Bricker & Eckler will file
a supplemental disclosure pursuant to Bankruptcy Rule 2014
detailing the information; and
(e) Bricker & Eckler will be compensated for its services and
reimbursed for any related expenses in accordance with
applicable provisions of the Bankruptcy Code, the Bankruptcy
Code, the Bankruptcy Rules and any applicable orders of this
Court. (National Century Bankruptcy News, Issue No. 9;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PACIFICARE HEALTH: Fourth Quarter 2002 Performance Swings-Up
------------------------------------------------------------
PacifiCare Health Systems Inc. (Nasdaq:PHSY), announced that pro
forma net income for the fourth quarter ended Dec. 31, 2002,
increased 37%, on a FAS 142 adjusted basis, to $35.9 million.
The pro forma results exclude a $9.4 million loss ($5.8 million
net of tax) primarily due to the disposition of the assets of
its e-prescribing subsidiary, and an $11.1 million credit ($6.9
million net of tax) for excess reserves released after the
completion of Office of Personnel Management audits. Adjusting
for the effects of the Jan. 1, 2002 accounting change related to
the adoption of FAS 142, fourth quarter pro forma net income in
2001 would have been $0.76 cents per diluted share, excluding a
net restructuring charge amounting to $1.11 per diluted share.
Reported net income for the fourth quarter of 2002, including
the net credit, was $37 million versus a $0.35 loss per share in
the fourth quarter of 2001 on a FAS 142 adjusted basis.
For the year ended Dec. 31, 2002 the company's pro forma
earnings per diluted share totaled $3.92, a 17% increase over
the FAS 142 adjusted pro forma net income for 2001. However, the
company recorded a non-cash goodwill impairment charge in the
first quarter upon adoption of FAS 142, resulting in a reported
full year net loss of $21.51 per diluted share.
Howard G. Phanstiel, PacifiCare's president and chief executive
officer, said: "A consistent focus on the execution of our
strategic plan in 2002 continued to produce benefits in the
fourth quarter. PacifiCare's stock price rose 76% during the
year, significantly outperforming the managed care sector
overall. We took several steps last year designed to attract new
commercial membership, with the introduction of numerous new
products and services as well as new alliances that are expected
to expand the visibility and non-affiliated membership of our
specialty companies. As we move into 2003, our plan is to
continue focusing on our goal of diversifying revenues and
transforming the company into a consumer health organization."
Revenue and Membership
Fourth quarter 2002 revenue of $2.7 billion was 5% below the
same quarter a year ago due to an 8% decrease in commercial
membership and a 20% decrease in Medicare+Choice membership,
consistent with the company's planned membership reductions in
2002. Partially offsetting the impact of the membership declines
were increases in commercial premium yields of 15% and
Medicare+Choice premium yields of 7%. For the full year, revenue
was down 5% from 2001 to $11.1 billion.
PacifiCare's medical membership was approximately 3.1 million on
December 31, 2002, down 10% year-over-year and 2% below the
third quarter of 2002. The year-over-year reduction in
commercial membership was driven in large part by the company's
planned reduction of unprofitable Texas HMO membership. The
188,000-member decrease in Medicare+Choice membership primarily
was due to benefit reductions in 2002, and county exits
affecting 64,000 members.
Commenting on membership trends, Brad Bowlus, president and
chief executive officer of PacifiCare's Health Plans Division,
said, "We've really been committed to our plan to maintain
pricing discipline, with our January 2003 commercial HMO price
increases averaging 18.5%, net of benefit buydowns.
Additionally, we've added in excess of 100,000 new commercial
members in the fourth quarter of 2002 and January of of 2003."
Other income, principally from the company's specialty
businesses, grew 10% year-over-year, primarily due to the strong
performance of the company's pharmacy benefit management
subsidiary, Prescription Solutions. Prescription Solutions
continued to grow its unaffiliated membership, which increased
by approximately 280,000 members (21%) in the fourth quarter and
rose a total of 506,000 members (45%) during the year.
PacifiCare Behavioral Health's unaffiliated membership increased
by 308,000 (22%) over the course of 2002.
Net investment income decreased 2% from the year-ago quarter
primarily due to the impact of lower interest rates on
marketable securities.
Health Care Costs
The consolidated medical loss ratio of 86.0% decreased 350 basis
points from the fourth quarter of 2001 and increased 20 basis
points sequentially. The senior MLR, which includes
Medicare+Choice and Medicare Supplement products, was 84.3%, 700
basis points lower than the senior MLR in the fourth quarter of
2001 and 50 basis points lower than the third quarter of 2002.
For the full year, the senior MLR decreased 350 basis points
compared to 2001. The decrease was due to the implementation of
significant benefit changes effective January 1, 2002, as well
as the positive effect of medical management programs. Fourth
quarter results included favorable changes in reserves netting
to $16 million. This was made up of a $19 million favorable
adjustment to senior reserves, offset by a $4 million
unfavorable adjustment to commercial reserves. The adjustment to
senior reserves was driven by a favorable claims experience
throughout 2002, indicating the emergence of positive
Medicare+Choice trends.
"We are very encouraged by the performance of our
Medicare+Choice business in 2002, and believe that our
successful management of this program, despite its challenges,
gives us more time and flexibility to grow our commercial
business while we continue to assess our future in
Medicare+Choice," said Phanstiel. 6 The fourth quarter
commercial MLR of 87.9% increased 100 basis points from the
prior year, and 90 basis points sequentially, but decreased 130
basis points for the full year compared to 2001. The sequential
quarter increase was attributable primarily to the write-off of
premiums receivable from the Federal Employees Health Plan due
to unexpected retroactive membership adjustments received from
these groups, and an allowance for premiums receivable from
CalPERS which are still being reviewed and reconciled.
Selling, General & Administrative Expenses
The selling, general and administrative expense ratio of 13.6%
for the fourth quarter of 2002 increased by 280 basis points
year-over-year. For the full year 2002 the SG&A ratio was 12.1%,
180 basis points higher than 2001. The increase in this ratio
was the net result of several factors. A workforce reduction was
offset by the effect of lower revenues, as well as investments
made to enhance the company's infrastructure in areas such as IT
and claims payment and costs related to the development and
marketing of numerous new products. The SG&A ratio rose 60 basis
points from the prior quarter, mainly due to increased
advertising and marketing, the write-off of hardware and
software associated with obsolete systems, and seasonal costs
associated with the annual commercial group open enrollment
process. SG&A expenses for the full year 2002 rose 12%, compared
with the prior year, to $1.3 billion.
Other Financial Data
Medical claims and benefits payable totaled $1 billion at
December 31, 2002, which was comparable with the prior quarter,
despite a 2% sequential decrease in membership. The incurred but
not reported (IBNR) portion of MCBP increased slightly during
the quarter, with an offsetting reduction in other provider
capitation and risk-sharing liabilities. Days claims payable for
the fourth quarter decreased one-tenth of one day to 41.9
compared with the third quarter. However, days claims payable as
adjusted to eliminate the portion of the company's business that
is capitated increased by half a day, to 78.1 days.
"The strength of the balance sheet is evidenced by an increase
in IBNR despite a continued reduction in claims processing time,
and a somewhat lower membership base," said Executive Vice
President and Chief Financial Officer Gregory W. Scott.
The average claim turnaround time in December was shortened by
another 4% from the end of the prior quarter, bringing the total
reduction for the year to 12%. Days claims receipts on hand was
6.6 days at Dec. 31, 2002, a slight increase from 6.1 days in
the third quarter and 6.2 days on hand at the close of 2001.
Earnings before interest, taxes, depreciation, amortization, and
the non-recurring net credit (EBITDA) totaled $94.9 million in
the fourth quarter of 2002, compared with $109.3 million in the
third quarter. Free cash flow, defined as net income plus
depreciation and amortization, less capital expenditures and the
non-recurring net credit, was $38 million. Total free cash flow
for the year, net of all non-operational items, was $156
million, which was 42% higher than the prior year.
During the fourth quarter of 2002 the company issued $135
million in convertible subordinated debentures. The debt, which
is convertible into PacifiCare common stock after certain
conditions are met, carries a 3% rate of interest and is
callable in October of 2007. Proceeds from the issuance were
used to reduce the outstanding balance of the company's senior
credit facility and for general corporate purposes.
Commenting on the progress made during the year to restructure
the company's balance sheet, Scott said, "We entered 2002 with
$800 million in debt maturing in less than 12 months. Now, after
two refinancing transactions and an extension of our bank debt,
the average time to maturity of our debt has increased to more
than five years."
Scott reiterated PacifiCare's previously announced 2003
guidance, stating, "We expect the momentum that was generated in
2002 to carry through into 2003, resulting in a 15% increase in
net income and EPS in the range of $4.25 to $4.35."
PacifiCare Health Systems is one of the nation's largest
consumer health organizations. Primary operations include
managed care products for employer groups and Medicare
beneficiaries in eight Western states and Guam serving more than
3 million members. Other specialty products and operations
include pharmacy benefit management, behavioral health services,
life and health insurance, and dental and vision services. More
information on PacifiCare Health Systems can be obtained at
http://www.pacificare.com
* * *
As reported in Troubled Company Reporter's December 4, 2002
edition, Standard & Poor's assigned its 'B' rating to PacifiCare
Health Systems Inc.'s $125 million 3% convertible subordinated
debentures, which are due in 2032 and are being issued under SEC
Rule 144A with registration rights.
Standard & Poor's also said that it revised its outlook on
PacifiCare to stable from negative.
"The rating is based on PacifiCare's good business position as a
regional managed care organization and improved earnings
performance," said Standard & Poor's credit analyst Phillip C.
Tsang. "Offsetting these strengths are PacifiCare's marginal
capitalization and high percentage of goodwill in its capital."
PacifiCare expects to use the net proceeds from the issue to
permanently repay indebtedness under its senior credit facility,
with the remainder for general corporate purposes.
PAPER WAREHOUSE: Full-Year Retail Sales Slide-Down 1% to $73.7MM
----------------------------------------------------------------
Paper Warehouse, Inc. (OTCBB:PWHS), reported preliminary total
sales and same-store sales results for the fourth quarter and
year ended January 31, 2003.
For the full year, retail sales from continuing operations of
approximately $73.7 million decreased one percent from prior-
year retail sales from continuing operations of $74.4 million.
Full year comparable-store sales decreased less than two
percent. Fourth-quarter retail sales of approximately $17.4
million decreased four percent from retail sales of
approximately $18.1 million for the same quarter in the prior
year, while comparable store sales also decreased four percent.
Paper Warehouse expects to release final fourth-quarter and
full-year results by late April.
Paper Warehouse specializes in party supplies and paper goods
and operates under the names Paper Warehouse, Party Universe,
and www.PartySmart.com. PartySmart.com can be accessed at
http://www.PartySmart.com Paper Warehouse stores offer an
extensive assortment of special occasion, seasonal and everyday
party and entertainment supplies, including paper supplies, gift
wrap, greeting cards and catering supplies at everyday low
prices. As of January 31, 2003, the company had 137 retail
locations (86 company-owned stores and 51 franchise stores)
conveniently located in major retail trade areas to provide
customers with easy access to its stores. The company's
headquarters is in Minneapolis.
As reported in Troubled Company Reporter's October 21, 2002
edition, Paper Warehouse received the requisite consent from
holders of its $4.0 million Convertible Subordinated Debentures
due 2005 to waive the breaches and defaults existing under the
indenture governing the Debentures. The requisite number of
Debenture holders also consented to amend the indenture to make
certain changes in its financial covenants. The Company also
received a waiver from its senior lender for the cross-default
that existed under its credit agreement as a result of the
defaults under the indenture.
RECIPROCAL ALLIANCE: S&P Assigns R Rating Due to Receivership
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'R' financial
strength rating to the Reciprocal Alliance Risk Retention Group
after the Tennessee Department of Commerce and Insurance placed
the company, along with two affiliated insurers, Doctors
Insurance Reciprocal Risk Retention Group and American National
Lawyers Insurance Reciprocal RRG, under receivership on Jan. 31,
2003.
"Tennessee insurance regulators cited the insurers' hazardous
financial condition and inability to cover existing claims as
reasons behind the regulatory action," said Standard & Poor's
credit analyst Bart Bertero. The three Tennessee insurers were
under risk-sharing arrangements, using reinsurance with another
affiliate, Virginia-based Reciprocal of America, which was
placed under receivership by Virginia state regulators only two
days earlier.
Reciprocal Alliance, formed in 1995, is a professional liability
insurer that is licensed in Tennessee.
An insurer rated 'R' is under regulatory supervision owing to
its financial condition. During the pendency of the regulatory
supervision, the regulators may have the power to favor one
class of obligations over others or pay some obligations and not
others. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
RESOURCE AMERICA: Posts Weaker Operating Results for Fiscal Q1
--------------------------------------------------------------
Resource America, Inc., (NASDAQ:REXI) reported net income of
$1.8 million for the first fiscal quarter ended December 31,
2002 as compared to $2.2 million for the first fiscal quarter
ended December 31, 2001, a decrease of $408,000 (19%). Net
income per common share-diluted was $.10 for the first fiscal
quarter ended December 31, 2002, as compared to $.12 for the
first fiscal quarter ended December 31, 2001, a decrease of 17%.
Earnings before interest, taxes, depreciation, depletion and
amortization (EBITDDA) was $8.9 million for the first fiscal
quarter ended December 31, 2002 as compared to $10.5 million for
the first fiscal quarter ended December 31, 2001, a decrease of
$1.6 million (15%).
Resource America, Inc., is a proprietary asset management
company that uses industry specific expertise to generate and
administer investment opportunities for its own account and for
outside investors in the energy, real estate finance and
financial services industries.
Highlights for the First Fiscal Quarter
Ended December 31, 2002 and Recent Developments:
-- The Company's energy division closed its Public #11
drilling program which raised a record $31.1 million in
partnership subscriptions. At December 31, 2002, the Company's
drilling backlog was approximately 138 wells and deferred
revenue on drilling contracts was $22.2 million as compared to
$4.9 million at September 30, 2002. Due to the timing of the
raising of drilling capital, the Company reported fewer wells
drilled in the quarter ended December 31, 2002 as compared to
the quarter ended December 31, 2001.
-- The Company increased its managed assets to $1.6
billion at December 31, 2002 from $1.2 billion at September 30,
2002, an increase of 36%.
-- Average price realized for natural gas was $3.97 per
thousand cubic feet in the first fiscal quarter ended December
31, 2002 as compared to $3.39 per Mcf for the first fiscal
quarter ended December 31, 2001, an increase of $.58 (17%).
-- Natural gas revenues were $7.1 million in the first
fiscal quarter ended December 31, 2002 as compared to $6.4
million in the first fiscal quarter ended December 31, 2001, an
increase of $649,000 (10%).
-- The Company recognized a gain of $813,000 in resolving
a loan of an office building located in Philadelphia,
Pennsylvania for $5.0 million.
-- Sold 163,500 shares of RAIT Investment Trust (NYSE:RAS)
for $3.4 million, realizing a pre-tax gain of $969,000.
-- The Company repurchased 187,950 shares of its common
stock at an average price of $8.49 at a range of $7.80 and $8.99
for the first fiscal quarter ended December 31, 2002. From
January 1, 2003 through February 11, 2003, the Company
repurchased an additional 155,500 shares of its common stock at
an average price of $8.90 at a range of $8.16 and $9.15.
-- Filed registration statements on Forms S-4 and S-3 with
the Securities and Exchange Commission relating to a proposed
offer to exchange our senior notes due 2004 for a combination of
new notes and cash and the proposed issuance of $30.0 million of
new 12% senior notes due 2008.
-- In the quarter ending March 31, 2003, the Company
expects to close the second secured CDO issuance collateralized
by a pool of approximately $400.0 million of diversified trust
preferred securities. The first issuance collateralized by a
pool of approximately $330.0 million of diversified trust
preferred securities closed in November 2002. The Company is an
investor, the co-general partner and collateral manager of both
issuers. The Company is working on preparing further issuances.
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.
RICA FOODS: Fitch Places BB Currency Ratings on Watch Negative
--------------------------------------------------------------
Fitch Ratings has placed the 'BB' foreign and local currency
ratings of Rica Foods Inc., on Rating Watch Negative. The
ratings apply to Corporacion Pipasa's senior notes due 2005 and
Corporacion As de Oros' senior notes due 2005, jointly and
severally guaranteed by Rica Foods. Pipasa and As de Oros are
wholly owned subsidiaries of Rica Foods that operate in Costa
Rica.
The action follows the disclosure by Rica Foods in its Form 8-K
filed January 30, 2003 that the financial statements included in
its Form 10-K filed Jan. 13, 2003 contained financial errors and
that its client-auditor relationship with Deloitte & Touche S.A.
had ceased. Although the financial errors listed by Rica Foods
in its Form 8-K appear to be mainly related to the
classification of balance sheet items and do not appear to
trigger debt covenants or materially affect the cash flow
generation of the company, Fitch will maintain the ratings on
Rating Watch Negative until Rica Foods' financial statements are
audited and will subsequently review the ratings.
Rica Foods is the largest poultry producer and processor in
Costa Rica.
ROWECOM: Seeking Okay to Bring-In Duane Morris as Local Counsel
---------------------------------------------------------------
RoweCom, Inc., and its debtor-affiliates ask for permission from
the U.S. Bankruptcy Court for the District of Massachusetts to
employ Duane Morris LLP as their Local Co-Counsel.
The Debtors believe that they need to employ Duane Morris to
perform the legal services necessary to properly perform their
duties as debtors in possession. Concurrently, the Debtors are
also seeking authority to retain Kaye Scholer LLC as general
bankruptcy counsel. The Debtors explain that Duane Morris will
assist Kaye Scholer as local counsel.
In its capacity as Local Co-Counsel, Duane Morris will:
a. advise the Debtors of their rights, powers and duties as
debtors and debtors in possession continuing to operate
and manage their businesses and properties under chapter
11 of the Bankruptcy Code;
b. prepare on behalf of the Debtors all necessary and
appropriate applications, motions, draft orders, other
pleadings, notices, schedules and other documents, and
review all financial and other reports to be filed in
these Chapter 11 cases;
c. advise the Debtors concerning, and prepare responses to,
applications, motions, other pleadings, notices and
other papers that may be filed and served in these
Chapter 11 cases;
d. advise the Debtors with respect to, and assist in the
negotiation and documentation of, financing agreements,
debt and cash collateral orders and related
transactions;
e. review the nature and validity of any liens asserted
against the Debtors' property and advise the Debtors
concerning the enforceability of such liens;
f. advise the Debtors regarding their ability to initiate
actions to collect and recover property for the benefit
of their estates;
g. counsel the Debtors in connection with the formulation,
negotiation and promulgation of a plan or plans of
reorganization and related documents;
h. advise and assist the Debtors in connection with any
potential property dispositions;
i. advise the Debtors concerning executory contract and
unexpired lease assumptions, assignments and rejections
and lease restructurings and recharacterizations;
j. assist the Debtors in reviewing, estimating and
resolving claims asserted against the Debtors' estates;
k. commence and conduct any and all litigation necessary or
appropriate to assert rights held by the Debtors,
protect assets of the Debtors' Chapter 11 estates or
otherwise further the goal of completing the Debtors'
successful reorganization other than with respect to
matters with respect to which the Debtors may retain
special counsel;
l. provide general corporate, litigation and other
nonbankruptcy services for the Debtors as requested by
the Debtors; and
m. perform all other necessary or appropriate legal
services in connection with these Chapter 11 cases for
or on behalf of the Debtors, other than those matters
with respect to which the Debtors may retain special
counsel.
The Debtors, Duane Morris and Kaye Scholer will coordinate their
efforts and take steps to avoid any unreasonable duplication of
effort between law firms.
The Debtors delivered retainer fees totaling $115,000 to Duane
Morris in connection with the commencement and prosecution of
these cases. Duane Morris will bill the Debtors for its legal
services on an hourly basis:
Partners $275 to $625 per hour
Associates $210 to $420 per hour
Paralegals $ 85 to $255 per hour
The professionals in-charge of these cases are:
Jeffrey D. Sternklar $450 per hour
Marian B. Hand $300 per hour
Jennifer L. Hertz $270 per hour
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 in the U.S. Bankruptcy Court for
the District of Massachusetts Eastern Division (Bankr. 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. RoweCom has sued divine, Inc.,
to recover $73.7 million allegedly looted from the company prior
to the petition date.
RYERSON TULL: Weak Credit Protection Measures Spurs BB- Rating
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on metals processor and distributor Ryerson Tull Inc., to
'BB-' from 'BB' based on expectations that the current poor
operating environment and the company's weak credit protection
measures will continue.
The current outlook is stable. Chicago, Illinois-based Ryerson
has about $260 million in debt.
"The downgrade reflects Standard & Poor's assessment that the
challenging operating environment Ryerson has faced will
continue over the intermediate term and that poor credit
protection measures will continue,", said Standard & Poor's
credit analyst Paul Vastola. "The economy remains sluggish and
demand from Ryerson's key end markets, including machinery
manufacturers, metal fabricators, and construction-related
purchasers remains substantially below historical levels."
Standard & Poor's said that its ratings on Ryerson reflect the
company's decent business position in the metals processing and
distribution market, its moderate financial policy and fair
liquidity. Ryerson holds an estimated 10% market share of the
processing and distribution industry in the U.S., with about
$2.1 billion of revenues.
SALS 2002-2: S&P Cuts Class E Credit-Linked Notes Rating to BB-
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on two
tranches of SALS 2002-2's credit-linked notes due April 2007.
The rating actions reflect the valuation price of a previously
defaulted reference credit as well as credit deterioration in
the $1 billion pool of reference credits. The notional amount of
the reference pool will be reduced as a result of the defaults.
The ratings actions also reflect the credit quality of the
reference credits, the level of credit enhancement provided by
subordination, and UBS AG's ability to meet its payment
obligations as issuer of the notes.
RATINGS LOWERED
SALS 2002-2
Class Rating
To From
D BBB- A-
E BB- BBB-
SEA DREAM LEATHER: Files for Chapter 11 Relief in Richmond, Va.
---------------------------------------------------------------
Sea Dream Leather Company, a 12-store regional retail chain
selling leather apparel, related leather accessories and
specialty leather clothing, filed for Chapter 11 protection in
the U.S. Bankruptcy Court for the Eastern District of Virginia
in Richmond (Bankr. Case No. 03-31218-DOT).
At the time of filing, the Company listed $1.9 million in assets
and $988,748 in liabilities. Lynn L. Tavenner, Esq., and Paula
S. Beran, Esq., at Tavenner & Beran, PLC, represent the Company
in this case.
On Tuesday, Judge Douglas O. Tice, Jr., approved the Company's
request to conduct a going-out-of-business sales in six of its
stores, the Richmond Times-Dispatch reports. Now's the best
time to conduct those GOB sales, James C. Storie, the company's
president, explained to reporter Gregory J. Gilligan, because
leather clothing sells for higher prices when its cold outside.
SEA DREAM: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------
Lead Debtor: Sea Dream Leather Company
3302 West Broad Street
Richmond, Virginia 23230
aka Sea Dream
Bankruptcy Case No.: 03-31218
Type of Business: Retailer of leather apparel, related leather
accessories and specialty leather clothing.
Chapter 11 Petition Date: February 7, 2003
Court: Eastern District of Virginia (Richmond)
Judge: Douglas O. Tice Jr.
Debtor's Counsel: Lynn L. Tavenner, Esq.
Paula S. Beran, Esq.
Tavenner & Beran, PLC
1015 East Main Street, First Floor
Richmond, VA 23219
Tel: (804) 783-8300
Fax : 804-783-0178
Total Assets: $1,900,000
Total Debts: $988,748
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Trek Leather Inc. Trade Debt $76,672
Avirex Lt Trade Debt $55,407
Haddad Apparel Group Ltd. Trade Debt $47,022
G-III Licensing Division Trade Debt $44,490
Kenneth Cole Productions LP Trade Debt $41,245
Harlin Leather (F&T Trading) Trade Debt $36,648
NoHo Leather LLC Trade Debt $31,661
Durango Boot Trade Debt $31,389
Diba Trade Debt $29,671
JH Design Group Trade Debt $29,036
Adler Leather Sportswear Trade Debt $21,549
Pan United Inc. Trade Debt $18,744
The Whole Shebang Trade Debt $18,194
4661 Shopping Ctr Trade Debt $17,794
ID# 774661
Knickerbocker Prop Inc. III Trade Debt $15,996
Potomac Mills Operating Co. Trade Debt $15,470
Max Wiener & Co. Trade Debt $15,246
Winlit Trade Debt $14,090
Dolomite Trade Debt $13,720
MPC Trade Debt $13,307
SPINNAKER EXPLORATION: Cuts Working Capital Deficit to $6 Mill.
---------------------------------------------------------------
Spinnaker Exploration Company (NYSE: SKE) reported fourth
quarter 2002 earnings of $12.6 million, compared to fourth
quarter 2001 net income of $5.5 million. Fourth quarter 2002 net
income increased 130% over fourth quarter 2001 and 77% over
third quarter 2002 net income.
Spinnaker's record quarterly production of 16.3 billion cubic
feet of gas equivalent ("Bcfe") exceeded fourth quarter 2001
production of 12.9 Bcfe by 26% and third quarter 2002 production
of 14.8 Bcfe by 10%.
Fourth quarter 2002 net cash flow from operations before working
capital changes increased 91% to $58.8 million compared to
fourth quarter 2001 net cash flow from operations before working
capital changes of $30.7 million. Fourth quarter 2002 cash flow
from operations before working capital changes increased 35%
over third quarter 2002 cash flow from operations before working
capital changes of $43.5 million.
Fourth quarter 2002 revenues increased 74% to $67.0 million
compared to fourth quarter 2001 revenues of $38.6 million.
Fourth quarter 2002 revenues increased 30% over third quarter
2002 revenues of $51.6 million. The increase in revenues was due
to both higher production and average commodity prices in the
fourth quarter of 2002.
Fourth quarter 2002 realized prices averaged $4.02 per thousand
cubic feet of gas ("Mcf") and $28.56 per barrel of oil ("Bbl")
compared to fourth quarter 2001 average realized prices of $3.02
per Mcf and $19.43 per Bbl, representing an increase of 36% on
an equivalent basis. The realized average natural gas price was
negatively impacted by $0.21 per Mcf related to hedging
activities in the fourth quarter of 2002. Excluding the effects
of hedging activities, the fourth quarter 2002 natural gas price
averaged $4.23 per Mcf compared to the fourth quarter 2001
average price of $2.48 per Mcf.
Net income in 2002 was $31.6 million, compared to 2001 net
income of $66.2 million. Net cash flow from operations before
working capital changes in 2002 was $160.4 million compared to
2001 net cash flow from operations before working capital
changes of $189.2 million.
Revenues in 2002 were $188.3 million compared to revenues of
$210.4 million in 2001, a decrease of 10%. Production in 2002
decreased 3% to 51.4 Bcfe from 53.1 Bcfe in 2001. The decrease
in revenues was primarily attributable to a lower average
commodity price on an equivalent basis, offset in part by an
increase in net hedging income in 2002.
Realized prices in 2002 averaged $3.56 per Mcf and $26.39 per
Bbl compared to $3.96 per Mcf and $24.90 per Bbl in the same
period in 2001, representing a decrease of 8% on an equivalent
basis. The realized average natural gas price in 2002 was
positively impacted by $0.10 per Mcf related to hedging
activities. Excluding the effects of hedging activities, the
natural gas price averaged $3.46 per Mcf in 2002 compared to an
average price of $4.14 per Mcf in 2001, representing a decrease
of 16% on an equivalent basis.
Lease operating expenses were $0.36 per thousand cubic feet of
gas equivalent ("Mcfe") and $0.35 per Mcfe in the fourth quarter
and full year 2002, respectively. The depreciation, depletion
and amortization rate was $2.37 per Mcfe and $2.12 per Mcfe in
the fourth quarter and full year 2002, respectively. Costs
associated with unsuccessful wells were $9.6 million and $72.6
million in the fourth quarter and full year 2002, respectively.
In the fourth quarter of 2002, Spinnaker incurred lease
acquisition, exploration and development costs of approximately
$2.0 million, $25.1 million and $34.6 million, respectively, and
other property and equipment costs of $0.6 million. In 2002,
Spinnaker incurred lease acquisition, exploration and
development costs of approximately $39.8 million, $163.3 million
and $139.4 million, respectively, and other property and
equipment costs of $7.2 million.
Income tax and cash tax rates in 2002 were 36% and 0%,
respectively.
At December 31, 2002, the Company's balance sheet shows that
total current liabilities exceeded total current assets by about
$6 million.
Spinnaker Exploration Company is an independent energy company
engaged in the exploration, development and production of
natural gas and oil in the U.S. Gulf of Mexico. To learn more
about Spinnaker, visit http://www.spinnakerexploration.com
STANDARD AUTOMOTIVE: Canadian Asset Auction Set for Mar. 5, 2003
----------------------------------------------------------------
Standard Automotive Corporation and Critical Components
Corporation are selling substantially all the assets of their
Canadian subsidiaries Arell Machining, Ltd. and Airborne Gear &
Machine Ltd., to Dover Corporation (Canada) Limited for
approximately $14 million. The sale is subject to higher and
better offers.
The assets to be sold, located in Montreal, Quebec, are used in
the business of manufacturing a broad range of products for
aerospace engines, landing gear, and structural airframe
assemblies.
Qualified competing offers must be submitted by 5:00 p.m. on
February 26, 2003. If qualified bids are received, an auction
will be conducted at the U.S. Bankruptcy Court in Manhattan at
2:00 p.m. on March 5, 2003.
Additional information regarding the Assets, the Auction and
Overbid Procedures, and bid pre-qualification requirements may
be obtained from:
Jeffrey R. Manning
Legg Mason Wood Walker, Inc.
100 Light Street
Baltimore, Maryland 21202
Tel: 410-454-5395
-and-
Larry D. Henin, Esq.
Anderson Kill & Olick, Esq.
1251 Avenue of the Americas
New York, NY 10020
Tel: 212-278-1000
Standard Automotive Corporation manufactures and distributes
trailer chassis for use primarily in the transport of shipping
containers and a broad line of specialized dump truck bodies,
dump trailers, truck suspensions and other related assemblies.
The Debtors filed for Chapter 11 protection on March 19, 2002 in
the U.S. Bankruptcy Court for the Southern District of New York
(Bankr. Case No. 02-11259). J. Andrew Rahl, Jr., Esq., at
Anderson Kill & Olick, P.C., serves as lead counsel to the
Debtor. When Standard Automotive filed for protection from its
creditors, it reported total assets of about $114 million and
total debts of $125 million.
SUN WORLD: Look for Schedules and Statements by March 3, 2003
-------------------------------------------------------------
The U.S. Bankruptcy Court for the Central District of California
gave Sun World International, Inc., and its debtor-affiliates an
extension of time within which they must file their schedules of
assets and liabilities, statements of financial affairs and
lists of executory contracts and unexpired leases required under
11 U.S.C. Sec. 521(1). The Debtors have until March 3, 2003 to
file these documents.
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.
SWIFT ENERGY: Dec. 31 Working Capital Deficit Stands at $17MM
-------------------------------------------------------------
Swift Energy Company (NYSE:SFY) (PCX:SFY) announced that net
income for the fourth quarter of 2002 totaled $3.4 million
compared to a loss of $67.1 million in the fourth quarter of
2001. Net income for the full year 2002 totaled $11.9 million
compared to a $22.3 million loss for the full year 2001.
Production for 2002 increased to an annual record of 49.8
billion cubic feet equivalent ("Bcfe"), an increase of 11% from
2001 production of 44.8 Bcfe. Production for the fourth quarter
of 2002 was 12.6 Bcfe, which was a 10% increase from the 11.5
Bcfe produced in the fourth quarter of 2001, and a 3% increase
from the 12.2 Bcfe produced in the preceding third quarter of
2002. Fourth quarter 2002 production included 7.6 Bcfe of
domestic production and 5.0 Bcfe produced in New Zealand.
The Company increased proved reserves by 16% to 749 Bcfe at
year-end 2002 and replaced 308% of 2002 production with a
finding and development cost of $1.02 per thousand cubic feet
equivalent ("Mcfe"). Domestic proved reserves increased by 9% to
594 Bcfe, replacing 246% of domestic production for the year
with a finding and development cost of $0.80 per Mcfe. New
Zealand proved reserves increased by 53% to 155 Bcfe, replacing
444% of 2002 New Zealand production at a finding and development
cost of $1.28 per Mcfe.
Terry Swift, President and CEO, noted that, "Our 2002 financial
and operational results have positioned Swift to implement a
multi-year plan focused on value creation. We plan to build upon
our 2002 successes this year, particularly in Lake Washington
and New Zealand. We have significantly improved the underlying
reserve and production characteristics of the Company with the
transition that occurred domestically and with the addition of
the TAWN assets in New Zealand. In Lake Washington, we plan to
double our production levels from those seen at the end of 2002.
New Zealand has become a self-sufficient operating entity with
significant production and cash flow. Company-wide, we have a
higher quality reserve base with more geologic and geographical
diversity. Our percentage of proved developed reserves has
increased to 60%. We are very excited about the drilling and
production opportunities that lie before us. We are equally
convinced of a long-term positive shift in the pricing
fundamentals of the oil and gas commodity markets."
Revenues and Expenses
Revenues for the fourth quarter of 2002 increased 45% to $40.5
million from the $27.9 million received in the fourth quarter of
2001 due to higher commodity prices and increased levels of
production. Cash flow from operations, before changes in working
capital, increased 57% to $19.3 million from the $12.3 million
received in the fourth quarter of 2001.
Revenues for the full year 2002 totaled $150.0 million, down 18%
from $183.8 million in 2001, and cash flow from operations,
before changes in working capital, totaled $67.6 million for
2002, a decline of 45% from $124.0 million in the prior year.
Revenues and earnings were affected by the overall lower
commodity prices received in 2002 and the planned transition
that occurred during the year from high deliverability
production to longer life production to improve the Company's
reserves and production profile. Revenues for 2002 included a
gain of $7.3 million on the sale of the Company's interests in
the Samburg project in Western Siberia, Russia that occurred in
the first quarter of the year.
Interest expense increased in 2002, resulting from the Company's
successful second quarter issuance of $200 million of senior
subordinated debt, which greatly increased the financial
flexibility of the Company. Also, general and administrative
costs increased as expected due to the expansion of management
and employees in New Zealand operations and the final
liquidation of the Company's managed public partnerships.
Depreciation, depletion and amortization expenses improved 6%,
and lease operating expenses were commensurate with production
increases.
Reserves
The Company made significant strides in 2002 improving the
quality and the quantity of its reserves. Year-end 2002 proved
reserves of 749 Bcfe were 44% natural gas, 42% crude oil and 14%
natural gas liquids ("NGLs"). Proved developed reserves
increased to 60% of total reserves in 2002, up from 50% in the
previous year. The majority of proved undeveloped reserves at
year-end 2002 is located in the AWP Olmos area (11% of total
reserves) and in the Lake Washington area (17% of total
reserves), both of which are characterized as long reserve life
fields.
Domestic reserves increased at year-end to 594 Bcfe, driven
mainly by the reserves increase in the Lake Washington Field,
which increased 162% to 190 Bcfe (31.7 million barrels) up from
72.5 Bcfe (12.1 million barrels) at year-end 2001. Domestic
reserves at year-end were 44% crude oil, 41% natural gas and 15%
NGLs. Domestic reserves, making up 79% of total reserves at
year-end 2002, were those in the AWP Olmos area (30%), Lake
Washington area (25%), Masters Creek area (10%), Brookeland area
(6%) and other domestic properties (8%).
In New Zealand, 2002 year-end proved reserves totaled 155 Bcfe,
90% of which is categorized as proved developed reserves. New
Zealand reserves constitute 21% of total Company reserves and
consist 56% of natural gas, 34% crude oil and 10% NGLs. The 2002
increase in reserves was primarily attributable to the
acquisition of the TAWN fields in early 2002. The year-end
reserves include a downward revision in the reserves located in
the Rimu/Kauri area of approximately 27 Bcfe. A recent
independent study has concluded that formation damage around
certain well bores has reduced deliverability from wells
completed in the Tariki Sand in the Rimu/Kauri area.
Production & Pricing
For 2002, total production increased 11% to 49.8 Bcfe from 44.8
Bcfe in 2001. New Zealand operations began commercial production
in 2002 with the initiation of production from the Rimu/Kauri
area and the acquisition of the TAWN properties. New Zealand
accounted for 31% of overall corporate production with 15.5 Bcfe
produced in 2002. Domestically, production decreased as planned
as the Company changed the allocation of capital away from high-
deliverability natural gas areas such as the Austin Chalk and
focused it toward the development of longer life oil reserves in
the Lake Washington area. This transition saw domestic
production decline in 2002 by 23% to 34.3 Bcfe from 44.3 Bcfe in
2001. Fourth quarter 2002 domestic production of 7.6 Bcfe
decreased 6% sequentially from the 8.1 Bcfe produced in the
third quarter in 2002, however, current guidance provided by the
Company indicates that first quarter domestic production in 2003
will increase by at least 5% sequentially to between 8.0 to 8.5
Bcfe. Total fourth quarter production in 2002 of 12.6 Bcfe
increased 10% from the 11.5 Bcfe produced in the fourth quarter
of 2001 and increased 3% sequentially from third quarter
production in 2002.
In 2002, the Company saw substantially lower average natural gas
prices of $3.01 per thousand cubic feet ("Mcf") domestically, a
decline of 29% from the $4.23 average per Mcf in 2001.
Meanwhile, average domestic crude oil prices remained relatively
flat at $24.57 per barrel in 2002 compared to $24.64 per barrel
in 2001. Prices for NGLs domestically averaged $13.20 per barrel
in 2002, a 5% increase over the 2001 NGL price. In New Zealand,
the Company received an average natural gas price of $1.32 per
Mcf under the Company's long-term reserve-based contracts. Also
in New Zealand, the Company's McKee blend crude oil averaged
$24.31 per barrel and the Company's NGL contracts saw an average
price of $11.06 per barrel for the year 2002. New Zealand
natural gas and the NGL price contracts are denominated in New
Zealand dollars, which has significantly strengthened during
2002 as it relates to the US dollar. The currency exchange rate
increased to approximately 0.53 New Zealand dollars to one U. S.
dollar at the end of 2002 compared to approximately 0.42 per one
U. S. dollar at the end of 2001 (a 26% increase in value).
In the fourth quarter, the Company realized an aggregate global
average price of $3.15 per Mcfe, an increase of 30% from fourth
quarter 2001 prices, when the price averaged $2.43 per Mcfe.
Domestically, the Company realized an aggregate average price of
$3.93 per Mcfe, an increase of 62% over the $2.43 seen in the
fourth quarter of 2001. In New Zealand, the Company received an
aggregate average price of $1.97 per Mcfe for the fourth quarter
in 2002.
Operations Update
Domestically, the Company has drilled five additional wells in
the Lake Washington area since the last update provided on
January 21, 2003, consisting of two successful wells where pipe
had been set and three dry holes that were plugged. The
completion rig now operating in the Lake Washington Field has
recently completed one saltwater disposal well, as well as two
additional oil completions. The Company also has two drilling
rigs operating in the area, and it is anticipated that they will
continue operations throughout the first quarter of 2003 as part
of the Company's 50 to 60 well Lake Washington drilling program
in 2003. The drilling of a series of three wells in the AWP
Olmos area will commence later this month. Additionally, one
development well, the Bego #1 (61% working interest) in Goliad
County, Texas, will spud in March, targeting the Wilcox sands.
In New Zealand, production from the TAWN and Rimu/Kauri areas
has continued as expected, averaging approximately 55 million
cubic feet equivalent per day during January 2003. The Company
has several operations planned in the first half of 2003 in the
Rimu/Kauri area, including a CO2 injection in the Tariki Sand in
the Rimu-A2A well, hydraulic fracturing of the Kauri Sand in the
Kauri-A4 well and the drilling of the Kauri-F1 well, targeting
the Manutahi Sand.
Hedges
Since the last update on January 21, 2003, the Company has
continued to enter into additional price risk management
transactions. The Company recently purchased a floor of $26.25
per barrel for 200,000 barrels for April 2003. Additionally, the
Company purchased participating cashless collars for 30,000
barrels per month during the second quarter of 2003 with a floor
price of $25.00 per barrel and a ceiling price of $32.42 per
barrel. The Company will participate in 60% of any prices
received above this ceiling. The Company also purchased natural
gas floors for 100,000 MMBtu per month from April through and
including October 2003 at a floor price of $4.50 per MMBtu.
As a result of the above mentioned and previously reported
transactions, the Company has entered into hedges covering
approximately 65-70 % of the Company's expected total crude oil
production in the first quarter and 45-50 % of expected total
crude oil production in the second quarter. Similarly, in
regards to domestic natural gas, the Company has now protected
approximately 40-45 % of its expected natural gas production in
the first quarter, 55-60 % in the second quarter, 35-40 % in the
third quarter, and 10-15% in the fourth quarter.
Swift Energy now maintains all its previously announced price
risk management information (hedge positions) on its guidance
page on the Swift Energy Web site at http://www.swiftenergy.com
At December 31, 2002, the Company's balance sheet shows that
total current liabilities exceeded total current assets by about
$17 million.
Guidance
The Company has reiterated its guidance that was released last
month in conjunction with a series of analyst and investor
meetings beginning January 21, 2003. The Company would also like
to note that the costs listed do not include the effect of FASB
143 that requires implementation in 2003, accounting for the
liability of plugging and abandonment of well bores.
Swift Energy Company engages in developing, exploring,
acquiring, and operating oil and gas properties, with a focus on
onshore and inland waters oil and natural gas reserves in Texas
and Louisiana and onshore oil and natural gas reserves in New
Zealand. Founded in 1979 with headquarters in Houston, Texas,
the Company has consistently grown its proved oil and gas
reserves, production, and cash flow through a disciplined
program of acquisitions and drilling, while maintaining a strong
financial position.
TEEKAY SHIPPING: S&P Rates $125M Sub. Unsec. Equity Units at BB-
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB-' rating to
Teekay Shipping Corp.'s proposed $125 million subordinated
unsecured Premium Equity Participating Security Units (equity
units), a drawdown from Teekay's $500 million Rule 415 shelf
registration. The lower rating on the equity units reflects the
subordinated nature of the obligation. Standard & Poor's
affirmed its 'BB+' corporate credit rating on the company. The
outlook is stable.
"Standard & Poor's considers mismatched mandatory convertibles,
such as these equity units, as a package of two distinct
securities--medium-term notes, which are viewed as debt, and a
forward contract for the issuance of common stock," said
Standard & Poor's credit analyst Philip Baggaley. "The rating on
the unit applies to the company's obligation to service the debt
component, as well as its obligation to issue common shares
under the forward contract," the credit analyst continued. The
rating does not pertain to the safety of principal. The units'
value depends on the market value of the company's common
shares-and is not addressed by the credit rating.
Vancouver, British Columbia-based Teekay Shipping also announced
its preliminary 2002 results, with revenues of $544 million and
net income of $53 million, compared with 2001 results of $790
million in revenues and $337 million in net income. The
decreased revenue and earnings were primarily due to a somewhat
stronger tanker market in 2001 compared with 2002. As of Sept.
30, 2002, the company had approximately $1.0 billion of debt
outstanding with lease-adjusted debt to capital of 42%. The
subsequent $800 million acquisition of Statoil ASA's shipping
subsidiary, Navion ASA, resulted in an increase in lease-
adjusted debt to capital to approximately 56%. The $125 million
proceeds will be used to repay existing revolver debt.
The corporate credit rating on Teekay reflects the company's
favorable business position as the leading midsize Aframax
crude-oil tanker operator in the Indo-Pacific Basin, its strong
market share in the Atlantic-Aframax and North-Sea shuttle
tanker markets, and its fairly conservative financial policies.
These factors are offset by significant, but carefully managed,
exposure to the volatile tanker spot markets and an active
acquisition program.
Teekay's fleet, including the Navion ASA acquisition, which is
expected to close in the second quarter of 2003, consists of 136
vessels. The company's vessel replacement and growth program
continues with 11 ships under construction--six Aframax tankers,
three Suezmax tankers, and two shuttle tankers. The company's
Aframax and shuttle tanker fleets, comprised of 63 and 39
vessels, respectively, are significantly larger than those of
the next comparable competitors.
Tanker rates declined in the second half of 2001, and most of
2002, due to reduced global demand for oil and general economic
weakness. Rates increased dramatically late in the fourth
quarter of 2002 and have continued at strong levels in the first
quarter of 2003 resulting from a "normal" winter, war premiums
associated with a potential conflict with Iraq, and an extension
of transit time to supply North America due to the oil company
strike in Venezuela. Additional rate increases and long-term
charter contracts for quality modern tankers are possible due to
environmental concerns after the sinking of the tanker Prestige
off the coast of Spain. The global Aframax and Suezmax fleets
are expected to increase slightly over the next few years, since
the delivery schedule represents a somewhat higher percentage of
the existing fleet compared with the capacity of ships over 20
years old that will likely be scrapped.
TOKHEIM: First Reserve Pitches Best Bid for No. American Assets
---------------------------------------------------------------
First Reserve Corporation and Dresser, Inc., announced that a
subsidiary of First Reserve tendered a successful auction bid
for the North American gasoline dispenser manufacturing and
point-of-sale systems assets of Tokheim Corporation, in an
auction conducted pursuant to a bidding procedures order issued
by the United States Bankruptcy Court for the District of
Delaware. The auction took place on February 7th and 8th, 2003.
The bid is subject to approval of the bankruptcy court at a
hearing that will take place on February 25, 2003. The completed
transaction also is subject to other customary conditions.
As announced earlier, First Reserve Corporation intends to
assign the right to acquire the Tokheim assets to Dresser, Inc.,
one of First Reserve's portfolio companies. Upon completion of
the transaction, the Tokheim assets will become part of Dresser
Wayne, a business unit of Dresser, Inc.
First Reserve Corporation is a Greenwich, Connecticut-based
private equity investor specializing in the energy industry.
First Reserve is the largest shareholder of Pride International,
Dresser, Inc., Chicago Bridge & Iron, and Superior Energy
Services.
Tokheim Corporation manufactures and services electronic and
mechanical petroleum dispensing systems. These systems include
petroleum dispensers and pumps, retail automation systems (such
as point-of-sale systems), dispenser payment or "pay-at-the-
pump" terminals, replacement parts, and upgrade kits.
Dresser Wayne, a business unit of Dresser, Inc., is a leading
supplier of integrated retail solutions to the global petroleum
and convenience store industries. These integrated retail
solutions include point-of-sale systems, fuel dispensers, and
after-sale support services.
Headquartered in Dallas, Texas, Dresser, Inc., is a worldwide
leader in the design, manufacture and marketing of highly
engineered equipment and services sold primarily to customers in
the flow control, measurement systems, and power systems
segments of the energy industry. Dresser has a widely
distributed global presence, with over 7,500 employees and a
sales presence in over 100 countries worldwide. The company's
Web site can be accessed at http://www.dresser.com
TRENWICK GROUP: Will Publish Fourth Quarter Results on Feb. 20
--------------------------------------------------------------
Trenwick Group Ltd., (NYSE: TWK - news) will conduct an
investment community conference call on Friday, February 21,
2002 at 11:00 a.m. EST to discuss its financial results for the
fourth quarter, as well as the company's outlook.
Trenwick Group Ltd., will release the results after the closing
of the market on Thursday, February 20, 2003.
The conference call will include remarks by W. Marston Becker,
Acting Chairman and Acting Chief Executive Officer and Alan L.
Hunte, Executive Vice President and Chief Financial Officer.
Details for the live webcast of this call are available on the
Trenwick Group Ltd. Web site at http://www.Trenwick.com In
addition, the site will contain details for the retrieval of an
archived copy of the webcast together with the results release
and supplemental financial information.
People not able to access the Internet may access the conference
call by dialing (800) 633-8634 (domestic) and (609) 450-1023
(international) and ask to be connected to the Trenwick Earnings
Release call.
A replay of the call will be available until 5:00 p.m EST March
6, 2003. To access the replay, please call (800) 835-2663
(domestic) or (609) 896-8185 (international) and ask for the
Trenwick Earnings Release call.
If you have any questions, or wish to receive a hard copy of the
supplemental financial information, please contact Investor
Relations at (441) 292-3339.
Trenwick is a Bermuda-based specialty insurance and reinsurance
underwriting organization with two principal businesses
operating through its subsidiaries located in the United States,
the United Kingdom and Bermuda. Trenwick's reinsurance business
provides treaty reinsurance to insurers of property and casualty
risks from offices in the United States and Bermuda. Trenwick's
operations at Lloyd's of London underwrite specialty insurance
as well as treaty and facultative reinsurance on a worldwide
basis.
As previously reported in Troubled Company Reporter, Fitch
Ratings lowered its long-term rating and senior debt ratings on
Trenwick Group. Ltd., and its subsidiaries, to 'C' from 'CC'.
Fitch's ratings on Trenwick's capital securities and preferred
stock remain 'C'.
Fitch's rating action followed Trenwick's recent announcement
that it was taking a $107 million reserve charge. Trenwick has
$75 million of senior debt outstanding due April 1, 2003.
UNIFAB INT'L: Fails to Maintain Nasdaq SmallCap Listing Criteria
----------------------------------------------------------------
UNIFAB International, Inc., (NASDAQSC: UFAEC) reports that it's
common stock may be delisted from the Nasdaq SmallCap Market if
it is unable to comply with certain exceptions to the listing
requirements previously granted to the Company by Nasdaq.
The first of the exceptions regards the $1.00 minimum bid price
listing requirement. As of Wednesday, a "C" has been added to
the end of the Company's trading symbol as indication that the
Company does not currently meet the Minimum Bid Price required
to maintain its listing on the SmallCap Market. However, based
upon modifications to the bid price rules proposed by Nasdaq's
Board of Directors, the Company has until August 8, 2003 to
comply with the $1.00 minimum bid price requirement. If by that
date the closing price of the Company's common stock meets or
exceeds the $1.00 minimum bid price for a period of not less
than 10 trading days, then the "C" will be removed from the
trading symbol.
The second of the exceptions regards the Company's failure to
file its report on Form 10-Q for the period ending September 30,
2002. Because of this filing delinquency, the Company's common
stock was subject to delisting from the SmallCap Market, as a
result of which an "E" was added to the end of the Company's
trading symbol on November 22, 2002.
Subsequent to a hearing before a Nasdaq Listing Qualifications
Panel, the Company was granted an extension through February 13,
2003 to file the September Form 10-Q. The Company filed its
September Form 10-Q on that date.
UNIFAB International, Inc., whose June 30, 2002 balance sheet
shows a working capital deficit of about $19 million, is a
custom fabricator of topside facilities, equipment modules and
other structures used in the development and production of oil
and gas reserves. In addition, the Company designs and
manufactures specialized process systems, refurbishes and
retrofits existing jackets and decks, provides design, repair,
refurbishment and conversion services for oil and gas drilling
rigs and performs offshore piping hook-up and platform
maintenance services.
UNITED AIRLINES: Ad Hoc Committee Seeking Adequate Protection
-------------------------------------------------------------
The Ad Hoc Committee of Noteholders of UAL Corporation and its
debtor-affiliates currently consists of:
a) AIG Life Insurance Company and American General Life &
Accident Insurance Company;
b) American Express Financial Advisors;
c) Angelo, Gordon & Co.;
d) Barclays Capital Asset Management;
e) Bracebridge Capital
f) Calvert Asset Management Co.;
g) CIGNA Investments Inc.;
h) Conseco Capital Management Inc.;
i) Cypress Management;
j) Denver Investment Advisors;
k) Equitable Life Assurance Society of the U.S.;
l) Great-West Life & Annuity Insurance Company;
m) Jefferson-Pilot Life Insurance Company, Jefferson Pilot
Financial Insurance Company and Jefferson Pilot
LifeAmerica Insurance Company;
n) John Hancock Life Insurance Company;
o) Mass Mutual;
p) Metropolitan Life Insurance Company;
q) Ore Hill Partners;
r) Pacific Life Insurance Company;
s) Pacific Investment Management Company;
t) PPM America Inc.;
u) Principal Life Insurance Company;
v) Resurgence Asset Management;
w) State Farm Insurance Companies;
x) Sun Life Financial
y) Taconic Capital Advisors; and
z) Teachers Insurance and Annuity Association of America.
These committee members are holders of Equipment Trust
Certificates and Enhanced Equipment Trust Certificates. The
Noteholders facilitated mortgages and leases so that the Debtors
can own or lease aircraft.
David H. Botter, Esq., at Akin, Gump, Hauer & Strauss, tells the
Court that the Debtors failed to make a $375,000,000 payment
that was due on December 2, 2002. In fact, the Debtors have not
made any postpetition payments. The Debtors continue to use the
Aircraft, diminishing its value. The Ad Hoc Committee asks the
Court to enjoin the Debtors from using the Aircraft unless and
until they can provide the Noteholders with adequate protection.
Mr. Botter argues that the Noteholders are entitled to exercise
their rights and remedies, which were triggered by the
bankruptcy filing, to recover their collateral. Since the
Noteholders may be prevented from doing so by the automatic
stay, they request adequate protection of their Leased
Equipment, which is in the Debtors' control and possession,
until they are able to recover their collateral.
Mr. Botter relates that in exchange for the cash that the
Debtors used to finance the Aircraft, the Noteholders received a
first priority mortgage on, and a first priority security
interest in, the Owned Equipment.
The Noteholders point out that the continued use of the Aircraft
brings it closer to expensive mandatory maintenance inspection.
Commercial aircraft must undergo a C check, which evaluates its
integrity and condition. A C check can cost over $1,000,000.
According to Mr. Botter, some Equipment is not being used.
Instead, it is parked in the desert without receiving regular
maintenance required to keep it in working condition. The
Noteholders fear that parts will be removed, swapped or replaced
with other parts that may not be subject to their security
interests.
If the Debtors are unable to provide them with adequate
protection to guard against further diminution in value, the Ad
Hoc Committee asks the Court grant the Noteholders a super-
priority administrative claim, higher in priority than all other
administrative claims.
Debtors Object
James H.M. Sprayregen, Esq., at Kirkland & Ellis, explains that
the overwhelming majority of aircraft financings were on an
individual basis, with independent documentation and structures.
Each transaction was painstakingly structured, secured and
documented to maximize the value and utility of the aircraft to
the Debtors. Each EETC has at least four, and in some cases six
tranches of debt. Each tranche of debt in an EETC is
subordinated to junior tranches of debt.
Mr. Sprayregen asserts that the Ad Hoc Committee lacks
contractual standing to seek adequate protection. There is no
verification that the members of this so-called Ad Hoc Committee
are the proper parties to represent the interests of any of the
Financed Aircraft Trusts at issue. The Trustee -- and not any
individual certificate holder -- is the proper party to
represent each of the Trusts.
In addition, the Ad Hoc Committee fails to comply with Rule 2019
of the Federal Rules of Bankruptcy Procedure, by not providing
many of the facts necessary for the Debtors to identify the
interests it seeks to have adequately protected. To represent
more than one creditor, Rule 2019(a) mandates that this
information should be disclosed:
a) names and addresses of creditor or equity holder;
b) nature and amount of claim and time of acquisition;
c) pertinent facts and circumstances connected to the
employment of the entity or indenture trustee; and
d) -- the organization or formation of the committee,
-- the appearance of an indenture trustee,
-- the amounts of claims or interests owned,
-- the members of the committee or indenture trustee,
-- the time acquired, and
-- the amounts paid and any sales or dispositions.
In addition, the Ad Hoc Committee must file a document
confirming that it is empowered to act on behalf of other
similarly situated creditors.
Mr. Sprayregen notes that the Ad Hoc Committee's Rule 2019
Statement was entirely deficient in numerous areas.
Moreover, the Ad Hoc Committee failed to disclose the Trust that
each member holds an interest in. Absent this disclosure, the
Debtors are not aware which aircraft and engines adequate
protection is sought. For example, the 1997-1 EETC has four
tranches for an original principal amount exceeding
$673,000,000. Each tranche is subordinated to the other with the
certificates secured directly or indirectly by 14 aircraft. The
D tranche is subordinate to the right of the C tranche. The C
tranche is subordinate to the rights of the B tranche. And the
B tranche is subordinate to the rights of the A tranche. The
Debtors need to know specific certificates held by the Ad Hoc
Committee's members to determine what interests, if any, are to
be provided adequate protection. Certain members of the Ad Hoc
Committee may hold certificates that are so deeply subordinated,
they may have no interest that needs adequate protection, while
the opposite may be true for holders of less-subordinated
certificates.
JPMorgan & Citigroup Don't Like It Either
JPMorgan Chase Bank and Citicorp USA, as co-administrative
agents for the DIP Lenders, object to the Ad Hoc Committee's
request to the extent the Noteholders seek adequate protection
in the form of an administrative priority claim, which is either
pari passu with or senior to, the Superpriority Claims granted
to the DIP Lenders pursuant to the Final DIP Order.
"The DIP Order clearly states that as long as the DIP
Obligations remain outstanding, no liens or claims shall be
granted which are pari passu with or senior to the liens granted
to the DIP Lenders," Jay Teitelbaum, Esq., at Morgan, Lewis &
Bockius, in New York City, says. Under the DIP Credit
Agreement, granting a claim that is senior to or pari passu with
the DIP Lenders' claims constitutes an event of default.
The Agents asserts that any claim granted to the Ad Hoc
Committee must be junior to the Superpriority Claims granted to
the DIP Lenders. (United Airlines Bankruptcy News, Issue No. 8;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
United Airlines' 10.670% bonds due 2004 (UAL04USR1) are trading
at about 4 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL04USR1for
real-time bond pricing.
USEC: Seeks Regulatory Nod to Operate Centrifuge Demo Facility
--------------------------------------------------------------
Taking another key step in its plan to deploy the world's most
advanced uranium enrichment technology, USEC Inc., (NYSE:USU)
submitted a license application to the U.S. Nuclear Regulatory
Commission to construct and operate the American Centrifuge
Demonstration Facility at its Portsmouth plant in Piketon, Ohio.
Scheduled to begin operation in 2005, the demonstration facility
will contain a lead cascade of up to 240 centrifuge machines,
the first new centrifuge enrichment machines in the United
States. The lead cascade is the basic building block of a
commercial enrichment plant. It will yield cost, schedule and
performance data before USEC begins construction of a $1 billion
to $1.5 billion commercial plant later in the decade.
"Submission of this license application is an important event
for USEC, the U.S. nuclear industry and power plant operators
around the world," said Dennis Spurgeon, USEC Executive Vice
President and Chief Operating Officer. "We have delivered our
blueprint for operating the American Centrifuge, a technology
that will help ensure our position as the global leader in
uranium enrichment."
USEC's design will leverage more than two decades of U.S.
Department of Energy (DOE) research and development. In 1985,
DOE centrifuge machines demonstrated a production rate for
enriching uranium several times that of any commercial
centrifuge operating today. The American Centrifuge employs this
same proven technology, while improving efficiency and reducing
costs through the use of state-of-the-art materials, control
systems and manufacturing processes.
USEC is submitting its application more than two months ahead of
schedule. The NRC will perform an extensive safety and
environmental review.
"We are delivering on our commitment to our customers as well as
to America's energy security and national security interests.
Our new enrichment technology will provide a reliable and
competitive fuel source for the world's nuclear power plants,"
Spurgeon said.
USEC has also begun testing key centrifuge components at the
Company's facilities in Oak Ridge, Tennessee. Early results are
positive, and tests will continue for several months.
The American Centrifuge Demonstration Facility will be located
in the existing centrifuge facilities at USEC's Portsmouth
plant, where DOE operated hundreds of centrifuge machines in the
1980s. These existing buildings have been well maintained and
provide a strong infrastructure. The facility is expected to
employ approximately 50 people.
USEC will make a decision on siting the commercial plant in
2004. The Company expects to build the plant either at
Portsmouth or in Paducah, Kentucky, where it operates a uranium
enrichment plant. The new plant will provide several hundred
manufacturing and construction jobs in addition to approximately
500 operating jobs.
As previously reported, Standard & Poor's affirmed its double-
'B' corporate credit rating on uranium processor USEC Inc. The
outlook remains negative.
At the same time, Standard & Poor's assigned its triple-'B'-
minus bank loan rating, to the primary operating subsidiary of
USEC, United States Enrichment Corp's new $150 million senior
secured revolving credit facility due Sept. 2005. The bank loan
rating is two notches higher than the corporate credit rating.
Standard & Poor's also lowered its unsecured debt rating on USEC
to double-'B'-minus from double-'B', reflecting the
disadvantaged position the unsecured debt now holds in the
capital structure due to security granted to the bank facility.
Bethesda, Maryland-based USEC has $500 million in total debt.
WACHOVIA BANK: Fitch Rates Six Note Classes at Lower-B Level
------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust, series 2003-C3,
commercial mortgage pass-through certificates are rated by Fitch
Ratings as follows:
-- $259,086,000 class A-1 'AAA';
-- $477,837,000 class A-2 'AAA';
-- $937,264,149 class IO-I 'AAA';
-- $890,430,000 class IO-II 'AAA';
-- $36,319,000 class B 'AA';
-- $12,888,000 class C 'AA-';
-- $25,775,000 class D 'A';
-- $12,887,000 class E 'A-';
-- $10,544,000 class F 'BBB+';
-- $12,888,000 class G 'BBB';
-- $12,887,000 class H 'BBB-';
-- $22,260,000 class J 'BB+';
-- $9,373,000 class K 'BB';
-- $7,029,000 class L 'BB-';
-- $2,343,000 class M 'B+';
-- $7,030,000 class N 'B';
-- $4,686,000 class O 'B-';
-- $23,432,149 class P 'NR'.
Classes A-1, A-2, B, C, D, and E are offered publicly, while
classes IO-I, IO-II, F, G, H, J, K, L, M, N, O, and P are
privately placed pursuant to rule 144A of the Securities Act of
1933. The certificates represent beneficial ownership interest
in the trust, primary assets of which are 130 fixed-rate loans
having an aggregate principal balance of approximately
$937,264,149 as of the cutoff date.
WHEELING-PITTSBURGH: Committees Win Approval to Hire Kroll Zolfo
----------------------------------------------------------------
The Official Committee of Unsecured Noteholders of Pittsburgh-
Canfield Corporation and the Official Committee of Unsecured
Trade Creditors of Pittsburgh-Canfield Corporation obtained
permission from the Court to employ and retain, nunc pro tunc to
September 6, 2002, of Kroll Zolfo Cooper LLC, as successors in
interest to Zolfo Cooper LLC. Kroll will serve as the
Committees' bankruptcy consultants and special financial
advisors.
As previously reported, in January 2001 the Committees filed a
joint application seeking retention of Zolfo Cooper LLC to
provide special financial advisory and bankruptcy consulting
services to the Committees, which was granted. Since
December 27, 2000, Zolfo Cooper LLC has been providing the
Committees with advisory and consulting services.
In September 2002, Zolfo Cooper LLC closed on a transaction
whereby all of the membership interests of Zolfo Cooper
Management LLC, and Zolfo Cooper Capital LLC, were transferred
to Zolfo Cooper LLC. The members of Zolfo Cooper LLC then
transferred all of the membership interests in that company to
Kroll, Inc., a publicly traded Delaware corporation, as the
result of which Zolfo Cooper LLC is a wholly-owned, first-tier
subsidiary of Kroll, Inc.
In addition, on the same date, 100% of the issued and
outstanding shares in Zolfo Cooper Advisors, Inc., Zolfo Cooper
Management Advisors, Inc., and Zolfo Cooper Services Inc., also
affiliates of Zolfo Cooper, LLC, has transferred to Zolfo Cooper
Holdings, Inc., and 100% of the common stock in Zolfo Cooper
Holdings, Inc., was transferred to Kroll, Inc. On November 8,
2002, Zolfo Cooper LLC has changed its name to Kroll Zolfo
Cooper LLC. In the interim, since September 6, 2002, Zolfo
Cooper LLC was authorized to do business under the alternate
name of Kroll Zolfo Cooper. In the future, Zolfo Cooper Capital
LLC and Kroll Zolfo Cooper Management LLC intend to merge their
interests into Kroll Zolfo Cooper LLC. (Wheeling-Pittsburgh
Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
WORLDCOM INC: Court Approves Kelley Drye as Committee's Counsel
---------------------------------------------------------------
The Official Committee of Unsecured Creditors of Worldcom Inc.,
obtained the Court's authority to retain Kelley Drye & Warren
LLP, as special counsel, nunc pro tunc to September 16, 2002.
Kelley Drye will render legal services in certain Potential
Conflict Circumstances as requested by the Committee.
Specifically, Kelley Drye will:
A. advise the Committee with respect to the Debtors' sale
of the Pentagon City Office Complex;
B. represent the Committee in connection with a settlement
between WorldCom, Inc. and XO Communications, Inc.;
C. investigate, file and prosecute litigation on the
Committee's behalf;
D. represent the Committee at hearings and other
proceedings;
E. assist the Committee in preparing pleadings and
applications as may be necessary in furtherance of the
Committee's interests and objectives; and
F. perform any other legal services as may be required and
are deemed to be in the Committee's interests in
accordance with the Committee's powers and duties as set
forth in the Bankruptcy Code.
Kelley Drye will seek compensation based on its standard hourly
rates, which are based on each professional's level of
experience. At present, the hourly rates range from:
Partners $300 - 590
Counsel 395 - 450
Associates 155 - 340
Legal Assistants 110 - 160
(Worldcom Bankruptcy News, Issue No. 19; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
DebtTraders reports that Worldcom Inc.'s 8.000% bonds due 2006
(WCOE06USR2) are trading at about 23 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOE06USR2
for real-time bond pricing.
W.R. GRACE: Fresenius Paying $115MM to Settle Asbestos Dispute
--------------------------------------------------------------
Fresenius Medical Care AG (Frankfurt Stock Exchange: FME, FME3)
(NYSE: FMS, FMS_p), the world's largest provider of dialysis
products and services, has signed a definitive agreement with
the official committees of asbestos creditors for the settlement
of all fraudulent conveyance and other claims related to the
bankruptcy of W.R. Grace & Co.
Under the terms of the definitive agreement, fraudulent
conveyance and other claims raised by the asbestos committees on
behalf of the Grace bankruptcy estates will be dismissed with
prejudice upon confirmation of the W.R. Grace & Co. bankruptcy
reorganization plan. In addition, the Company will also receive
protection against all current and future W.R. Grace-related
claims including fraudulent conveyance, asbestos and income tax
claims relating to the non-NMC members of the W.R. Grace & Co.,
consolidated tax group.
This definitive agreement supersedes the terms of the earlier
agreement in principle announced on November 29, 2002, under
which the Company would have paid $ 15 million to the W.R. Grace
bankruptcy estate upon plan confirmation and also retained
responsibility to resolve the outstanding pre-merger income
taxes of the W.R. Grace & Co. consolidated group. Payments and
expenses under those previous terms were expected to remain
within the amount reserved by the Company in the fourth quarter
2001.
In the definitive agreement announced the Company has agreed to
pay in total $115 million to the W.R. Grace bankruptcy estate or
as otherwise directed by the court upon plan confirmation.
Consequently, the Company is relieved of the burden of resolving
W.R. Grace's tax obligations and can confirm the adequacy of
it's accrued reserve. No admission of liability has been or
will be made. As part of the W.R. Grace Chapter 11 proceeding,
the definitive agreement will be submitted to the court for
approval.
Ben Lipps, Chief Executive Officer of Fresenius Medical Care,
commented: "The terms of this definitive agreement provide
certainty and finality for Fresenius Medical Care upon plan
confirmation. This settlement not only avoids the costs of
expensive and distracting fraudulent conveyance litigation, but
also relieves Fresenius Medical Care of the burden of resolving
the tax liabilities of the W.R. Grace consolidated group. We are
indeed pleased to have this behind us and we now look forward to
focusing all of our energies on bringing innovative therapies to
the treatment of kidney disease."
Fresenius Medical Care AG is the world's largest, integrated
provider of products and services for individuals undergoing
dialysis because of chronic kidney failure, a condition that
affects more than 1,100,000 individuals worldwide. Through its
network of approximately 1,450 dialysis clinics in North
America, Europe, Latin America and Asia-Pacific, Fresenius
Medical Care provides Dialysis Treatment to approximately
110,100 patients around the globe. Fresenius Medical Care is
also the world's leading provider of Dialysis Products such as
hemodialysis machines, dialyzers and related disposable
products. For more information about Fresenius Medical Care,
visit the Company's Web site at http://www.fmc-ag.com
* Adolfo R. Garcia Joins Ropes & Gray as Boston Office Partner
--------------------------------------------------------------
Ropes & Gray announced that Adolfo R. Garcia has joined the
firm's Boston office as a partner in the Corporate Department.
He will become co-head of the International Practice Group in
addition to continuing his corporate/transactional work.
"Dolf's transactional practice is an excellent fit with our
practice, and his emphasis on international matters is a real
plus," said Douglass N. Ellis, Jr., Ropes & Gray's chairman. "As
we look for natural extensions of our core practice areas
outside of the U.S., Dolf will be a tremendous asset to us."
Formerly a partner at McDermott, Will & Emery, Dolf specializes
in corporate, financial and international transactions,
including mergers and acquisitions and joint ventures. During
his twenty-nine years in practice, Dolf has been involved in
transactions or other legal matters in all major money centers
and developed countries as well as most of the important
emerging economies. While Dolf's international practice has
focused on "out-bound" work in foreign countries, the practice
has also expanded in the past few years to include significant
"in-bound" work for foreign clients, particularly from Western
Europe and South America. Dolf also advises foreign clients on
international estate and trust planning matters and has
experience advising clients in connection with foreign
arbitration, mediation and litigation matters.
Ropes & Gray partner Cary Armistead will continue to coordinate
the firm's international work, and will collaborate with Dolf on
identifying opportunities across several disciplines. Said
Armistead, "We have a well-established international practice
that supports our clients' trans-border business activities,
particularly in structuring and implementing investments and
acquisitions, and multinational distribution and licensing
programs. Dolf's experience blends neatly with our current
practice and bolsters our ability to serve the international
needs of our clients, especially in Western Europe and South
America. Dolf's fluency in Spanish and his very extensive
experience in Spain and Latin America are particularly important
additions to Ropes & Gray's international capabilities."
Dolf is a member of the bars of both Massachusetts and New York.
He is Vice President and Director of the New England-Latin
America Business Council, of which he is also a co-founder. He
has been a frequent speaker and lecturer at events sponsored by
corporate and business groups, including the Institute for
International Research, the International Business Center of New
England, the Massachusetts Port Authority, the Boston Bar
Association, and the Massachusetts Office of International Trade
and Investment.
He received his Bachelor of Arts degree magna cum laude from
Harvard University, and went on to Georgetown University Law
Center, graduating in 1974.
Ropes & Gray's International Practice Group includes attorneys
from several disciplines in the firm, including:
-- Antitrust
-- Corporate Transactions
-- Financing and Securities
-- Foreign Corrupt Practices Act
-- Insolvency
-- Intellectual Property Licensing and Rights Management
-- Investment Management
-- Life Sciences
-- Litigation and Commercial Arbitration
-- Tax Planning
For more than a century, Ropes & Gray has been a leading U.S.
law firm serving the needs of businesses and individuals
throughout the nation and the world. With more than 500 lawyers,
Ropes & Gray creates solutions to complex legal problems across
a wide range of legal disciplines, including: antitrust,
corporate, creditors' rights, employee benefits, environmental,
health care, intellectual property and technology,
international, labor and employment, life sciences, litigation,
private client services, real estate, and tax. The firm has
offices in Boston; New York; San Francisco; and Washington,
D.C.; and conference centers in London and Providence. For
further information, please visit http://www.ropesgray.com
* TSYS Debt Management Chairman Richard de Mayo to Retire
---------------------------------------------------------
TSYS Debt Management announced the retirement of its Chairman of
the Board, Richard de Mayo, effective March 31. De Mayo intends
to return to the private practice of law.
Before his appointment at TDM, de Mayo began practicing law with
the law firm of Howard, Wiggins & Smith in Atlanta, where he
worked for five years. As a part of his early practice of law,
he represented creditors as well as a large collections agency,
and thus he made appearances in the state courts throughout
Georgia for the first five years of his practice. He also served
as special assistant attorney general for the State of Georgia.
In 1979, de Mayo merged his law practice to form Wallace & de
Mayo, P.C. He has almost 30 years of legal experience and has
served on numerous bar committees. Currently, de Mayo serves on
the Board of Visitors, Emory University; Board of Advisors,
George West Mental Health Foundation; Board of Visitors, Camp
Seafarer/Camp Seagull; Board of Directors, Northern Kenya
Wildlife Trust; Member, State of Georgia Judicial Nominating
Commission; Officer, Old War Horse Lawyers Association; Member,
American Bar Association, Consumer Finance Committee.
"Under Richard's direction, TDM has seen tremendous growth. In
1979, the company began with two team members, and today it has
grown to more than 300 and has also become the largest legal
network and the largest bankruptcy management company in the
United States. Although we will greatly miss Richard and his
contributions to TSYS, his legacy will continue to thrive in the
industry through TDM. We wish the best of luck to Richard and
his family in his retirement. Chuck Kinney, TDM president and
CEO, will continue to lead the company's strategic direction and
daily operations," said Richard W. Ussery, TSYS CEO and Chairman
of the Board.
In 1999, Synovus acquired the debt collection and bankruptcy
management business offered by Wallace & de Mayo. After the
acquisition, the company was named TSYS Debt Management, and de
Mayo became president and CEO until he was named Chairman of the
Board in 2001. TDM became a wholly owned subsidiary of TSYS in
2002.
With the most sophisticated collections applications in the
industry, TSYS Debt Management(SM)(TDM), a wholly owned
subsidiary of TSYS, offers clients low-cost, high-value early
out and recovery collections and agency management, bankruptcy
process and legal account management, and skip tracing services.
Located in Atlanta, Ga., TDM handles any or all portions of a
client's collections business.
TDM provides fully integrated technology offerings like the
National Attorney Network (NAN), its legal management unit,
which is the nation's largest legal collections network, serving
retailers, banks and finance companies. NAN facilitates and
manages the placement of legal collection cases at the account
level from the creditor to the collection law firm.
TSYS (NYSE: TSS) -- http://www.tsys.com-- brings integrity and
innovation to the world of electronic payment services as the
integral link between buyers and sellers in this rapidly
evolving universe. Synovus (NYSE: SNV) owns an 81- percent
interest in TSYS. For more information, contact news@tsys.com .
* Weil Gotshal Expands Silicon Valley Office with 2 New Partners
----------------------------------------------------------------
Weil, Gotshal & Manges LLP, one of the world's leading law
firms, announced that Rod J. Howard and Curtis L. Mo have joined
as partners in the Firm's Corporate practice, based in the
Silicon Valley office. Messrs. Howard and Mo formerly were
partners with Brobeck, Phleger & Harrison LLP, where Howard was
head of its national Mergers & Acquisitions practice, and Mo
served as head of its Silicon Valley corporate practice and co-
chair of its national capital markets practice. Six corporate
associates will join Weil, Gotshal & Manges LLP's Corporate
practice along with Howard and Mo.
"Rod Howard and Curtis Mo are exceptional attorneys," said
Stephen J. Dannhauser, Chairman of Weil, Gotshal & Manges LLP.
"We welcome them to the Firm as part of our continuing strategy
to build a leading corporate practice in Silicon Valley. I am
confident that the combination of Rod's and Curtis' expertise
will add valuable strength to our top-tier, international
Corporate practice and further our ability to meet the broad
range of client needs," Dannhauser added.
"I have long had the highest respect for the caliber of work
produced by Weil Gotshal, and its consistent standing as a
leading M&A firm," said Rod Howard. "I have been impressed by
Weil Gotshal's focused and measured approach to growth, and its
ability to serve clients as a team, across practices and across
borders. I look forward to being part of this premier firm," he
added.
"Weil Gotshal's continuing commitment to capitalize on its
leading corporate and IP practices to build a top Silicon Valley
and West Coast practice immediately drew me to the Firm," said
Curtis Mo. "The Firm's reputation, talent and leading cutting
edge practice groups will allow us to provide clients with full
service capabilities, not only here in Silicon Valley, but also
on a national and international scale," Mo added.
Howard is a 1982 graduate of the University of Chicago Law
School, with honors. His transactions have included over $65
billion in recent technology mergers and acquisitions. Mo
graduated from Columbia Law School in 1988 as a Harlan Fiske
Stone Scholar. He has been selected by California Law Business
as one of the "Top 20 Lawyers in the State of California Under
the Age of 40" and by Silicon Valley Magazine as one of the "Top
Lawyers in Silicon Valley."
"We are extremely pleased that Rod and Curtis will be joining
us," said Matthew D. Powers, managing partner of Weil, Gotshal &
Manges LLP's Silicon Valley office. "Rod is one of Silicon
Valley's leading M&A lawyers, and Curtis has a leading venture
capital, emerging growth company and securities practice. They
are well-known and highly regarded Silicon Valley attorneys
with national reputations who are committed to producing the
highest quality work for their clients, and we look forward to
the synergies they will bring to our existing corporate team in
Silicon Valley, which is very active and well regarded in all
these areas," Powers added.
Opened in 1991, Weil, Gotshal & Manges LLP's Silicon Valley
office now has 59 lawyers. The Silicon Valley office regularly
represents clients from the United States, Asia and Europe. The
diverse client base comprises companies in the fields of
semiconductors, semiconductor equipment, networking, wireless
and other communications, software, hardware, interactive and
digital media, internet, internet infrastructure, life sciences,
medical devices and biotechnology.
Weil, Gotshal & Manges LLP is an international law firm of over
1,000 attorneys, including approximately 285 partners. Weil
Gotshal is headquartered in New York, with offices in Austin,
Boston, Brussels, Budapest, Dallas, Frankfurt, Houston, London,
Miami, Paris, Prague, Silicon Valley, Singapore, Warsaw and
Washington, D.C.
* BOOK REVIEW: Land Use Policy in the United States
---------------------------------------------------
Author: Howard W. Ottoson
Publisher: Beard Books
Paperback: US$34.95
Review by Gail Owens Hoelscher
Order your personal copy today and one for a colleague at
http://amazon.com/exec/obidos/ASIN/1893122832/internetbankrupt
In 1962, marking the 100th anniversary of the signing of the
Homestead Act by President Lincoln, 20 nationally recognized
economists, historians, a political scientist, and a geographer
presented papers at the Homestead Centennial Symposium at the
University of Nebraska. Their task was to appraise the course
that United States land policy had taken since independence. The
resulting papers are presented in this book, grouped into five
major areas: historical background; social factors influencing
U.S. land policy; past, present and future demands for lands in
the U.S.; control of land resources; and implications for future
land policy.
This book begins with a summary of the Homestead Act, its
antecedents, the arguments of its supporters and detractors, and
its intent versus implementation. The Act offered a quarter
section (160 acres) of public land in the West to citizens and
intended citizens for a $14 filing fee and an agreement to live
on the land for five years. The program ended in 1935.
Advocates claimed that frontier lad had no value to the
government until it was developed and began generating tax
revenue. Opponents feared the Act would lower land valued in the
East and pushed for government sale of the land. In practice,
states, territories, railroads and investors were able to set
aside more land than was eventually handed over to the
homesteaders.
One paper deals with land policy before 1862. From the start,
the U.S. required that "all grants of land by the federal
government should embody a description of the land not merely in
quality, but in place as defined by relation to an actual
survey." This policy avoided countless boundary disputes so
vexing to other countries.
Perhaps most interesting are the social history chapters:
Czechoslovakians pushing wheelbarrows across Nebraska,
"Daughters and Sons of the Revolution.(living) next
to.Mennonites," and "an illiterate.neighborly with a Greek and a
Hebrew scholar from a colony of Russian Jews." Mail-order
brides, "defectors from civilization," the importance of the
Mason jar, the Jeffersonian dream of a nation of agrarian
freeholders, and Santayana's observation that the typical
American skitters between visionary idealism and crass
materialism, all make for fascinating reading.
The land-use policy problems discussed certainly haven't been
solved today. And, although land use conflicts in the U.S.
haven't always been resolved equitably, "the big step forward
taken by the United States during the last one hundred and fifty
years in the age-long struggle of man towards the ideals of
mutuality and equity has been the working out of a system
wherein the sovereign superior who prescribes the working-rules
for land use and decision making have become, himself, a
collective of the citizenry."
A chapter is devoted to the arguments between the family farm ad
the "sentiment against concentration of wealth in the hands of a
few." The discussion of the Land Grant college system and its
contribution to international development closes with a quote
from Chester Bowles:
"Can we, now the richest people on earth, become creative
participants in the unprecedented revolutionary changes of our
era, changes that the most privileged people will oppose tooth
and nail, but which for the bulk of mankind offer the hopeful
prospect of a little more food, a little more opportunity, a
doctor for their sick child, and sense of personal dignity?"
*********
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-
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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 ***