/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/030304.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, March 4, 2003, Vol. 7, No. 44 Headlines ABN AMRO: Fitch Rates Class B-3 & B-4 P-T Certs. at BB/B ACANDS: Has Exclusive Right until May 14 to File Chapter 11 Plan ADVANCED LIGHTING: S&P Cuts Ratings to D after Chapter 11 Filing ADVANCED MATERIALS: Fourth Quarter Net Loss Narrows to $107K ALTERRA HEALTHCARE: Closes $68-Million Senior Housing Financing ALTERRA HEALTHCARE: AMEX Intends to Strike Shares from Listing AMERICAN AIRLINES: Heavy Losses Spur S&P to Cut Ratings to B- AMERICAN COUNTRY INSURANCE: S&P Junks Counterparty Credit Rating AMERIFIRST FOUNDATION: Case Summary & Largest Unsec. Creditors ARIBA: Expects to Complete Accounting Review Before Month-End ASIA GLOBAL CROSSING: Court Approves Milligan as Bermuda Counsel ASSOCIATED INDUSTRIES: S&P Cuts Ratings to Bpi Over Weak Capital ATLAS AIR: Initiates Talks with Lenders about Financial Covenant BEYOND.COM: Judge Morgan Blasts Debtor's Liquidating Plan BRANT POINT: Fitch Affirms BB Rating on Class D Sr Secured Notes BUDGET GROUP: Court Fixes April 30, 2003 as Claims Bar Date BURLINGTON INDUSTRIES: BIT Hires Southern Caswell as Auctioneers CABLE SATISFACTION: Brings-In Rothschild for Financial Advice CEDRIC KUSHNER: Sept. 30 Working Capital Deficit Tops $7 Million CELLSTAR CORP: Says Funds Sufficient to Meet Cash Requirements CENDANT MORTGAGE: Fitch Rates Class B-4 and B-5 Certs. at BB/B CHAMPION ENTERPRISES: S&P Cuts Rating to B+ over Restructuring CHESAPEAKE ENERGY: Prices Private Offering of 6% Preferreds CHESAPEAKE ENERGY: S&P Keeps Watch on B-Rated Sr. Unsec. Notes COLD METAL: Steel Tech. Acquires Cold Rolled Strip Facility COMDISCO INC: Downey Demands Expedited Claim Objection Process CREDIT STORE: Turns to Vengroff for Collection Assistance CWMBS INC: Fitch Assigns Low-B Ratings to Class B-3 & B-4 Notes CWMBS INC: Fitch Rates Class B-3 & B-4 Certs. at Low-B Levels DOANE PET CARE: Amends Credit Facility After Sr. Notes Offering DOMAN INDUSTRIES: KPMG Files February Report with Canadian Court DONINI INC: Samuel Klein Expresses Going Concern Doubt E.SPIRE: DIP Lenders Want a Chapter 11 Trustee Before March 22 EASYLINK SERVICES: Reviewing PTEK Holdings' Purchase Offer ELWOOD ENERGY: S&P Places BB+ Bond Rating on Watch Negative ENCOMPASS SERVICES: Signs-Up Conway Del Genio as Crisis Managers ENRON CORP: Neal Batson Earns Nod to Hire 8 Contract Attorneys EPOCH 2000-1: Fitch Junks Three Floating-Rate Note Classes ESPM MIDWEST: Ch. 11 Case Summary & Largest Unsecured Creditors GENTEK: General Chemical Unit Enters Joint Venture with Esseco GENTEK INC: Court Convenes Exclusivity Extension Hearing Today GLEACHER CBO: Two 2000-1 Classes' Ratings Lowered to Low-B Level GLOBAL CROSSING: Worldcom Seeks Relief to Reject Three Contracts HAYES LEMMERZ: Wants Additional Time to Move Actions to Delaware HOLLINGER INC: S&P Assigns B Rating to US$110-Mill. Senior Notes HORSEHEAD IND.: Wants to Continue Hiring Ordinary Course Profs. INTERPLAY ENTERTAINMENT: Kisses Auditors Ernst & Young Goodbye KEY3MEDIA: Wants to Continue Ordinary Course Profs. Employment KIT MANUFACTURING: Completes Sale of RV Division to Extreme RVs KMART CORP: Wants to Pull Plug on Self-Checkout Equipment Lease KNOLOGY BROADBAND: Asks Court for Final Decree Closing this Case LEATHERLAND: Brings-In Roetzel & Andress as Bankruptcy Counsel LTV CORP: Wins Nod to Recover Documents Accidentally Produced MEDCOMSOFT INC: Net Capital Deficit Slides-Down to $1.7 Million MET WELD: Chapter 11 Case Summary & 20 Largest Unsec. Creditors MORTGAGE ASSET: Fitch Rates 3 P-T Cert. Classes at Low-B Levels MOTOROLA INC: Del. Courts Nix Next Level Appeal re Tender Offer NASH FINCH: Pays 1.5% to Bondholders for Late SEC Filing Waiver NATIONAL CENTURY: UST Amends Creditors' Committee Membership NAT'L HERITAGE: Volatile Earnings Spur S&P to Cut Ratings to Bpi NAVISITE INC: Names Arthur Becker as New Chief Executive Officer NUTRITIONAL SOURCING: Court OKs Innisfree as Balloting Agent OGLEBAY NORTON: Sets Annual Shareholders' Meeting for April 30 PACIFIC GAS: Gets Approval to Refund $157-Mil. FERC-Ordered Dues PANDA FUNDING: S&P Downgrades Pooled Project Bonds Rating to B+ PEREGRINE SYSTEMS: March 31, 2002 Net Capital Deficit Tops $360M PERSONNEL GROUP: Dec. 29 Balance Sheet Upside-Down by $52 Mill. PLAINTREE SYSTEMS: Seeking New Financing to Continue Operations POLAROID CORP: Court Appoints Perry M. Mandarino as Examiner PPL CORPORATION: Increases Quarterly Dividend Rate by 6.9% RADIO UNICA: Makes $9.3MM Interest Payment on 11-3/4% Sr. Notes SALON MEDIA: Issues Conv. Notes & Warrants in Financing Deal SEITEL INC: Noteholders Want Workout Documents Ready by April 10 SERVICE MERCHANDISE: Wind-Down Plan Should be Filed Tomorrow SHELBOURNE PROPERTIES: Sells Melrose Park Property for $5.5 Mil. SLI INC: Obtains Approval Extending Exclusivity through April 23 SPIEGEL: Alvarez & Marsal's William Kosturos Hired as New CRO STAR GAS PARTNERS: Fitch Rates $200 Million Senior Notes at BB SUPERIOR TELECOM: Files for Chapter 11 Protection in Delaware SUPERIOR TELECOM: Case Summary & 20 Largest Unsecured Creditors SWEETHEART HLDGS: CCC+ Rating Remains on Watch After S-4 Filing TELESYSTEM INT'L: Reports Improved EBITDA for Fourth Quarter TRENWICK GROUP: Restructures $75 Million of Senior Notes TROUTMAN'S EMPORIUM: Court Approves Going-Out-Of Business Sales UNIROYAL TECHNOLOGY: Brings-In Sonnenschein Nath as Counsel UNITED AIRLINES: Court Okays Amendments to $300MM DIP Financing USG CORP: Settling Up to $5 Million of Postpetition Tort Claims WARNACO GROUP: Goldman Sachs Group Discloses 0.5% Equity Stake WHEELING-PITTSBURGH: Disclosure Statement Hearing Now on Mar. 27 WINSTAR COMMS: Chapter 7 Trustee Taps Adelman as Special Counsel WORLDCOM INC: Aerotel Demands Prompt $10MM Admin Claim Payment * PwC Sees 180 Public Co.'s with $240BB in Assets Filing in 2003 * Large Companies with Insolvent Balance Sheets ********* ABN AMRO: Fitch Rates Class B-3 & B-4 P-T Certs. at BB/B -------------------------------------------------------- ABN AMRO Mortgage Corporation's multi-class mortgage pass- through certificates, series 2003-3, classes A-1 through A-17, A-X, A-P, and R ($604.6 million) are rated 'AAA' by Fitch Ratings. In addition, Fitch rates class M ($10 million) 'AA', class B-1 ($3.7 million) 'A', class B-2 ($1.9 million) 'BBB', class B-3 ($1.2 million) 'BB' and class B-4 ($0.9 million) 'B'. The 'AAA' rating on the class A senior certificates reflects the 3% subordination provided by the 1.60% class M, 0.60% class B-1, 0.30% class B-2, 0.20% privately offered class B-3, 0.15% privately offered B-4 and 0.15% privately offered class B-5. Classes M, B-1, B-2, B-3, and B-4, are rated 'AA', 'A', 'BBB', 'BB' and 'B', respectively, based on their respective subordination. Fitch believes the amount of credit enhancement will be sufficient to cover credit losses, including limited bankruptcy, fraud and special hazard losses. The ratings also reflect the high quality of the underlying collateral originated by ABN AMRO Mortgage Group, Inc.. The integrity of the legal and financial structures and the servicing capabilities of Washington Mutual Mortgage Securities Corp. (rated 'RPS2' by Fitch). The mortgage pool consists of a group of recently originated, 30-year fixed-rate mortgage loans secured by one- to four-family residential properties. The mortgage loans have an aggregate principal balance of $623.2 million as of the cut-off date and have a weighted average remaining term to maturity of 358 months. The weighted average original loan-to-value ratio (OLTV) of the pool is approximately 69.16%. Approximately 2.56% of the mortgage loans have an OLTV greater than 80%. The weighted average coupon of the mortgage loans is 6.199%. The weighted average FICO score is 741. The states that represent the largest geographic concentration are California (49.94%), Illinois (7.52%), New York (3.95%) and Florida (3.54%). Approximately 1.03% of the mortgage loans are secured by properties located in the state of Georgia, none of which are covered under the Georgia Fair Lending Act, effective as of October 2002. AAMG originated all of the loans. U.S. Bank National Association will serve as trustee. AMAC, a special purpose corporation, deposited the loans into the trust, which then issued the certificates. For federal income tax purposes, the offered certificates will be treated as ownership of debt. ACANDS: Has Exclusive Right until May 14 to File Chapter 11 Plan ---------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the District of Delaware, ACandS, Inc., obtained an extension of its exclusive periods. The Court gives the Debtors, until May 14, 2003, the exclusive right to file their plan of reorganization and until July 12, 2003, to solicit acceptances of that Plan from their creditors. AcandS, Inc. was an insulation contracting company, primarily engaged in the installation of thermal and mechanical insulation. In later years, Debtor also performed a significant amount of asbestos abatement and other environmental remediation work. The Company filed for chapter 11 protection on September 16, 2002 (Bankr. Del. Case No. 02-12687). Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it estimated its debts and assets of over $100 million. ADVANCED LIGHTING: S&P Cuts Ratings to D after Chapter 11 Filing ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Solon, Ohio-based Advanced Lighting Technologies Inc., to 'D' from 'SD' (selective default) and lowered its senior secured rating to 'D' from 'CCC'. "The rating actions follow the company's announcement that it has voluntarily filed for protection under Chapter 11 of the U.S. bankruptcy code," said Standard & Poor's credit analyst Nancy C. Messer. The senior unsecured rating on Advanced Lighting remains 'D', reflecting the company's failure to make its semiannual $4 million interest payment, due Sept. 16, 2002, on its 8% senior notes within the 30-day grace period provided for in the note indenture. The company said it would continue to operate its business while it seeks to restructure its debt with senior lenders and unsecured bondholders as well as the preferred stock interests of General Electric Co. The company is operating with funds generated from operations and a debtor-in-possession loan. The company's current financial difficulties resulted from its weak operating performance during 2001 and 2002 combined with a heavy debt burden. The company's subpar operating performance is primarily attributable to the overall weak U.S. economy, which has reduced demand for Advanced Lighting's metal halide products; higher operating costs as a percentage of sales; and competitive pricing. ADVANCED MATERIALS: Fourth Quarter Net Loss Narrows to $107K ------------------------------------------------------------ Advanced Materials Group, Inc., (OTCBB:ADMG) reported final sales and income from operations for the fourth fiscal quarter and fiscal year ended November 30, 2002. Net sales for the fourth quarter of fiscal 2002 were $8.8 million, versus $9.2 million for the comparable period of fiscal 2001. The net loss for the fourth quarter of fiscal 2002 was $107,000 compared to a net loss of $841,000 for the fourth quarter of fiscal 2001. The basic and diluted loss per share for the fourth quarter was $0.01 per share on an average of 8.7 million shares, versus basic and diluted loss of $0.09 per share on an average of 8.7 million shares in the year-ago period. Net sales for the fiscal year 2002 were $36.3 million, versus $38.5 million for the comparable period of 2001. The net loss for fiscal year 2002 was $474,000, including costs of $613,000 for charges related to the write-off of goodwill and restructuring charges, partially offset by a $257,000 non- recurring tax benefit. The net loss for fiscal year 2001 was $3,386,000, which included $1.3 million in restructuring charges. The basic and diluted net loss per share for fiscal year 2002 was $0.05 per share on an average of 8.7 million shares, versus basic and diluted net loss per share of $0.39 per share on an average of 8.7 million shares in fiscal year 2001. Advanced Materials Group's November 30, 2002 balance sheet shows a working capital deficit of about $107,000. The Company's total shareholders' equity diminished to about $431,000. Chief Executive Officer Comments on Results Commenting on the results, Advanced Materials Group CEO and President Steve Scott said, "We made good progress in 2002 towards returning to profitable operations. Our efforts in consolidating facilities, pruning account mix, and focusing on continuous improvement have paid off. However, unfortunately these improvements were offset to a degree by cost pressures resulting from escalating raw material prices. We believe that continuing on our charter of being lean and agile will serve us well as we face the market uncertainties of 2003." Mr. Scott added, "We recently announced the addition of Robert Delk to our Board of Directors. Mr. Delk, who has extensive experience in our industry, is acting as a consultant to the Company to assist in instituting additional programs to improve our efficiencies and further reduce our costs." Advanced Materials Group, Inc., is a leading manufacturer and fabricator of specialty foams, foils, films and pressure- sensitive adhesive components for a broad base of customers in the computer, medical, automotive and aerospace industries both in the U.S. and abroad. ALTERRA HEALTHCARE: Closes $68-Million Senior Housing Financing --------------------------------------------------------------- Senior Housing Properties Trust (NYSE: SNH) has closed its previously announced transaction to provide $67.9 million of financing to Alterra Healthcare Corporation. The final terms of this transaction are substantially as previously announced: -- SNH purchased from Alterra 18 assisted living facilities with 894 living units located in ten states for $61 million. Simultaneously with this purchase, SNH leased these properties to a subsidiary of Alterra for an initial term through 2017, plus renewal options. The rent payable to SNH under this lease is $7 million per year plus increases starting in 2004 based upon increases in the gross revenues at the leased properties. -- SNH provided mortgage financing to Alterra for six assisted living facilities with 202 living units located in two states. The amount of this mortgage loan is $6.9 million. The interest rate is 8% per year. The maturity of this loan is June 30, 2004, but SNH expects it may be prepaid as Alterra sells the mortgaged properties. The total investment of $67.9 million was funded with cash drawn under SNH's revolving, unsecured, bank credit facility and from cash on hand. Alterra filed for bankruptcy reorganization in January 2003. Earlier this week, the Alterra Bankruptcy Court approved the terms of SNH's investment with Alterra, and that approval includes a decision that payments due to SNH under this lease and mortgage are accorded priority status under the Bankruptcy Code. Alterra has stated that it will use the proceeds of this transaction primarily to refinance maturing debt thereby furthering its plan for reorganization. Senior Housing Properties Trust is a real estate investment trust headquartered in Newton, MA which owns or has mortgage investments in 143 senior living properties, including independent living apartments, assisted living facilities, nursing homes and hospitals, located in 31 states which are leased or mortgaged to various health care and senior living operating companies. ALTERRA HEALTHCARE: AMEX Intends to Strike Shares from Listing -------------------------------------------------------------- Alterra Healthcare Corporation (AMEX:ALI) received a notification on February 21, 2003 from the American Stock Exchange regarding AMEX's intention to file an application with the Securities and Exchange Commission to strike the Company's common stock from listing and registration on the AMEX. The AMEX notification states that the Company has fallen below the continued listing guidelines set forth in Section 1003(a)(i) of the AMEX Company Guide with shareholders' equity of less than $2,000,000 and losses from continuing operations and/or net losses in two of its three most recent fiscal years and in Section 1003(a)(ii) with shareholders' equity of less than $4,000,000 and losses from continuing operations and/or net losses in three out of its four most recent fiscal years. In addition, the AMEX notification stated that it appears that the Company is not in compliance with Section 1003(a)(iv) of the AMEX Company Guide in that its operating results are unsatisfactory and its financial condition may be impaired, raising questions about whether it will be able to continue operations or meet its obligations as they mature. Finally, the AMEX notification states that the Company does not meet certain other continued listing guidelines, and it expresses concern regarding the low selling price per share of the Company's common stock for a substantial period of time. The Company has determined not to appeal the AMEX determination to seek delisting given the Company's pending Chapter 11 proceeding and its ongoing efforts to develop a plan of reorganization to, among other things, restructure its junior capital structure. Alterra offers supportive and selected healthcare services to our nation's frail elderly and is the nation's largest operator of freestanding Alzheimer's/memory care residences. Alterra currently operates in 24 states. AMERICAN AIRLINES: Heavy Losses Spur S&P to Cut Ratings to B- ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings for AMR Corp., and subsidiary American Airlines Inc., including lowering the long-term corporate credit ratings for both entities to 'B-' from 'BB-' and revised the CreditWatch implications on those ratings to developing from negative. "The downgrade reflects continuing heavy losses and diminishing liquidity, with the potential for a voluntary bankruptcy filing by midyear if American is not able to negotiate significant concessions from its labor groups," said Standard & Poor's credit analyst Philip Baggaley. "Any war between the U.S. and Iraq, a prospect that has already raised airline fuel prices, would cause a further erosion of revenues and raise already high fuel costs (at least for awhile), widening the company's losses," the credit analyst continued. Fort Worth, Texas-based American is the world's largest airline, with an extensive route system and leading or substantial market shares in the U.S. domestic market, on trans-Atlantic routes, and on routes to Latin America. American has accelerated negotiations with its unions and is seeking about $1.8 billion of annual concessions from employees, equal to about 21% of 2002 labor expense. This is in addition to an ongoing program to lower other, nonlabor costs by an eventual $2 billion annually, compared with pre-September 11, 2001, expenses (management states that about $900 million of these savings were reflected already in 2002 results). Although securing labor concessions outside of bankruptcy has historically been very difficult for airlines, prospects for success are bolstered by the severe pay and benefit reductions that have been negotiated or imposed on employees at bankrupt competitor United Air Lines Inc., with further concessions anticipated. Unrestricted cash and investments were over $1.9 billion at Dec. 31, 2002, with restricted cash of $775 million. AMR expects to receive a cash tax refund of over $550 million by the end of the first quarter of 2003. American's secured bank facility has no availability and the company will almost certainly be in violation of a covenant that measures fixed-charge coverage for the six months through June 30, 2003, which could accelerate repayment of $834 million of borrowings. If American is able to reach agreement on substantial cost reductions from its unions, it appears likely that the banks would be willing to amend the agreement to waive the violation. If not, American and AMR would likely choose to file for bankruptcy. AMR would in that case likely plan to have at least $1 billion of unrestricted cash on hand, and should be able to arrange a debtor-in-possession facility as large as United's $1.5 billion in facilities. Ratings for AMR and American could be lowered if American is not able to negotiate significant labor concessions to stem its losses, or if any U.S.-Iraq war and/or renewed terrorism further erodes the companies' financial position. Alternatively, ratings could be raised modestly if American is successful in its cost- cutting efforts. AMERICAN COUNTRY INSURANCE: S&P Junks Counterparty Credit Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its counterparty credit and financial strength ratings on American Country Insurance Co., to 'CCCpi' from 'BBpi'. "The ratings action is based on ACIC's weak capital, poor operating performance, and high geographic concentration," said Standard & Poor's credit analyst Allison MacCullough. ACIC is a writer of taxicab and limousine insurance and also offers commercial lines of coverage for artisan contractors, distributors, and the hospitality industry, including restaurants. Based in Chicago, Illinois and licensed in 11 states and D.C., it began business in 1961. 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. AMERIFIRST FOUNDATION: Case Summary & Largest Unsec. Creditors -------------------------------------------------------------- Lead Debtor: Amerifirst Foundation, Inc. 1630 S. Stapley, #219 Mesa, Arizona 85204 Bankruptcy Case No.: 03-02652 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Planned Giving Advisors, LLC 03-02653 Simplified Planned Giving Network, LLC 03-02654 Type of Business: Foundation Chapter 11 Petition Date: February 19, 2003 Court: District of Arizona (Phoenix) Judge: Randolph J. Haines Debtors' Counsel: John R. Clemency, Esq. Todd A. Burgess, Esq. Quarles & Brady Streich Lang LLP Two N. Central, Suite 200 Phoenix, AZ 85004-2391 Tel: (602) 229-5412 Total Assets: $18,031,145 Total Debts: $16,607,250 A. Amerifirst Foundation's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Quinton Family Ltd. Charitable gift $8,968,533 Partnership annuity 400 West King Street, Suite 101-2158 Carson City, NV 89703 Marjorie & Reid Olson Charitable gift $1,522,953 22509 94th Avenue South annuity Kent, WA 98031 Donna Marie Floyd Charitable gift annuity $1,064,104 William L. Cook 7301 Teasdale Avenue University City, MO 63130 April E. Kearns Charitable gift annuity $632,661 196 Leisure World Meza, AZ 85206 Robert Binder Charitable gift annuity $363,558 10218 Spring Creek Road Sun Lakes, AZ 85248 Shirley Davis Charitable gift annuity $249,993 Gail & Linda Goodman Charitable gift annuity $205,465 Lucile & Robert Hicks Charitable gift annuity $186,380 Hester Cunningham Charitable gift annuity $186,020 Lucile Hicks Charitable gift annuity $178,960 Cornelius N. Pestes Charitable gift annuity $177,339 Eleanor Fixen Charitable gift annuity $141,726 Virginia Schireson Charitable gift annuity $171,065 Lucile Hicks Charitable gift annuity $170,526 Maryella & Edward Strane Charitable gift annuity $159,937 Ruth Smart Charitable gift annuity $145,209 James & Linda Hall Charitable gift annuity $136,107 Mary Vickers Charitable gift annuity $130,984 Russel & Barbara Jenkins Charitable gift annuity $119,660 Helen Brown Charitable gift annuity $107,533 B. Simplified Planned Giving's 12 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ American Express Trade Debt $4,000 George Chant Wages $1,666 Mountain telecommunications Trade Debt $1,000 Tom Bishop Wages $777 QA3 Financial Corp. Trade Debt $500 Carrie Fulghum Wages $323 AT&T Trade Debt $250 Purchase Power Trade Debt $200 Cox Communications Trade Debt $125 Saddleback Communications Trade Debt $100 Aqua Chill Trade Debt $40 Interworks/Southwest Link Trade Debt $40 ARIBA: Expects to Complete Accounting Review Before Month-End ------------------------------------------------------------- Ariba, Inc., (Nasdaq: ARBAE) announced its updated information concerning the anticipated timing for completion of its ongoing accounting review and the resumption of its periodic Securities and Exchange Commission filings. Ariba appeared at the previously disclosed hearing before a Nasdaq Listing Qualifications Panel, at which it updated Nasdaq on the status of its ongoing review of certain accounting matters. Based on its assessment of the ongoing review to date, Ariba expects that the review will be completed and that Ariba will be current in its periodic filings with the SEC before the end of March 2003. Nasdaq has not yet communicated to Ariba its conclusions from the hearing, and no assurance can be given that the Nasdaq Listing Qualifications Panel will accommodate the company's timeline. As a matter of policy, Ariba does not expect to provide information about the review until it has been completed. Ariba, Inc., is the leading Enterprise Spend Management (ESM) solutions provider. Ariba helps companies develop and leverage spend management as a core competency to drive significant bottom line results. Ariba Spend Management software and services allow companies to align their organizations with a spend-centric focus and deploy closed-loop processes for increased efficiencies and sustainable savings. Ariba can be contacted in the U.S. at 1-650-390-1000 or at http://www.ariba.com * * * Liquidity and Capital Resources In its report for the period ended June 30, 2002, filed with the Securities and Exchange Commission, the Company stated: "As of June 30, 2002, we had $167.6 million in cash, cash equivalents and short-term investments, $80.2 million in long- term investments and $30.6 million in restricted cash, for total cash and investments of $278.4 million and ($1.4 million) in working capital. As of September 30, 2001, we had $217.9 million in cash, cash equivalents and short-term investments, $43.1 million in long-term investments and $32.6 million in restricted cash, for total cash and investments of $293.6 million and $57.6 million in working capital. Our working capital declined $59.0 million from September 30, 2001 to June 30, 2002, reflecting a reduction of current assets by $90.8 million (of which $37.1 million related to transfers of investments to non-current investments due to longer maturities) and a $31.9 million reduction of current liabilities. "Net cash used in operating activities was approximately $19.0 million for the nine months ended June 30, 2002, compared to $17.6 million of net cash provided by operating activities for the nine months ended June 30, 2001. Net cash used in operating activities for the nine months ended June 30, 2002 is primarily attributable to decreases in accounts payable, accrued compensation and related liabilities, accrued liabilities and deferred revenue, and to a lesser extent, the net loss for the period (less non-cash expenses). These cash flows used in operating activities were partially offset by decreases in accounts receivable and, to a lesser extent, prepaid expenses and other assets. "Net cash provided by investing activities was approximately $42.8 million for the nine months ended June 30, 2002 compared to $135.6 million of net cash used in investing activities for the nine months ended June 30, 2001. Net cash provided by investing activities for the nine months ended June 30, 2002 is primarily attributable to the redemption of our investments partially offset by the purchases of property and equipment. Although the recent restructuring of our operations will reduce our capital expenditures over the near term, these expenditures may increase over the longer term. "Net cash provided by financing activities was approximately $8.1 million for the nine months ended June 30, 2002 compared to $80.5 million of net cash provided by financing activities for the nine months ended June 30, 2001. Net cash provided by financing activities for the nine months ended June 30, 2002 is primarily from the proceeds from the exercise of stock options offset by the repurchase of our common stock and payment of capital lease obligations. "In March 2000, we entered into a new facility lease agreement for approximately 716,000 square feet constructed in four office buildings and an amenities building in Sunnyvale, California as our headquarters. The operating lease term commenced in phases from January through April 2001 and ends on January 24, 2013. Minimum monthly lease payments are $2.2 million and will escalate annually with the total future minimum lease payments amounting to $347.9 million over the lease term. We also contributed $80.0 million towards leasehold improvement costs of the facility and for the purchase of equipment and furniture of which approximately $49.2 million was written off in connection with the abandonment of excess facilities. As part of this agreement, we are required to hold certificates of deposit totaling $25.7 million as a form of security through fiscal 2013, which is classified as restricted cash on the condensed consolidated balance sheets. In the quarter ended March 31, 2002, a certificate of deposit totaling $2.5 million as a security deposit for our headquarters was released. "Operating lease payments shown above exclude any adjustment for lease income due under noncancelable subleases of excess facilities, which amounted to $82.9 million as of June 30, 2002. Interest expense related to capital lease obligations is immaterial for all periods presented. "We do not have commercial commitments under lines of credit, standby lines of credit, guarantees, standby repurchase obligations or other such arrangements. "We expect to incur significant operating expenses, particularly research and development and sales and marketing expenses, for the foreseeable future in order to execute our business plan. We anticipate that such operating expenses, as well as planned capital expenditures, will constitute a material use of our cash resources. As a result, our net cash flows will depend heavily on the level of future sales, our ability to manage infrastructure costs and our assumptions about estimated sublease income related to the estimated costs of abandoning excess leased facilities. "Although our existing cash, cash equivalent and investment balances together with our anticipated cash flows from operations will be sufficient to meet our working capital and operating resource expenditure requirements for at least the next 12 months, given the significant changes in our business and results of operations in the last 12 to 18 months, the fluctuation in cash, cash equivalents and investments balances may be greater than presently anticipated. After the next 12 months, we may find it necessary to obtain additional equity or debt financing. In the event additional financing is required, we may not be able to raise it on acceptable terms or at all." ASIA GLOBAL CROSSING: Court Approves Milligan as Bermuda Counsel ---------------------------------------------------------------- Asia Global Crossing Ltd., together with its debtor-affiliates, obtained from the Court to employ Milligan-Whyte & Smith as their special Bermuda insolvency counsel to assist them with their Bermuda insolvency proceedings. The AGX Debtors will compensate Milligan on an hourly basis, and will reimburse the firm of actual, necessary expenses and other charges incurred. The attorneys and paraprofessionals primarily involved in providing the services and their current standard hourly rates are: John Milligan-Whyte Partner $450 Tim Fellows, Q.C. Special Counsel 450 Lesley Basden Associate 350 Jennifer Furbert Associate 200 (Global Crossing Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) Asia Global Crossing's 13.375% bonds due 2010 (AGCX10USR1) are trading at about 12 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AGCX10USR1 for real-time bond pricing. ASSOCIATED INDUSTRIES: S&P Cuts Ratings to Bpi Over Weak Capital ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its counterparty credit and financial strength ratings on Associated Industries Insurance Co., to 'Bpi' from 'BBpi'. "This rating action was based on AII's weak capital, weak liquidity, high geographic and product-line concentrations, and volatile operating performance," said Standard & Poor's credit analyst Allison MacCullough. Based in Boca Raton, Florida, AII writes only workers' compensation insurance. Its products are distributed primarily through independent general agents. The company, which began business in 1954, is licensed in Alabama, Florida, Georgia, and Mississippi. ATLAS AIR: Initiates Talks with Lenders about Financial Covenant ---------------------------------------------------------------- Atlas Air Worldwide Holdings, Inc., (NYSE:CGO) provided the following summary of certain of its operating results for the fourth quarter ending December 31, 2002. The Company also announced the appointment of Jeffrey H. Erickson to the position of acting President of Atlas Air Worldwide Holdings. The Company's third quarter Form 10Q and 2002 Form 10K to the SEC will be delayed until the ongoing re-audit of its annual financial results for fiscal years 2000 and 2001 has been completed. Chief Executive Officer Richard Shuyler said, "In the fourth quarter of 2002, both our scheduled service and charter services benefited from the disruption of port operations on the West Coast, primarily resulting in stronger yields, as well as strong demand from the US military. Although Atlas's traditional ACMI market is still depressed, we have adapted to today's market by shifting our operations towards maximizing military and commercial charter opportunities. Military charter demand has continued into the first quarter of 2003, and our fleet remains at near capacity operation as a result." Financial Results For a more detailed update regarding the Company's financial and operational performance in the fourth quarter 2002, please refer to the Form 8-K filed Friday by the Company with the SEC. Total operating revenues for the three months ended December 31, 2002, increased $129.9 million, or 45.8% to $413.7 million, primarily due to the inclusion of Polar Air Cargo's revenues in 2002 as well as strong military charter demand and commercial charter demand created by labor disruptions at West Coast ports. Revenues from traditional ACMI services were down 44.5%, or $67.8 million, compared to the same period during 2001. However, revenues from other contract services were up 201.1%, to $26.5 million year-over-year, and revenues from charter services were up 106.0%, to $153.3 million. For Atlas Air, operated block hours decreased 0.2% year over year, from 30,311 block hours operated during the fourth quarter of 2001, to 30,236 block hours in the same period in 2002. At Polar, total block hours operated were up 36.5% in the fourth quarter of 2002, compared to the same period in 2001, increasing from 10,929 to 14,922. The revenue and block hour information provided for Polar for the fourth quarter of 2001 does not include the period prior to Atlas Air Worldwide Holdings' acquisition of Polar on November 1, 2001. Liquidity As of December 31, 2002, the Company's cash and investment balance stood at $254.9 million on a consolidated basis at the end of the year and $228.4 million at Atlas Air, Inc. As of the same date, the Company's outstanding long-term debt, including the current portion, amounted to $930.6 million on a consolidated basis and $921.3 million at Atlas Air. Total future payments of long-term lease obligations, as of that date, amounted to $3.7 billion on a consolidated basis and $2.5 billion at Atlas Air. Debt Covenant and Lease Negotiations, Re-Audit Status Atlas has begun negotiating with some of its aircraft lessors to reduce or defer operating lease payments relating to five Boeing 747-200 and one Boeing 747-300 aircraft. At this time, Atlas has not made six lease payments, and may choose to defer others pending the outcome of the negotiations. After receiving a notice of lease termination for one Boeing 747-200, Atlas is in the process of returning that aircraft to its lessor. While the company is optimistic that the ongoing lease renegotiations will result in payments that better reflect market conditions, there can be no assurance that other lessors will not elect to exercise remedies available to them, including initiating litigation, under their leases in response to any non-payments. As previously reported, in January the Company entered into an agreement with its bank lenders to amend loan agreements to waive previously announced events of default. As part of this amendment, the bank lenders agreed to waive application of financial covenants contained in the loan agreements through March 31, 2003. Atlas Air is currently in discussions with its lenders to address financial covenant levels beyond March 31, 2003. It is likely that the Company will also have to seek additional waivers to extend the requirement for providing financial statements beyond such date. Information obtained from http://www.LoanDataSource.comshows that ATLAS AIR, INC., is the Borrower under a FOURTH AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 25, 2000 among and unidentified consortium of Lenders for which DEUTSCHE BANK TRUST COMPANY AMERICAS serves as the Administrative Agent. That loan agreement contains four key financial covenants: (1) MINIMUM LIQUIDITY. Atlas covenants with the Lenders that it will not permit its reserve of Unrestricted Cash and Cash Equivalents to be less than $200,000,000. (2) MINIMUM INTEREST COVERAGE RATIO. Atlas agrees in the near-term that the ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense will be at least: For the Fiscal Minimum Interest Quarter Ending Coverage Ratio -------------- ---------------- December 31, 2002 1.65:1.00 March 31, 2003 2.50:1.00 June 30, 2003 2.75:1.00 September 30, 2003 2.75:1.00 December 31, 2003 2.75:1.00 (3) MAXIMUM LEVERAGE RATIO. Atlas promises that it will not permit the ratio of (i) Consolidated Total Debt as of each date set forth below (less Cash and Cash Equivalents held by Company in excess of $25 million as of such date) plus seven times Consolidated Rental Payments (for the four fiscal quarter period ending with the most recently ended fiscal quarter) to (ii) Consolidated Adjusted EBITDA plus Consolidated Rental Payments to exceed: For the Fiscal Maximum Quarter Ending Leverage Ratio -------------- -------------- December 31, 2002 6.75:1.00 March 31, 2003 4.25:1.00 June 30, 2003 4.25:1.00 September 30, 2003 4.25:1.00 December 31, 2003 4.00:1.00 (4) MINIMUM CONSOLIDATED NET WORTH. Atlas agrees to maintain Consolidated Net Worth of no less than: Minimum Consolidated Testing Date Net Worth -------------- ------------ June 30, 2002 $400 million September 30, 2002 $380 million October 31, 2002 $385 million November 30, 2002 $385 million December 31, 2002 $400 million March 31, 2003 $450 million June 30, 2003 $450 million September 30, 2003 $450 million December 31, 2003 $450 million March 31, 2004 $450 million June 30, 2004 $450 million September 30, 2004 $450 million December 31, 2004 $450 million March 31, 2005 $450 million Commitments and Contingencies Atlas Air and Boeing have agreed to delay the delivery of one Boeing 747-400 aircraft, previously scheduled for delivery in October 2003, until September 2006. The Company has no obligations or commitments with respect to additional aircraft deliveries beyond the aircraft referred to here. Regulatory Matters The SEC notified the Company on October 17, 2002 that an informal investigation had begun, arising from the Company's October 16, 2002 announcement that it would restate its financial results for 2000 and 2001. The SEC has since formalized that investigation, and required, among other things, that the Company provide the SEC with certain documents. The Company intends to continue cooperating fully with the SEC in its investigation. Atlas Air Worldwide Holdings, Inc., is the parent company of Atlas Air, Inc., and of Polar Air Cargo, Inc. Atlas Air offers its customers a complete line of freighter services, specializing in ACMI (Aircraft, Crew, Maintenance, and Insurance) contracts, utilizing its fleet of Boeing 747 aircraft. Polar's fleet of Boeing 747 freighter aircraft specializes in time-definite, cost-effective, airport-to-airport scheduled airfreight service. Polar and Atlas Air are operated as separate subsidiaries of the Company. For more information, go to http://www.atlasair.com As reported in Troubled Company Reporter's January 27, 2003 edition, Standard & Poor's lowered its ratings on Atlas Air Worldwide Holdings Inc., and subsidiary Atlas Air Inc., following news of a payment default on an operating lease obligation. Ratings on both entities remain on CreditWatch with negative implications, where they were placed on October 17, 2002. Standard & Poor's lowered the corporate credit rating to 'CCC-' from 'B-' and senior unsecured debt to 'CC' from 'CCC'. Pass- through certificates Series 1998-1, Class A were lowered to 'BB' from 'BBB', Class B to 'B-' from 'BB-', and Class C to 'CCC+' from 'B+'. In addition, Series 1999-1, Class A-1 were lowered to 'BB' from 'BBB', Class A-2 to 'BB' from 'BBB', Class B to 'B+' from 'BB+', and Class C to 'CCC+' from 'B+'. Finally, Series 2000-1, Class A were lowered to 'BB+' from 'BBB+', Class B to 'B+' from 'BB+', and Class C to 'B-' from 'BB-'. The downgrades of the enhanced equipment trust certificates reflect the downgrade of Atlas Air Inc. BEYOND.COM: Judge Morgan Blasts Debtor's Liquidating Plan --------------------------------------------------------- The Honorable Marilyn Morgan refuses to approve a disclosure statement filed by Beyond.com Corporation because the underlying plan is patently unconfirmable. "The offensive plan provisions are not unique to this liquidating chapter 11 case and are not the brainchild of counsel for the debtor, but were copied from some other plan, apparently confirmed in some other jurisdiction and circulated as a model of creativity," Judge Morgan says. Beyond.com's liquidating chapter 11 plan is not confirmable chiefly, Judge Morgan opines, because it alters the Bankruptcy Code in derogation of the notice provisions that provide fundamental protections for creditors and because its thrust is to avoid judicial supervision unless it is convenient to the debtor or its professionals. Judge Morgan says that the Bankruptcy Court has a continuing oversight responsibility in liquidation cases that cannot be selectively invoked. "In its exuberance rewriting provisions of the Code, the author of the proposed plan overlooked the requirements of Sec. 1129(a), which provide a framework ensuring the integrity of the system. These defects cannot be cured," Judge Morgan explains, and won't allow Beyond.com to "rewrite the Bankruptcy Code to suit its purposes." Case Background During the height of the dot-com boomlet, Beyond.com's stock was publicly traded, raising $185 million from its initial and secondary offerings and $63 million from convertible notes. As of December 31, 2001, Beyond.com showed a net operating loss carry forward of $316,578,000. Beyond.com filed the bankruptcy case on January 24, 2002, after it had ceased operations. The United States Trustee appointed an official unsecured creditor's committee, consisting of five creditors, on February 6, 2002. Although not identified in the debtor's disclosure statement, the members of the official unsecured creditor's committee and the amounts of their claims are: LaSalle Bank, N.A. $15,274,000 Microsoft Corporation $20,595,308 Stellent Chicago, Inc. $100,000 Sento Corporation $107,349 Right Now Technologies $200,000 The debtor sold its on-line retail software operations in two unrelated sales. The eStore business sale to Digital River closed on March 31, 2002, and the Government Systems business sale to Softchoice closed on July 31, 2002. The disclosure statement reveals assets approximating $9,268,397, a significant portion of which consists of shares of publicly traded stock, and it estimates liabilities at $47,636,000. From the outset, a liquidating plan was the goal of the parties as the quickest method to distribute funds to creditors. The Liquidating Plan Beyond.com originally filed its plan on August 9, 2002. The plan is unusual in that it envisions that the reorganized debtor would "retain all of the rights, powers, and duties of a trustee under the Bankruptcy Code." The debtor's former Chief Operating Officer, John Barratt, would serve as a Liquidation Manager in accordance with a Liquidation Manager Agreement not a part of the court's record. Barratt's work would be supervised by the committee pursuant to Committee By-Laws, also not a part of the court's record. Among other things, the plan authorizes Barratt to "hold, sell, enter into derivative contracts for hedging, or otherwise dispose of the stock" upon majority approval of a subcommittee consisting of Barratt and two members of the committee, which is deemed approved twenty-four hours after written notice to the sub-committee. Post-confirmation, Barratt is authorized to retain and pay advisors regarding the stock, without supervision or limitation. Otherwise, he is authorized to abandon or sell assets valued at less than $50,000 only on notice to or with the consent of the committee. As to the employment of professionals, the disclosure statement, in a sentence certain to confound, provides: From time to time after the Effective Date, the Reorganized Debtor and/or the Committee may employ, engage the services of and compensate Persons and Professional Persons (which may include agents or independent contractors or Professional Persons previously or concurrently employed by the Committee or previously employed by the Debtor including, without limitation, Committee Counsel, Debtor's Counsel, Debtor's special counsel, Committee Accountants and Debtor's Accountants), reasonably necessary to assist the Liquidation Manager in performing his duties under this Plan, without the necessity of further authorizations by the Bankruptcy Court, provided that the Liquidation Manager shall not hire a Professional Person except upon either (1) consent of the Committee or (2) Bankruptcy Court authorization granted upon no less than ten (10) days notice to the Committee and Debtors' Counsel; provided, further, after the Confirmation Date, the Reorganized Debtor and/or the Committee may retain Debtor's accountants, Debtor's Counsel, Debtor's brokers or agents, Committee Counsel, Committee's accountants and Committee's financial advisor, as professionals without further action by the Committee or order of the Bankruptcy Court. Additionally, Barratt, may either act as the disbursing agent or engage one. As to litigation claims, the disclosure statement provides that all of the estate's claims and causes of action as set forth in Exhibit "A" (litigation listed in the Statement of Affairs) and Exhibit "C" attached to the disclosure statement may be asserted by the Liquidation Manager and the Committee, but that the debtor has not had an adequate opportunity to complete its review of these claims and will not have identified all potential defendants by the time of plan confirmation. Exhibit "C" entitled "Retained Claims and Defenses" is a five page document. The preface to the exhibit explains that "[t]he inclusion of a particular claim, including but not limited to claims against insiders and or (sic) officers of the Debtor, does not indicate an endorsement or opinion on the validity or merits of a particular claim." Sub-paragraphs (a) through (p) are generally generic in substance, except that Barratt is identified by name twice and implicated in a third paragraph. Of particular concern are the following paragraphs: The term "Retained Claims and Defenses" is broadly defined in the Plan to mean: All claims . . . (including but not limited to those arising under Bankruptcy Code sections 542, 543, 544, 545, 546, 547, 548, 549, 550, 551, and 553), which . . . arise out of, or are related to any of the following: (a) All claims, causes of action and defenses against the current and/or past officers and/or directors of the Debtor, including but not limited to . . . John Barratt . . . including claims, causes of action and defenses arising out of or related to breach of duty, negligence, mismanagement and/or excessive compensation together with all claims, recoveries, and proceeds of and rights in and under any insurance policies therefore, including but not limited to the Directors and Officers Liabilities Insurance policies. . . . * * * (c) All claims causes of action, defenses, rights of offset or recoupment, fraudulent transfer claims, avoidance and recovery of preferential transfers and other bankruptcy avoidance actions, and all rights and remedies including contractual subordination or equitable subordination of claims, against or with respect to current and/or past officers and/or directors of the Debtor, including but not limited to . . . John Barratt . . . with respect to the Executive Trust. * * * (j) All claims and causes of action, including bankruptcy avoidance powers, against any present or former officer or employee of the Debtor on account of payments of salary, severance pay, termination pay, employee benefits, or other compensation which Debtor paid or became obligated to pay within four (4) years prior to the Petition Date. Elsewhere in the disclosure statement the Executive Trust referenced above is explained. Prior to the creation of the Executive Trust, Beyond.com had contracted to pay as severance one year's salary and bonus totaling $2,300,000 for its five executives, including Barratt. According to the disclosure statement, the Executive Trust was created in November, 2001, six weeks before filing, to provide a mechanism to fund that obligation and to revise executive incentives. It is perhaps noteworthy that the board of directors received advice from current counsel for the debtor regarding its duties to "various stakeholders" and that the five executives were represented by independent counsel. Merrill, Lynch Trust Co. F.S.B., as trustee, distributed half of the severance obligations as a result of certain triggering events, specifically, the filing of the bankruptcy petition, non-payment of regular executive compensation, cessation of business and termination of employment. The remaining half of the Executive Trust was funded in January, 2002, when the board of directors authorized a contract to sell the operating businesses on favorable terms, but before the filing of the bankruptcy case. These funds were to be distributed one half upon consummation of a sale in excess of $5 million for the eStore business and the remainder upon consummation of a sale in excess of $5 million for the Government Systems business. However, after the filing of the case, the favorable contract failed and the sales targets were not met, resulting in the return by Merrill, Lynch of $1,150,000 to the estate. The plan also provides that either Barratt or the committee, on ten days' notice to the other and to a "Post-Effective date Limited Notice List" could modify or amend the plan or request "instructions" from the court with respect to "authority to undertake certain actions or to refrain from taking actions under this Plan." For these services, Barratt would be paid at an hourly rate of $225, a minimum monthly payment of $10,000, for an "initial term" of nine months. As to the disclosure statement's liquidation analysis, the sole asserted difference between the costs of liquidating in chapter 11 versus chapter 7 is the assumption that a chapter 7 trustee would receive the statutory maximum fee of $301,601, while Barratt's "initial 9 month budget" proposes to cost a mere $255,000. Post-confirmation legal fees are estimated at $100,000 in the chapter 11 analysis but are estimated at $150,000 in the chapter 7 analysis. At the insistence of the United States Trustee, a provision titled "Channeling of Claims," which purported to preclude post- confirmation date claims against the estate, the reorganized debtor and the liquidation manager, was deleted from the final version of the plan and disclosure statement filed with the court. However, other provisions remain that attempt to limit the personal liability of Barratt and the committee for acts performed in their official capacities. DISCUSSION Conceptually, Beyond.com's plan and disclosure statement is as freewheeling with the Bankruptcy Code and Rules as Enron's accountants were with the tax laws in the 1990s. There are many reasons why the disclosure statement before the court should not be approved. However, this decision focuses on the requirements of 11 U.S.C. Sec. 1129(a), specifically Sec. 1129(a)(1), requiring compliance with the applicable provisions of Title 11, Sec. 1129(a)(4), requiring that payments for services in connection with the case be approved by the court as reasonable, 1129(a)(5) requiring disclosure of the identity and affiliations of individuals proposed to serve as directors, officers or voting trustees of the debtor and that the appointment or continuance in such office be consistent with the interests of creditors and with public policy, and Sec. 1129(a)(11), requiring that confirmation of the plan not likely be followed by the need for further financial reorganization. 1. Compliance with Applicable Provisions of Title 11. Section 1129(a)(1) provides: (a) The court shall confirm a plan only if all of the following requirements are met: (1) The plan complies with the applicable provisions of this title. This section provides that the bankruptcy court has the power to confirm a plan only if it complies with applicable provisions of the Bankruptcy Code. See In re Lowenschuss, 67 F.3d 1394, 1401 (9th Cir. 1995), cert. denied, 517 U.S. 1243 (1996); In re Commercial Western Finance Corp., 761 F.2d 1329, 1338 (9th Cir. 1985). Beyond.com's proposed plan contains numerous provisions that modify the requirements of the Bankruptcy Code. Of greatest concern to the court are those provisions that dramatically reduce notice to creditors of matters that the drafters of the Bankruptcy Code and Rules considered fundamental to bankruptcy due process. Notice, after all, is the cornerstone underpinning bankruptcy procedure. In re Savage Industries, Inc., 43 F.3d 714, 720 (1st Cir. 1994); In re Hexcel Corp., 239 B.R. 564, 567 (N.D. Cal. 1999). For example, the plan grants the Liquidation Manager the authority under the plan to dispose of property and to engage in agreements without court order or compliance with Sec. 554 and Bankruptcy Rule 6007 regarding the abandonment of property of the estate, Secs. 327 and 330 and Bankruptcy Rules 2002, 2014, and 2016 regarding the retention and compensation of professionals, Sec. 1127 regarding modification of the confirmed plan, Sec. 363 and Bankruptcy Rules 2002 and 6004 regarding the sale of property of the estate, and Bankruptcy Rules 2002 and 9019 regarding compromises or settlements of controversies. The modifications to the applicable provisions of title 11 are not minor, ministerial or simply pragmatic. In effect, the plan affords the reorganized debtor the prerogative to comply selectively with the provisions of the Bankruptcy Code and Rules without judicial supervision. A more cynical view suggests that providing the least notice to the fewest people reduces oversight. Accordingly, the plan fails to satisfy the requirements of Sec. 1129(a)(1). 2. Approval by the Court of Services in Connection with the Case as Reasonable. Section 1129(a)(4) provides: Any payment made or to be made by the proponent, by the debtor, or by a person issuing securities or acquiring property under the plan, for services or for costs and expenses in or in connection with the case, or in connection with the plan and incident to the case, has been approved by, or is subject to the approval of, the court as reasonable. This section mandates full disclosure of all payments for services, costs, and expenses in connection with the case and subjects the reasonableness of these payments to the scrutiny and approval of the court. In re Future Energy Corp., 83 B.R. 470, 488 (Bankr. S.D. Ohio 1988). It ensures compliance with the policies of the Code that the bankruptcy court should police the awarding of fees in title 11 cases and that holders of claims and interests should have the benefit of information that might affect the claimants' decision to accept or reject the plan. Id. The requirements under Sec. 1129(a)(4) are two-fold. First, there must be disclosure. Second, the court must approve of the reasonableness of payments. 7 Collier on Bankruptcy par. 1129.03[4]. Here, the debtor's plan can't estimate the cost of services because it is premature. The debtor has not yet announced what litigation it will pursue. At a minimum, however, there appears to be a likelihood of significant litigation over the Digital River sale, the Executive Trust, and possibly the Softchoice sale. As a result, the generalized projection provided to creditors in the liquidation analysis of the disclosure statement may become so understated as to be meaningless. The plan fails to satisfy the requirements of Sec. 1129(a)(4). 3. Disclosure of Identity and Affiliations of Individuals and Governance Consistent with the Interests of Creditors and Public Policy. Section 1129(a)(5) provides: (A) (i) The proponent of the plan has disclosed the identity and affiliations of any individual proposed to serve, after confirmation of the plan, as a director, officer, or voting trustee of the debtor, an affiliate of the debtor participating in a joint plan with the debtor, or a successor to the debtor under the plan; and (ii) the appointment to, or continuance in, such office of such individual, is consistent with the interests of creditors and equity security holders and with public policy. . . . This section contains a blend of disclosure and substantive requirements. 7 Collier on Bankruptcy par. 1129.03[5](15th ed. rev. 2002). While the disclosure statement identifies Barratt as the initial Liquidation Manager, it fails adequately to disclose his affiliations. In particular, it fails to disclose the terms of the agreement that governs Barratt's duties. As a former executive of the debtor, Barratt is subject to potential conflicts of interest, particularly with respect to the administration of the Executive Trust. Notably, the Executive Trust was created as a vehicle that allowed Beyond.com executives, presumably including Barratt, to receive 50% of their "golden parachutes," an amount substantially in excess of the less than 20% distribution anticipated to other unsecured creditors of the estate. Barratt and the committee have the responsibility of deciding whether to sue the executives to recover the funds. Under the plan, the official committee of unsecured creditors is charged with monitoring and supervising the activities of the Liquidation Manager. While the express language of Sec. 1129(a)(5)(A)(i) does not require it, some courts have extended the reach of the section to include individuals such as the committee members in this case. Id. at par. 1129.03[5][a]. See, e.g., In re Valley View Shopping Center, L.P., 260 B.R. 10, 23 (Bankr. D. Kan. 2001); In re Holley Garden Apartments, Ltd., 238 B.R. 488, 493 (Bankr. M.D. Fla. 1999). But see In re Eagle- Picher Industries, Inc., 203 B.R. 256, 267 (S.D. Ohio 1996). The disclosure statement fails to disclose the identities or affiliations of the members of the official committee of unsecured creditors. It also fails to disclose the terms of the committee's bylaws, which generally dictate its duties and rules of governance. Once disclosed, the court makes a substantive determination under Sec. 1129(a)(5)(A)(ii) whether post-confirmation management serves the interests of creditors and equity security holders and is consistent with public policy. See In re Sovereign Group, 1984-21 Ltd., 88 B.R. 325, 329 (Bankr. D. Colo. 1988). Continued service by prior management may be inconsistent with the interests of creditors, equity security holders, and public policy if it directly or indirectly perpetuates incompetence, lack of discretion, inexperience, or affiliations with groups inimical to the best interests of the debtor. In re Polytherm Industries, Inc., 33 B.R. 823, 829 (W.D. Wis. 1983). While the court is not prepared to find that the service of Barratt as Liquidation Manager is unfit, or that management by Barratt or the committee is contrary to the interests of parties in this case or against public policy, the disclosures to date are insufficient to enable the court to conclude that the converse is true. Without adequate disclosures, the court cannot conduct an intelligent analysis of whether the continuance of those parties in their roles is consistent with the interests of creditors and equity security holders and with public policy. Based on the record presently before the court, it appears there are insufficient safeguards with respect to post-confirmation governance of the debtor to ensure that the interests of creditors and equity security holders are protected. For these reasons, the requirements of Sec. 1129(a)(5) have not been satisfied. 4. Not Likely to be Followed by the Need for Further Financial Reorganization. Section 1129(a)(11) provides: (11) Confirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan. The feasibility requirement requires courts to scrutinize carefully the plan to determine whether it offers a reasonable prospect of success and is workable. In re Acequia, Inc., 787 F.2d 1352, 1364 (9th Cir. 1986); 7 Collier on Bankruptcy par. 1129.03[11]. The Bankruptcy Code does not allow modification after substantial consummation, which generally occurs soon after the effective date. However, the proposed plan expressly anticipates modification and implements procedures for modification. Plan modification necessarily requires further financial reorganization. See In re Hoffman, 52 B.R. 212, 215 (Bankr. D. N.D. 1985). For this reason, the requirements of Sec. 1129(a)(11) are not met. BRANT POINT: Fitch Affirms BB Rating on Class D Sr Secured Notes ---------------------------------------------------------------- Fitch Ratings affirms two classes of notes issued by Brant Point CBO 1999-1, Ltd. These affirmations are the result of Fitch's annual review process. The following rating actions are effective immediately: -- $48,750,000 class C third priority senior secured notes 'BBB-'; -- $18,118,214 class D fourth priority senior secured notes 'BB'. Fitch does not rate the class A or class B notes of Brant Point. Brant Point is a collateralized bond obligation managed by Sankaty Advisors, Inc. Fitch has reviewed in detail the portfolio performance of Brant Point. In conjunction with this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. The Brant Point portfolio has experienced some deterioration since its inception with a cumulative reduction in its overcollateralization levels of between 6% and 8% on average. The current portfolio has 7% in defaulted securities and 12% in securities rated 'CCC+' or lower (excluding defaults). Sankaty has been successfully managing this portfolio, trading premium securities and reinvesting the proceeds in par assets without further reducing the credit quality of the portfolio. Despite some of the deterioration in the portfolio, Brant Point is performing well due to some of the deal's structural features, including the ability of the asset manager to keep equity distributions in the deal and a $10 million interest reserve account that is still fully available, is not included in the coverage test calculations and provides additional support to the deal in the event that a coverage test is breached. Very few other transactions of this vintage contain the same interest reserve account feature. Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. As a result of this analysis, Fitch has determined that the original ratings assigned to the class C and D notes still reflect the current risk to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments. BUDGET GROUP: Court Fixes April 30, 2003 as Claims Bar Date ----------------------------------------------------------- Budget Group Inc., and its debtor-affiliates sought and obtained a Court order establishing April 30, 2003 at 4:00 p.m. as the final date and time for filing proofs of claim on account of claims arising, or deemed to have arisen prior to the Petition Date. Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor, in Wilmington, Delaware, relates that the Bar Date Order provides that each person or entity that asserts a Prepetition Claim against any of the Debtors must file a separate and original proof of claim that substantially complies with Official Bankruptcy Form 10 against that Debtor so as to be received on or before the Bar Date by Trumbull Services, LLC, the Court approved claims and noticing agent in these Chapter 11 cases. Proofs of Claim will be deemed timely filed only if actually received by Trumbull on or prior to the Bar Date. These persons or entities are not required to file a Proof of Claim on or before the Bar Date: A. any person or entity that has already properly filed a Proof of Claim against one or more of the Debtors with Trumbull or the Clerk of the Court for the United States Bankruptcy Court for the District of Delaware; B. any person or entity: 1. whose claim is listed in the Schedules or any of its amendments; 2. whose claim is not described in the Schedule as "disputed," "contingent," or "unliquidated,"; or 3. who does not dispute the amount or classification of its claim as set forth in the Schedules; C. professionals retained by the Debtors or the Committee pursuant to orders of this Court who assert administrative claims for fees and expenses subject to the Court's approval pursuant to Sections 330, 331(a) and 503(b) of the Bankruptcy Code; D. any person or entity that asserts an administrative expense claim against the Debtors pursuant to Section 503(b) of the Bankruptcy Code; E. the Debtors' current officers and directors who assert claims for indemnification and contribution arising as a result of these officers or directors' services to the Debtors; F. any person or entity whose Prepetition Claim is limited exclusively to a claim for the repayment by the applicable Debtor of principal, interest and other applicable fees and charges on or under the 9.125% Senior Notes due April 1, 2006, the 6.85% Convertible Subordinated Notes due April 29, 2007, the 6.25% Remarketable Term Income Deferrable Equity Securities or the indentures in respect of any of these securities and notes; provided, however, that: 1. these securities and notes do not apply to the indenture trustees under the Indentures; 2. the indenture trustees under the Indentures are required to file Proofs of Claim on account of Note Claims under the applicable Note Instruments on or before the Bar Date; and 3. any holder of the 9.125% Notes, the 6.85% Notes and the 6.25% Notes that wishes to assert a Prepetition Claim against the Debtors arising out of or relating to a Note Instrument, other than a Note Claim, is required to file a Proof of Claim on account of the claim on or before the Bar Date; G. any Debtor asserting a claim against another Debtor; H. any direct or indirect non-debtor subsidiary of a Debtor asserting a claim against a Debtor; and I. any person or entity whose claim against the Debtors has been allowed by an order of the Court entered on or before the Bar Date. The Debtors propose that any person or entity that asserts a claim against them arising from the rejection of an executory contract or unexpired lease where the order authorizing the rejection is entered on or before February 28, 2003 must file a Proof of Claim based on the rejection on or before the Bar Date. Any person or entity that asserts a claim against the Debtors arising from the rejection of an executory contract or unexpired lease where the order authorizing the rejection is entered after February 28, 2003 must file a Proof of Claim on or before the date as the Court may fix. Mr. Brady tells the Court that the Debtors do not intend for the Bar Date to apply to the filing of proofs of interest. Under the Bar Date Order, any person or entity holding an equity interest in the Debtors, whose interest is based exclusively on the ownership of common or preferred stock in the Debtors, or warrants or rights to purchase, sell or subscribe to the stock, need not file a Proof of Claim based solely on account of the Interest Holder's ownership of the Debtors' stock. However, any Interest Holder who wishes to assert a claim against any of the Debtors based on transactions in the Debtors' securities including claims for damages or rescission based on the purchase or sale of the Debtors' securities must file a Proof of Claim on or before the Bar Date. The Bar Date Order also provides that in case the Debtors amend their Schedules subsequent to giving notice of the Bar Date, the Debtors will give notice of any amendment to the persons or entities affected, and the persons or entities will be afforded 20 days from the date the notice is given in accordance with Del. Bankr. L.R. 1009-2 to file Proofs of Claim, if necessary, or be forever barred from doing so. Pursuant to Rule 3003(c)(2) of the Federal Rules of Bankruptcy Procedure, any person or entity that is required to file a timely Proof of Claim in the form and manner specified in the Bar Date Order and that fails to do so on or before the Bar Date: -- will be forever barred, estopped and enjoined from asserting the claim against the Debtors; -- will not, with respect to the claim, be treated as a creditor of the Debtors for the purpose of voting on any plan in these proceedings; and -- will not receive or be entitled to receive any payment or distribution of property from the Debtors or their successors or assigns with respect to the claim. The Debtors intend to provide notice of the Bar Date by mailing a copy of the Bar Date Notice together with a Proof of Claim form by United States mail, first class postage prepaid, to these persons and entities: -- the Office of the United States Trustee; -- counsel to the Committee; -- counsel to the Agent for the Debtors' prepetition secured lenders; -- counsel to the Agents for the Debtors' postpetition debtor-in-possession financing lenders; -- all persons and entities who have requested notice pursuant to Bankruptcy Rule 2002 as of the date of the Bar Date Order; -- all persons or entities listed in the Schedules; -- all known parties to executory contracts or unexpired leases with the Debtors; -- all known holders of equity securities in the Debtors as of the Petition Date; -- all indenture trustees under the Indentures; -- all taxing authorities for the jurisdictions in which the Debtors maintained assets or conducted business up to one year prior to the Petition Date; -- all known holders of Prepetition Claims against the Debtors and their counsel, if known; and -- all of the Debtors' current employees and all persons employed by the Debtors up to one year prior to the Petition Date. In addition to the Bar Date Notice, the Debtors also intend to provide all: -- Employees with a memorandum, describing the circumstances in which Employees may need to file Proofs of Claim; -- parties to executory contracts and unexpired leases assumed and assigned by the Debtors to Cherokee pursuant to the Asset & Stock Purchase Agreement with a memorandum, addressing the need for the contract parties to file Proofs of Claim; -- creditors whose claims against the Debtors were assumed by Cherokee pursuant to the ASPA with a memorandum, addressing the need for the creditors to file Proofs of Claim; and -- persons or entities who have already properly filed a Proof of Claim against the Debtors with a memorandum, informing the creditors that they need not file another Proof of Claim. Furthermore, the Debtors intend to provide notice of the Bar Date to unknown creditors by publishing a copy of the notice at least once 30 days prior to the Bar Date in the national and global editions of The Wall Street Journal and in the national editions of The New York Times and USA Today. In the Debtors' judgment, these publications are likely to reach the widest possible audience of creditors who may not otherwise have notice of these proceedings. The Bar Date Notice and the Publication Notice will: -- set forth the Bar Date; -- advise creditors under what circumstances they may file a Proof of Claim in respect of a Prepetition Claim under Bankruptcy Rules 3002(a) and 3003(c)(2) or an order of this Court, as applicable; -- alert creditors to the consequences of failing to timely file a Proof of Claim, as set forth in Bankruptcy Rule 3003(c)(2) or an order of this Court, as applicable; -- set forth the address to which Proofs of Claim must be sent for filing; and -- notify creditors that: 1. Proofs of Claim must be filed with original signatures; and 2. facsimile or e-mail filings of Proofs of Claim are not acceptable and are not valid for any purpose. The Debtors assert that the Bar Date Notice and the Publication Notice will provide creditors with sufficient information to file properly prepared and executed Proofs of Claim in a timely manner. (Budget Group Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) BURLINGTON INDUSTRIES: BIT Hires Southern Caswell as Auctioneers ---------------------------------------------------------------- Debtor B.I. Transportation seeks the Court's authority to employ and retain Southern Caswell Auctioneers, Inc., as auctioneers for the sale of certain excess equipment and personal property. Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, informs the Court that B.I. Transportation is seeking to sell certain tractors, tanker trailers, and related items -- the "Rolling Stock" -- and miscellaneous equipment, personal property and vehicles. B.I. Transportation does not believe that it would be cost effective to seek to sell each Asset by private sale. Accordingly, B.I. Transportation is seeking to retain SCA to sell the Assets at auction pursuant to the Personal Property Auction Contracts between B.I. Transportation and SCA, dated January 31, 2003. "Pursuant to the SCA Contracts, SCA will conduct two auctions of the Assets," reveals Mr. DeFranceschi. The Debtors estimate that the Auctions will produce between $150,000 and $230,000 in gross proceeds. At the conclusion of each Auction, SCA will be entitled to a commission equal to 8% of the gross proceeds of each Auction. Mr. DeFranceschi adds that SCA will also provide these services: (a) advertise the Auctions in local publications, flyers and on SCA's Internet website; (b) tag the Assets for proper identification; and (c) keep proper records of the sales completed at the Auctions, which will be provided to B.I. Transportation at the conclusion of the Auctions. SCA has nearly 30 years of experience in conducting auctions of items and has successfully completed over 500 auctions. In addition, because of its longevity and experience, SCA has significant contacts in the community and surrounding areas where the Assets are located. Accordingly, B.I. Transportation believes that SCA is well qualified to be retained as its auctioneer for the Assets. Harvey L. Tate, the owner of SCA, informs Judge Newsome that SCA does not represent or hold any interest adverse to the Debtors or their estates with respect to the matters on which it is to be employed. Furthermore, SCA does not have any connection with any creditor or other parties-in-interest, or their attorneys or accountants, or the U.S. Trustee or any of its employees except as set forth in his Affidavit. Under the SCA Contracts, and upon the Court's approval, SCA is entitled to payment of the Commission upon the conclusion of each Auction. Mr. DeFranceschi submits that the Commission is a reasonable and customary fee for SCA's services with respect to a sale of the magnitude of the sale of the Assets. Thus, B.I. Transportation seeks a Court Order: (a) authorizing the Debtors to retain and employ SCA as their auctioneer to facilitate the sale of the Assets, pursuant to Section 327(a) of the Bankruptcy Code; and (b) pay to SCA the Commission without further application to or order of the Court. (Burlington Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) Burlington Industries' 7.25% bonds due 2005 (BRLG05USR1) are trading at about 38 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BRLG05USR1 for real-time bond pricing. CABLE SATISFACTION: Brings-In Rothschild for Financial Advice ------------------------------------------------------------- Cable Satisfaction International Inc., has retained the services of Rothschild as financial advisor and formed a Special Committee of its Board of Directors. The mandate of the Special Committee is to review and evaluate the alternatives for meeting the financial needs of the Company and its subsidiary Cabovisao - Televisao por Cabo, S.A., and to negotiate with secured lenders, noteholders and potential investors. Alternatives include a debt restructuring, recapitalization, potential capital infusion or other types of transactions, including a possible court supervised restructuring. In its capacity as financial advisor, Rothschild will advise and make recommendations to the Special Committee during this process. There can be no assurance as to the outcome of the Company's discussions with secured lenders, noteholders and potential investors. The Company did not make the scheduled March 3rd 2003 interest payment on its 12.75% Senior Notes due 2010. Under the indenture governing the notes, the Company has a 30-day grace period until March 31, 2003 to make the payment in order to avoid an event of default. Concurrently, the Company announced a further extension of waivers pertaining to its secured bank debt until March 26, 2003. Csii is in discussions with secured lenders, its noteholders and potential investors. The objective of these discussions is to reach a consensual agreement on a long-term solution to the Company's financial requirements and those of Cabovisao. Csii builds and operates large bandwidth (750 Mhz) hybrid fibre coaxial networks and, through its subsidiary Cabovisao - Televisao por Cabo, S.A. provides cable television services, high-speed Internet access, telephony and high-speed data transmission services to homes and businesses in Portugal through a single network connection. The subordinate voting shares of Csii are listed on the Toronto Stock Exchange (TSX) under the trading symbol "CSQ.A". CEDRIC KUSHNER: Sept. 30 Working Capital Deficit Tops $7 Million ---------------------------------------------------------------- The revenues of Cedric Kushner Promotions Inc., decreased by approximately $4,438,000, to $1,869,000 for the three months ended September 30, 2002, from $6,307,000 for the three months ended September 30, 2001. While the number of televised events promoted were equal at eight events during each period, the average size of the events decreased significantly from approximately $555,000 per event during the three months ended September 30, 2001 to $171,000 for the same period in 2002. This decrease was due to relatively fewer premium cable licensing fees due to the expiration of contracts with premium level boxers. In addition, the Company had a decrease in activity from its talent command premium cable licensing fee. The revenue for the three months ended September 30, 2002 includes $500,000 from the assignment of a boxer's contract to another promoter. Costs of revenue decreased by approximately $3,710,000, to $2,183,000 for the three months ended September 30, 2002, from $5,893,000 for the three months ended September 30, 2001. Costs declined corresponding with the number and dollar volume of events promoted by the Company. Revenues decreased by approximately $840,000, to $13,604,000 for the nine months ended September 30, 2002, from $14,444,000 for the nine months ended September 30, 2001. The number of televised events promoted increased slightly during the period ended September 30, 2002 to 23 events from 19 during the same period the previous year. However the average size of the events decreased from approximately $760,000 per event during the nine months ended September 30, 2001 to $570,000 for the same period in 2002. This decrease was due to relatively fewer premium cable licensing fees due to the expiration of contracts with premium level boxers. In addition, the Company had a decrease in activity from its talent command premium cable licensing fee. The revenue for the nine months ended September 30, 2002 includes $500,000 from the assignment of a boxer's contract to another promoter. Costs of revenue decreased by approximately $72,000, to $13,329,000 for the nine months ended September 30, 2002, from $13,401,000 for the nine months ended September 30, 2001. Costs declined corresponding with the number and dollar volume of events promoted by the Company. At September 30, 2002, the Company had deficiencies in working capital of approximately $7,402,000 and an accumulated deficit of $11,380,000 and there is substantial doubt about the Company's ability to continue as a going concern unless it is able to obtain additional financing. There can be no assurance that sufficient funds required during the next twelve months or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Further, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing shareholders. There is substantial doubt about the Company's ability to continue as a going concern. CELLSTAR CORP: Says Funds Sufficient to Meet Cash Requirements -------------------------------------------------------------- CellStar Corporation (Nasdaq: CLST) announced results for the fiscal year and fourth quarter ended November 30, 2002. For the fiscal year ended November 30, 2002, the Company reported revenues of $2.2 billion compared to $2.4 billion for fiscal 2001. The Company reported a consolidated net loss of $29.9 million for fiscal 2002 compared to $0.6 million of consolidated net income for fiscal 2001. The Company's results include non- cash tax provisions of $44.2 million related to a change in accounting treatment for undistributed earnings, of which $42.2 million related to the Company's operations in the Asia Pacific Region and $2.0 million related to operations in Sweden, The Netherlands and Colombia. Excluding the non-cash tax provisions, the Company earned net income of $14.3 million for the year ended November 30, 2002. For the fourth quarter of fiscal 2002, the Company reported a consolidated net loss of $41.6 million compared to a net loss of $1.4 million in the fourth quarter of fiscal 2001. Excluding the non-cash tax provisions in 2002, the Company reported consolidated net income of $2.6 million for the fourth quarter of 2002. The number of fully diluted shares the Company uses to determine per-share data varies depending on whether the Company reports net income or a net loss. When reporting per-share losses, the Company uses approximately 12 million shares. However, the Company uses approximately 20 million shares when reporting per- share income in the fourth quarter of 2002, the difference primarily being the effect of the convertible bonds issued upon completion of the exchange offer earlier in fiscal 2002. For fiscal 2002, the net loss per share was $2.44 compared to net income of $0.05 per fully diluted share in 2001. For the fourth quarter of fiscal 2002, the Company reported a consolidated net loss of $3.29 per share, compared to the fourth quarter of fiscal 2001 when the Company reported a consolidated net loss of $1.4 million, or $0.12 per share. Revenues for the fourth quarter ended November 30, 2002, were $471.1 million, compared to $605.3 million for the fourth quarter of fiscal 2001. The decline was due to changes in market conditions in Asia, soft holiday sales and operations exited earlier in the year. In China, the market share for lower-end product produced by local Chinese manufacturers increased significantly during fiscal 2002. As a result, CellStar's revenues in China have been materially impacted because the Company primarily distributes higher-end products in China. "Despite our disappointment in fourth quarter revenues, particularly in China, we are pleased to report a profit for fiscal 2002, excluding the non- cash tax provisions. 2002 was a very challenging year in the wireless communications business," said Chief Executive Officer, Terry Parker. "We have stressed all year long that we should be measured on operating results and not top line growth, and, excluding the non-cash tax provisions in the fourth quarter, we have delivered." In the quarter ended November 30, 2002, the Company recorded U.S. Federal income taxes on the undistributed earnings of the Asia Pacific Region of approximately $42.2 million, resulting from a change in its historical accounting treatment for undistributed earnings of its Asia Pacific Region subsidiaries. The Company recently announced that it intends to pursue a possible initial public offering in Asia of its China, Hong Kong and Taiwan operations in 2003. The offering is designed to allow the Company to withdraw and return to the U.S. some or all of the value of those operations, which the Company believes is not currently reflected in the market price of the Company's stock. As a result, the Company is required by generally accepted accounting principles to account for the earnings in its Asia Pacific Region as no longer permanently reinvested. Prior to the fourth quarter of 2002, the Company did not provide for U.S. Federal income taxes or tax benefits on the undistributed earnings or losses of its international subsidiaries because earnings were reinvested and, in the opinion of management, would continue to be reinvested indefinitely. Accordingly, there was no liability recorded for such potential U.S. Federal income taxes. The non-cash tax provisions made in the fourth quarter were for book purposes only, and payment of taxes, if any, would be due only upon realization of the proceeds from an offering or otherwise upon the return of earnings to the U.S. The Company has net operating loss carryforwards in the U.S. of approximately $70 million and believes it will be able to utilize a significant portion of these net operating loss carryforwards to offset the taxes payable in the event a transaction is completed. Therefore, the Company does not expect the payment of any taxes associated with the possible offering to significantly impact the cash position of the Company. Furthermore, the Company will have cash proceeds from any such transaction to fund the actual payment of such taxes. "We are taking this step to enhance the Company's financial position as well as its market valuation. We have made an investment in our Greater China Operations and built a substantial market share. However, because we believe the value of our Greater China Operations is not adequately reflected in the price of our stock today on the U.S. stock market, our stockholders have not received the benefit of this investment," said Mr. Parker. "We believe the unfamiliarity with the China marketplace and a fear of the political climate in China causes U.S. investors to heavily discount the value of the operation. Therefore, we feel it is appropriate to consider an offering on an Asian stock exchange so the operation can be valued on its own merits." There can be no assurance that the proposed initial public offering will occur. Any securities that may be offered in the United States will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. Securities laws restrict the disclosure of information about the initial public offering at this time. The Company will make announcements about the initial public offering when it is permitted under applicable securities laws. Consistent with the change in historical accounting treatment for undistributed earnings discussed above, the Company also recorded a $2.0 million non-cash tax provision in the fourth quarter of 2002 for the undistributed earnings from Sweden, The Netherlands and Colombia. These previously undistributed earnings are no longer considered permanently reinvested following the Company's evaluations of these markets. Gross profit declined from $135.8 million in fiscal 2001 to $130.8 million in 2002, while gross margin improved to 5.9% from 5.6% in 2001. Gross profit for the fourth quarter was $26.4 million compared to $35.7 million in the fourth quarter of last year, and gross margin was 5.6% compared to 5.9% in 2001. Selling, general and administrative (SG&A) expense was $112.7 million or 5.1% of revenues in fiscal 2002 compared to $113.8 million or 4.7% of revenues in fiscal 2001. SG&A decreased primarily as a result of exited operations and a decrease in bad debt partially offset by increases in insurance premiums and senior management transition costs. SG&A expense was $21.8 million or 4.6% of revenues for the fourth quarter of 2002 compared to $32.9 million or 5.4% of revenues for the fourth quarter of 2001. SG&A decreased primarily as a result of exited operations, lower bad debt expense and payroll costs. Interest expense for fiscal 2002 was $7.6 million compared to $15.4 million in 2001. For the fourth quarter of fiscal 2002 and 2001, interest expense was $1.2 million and $2.9 million, respectively. The variances are due primarily to the accounting for interest expense on bonds issued upon completion of the exchange offer on February 20, 2002. Generally accepted accounting principles require that the gain on the securities retired be reduced by the amount of the future interest payments on the new securities issued. Consolidated Balance Sheet Cash, cash equivalents, and restricted cash at the end of the fourth quarter declined to $53.0 million from $77.4 million at the end of the preceding quarter. The decline was a result of cash used for the retirement of the 5% Convertible Subordinated Notes that matured on October 15, 2002, lowering of the Company's domestic credit line borrowings, and reduction of loans outstanding in Asia. Accounts receivable were $175.1 million at the end of the fourth quarter, compared to $181.4 million at the end of the third quarter. Accounts receivable were down $40.9 million or 19% from the fourth quarter of 2001, primarily due to the conversion of a major customer to consignment. Accounts receivable days sales were 33.2 compared to 31.5 in the third quarter, but were still better than the Company's target range of 35 to 40 days. Inventory at the close of the fourth quarter was $163.2 million compared to $165.3 million at the end of the third quarter and turned at an annualized rate of 9.7 times. Inventories were down $55.7 million or 25% from November 30, 2001, due largely to the conversion of a major customer to consignment as well as overall improved inventory management. For the full year, the Company generated cash flow from operations of $37.2 million. In the fourth quarter, cash flow from operations was $20.2 million. "During 2002, CellStar had many significant achievements. We were profitable excluding the non-cash tax provisions, completed the exchange offer, exited some under performing markets and completed an extensive evaluation of several other markets," said Robert Kaiser, Senior Vice President and Chief Financial Officer. "We are pleased with the overall improvements in our operating performance. CellStar's balance sheet and liquidity are strong, and we believe projected cash flows from our operations combined with our credit facility are sufficient to meet our cash requirements for the foreseeable future." Liquidity As of November 30, 2002, the Company had borrowed $23.1 million under its domestic revolving credit facility compared to $29.9 million at the end of the third quarter of 2002. The Company also had $30.3 million in loans to support its China operations, which were partially collateralized by restricted cash of $23.3 million. Long-term debt on November 30, 2002 consisted of $12.4 million of Senior Subordinated Notes that mature in January 2007. Handset Data CellStar handled 3.7 million handsets (including 0.8 million consignment units) in the fourth quarter of fiscal 2002 compared to 5.0 million (including 1.2 million consignment units) in the fourth quarter last year and 4.0 million (including 0.7 million consignment units) in the third quarter of 2002. The average selling price of handsets in the fourth quarter was $145, compared to $141 the fourth quarter a year ago and slightly lower than $147 in the third quarter this year. CellStar Corporation is a leading global provider of value added logistics and distribution services to the wireless communications industry, with operations in Asia-Pacific, North America, Latin America and Europe. CellStar facilitates the effective and efficient distribution of handsets, related accessories and other wireless products from leading manufacturers to network operators, agents, resellers, dealers and retailers. In many of its markets, CellStar provides activation services that generate new subscribers for its wireless carrier customers. For the year ended November 30, 2002, the Company generated revenues of $2.2 billion. Additional information about CellStar may be found on its Web site at http://www.cellstar.com * * * As previously reported in Troubled Company Reporter, Standard & Poor's lowered its corporate credit rating on CellStar Corp., to 'SD' (selective default) from 'CCC-' and removed its ratings from CreditWatch, where they had been placed with negative implications on Sept. 6, 2001. At the same time, Standard & Poor's lowered its rating on the subordinated debt to 'D' for the distributor of wireless communications products. As of Aug. 31, 2001, total outstanding debt was about $200 million. CENDANT MORTGAGE: Fitch Rates Class B-4 and B-5 Certs. at BB/B -------------------------------------------------------------- Cendant Mortgage Capital LLC $274.6 million mortgage pass- through certificates, series 2003-1 classes A-1 through A-10, P, X, and R certificates (senior certificates) are rated 'AAA' by Fitch Ratings. In addition, Fitch rates the $12.4 million class B-1 certificates 'AA', $1.4 million class B-2 certificates 'A', $1.2 class B-3 certificates 'BBB', $550,299 class B-4 certificates 'BB' and $412,724 class B-5 certificates 'B'. The 'AAA' rating on the senior certificates reflects the 6% subordination provided by the 4.50% class B-1, the 0.50% class B-2, the 0.45% class B-3, the 0.20% privately offered class B-4, the 0.15% privately offered class B-5, and the 0.20% privately offered class B-6 (which is not rated by Fitch). Classes B-1, B- 2, B-3, B-4, and B-5 are rated 'AA', 'A', 'BBB', 'BB', and 'B', respectively, based on their respective subordination. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the servicing capabilities of Cendant Mortgage Corporation, which is rated 'RPS1-' by Fitch. The mortgage pool consists of 615 one- to four-family conventional, fixed rate mortgage loans secured by first liens on residential mortgage properties. As of the cut-off date (Feb. 1, 2003), the mortgage pool has an aggregate principal balance of approximately $275,149,326, a weighted average original loan-to-value ratio (OLTV) of 70.00%, a weighted average coupon of 6.165%, a weighted average remaining term of 351 months and an average balance of $447,397. The loans are primarily located in California (25.81%), New Jersey (14.37%) and New York (9.52%). All of the mortgage loans were either originated or acquired in accordance with the underwriting guidelines established by Cendant Mortgage Corporation. Any mortgage loan with an OLTV in excess of 80% is required to have a primary mortgage insurance policy. Approximately 2.64% of the mortgage loans are pledged asset loans. These loans referred to as 'Additional Collateral Loans', are secured by a security interest, normally in securities owned by the borrower, which generally does not exceed 30% of the loan amount. Ambac Assurance Corporation provides a limited purpose surety bond, which guarantees that the Trust receives certain shortfalls and proceeds realized from the liquidation of the additional collateral, up to 30% of the original principal amount of that Additional Collateral Loan. Citibank N.A. will act as the Trustee of the trust. For federal income tax purposes, an election will be made to treat the trust fund as a real estate mortgage investment conduit. CHAMPION ENTERPRISES: S&P Cuts Rating to B+ over Restructuring -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Champion Enterprises Inc.,and its subsidiary, Champion Home Builders Co. At the same time, the ratings are removed from CreditWatch with negative implications, where they were placed August 14, 2002, following an announced restructuring. The outlook is negative. The rating actions follow the company's recent earnings announcement, which reflected a weaker-than-expected fourth quarter, driven by continued losses within Champion's retail division, additional charges related to realignment efforts, and the carrying costs associated with the company's new finance arm. Standard & Poor's believes the company has adequate liquidity to support the revised ratings, given current unrestricted cash balances and revolver capacity, the absence of any near-term debt maturities and minimal capital expense needs for the coming year. However, given continued slippage in shipment levels -- the result of limited consumer financing availability and competition from repossessions -- conditions will remain challenging for Champion, the industry's largest producer. Auburn Hills, Michigan-based Champion, was an aggressive consolidator during the late 1990s when the industry's liberal lending practices helped fuel unsustainably high demand for the homes that it produced and retailed. As is now the case with most industry participants, Champion's sales have been adversely affected by the prolonged recession in the sector, with revenues falling sharply to $1.4 billion in 2002 from a peak of more than $2.5 billion in fiscal year 1999. Champion posted its third annual operating loss in 2002, with a net loss of $255.6 million. This figure included $137.0 million in impairment and other non-recurring costs as the company closed 126 retail centers and 12 manufacturing plants in an effort to right-size production to better match contracted demand. Champion is now operating 37 manufacturing plants in 16 states and Canada, and owns and operates 118 retail centers. Following the restructuring, EBITDA (adjusted for impairment charges and other reported closing costs) was materially weaker than anticipated when the ratings were placed on CreditWatch. Adjusted EBITDA was negative $4.4 million in the seasonally slower fourth quarter and negative $19.3 million for the full year, which ended Dec. 28, 2002. Continued losses within the downsized retail group and the carrying costs associated with Champion's recently acquired loan origination platform have outweighed relative strength in the manufacturing segment. Despite the operating inefficiencies, which have resulted from materially lower production volume, Champion's manufacturing segment has managed to remain marginally profitable, supported by solid growth within the promising Genesis segment (predominately modular housing), as well as declining independent dealer default costs. On a sequential basis, it does appear that quarterly retail losses may be moderate, although it remains to be seen whether this trend is sustainable. Last year's impairment and other charges lowered assets by 15% to $729 million, while equity declined materially to $67 million (treating the convertible preferred stock as equity), pushing book value leverage to 84%. Furthermore, debt exceeds tangible book equity as the asset base includes $165.4 million of remaining goodwill, largely related to its manufacturing operations. As is customary in the industry, as a producer, Champion also has contingent liabilities related to floor plan repurchase obligations for some homes sold to independent retailers. This exposure, roughly $225 million at year-end, has come down dramatically during the past few years, and does not include the resale value of the homes that would theoretically be repurchased. Liquidity A counterbalance to the company's higher leverage, contingent liabilities, and currently negative EBITDA position is adequate near-term liquidity and manageable capital needs. Actual cash used for operations was a manageable $1.5 million due to aggressive management of working capital, including significant inventory liquidation. As of Dec. 28, 2002, Champion had unrestricted cash balances of approximately $77.4 million and appears to have sufficient capacity to meet expected capital expenditures (around $10 million), as well as fund a modest level of additional operating losses should break-even performance prove elusive in the coming year. Additionally, management has indicated that a tax refund of approximately $60 million is anticipated in the second quarter. The company also had $68.4 million of restricted cash and cash deposits, which primarily serve as collateral for outstanding letters of credit. In January 2003 the company obtained a three-year, $75 million secured revolving credit facility, which is subject to borrowing base availability. This line can be used to support letters of credit and has subsequently freed up a substantial portion of the restricted cash. The company has a $150 million warehouse revolver (roughly $39 million drawn currently), which is secured by loans originated by its finance unit. This agreement matures in April 2003 and does contain a ratings trigger, which would enable the lender to withhold additional funding should the rating on Champion's unsecured debt fall below 'B-'. Champion does not face the maturity of its $150 million 11.25% senior unsecured notes until 2007, and its $170 million 7.625% senior unsecured notes until 2009. Outlook: Negative A long awaited industry recovery continues to be forestalled by the scarcity of retail consumer financing and the persistent glut of repossessed homes on the market. Standard & Poor's acknowledges management's efforts to build and preserve liquidity and the aggressive steps taken to rationalize operations during the past three years. However, the company's cost structure may not have been lowered sufficiently to allow break-even or profitable operations, particularly in the cyclically slower winter months. As a result, further cost cutting measures could be necessary. Should Champion succeed in restoring sustainable profitability, the outlook would be revised to stable. However, significant operating losses in the second and third quarters of 2003, traditionally the peak home buying period, would lead to another downgrade. Ratings Revised Rating To From Champion Enterprises Inc. * Corporate credit B+/Negative BB-/Watch Neg * $170 mil 7.625% sr unsecured notes due 2009 B- B Champion Home Builders Co. * Corporate credit B+/Negative BB-/Watch Neg * $150 mil 11.25% sr unsecured notes due 2007 B- B CHESAPEAKE ENERGY: Prices Private Offering of 6% Preferreds ----------------------------------------------------------- Chesapeake Energy Corporation (NYSE: CHK) has priced a private offering of 4.0 million shares of cumulative convertible preferred stock at its liquidation preference of $50 per share. Chesapeake expects the issuance and delivery of the shares to occur on March 5, 2003. Chesapeake also has granted the initial purchasers a 30-day option to purchase up to 600,000 additional shares of preferred stock. Each share of preferred stock will be subject to an annual cumulative cash dividend of $3.00 payable quarterly when, as and if declared by the company, on the fifteenth day of each March, June, September, and December to holders of record as of the first day of the payment month, commencing on June 15, 2003. The preferred stock will not be redeemable. Each preferred share will be convertible at any time at the option of the holder into 4.8605 shares of Chesapeake common stock, which is based on an initial conversion price of $10.29 per common share. The conversion price is subject to customary adjustments in certain circumstances. The preferred shares will be subject to mandatory conversion after March 20, 2006 into Chesapeake common stock, at the option of the Company, if the closing price of Chesapeake's common stock exceeds 130% of the conversion price for 20 trading days during any consecutive 30 trading day period. The preferred stock being sold by Chesapeake and the underlying common stock issuable on its conversion will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The preferred stock will be eligible for trading under Rule 144A. Purchasers of the preferred stock are being granted rights to register resales of the preferred stock and underlying common stock under the Securities Act. The net proceeds from this offering will be used to finance, in part, the pending acquisitions of Mid-Continent natural gas properties from the El Paso Corporation and Vintage Petroleum, Inc., which are scheduled to close in March 2003, and to repay amounts outstanding under our revolving bank credit facility. In the event the El Paso and Vintage acquisitions are not consummated, proceeds will be used for general corporate purposes, including other possible future acquisitions. Chesapeake Energy Corporation is one of the ten largest independent natural gas producers in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and producing property acquisitions in the Mid-Continent region of the United States. The company's Internet address is http://www.chkenergy.com As reported in Troubled Company Reporter's February 27, 2003 edition, Fitch Ratings affirmed the 'BB-' rating of Chesapeake Energy's senior unsecured notes. Fitch maintains the 'BB+' rating on its senior secured bank facility and 'B' rating on its convertible preferred stock. The Rating Outlook for Chesapeake has been changed to Positive. Chesapeake Energy announced on February 24, 2002 that it had agreed to acquire $530 million of Mid-Continent natural gas assets in two transactions. From El Paso Corporation, Chesapeake is acquiring an internally estimated 328 billion cubic feet of gas equivalent of proved gas reserves, 70 bcfe of probable and possible gas reserves, 293,000 leasehold acres and current production of 67 million cubic feet of gas equivalent per day for $500 million. The El Paso proved reserves have a reserves- to-production index of 13 years, are 96% natural gas (or natural gas liquids) and are 71% proved developed. From Vintage Petroleum. Inc. Chesapeake is acquiring an internally estimated 22 bcfe of proved gas reserves, 8 bcfe of probable and possible gas reserves and current gas production of 3.5 mmcfe per day for $30 million. The Vintage proved reserves have a reserves-to- production index of 17 years, are 97% natural gas and are 56% proved developed. These transactions follow on the heels of Chesapeake's $300 million acquisition of Mid-Continent gas assets from ONEOK, which was completed earlier this month. The ratings reflect the conservative nature in which the transactions have been funded, Chesapeake's long-lived, focused natural gas reserve base and its modest but improving credit profile. CHESAPEAKE ENERGY: S&P Keeps Watch on B-Rated Sr. Unsec. Notes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to independent oil and gas exploration and production company Chesapeake Energy Corp.'s proposed $300 million senior unsecured notes due 2013. At the same time, Standard & Poor's assigned its 'CCC+' rating to Chesapeake's $200 million convertible preferred stock. All of Chesapeake's ratings remain on CreditWatch with positive implications where they were placed on Feb. 25, 2003 following Chesapeake's announcement that it has signed agreements to purchase oil and gas exploration and production assets from El Paso Corp. and Vintage Petroleum Inc. for a total consideration of $530 million. Oklahoma City, Oklahoma-based Chesapeake has about $1.9 billion in debt pro forma for the current financing transactions. "The ratings were placed on CreditWatch with positive implications, which indicates that ratings may be raised or affirmed in the near term," said Standard and Poor's credit analyst Bruce Schwartz. The CreditWatch with positive implications reflect that: -- Chesapeake is acquiring properties with low cost structures in its core Mid-Continent operating area that have a high degree of overlap with Chesapeake's operations, which should provide cost-reduction opportunities. -- Chesapeake intends to fund the transactions with a high percentage of equity; Chesapeake has announced an offering of eight million common shares (about $160 million of net proceeds are expected) and $200 million of convertible preferred securities with the balance funded with debt. Based on the cash flow characteristics of the acquired properties (which are reinforced by commodity price hedges), Chesapeake effectively will be adding the properties at a debt to EBITDA ratio of about 1x. -- Chesapeake has hedged a high percentage of its 2003 production, which in combination with a favorable outlook for natural gas prices in 2003 will assure the company of ample cash flow for debt service, reserve replacement capital spending, and capital for growth. -- Chesapeake is issuing $300 million of new notes, which will improve financial flexibility by extending its debt maturity profile; following the expected financing, Chesapeake will have an undrawn $225 million revolving credit facility that matures in 2005, no material debt maturities until 2008, and a capital budget that should be funded internally. Nevertheless, Chesapeake still remains highly indebted (about $0.72 per million cubic feet equivalent pro forma the El Paso and Vintage transactions) and intends to continue growing aggressively through acquisitions. Standard & Poor's expects to resolve the CreditWatch in the very near term upon a thorough review of the company's 2002 operational and financial performance. Chesapeake Energy's 9.000% bonds due 2012 (CHK12USN1) are trading slightly above par at 107 cents-on-the-dollar, says DebtTraders. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=CHK12USN1for real-time bond pricing. COLD METAL: Steel Tech. Acquires Cold Rolled Strip Facility ----------------------------------------------------------- Steel Technologies Inc., (NASDAQ/NM:STTX) has agreed to acquire Cold Metal Products Company, Inc.'s Cold Rolled Strip facility in Ottawa, Ohio, and certain other assets for approximately $10 million in cash. The acquisition includes all the land, building and steel processing equipment at the Ottawa facility, as well as selected inventory, finished goods and accounts receivable. Also included in the sale will be certain equipment located in the seller's Indianapolis facility. The U.S. Bankruptcy Court in Youngstown, Ohio, approved the purchase on February 27, and the transaction is expected to close on March 7, 2003. "The Ottawa facility was expanded in 1996 and has a broad range of rolling, annealing and oscillating capabilities," said Bradford T. Ray, Chairman and Chief Executive Officer. "This facility has an excellent reputation for its ability to produce and service high-quality, cold-rolled strip for precision applications. This operation will broaden our capabilities and complement our other cold-rolled strip facilities. Our intent is to reestablish supply with historical customers and grow with our current customer base as we bring this facility back up to full capacity. "This purchase is another step in our continuing efforts to expand the product range and value we bring to the marketplace. We expect a quick transition as we fold the Ottawa location into the Steel Technologies network of facilities," added Mr. Ray. Steel Technologies processes flat-rolled steel to specified thickness, width, temper, finish and shape requirements for automotive, appliance, lawn and garden, agricultural, recreational, office equipment and railcar industries among others. The Company operates 15 production facilities located throughout the United States and Mexico, including three at Mi- Tech Steel, Inc. For the fiscal year ended September 30, 2002, Steel Technologies reported sales of $475.4 million and net income of $15.8 million or $1.60 per diluted share. More information about the Company may be found on the World Wide Web at http://www.steeltechnologies.com COMDISCO INC: Downey Demands Expedited Claim Objection Process -------------------------------------------------------------- Downey Savings and Loan Association, F.A., asks the Court to accelerate the claims objection process with respect to its proof of claim against Comdisco, Inc., by setting dates and deadlines for discovery, motions and an evidentiary hearing. Ronald S. Katz, Esq., at Manatt, Phelps & Phillips, in Los Angeles, California, relates that Comdisco and Downey entered into an Equipment Lease, dated December 28, 1990, with Downey as Lessor, and Comdisco as Lessee; and an Equipment Purchase Agreement dated December 28, 1990. However, after their entry of the Equipment Lease and the Equipment Purchase Agreement, Downey suffered damages amounting to $21,975,000 due to various Events of Default on Comdisco's Comdisco, including material inaccuracies by Comdisco in the performance of its obligations under the Equipment Lease and the Equipment Purchase Agreement. On June 14, 2001, counsel for Downey sent a letter to Comdisco setting forth in detail Downey's claim for damages and demanding that Comdisco indemnify Downey for those losses. "The June 14 letter made clear that Downey was amenable to a negotiated settlement of Downey's claim," Mr. Katz notes. On July 3, 2001, Comdisco responded to Downey's June 14 letter, stating that Comdisco needed additional information to evaluate Downey's claim. However, Mr. Katz notes, Comdisco expressly conditioned any future discussion of Downey's claim on Downey's waiver of a potential conflict by one of Comdisco's outside counsel, an attorney whose law firm had acted as special counsel to Downey in connection with Downey's entry into both the Equipment Lease and the Equipment Purchase Agreement. Less than two weeks later, Comdisco filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. Subsequently, the Court entered an order establishing November 30, 2001 as the last day for filing proofs of claim with respect to prepetition claims. Six days later, Downey filed its proof of claim for $21,975,000 with respect to Comdisco's defaults under the Equipment Lease and Equipment Purchase Agreement. In its First Omnibus objection to Claims, Comdisco listed Downey's claim among hundreds of others with respect to which "the Debtors believe that they have no liability" and which "should be disallowed in full and expunged." Downey's counsel spoke with Comdisco's counsel to discuss the merits of Downey's claim and agreed not to proceed with the objection to Downey's claim pending further discussions. By letter dated March 12, 2002, Comdisco's counsel confirmed this agreement. On April 2002, Downey sent to Comdisco a detailed letter setting forth the background and basis of Downey's claim. After repeated prodding by Downey, Comdisco provided a noncommittal response by e-mail: "While Comdisco will obviously work with you to reconcile the claim, this e-mail should not be construed as committing Comdisco to specifically address or respond to your letter, of April 12, 2002 or any assertions made therein." Mr. Katz informs the Court that Downey then waited in vain for nearly two more months for a substantive response from Comdisco regarding its still unsubstantiated objection to Downey's claim. After further prodding by Downey, Downey received a curt reply from Comdisco stating that, "as we discussed, your claim will not be addressed substantively at the July 15, 2002 status hearing." Comdisco again refused to address the merits of its objection to Downey's claim nor would Comdisco set any timeframe in which to do so. On July 30, 2002, the Court confirmed the First Amended Joint Plan of Reorganization of Comdisco, Inc. Although the Plan provides for "catch-up" payments to the holders of Disputed Claims like Downey, if and when the Disputed Claims become Allowed Claims, the Plan does not provide for, interest on the catch-up payments. As a result, Mr. Katz points out, Comdisco has absolutely no incentive to resolve its objection to Downey's claim sooner rather than later. Moreover, the longer that Comdisco's objection to Downey's claim remains unresolved, the lower the ultimate value of any payments on the claim will be to Downey. Accordingly, Mr. Katz asserts, any delay necessarily inures to Downey's detriment. Downey again contacted Comdisco in November 2002. This time, Downey's counsel was placed in direct contact with one of Comdisco's in-house counsel, Frank J. Ziegler, Esq. Later in November 2002, for the first time since July 2001, Comdisco's counsel sought to make any future settlement discussions contingent upon Downey granting a conflict waiver for the Conflicted Counsel. In fact, Mr. Ziegler refused even to conduct substantive discussions at that time absent the requested waiver. Mr. Katz tells the Court that when Downey indicated reluctance in connection with the requested conflict waiver, Comdisco attempted to pressure Downey into granting the waiver. Although still hesitant to grant the requested waiver, Downey offered to do so on December 23, 2002 in exchange for Comdisco's agreement to an expedited schedule for the resolution of its objection to Downey's claim. Comdisco indicated that it would respond to Downey's proposed compromise by mid-January, 2003. However, by the end of January, no response had been received from Comdisco, despite at least two written communications by Downey. When Comdisco finally did contact Downey on Friday, January 31, 2003, Comdisco had no response to Downey's December 23, 2002 proposal. Accordingly, Downey seeks the Court's assistance in ending the undue delay in the resolution of Comdisco's objections to Downey's claim. Specifically, Downey wants the Court to set: (1) a discovery schedule and deadlines over the next 90 days, (2) dates for appropriate motions, (3) an appropriate briefing schedule, and (4) if necessary, an evidentiary hearing. (Comdisco Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) CREDIT STORE: Turns to Vengroff for Collection Assistance --------------------------------------------------------- The Credit Store, Inc., wants to bring-in Vengroff, Williams & Associates, Inc. as its Collection Agent. The Debtor asks the U.S. Bankruptcy Court for the District of South Dakota to approve its retention of Vengroff Williams because the Firm has the necessary experience and knowledge to effectively assist the Debtor's efforts to effect collections of certain credit card accounts -- and that'll be beneficial to the estate and its creditors. The Debtor points out that Vengroff Williams' services is necessary to assist the Debtor's efforts to effect collections of certain delinquent credit card accounts by managing and coordinating all collection efforts. Vengroff Williams will charge the Debtor a fee of 28% on all monies collected for accounts placed over three hundred dollars, 50% on monies collected for accounts placed up to three hundred dollars in balance, and a resolution fee of 12 1/2% for all accounts researched and found to be paid prior to placement. The Credit Store, Inc., is primarily in the business of providing credit card products to consumers who may otherwise fail to qualify for a traditional unsecured bank credit card. The Company filed for chapter 11 protection on August 15, 2003 before it converts its case under Chapter 7 on February 4, 2003 (Bankr. S.D. Dak. Case No. 02-40922). Mark E. Andrews, Esq., at Neligan Tarpley, Andrews & Foley, LLP represents the Debtor as it winds down its operation. When the Company filed for protection from its creditors, it listed $68 million in assets and $69 million in debts. CWMBS INC: Fitch Assigns Low-B Ratings to Class B-3 & B-4 Notes --------------------------------------------------------------- CWMBS, Inc.'s mortgage pass-through certificates, CHL Mortgage Pass-Through Trust 2003-4 classes 1-A-1 through 1-A-15, 2-A-1, PO and A-R (senior certificates, $876,150,000) are rated 'AAA' by Fitch Ratings. In addition, Fitch rates class M ($11,250,000) 'AA', class B-1 ($4,950,000) 'A', class B-2 ($3,150,000) 'BBB', class B-3 ($1,800,000) 'BB' and class B-4 ($900,000) 'B'. The 'AAA' rating on the senior certificates reflects the 2.65% subordination provided by the 1.25% class M, 0.55% class B-1, 0.35% class B-2, 0.20% privately offered class B-3, 0.10% privately offered class B-4 and 0.20% privately offered class B-5 (which is not rated by Fitch). Classes M, B-1, B-2, B-3, and B-4 are rated 'AA', 'A', 'BBB', 'BB' and 'B', respectively, based on their respective subordination. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the master servicing capabilities of Countrywide Home Loans Servicing LP, a direct wholly owned subsidiary of Countrywide Home Loans, Inc. The certificates represent ownership in a trust fund, which consists primarily of 2 separate Groups of mortgage loans. Each of the classes 1-A-1 through 1-A-15, A-R, and PO-1 (the Group 1 senior certificates), and the classes 2-A-1 and PO-2 (the Group 2 senior certificates) will receive interest and/or principal from its respective mortgage loan group. If on any distribution date, the available funds from one loan group is insufficient to make distributions of interest and/or principal on that related senior certificate group, available funds from the other loan group, after first making the interest and/or principal distribution on its related senior certificates, will be available to cover shortfalls of interest and/or principal distributions on the loan group's senior certificates, before any distributions of interest and/or principal are made to the subordinate certificates. The Group 1 senior certificates are collateralized by a pool of conventional, fully amortizing, 20- to 30-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. As of the closing date (Feb. 28, 2003), the mortgage pool demonstrates an approximate weighted-average original loan-to-value ratio of 68.89%. Approximately 52.25% of the loans were originated under a reduced documentation program. Cash-out and rate/term refinance loans represent 19.82% and 54.04% of the mortgage pool, respectively. Second homes account for 2.38% of the pool. The average loan balance is $438,874. The three states that represent the largest portion of mortgage loans are California (65.38%), Florida (2.98%) and New York (2.63%). The Group 2 senior certificates are collateralized by a pool of conventional, fully amortizing, 10- to 15-year fixed-rate mortgage loans secured by first liens on one- to four-family residential properties. As of the closing date (Feb. 28, 2003), the mortgage pool demonstrates an approximate weighted-average OLTV of 64.27%. Approximately 42.87% of the loans were originated under a reduced documentation program. Cash-out and rate/term refinance loans represent 30.92% and 60.76% of the mortgage pool, respectively. Second homes account for 3.22% of the pool. The average loan balance is $479,784. The three states that represent the largest portion of mortgage loans are California (41.16%), Virginia (3.84%) and Maryland (3.66%). Approximately 1.14% and 1.72% of the Group I and Group II mortgage loans, respectively, are secured by properties located in the State of Georgia, none of which are covered under the Georgia Fair Lending Act, effective as of October 2002. Approximately 95.15% and 4.85% of the Group I mortgage loans and 94.65% and 5.35% of the Group II mortgage loans as of the closing date were originated under CHL's Standard Underwriting Guidelines and Expanded Underwriting Guidelines, respectively. Mortgage loans underwritten pursuant to the Expanded Underwriting Guidelines may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios and different documentation requirements than those associated with the Standard Underwriting Guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. The collateral characteristics provided are based off the mortgage loans as of the closing date. Fitch ensures that the deposits of subsequent loans conform to representations made by Countrywide Home Loans, Inc. CWMBS purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. For federal income tax purposes, an election will be made to treat the trust fund as multiple real estate mortgage investment conduits. CWMBS INC: Fitch Rates Class B-3 & B-4 Certs. at Low-B Levels ------------------------------------------------------------- CWMBS, Inc.'s mortgage pass-through certificates, CHL Mortgage Pass-Through Trust 2003-3 classes A-1 through A-7, PO and A-R (senior certificates, $492,999,971) are rated 'AAA' by Fitch Ratings. In addition, Fitch rates class M ($3,500,000) 'AA', class B-1 ($1,250,000) 'A', class B-2 ($750,000) 'BBB', class B-3 ($500,000) 'BB' and class B-4 ($500,000) 'B'. The 'AAA' rating on the senior certificates reflects the 1.40% subordination provided by the 0.70% class M, 0.25% class B-1, 0.15% class B-2, 0.10% privately offered class B-3, 0.10% privately offered class B-4, and 0.10% privately offered class B-5 (which is not rated by Fitch). Classes M, B-1, B-2, B-3, and B-4 are rated 'AA', 'A', 'BBB', 'BB' and 'B', respectively, based on their respective subordination. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the master servicing capabilities of Countrywide Home Loans Servicing LP, a direct wholly owned subsidiary of Countrywide Home Loans, Inc. The certificates represent an ownership interest in a pool of conventional, fully amortizing, 15-year fixed-rate mortgage loans, secured by first liens on one- to four-family residential properties. As of the closing date (Feb. 28, 2003), the mortgage pool demonstrates an approximate weighted-average original loan- to-value ratio of 60.36%. Approximately 34.55% of the loans were originated under a reduced documentation program. Cash-out refinance loans represent 29.15% of the mortgage pool and second homes 4.17%. The average loan balance is $480,800. The three states that represent the largest portion of mortgage loans are California (38.74%), Massachusetts (4.82%) and New Jersey (4.79%). Approximately 1.92% of the mortgage loans are secured by properties located in the State of Georgia, none of which are covered under the Georgia Fair Lending Act, effective as of October 2002. Approximately 93.92% and 6.08% of the mortgage loans as of the closing date were originated under CHL's Standard Underwriting Guidelines and Expanded Underwriting Guidelines, respectively. Mortgage loans underwritten pursuant to the Expanded Underwriting Guidelines may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios and different documentation requirements than those associated with the Standard Underwriting Guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. The collateral characteristics provided are based off the mortgage loans as of the closing date. Fitch ensures that the deposits of subsequent loans conform to representations made by Countrywide Home Loans, Inc.. CWMBS purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. For federal income tax purposes, an election will be made to treat the trust fund as multiple real estate mortgage investment conduits. DOANE PET CARE: Amends Credit Facility After Sr. Notes Offering --------------------------------------------------------------- Doane Pet Care Company reported results for its fourth quarter and fiscal year ended December 28, 2002 and reiterated its earnings guidance for fiscal 2003. Quarterly Results The Company reported a net loss of $1.1 million for its fourth quarter ended December 28, 2002 on net sales of $246.6 million, compared to a net loss of $7.0 million on net sales of $221.5 million for the fourth quarter ended December 29, 2001. Net sales increased 11.3% for the 2002 fourth quarter compared to the 2001 fourth quarter, primarily a result of increased sales volume from the Meaty Chunks N' Gravy and Meow Mix new business awarded in 2002. Adjusted EBITDA (income (loss) before net interest expense, income taxes, depreciation, amortization and other charges) increased 18.6%, or $4.6 million, to $29.3 million in the 2002 fourth quarter from $24.7 million recorded in the 2001 fourth quarter. The 2002 fourth quarter performance continued to be favorably impacted by Project Focus initiatives, including improved results at the Company's European operations, cost reductions and customer and/or product mix improvements. The benefit of the increased sales volume from new business awards was offset by start up costs. Doug Cahill, the Company's President and CEO, said, "We are very pleased with results for both the fourth quarter and full year 2002. Our fourth quarter results reflected the success of our ongoing Project Focus initiatives and top-line growth from the new business awards. We applaud the hard work and dedication of our associates worldwide this past year and for their continuing commitment for Doane to be the trusted partner of choice for our customers' brands." Net interest expense for the 2002 fourth quarter increased $2.4 million to $16.1 million from $13.7 million recorded in the 2001 fourth quarter, primarily due to a $2.2 million accrual of non- cash interest expense for the excess leverage fee under the Company's amended senior credit facility. The fair value accounting for the Company's commodity derivative instruments under SFAS 133 resulted in an $8.2 million increase in cost of goods sold for the 2002 fourth quarter, compared to a $2.6 million increase in cost of goods sold for the 2001 fourth quarter, or a $5.6 million period-over-period unfavorable impact on operating results. The Company adopted Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, or SFAS 142, as of the beginning of fiscal 2002. In accordance with SFAS 142, the Company ceased amortizing goodwill and trademarks; and therefore, recorded no related amortization expense in the 2002 fourth quarter compared to $2.6 million recorded in the 2001 fourth quarter. The Company incurred non-recurring expenses of $0.6 million in the 2002 fourth quarter, principally the result of costs related to its abandoned European sales process, compared to $2.0 million of non-recurring charges in the 2001 fourth quarter for Project Focus implementation costs. Full Year 2002 Results The Company reported net income of $15.3 million for the fiscal year ended December 28, 2002 on net sales of $887.3 million, compared to a net loss of $21.9 million on net sales of $895.8 million for the fiscal year ended December 29, 2001. Net sales in fiscal 2001 included $16.6 million of net sales from the Deep Run and Perham businesses prior to their divestiture in the 2001 second quarter. Excluding the divestitures from fiscal 2001, the Company's net sales for fiscal 2002 increased 1%, or $8.1 million, principally a result of increased sales volume from the new business awards, partially offset by the Company's Project Focus strategy implemented in the fourth quarter of 2001. For fiscal 2002, the Company's Adjusted EBITDA increased 20.5%, or $18.4 million, to $108.2 million. The Company's Adjusted EBITDA for fiscal 2001 was $89.8 million, which included net losses of $2.6 million related to the Deep Run and Perham businesses. Excluding these net losses from fiscal 2001, Adjusted EBITDA increased 17.1% in fiscal 2002. Fiscal 2002 performance was favorably impacted by Project Focus implementation, including improvements in manufacturing efficiencies, customer and/or product mix and our European operations. Net interest expense for fiscal 2002 increased $5.4 million to $62.4 million from $57.0 million in fiscal 2001, primarily due to a $6.7 million accrual of non-cash interest expense for the excess leverage fee under the Company's amended senior credit facility. The fair value accounting for the Company's commodity derivative instruments under SFAS 133 resulted in a $4.9 million reduction in cost of goods sold for fiscal 2002, compared to a $12.6 million increase in cost of goods sold for fiscal 2001, or a $17.5 million period-over-period favorable impact on operating results. Under SFAS 142, the Company had no amortization expense associated with its goodwill and trademarks in the 2002 fiscal year compared to $10.3 million in fiscal 2001. The Company incurred non-recurring expenses of $1.4 million in fiscal 2002, consisting of a $0.8 million charge for costs related to our postponed bond offering and a $0.6 million charge for costs related to our abandoned European sales process, compared to $8.7 million in fiscal 2001, which consisted of $4.7 million in net losses from the Deep Run and Perham divestitures, $2.0 million of severance costs associated with a workforce reduction following these divestitures, and $2.0 million of Project Focus related costs. In fiscal 2002, the Company's capital expenditures totaled $24.3 million compared to $17.3 million in fiscal 2001. The Company also said that it ended fiscal 2002 with total debt of $554.0 million, a reduction of $33.8 million from $587.8 million at year-end 2001. Bond Offering and Senior Credit Facility Amendments On February 28, 2003, the Company completed its previously announced offering of $213.0 million in fixed-rate Senior Notes. The New Notes, priced at 98.8% of the principal amount, have a coupon interest rate of 10-3/4% per annum, and mature on March 1, 2010. Proceeds from the offering were used to repay approximately $169.0 million of the outstanding balance under the Company's senior credit facility. In addition, approximately $33.7 million is expected to be used to repay the outstanding principal and accrued interest under the Company's sponsor facility, assuming that all holders tender their notes by the expiration of the offering period. To the extent one or more of these holders do not tender their notes, we intend to use those proceeds to further reduce indebtedness under our senior credit facility. The remainder of the proceeds were used to pay transaction fees and expenses associated with the offering. In connection with the New Notes offering, the Company also amended its existing senior credit facility to, among other things, modify certain financial covenant tests and other provisions through the term of the facility, thereby providing the Company with additional flexibility. The amendments also extend the average maturity of the facility by eliminating the principal amortization requirement in 2003 and reducing the principal amortization requirement in 2004. The Company was in compliance with the requirements of the December 28, 2002 financial covenants tests. The Company said that it expects to record a pre-tax charge to earnings of $10.8 million in its 2003 first quarter associated with the repayment of its senior credit facility and sponsor facility. This pre-tax charge is net of $6.7 million for the reversal of the accrued excess leverage fee. 2003 Earnings Guidance and Outlook The Company reiterated the sales and earnings guidance provided by the Company on February 7, 2003. For fiscal 2003, the Company anticipates net sales growth of approximately 7% to 8% and Adjusted EBITDA of approximately $105 million, reflecting the Company's current expectation of the impact of an overall higher commodity cost environment and other assumptions. Cahill continued, "The successful completion of our bond offering and the concurrent amendment to our senior credit facility are significant developments for our business. These transactions improve our capital structure and enhance our growth prospects by allowing us to repay more restrictive senior bank debt, eliminate or reduce certain financial covenant tests, extend the average maturity of our debt and increase our ability to make capital investments to further grow our business. "With our improved capital structure and the majority of our Project Focus and restructuring initiatives effectively completed and behind us, we began 2003 with positive momentum and are now solidly positioned to continue to grow our leading market positions in both the United States and Europe. "We are optimistic about our prospects for delivering sustainable earnings in 2003 and beyond, but we are cautious as we move into the first half of the year because of the potential for volatility in commodities, particularly corn and natural gas. We will continue our risk management strategies to seek to mitigate the impact of rising commodity prices throughout the balance of 2003." Doane Pet Care Company, based in Brentwood, Tennessee, is the largest manufacturer of private label pet food and the second largest manufacturer of dry pet food overall in the United States. The Company sells to over 600 customers around the world and serves many of the top pet food retailers in the United States, Europe and Japan. The Company offers its customers a full range of pet food products for both dogs and cats, including dry, semi-moist, wet, treats and dog biscuits. * * * As previously reported in Troubled Company Reporter, Standard & Poor's said its ratings on pet food manufacturer Doane Pet Care Co., remain on CreditWatch with negative implications, where they were placed April 3, 2002. The CreditWatch listing reflects credit protection measures that have fallen below Standard & Poor's expectations and Doane's limited cushion under its bank loan financial covenants. At the same time, Standard & Poor's assigned its single-'B'- minus rating to Doane's proposed $200 million senior unsecured notes due 2008. This rating is not on CreditWatch. The net proceeds of the issue will be used to repay a portion of the company's outstanding indebtedness. Brentwood, Tennessee-based Doane had about $555 million of total debt outstanding as of March 31, 2002. DOMAN INDUSTRIES: KPMG Files February Report with Canadian Court ---------------------------------------------------------------- Doman Industries Limited announces that KPMG Inc., the Monitor appointed by the Supreme Court of British Columbia under the Companies Creditors Arrangement Act has filed with the Court today its report for the period ended February 21, 2003. The report, a copy of which may be obtained by accessing the Company's Web site at http://www.domans.comor the Monitor's Web site at http://www.kpmg.ca/domancontains selected unaudited financial information prepared by the Company for the period. DONINI INC: Samuel Klein Expresses Going Concern Doubt ------------------------------------------------------ Donini, Inc., was incorporated under the name PRS Sub VI, Inc., in the State of New Jersey in 1991 as a subsidiary of People Ridesharing Systems, Inc., a public corporation which filed for the protection of the Bankruptcy Court in 1989, to provide a candidate for merger with an operating company. The Company retained its status as a public company with no assets and no liabilities. In January 2001 certain shareholders of Pizza Donini Inc. a company organized under the laws of Canada, acquired eighty-two percent (82%) of the outstanding shares of the Company and the Company agreed to assume all liabilities of Pizza Donini. The Company owns 100% of the common stock Pizza Donini Inc. On February 6, 2001, Donini amended its Certificate of Incorporation changing its name from PRS Sub VI, Inc. to Donini, Inc. and increasing its authorized shares of common stock from 10,000,000 to 100,000,000, par value $.001. Pizza Donini Inc. was organized in 1987 and at present operates a franchise management company supporting over thirty pizza outlets in the Greater Montreal area. Pizza Donini Inc., supports twenty-eight pizza outlets. At May 31, 2002 twenty- seven were franchised and one location was held with intention of selling it as a Pizza Donini franchise. In addition, Pizza Donini Inc. entered into an agreement with Zellers Inc., a Canadian national merchandise chain, to offer for sale Pizza Donini Inc. products in twenty seven of its in store restaurants within its department stores, all in the Province of Quebec. Intrawest Corp, a developer and operator of village centered destinations resorts, has signed a three year contract for the supply of pizzas. During fiscal 2002, Donini's consolidated revenues increased $19,067, or 1.2%, to $1,593,462 from 2001 revenues of $1,574,395. This increase is primarily a result of increased revenues to outside distributors. Cost of goods sold for the year ended May 31, 2002 was $713,896, or 75.6%, as compared to $515,372, or 62.9%, for fiscal 2001. Working capital deficit during this period increased from $1,070,896 at May 31, 2001 to $1,234,186 at May 31, 2002. Total assets increased from $1,001,343 as of May 31, 2001 to $1,010,290 as of May 31, 2002. Net losses increased $493,820 from $1,029,453 during fiscal 2001 to $1,523,273 at May 31, 2002. The net increase in net losses is primarily due to increases in stock based compensation of $650,643 ($267,745 for advertising and promotion, and 382,898 for professional fees) and a decrease in product development, and recapitalization cost of $53,884 and $179,405 respectively. The Company maintains that its liquidity will improve marginally with improved earnings, but will not be sufficient to allow it to expand its operations to any significant degree. The Company has adopted a plan to raise additional capital through an outside offering of debentures. During fiscal year ended May 2002, Donini's principal independent account, KPMG LLP, resigned. That decision was based on the fact that fees were owed to the accounting firm, which fees the Company discharged through the issuance of 269,752 shares of common stock to KPMG LLP. The Board of Directors approved the change, which was deemed to be in the best interest of the corporation to change auditors. The financial statements for the Company's fiscal year ended May 31, 2002, were audited by Samuel Klein and Company. The audit report contains an explanatory paragraph related to substantial doubt about the Company's ability to continue as a going concern. E.SPIRE: DIP Lenders Want a Chapter 11 Trustee Before March 22 -------------------------------------------------------------- Foothill Capital Corporation, in its role as agent for the post- petition lenders to e.spire Communications, Inc., its subsidiaries and affiliates, will ask Judge Jerry Venters at a hearing tomorrow in Wilmington to appoint a chapter 11 trustee in the Debtors' chapter 11 cases. e.spire's Meltdown e.spire filed for chapter 11 protection on March 22, 2001, in the U.S. Bankruptcy Court for the District of Delaware (Bankr. Case No. 01-974). On June 12, 2001, the Court entered a final debtor-in-possession financing order enabling the Debtors to obtain on-going working capital from Foothill on a super- priority secured basis. Unforeseen and unprecedented deterioration of the telecommunications industry followed e.spire's chapter 11 filing. Combined with financial market and world events, e.spire's reorganization efforts were crippled. A significant portion of e.spire's projected revenue stream evaporated and the Debtors found themselves unable to pay their post-petition expenses. The Debtors, the post-petition Lenders, and the pre-petition lenders concluded that the best way to maximize value was through an expedited sale of substantially all of the estates' assets as going concerns in one or more transactions. Foothill agreed to forebear from exercising the DIP Lenders' default remedies to allow the sale transactions to go forward. On April 17, 2002, the Debtors filed their Sec. 363 Sale Motions. Thermo Telecom Partners LLC and Xspedius Management Co., LLC, presented the highest and best offer, and the sale transactions closed on August 30, 2002. Six Months Pass with Minimal Progress For the past six months, e.spire's focused on disposing of miscellaneous assets, resolving contract assumption and assignment disputes, resolving minor disputes with the Purchasers, and attacking the validity of some mechanics' liens. What e.spire Hasn't Done "[T]here are a number of extant claims for which suit has not yet been brought, including known avoidance actions under Chapter 5 of the [Bankruptcy] Code, and the possibility of other claims against third parties or potential recoveries under D&O or other liability insurance policies, which have not yet been thoroughly investigated and a determination made as to their viability," Michael L. Cook, Esq., and David J. Ciminesi, Esq., at Schulte Roth & Zabel LLP, tell Judge Venters. There are also $29 million of potentially recoverable preference payments that haven't been pursued, as well as claims and causes of action against "insiders." These assets are significant to the DIP Lenders and the two-year statute of limitation to bring these avoidance actions will pass on March 22, 2003. Foothill doesn't think e.spire's skeletal staff with limited resources can get all the lawsuits it needs to file filed before March 22. Appoint a Chapter 11 Trustee Now Accordingly, to extend the two-year statute of limitation imposed by 11 U.S.C. Sec. 546(a) for another year using the exception buried in subsection Sec. 546(a)(1)(B), Foothill proposes that the Court direct the appointment of a Chapter 11 Trustee before March 22. e.spire Communications, Inc., filed for chapter 11 protection March 22, 2001 (Bankr. Del. Case No. 01-974) and completed a sale of substantially all of its assets on August 30, 2002. The Company's liabilities top $1 billion. Domenic E. Pacitty, Esq., at Saul Ewing LLP, represents e.spire. Thomas Kent, Esq., and Anthony Princi, Esq., at Orrick Herrington & Sutcliffe LLP, represent e.spire's unsecured creditors' committee. Richard Mason, Esq., at Wachtell, Lipton, Rosen & Katz, serves as counsel to the Pre-Petition Lenders and Michael L. Cook, Esq., and David J. Ciminesi, Esq., at Schulte Roth & Zabel LLP,represent the Post-Petition Lenders. EASYLINK SERVICES: Reviewing PTEK Holdings' Purchase Offer ---------------------------------------------------------- EasyLink Services Corporation (NASDAQ: EASY), a leading global provider of services that power the exchange of information between enterprises, their trading communities and their customers, is evaluating the proposed purchase by PTEK Holdings, Inc. (NASDAQ: PTEK), in a privately negotiated transaction between AT&T Corp., and PTEK, of 1,423,980 shares of outstanding Class A common stock of EasyLink held by AT&T and a promissory note of EasyLink held by AT&T. The promissory note, with a principal amount of $10,000,000, represents approximately 13% of the aggregate principal amount of debt that EasyLink is seeking to restructure, and the shares represent approximately 8.3% of the total number of shares of Class A and Class B common stock outstanding as of December 31, 2002 and approximately 5.4% of the total outstanding voting power. EasyLink did not have prior knowledge of the proposed transaction between PTEK and AT&T Corp., and is reviewing whether the transaction would violate its rights. The Company plans to meet with PTEK to discuss PTEK's intentions. At the present time, EasyLink is unable to evaluate the effect, if any, of the proposed transaction on EasyLink, including its proposed debt restructuring. EasyLink Services Corporation (NASDAQ: EASY), headquartered in Edison, New Jersey, is a leading global provider of services that power the exchange of information between enterprises, their trading communities, and their customers. EasyLink's networks facilitate transactions that are integral to the movement of money, materials, products, and people in the global economy, such as insurance claims, trade and travel confirmations, purchase orders, invoices, shipping notices and funds transfers, among many others. EasyLink helps more than 20,000 companies, including over 400 of the Global 500, become more competitive by providing the most secure, efficient, reliable, and flexible means of conducting business electronically. For more information, please visit http://www.EasyLink.com * * * As previously reported, EasyLink Services said it was seeking to restructure substantially all of approximately $86.2 million of outstanding indebtedness, including approximately $10.7 million of capitalized future interest obligations. The Company is currently in discussions with holders of its debt relating to the proposed restructuring. To date, the holders of approximately 70% of this debt have expressed interest in completing a restructuring on the terms discussed. Management seeks to restructure substantially all of the debt. If all of the debt were successfully eliminated on the currently proposed terms, the Company would pay approximately $2.0 million in cash and issue up to 35 million shares of its Class A common stock, including the shares issued to fund the cash payment. The number of shares to be exchanged for each class of debt was determined based on a deemed per share price of between $2.00 and $3.00. ELWOOD ENERGY: S&P Places BB+ Bond Rating on Watch Negative ----------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB+' rating on Elwood Energy LLC's $402 million bonds due 2026 on CreditWatch with negative implications. Elwood is a 1,409-megawatt merchant peaking power plant that sells into the Mid-American Interconnected Network and that is fully contracted through 2012 and partially through 2017. The rating action reflects the recent downgrade by Standard & Poor's of Aquila Inc.'s rating to B+/Watch Neg from BB/Negative. Under a power sales agreement, Aquila provides about 48% of Elwood's contractual net operating cash flow through 2012 and thereafter 100% of contractual cash flow until 2017. Under the PSA, Aquila is now required to post 12 months of capacity payments, or $37 million, as collateral to back up its offtake obligations. Aquila already posted to Elwood an LOC for six months of capacity payments, or $18.7 million, after its rating was lowered in November 2002. The sponsors have issued a request to Aquila to provide the additional security. If Aquila does not post the collateral by March 10, Aquila will be in default under the PSA. Standard & Poor's expects to resolve Elwood's CreditWatch placement by March 10. If Aquila posts the collateral as required, Standard & Poor's will likely maintain the 'BB+' rating on Elwood's bonds. If Aquila fails to meet this contractual obligations, the rating on Elwood will likely fall from the current level. ENCOMPASS SERVICES: Signs-Up Conway Del Genio as Crisis Managers ---------------------------------------------------------------- Encompass Services Corporation and its debtior-affiliates sought and obtained the Court's authority to employ Conway Del Genio Gries & Company LLC as crisis managers. Conway will provide certain temporary staff to assist the Debtors in their restructuring process. Pursuant to an engagement letter dated October 8, 2002, Conway's staff will assume certain management positions of the Debtors' business. In particular, Gray H. Muzzy, Encompass Senior Vice President, Secretary and General Counsel, reports that Conway's Michael F. Gries is currently serving as the Debtors' Chairman of the Board, Senior Vice President, and Chief Restructuring Officer. Mr. Gries collaborates with the Debtors' senior management and financial advisors to develop proposals for the Board of Directors to consider that will address the Debtors' financial and operating performance. Mr. Gries will direct the implementation of the proposals once approved by the Board. Aside from Mr. Gries, Conway is also providing and will continue to provide additional temporary staff when needed. Together, Mr. Gries and the temporary staff will: (a) perform general due diligence to assist the Debtors in defining their financial and operational difficulties. This will include gathering and analyzing data, interviewing appropriate management and evaluating the Debtors' existing financial forecasts and budgets; (b) review the Debtors' current short-term liquidity forecasts and assist the management in modifying and updating the forecasts based on current information, Conway's observations and other information as it becomes available; (c) develop alternative strategies for improving liquidity. This includes developing and executing overhead expense reduction, divestitures and cash conservation programs, and assisting in the implementation of the programs; (d) assist the Debtors in the development and preparation of an operating plan, cash flow forecasts, and business plan and present these plans and forecasts to the Board and to the Debtors' creditors; (e) assist in the development and execution of plans to dispose of non-core assets; (f) assist with the preparation of reports and communications with the Debtors' lenders and other constituencies; (g) assist in addressing issues and in discussions with the existing lenders in connection with maintaining ongoing financing of the Debtors' operations, including the DIP and exit financing; (h) manage the development, evaluation, negotiation and execution of any potential restructuring transaction or reorganization plan; (i) assist in negotiations for the implementation of a restructuring transaction with existing lenders, creditors and other parties-in-interest; (j) provide expert testimony concerning financial matters relating to a plan or plans of reorganization, including the feasibility of the reorganization plans, the valuation of any securities issued in connection with the Plans; and (k) conduct other studies, analyses or activities as approved by the Board or otherwise related to the Debtors' restructuring efforts as the parties mutually agree. Mr. Muzzy relates that, under the Engagement Letter, the Debtors agreed to pay Conway a $250,000 monthly fee for its services. However, from and including November 18, 2002, the parties agreed that the Debtors will pay a $300,000 monthly fee, which is payable in advance. Mr. Muzzy discloses that Conway was paid a $250,000 retainer at the execution of the Engagement Letter. If unused, the retainer will be applied against any unpaid invoices at the completion of Conway's assignment or returned to the Debtors. Conway will also be reimbursed, in arrears for all of its reasonable out-of-pocket expenses. If a reorganization plan is confirmed, Conway will receive a confirmation bonus fee, based on the aggregate cumulative of: (i) gross cash proceeds from asset sales; (ii) gross tax refunds associated with the asset sales, as evidenced by tax returns to be filed by the Debtors; and (iii) the aggregate amount of the Reorganized Debtors reinstated or new debt that is issued pursuant to the Reorganization Plan on market terms applicable to the Debtors' prepetition senior lenders. The Bonus Fee will consist of: (a) a $1,250,000 base Bonus Fee which will be earned once the Debtors achieve $150,000,000 in aggregate proceeds; (b) an incremental bonus fee in the event the Aggregate Proceeds exceed $150,000,000. The Incremental Bonus Fee will be calculated as; -- 1% of the Aggregate Proceeds in excess of $150,000,000 to $200,000,000; and -- 1-1/2% of the Aggregate Proceeds in excess of $200,000,000 and up to a maximum of $400,000,000. (c) an incentive component, in the event the Aggregate Proceeds exceed $225,000,000. In this case, the Base Bonus Fee and the Incremental Bonus Fee will be subject to increase or decrease based on the timing of asset sales in accordance with this schedule: Asset Sales Completed By Incremental % ------------------------ -------------- February 28, 2003 17% March 31, 2003 12% April 30, 2003 7% May 31, 2003 3.5% June 30, 2003 0 July 31, 2003 -5% August 31, 2003 -10% Thereafter -15% The Bonus Fee is payable to the extent earned, once the Debtors receive all or a requisite amount of the Aggregate Proceeds. The Debtors will also indemnify Mr. Gries and hold him harmless from and against any and all expenses and liabilities that he has incurred, in accordance with an indemnification agreement with Conway. The priority afforded Mr. Gries will be subject to the terms, conditions, and limitations of the Interim and Final DIP Financing Orders, including in particular, the provisions relating to the limitations and priority of payment afforded professional fees and expenses. (Encompass Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Neal Batson Earns Nod to Hire 8 Contract Attorneys -------------------------------------------------------------- Enron Corporation Examiner Neal Batson obtained the Court's authority to retain eight attorneys to process hundreds of thousands of pages of documents produced by the various respondents to the subpoenas authorized under Rule 2004 of the Federal Rules of Bankruptcy Procedure, nunc pro tunc to November 11, 2001. The Attorneys are: -- Todd J. Grates, Esq., -- Paul Leavitt, Esq., -- Ross Miller, Esq., -- Alan Nichols, Esq., -- Sean Rogers, Esq., -- David Savoy, Esq., -- Eric Taylor, Esq., and -- Delbert Winn, Esq. (Enron Bankruptcy News, Issue No. 57; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Enron Corp.'s 9.875% bonds due 2003 (ENRN03USR3) are trading at about 15 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR3 for real-time bond pricing. EPOCH 2000-1: Fitch Junks Three Floating-Rate Note Classes ---------------------------------------------------------- Fitch Ratings has downgraded four classes from EPOCH 2000-1 Ltd., a partially funded credit default swap referencing a static $2.39 billion portfolio of primarily senior unsecured bonds. The following securities have been downgraded: -- Class I secured floating-rate notes downgraded to 'A-' from 'AA-'; -- Class II secured floating-rate notes downgraded to 'BBB+' from 'A-'; -- Class III secured floating-rate notes downgraded to 'BBB-' from 'BBB+'; -- Class IV secured floating-rate notes downgraded to 'CCC-' from 'CCC+'; The following securities have been affirmed: -- Class V secured floating-rate notes affirmed 'CC'; -- Preferred Shares affirmed 'C'. Fitch's rating action reflects further credit deterioration and the notes' exposure to NRG Energy, Equistar Chemicals, and Solutia, which were recently called credit events. This will result in higher than expected credit protection payments under the credit default swap agreement, and a diminished level of credit enhancement for the class I, II, III, and IV notes. Fitch will continue to monitor this transaction. ESPM MIDWEST: Ch. 11 Case Summary & Largest Unsecured Creditors --------------------------------------------------------------- Lead Debtor: ESPM Midwest, Inc., 130 E. 8th Street Rochester, Indiana 46975 Tel: 574-224-1569 Bankruptcy Case No.: 03-30993 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Environmental Service Products Manufacturing Inc. 03-30994 ESP Enterprises, LLC 03-30995 Type of Business: Environmental Service Products Manufacturing (ESPM) Inc., based in Lodi, Calif., manufactures roll-off equipment such as container trailers, intermediate single roll- off trailers, drop-deck trailers, pull trailers and roll-off hoists. The company also manufactures environmental roll-off containers such as sludge containers with tarps and several lid configurations, vacuum containers, frac tanks and miniature frac tanks. Chapter 11 Petition Date: February 28, 2003 Court: Northern District of Indiana (South Bend Division) Debtors' Counsel: John R. Humphrey, Esq. Paul T. Deignan, Esq. Sommer Barnard Ackerson 400 Bank One Tower 111 Monument Circle Indianapolis, IN 46204 Tel: (317) 713-3500 Fax : (317) 713-3699 Estimated Assets: $1 to $10 Million Estimated Debts: $1 to $10 Million A. ESPM Midwest's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Advanta Bank Corp. Trade Debt $10,772 BankCard Center Trade Debt $9,730 Carboline Company Trade Debt $36,999 Custom Heists, Inc. Trade Debt $11,589 Fastenal Trade Debt $6,860 Federated Insurance Group Health Premium $14,786 G.V.W. Tire Inc. Trade Debt $15,390 Industrial Service Group Trade Debt $12,363 Joe's Salvage, Inc. Trade Debt $16,091 Murray Leasing LLC Trade Debt $5,805 Namasco Trade Debt $46,759 National Vacuum Equipment Trade Debt $8,540 New Life Parts Trade Debt $17,138 Northstar Productions Trade Debt $5,813 O'Neal Steel Corp. Trade Debt $11,046 Olympic Steel Trade Debt $26,301 Pre-Pro Assembly East Trade Debt $7,200 Prime Transport Inc. Trade Debt $17,443 The BIC Alliance Inc. Trade Debt $8,000 Weldstar Trade Debt $10,584 B. Environmental Service's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ AFCO Gen. Insurance Premium $13,300 Delta Rubber Trade Debt $12,183 Dentoni's Welding Works Trade Debt $82,384 Don Miner Trade Debt $12,110 Downing Paint & Equipment Trade Debt $27,496 E.F. Kludt #12673 Trade Debt $17,564 E.I. Dupont DE Nemours Trade Debt $28,397 & Co. Fleetpride Trade Debt $14,007 Gary Steel Division Trade Debt $105,277 Grange Debris Box and Monthly Building Lease $39,315 Wrecking Holland USA, Inc. Trade Debt $11,629 Hydraulic Controls Trade Debt $16,801 PDM Steel Services Trade Debt $107,150 Pioneer Cover-All Trade Debt $35,867 Reliance Sheet and Strip Trade Debt $31,554 Sierra Airgas Trade Debt $57,718 State Fund Workers Comp. Premium $151,026 Tahoma Tire Services Trade Debt $28,373 Tulsa Winch Trade Debt $30,000 Wells Fargo Card Service Trade Debt $23,034 C. ESP Enterprises' 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ ABI Logistics, Inc. Trade Debt $3,173 Armstrong Equipment Trade Debt $2,861 Arthur Harris & Company Trade Debt $2,289 Carboline Company Trade Debt $21,563 Century Wheel & Rim Trade Debt $27,054 Dentoni's Welding Works Trade Debt $30,454 E.I. Dupont DE Nemours & Trade Debt $106,508 Co. Envirocon Int'l. Consulting Trade Debt $6,490 Gary Steel Division Trade Debt $448,993 PO Box 41250 Santa Ana, CA 92799-1250 Tel: 562-906-2020 Jason Reis Trade Debt $2,283 Jose A. Miranda Trade Debt $4,100 National Vacuum Equipment Trade Debt $9,538 PDM Steel Services Trade Debt $108,030 Pinnacle Trade Debt $12,055 Pre-Pro Assembly Trade Debt $2,595 Roger Fox Trade Debt $9,483 Ryder Trade Debt $6,416 Sprint PCS Trade Debt $5,372 Tahama Tire Services Trade Debt $8,590 USF Surface Preparation Trade Debt $2,510 GENTEK: General Chemical Unit Enters Joint Venture with Esseco -------------------------------------------------------------- General Chemical Corporation, a subsidiary of GenTek Inc. (OTC Bulletin Board: GNKIQ), and Esseco S.p.A., announced plans to form a joint venture, Esseco General Chemical LLC, to supply various sodium and sulfur-based chemistries to the North American market. Initially, the joint venture will focus on the supply and distribution of all grades of sodium metabisulfite, sodium sulfite and sodium thiosulfate, among other products. "General Chemical and Esseco are excited to be bringing together our respective technical, market, distribution and manufacturing expertise," said Charlie Shaver, vice president and general manager of GenTek's Performance Products business. "With our combined global capabilities, the new Esseco General Chemical joint venture will be able to bring even more value to our North American customers, who have been served by General Chemical for almost 90 years." "This joint venture will allow Esseco to bring our over 80 years of experience in these products to North America and demonstrates the long term commitment of both Esseco and General Chemical to continue to grow as global leaders in these markets," said Piero Nulli, Chief Executive Officer of Esseco. In the fourth quarter of 2002, Esseco launched a 20,000-ton per year expansion of its sodium metabisulfite plant in Trecate, Italy. "We believe this expansion will strengthen the joint venture's position as a leading supplier to North America, and Esseco's position as a leading global supplier," said Nulli. It is anticipated that the joint venture will be operational early in the second quarter of 2003. Details will be discussed with General Chemical's customers individually by representatives of General Chemical and the joint venture. The implementation of the joint venture is subject to certain conditions, including approval of the Bankruptcy Court in Delaware. General Chemical Corporation, which traces its roots to 1899, is part of GenTek's Performance Products business headquartered in Parsippany, N.J. GenTek's Performance Products segment operates a network of more than 40 production facilities in North America and Europe, in addition to various technical centers, warehouses, terminals and distribution operations, and is a global supplier to a wide variety of end markets, including petroleum refining, water treatment, semiconductor, pharmaceutical and personal care, paper, foods and chemical processing. Esseco S.p.A, founded in 1920 and based in Trecate, Italy, is a leading European manufacturer and global supplier of sulfur dioxide and a wide range of its derivative products. Esseco's products serve diverse markets and industries, including paper, water treatment, rubber, textiles, glass, agriculture and foods. GenTek Inc., is a technology-driven manufacturer of communications products, automotive and industrial components, and performance chemicals. A global leader in a number of markets, GenTek provides state-of-the-art connectivity solutions for telecommunications and data networks, precision automotive valve-train components, and performance chemicals for environmental, pharmaceutical and personal care, technology and chemical- processing markets. Additional information about the company is available on GenTek's Web site at http://www.gentek-global.com On October 11, 2002, General Chemical, its parent, GenTek Inc., and 30 of its U.S. affiliates filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware to facilitate a restructuring of GenTek and certain of its U.S. affiliates. General Chemical commenced its Chapter 11 process in the United States because its other Chapter 11 affiliates are all either obligors or guarantors under GenTek's senior secured credit facility. Since the Chapter 11 filings, GenTek and its affiliates, including General Chemical, have continued to operate their businesses as debtors in possession under the provisions of the U.S. Bankruptcy Code and will continue their business operations in the ordinary course. GENTEK INC: Court Convenes Exclusivity Extension Hearing Today -------------------------------------------------------------- The hearing on GenTek Inc., and its debtor-affiliates' request to extend their exclusive periods will convene today, March 4, 2003 at 2:00 p.m., in Wilmington, Delaware. As previously reported, the Debtors asked the Court to extend their initial exclusive periods for proposing and obtaining acceptances of one or more reorganization plans for another 90 days. Specifically, the Debtors asked the Court to extend their Exclusive Proposal Period through and including May 9, 2003 and their Exclusive Solicitation Period through and including July 8, 2003. (GenTek Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLEACHER CBO: Two 2000-1 Classes' Ratings Lowered to Low-B Level ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class A, B-1, and B-2 notes issued by Gleacher CBO 2000-1 Ltd., a high-yield arbitrage CBO transaction managed by Gleacher Capital Management LLC, and removed them from CreditWatch where they were placed on February 12, 2003. The rating actions reflect factors that have negatively affected the credit enhancement available to support the notes. These factors include a negative migration in the credit quality of the performing assets in the pool and a decline in the weighted average fixed coupon from the collateral pool available for hedge and interest payments. Standard & Poor's noted that its Trading Model test, which measures the credit quality of a portfolio's ability to support the rating on a given tranche, is out of compliance according to the January trustee report. Securities worth $87.59 million, or 23.8% of the performing collateral, come from obligors with ratings in the 'CCC' range. Furthermore, securities worth $153.73 million, or 41.81% of the performing collateral, come from obligors whose ratings are currently on CreditWatch with negative implications. The transaction has also been failing the minimum fixed coupon test. According to the latest trustee report, the minimum weighted average fixed-rate coupon was at 8.9% versus the required 10.05%. As a part of its analysis, Standard & Poor's reviewed the results of recent cash-flow model runs. These runs stressed various parameters that are instrumental in the performance of this transaction, and are used to determine its ability to withstand various levels of default. When the stressed performance of the transaction was then compared to the projected default performance of the current collateral pool, Standard & Poor's found that the projected performance of the class A, B-1, and B-2 notes, given the current quality of the collateral pool, was not consistent with the prior ratings. Consequently, Standard & Poor's has lowered its ratings on these notes to the new level. Standard & Poor's will continue to monitor the performance of the transaction to ensure that the ratings assigned to the rated tranches continue to reflect the credit enhancement available to support the notes. RATINGS LOWERED Gleacher CBO 2000-1 Rating Class To From Current Balance (mil. $) A AA- AAA/Watch Neg 276 B-1 BB+ A-/Watch Neg 33 B-2 BB+ A-/Watch Neg 10 GLOBAL CROSSING: Worldcom Seeks Relief to Reject Three Contracts ---------------------------------------------------------------- WorldCom, Inc., asks the Court for relief from the automatic stay so it can seek authority in its own bankruptcy case to reject certain of its contracts with Global Telesystems Ltd., GT U.K. LTD. and GT Landing Corp. Thomas R. Califano, Esq., at Piper Rudnick LLP, in New York, informs the Court that IDB WorldCom Services, Inc., a subsidiary of WorldCom, Inc. and a debtor in the WorldCom Bankruptcy Case, entered into agreements for the purchase of capacity on the GX Debtors' telecommunications system connecting: -- the United States to the United Kingdom, -- the United Kingdom to the Netherlands, -- the Netherlands to Germany, and -- Germany to the United States. Specifically, IDB WorldCom entered into: -- a Capacity Purchase Agreement dated as of March 11, 1998 with Global Telesystems Ltd.; -- an Indefeasible Right of Use Agreement in Inland Capacity (United Kingdom) dated as of June 5, 1998 with GT U.K. LTD.; and -- an Indefeasible Right of Use Agreement in Inland Capacity (United States) dated as of June 5, 1998 with GT Landing Corp. The total annual cost under the Agreements is $3,000,000. Mr. Califano tells the Court that WorldCom has determined that the network capacity IDB WorldCom purchased from the GX Debtors pursuant to the Agreements is no longer beneficial to the WorldCom bankruptcy estate. IDB WorldCom has re-routed to other systems all the traffic from the AC-1 system corresponding to the three agreements. Thus, WorldCom expects to have no use in its ongoing business for all of the capacity purchased under these three agreements, which are a cash drain on the WorldCom bankruptcy estates. By rejecting the Agreements, WorldCom will save its bankruptcy estates $3,000,000 in administrative expense per annum for unnecessary capacity. WorldCom wants to reject the Agreements effective as of January 1, 2003. Absent relief from the automatic stay, WorldCom will be effectively denied its statutory rights under Section 365 of the Bankruptcy Code and, as a consequence, be saddled with an administrative burden to the prejudice of its bankruptcy estates and creditors. Mr. Califano points out that there will be no prejudice to the Debtors or their creditors if WorldCom is granted relief from the automatic stay. While the Agreements ultimately may be rejected in the WorldCom Bankruptcy Case, the GX Debtors will recover their capacity to sell to other customers. Furthermore, the contemplated rejection of the Agreements will not impose a hardship on the GX Debtors as they will not be required to respond or otherwise to participate in the rejection proceeding. (Global Crossing Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) Global Crossing Holdings's 9.625% bonds due 2008 (GBLX08USR1) are trading at 3 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX08USR1 for real-time bond pricing. HAYES LEMMERZ: Wants Additional Time to Move Actions to Delaware ---------------------------------------------------------------- Anthony W. Clark, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Wilmington, Delaware, explains that Hayes Lemmerz International, Inc., and its debtor-affiliates still have not finished determining which of the state court actions they will remove. The Debtors are parties to numerous judicial and administrative proceedings currently pending in various courts or administrative agencies throughout the country. The Actions involve a wide variety of claims, some of which are extremely complex. Mr. Clark also points out that the Debtors have filed a Reorganization Plan and Disclosure Statement with the Court. The Debtors are committed to emerging from Chapter 11 in the first half of 2003, consistent with the timetable outlined to the Court and all interested parties at the outset of these cases. For these reasons, the Debtors ask the Court to further extend the deadline in which they can remove any prepetition actions for another three months, through the longer of: -- June 3, 2003, or -- 30 days after entry of an order terminating the automatic stay with respect to any particular action sought to be removed. At the outset of these cases 14 months ago, Mr. Clark relates that the Debtors prioritized their goals, first to stabilize their business operations, next to formulate and implement a five-year business plan which would lay the foundation for emerging from these proceedings, and finally to negotiate a reorganization plan. Consistent with these goals, the Debtors have worked diligently to develop the Plan that is fair and equitable to its creditor constituencies. Mr. Clark asserts that another extension of the removal period is reasonable. The extension sought will afford the Debtors sufficient opportunity to make fully informed decisions concerning the possible removal of the Actions and protect the Debtors' valuable right to economically adjudicate the lawsuits pursuant to Section 1452 of the Judiciary Procedures Code if the circumstances warrant removal. Mr. Clark further assures the Court that the Debtors' adversaries will not be prejudiced by this extension because the adversaries may not prosecute the Actions absent relief from the automatic stay. Nothing will prejudice any adversary whose proceeding is removed from pursuing a remand pursuant to Section 1452(b) of the Bankruptcy Code. Judge Walrath will convene a hearing to consider the Debtors' request on March 6, 2003 at 9:30 a.m. By application of Del.Bankr.LR 9006-2, the Removal Period is automatically extended through the conclusion of that hearing. (Hayes Lemmerz Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) HOLLINGER INC: S&P Assigns B Rating to US$110-Mill. Senior Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' rating to Hollinger Inc.'s proposed US$110 million senior secured notes due 2010. Net proceeds from the offering are expected to refinance Hollinger Inc.'s existing indebtedness, make an advance to its controlling shareholder Ravelston Corp. Ltd., to repay debt at Ravelston, and for general corporate purposes. In addition, all ratings outstanding on Hollinger Inc., and its subsidiaries, including Hollinger International Inc., and Hollinger International Publishing Inc., remain on CreditWatch with negative implications, where they were placed Dec. 11, 2002, reflecting Standard & Poor's concerns over near-term maturities at the Hollinger Inc. holding company level. Hollinger Inc. recently has announced that it has received an extension to March 14, 2003, from Feb. 28, 2003, on the US$44.0 million payment that was due under its C$90.8 million bank facility. The proposed refinancing would allow Hollinger Inc. to repay all of the outstanding facility, thus removing concerns about refinancing risk. "The proposed notes were rated at 'B', two notches below the 'BB-' long-term corporate credit rating, to reflect structural subordination to debt outstanding at its subsidiaries, mainly at HIPI," said Standard & Poor's credit analyst Barbara Komjathy. The resolution of the CreditWatch placement is dependent upon the successful completion of the announced transaction at Hollinger Inc. before March 14, 2003, after which the long-term corporate credit ratings will be affirmed at 'BB-' with a negative outlook. The anticipated negative outlook following the CreditWatch resolution reflects Hollinger's financial profile and policy that remain aggressive for the rating category. To maintain the 'BB-' rating, Standard & Poor's anticipates that Hollinger will reduce its consolidated debt burden in 2003 from the sale of noncore assets and/or from the application of internal cash flows. In addition, credit measures are expected to improve in the near term, including operating margins, EBITDA coverage of interest, and preferred dividends and leverage ratios, to more in line with the rating category. In particular, EBITDA coverage of interest and preferred dividends should reach close to 2.0x in 2003. The ratings are based on the consolidated group of Hollinger companies, including parent Hollinger Inc. The ratings on Hollinger reflect the strong market positions of the company's two key newspapers, The Daily Telegraph (U.K.) and the Chicago Sun-Times (U.S.), and the geographic diversity they provide, which help to mitigate regional downturns. These factors are offset by the inherent cyclicality of the advertising revenues and newsprint prices and by Hollinger's relatively aggressive financial profile and policy. HORSEHEAD IND.: Wants to Continue Hiring Ordinary Course Profs. --------------------------------------------------------------- Horsehead Industries, Inc., d/b/a Zinc Corporation of America, and its debtor-affiliates want to continue the employment of the professionals they turn to in the ordinary course of their businesses through the duration of the Companies' chapter 11 cases. The Debtors ask the U.S. Bankruptcy Court for the Southern District of New York to permit them to pay each Ordinary Course Professional, without a prior application to the Court, 100% of the fees and disbursements incurred, upon the submission of an appropriate invoice setting forth in reasonable detail the nature of the services rendered and disbursements actually incurred, subject to a $10,000 per month per Professional cap. In the event that an Ordinary Course Professional seeks more than $10,000 in compensation in a single month or $100,000 in the whole duration of the Chapter 11 period, that Ordinary Course Professional will be required to file a fee application for the full amount of its fees and disbursements in accordance with the Bankruptcy Code. The Debtors ask the Court to allow them to expend up to $400,000 in fees and disbursements on all Ordinary Course Professionals. The Debtors relate that they desire to continue to employ the Ordinary Course Professionals to render many of the services to their estates similar to those services rendered prior to the Petition Date. These professionals render a wide range of legal, accounting, tax, real estate, and other services for the Debtors that impact the Debtors' day-to-day operations. Specifically, the Debtors intend to employ professionals to assist with: a) Labor Issues - The employment of a labor law firm law firm to assist with discrimination issues, labor arbitration issues, benefit issues and ERISA matters. b) State and local legal issues - The employment of law firms located in the vicinities of the Debtors' operations to assist with issues that might arise under state and local laws. c) OSHA - The employment of law firms to respond to OSHA issues when the need arises. The Debtors argue that it is essential that the employment of the Ordinary Course Professionals, many of whom are already familiar with the Debtors' affairs, be continued on an ongoing basis so as to avoid disruption of the Debtors' normal business operations. The Debtors submit that the proposed employment of the Ordinary Course Professionals is in the best interest of their estates and their creditors. INTERPLAY ENTERTAINMENT: Kisses Auditors Ernst & Young Goodbye -------------------------------------------------------------- On February 18, 2003, Interplay Entertainment Corp., informed Ernst and Young LLP that their firm would no longer be engaged as the Company's independent public accountants. Ernst and Young LLP's report on the Company's financial statements for the year ended December 31, 2001 contained a qualification as to the Company's ability to continue as a going concern. The decision to change the Company's independent public accountants was approved by the Company's Audit Committee of the Board of Directors. On February 18, 2003, the Company's Audit Committee of the Board of Directors approved and authorized the engagement of Squar, Milner, Reehl & Williamson, LLP as the Company's independent public accountants. Interplay Entertainment makes PC and console video games with titles like Dungeon Master II, Redneck Rampage, and Torment. Among the subsidiaries and divisions under the Interplay umbrella are 14 Degrees East (strategy and puzzle games), Black Isle (role playing games), Shiny Entertainment (cartoon animation), Tantrum (action games), and Digital Mayhem. Struggling to rebound from financial problems, Interplay is putting more focus on its console games. KEY3MEDIA: Wants to Continue Ordinary Course Profs. Employment -------------------------------------------------------------- Key3Media Group, Inc., and its debtor-affiliates want to continue their employment of the professionals they turn to in the ordinary course of their businesses while they wind their way through the chapter 11 process. The Debtors tell the U.S. Bankruptcy Court for the District of Delaware that the continued employment of the Ordinary Course Professionals is important to obtain services like: (a) tax preparation and other tax advice; and (b) legal services with regard to: i) routine litigation, ii) collection matters, iii) reimbursement and regulatory matters, iv) government investigations, v) acquisitions, divestitures, and other corporate matters, and vi) real estate issues. The Debtors utilize the professionals in the ordinary course of their businesses to provide the services required on a day-to- day basis to manage the Debtors' affairs. Although the Ordinary Course Professionals are not integral to the administration of the Debtors' cases or the carrying out of their duties as debtors in possession, the Ordinary Course Professionals are integral to the operation of the Debtors' business. The Debtors submit that it would be more costly and more financially inefficient to require the Ordinary Course Professionals to file separate applications for retention with the Court. Consequently, the Debtors propose that they be permitted to pay each Ordinary Course Professional, without prior application to the Court, up to a total of $25,000 per month. At this time, the Debtors believe that the fees payable to the Ordinary Course Professionals will not exceed $25,000 per month per professional. Key3Media Group, Inc.'s business consists of the production, management and promotion of a portfolio of trade shows, conferences and other events for the information technology industry. The Company filed for chapter 11 protection on February 3, 2003 (Bankr. Del. Case No. 03-10323). John Henry Knight, Esq., and Rebecca Lee Scalio, Esq., at Richards, Layton & Finger, P.A., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $241,202,000 in total assets and $441,033,000 in total debts. KIT MANUFACTURING: Completes Sale of RV Division to Extreme RVs --------------------------------------------------------------- KIT Manufacturing Company (OTC: KTMC) announced that on January 30, 2003, it had completed the sale of substantially all of the assets of its Recreational Vehicles Division to Extreme RVs LLC, an Idaho limited liability company. The assets were sold for cash and the assumption of certain liabilities related to the RV Division. The Company also agreed to sell certain real property to Extreme. Pending the sale of the real property to Extreme, the Company has leased the real property to Extreme. "By selling these assets and reducing non-essential expenses, KIT has significantly strengthened its balance sheet," said KIT Chairman and CEO Dan Pocapalia. "The Company has initiated a comprehensive corporate restructuring program that includes a dramatic reduction in corporate overhead expenses. We believe these initiatives will enable us to profitably operate our manufactured housing division while the Company continues to review a definitive agreement to sell this segment of the business to an unaffiliated third party." KIT Manufacturing Company is a leading producer of manufactured homes and constructs both single-section and multi-section manufactured homes under brand names that include Cypress, Chateau, Sierra XL, Sunrise and Golden State. KIT sells manufactured homes through a network of approximately 60 dealers in the western United States and Canada and a wholly owned retail facility. * * * Liquidity and Going Concern Uncertainty In its Form 10-Q for the period ended July 31, 2002, the Company stated: "The Company's consolidated financial statements have been presented on the basis that it will continue as a going-concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has suffered net losses of $3,061,000 for the nine months ended July 31, 2002, and $2,527,000 and $269,000 for the years ended October 31, 2001, and 2000, respectively. The Company has used cash from operating activities of $3,437,000 for the nine months ended July 31, 2002 and $2,311,000 and $1,720,000 for the years ended October 31, 2001 and 2000, respectively. These recurring losses and the need for continued funding, as discussed below, raise substantial doubt about the Company's ability to continue as a going concern. "The Company has funded its financial needs primarily through operations and its lines of credit, as amended. At October 31, 2001, the Company had cash and cash investments of $5,991,000, which was restricted under its then existing line of credit, as amended, and working capital of $3,499,000. At July 31, 2002, the Company had cash and cash investments of $783,000, which was not restricted under its new line of credit, working capital of $1,024,000 and availability under its current line of credit of $27,000. The Company remains dependent upon its ability to obtain outside financing either through the issuance of additional shares of its common stock or through borrowings until it achieves sustained profitability through increased sales and improved product margins. The Company's business continues to focus on the manufacturing, marketing and selling of its manufactured homes and recreational vehicles. "Management also plans to continue its internal cost reduction initiatives that were implemented in previous years. Additionally, management believes that given current sales and margins, and with the additional funding provided under a new long-term credit facility, as amended in August 2002, the Company should have sufficient capital resources to sustain its operations through fiscal year 2002. Should the Company require further capital resources during 2002, it would most likely address such requirement through a combination of sales of its products, sales of equity securities, and/or additional debt financings. If circumstances changed, and additional capital was needed, no assurance can be given that the Company would be able to obtain such additional capital resources. "If unexpected events occur requiring the Company to obtain additional capital and it is unable to do so, it then might attempt to preserve its available resources by deferring the creation or satisfaction of various commitments, deferring the introduction of various products or entry into various markets, or otherwise scaling back its operations. If the Company were unable to raise such additional capital or defer certain costs as described above, such inability would have a material adverse effect on the financial position, results of operations, cash flows and prospects of the Company. "In fiscal 2001, the Company assumed significantly all responsibility in connection with the daily operations of the retail sales partnership. Although the original partnership agreement governing the relationship between the Company and the minority interest holder provided participating rights to the minority holder and thus precluded the Company from consolidating the retail sales partnership, the partnership's recurring losses and need for continued funding required the Company's attention. The retail sales partnership commenced operations in fiscal 1998 and has continued to perform substantially below expectations with losses trending significantly higher in each successive year. While lenders' tightened credit policies and industry-wide excess inventory levels were partially responsible for the partnership's poor performance, the Company's management raised some concerns regarding the minority interest holder's management of the partnership's operations in accordance with the original agreement. The partnership agreement specifically delegated day-to-day operating responsibility and decision making authority to the minority interest holder and it is management's belief that such responsibilities could have been performed at a higher level, as evidenced by the poor operating results previously mentioned. As a result, in fiscal 2001, the Company continued to fund 100% of the partnership's working capital needs and also became substantially involved in the decision making process and its daily operations. Additionally, the Company purchased the minority interest holder's 30% interest in the partnership for $20,000 in cash and the assumption of $40,000 in debt and has consolidated its investment effective the beginning of fiscal 2001." KMART CORP: Wants to Pull Plug on Self-Checkout Equipment Lease --------------------------------------------------------------- Pursuant to a Master Lease Agreement dated August 2, 2001, the Debtors lease 790 NCR self-checkout units from General Electric Capital Corporation. The self-checkout equipment is used to allow customers to pay for merchandise without a Kmart Corporation associate's assistance. As part of their restructuring strategy, the Debtors have determined that the equipment is no longer cost-effective for them and their ongoing business. The equipment uses outdated technology, which costs the Debtors large sums in repair and maintenance charges. The Debtors also note that the lease payments under the Agreement no longer bear any relation to the value of the equipment. They could purchase new self-checkout units today for about two-thirds as much as they pay in lease payments. Thus, the Debtors seek the Court's authority to terminate the Master Lease Agreement. The Debtors inform the Court that rejecting the equipment will save them $55,700,000 over the course of the term of the Agreement. The Debtors pay $2,200,000 each month in lease payments for the equipment. In addition, 257 self-checkout units are located in stores that the Debtors intend to close. The Debtors estimate that there are very high costs associated with relocating and re-installing the equipment. Aside from the economics, the Debtors relate that it is not clear if the self-checkout units will be a part of their ongoing business. (Kmart Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Kmart Corp.'s 9.00% 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. KNOLOGY BROADBAND: Asks Court for Final Decree Closing this Case ---------------------------------------------------------------- As previously reported in the Troubled Company Reporter on October 29, 2002, the U.S. Bankruptcy Court for the Northern District of Georgia confirmed Knology Broadband, Inc.'s Prepackaged Reorganization Plan. The Debtor tells the Court their chapter 11 Plan took effect November 6, 2002, and the transactions contemplated under the Plan have been consummated. The estate has been fully administered and there is no motion, contested matter or other proceeding pending on the court's docket. Moreover, the Debtors paid all fees due to the United States Trustee and other parties entitled to compensation. Consequently, the Debtor asks the Court for entry of a final decree closing this case. Knology Broadband, Inc. provides services to certain of its affiliates which are providers of cable TV, telephone and high speed Internet access to business and residential customers. The Debtor filed for chapter 11 protection on September 18, 2002 (Bankr. N.D. Ga. Case No. 02-1154). Barbara Ellis-Monro, Esq., Michael S. Haber, Esq., and Ronald E. Barab, Esq., at Smith, Gambrell & Russell, LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $43,646,524 in total assets and $473,814,416 in total debts. LEATHERLAND: Brings-In Roetzel & Andress as Bankruptcy Counsel -------------------------------------------------------------- Leatherland Corp., d/b/a Leather Limited, asks for permission from the U.S. Bankruptcy Court for the Northern District of Ohio to employ Roetzel & Andress as Counsel. The Debtor tells the Court that it has selected Roetzel & Andress as its attorneys because such firm has experience and knowledge in the field of debtors' and creditors' rights and because it believes that the firm is well qualified to represent it as a debtor-in-possession in this case. As the Debtor's counsel, Roetzel & Andress will be required: a) provide legal advice with respect to the Debtor's powers and duties as a debtor-in-possession in the continued operation of its business and management of its properties; b) take all necessary action to protect and preserve the Debtor's estate, including the prosecution of actions on behalf of the Debtor, the defense of any actions commenced against the Debtor, negotiations concerning all litigation in which the Debtor is involved, and objecting to claims filed against the Debtor's estate; c) prepare on behalf of the Debtor, as a debtor-in-possession, all necessary motions, answers, orders, reports and other legal papers in connection with the administration of its estate herein; and d) perform any and all other legal services for the Debtor, as a debtor-in-possession, in connection with this Chapter 11 case, including the formulation and implementation of a plan of reorganization. Roetzel & Andress will bill the Debtor in its current hourly rates: Patricia B. Fugee $195 per hour Bruce R. Schrader $235 per hour Jerome Cox $175 per hour Leatherland Corp., is in the business of retail store of leather goods. The Company filed for chapter 11 protection on February 25, 2003 (Bankr. N.D. Oh. Case No. 03-31195). Patricia B Fugee, Esq., at Roetzel & Andress represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $18,525,306 in total assets and $12,606,482 in total debts. LTV CORP: Wins Nod to Recover Documents Accidentally Produced ------------------------------------------------------------- LTV Steel Company, Inc., tells Judge Bodoh it brings this motion to avoid distinct harm that will result if counsel for one of its creditors is able to use inadvertently produced privileged documents against LTV Steel in litigation unrelated to the bankruptcy proceeding. On June 20, 2002, as part of the Allocation Proceeding, Judge Bodoh ordered LTV Steel to make thousands of documents available to its creditors within 24 hours. The documents spanned a wide range of LTV Steel's operations and were compiled so that potential purchaser of the assets could accurately assess the risks and benefits associated with a purchase. A significant portion of the data room documents focused on environmental matters, including the status of pending litigation and regulatory proceedings. Before gaining access to the data room, all potential purchasers of LTV Steel's assets were required to sign confidentiality agreements. Those agreements confirmed that the potential purchasers were gaining access to "evaluation materials" which is non-public, confidential and/or proprietary. Potential purchasers could disclose the evaluation material to their advisors only on a need-to-know basis and only after those advisors agreed to maintain the confidentiality of the information. This material could not be used in any other way for any third party's benefit to LTV Steel's detriment. During the allocation proceeding, various LTV Steel creditors "clamored for access" to the environmental documents contained in the data room as well as certain environmental surveys. Among the leaders of the charge to obtain access were K&L attorneys, who were representing several creditors. When the first round of the allocation hearings ended, counsel for several of the creditors asked for immediate access to the environmental documents in order to further prepare their case for the continued proceedings. Over LTV Steel's objections, Judge Bodoh signed a written order granting the creditors immediate access to the environmental documents. Under the terms of the order, LTV Steel had 24 hours to make over 21,000 pages of environmental documents available or face a further delay in the proceeding, and the recalling of witnesses. LTV Steel complied with the order and, despite its reasonable precautions, inadvertently disclosed to its creditors several documents that are either classic attorney work product or contain attorney-client privileged communications. LTV Steel learned of its disclosure when attorneys from Kirkpatrick & Lockhart, who represent Baker Environmental, Inc., in an unrelated breach of contract action against LTV Steel in a case styled "Baker Environmental, Inc. v. LTV Steel Company" pending in the Western District of Pennsylvania, wrote a letter to counsel for LTV Steel stating that LTV Steel had failed to produce certain documents in that action. Baker claimed that LTV Steel had waived privilege for these documents by producing them to certain LTV Steel creditors in the Allocation Proceeding. Allowing the use of those documents to prejudice LTV Steel's interest in unrelated litigation violates the spirit of the attorney-client and work product privileges and the rationale behind the disclosures in this proceeding. Because the overriding interests of justice preclude a finding that LTV Steel has waived the work product protections or privilege attendant with these documents, LTV Steel seeks a ruling requiring the creditors to return these inadvertently produced documents and to not make any use of them. JWP/Hyre Electric Responds Kenneth D. Reed, Esq., at Abrahamson & Reed in Hammond, Indiana, responds to this motion on behalf of JWP/Hyre. He points out that the Debtor's motion is non-specific as to the identity of persons to whom it may have sent the documents in question, except perhaps for naming one of the lawyers for Baker Environmental Company. Mr. Reed himself states that he has no recollection of ever having received any of the allegedly "confidential" work product or privileged documents. In addition, a search was conducted by a paralegal working for Mr. Reed, who was in charge of maintaining the LTV Steel files, and after several hours of searching, the paralegal was unable to find any such documents. Nonetheless, counsel for JWP/Hyre received a letter requesting return of the documents, and has been served with a copy of the motion. LTV Steel founds its motion on the predicate assumption that "allowing the use of those documents to prejudice LTV's interest in unrelated litigation violates the spirit of the attorney- client and work product privileges. . . ." JWP/Hyre is not involved in any unrelated litigation and has absolutely no use for the documents, even if it had ever laid eyes on them. It costs time and money to search files and prepare responses to motions such as that filed by the Debtor. The Debtor should at least know the persons or companies to which it inadvertently sent the allegedly confidential documents. It should limit its inquiries and motions to those individuals and companies. For these reasons, JWP/Hyre objects to the motion as it pertains to JWP/Hyre or its counsel, and asks for the assessment of reasonable attorney's fees and costs for burdening JWP/Hyre and its counsel with having to search its records and respond to the motion, in the reasonable sum of $2,250. Bank One Trust Company Answers Bank One, represented by Eric M. Stoller, Esq., at the Columbus firm of Schottenstein Zox & Dunn Co. LPA, says that counsel for the Debtors already contacted Bank One's counsel seeking return of any documents in its possession. Accordingly, Bank One believes that the Debtor seeks to subject Bank One and its counsel to the terms of the motion and any relief that is granted on it, despite the fact that the primary dispute appears to be between the Debtors and the law firm of Kirkpatrick & Lockhart. As already stated by letter, neither Bank One nor its counsel has any knowledge of receiving copies of any of the documents, and to the best of its knowledge, Bank One is not in possession of any of the documents. Further, neither Bank One nor its counsel ever visited the data room described in the Motion. It is therefore not possible to return any of the documents to the Debtors, or make use of the documents. Accordingly, the motion should be denied if it requires Bank One or its counsel to take any action. * * * Considering this motion on an expedited basis, Judge Russ Kendig orders certain documents be returned: (1) Outline of proof prepared by LTV Steel's counsel in the Baker Environmental litigation; (2) LTV Steel's confidential mediation statement prepared by counsel in the Baker Environmental litigation; (3) Summaries of litigation and potential litigation prepared by LTV Steel's in-house counsel; and (4) a memo from LTV Steel's in-house counsel to a member of senior management relating to environmental issues at the Cleveland Works. Judge Kendig holds that LTV Steel's inadvertent production of these documents does not waive the attorney-client privilege and/or work product protections for these documents. He finds that LTV Steel took "reasonable precautions" to prevent inadvertent disclosure based on the breadth of the document production and the limited time in which it was required to produce the documents. All persons, parties or entities who received the documents or had access to them are required to: (a) return these documents to LTV Steel or certify that they have destroyed the documents; and (b) make no use of these documents or the information contained in them. (LTV Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392- 00900) MEDCOMSOFT INC: Net Capital Deficit Slides-Down to $1.7 Million --------------------------------------------------------------- MedcomSoft Inc., (TSX - MSF) announced financial and operating results for its second fiscal quarter ended December 31, 2002. Overview of the Second Quarter Activities During this second fiscal quarter, MedcomSoft continued its stabilization and reorganization efforts. In that regard, the Company: - Recalled its core R&D team and resumed its development activities to provide ongoing support for existing products and to prepare for release of additional features that will maintain its product competitive edge in the marketplace. New releases for Medworks 4.0 and Record 1.3 have been scheduled for the third quarter. - Retained the services of the Malahat group, a highly specialized team with extensive experience in sales, marketing, and channel development; to help reengineer its distribution and market penetration strategies for the US market. - Negotiated several strategic alliances with new distribution partners in the US and released product interfaces to eight of the top practice management systems in that market. Results of Operations Revenue for the quarter was $143 thousand compared to $65 thousand for the second quarter last year. For the quarter, the gross margin was $137 thousand or 96% of revenue compared to $57 thousand or 88% of revenue for the second quarter in the prior year. Revenues recognized during the quarter included $59 thousand from utilization fees in Canada and the remainder was attributed to the sale of MedcomSoft Record licenses and related services in the United States. Income from operations in the second quarter was $2 thousand compared to a loss from operations of $4.4 million in the second quarter of last year. The Company realized a net income after tax in the second quarter of $3 thousand, compared to a net loss after tax of $4.4 million for the second quarter of last year. During the quarter, the Company recorded, as a reduction of expenses, $483 thousand relating to an agreement reached during the quarter with Lamsak Pty. Limited and its affiliates in Australia to terminate and release each other from all obligations under the Software License Agreement and related contracts executed in May 2000 and December 2000. There was no tax expense recorded in the second quarter as there are sufficient non-capital loss carryforwards to reduce current tax expense to nil. At December 31, 2002 cash and short-term investments were $nil compared to $13 thousand at the June 30, 2002 year-end, a decrease of $13 thousand. Accounts receivable decreased to $22 thousand compared to $29 thousand at the year-end due to timing and collection of customer billings. Prepaid expenses of $63 thousand increased compared to the $50 thousand balance at year- end due to the timing and recognition of certain prepayments made during the quarter. The Company continues to maintain inventories sufficient to support immediate sales activities. As at December 31, 2002, MedcomSoft continued to have no long- term debt and capital lease obligations were $21 thousand compared to $55 thousand at the year-end. Deferred revenue decreased to $104 thousand compared to $572 thousand at the year-end. This decrease was mainly attributable to the recognition of income of $483 thousand on the software license agreement with Lamsak Pty. Limited and its affiliates in Australia, net of deferred revenue arising on payments received on certain licenses sold to United States physicians for which the company has not recorded revenue. Only a pro-rata portion of maintenance contracts was recorded in revenue in the second quarter, with the balance remaining in deferred revenue. After two years of profitable operations in fiscal 2000 and 2001, the Company incurred a significant operating loss in fiscal 2002, which resulted in a capital deficiency of $2.5 million and a working capital deficiency of $2.9 million as at June 30, 2002. The Company currently has a capital deficiency of $1.7 million and a working capital deficiency of $2.0 million as at December 31, 2002. The Company's continued existence is dependent upon its ability to maintain profitable operations and obtain financing. At the Company's annual and special meeting held on December 4, 2002, the shareholders of the Company approved a resolution providing for advance approval of private placement(s) of securities resulting in the issuance of up to a maximum of 14,000,000 Common Shares. The Company is currently pursuing various options with its creditors and has made efforts to restore profitable operations. However, there can be no assurance that the Company will be able to maintain profitable operations, nor that financing efforts will be successful. MET WELD: Chapter 11 Case Summary & 20 Largest Unsec. Creditors --------------------------------------------------------------- Debtor: Met Weld, Inc. 5727 Ostrander Road Altamont, New York 12009 Bankruptcy Case No.: 03-11164 Type of Business: Manufacturer of a wide range of fabricated industrial equipment, components and systems from one-of-a-kind specialty items to high volume production quantities. See http://www.metweld.com/about-us.html Chapter 11 Petition Date: February 26, 2003 Court: Northern District of New York (Albany) Judge: Robert E. Littlefield Jr. Debtor's Counsel: Richard L. Weisz, Esq. Hodgson Russ LLP Three City Square, Third Floor Albany, NY 12207 Tel: (518) 465-2333 Total Assets: $2,515,861 Total Debts: $1,574,317 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Nooney Controls Corporation $46,079 Chromalox $33,642 Textron Financial Corporation $24,225 Emerick Associates, Inc. $23,480 Hayward Industrial Products, Inc. $26,053 Horizon Solutions Corp. $16,406 Adirondack Heat & Frost Insulation $16,850 ACI Controls, Inc. $15,235 American Tank and Fabrication Company $13,395 CBM Fabrications, Inc. $13,106 Empire State Electric Supply, Inc. $14,023 Kaman Industrial Technologies $13,894 Robicon Corporation $12,521 Team Ocean Services $12,590 Tri County $11,319 Micro Motion, Inc. $10,559 Thermo Reax $8,911 CPI Controls, Inc. $9,788 Pall Trincor $9,546 Magnetrol International, Inc. $9,194 MORTGAGE ASSET: Fitch Rates 3 P-T Cert. Classes at Low-B Levels --------------------------------------------------------------- Mortgage Asset Securitization Transactions, Inc. $926.2 million mortgage pass-through certificates, series 2003-2, MASTR Asset Securitization Trust 2003-2 classes 1-A-1, 2-A-1 through 2-A-13, 3-A-1 through 3-A-14, PO, 15-A-X, 30-A-X and A-R (senior certificates) are rated 'AAA' by Fitch Ratings. In addition, Fitch rates the $6.6 million class 30-B-1 certificates 'AA', $2.6 million class 30-B-2 certificates 'A', $1.8 million class 30-B-3 certificates rated 'BBB', $0.8 million class 30-B-4 certificates rated 'BB', $0.8 million class 30-B-5 certificates rated 'B' and $0.3 million class 15-B-5 certificates 'B'. The 'AAA' rating on the 1-A-1, 2-A-1 through 2-A-13, PO, and 15- A-X and A-R senior certificates reflects the 1.25% subordination provided by the 0.60% class 15-B-1, 0.30% class 15-B-2, 0.15% class 15-B-3 and 0.20% privately offered classes 15-B-4 through 15-B-6 certificates. The 'AAA' rating on the 3-A-1 through 3-A- 14, PO, and 30-A-X senior certificates reflects the 3.35% subordination provided by the 1.65% class 30-B-1, 0.65% class 30-B-2, 0.45% class 30-B-3 and 0.60% privately offered classes 30-B-4 through 30-B-6 certificates. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the master servicing capabilities of Wells Fargo Bank Minnesota, N.A., which is rated 'RMS1' by Fitch. The mortgage loans have been divided into three groups. The class 1 and class 2 certificates represent an ownership interest in the Group 1 and Group 2 mortgage loans, respectively. The subordinate certificates of the class 1 and class 2 certificates are cross-collateralized with both loan Groups. The class 3 certificates represent an ownership interest in the Group 3 mortgage loans only (is not crossed with Group 1 and Group 2). Group 1 consists of fully amortizing, mostly 15-year fixed-rate mortgage loans secured by first liens. As of the cut-off date (Feb. 1, 2003), the mortgage pool demonstrates a weighted average original loan-to-value ratio of 59.01%. Approximately 22.47% of the loans were originated under a reduced documentation, streamlined or stated income program. Cash-out and rate/term refinance loans represent 18.52% and 73.59% of the mortgage pool, respectively. Second homes account for 6.73% of the pool. The average loan balance is $476,626. The weighted average FICO score is 739. The states that represent the largest portion of mortgage loans are California (26.89%), Virginia (6.65%), Florida (6.08%), Maryland (5.65%) and Illinois (5.52%). Group 2 consists of fully amortizing, mostly 15-year fixed-rate mortgage loans secured by first liens. As of the cut-off date (Feb. 1, 2003), the mortgage pool demonstrates a weighted average OLTV of 58%. Approximately 23.14% of the loans were originated under a reduced documentation, streamlined, no ratio or stated income program, and 0.46% of the loans were originated under a no income-no asset documentation program. Cash-out and rate/term refinance loans represent 21.97% and 71.31% of the mortgage pool, respectively. Second homes account for 4.80% of the pool. The average loan balance is $480,509. The weighted average FICO score is 738. The states that represent the largest portion of mortgage loans are California (29.37%), Virginia (5.39%), New Jersey (5.32%) and Illinois (5.08%). Group 3 consists of fully amortizing, mostly 30-year fixed-rate mortgage loans secured by first liens. As of the cut-off date (Feb. 1, 2003), the mortgage pool demonstrates a weighted average OLTV of 67.43%. Approximately 34.35% of the loans were originated under a streamlined, reduced documentation, limited or stated income program, and 0.10% of the loans were originated under a no income-no asset documentation program. Cash-out and rate/term refinance loans represent 24% and 58.76% of the mortgage pool, respectively. Second homes account for 1.15% of the pool. The average loan balance is $449,782. The weighted average FICO score is 739. The states that represent the largest portion of mortgage loans are California (48.53%), Virginia (8.29%), Maryland (6.48%) and Illinois (5.88%). Approximately 8.50% of the Group 1 and Group 2 mortgage loans and approximately 1.20% of the Group 3 mortgage loans are secured by properties located in the State of Georgia, none of which are covered under the Georgia Fair Lending Act, effective as of October 2002. MASTR, a special purpose corporation, deposited the loans into the trust, which issued the certificates. JPMorgan Chase Bank will act as trustee. For federal income tax purposes, elections will be made to treat the trust fund as three real estate mortgage investment conduits. MOTOROLA INC: Del. Courts Nix Next Level Appeal re Tender Offer --------------------------------------------------------------- Thursday, the Delaware Chancery Court and the Delaware Supreme Court both denied Next Level Communications, Inc. (Nasdaq: NXTV) efforts to pursue an appeal of the Chancery Court's decision not to enjoin Motorola, Inc.'s (NYSE: MOT) pending tender Offer for all of the outstanding shares of stock of Next Level, not owned by Motorola. Friday, Motorola issued the following letter to the Next Level stockholders: February 28, 2003 To Fellow Shareholders of Next Level Communications, Inc. "We are writing to provide you an update regarding the status of the tender offer that we commenced on January 27, 2003 to acquire all of the shares of common stock in Next Level that Motorola does not already own at a price of $1.04 per share in cash. We will shortly amend our Offer to provide an update of the events that have occurred since our Offer was announced and to make certain technical amendments to it. We Want to Set the Record Straight "The volume of press releases, SEC filings and court appearances by Next Level has been overwhelming since we announced our Offer and much of the language and arguments used by Next Level management and their advisors have been technical, legalistic and simply false. This makes it harder for you to come to an informed decision about whether to accept our Offer. "Our interest, like yours, is to get the best return possible out of our investment in Next Level. With nearly $180 million invested in the company since December 2000, no other entity, (including Next Level management) has provided as much support as Motorola. We're All in the Same Boat "Like many of you, we have seen our investment in Next Level deteriorate alarmingly over the past two years and we haven't just had to swallow the decline in stock value. Motorola consolidates Next Level's substantial and ongoing losses into our own income statement, negatively affecting our own financial performance. We were prompted to make this Offer because we came to the conclusion that Next Level, like many other small telecommunications equipment providers, would not be able to survive without large cash infusions and a change in its cost structure. "The financial markets recognized this problem. Over the past 2 years Next Level's stock plummeted from a high of $195 per share to a low of 58 cents per share (in November 2002). Analysts covering the company have acknowledged that Next Level will require substantial additional funding to continue operations until the company achieves positive cash flow. Because of the current market environment, Motorola believes that Next Level is highly unlikely to be able to raise funds in the capital markets by floating more shares or issuing additional debt. "The 'significant shareholders' who have indicated that they would not tender their shares would have you believe that they share your pain. In reality, these shareholders or their affiliates (who have a representative on the Next Level independent committee) have cashed out over $150 million in proceeds from the sale of Next Level securities from an initial $10 million investment. How much gain have you realized? The High Cost of Remaining Public "We believe that the only viable alternative for Next Level is to secure significant additional funding in order to support not only sales, operations and R&D, but the company's substantial costs to remain publicly traded. To our knowledge Next Level has not been able to secure such funding and we do not believe it will be able to do so. In fact the only funding alternative that Next Level ever presented to Motorola would have obligated Motorola to guarantee a 43% return on investment to those investors over a 12 month period. Over this period the actual value declined over 80%. "Let's take a look at some of Next Level's costs. In 2001 Next Level paid its top six officers over $1.6 million in cash, excluding options. Additionally we estimate the annual cost to Next Level of remaining publicly listed to be approximately $4 million. We believe that without access to additional public market capital or third party financing Next Level is not able to support its current cost structure and thus in our view may not remain viable as an independent public company. After diligent and deliberate review, we came to the conclusion that we were no longer willing to finance Next Level under the status quo. The Facts "The Delaware Chancery Court rejected Next Level's charges that Motorola unfairly timed its Offer. "Someone seeking to take advantage of Next Level's price would have launched its offer when the stock was trading at 58 cents in November 2002, nearly 50% below the price we are now offering. "In denying Next Level's motion for preliminary injunction, the Delaware Chancery Court considered and rejected the argument that the timing of the Motorola Offer is inequitable. Specifically, the Court noted that, "the evidence of record demonstrates that the timing of Motorola's tender is not related to the market price of Next Level common stock. Instead, the timing has been driven by Motorola's change in management and the overall strategic review initiated in the summer of 2002. Indeed, the record supports the conclusion that Motorola has acted consistently and at great expense to itself to maintain Next Level's NASDAQ listing, thus, preventing further erosion in Next Level's share price." "We believe that the prices at which Next Level stock has traded since January 13, 2003 reflect speculation surrounding the Offer and do not reflect Next Level's intrinsic value. In fact, the $1.04 price represents a 14.4% premium over the closing price on January 10, 2003, the day before Motorola announced the Offer and premium of 28.6%, 22.6% and 17.7% over the 90, 20 and 5 trading days ending on January 10, 2003. In our view $1.04 significantly exceeds the intrinsic value of Next Level. "The Delaware Chancery court rejected Next Level's claims that Motorola failed to disclose material information. "Motorola believes that the Court's ruling demonstrates that Next Level's efforts to block the stockholders consideration of the tender Offer are without merit. In fact, the Court found that Next Level demonstrated no reasonable probability of success on any of its claims and that certain of its claims '[p]erhaps exceed[ed] the reasonable bounds of zealous advocacy.' "In its opinion, the Court noted, 'the record developed in connection with these expedited proceedings supports a conclusion that Motorola has fully and adequately disclosed all material information and that its tender Offer is not inequitably coercive.' The Court further concluded, '[I]n the circumstances, the decision to accept or reject Motorola's offer should be left in the hands of the Next Level stockholders.' "In rejecting Next Level's attempt to appeal the Delaware Chancery Court's earlier findings, the Court noted that 'on the disclosure issues, this was not that hard a case.' "Indeed, despite all of the noise about Motorola failing to disclose material information, the only item Next Level could successfully point to was a typographical error Motorola made on page 3 of our Offer to Purchase. We had erroneously attributed Next Level's $1.79 loss per share for the first nine months of 2001 to the first nine months of 2002. Next Level reported losses per share of $0.78 in the first nine months of 2002, as we correctly noted in the table on page 36 of the Offer to Purchase. "Next Level has a long history of wishful and inaccurate thinking about its prospects. "In our view, Next Level's revised management case projections, first made available on February 4, 2003, significantly overstate Next Level's likely financial performance and valuation. In fact, Next Level's projected revenue growth dramatically exceeds the independent estimates of Wall Street firms providing equity research analysis of Next Level. "As the Delaware Chancery Court noted in its rejection of Next Level's motion for a preliminary injunction, '[i]t is unclear to this court whether Next Level has ever met its projections during the last year. In fact, in February 2002, Next Level projected 2002 annual revenues to be $150 million. Next Level's actual 2002 revenues were approximately $57 million. Similarly, in September 2002, Next Level projected fourth quarter 2002 revenues as $22 million. Actual revenues for that period were approximately $14 million.' "In support of its new projections, Next Level has cited substantial progress with regard to the regional Bell operating companies and other major telecommunications providers. Yet, as the Court observed in deeming Next Level's projections 'substantially unreliable', Next Level management has a history of 'optimistic forecasting . . . about impending large customer orders or imminent turnarounds in financial performance that have invariably proven to be incorrect.' "For 2003 Next Level also projected operating margins of (18%) compared to (69%) by Credit Suisse First Boston. Historically, Next Level's unadjusted operating margin was (96%) and (186%) in 2002 and 2001, respectively. "Next Level's earnings per share performance has repeatedly fallen short of Wall Street's expectations. During 2002, Next Level missed consensus expectations by an average of 24%. What is Next Level's Realistic Future? "Next Level has already been notified that its stock would be delisted from the NASDAQ National Market for failure to comply with the National Market's minimum bid and shareholder equity requirements. If Next Level's appeal from such notification in unsuccessful and such delisting were to occur, liquidity and institutional support for the stock would likely drop, along with valuation and trading volume. In addition, Next Level has acknowledged that if it does not obtain approximately $30 million in financing before the end of March, it may not be able to avoid a "going concern" qualification from its auditors. "Who has your interests in mind and has a solution for Next Level? "The interests of Next Level management and its advisors are not necessarily the same as yours. In our view they are fighting for their own high-paying jobs and/or fees and for select investors who have already profited handsomely from their investment in Next Level. The irony is not lost on us that Next Level is spending hundreds of thousands of dollars of shareholder money fighting this Offer when in all likelihood those dollars came from Motorola. We are glad that the Delaware Chancery Court and the Delaware Supreme Court have granted you the opportunity to make up your mind about the merits of this Offer. As you consider this Offer, we would pose to you two questions: -- What would the price of Next Level's common stock be without Motorola's consistent financial support? -- What would the price of Next Level's common stock be today without Motorola's pending Offer? "If you have any questions or if you need assistance, including assistance in tendering your shares, you should contact the Information Agent at the following address and telephone number: Georgeson Shareholder Communications Inc. 17 State Street, 10th Floor New York, New York 1004 Toll Free: 866-203-9357 Banks and Brokers may call collect: 212-440-9800 Notice For Next Level Securityholders "Next Level securityholders and other interested parties are urged to read Motorola's tender offer statement and other relevant documents filed with the SEC because they contain important information. Next Level security holders will be able to receive such documents free of charge at the SEC's web site, www.sec.gov , from Motorola, Inc. at 1303 E. Algonquin Road, Schaumburg, Illinois 60196, ATTN: Investor Relations, or by calling Georgeson Shareholder toll free at (866) 203-9357. Copies of the full text of the Chancery Court's opinions denying the motions for preliminary injunction and interlocutory appeal are also available by contacting Motorola at the above address or by calling Georgeson Shareholder at the above telephone number." Motorola, Inc., (NYSE: MOT) is a global leader in providing integrated communications and embedded electronic solutions. Sales in 2002 were $26.7 billion. Motorola is a global corporate citizen dedicated to ethical business practices and pioneering important technologies that make things smarter and life better for people, honored traditions that began when the company was founded 75 years ago this year. For more information, please visit: http://www.motorola.com NASH FINCH: Pays 1.5% to Bondholders for Late SEC Filing Waiver --------------------------------------------------------------- Nash Finch Company (Nasdaq:NAFCE) announced that holders of more than 51% of the Company's $165,000,000 8-1/2% Senior Subordinated Notes due 2008, agreed to waive the previously reported default under the Indenture resulting from the Company's failure to file certain financial reports with the Securities and Exchange Commission. The waiver requires the Company to file its Form 10-Q for its third fiscal quarter of 2002 by May 15, 2003. Such holders also agreed to extend the time for the Company to file its Form 10-K for its fiscal year ended December 28, 2002 and its Form 10-Q for its first fiscal quarter of 2003 until June 15, 2003. In consideration for the waiver, the Company will pay a fee to the bondholders equal to 1.5% of the outstanding principal amount of the notes. The 10-year Senior Subordinated Notes were issued by NASH-FINCH COMPANY, are guaranteed by Nash-Finch subsidiaries T.J. MORRIS COMPANY, SUPER FOOD SERVICES, INC., GTL TRUCK LINES, INC., PIGGLY WIGGLY NORTHLAND CORPORATION, and ERICKSON'S DIVERSIFIED CORPORATION, and additional guarantees are provided by HINKY DINKY SUPERMARKETS, INC., and U SAVE FOODS, INC. As previously reported in the Troubled Company Reporter, an unremediated default under the Indenture governing the 8-1/2% Senior Subordinated Notes due 2008 for which U.S. BANK TRUST NATIONAL ASSOCIATION serves as the Trustee would have triggered a cross-default under the Company's bank credit facility. That $250,000,000 facility -- according to information obtained from http://www.LoanDataSource.com-- provides the Company with financing provided by: Revolving Loan Term Loan Lender Commitment Commitment ------ ---------- ---------- Bankers Trust Company $14,000,000 $21,000,000 General Electric Capital Corp. $14,000,000 $21,000,000 Harris Trust and Savings Bank $14,000,000 $21,000,000 U.S. Bank National Association $14,000,000 $21,000,000 Firstar Bank, N.A. $10,000,000 $15,000,000 GMAC Commercial Credit LLC $10,000,000 $15,000,000 The Bank of Tokyo Mitsubishi Ltd. $10,000,000 $15,000,000 Transamerica Business Credit Corp. $10,000,000 $15,000,000 National City Bank $4,000,000 $6,000,000 ------------ ------------ $100,000,000 $150,000,000 Nash-Finch has indicated that for the third and fourth quarters of fiscal year 2002, based upon unaudited information prepared under the assumption that the current accounting for Count- Recount charges is determined to be correct, for fiscal 2002 the Company had total sales and revenues of $3.9 billion compared to $4.0 billion for fiscal 2001. While sales were difficult in this competitive environment, based on the same assumption, the Company was able to achieve net earnings and diluted earnings per share of $29.7 million and $2.46, respectively, as compared to $21.2 million and $1.78, respectively, for the prior fiscal year, as reported. In addition, for the 16-week period ended October 5, 2002, the Company had net earnings of $7.3 million and diluted earnings per share of $0.61 compared to $6.0 million and $0.50, as reported, for the comparable period last year. For the 12-week period ended December 28, 2002 the Company had net earnings of $8.4 million and diluted earnings per share of $0.70 compared to $6.7 million and $0.55, as reported, for the prior period. Nash Finch Company is a Fortune 500 company and one of the leading food retail and distribution companies in the United States with approximately $4 billion in annual revenues. Nash Finch owns and operates 112 stores in the Upper Midwest, principally supermarkets under the AVANZA(TM), Buy n Save(R), Econofoods(R), Sun Mart(R), and Family Thrift Center(TM) trade names. In addition to its retail operations, Nash Finch's food distribution business serves independent retailers and military commissaries in 28 states, the District of Columbia and Europe. Further information is available on the Company's Web site at http://www.nashfinch.com Nash-Finch Company's 8.500% bonds due 2008 (NAFC08USR1) are trading at about 65 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NAFC08USR1 for real-time bond pricing. NATIONAL CENTURY: UST Amends Creditors' Committee Membership ------------------------------------------------------------ Katalin Kutasi of Alliance Capital Management, LP resigned from the Official Committee of Unsecured Creditors of National Century Financial Enterprises, Inc., and its debtor-affiliates. The Committee now consists of eight members: 1. Allan Martia Biomar Technologies 221 East Walnut Street, #243 Pasadena, California 91101 Telephone Number: 626-440-8288 Fax Number: 626-440-8299 Claim Amount: $250,000 2. Linda Schwieterman Expert Technical Consultants, Inc. 5115 Parkcenter Avenue, Suite 275 Dublin, Ohio 43017 Telephone Number: 614-766-5103 ext. 12 Fax Number: 614-798-5228 Claim Amount: $67,200 3. Alexander Hoinsky Solutions For Management, Inc. 8 East Germantown Pike, Suite 100 Plymouth Meeting, Pennsylvania 19462 Telephone Number: 610-832-5901 ext. 100 Fax Number: 610-832-5909 Claim Amount: $35,660 4. Peter Clinton, John Costa and Geoff Arens ING Capital Markets LLC, agent for Mont Blanc Capital Corp. 1325 Avenue of the Americas New York, New York 10019 Telephone Number: 646-424-6514 Fax Number: 646-424-6077 Claim Amount: $456,862,239 -- NPF VI 5. Mohan V. Phansalkar Pacific Investment Management Co. 840 Newport Center Drive, Suite 300 Newport Beach, California 92660 Telephone Number: 949-720-6180 Fax Number: 949-720-6361 Claim Amount: $283,300,000 -- NPF XII 6. Scott Wyler III Finance Ltd. C/O III Offshore Advisors 250 South Australian Ave., Ste. 600 West Palm Beach, Florida 33401 Telephone Number: 561-555-5885 Fax Number: 561-655-5496 Nature of Claim: Note Holder Amount of Claim: $180,000,000 - NPF XII 7. Steven P. Rofsky Ambac Investments Inc. One State Street Plaza New York, New York 10004 Telephone Number: 212-208-3441 Fax Number: 212-797-5725 Claim Amount: $120,500,000 -- NPF VI $54,000,000 -- NPF XII 8. Oliver Dieudonne Ofivalmo Gestion 75017 Paris, France Telephone Number: 00-331-40686056 Fax Number: 00-331-40559213 Claim Amount: $10,000 -- NPF VI (National Century Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) NAT'L HERITAGE: Volatile Earnings Spur S&P to Cut Ratings to Bpi ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its counterparty credit and insurer financial strength ratings on National Heritage Insurance Co., to 'Bpi' from 'BBpi'. "The ratings actions are based on National Heritage TX's weak capitalization, high geographic and product concentrations, and volatile earnings," said Standard & Poor's credit analyst Allison MacCullough. National Heritage TX is licensed and operates only in Texas. Its major line of business is group accident and health, and it is not a member of any insurance group. The company commenced operations in 1976. 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. NAVISITE INC: Names Arthur Becker as New Chief Executive Officer ---------------------------------------------------------------- NaviSite, Inc. (NASDAQ: NAVI), a leader in Managed Applications and Managed Infrastructure for the Mid-Market, announced the appointment of a new CEO, Arthur Becker, to replace CEO Trish Gilligan. Gilligan recently guided the company past several key integration milestones, including the creation of a new corporate vision, several strategic acquisitions, and significant internal reorganization. Becker brings a solid background in finance and corporate investment and restructuring. He is the founder of several technology companies and prior to that was a Director at Bear Stearns. Becker is a founding partner and managing member of Atlantic Investments, LLC, an investment fund focused on the Internet Infrastructure and Managed Services industry and has significant experience in strategic corporate development and finance. As an executive and board member of ClearBlue Technologies Management, he played a key role in the acquisitions of the data centers of the former Colo.com and the managed services business of the former AppliedTheory. Becker is currently a member of the NaviSite Board of Directors and has been instrumental in the acquisition of the senior debt of Interliant, the corporate integration of ClearBlue Technologies Management, Inc. and the most recent Avasta acquisition. Outgoing CEO Trish Gilligan has lead NaviSite through the worst of the dot-com fallout. She successfully guided the company through a series of reorganizations and mergers, culminating in late 2002 with the acquisition of ClearBlue Technologies Management, Inc. The transition will take place immediately and Gilligan will remain with NaviSite in an advisory role through March. "While many larger competitors have fallen away, NaviSite has found a way to survive. Through it all, Trish provided leadership, vision and stability which have been key to holding the company together through turbulent times," said Andy Ruhan, Chairman of the Board for NaviSite. "The skills and experience Arthur brings to NaviSite are especially crucial during this time of rapid consolidation within the industry. We have a strong platform in place and look forward to continuing to build a profitable, leadership position for ourselves in this Industry." Over the past few months Gilligan and her management team have focused on delivering the successful integration of formerly separate assets into one company. The goal has been to rapidly build a single integrated operating platform for the entire company without negatively impacting customers. "I wanted to guide the company far enough through the integration process so we felt certain about our new strategy and confident in a stable future," said Gilligan. "NaviSite has always been about service delivery excellence with an extremely high level of customer focus. Before I left, I wanted to ensure that the best of NaviSite would continue to be at the core of the new business moving forward." NaviSite, Inc., a leader in "Always On Managed Hosting(SM)" for companies conducting mission-critical business on the Internet, including enterprises and other businesses deploying Internet applications. The Company's goal is to help customers focus on their core competencies by outsourcing the management and hosting of their Web operations and applications, allowing customers to fundamentally improve the ROI of their web operations. NaviSite's solutions provide secure, reliable, co- location and high-performance hosting services, including high- performance Internet access, and high-availability server management solutions through load balancing, clustering, mirroring and storage services. In addition, NaviSite's enhanced management services, beyond basic co-location and hosting, are designed to meet the expanding needs of businesses as their Web sites and Internet applications become more complex and as their needs for outsourcing all aspects of their online businesses intensify. The Company's application services, which include application hosting and management, provide cost- effective access to, as well as rapid deployment and reliable operation of, business- critical applications. For more information about NaviSite, please visit http://www.navisite.com NaviSite, whose October 31, 2002 balance sheet shows a total shareholders' equity deficit of about $744,000, is headquartered at 400 Minuteman Road, Andover, MA 01810 and is majority-owned by ClearBlue Atlantic, LLC, an affiliate of ClearBlue Technologies Inc. NUTRITIONAL SOURCING: Court OKs Innisfree as Balloting Agent ------------------------------------------------------------ Nutritional Sourcing Corporation sought and obtained approval from the U.S. Bankruptcy Court for the District of Delaware to retain Innisfree M&A Incorporated, as Special Noticing, Balloting and Tabulation Agent, nunc pro tunc to January 21, 2003 Specifically, Innisfree will: a) provide advice to the Debtor and its counsel regarding aspects of the vote on the Plan including timing issues, voting and tabulation procedures, and solicitation materials; b) assist the Debtor in obtaining appropriate information from the trustee of the bonds and the Depository Trust Company; c) mail voting and non-voting materials to any registered record holder of the Debtor's bonds; d) coordinate the distribution of solicitation materials to street name bondholders by forwarding the appropriate documents to the banks and brokerage firms holding the securities, who in turn will forward such materials to the beneficial owners for voting; e) distribute copies of the master ballots to the appropriate nominees so that firms may cast votes on behalf of the beneficial owners of certain bonds; f) prepare a certificate of service for filing with the Court; g) handle requests for documents from parties in interest, including brokerage firms, bank back offices and institutional holders; h) respond to telephone inquiries from bondholders and other parties regarding the Plan and the Disclosure Statement and any voting procedures approved by this Court; i) receive and examine ballots cast and date and time stamp original ballots upon receipt; j) tabulate ballots received before the voting deadline; and k) prepare a vote certification for filing with the Court. The Debtor agrees to pay Innisfree: (i) a one-time $15,000 project fee to coordinate the delivery of materials to the banks and brokerage firms holding the Debtor's notes, (ii) labor charges for mailing the solicitation packages, tabulating the ballots and receiving telephone inquires, and (iii) usual and customary hourly rates for consulting services to be provided, which range between $175 and $400 per hour. Nutritional Sourcing Corporation is a holding company with no business operations of its own. The sole assets of the Debtor are its equity interests in its non-debtor operating subsidiaries and intercompany notes. On September 4, 2002, certain members of the 9-1/2% Senior Noteholders' Ad Hoc Committee filed an involuntary petition against the Debtor for reorganization under Chapter 11 of the Bankruptcy Code (Bankr. Del. Case No. 02-12550). On September 24, 2002, the Debtor consented to the involuntary petition. William Harrington, Esq., at Kaye Scholer LLC represents the Debtor as it winds down its operations. OGLEBAY NORTON: Sets Annual Shareholders' Meeting for April 30 -------------------------------------------------------------- The Annual Meeting of Shareholders of Oglebay Norton Company will be held at The Forum Conference and Education Center, 1375 East Ninth Street, Cleveland, Ohio, on Wednesday, April 30, 2003, at 10:00 a.m., Cleveland, Ohio time. At the Annual Meeting, Shareholders will be asked to: - elect nine Directors for a one year term expiring in 2004; - consider a proposal to amend and restate Oglebay Norton's Code of Regulations; and - transact any other business that may properly come before the Annual Meeting. The Board of Directors fixed the close of business on March 12, 2003 as the record date for determining the shareholders entitled to notice of and to vote at the Annual Meeting, or at any postponement or adjournment of the Annual Meeting. Oglebay Norton Company, a Cleveland, Ohio-based company, provides essential minerals and aggregates to a broad range of markets, from building materials and home improvement to the environmental, energy and metallurgical industries. Building on a 149-year heritage, our vision is to be the best company in the industrial minerals industry. The company's Web site is located at http://www.oglebaynorton.com At December 31, 2002, the Company's balance sheet shows that its total current liabilities exceeded its total current assets by about $14 million. * * * As previously reported, Standard & Poor's lowered its corporate credit and bank loan ratings on Oglebay Norton Co., to single- 'B' from single-'B'-plus due to difficult end-market conditions, the company's weak financial performance, and its limited free cash-flow generation, which will continue to result in high debt levels. The outlook is negative. The ratings reflect Oglebay's very high debt leverage, cyclical end markets, high capital spending requirements relative to operating cash flow, and refinancing risk. The ratings also reflect the company's diversified business segments and a focus on productivity and operational improvements. PACIFIC GAS: Gets Approval to Refund $157-Mil. FERC-Ordered Dues ---------------------------------------------------------------- Pacific Gas and Electric Company obtained permission from the U.S. Bankruptcy Court for the Northern District of California to pay its refund obligations to certain customers in accordance with several final orders issued by, and two settlement agreements approved by, the Federal Energy Regulatory Commission. Each of these settlement agreements and FERC orders reduced or reallocated charges previously passed on by PG&E to its customers and ordered that PG&E refund the customers accordingly. Some of these refund obligations can be addressed by adjustments and credits to customer accounts but others necessitate actual payment. PG&E and other state utilities generally pass on charges imposed by the California Independent System Operator Corporation to their customers by adjusting rates. The FERC provides very strict guidelines as to how the utilities can pass on these costs and which customers must bear the increased rates. The FERC typically issues preliminary indications subject to later review and, if necessary, customer refunds. To settle disputes, the FERC conducts extensive hearings and issues binding orders. PG&E will effect three categories of FERC-ordered refund obligations before the confirmation of its reorganization plan: -- $110,000,000 to its Transmission Owner Tariff customers; -- $37,000,000 to its Existing Transmission Contract customers; and -- $10,500,000 to its Wholesale Transmission Owner Tariff Customers. A. Transmission Revenue Balancing Account Adjustment In connection with California's electric industry restructuring, the CAL ISO was established to provide operational control over most of the state's electric transmission facilities and to provide open access, on comparable terms and conditions, for electric transmission service. Mr. Lafferty relates that PG&E serves as the scheduling coordinator under the CAL ISO Tariff to facilitate the continuing transmission service under certain of the ETC Customer contracts that PG&E entered into before the CAL ISO was established. The CAL ISO then bills PG&E, as the scheduling coordinator, for providing certain services associated with the contracts. These CAL ISO charges are referred to as SC costs. Since April 1, 1998, PG&E has included the SC Costs in its calculation of rates for TO Tariff Customers via an accounting mechanism known as the Transmission Revenue Balancing Account Adjustment. Recently, however, the FERC held in its Opinion 16 No. 458, issued on August 5, 2002, that PG&E's use of the TRBAA mechanism resulted in its TO Tariff Customers paying for all of the SC Costs. The FERC concluded that some recovery of these costs should come from PG&E's ETC Customers. As a result, the FERC ordered PG&E to refund the TO Tariff Customers $110,000,000, of which $75,000,000 reflects prepetition payments. This adjustment will not involve any cash layout by PG&E and will be effected solely through lower transmission rates to TO Tariff Customers in 2003. B. Reliability Service Tariff The CAL ISO also imposes charges on PG&E and the state's other investor-owned electric utilities for certain expenses that the CAL ISO incurs in its efforts to ensure reliable electricity services. These charges are collectively referred to as Reliability Service Charges. Since June 29, 2000, PG&E has allocated the RS Charges to both ETC and TO Tariff Customers. Pursuant to a final order, Opinion No. 459, issued on August 2, 2002, the FERC held that PG&E lacked authority to collect the RS Charges from its ETC Customers. Therefore, PG&E is obligated to refund $37,000,000 in charges to the ETC Customers. This amount will be re-allocated and collected from retail TO Tariff Customers pursuant to a partial settlement approved by the FERC. C. TO5 Rate Case and TAC Implementation Settlements On June 26, 2001, the FERC approved a settlement of PG&E's fifth Transmission Owner Rate case reducing its transmission rates. On February 27, 2002, the FERC approved a settlement that had been entered into by PG&E and all parties to PG&E's Transmission Access Charge Implementation filing, which made changes to PG&E's TO Tariff to implement a new rate methodology adopted by the CAL ISO. The TAC Settlement incorporates certain changes to the rate design itself, rather than PG&E's revenue requirement. (Pacific Gas Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 609/392-0900) PANDA FUNDING: S&P Downgrades Pooled Project Bonds Rating to B+ --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Panda Funding Corp.'s $105 million pooled project bonds to 'B+', from 'BB-', following reports of forced outages at its Brandywine facility that will weaken its cash flow for the next two years. The outlook remains negative, reflecting the concern that PFC has a smaller margin of error and its financials could deteriorate rapidly if Brandywine fails to achieve a very high availability outside of its scheduled maintenance period in 2003 and 2004. Forced outages at Brandywine, a 230 MW cogeneration facility located in Maryland, affected two months of operation in 2002 and, the availability during that period averaged about 57%. The average availability for the entire year, however, was closer to 92%. The corresponding reduction in capacity payments lowered PFC's 2002 debt service coverage ratio to 1.14x and its consolidated DSCR to 1.04x. Partly due to the outage in 2002, the company decided to defer its scheduled maintenance into 2003 and 2004. Because the scheduled maintenance periods will count against the units' availability, Brandywine will receive lower capacity payments and incur higher maintenance expenses in 2003 and 2004. Rosemary, PFC's other facility, completed the installation of its water distillation unit at the end of last year. The distillation unit is expected to be fully operational within the next few weeks. PFC is an intermediate holding company that depends on dividends from its Brandywine and Rosemary facilities to service its debt. Brandywine represents about 75% of PFC's cash flows, with Rosemary contributing the balance. Brandywine sells capacity and power to Potomac Electric Power Company (BBB+/Stable/--) under a long-term 25-year power purchase agreement. Rosemary sells capacity and energy to Virginia Electric and Power Company (A- /Stable/--) under a long-term PPA. PEREGRINE SYSTEMS: March 31, 2002 Net Capital Deficit Tops $360M ---------------------------------------------------------------- Peregrine Systems, Inc., (OTC: PRGNQ) filed audited annual financial statements for the three fiscal years ended March 31, 2002, which included restatements of fiscal years 2001 and 2000. Peregrine submitted the audited financial statements to the U.S. Bankruptcy Court in the District of Delaware and the Securities and Exchange Commission on Form 8-K. For the restatement period, between April 1, 1999 and Dec. 31, 2001, Peregrine reduced previously reported revenue of $1.34 billion by $509 million. Of that revenue reduction, approximately $259 million was reversed for non-substantiated transactions, while $70 million was reversed and used to reduce acquisition or investment costs. The remaining $180 million will be reported as revenue in future periods, assuming all relevant criteria for revenue recognition are eventually satisfied. Completion of the audited statements marks the culmination of an intensive worldwide financial review that Peregrine's board of directors and new management initiated after accounting irregularities were discovered in May 2002. The company hired new senior management in June 2002 and replaced its independent accountants with PricewaterhouseCoopers. "Peregrine's commitment to putting our financial house in order gave rise to an exhaustive review to ensure the accuracy and reliability of financial results for the three fiscal years," said Gary Greenfield, Peregrine's CEO, who joined the company in June 2002. "We conducted a thorough investigation, identified issues and have taken corrective measures to prevent or detect future occurrences. The restatement is behind us, and we are now creating a foundation to ensure that the company's financial policies and practices meet the highest standards in the future." Audited Results -- Fiscal 2002, 2001 and 2000 The total revenue reported from continuing operations for the three fiscal years was $441.2 million for fiscal 2002, $213.4 million for fiscal 2001, and $131.6 million for fiscal 2000. Reported revenue came from Peregrine's core business and other non-core product lines (Remedy, FacilityCenter, Transportation, Telco) that were divested after the fiscal year ended March 31, 2002. The results exclude revenue from Peregrine's Supply Chain Enablement business of $123.9 million and $97.2 million for fiscal 2002 and 2001, respectively. The SCE business, which was acquired in June 2000 in the Harbinger Corp., transaction and sold in June 2002, was treated as a discontinued operation in the audited financial statements. For fiscal 2002, the company posted a loss from continuing operations of $1.5 billion, compared with a loss of $374.8 million in fiscal 2001. The loss from continuing operations for fiscal 2000 was $217.4 million. A substantial portion of these losses resulted from one-time acquisition costs, non-cash impairment charges for long-term assets related to acquisitions, and amortization of stock-based compensation. "Our license fee revenue in our ongoing business grew substantially during the period, climbing by about 50 percent from fiscal 2000 to 2001 and approximately 75 percent between 2001 and 2002," said Greenfield. "This growth in revenue during the audited period, along with recent business activity, gives us confidence in our ongoing business. The company continues to perform well against the operating plan adopted last September, and we are on track to expand our leadership in consolidated asset and service management software." Restatement -- Fiscal 2000 and 2001, first three quarters of fiscal 2002 Revenue adjustments of $509 million for the restatement period related to five areas: -- Reseller Sales: Revenue from sales to resellers has been reduced by $225 million, predominantly for non- substantiated transactions. For much of the restatement period, Peregrine recognized revenue when it "sold in" to a third-party reseller at the time of the initial transaction, regardless of whether there was a firm commitment. In the restatement, the company recognized revenue on sale to an end-user customer. -- Reciprocal Transactions: Peregrine made permanent revenue adjustments of $70 million related to reciprocal transactions in connection with acquisitions, investments and license exchanges. The cash received by the company has now been applied to reduce the costs of the acquisitions or investments, rather than recognized as revenue. -- Installment Contracts: In the past, Peregrine recognized revenue on long-term installment contracts when it entered into the contract. Based on collection history, Peregrine recognized installment revenue in the restatement when it was collected. This change resulted in a $100 million revenue reduction. Some revenue from these transactions is due in the future and will be recognized when cash is received and all other revenue criteria are met. -- Other Timing Issues: Approximately $80 million represents transactions in which the revenue has been deferred to future periods and will be recognized when all remaining revenue criteria are satisfied. -- Other Accounting Issues: Approximately $34 million in revenue was reversed because of erroneous calculations or unsupported transactions. A substantial portion of the uncollectible revenue had previously been improperly charged as bad debt expense, cost of acquisitions or accrued liabilities. These inappropriate charges have been removed from expenses and included as a reduction in revenue as described above. Peregrine also generally underestimated the value of the total cost of acquisitions and non-cash impairment charges. The company, for example, did not always calculate the fair market value of stock options as an acquisition cost or correctly value Peregrine shares issued in some acquisitions. In addition, the company has corrected its accounting for receivables financing. Peregrine had earlier accounted for these transactions as true sales of the receivables to the financial institutions without recourse, rather than appropriately as loans from the banks secured by the receivables. As a result, a loan balance of $141.6 million was added to the balance sheet as of March 31, 2002. Corporate Governance, Compliance Policy Peregrine's board and management are taking decisive steps to ensure the company adheres to strict financial reporting and accounting standards. In Oct. 2002, Peregrine adopted a corporate compliance policy, with the intent of creating a company-wide environment in which Peregrine and anyone acting on behalf of the company adheres to the highest standards of conduct in complying with the laws, regulations and accounting principles that govern business practices on a global basis. To implement the compliance policy, Peregrine's board established two new positions: a corporate compliance officer, a senior-level position reporting directly to the board's audit committee, and an internal auditor, whose role is to assist in compliance activities related to the company's financial and operating condition. "This marks the beginning of a new chapter in Peregrine's history," said Greenfield. "We have already taken many concrete steps to help ensure that our business practices are strong, professional and above reproach, and there are more initiatives to come. It's our intent to rebuild trust and renew confidence in our company as we leverage Peregrine's heritage of innovation and thought leadership as a strategic enterprise software vendor. We are pleased that our customers continue to buy our products, and we sincerely appreciate their loyalty." Founded in 1981, Peregrine Systems develops and sells application software to help large global organizations manage and protect their technology resources. With a heritage of innovation and market leadership in consolidated asset, service and change management software, the company's flagship offerings include ServiceCenter(R) and AssetCenter(R), complemented by its Employee Self Service, Automation and Integration product lines. Headquartered in San Diego, Calif., Peregrine's solutions facilitate the automation of business processes, resulting in increased productivity, reduced costs and accelerated return on investment for its more than 3,500 customers worldwide. Peregrine filed a voluntary Chapter 11 petition on Sept. 22, 2002 with the Delaware bankruptcy court. The company filed its proposed plan of reorganization and disclosure statement with the court on Jan. 20. More information about Peregrine is available at http://www.peregrine.com Peregrine Systems' March 31, 2002 balance sheet (after restatement) show a working capital deficit of about $307 million, and a total shareholders' equity deficit of about $360 million. PERSONNEL GROUP: Dec. 29 Balance Sheet Upside-Down by $52 Mill. --------------------------------------------------------------- Personnel Group of America, Inc. (OTCBB: PRGA.OB), a leading information technology and professional staffing services company, announced its results for the fourth quarter and year ended December 29, 2002. For the fourth quarter, total revenues were $136.3 million compared with $154.8 million in the fourth quarter last year. PGA's Commercial Staffing business contributed $70.9 million, or 52%, of total revenues during the quarter, and the Company's Information Technology Services practice added $65.4 million, or 48%, of total revenues. Primarily as the result of certain restructuring and rationalization charges and a further SFAS 142 goodwill impairment charge, PGA reported a net loss of $96.0 million for the fourth quarter, compared with a net loss of $65.4 million in the fourth quarter last year. During the fourth quarter of 2002, the Company recorded restructuring and rationalization charges of $5.7 million ($4.0 million after tax) related primarily to office closures, branch consolidations and lease space reductions. Additionally, as required by SFAS 142, the Company recorded a non-cash goodwill impairment charge of $89.9 million in the fourth quarter of 2002. Exclusive of goodwill impairment and restructuring and rationalization charges, the Company recorded operating income of $1.4 million for the fourth quarter, versus an operating loss, also exclusive of goodwill impairment and restructuring and rationalization charges, of $0.8 million in the fourth quarter last year. For the full year, revenues decreased to $557.7 million from $732.3 million in 2001 and PGA's net loss increased to $350.5 million from $66.7 million in 2001. As previously reported, effective at the beginning of 2002, the Company was required to adopt SFAS 142, which resulted in a non-cash goodwill impairment charge of $242.5 million to reflect the cumulative effect of the accounting change, net of tax benefit. Exclusive of goodwill impairment and restructuring and rationalization charges, PGA reported operating income of $8.1 million down from $14.8 million on an equivalent basis, last year. As a result of the goodwill impairment and restructuring and rationalization charges of $89.9 million and $8.3 million, respectively, PGA reported an operating loss of $90.1 million for full year 2002. At December 29, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $52 million. "Our operations held up well in 2002 in the face of what has been characterized as an extremely difficult environment for the staffing services industries," noted Larry L. Enterline, PGA Chief Executive Officer. "As we expected, revenue generation was a challenge throughout the year and our IT revenue declines throughout the year more than offset the sequential revenue increases we saw in Commercial Staffing in the second half. We focused in 2002 on maintaining our customer relationships, preserving as much of our infrastructure as possible and rightsizing our expenses for the reduced revenue expectations. Despite the tough operating conditions, we generated positive cash flow during the year and entered 2003 with significant cash on our balance sheet. More importantly, however, we have preserved critical infrastructure and our field management has been successful in keeping key resources intact. Obviously, we will not see the results of these efforts until the environment improves, but PGA is better positioned today because of these strong efforts, and I congratulate each and every one of our people in the field who stayed with us during this very tough year." "We are continuing to pursue a comprehensive financial restructuring with our senior lenders and significant note holders," Mr. Enterline added, "and we are working hard with these creditors to finalize terms and conditions." PGA continued to manage its cash very closely throughout 2002, and also reported that 2001 income tax refunds and its ongoing receivables management programs had resulted in significant cash generation in 2002. At the end of the fourth quarter, the Company had $22.6 million of cash on hand and expects to receive additional federal income tax refunds of approximately $24.4 million in 2003. Days sales outstanding at the end of the fourth quarter were 43 days in Commercial Staffing (with average DSO during the year of 40 days), 54 days in IT, and 49 days overall. DSO at the end of 2001 were 40 days in Commercial Staffing, 56 days in IT, and 50 days overall. Information Technology Services IT Services revenues in the fourth quarter decreased 6.6% to $65.4 million from $70.0 million in the third quarter, and 28.0% from the $90.9 million of revenues in the fourth quarter last year. IT gross margins were 24.4% in the fourth quarter, up from 23.6% in the third quarter this year and down from 25.5% in the fourth quarter of 2001. Operating income margin, exclusive of the fourth quarter 2002 goodwill impairment and restructuring and rationalization charges, was 3.7%, down from 4.6% in the third quarter this year, and down from 5.4% in the fourth quarter last year. The Company held its bill rate and pay rate spread relatively constant during the fourth quarter. Average bill rates were $74.92 in the fourth quarter and average pay rates were $56.79, up slightly from $74.12 and $56.22, respectively, in the third quarter. IT billable headcount declined from the third quarter levels, with an average of approximately 2,027 IT professionals on assignment during the quarter and 1,969 IT professionals on assignment at the end of the quarter. Commercial Staffing Revenues for PGA's Commercial Staffing unit in the fourth quarter increased 4.8% to $70.9 million from $67.6 million in the third quarter, and 11.0% from the $63.9 million of revenues generated in the fourth quarter of last year. Gross profits in Commercial Staffing in the fourth quarter declined 0.8% from $15.2 million in the third quarter to $15.0 million. Commercial Staffing permanent placement revenue in the fourth quarter decreased 37.3% from the fourth quarter last year, declined 21.3% from the third quarter, and declined as a percentage of total division sales to 2.3% in the fourth quarter from 3.1% in the third quarter. As a result of the softer permanent placement business, gross margin percentage for the quarter was 21.2%, down from 22.4% in the third quarter, and down from 24.8% in the fourth quarter last year. Operating income margin was 4.3%, down from 5.4% in the third quarter this year and down from 4.7% in the fourth quarter last year. New York Stock Exchange Delisting PGA also reported that the NYSE Committee for Review has denied the Company's appeal of the Exchange staff's decision to seek delisting of the Company's common stock and advised the Company that the staff's decision to delist PGA has been upheld. In connection with its financial restructuring, the Company intends to apply for a new stock exchange listing subject to completion of the financial restructuring. "Although we are disappointed by the NYSE Review Committee's decision, we are not surprised by it," said Larry Enterline. "We expect to return to one of the stock exchanges or the NASDAQ Stock Market after we complete our financial restructuring, but in the meantime our stock will continue to trade on the Over the Counter Bulletin Board where we have been trading since November." Personnel Group of America, Inc., is a nationwide provider of information technology consulting and custom software development services; high-end clerical, accounting and other specialty professional staffing services; and technology systems for human capital management. The Company's IT Services operations now operate under the name "Venturi Technology Partners" and its Commercial Staffing operations operate as "Venturi Staffing Partners" and "Venturi Career Partners." PLAINTREE SYSTEMS: Seeking New Financing to Continue Operations --------------------------------------------------------------- Plaintree Systems Inc. (TSE: LAN; OTC BB: LANPF), reported results for the third quarter of fiscal 2003 ended December 31, 2002. (All amounts are expressed in Canadian unless specified otherwise). Consolidated revenue for the third quarter ended December 31, 2002 was $114,183 compared to $583,979 for the second quarter of this fiscal year. The net loss for the third quarter was $972,378 compared to $1,591,768 for the previous quarter. For more information on these results, please refer to Plaintree's Third Quarter financial statements together with the related Management's Discussion and Analysis, located at http://www.sedar.com Plaintree continues to investigate sources of financing. However, if the Company is not successful in obtaining the necessary funding and/or if the Company does not meet its existing forecast, continuation of the existing business may not be viable. There can be no assurance that the Company will be able to raise additional capital. Ottawa-based, Plaintree Systems Inc. -- http://www.plaintree.com -- founded in 1988, develops and manufactures the WAVEBRIDGE series of Free Space Optical wireless links using Class 1, eye- safe LED (Light Emitting Diode) technology providing high-speed network connections for ISPs, traditional telcos, GSM or cellular operators, airports and campus networks. Acting as a replacement for cable, fiber or radio frequency systems, the WAVEBRIDGE links offer broadband access with no spectrum interference problems, and same day installation for rapid network deployment. Plaintree is publicly traded in Canada on The Toronto Stock Exchange (Symbol: LAN) and in the U.S. on the OTC BB (LANPF), with 90,221,634 shares outstanding. Plaintree's December 31, 2002 balance sheet shows a working capital deficit of about $700,000 and a total shareholders' equity deficit of about $291,000. BASIS OF PRESENTATION The Company's interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles except that these interim consolidated financial statements do not provide full note disclosure. These interim consolidated financial statements are based upon accounting principles consistent with those used in the annual consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the fiscal 2002 Annual Report. GOING CONCERN The financial statements as of December 31, 2002 have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and pursuant to the Proposal to Creditors referred to in Note 5. However, there is substantial doubt about the Company's ability to continue as a going concern because of the Company's losses during the current year of $2,849,046 and net loss of $972,378 for the three months ended December 31, 2002 and an accumulated deficit of $97,405,531 at December 31, 2002. The Company's continued existence is dependent upon the Company's ability to raise additional capital, to increase sales, achieve profitability and the agreement of Targa, its largest shareholder and secured creditor, to not enforce its security. There are no assurances that the Company will achieve such results and to date the Company has not secured such funding, sales or agreements, either through an equity investment or strategic partnership. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern. RELATED PARTY TRANSACTIONS During the Quarter, the Company repaid $200,000 on its credit facility as described in Note 4, reducing the outstanding principal balance from $600,000 to $400,000. Lease arrears owing to the landlord for the Company's Ottawa premises, Tidal Quality Management, a subsidiary of Targa Group Inc., are included in Due to Related Parties. The related lease arrears balance as at December 31, 2002 is $179,571, ($151,262 at September 30, 2002). The comparative prior period balance of $99,644 at March 31, 2002, is reflected in the Accounts Payable balance at that time. Interest expense of $25,806 related to these arrears is included in the Due from Related Parties balance, as a reduction amount of a larger Due from a Related Party, and is reflected in the Finance and Administration expense on the statement of Operations and Deficit. The Company has granted a collateral mortgage over its land and building property in Arnprior to the landlord as security for the lease arrears. MANUFACTURING Due to absence of any material orders, the Company had excess manufacturing capacity of $109,640 in this third quarter of fiscal 2003. CREDIT FACILITY DUE TO RELATED PARTY The Company has in place an operating credit facility with a company controlled by Targa Group Inc., the largest shareholder of the Company. The credit facility is secured by a general security agreement covering all assets of the Company and expires on March 25, 2003. As at December 31, 2002, the facility that bears interest at the Company's bank's prime rate plus 2%, amounted to $400,000. Interest expense of $29,067 to date is included in the Due to Related Parties balance, and is reflected in the Finance and Administration expense on the statement of Operations and Deficit. The Proposal to Creditors under the Bankruptcy & Insolvency Act the Company made in December of 2002 violated the covenants of this credit facility. On this basis, Targa will not be extending further credit and is in a position to enforce its security. PROPOSAL TO CREDITORS On December 18, 2002, the Company, through its appointed trustee Doyle Salewski Inc., made a Proposal to Creditors under the Bankruptcy and Insolvency Act (BIA). The proposal was accepted by creditors on January 8, 2003 and approved by the Ontario Superior Court of Justice on January 29, 2003. According to the proposal, creditor claims are to be paid as follows: Secured creditors shall be paid in full, in accordance with existing arrangements or arrangements to be made between the Company and the holders of these claims. Payment of preferred and unsecured creditors shall be based on one of two scenarios: Scenario 1 is contingent on the company arranging a loan of $175,000 and the funds being advanced by the lender to the company no later than 30 days after Court approval of the Proposal. The aggregate maximum amount payable to the preferred and unsecured creditors under this scenario is $150,000. Payment under Scenario 1 shall be made no later than 30 days after the funds have been advanced to the Company. In the event the Company is unsuccessful in obtaining the funds contemplated in the first scenario, payments of claims will be based on Scenario 2. Under this scenario, the Company shall issue promissory notes to the preferred and unsecured creditors entitling them to a share, according to the amount of their admissible claims, of the available future cash flow of the Company from January 1, 2003 to December 31, 2006. The aggregate maximum amount payable to the preferred and unsecured creditors under this scenario is $250,000. Trustee fees shall be paid in full, in priority to all other claims, but shall not exceed $25,000. Adjustments to the statements because of this proposal will be reflected in the next quarter's statements. An extension of the Scenario 1, 30-day time period will be required and the Company anticipates Court approval. POLAROID CORP: Court Appoints Perry M. Mandarino as Examiner ------------------------------------------------------------ Donald F. Walton, Acting U.S. Trustee for Region 3, sought and obtained Court approval of his appointment of Perry M. Mandarino, CPA, as Polaroid Corporation and its debtor- affiliates' Examiner, pursuant to Rule 2007.1 of the Federal Rules of Bankruptcy Procedure. Frank J. Perch, III, Assistant United States Trustee, in Wilmington, Delaware, informs the Court that the appointment of Mr. Mandarino is with the consultation of: (a) the Debtors' counsel; (b) the Creditors' Committee's counsel; (c) OEP Imaging Corp.'s counsel; (d) JPMorgan Chase Bank's counsel; (e) the Securities and Exchange Commission; (f) Assistant U.S. Attorneys, Ellen Slights, Esq., and Shannon Hanson; (g) Kem Toole, Esq. of the U.S. Dept. of Justice, Civil Division; (h) Leonard Lockwood; (i) George Maiorelli; (j) Arthur Derek Jerrett; (k) John D. Gignac; (l) G. Michael Gignac, Jr.; (m) Stephen J. Morgan; and (n) William Cardinale. Mr. Mandarino discloses that certain professionals retained by parties-in-interest in the Debtors' cases have been involved in unrelated engagements with his firm, Traxi LLC, or himself. (Polaroid Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) PPL CORPORATION: Increases Quarterly Dividend Rate by 6.9% ---------------------------------------------------------- PPL Corporation (NYSE: PPL) increased its common stock dividend level by 6.9 percent, or $0.10 per share, to $1.54 per share, on an annualized basis. PPL Corporation's quarterly dividend rate will increase from $0.36 per share to $0.385 per share, payable April 1, 2003, to shareowners of record March 10, 2003. "This dividend increase is made possible by the high quality of PPL's earnings, its strong cash and credit positions and our solid foundation for future growth," said William F. Hecht, PPL chairman, president and chief executive officer. "Based on the company's closing stock price yesterday of $34.73 per share, this dividend increase will improve the current yield on our common stock to 4.43 percent. "Our business strategy of capturing margins in electricity markets while limiting our exposure to volatile energy prices has significantly reduced our business risk and has produced solid returns from core operations," Hecht said. These factors, in turn, permit PPL to increase its dividend, according to Hecht. "Recognizing our forecast for continuing improvement both in cash flow and in earnings," Hecht said, "we would anticipate being able to grow the dividend in the future." He said the company projects compound annual growth in core earnings per share of 5 to 8 percent. For 2003, PPL has forecast reported earnings of $3.75 to $4.05 per share and earnings from core operations, which exclude unusual items, of $3.45 to $3.75 per share. Based on the midpoint of its core earnings forecast for 2003, the company would be paying shareowners 43 percent of its earnings in the form of a dividend, Hecht said. "We believe that this new dividend level maintains the appropriate balance between near-term shareowner benefits and the company's efforts to grow value over the long term," said Hecht. All of the funding necessary to complete the construction of the remaining 690 megawatts of planned generation capacity by early 2004 is in place. PPL's credit and liquidity positions will benefit from the previously announced, planned issuance of $300 million of common stock in 2003. PPL's 2003 earnings forecast includes the effect of the common stock that the company expects to issue in 2003. Through Feb. 27, the company has issued about $58 million of common stock under its structured equity shelf program and its dividend reinvestment plan. Cash flow from operations in 2003 is expected to be about $1 billion, and PPL anticipates having positive free cash flow after the completion of its generation construction. In addition to strong cash flow, PPL has access to bank-borrowing capacity of $1.5 billion in the United States and $400 million in the United Kingdom for its electricity distribution company there. The difference between the forecast for reported earnings compared to the forecast of earnings from core operations in 2003 reflects two unusual items that should provide a net benefit to earnings of $0.30 per share: the adoption of a new accounting rule addressing asset retirement obligations, effective January 2003; and the addition to the company's balance sheet, in the third quarter of 2003, of the variable interest entities related to the Sundance (Arizona), University Park (Illinois) and Lower Mount Bethel (Pennsylvania) power plants, which currently are reflected as operating leases. PPL Corporation's annualized dividend level was last increased in April 2002 by 36 percent -- from $1.06 to $1.44 per share, or from $0.265 per share to $0.36 per share on a quarterly basis. PPL Electric Utilities Corporation, a subsidiary of PPL Corporation, today declared the following quarterly dividends on its preferred stock, payable April 1, 2003, to shareowners of record March 10, 2003. Preferred Preferred (cont.) 4-1/2% $1.125 6.125% Series $1.53125 3.35% Series $0.8375 6.15% Series $1.5375 4.40% Series $1.10 6.33% Series $1.5825 4.60% Series $1.15 6.75% Series $1.6875 PPL Corporation, headquartered in Allentown, Pa., controls about 11,500 megawatts of generating capacity in the United States, sells energy in key U.S. markets, and delivers electricity to customers in Pennsylvania, the United Kingdom and Latin America. PPL Corp.'s December 31, 2002 balance sheet shows a working capital deficiency of about $788 million. RADIO UNICA: Makes $9.3MM Interest Payment on 11-3/4% Sr. Notes --------------------------------------------------------------- Radio Unica Communications Corp. (OTC Bulletin Board: UNCA), the nation's only Spanish language radio network, has paid the $9,287,670 interest payment with respect to its 11-3/4% Senior Discount Notes due 2006 issued under an Indenture dated July 27, 1998. Under the Indenture pursuant to which the Senior Discount Notes were issued, the Company had until March 3, 2003 to make such interest payment before an event of default would occur. The Company is presently in discussions with representatives of the holders of the notes. The Company expects to report results for the year ended December 31, 2002 on or before March 27, 2003. Radio Unica Communications Corp., based in Miami, Florida, is the only national Spanish-language radio network in the country and reaches approximately 80% of Hispanic USA through a group of owned and operated stations and affiliates located nationwide. The Company's operations include the Radio Unica Network and an owned and/or operated station group covering the top U.S. Hispanic markets including Los Angeles, New York, Miami, San Francisco, Chicago, Houston, San Antonio, McAllen, Dallas, Fresno, Phoenix, Sacramento, and Tucson. Radio Unica's September 30, 2002 balance sheet shows a total shareholders' equity deficit of about $12 million. SALON MEDIA: Issues Conv. Notes & Warrants in Financing Deal ------------------------------------------------------------ On February 11, 2003, Salon Media Group, Inc., sold and issued a convertible promissory note and warrants in a financing transaction in which it raised gross proceeds of approximately $100,000. The terms of the transaction are set forth in the Note and Warrant Purchase Agreement entered into between the Company and an Ironstone Group, Inc., the investor. The Note may be convertible at a future date into equity securities of the Company at a conversion price to be determined. The warrants grant the holders thereof the right to purchase an aggregate of approximately 300,000 shares of the Company's common stock at an exercise price of $0.0575 per share. The Company will use the capital raised for working capital and other general corporate purposes. The Note automatically converts upon the first closing of the Company's Series D Preferred Stock securities proposed to be issued and, if no such Financing shall have occurred by the close of business on September 30, 2003, then the Note shall automatically convert into shares of the Company's common stock. In the event of an automatic conversion of the Note upon a Financing, the number of shares of preferred or common stock to be issued upon conversion of this and other notes shall equal the aggregate amount of the Note obligation divided by the price per share of the securities issued and sold in the Financing. In the event of an automatic Note conversion into common stock absent a Financing, the number of shares of the common stock to be issued upon conversion of Notes shall equal the aggregate amount of the Note obligations divided by the average closing price of the Company's common stock over the sixty (60) trading days ending on September 30, 2003, as reported on such market(s) and/or exchange(s) where the common stock has traded during such sixty trading days. In connection with the Financing, the Company granted the Investor a security interest in the Company's assets, subject to the rights of any Senior Indebtedness (as such term is defined in the Agreement) and pre-existing rights. Neither the Note, warrants, nor the shares of common stock underlying the warrants have been registered for sale under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration under such act or an applicable exemption from registration requirements. * * * Salon Media Group's September 30, 2002 balance sheet shows that total current liabilities eclipsed total current assets by about $2.2 million. In its SEC Form 10-Q filed on November 13, 2002, the Company reported: "As of September 30, 2002, Salon had approximately $0.3 million in available cash remaining from the issuance of convertible redeemable notes issued in July 2002. Salon also had $0.5 million of restricted cash held primarily as deposits for various lease arrangements. "Net cash used in operations was $1.9 million for the six months ended September 30, 2002, compared to $3.3 million for the six months ended September 30, 2001. The principal use of cash during the six months ended September 30, 2002 was to fund the $3.1 million net loss for the period and a $0.1 million decrease in liabilities, offset partly by non-cash charges of $1.1 million. The principal use of cash during the six months ended September 30, 2001 was to fund the $5.3 million net loss for the period and a $0.6 million decrease in liabilities, offset partly by non-cash charges of $2.2 million. "No cash was used in investing activities for the six months ended September 30, 2002, compared to an immaterial amount for the six months ended September 30, 2001. Salon does not expect any significant capital expenditures during the current fiscal year. "Net cash provided from financing activities was $0.6 million for the six months ended September 30, 2002, compared to $3.1 million for the six months ended September 30, 2001. The principal source of funds for the six months ended September 30, 2002 was $0.7 million from the issuance of convertible redeemable notes, offset by $0.1 million of lease payments. The principal source of funds for the six months ended September 30, 2001 was $3.2 million from the issuance of Series A convertible preferred stock, offset by $0.1 million of lease payments. "As of September 30, 2002, Salon's available cash resources were sufficient to meet working capital needs for approximately one month. Subsequent to September 30, 2002, Salon received gross proceeds of $0.2 million from the issuance of an unsecured promissory note to a member of Salon's Board of Directors. Salon believes with this cash, together with collections of accounts receivable, that it will be able to fund working capital needs through November 2002. Copies of the relevant documents relating to the issuance of the unsecured promissory note were filed with the Securities and Exchange Commission on October 15, 2002. "In October 2002, Salon entered into an Accounts Receivable Purchase Agreement with a bank. Under the terms of the agreement, the bank can purchase acceptable receivables from Salon for which Salon can receive 60% or 80% of the face value of the receivables, depending on the nature of the receivable. The aggregate purchase receivables outstanding under the agreement cannot exceed $1.0 million, however the amount is capped at $0.3 million until such time that Salon has $2.5 million of unrestricted cash. Salon has not received any funds under this agreement as of this filing and estimates that it may be able to receive approximately $70,000 during the month of November 2002. "Salon's independent accountants have included a paragraph in their report for the fiscal years ending March 31, 2002 and 2001 indicating that substantial doubt exists as to Salon's ability to continue as a going concern because it has recurring operating losses and negative cash flows, and an accumulated deficit. Salon has eliminated various positions, not filled positions opened by attrition, implemented a wage reduction of 15% effective April 1, 2001, and has cut discretionary spending to minimal amounts, and predicts it may reach cash-flow break even for its quarter ending September 30, 2003. "Salon needs to raise additional funds and is currently in the process of exploring financing options. If it is unable to complete the financial transactions it is pursuing or if it is unable to otherwise fund its liquidity needs, then it may not be able to continue as a going concern. Liquidity continues to be a constraint on business operations, including Salon's ability to react to competitive pressures or to take advantage of unanticipated opportunities. If Salon raises additional funds by selling equity securities, or instruments that convert into equity securities, the percentage ownership of Salon's current stockholders will be reduced and its stockholders will most likely experience additional dilution. Given Salon's recent low stock price, any dilution will likely be very substantial for existing stockholders." SEITEL INC: Noteholders Want Workout Documents Ready by April 10 ---------------------------------------------------------------- Seitel, Inc., (NYSE: SEI; Toronto: OSL) and its Noteholders have amended their existing standstill agreement to require that the documents necessary for a restructuring be completed by April 10, 2003. Previously, these documents were required to be substantially completed by February 28, 2003. The amendment also eliminates the requirement for the parties to reach an agreement in principle for the restructuring by an earlier date. Seitel markets its proprietary seismic information/technology to more than 400 petroleum companies, licensing data from its library and creating new seismic surveys under multi-client projects. SERVICE MERCHANDISE: Wind-Down Plan Should be Filed Tomorrow ------------------------------------------------------------ Service Merchandise Company, Inc., and its debtor-affiliates relate that their settlement discussions with the Creditors' Committee and various interested parties to streamline the confirmation process are currently ongoing. The Debtors continue to pursue various causes of action and intend to file a wind-down plan to provide for the distribution of the proceeds of all of their assets to creditors. Accordingly, the Debtors sought and obtained another extension of their exclusive period to file a Wind-down Plan to March 5, 2003. The Debtors expect to have a plan confirmation hearing on May 12, 2003. The Debtors' exclusive period to solicit acceptances of the plan currently expires on May 30, 2003. Paul G. Jennings, Esq., at Bass, Berry & Sims PLC, in Nashville, Tennessee, explains that the extension provides the parties additional time to finalize the settlement discussions without affecting the timing of the Debtors' plan confirmation process. The Debtors anticipate an initial distribution to their creditors in or about the third quarter of 2003. "The Debtors just want to ensure that they have the necessary time to file and solicit acceptances of a plan that provides for the distribution of cash to their creditors in a clear and straightforward manner," Mr. Jennings says. In the event the Debtors file a plan by March 5, 2003 and afterwards determine to withdraw the plan, the Court rules that the Exclusive Plan Filing Period will be deemed extended for another 30 days after the withdrawal date. (Service Merchandise Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) SHELBOURNE PROPERTIES: Sells Melrose Park Property for $5.5 Mil. ---------------------------------------------------------------- Shelbourne Properties II, Inc. (Amex: HXE), and Shelbourne Properties III, Inc. (Amex: HXF) have each sold their respective properties located in Melrose Park, Illinois commonly referred to as Melrose Park-Phase I (Shelbourne II) and Melrose Park- Phase II (Shelbourne III) for an aggregate purchase price of $5,500,000 ($3,427,200 for Phase I and $2,164,800 for Phase II). After closing adjustments and other closing costs, net proceeds were approximately $2,900,000 with respect to Phase I and approximately $1,950,000 with respect to Phase II. The proceeds from this sale have been included in the dividends announced by the Shelbourne REITs. The Board of Directors and Shareholders of each of Shelbourne Properties II, Inc. and Shelbourne Properties III, Inc. have previously approved a plan of liquidation for Shelbourne Properties II, Inc. and Shelbourne Properties III, Inc. SLI INC: Obtains Approval Extending Exclusivity through April 23 ---------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the District of Delaware, SLI, Inc., and its debtor-affiliates obtained an extension of their exclusive periods. The Court gives the Debtors, until April 23, 2003, the exclusive right to file their plan of reorganization and until June 23, 2003 to solicit acceptances of that Plan. SLI, Inc., and its affiliates operate in multi-business segments as a vertically integrated manufacturer and supplier of lighting systems, which includes lamps, fixtures and ballasts. The Company filed for chapter 11 protection on September 9, 2002 (Bankr. Del. Case No. 02-12608). Gregg M. Galardi, Esq. at Skadden, Arps, Slate, Meagher represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $830,684,000 in total assets and $721,199,000 in total debts. SPIEGEL: Alvarez & Marsal's William Kosturos Hired as New CRO ------------------------------------------------------------- The Spiegel Group's (OTC Pink Sheets: SPGLA) board of directors has named William Kosturos, a managing director at Alvarez & Marsal, Inc., an international turnaround and management consulting firm, as chief restructuring officer. The appointment follows the decision by Martin Zaepfel to retire from his positions as vice chairman, president and chief executive officer, effective March 1, 2003. Mr. Kosturos will assume the additional position and duties of interim CEO on that date. Mr. Kosturos will work with the Company's senior management team to strengthen the Company's financial position and improve operations. The board has initiated a search for a permanent CEO. Over the course of his nearly 20-year career, Mr. Kosturos has helped numerous companies improve their operational performance and successfully navigate turnaround, restructuring and reorganization situations. His experience spans a range of industries, including: retail, consumer products, food processing, technology and utilities. "We are delighted to have someone with Bill's depth of experience join our team," said Dr. Michael Otto, chairman of The Spiegel Group board of directors. "I am certain that his proven success in business restructuring will be very beneficial as we take steps to strengthen our Company's financial situation and position ourselves for a stronger future." "On behalf of the board, I would like to express our sincere gratitude to Martin for his hard work and dedication," continued Dr. Otto. "Martin's leadership was critical in guiding the Company for the past two years through a very challenging environment." Alvarez & Marsal, Inc., was formed in 1983 to provide specialized management and advisory services to underperforming and/or over-leveraged companies. A&M today has 170 professionals based in 12 locations serving the US, Europe, Asia and Latin America. For more information on Alvarez & Marsal, please visit http://www.alvarezandmarsal.com In or Near Zone of Insolvency The Spiegel Group, whose businesses include Eddie Bauer, Newport News, Spiegel Catalog and First Consumers National Bank, delivered its quarterly reports to the Securities & Exchange Commission last week showing that shareholder equity's dwindled to $72.4 million at September 30, 2002 -- roughly 3% of the company's $2.2 billion asset base. Dismal 2001 & 2002 Results Spiegel fell out of compliance with its 2001 loan covenants over a year ago and has been working with its bank group to amend and replace its existing credit facilities with a new credit facility. For the year ending December 29, 2001, Spiegel reported $2.9 billion in sales (down sharply from 2000) and a $587 million net loss (a $700 million downward swing from 2000 results). For the first nine months of 2002, net sales contracted to $1.5 billion and the company's net loss totaled $139 million. With another typical quarter or two of losses, Spiegel's liabilities will exceed its assets. The Bank Facilities The Company has a $600,000,000 revolving credit agreement with a group of banks that matures in July 2003 and a $150,000,000 364- Day Facility that matured in June 2002. The Company reports that $700,000,000 was outstanding at February 18, 2002. Information obtained from http://www.LoanDataSource.comshows that: * ABN Amro Bank N.V. * Banca Commerciale Italiana, New York Branch * Bank of America, N.A. * Bankgesellschaft Berlin AG * Bayerische Hypo und Vereinsbank AG * Commerzbank AG, New York and Grand Cayman Branches * Credit Lyonnais, New York Branch * Credit Suisse First Boston * Den Danske Bank * Deutsche Bank AG, New York and/or Cayman Island Branches * Deutsche Bank AG, New York Branch * DG Bank Deutsche Genossenschaftsbank AG * Dresdner Bank AG, New York and Grand Cayman Branches * HSBC Bank USA * Landesbank Hessen-Thuringen * Morgan Guaranty Trust Company of New York * Norddeutsche Landesbank Girozentrale, New York Branch and/or Cayman Island Branch * The Bank of New York * The Hongkong and Shanghai Banking Corporation Limited; and * Westdeutsche Landesbank Girozentrale, New York Branch are the financial institutions with exposure under these loan facilities. Needing continued access to working capital financing, in September 2001, the Company entered into a revolving credit agreement with Otto Versand (GmbH & Co), a related party, to obtain access to $100,000,000 of financing through June 15, 2002. As of February 2002, this credit facility was fully drawn. This loan was extinguished with the proceeds of new term loans totaling $100,000,000 from Otto-Spiegel Finance G.m.b.H. & Co. KG, a related party. The term loans matured on December 31, 2002, but as of January 2003, the $100,000,000 term loans are still outstanding. Late last year or early this year, Spiegel borrowed an additional $60,000,000 on a senior unsecured basis from Otto Versand (GmbH & Co) to keep operations going. New CFO on Board James M. Brewster was hired as the new senior vice president and chief Financial officer for The Spiegel Group on February 26, 2003. For the past 10 years, Brewster has served as senior vice president and chief financial officer for the company's Newport News subsidiary, and has a great resume. SEC Investigation Spiegel discloses that the SEC is conducting an investigation concerning the Company's delinquent filing of its Form 10-K for 2001 and its Forms 10-Q for 2002. "We are cooperating with the SEC in its investigation, but we cannot predict the duration, scope or outcome of, or potential sanctions resulting from the investigation," the Company says. KPMG Has Doubts Because (1) the Company is not in compliance with its debt agreements, and accordingly, substantially all of the Company's debt is currently due and payable and (2) the Company has violated certain provisions of agreements with MBIA Insurance Corporation, the insurer of its asset-backed securitization transactions, KPMG LLP expresses doubt about the Company's ability to continue as a going concern. The Spiegel Group is a leading international specialty retailer marketing fashionable apparel and home furnishings to customers through catalogs, 560 specialty retail and outlet stores, and e-commerce sites, including eddiebauer.com, newport-news.com and spiegel.com. The Company's corporate headquarters and Spiegel operations are located in leased office space in Downers Grove, Illinois. The Company owns its Westmont, Illinois corporate data center. The company's Class A Non-Voting Common Stock trades on the over-the-counter market under the SPGLA ticker symbol. Otto Versand (GmbH & Co), a privately-held German partnership, acquired the Company in 1982. In April 1984, Otto Versand transfered its interest in the Company to its partners and designees. Otto Versand and the Company have "entered into certain agreements seeking to benefit both parties by providing for the sharing of expertise" and have lots of relationships in far-flung places around the globe as a result. In October 2002, the German partnership changed its name from Otto Versand (GmbH & Co) to Otto (GmbH & Co KG). Investor relations information is available on The Spiegel Group Web site at http://www.thespiegelgroup.com STAR GAS PARTNERS: Fitch Rates $200 Million Senior Notes at BB -------------------------------------------------------------- Star Gas Partners, L.P.'s outstanding $200 million 10.25% senior notes due 2013, co-issued under SEC Rule 144A with its special purpose financing subsidiary Star Gas Finance Company, are rated 'BB' by Fitch Ratings. The notes were offered for sale on February 4, 2003. In addition, the private placement senior secured ratings of its operating subsidiaries, Petroleum Heat and Power Co. and Star Gas Propane, L.P. have been lowered to 'BBB-' from 'BBB' and removed from Rating Watch Negative where they were placed on January 28, 2003 following the public announcement of the proposed note issuance. The Rating Outlook for the above companies is Stable. Star Gas' 'BB' rating reflects its subordinated position to approximately $379 million of secured debt at Petro and Star Propane including $92 million of working capital borrowings. Fitch's rating assessment also considered the operating, financial, and structural characteristics of Star Gas, Petro, and Star Propane. Prospectively, credit measures at Star Gas and its affiliates will be affected by the application of the note proceeds. Star Gas is using approximately $150 million of the proceeds to repay lower cost debt at Petro and Star Propane. The remaining net proceeds of approximately $40 million are targeted for future acquisitions. As a result of the financing, annual consolidated interest costs will increase by about $7 million. However, the debt reductions at Petro and Star Propane will result in these companies having stronger standalone quantitative credit measures and will lessen near-term liquidity risk. Since no acquisitions have been made to date and the profitable heating season is about 70% completed, Fitch does not expect future acquisitions to contribute positive cash flow during Star Gas' fiscal year ending September 30, 2003. However, given cold weather conditions and favorable volumes and margins, free cash flow and consolidated credit measures for fiscal 2003 should improve over 2002 even with higher interest costs. The one notch downgrades to 'BBB-' for the secured debt of Petro and Star Propane primarily reflects the credit risk associated with Star Gas' debt offering. While standalone credit measures will meaningfully improve with the reduction of debt at both operating companies, default risk increases with the added parent company debt. Of particular concern is Star Gas' 'BB' rating and the existence of a cross default trigger between Star Gas and Petro. The two notch separation in ratings between Star Gas and Petro and Star Propane recognizes the standalone credit profiles at each operating company, the secured status of their debt, and several structural considerations, including the existence of cash distribution tests at both Petro and Star Propane. Star Gas through Petro and Star Propane is the largest domestic distributor of home heating oil and the seventh largest retail distributor of propane, respectively. Home heating oil operations serve customers in the Northeast and Mid-Atlantic regions and propane operations serve customers in the Northeast, Midwest, and Southeast regions of the U.S. Primary industry concerns are the negative impact of warm heating-season weather on profits and volumes sold and the potential adverse impact of supply price volatility where rapid increases in wholesale prices may not be immediately passed through to customers. Specific favorable considerations in assigning Star Gas' rating include: 1) A demonstrated willingness to issue equity combined with a successful track record on execution. Since August 1999, Star Gas has had eight equity financings totaling $280 million. Management indicates that future acquisitions will be financed 50% debt and 50% equity. 2) Historical unit margins have been very stable at both Petro and Star Propane irrespective of pricing and volume considerations. 3) Annual maintenance capital expenditures are small, totaling less than 10% of earnings, before interest, taxes, depreciation, and amortization (EBITDA). Low maintenance capital requirements minimize internal and external capital needs. 4) Star Gas has contracted for a minimum of $12.5 million of annual weather insurance protection through the 2006- 2007 winter, limiting weather induced financial volatility. Concerns include: 1) Poor operating performance at Total Gas & Electric, a natural gas and electric retail marketing subsidiary purchased by Star Gas in April 2000. 2) The residual sensitivity of volumes and cash flows to weather inherent in the sector. 3) Management's ability to invest the $40 million unused portion of note proceeds in assets that will perform well. In addition, there is the ongoing risk of aggressively pursuing acquisitions at Star Propane and Petro. Each of these companies has significant room under indenture debt incurrence tests to finance future acquisitions. Fitch's credit analysis for master limited partnerships emphasizes cash flow analysis on both a historic and prospective basis. Although reported financial performance weakened in 2002 due to record warm weather conditions, consolidated company and parent company-only credit measures at Star Gas are expected to remain consistent with its 'mid-BB' rating. For the most recent twelve month period ended December 31, 2002, consolidated company EBITDA-to-interest was 2.7 times. Total debt-to-EBITDA was high at 5.3x, however, adjusted for seasonal working capital borrowings the ratio drops to 4.4x. In addition, based on $95.1 million of EBITDA for that twelve month period, cash distributions to Star Gas after the servicing of interest and maintenance capital expenditures at Petro and Star Propane, cover parent company annual interest at Star Gas by 3.3x. A further consideration in cash flow analysis for MLPs is that they pay minimal or no income taxes and, in the case of Star Gas minimal maintenance capital expenditures. Therefore, in comparison with tax paying corporate entities, MLP EBITDA more closely matches cash flow from operations that is available to service its debt. Fitch also considered the potential events and/or conditions that would disrupt debt service at Star Gas. Based on indenture covenant distribution tests, EBITDA at the operating companies would have to drop by about 60% from $95.1 million before upstream cash dividends to Star Gas would be restricted. The likelihood of this level of EBITDA erosion is remote given a demonstrated record of customer retention and margin maintenance at the company. In addition, the above analysis does not consider the economic benefit of any insurance proceeds. SUPERIOR TELECOM: Files for Chapter 11 Protection in Delaware ------------------------------------------------------------- Superior TeleCom Inc., (OTC Bulletin Board: SRTO.OB) intends to implement a reorganization of its capital structure that will significantly reduce debt and interest cost and provide enhanced financial flexibility for the Company. To facilitate the restructuring, the Company and its U.S. subsidiaries have filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. The Company has obtained a $100 million "Debtor in Possession" financing facility from lenders within its existing bank group in order to provide sufficient liquidity during the restructuring process. The Company will conduct business as usual during the reorganization, including fully servicing all of its customer requirements on an uninterrupted basis, with no anticipated production or shipment disruptions. Employees will continue to receive wages and vendors will be paid for post-petition goods and services. Steven S. Elbaum, Chairman, stated, "The Company's decision to implement a major restructuring and deleveraging of its balance sheet was made in consultation with its principal secured lenders and follows a series of credit agreement amendments obtained by the Company which have allowed the Company to improve its competitiveness and strengthen its market leadership in its key business segments. However, the sustained downturn in the telecom markets, particularly the sharply reduced demand from our traditional local telephone company customers for communications cable products in the local loop, and continued lack of a visibly strong economic recovery have caused the Company to conclude that seeking further credit agreement amendments would not be productive. With the new working capital financing in place, the Company believes this restructuring is the best and shortest process at this time for it to emerge as the continued industry market leader, with not only the best businesses but also one of the strongest balance sheets." Superior TeleCom has developed a restructuring strategy with certain of its existing lenders under the Company's $1.15 billion senior secured credit facility that would include, among other things, the elimination and conversion into equity of a significant amount of debt. This will result in a substantial deleveraging of the Company's capital structure. The final amount of debt reduction and the Company's overall strategy will be subject to agreements with the Company's lenders and Court approval of a plan of reorganization. The Company's shareholders and holders of the Trust Convertible Preferred Securities issued by Superior Trust I will not receive any distribution under the contemplated restructuring strategy. The Company has been and continues to be in discussions with its entire lender group and hopes to obtain the requisite approvals for a plan of reorganization. However, there can be no assurance that such approval will be obtained or that the final restructuring and reorganization plan will contain the terms described herein. David S. Aldridge, Chief Financial Officer of Superior Telecom stated, "Chapter 11 provides the most appropriate forum for completing Superior's debt restructuring. We are fortunate that over the past eighteen months we have enacted a number of initiatives to streamline manufacturing, reduce the costs of our operations and balance production capabilities with demand cycles without compromising our ability to respond quickly to the eventual upturn in our basic markets. When we complete the financial restructuring, we will have substantially downsized debt levels and a strong equity base that, in connection with our well-managed base operations, result in a strong business model supported by a solid balance sheet." Along with Superior's filing, the Company also filed a variety of "first- day motions" that would allow the Company to: * Pay claims of essential trade creditors * Authorize payment of pre-petition employee obligations * Pay shipping charges, import/export obligations, sales and uses taxes * Authorize the continuation of customer programs * Maintain its consolidated cash management system * Jointly administer the bankruptcy cases for procedural purposes Superior TeleCom Inc., is one of the largest North American wire and cable manufacturers and among the largest wire and cable manufacturers in the world. Superior manufactures a broad portfolio of wire and cable products with primary applications in the communications and original equipment manufacturer (OEM) markets. The Company is a leading manufacturer and supplier of communications wire and cable products to telephone companies, distributors and system integrators and magnet wire for motors, transformers, generators and electrical controls. Additional information can be found on the Company's Web site at http://www.superioressex.com SUPERIOR TELECOM: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Lead Debtor: Superior TeleCom Inc. One Meadowlands Plaza Suite 200 East Rutherford, New Jersey 07073 Bankruptcy Case No.: 03-10607 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Superior Telecommunications Inc. 03-10608 Superior Telecommunications Realty Company 03-10609 Essex International Inc. 03-10610 Essex Group, Inc. 03-10611 Superior Essex Realty Company 03-10612 Active Industries, Inc. 03-10613 Diamond Wire & Cable Co. 03-10614 Essex Funding, Inc. 03-10615 Essex Services, Inc. 03-10616 Essex Canada Inc. 03-10617 Essex Wire Corporation 03-10618 Essex Technology, Inc. 03-10619 Essex Group, Inc. 03-10620 Essex Group Mexico Inc. 03-10621 Essex Mexico Holdings, L.L.C. 03-10623 Type of Business: Superior TeleCom is a leading manufacturer and supplier of communications wire and cable products to telephone companies, distributors and system integrators and magnet wire for motors, transformers, generators and electrical controls. Chapter 11 Petition Date: March 3, 2003 Court: District of Delaware Judge: Jerry W. Venters Debtors' Counsel: Laura Davis Jones, Esq. Michael Seidl, Esq. Pachulski, Stang, Ziehl Young Jones & Weintraub 919 N. Market Street 16th Floor Wilmington, DE 19899-8705 Tel: 302-652-4100 Fax : 302-652-4400 Total Assets: $861,716,000 Total Debts: $1,415,745,000 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ American Stock Transfer & Convertible Sub. $171,765,650 Trust Company Debentures 59 Maiden Lane New York, NY 10038 Tel: 212-936-5100 Fax: 718-236-2641 -and- American Stock Transfer & Trust Co. Herbert Lemmer, Esq. 62-01 Fifteenth Avenue, 3rd Floor Brooklyn, NY 11219 Fleet Bank, N.A. Sr. Sub. Notes $133,052,995 Kenneth Ahrens 100 Federal Street MA DE 10011A Boston, MA 02110 Tel: 617-434-2603 Fax: 617-434-1096 Deutsche Bank Trust Co. Sr. Sub. Notes $88,701,996 Americas Anthony Legrippo 130 Liberty Street 1 BT Plaza New York, NY 10006 Tel: 212-250-4886 Fax: 212-250-7218 E I DuPont Trade Debt $1,411,930 M. McGoonigal DuPOnt Nomex Customer Service Center PO Box 27001 Richmond, VA 23261 Tel: 804-383-2767 Fax: 804-383-2009 Equistar Chemicals LP Trade Debt $1,049,369 Wire & Cable Products Roger Hoogendoorn 428 Colver Road Nazareth, PA 18064 Tel: 888-274-2580 Fax: 610-759-7962 Alcoa Flexible Packaging Trade Debt $882,971 (Reynolds Metals) Laminated & Coated Products 1225 West Burnett Street Louisville, KY 40210 Outokumpu American Brass Trade Debt $777,322 Inc. Cheryl Craig 70 Sayre Street Buffalo, NY 40210 Tel: 502-636-8493 Fax: 502-636-8457 Penreco Trade Debt $712,822 Doug Reynolds 4401 Park Avenue PO Drawer C Dickinson, TX 77539 Tel: 713-236-6957 Fax: 281-337-2341 Dow Corning Trade Debt $699,791 Jin Stutelberg PO Box 70678 Chicago, IL 60673-0678 Tel: 989-496-3299 Fax: 989-496-4586 Dyneon LLC Trade Debt $648,135 David Tarantino 43536 Galway Drive Northville, MI 48167 Tel: 800-964-5608 Fax: 248-380-7329 Dow Chemical Company Trade Debt $631,222 The Wire & Cable Compounds Group Bob Reed 400 W. Sam Houston Pkwy, South Houston, TX 77042 P.D. George Trade Debt $598,884 Rohn Grant PO Box 503703 St. Louis, MO 63150-3703 Tel: 314-621-5700 Fax: 314-436-1030 OFS Fitel-Sturbridge Trade Debt $463,563 Optical Fiber Division Michelle Neifing 50 Hall Road Sturbridge, MA 01566 Tel: 508-347-5700 Fax: 508-347-1211 Owens-Corning Fiberglass Trade Debt $456,469 Corp. 7429 Mason Falls Circle Winston, GA 30187 Witco Chemical Trade Debt $450,374 Crompton Corp. Jack Drawdy 715 Shefwood Drive Easley, SC 29642 Tel: 864-855-4933 Fax: 864-855-8996 Teknor Apex Int'l Trade Debt $419,462 Plastics Division Bob Freeman 505 Central Avenue Pawtucket, RI 02861 Tel: 216-228-9670 Fax: 401-729-0166 Olin Corp. Brass Division Trade Debt $395,389 Greg Hoffmann 1665 Lakes Parkway, Suite 116 Lawrenceville, GA 30243 Tel: 678-482-1717 Fax: 678-482-1622 Phelps Dodge Trade Debt $317,088 Steve Higgins 1501 W. Fountainhead Pkwy Suite 290 Tempe, AZ 85282 Tel: 602-366-8411 Fax: 602-366-7305 Corning, Inc. Trade Debt $316,152 Optical Fiber David Kane One Riverfront Plaza MP-HQ-W2-18 Corning, NY 14831 Tel: 607-974-7152 Fax: 607-974-7648 Bedford Materials Co. Inc. Trade Debt $315,764 Ellen Shroyer Intersection of Rt 30 & 31 PO Box 657 Bedford, PA 15522 Tel: 8147-623-9014 Fax: 814-623-3323 SWEETHEART HLDGS: CCC+ Rating Remains on Watch After S-4 Filing --------------------------------------------------------------- Standard & Poor's 'CCC+' corporate credit ratings on paper products manufacturer Sweetheart Holdings Inc. and its subsidiaries remain on CreditWatch with developing implications following the company's recent filing of an amended Form S-4 regarding an exchange offer for its $110 million senior subordinated notes due 2003. Developing implications means that the ratings could be raised, lowered, or affirmed. The Owings Mills, Maryland-based company's total debt, including capitalized operating leases, exceeds $700 million. Sweetheart's amended offer is to exchange its $110 million senior subordinated notes due in September 2003 for the same amount of senior notes with similar terms and conditions due in July 2004. "If the exchange is executed under the proposed terms, Standard & Poor's will deem this a distressed exchange and will lower the corporate credit rating to 'SD' and the rating on the Sweetheart notes to 'D'," said Standard & Poor's credit analyst Cynthia Werneth. She added, "Following a successful completion of the exchange offer, the corporate credit rating could be revised from `SD' to as high as 'B-' to reflect the easing of refinancing pressures. In addition, the new senior notes would be rated two notches below the corporate credit rating, reflecting the significant amount of secured debt and operating leases, ranking ahead of them in the capital structure." If Sweetheart is unable to exchange or refinance the existing notes, its $235 million primary bank credit facility, under which about $180 million was outstanding as of Dec. 31, 2002, will become due on March 1, 2003. Sweetheart has requested a 120-day extension of this accelerated maturity. Management is also pursuing a number of strategic options including a sale of the entire business or of certain brands and related assets that generate net sales of $220 million, and earnings before interest, taxes, and depreciation of $25 million. If the bank loan extension is not granted, and the notes have not been exchanged for new notes by March 1, 2003, the company will default on its bank debt, and all the ratings will be lowered to 'D'. The company has struggled with declining prices and volumes as a result of a drop in business and leisure travel and away-from- home-dining following the terrorist attacks of Sept. 11, 2001. In addition, during the past year, the company has incurred about $20 million of one-time costs to restructure its operations. Cash flow generation has benefited slightly from inventory reductions, the receipt of business interruption insurance proceeds, and modest asset sales. As of Dec. 31, 2002, the company had about $32 million of bank loan availability. TELESYSTEM INT'L: Reports Improved EBITDA for Fourth Quarter ------------------------------------------------------------ Telesystem International Wireless Inc., (TSX, "TIW", Nasdaq, "TIWI") reported its results for the fourth quarter and year ended December 31, 2002. Consolidated operating income before depreciation and amortization (EBITDA) from continuing operations increased 67% to $62.9 million compared to $37.7 million for the fourth quarter of 2001. For the year 2002 as a whole, EBITDA increased 99% to $242.0 million compared to $121.6 million for 2001. The strong EBITDA growth reflects the continued solid performance in Romania and improved results in the Czech Republic where the Company's operating subsidiary recorded a fourth consecutive quarter of positive EBITDA. Operating income from continuing operations increased six fold to $18.6 million compared to $2.7 million for the same period last year. For the year 2002 as a whole, operating income from continuing operations reached $87.6 million compared to an operating loss of $0.4 million for 2001. "The 2002 results, with operating income of almost $90 million and EBITDA of $242 million clearly demonstrate our ability in sustaining profitable growth. In Romania, MobiFon recorded its best financial performance to date, distributing $53 million to its shareholders while maintaining its market leadership," said Bruno Ducharme, President and Chief Executive Officer of TIW. "In the Czech Republic, Oskar confirmed its position as one of Europe's most successful third operators and achieved positive EBITDA in each of the four quarters of 2002." Results of Operations TIW recorded net subscriber additions for the fourth quarter of 220,000, to reach total subscribers from continuing operations of 3,927,350, up 34% compared to 2,936,000 at the end of the fourth quarter of 2001. Consolidated service revenues increased 26% to $182.3 million compared to $144.7 million for the fourth quarter of 2001. The strong revenue growth, lower selling, general and administrative expenses as a percent of revenues and continued cost management at the corporate level resulted in an operating income of $18.6 million compared to $2.7 million for the same period last year. Loss from continuing operations was $8.4 million, or $0.01 per share compared to a loss from continuing operations of $15.9 million or $1.12 per share for the fourth quarter of 2001. Net loss for the fourth quarter 2002 amounted to $35.6 million or $0.06 per share compared to a net loss of $68.1 million or $3.66 per share for the fourth quarter 2001. The 2002 figure includes a loss from discontinued operations of $27.2 million as compared to $52.2 million in the fourth quarter 2001. For the year 2002 as a whole, consolidated service revenues increased 32% to $652.9 million compared to $495.2 million for 2001. Operating income was $87.6 million compared to an operating loss of $0.4 million for 2001, an improvement of $88.0 million. Income from continuing operations was $62.0 million, or $0.13 per share, including a pre-tax non-cash gain of $91.7 million mainly related to the financial restructuring completed during the first quarter and the expiry of the TIW Units and one time debt refinancing charges related to MobiFon of $10.1 million. Net loss for 2002 as a whole was $127.2 million or $0.29 per share resulting from a $189.1 million loss from discontinued operations recorded during the period. For the year 2001 as a whole, the Company recorded income from continuing operations of $162.4 million, or $7.71 and $4.05 per basic and diluted share, respectively, which included a $238.9 million non-cash gain on the forgiveness of debt. Loss from discontinued operations mainly related to Dolphin Telecom plc and was $416.1 million resulting in a net loss of $253.7 million, or $16.29 and $6.28 per basic and diluted share, respectively. MobiFon S.A. - Romania MobiFon, the market leader in Romania with an estimated 53% share of the cellular market, added 172,700 net subscribers for the fourth quarter for a total of 2,635,200, compared to 2,003,600 subscribers at the end of the same 2001 period, an increase of 31.5%. For the same quarter last year, MobiFon recorded 380,900 net additions and held a market share of approximately 53% at December 31, 2001. The pre-paid/post-paid mix at the end of the fourth quarter 2002 was 64/36 compared to 63/37 a year ago, consistent with the higher proportion of prepaid subscribers added during the last 12 months. Service revenues reached $114.1 million, an increase of 15%, due to a larger subscriber base including a larger proportion of prepaid subscribers, compared to $99.2 million for the fourth quarter last year. The monthly average revenue per subscriber (ARPU(1)) was $13.83 as compared with $14.45 in the preceding quarter and $17.00 in the fourth quarter of 2001. SG&A expenses decreased to 23% of service revenues compared to 28% for the 2001 corresponding period. EBITDA increased 24% to $58.7 million compared to $47.5 million for the same period last year and EBITDA as a percentage of service revenue improved to 51% compared to 48% in the quarter ending December 31, 2001. Operating income rose 40% to $34.5 million compared to $24.7 million for the fourth quarter in 2001. For the year 2002 as a whole, service revenues increased 18% to $425.6 million compared to $359.9 million for 2001. EBITDA increased 24% to $231.5 million compared to $186.4 million and EBITDA as a percentage of service revenue improved to 54% compared to 52% in the year ended December 31, 2001. Operating income rose 33% to $144.6 million compared to $108.6 million for 2001. Cesky Mobil a.s. - Czech Republic Cesky Mobil added 133,800 net subscribers in the fourth quarter. At year-end the Company made a downward adjustment of 93,600 to the "reported subscriber" count to reflect a more stringent policy of excluding from the count, pre-paid customers with six or more months of call inactivity. The year-end count of 1,179,800 subscribers represents an increase of 37% compared to 858,400 subscribers at the end of the fourth quarter of 2001. Cesky Mobil estimates it held a 14% share of the national cellular market as of December 31, 2002, compared to a 12% share at the same time last year. During the past 12 months, management estimates cellular penetration in the Czech Republic increased to 83% from 67% at the end of the fourth quarter of 2001 when Cesky Mobil recorded 178,100 net subscriber additions. The Company's pre-paid/post-paid mix as of December 31, 2002 was 64/36 compared to 71/29 at December 31, 2001. The change in mix is primarily attributable to a successful second half of the year's focus on post-paid growth which resulted in a higher proportion of post-paid subscribers additions in the third and fourth quarter of 2002. Service revenues increased 58% to $68.3 million compared to $43.3 million for the fourth quarter of 2001. The monthly average revenue per subscriber was $18.96 as compared with $18.20 in the preceding quarter and $18.14 in the fourth quarter of 2001. Cesky Mobil recorded EBITDA of $7.3 million, its fourth consecutive quarter of positive EBITDA, compared to negative EBITDA of $5.5 million for the same period last year. This improvement reflects the revenue impact of rapid subscriber growth and economies of scale. SG&A expenses declined to 31% of service revenues compared to 44% for the same period last year. Operating loss improved to $12.7 million compared to $17.6 million for the fourth quarter of 2001. For the year 2002 as a whole, service revenues increased 81% to reach $227.3 million compared to $125.9 million for 2001. EBITDA reached $20.2 million compared to negative EBITDA of $41.6 million for 2001, an improvement of $61.8 million. Operating loss declined to $47.2 million compared to $84.1 million for the same period in 2001. Corporate and Other The Company's wireless operations in India and other corporate activities recorded negative EBITDA of $3.1 million and $9.7 million for the fourth quarter and year ended December 31, 2002, respectively. This compares to negative EBITDA of $4.2 million and $23.3 million, respectively, for the same periods last year. The improvement reflects mainly a reduction in corporate overhead following the Company's restructuring. Liquidity and Capital Resources For the fourth quarter of 2002, operating activities provided cash of $39.3 million compared to $39.9 million in 2001 mainly explained by the increase in the fourth quarter 2002 EBITDA over the corresponding period in 2001 offset by taxes paid by MobiFon in 2002. For the year 2002 as a whole, operating activities provided cash of $125.1 million compared to $5.8 million for the same period last year. The increase year over year is mainly explained by the $120.4 million increase in EBITDA. Furthermore, results for 2001 include significant changes in operating assets and liabilities mainly related to Cesky Mobil. Investing activities used cash of $76.3 million and $242.2 million for the fourth quarter and year ended December 31, 2002, essentially for the expansion of cellular networks in Romania and the Czech Republic. This compares to investments of $141.8 million and $303.7 million for the fourth quarter of 2001 and year ended December 31, 2001, respectively. Financing activities provided cash of $12.4 million in the fourth quarter of 2002 and is mainly explained by net proceeds from debt and short-term loans of $14.2 million. The cash provided by financing activities in the corresponding period in 2001, after excluding the additions to cash and cash equivalents from restricted cash of $91.6 million, was $34.5 million and originated from proceeds of net debt borrowings, issuance of shares and warrants and subsidiary shares issued to non controlling interest of $4.5 million, $14.5 million and $15.5 million respectively. For the year ended December 31, 2002, financing activities generated cash of $98.7 million mainly explained by proceeds from shares and warrants issued, subsidiary's shares issued to non controlling interests and net borrowings of debt of $41.2 million, $30.0 million and $47.0 million, respectively, offset by subsidiaries dividends paid to non controlling interests of $10.8 million and financing costs of $8.6 million. For the year ended 2001, cash provided by financing activities was $332.6 million mainly explained by net proceeds from the issuance of shares, warrants and units of $263.8 million, proceeds from subsidiary's shares issued to non-controlling interest of $65.8 million and by borrowings of debt net of repayments of $3.1 million. Cash and cash equivalents at the end of the fourth quarter totaled $60.7 million, including $14.3 million at the corporate level. As of December 31, 2002, total consolidated indebtedness was $1,010.6 million, of which $272.6 million was at the corporate level, $267.7 million at MobiFon and $470.2 million at Cesky Mobil. Total indebtedness at the TIW level was mainly comprised of $47.4 million due under the corporate bank facility and $223.9 million in 14% Senior Guaranteed Notes and related accrued contingent payments. Both the total consolidated indebtedness and corporate indebtedness figures reflect the Company's financial restructuring and recapitalization which was completed during the first quarter of 2002. On December 15, 2002, the maturity of the corporate credit facility was extended to June 30, 2003. Considering the short term maturity of the 14% Senior Guaranteed Notes due December 2003, committed cash obligations of the Company for the upcoming 12 months exceed its committed sources of funds and cash on hand. As previously reported, there is significant uncertainty as to whether the Company will have the ability to continue as a going concern. In addition to the available sources of fund from MobiFon transactions described below, the Company continues to review opportunities to refinance its corporate debt, raise new financing and sell assets. In October 2002, MobiFon paid $0.6 million to its shareholders, representing the final installment of a $27.5 million dividend declared in March 2002. Also in October, the shareholders of MobiFon approved further distributions of up to $38.8 million by means of a share repurchase. Shareholders can tender their shares between October 30, 2002 and June 30, 2003 in order to realize their pro-rata share of this distribution amount of which ClearWave is $24.6 million. A first distribution of $16.6 million was paid on October 30,2002, of which $15.8 million was paid to ClearWave and an additional $8.8 million was paid to ClearWave on December 19, 2002. MobiFon's shareholders are not required, to participate pro-rata in the share repurchase. Accordingly, ClearWave's and the Company's ultimate ownership of MobiFon may vary between 62.4% and 64.0% and 53.4% and 54.8% respectively, throughout the tender period, depending on the timing and the extent of each shareholder's participation in the repurchase. In December 2002, TIW announced that it had reached agreement with Emerging Markets Partnership on the sale of 11.1 million shares of MobiFon currently owned by ClearWave, representing 5.68% of the currently issued and outstanding share capital of MobiFon for a total cash consideration of $42.5 million. The transaction, expected to close in the first quarter of 2003, is subject to the fulfillment of certain conditions. TIW intends to use substantially all of the proceeds from the sale to EMP to repay debt. As a result of the above transactions, ClearWave's ultimate ownership may be reduced from 63.5% down to between 58.9% and 56.6% while TIW's equity interest of ClearWave remains at 85.6%. Discontinued Operations On March 5, 2002, the Company adopted a formal plan to dispose of its Brazilian cellular operations by way of a sale of its equity interest within the next twelve months. However, in light of deterioration of the market conditions that existed at the date of the adoption of the formal plan to dispose, the horizon for disposal has been extended by an additional twelve months. The results of operations of the Brazilian cellular operations have been reported in these financial statements as discontinued operations. Subsequent to March 5, 2002, the date the Company adopted its formal plan to disposal, there has been a significant deterioration in the value of the Brazilian Real relative to the U.S. dollar and in the trading value of shares of the Company's Brazilian cellular operations and those of other wireless telecommunications companies in Brazil. In light of these declines, the Company recorded a loss from discontinued operations of $27.2 million in the fourth quarter and of $189.1 million for the year ended December 31, 2002. Of this amount, $155.3 million consists of foreign exchange translation losses related to these investments, of which $85.2 million were already recorded as a reduction of shareholders' equity as of December 31, 2001, and $33.8 million consists of additional provisions for exit costs and impairment in value. Share Consolidation TIW also announces that its Board of Directors has approved, subject to shareholder and regulatory approvals, a one for 25 (1:25) consolidation of the Company's Common Shares. TIW shareholders will be asked to vote on the proposal at TIW's Annual General Meeting of shareholders to be held on May 2, 2003. The proposal to proceed with the consolidation stems principally from the Board's desire to broaden the Company's shareholder base, maximize the liquidity of its shares and return the Company's share price to a level typical of other widely held- corporation with similar market capitalization. A share consolidation would better position the Company to comply with the NASDAQ minimum stock price conditions in order that the Common Shares will not be delisted from that market. Shareholders should also benefit from relatively lower trading cost for a higher priced stock. TIW is a leading cellular operator in Central and Eastern Europe with over 3.9 million managed subscribers. TIW is the market leader in Romania through MobiFon S.A. and is active in the Czech Republic through Cesky Mobil a.s. The Company's shares are listed on the Toronto Stock Exchange ("TIW") and NASDAQ ("TIWI"). * * * As reported in the Jan. 15, 2003, issue of the Troubled Company Reporter, Standard & Poor's lowered its long-term corporate credit rating on telecommunications company Telesystem International Wireless Inc., to 'CCC+' from 'B-'. The outlook is negative. At the same time, the rating on TIW's US$220 million 14% senior secured notes was lowered to 'CCC+' from 'B-'. The ratings actions on the Montreal, Quebec-based company reflect the refinancing risk of the US$220 million notes, which mature in December 2003, and the structural subordination of the debt at the corporate level. TRENWICK GROUP: Restructures $75 Million of Senior Notes -------------------------------------------------------- Trenwick Group Ltd., (NYSE: TWK) was engaged in continuing discussions with holders of its senior debt securities. Included in Trenwick's consolidated indebtedness are $75 million principal amount of senior notes of Trenwick's subsidiary, Trenwick America Corporation, which are due April 1, 2003. Subsequently, Trenwick enters into concession restructuring these notes. Trenwick's agreements entered into in connection with the renewal of its letter of credit facility in December 2002, provide replacement, refinancing or restructuring of the senior notes by March 1, 2003. The banks participating in Trenwick's letter of credit facility provided to Trenwick an interim waiver of this March 1, 2003 deadline as discussions with the senior note holders continued. 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. In 2002, Trenwick voluntarily placed into runoff its U.S. specialty program business and its specialty London market insurance company, Trenwick International Limited, and sold the in-force business of LaSalle Re Limited. TROUTMAN'S EMPORIUM: Court Approves Going-Out-Of Business Sales --------------------------------------------------------------- Going-out-of-business sales will begin immediately in the 34 family department stores in five states operated by Troutman's Emporium. The sales, which started Friday, are being conducted by a joint venture consisting of the national leading liquidating firms Buxbaum Group, SB Capital Group, and Tiger Capital Group. The liquidators were approved yesterday by the U.S. Bankruptcy Court for District of Oregon, in Eugene. Emporium, a privately held family department store operator, filed for protection under Chapter 11 of the Federal Bankruptcy Code on Jan 14, 2003. The bankruptcy filing covered the Troutman Investment Company (dba Troutman's Emporium), a Eugene, Ore.-based corporation. In addition to inventory disposal, Buxbaum Group, SB Capital Group, and Tiger Capital Group are assisting with the sale of the store fixtures and equipment, which are all expected to be sold at significant discounts. Payment may be made with cash, major credit cards, and with Emporium's private label card. Locations typically range in size from approximately 16,000 to 80,000 square feet. The company has approximately 1,600 employees in its stores, headquarters and a distribution center. Emporium operates in the western part of the country, with stores located in Oregon, Washington, Idaho, Nevada and California. Troutman's Emporium was founded by Dallas Troutman, who was 25 when he opened his first department store in 1955, in North Bend, OR. The 4,000 square foot former grocery store was distinguished by movable walls that could be adjusted depending upon the inventory levels. That first location was later expanded into a regional chain. "After 48 years in business, Troutman's Emporium was known for its commitment to customer satisfaction, but in today's competitive environment, that just isn't enough to attract and retain customers," said Paul Buxbaum, CEO of Buxbaum Group. "In this new era, the public has shifted its buying patterns, and family department stores are getting squeezed in the middle. If the company's locations are ultimately leased to other retailers, we would hope that current Troutman's employees could be quickly repositioned with new employers." Buxbaum Group, based in Calabasas, Calif.; Tiger Capital Group, which is based in Boston, Mass.; and Great Neck, N.Y.-based SB Capital Group are nationally recognized firms in the liquidation business. They specialize in consumer-product inventories, machinery and equipment and other assets. UNIFORET INC: Dec. 31 Working Capital Deficit Widens to $40 Mil. ---------------------------------------------------------------- Uniforet Inc., has incurred a net loss of C$8.6 million for its fourth quarter ended December 31, 2002, which compares to a net loss of C$56.5 million for the corresponding period in 2001, which included a non-recurring after-tax expense of C$50.0 million. (All subsequent amounts are expressed in Canadian dollars unless specified otherwise). Results for the fourth quarter of 2002 were affected by the pronounced weakness of the lumber market, which stemmed on the one hand from production outstripping demand, and on the other from the application of countervailing duties of 27.2% on all lumber shipments to the United States. Furthermore, fourth quarter results included a non-recurring charge of $1.6 million relating the professional fees incurred in connection with the plan of arrangement with creditors. For the year ended December 31, 2002, the net loss was $14.0 million, which compares to a net loss of $127.6 million for the same period of the previous fiscal year. Excluding non-recurring items and the effect of foreign exchange-rate fluctuations on long-term assets and liabilities denominated in foreign currencies, the net loss for the year ended December 31, 2002, was $18.4 million, compared to a net loss of $20.0 million for the same period last year. The accompanying unaudited consolidated financial statements for the quarters and the years ended December 31, 2002 and 2001 have been compiled on the same basis as the consolidated financial statements for the year ended December 31, 2000, using the going-concern assumption. In addition, these consolidated financial statements do not include any value adjustment or reclassification of assets, liabilities or operating results that may be appropriate in light of recent events and pursuant to the implementation or the non-implementation of a potential plan of arrangement with creditors or any other plan bearing on reorganization of the Company's activities, especially for indicated values for fixed assets and future income tax assets. SALES Sales for the fourth quarter of 2002 decreased by 7.2% to $30.2 million, compared to those of the same quarter last year, as net selling prices of lumber fell 15.0% while shipments increased by 5.1%. Pulp sector sales were $1.1 million for the corresponding period of last year. For the year ended December 31, 2002, sales amounted to $151.5 million, down by 7.4% from those of 2001 mainly as a result of the shutdown of operations at the pulp mill, which recorded sales of $27.2 million over the same period in 2001. Sales in the lumber sector rose by 11.0% to $151.5 million thanks primarily to an increase of 8.1% in the net selling prices of lumber accompanied by a 4.4% increase in shipments. Also contributing to improved sales for the year was a 15.2% increase in woodchip shipments to outside markets. OPERATING INCOME (loss) Operating loss for the fourth quarter of 2002 was $2.3 million, which compares to an operating lost of $1.8 million for the same quarter last year. Operating loss from the lumber sector amounted to $1.4 million compared to an operating income of $0.5 million for the corresponding period last year, the result of the drop in lumber and woodchip net selling prices, even though shipments of both products were up in volume. Unit costs of products sold decreased as compared with the corresponding period for the last fiscal year due to better operating rates of sawmills. The operating loss of the pulp sector amounted to $0.9 million for the fourth quarter of 2002, compared to $2.3 million for the same quarter last year. Operating income for the year ended December 31, 2002 was $8.8 million, compared to an operating loss of $2.1 million last year. Operating income from the lumber sector amounted to $13.2 million compared to $7.8 million for the last corresponding period owing to the improvement in lumber net selling prices and the increase in lumber shipments (4.4%) and woodchip shipments (17.4%). Unit costs of products sold increased by 8.7%, one reason being higher fibre use. Operating loss from the pulp sector amounted to $4.4 million, compared to $9.9 million for last year. CASH POSITION For the fourth quarter of 2002, $5.7 million was provided by operations, which was the same amount for the corresponding period of 2001. Net repayments on long-term debt were $0.3 million, compared to $0.4 million for the same period last year. Net additions to fixed assets amounted to $3.8 million, compared to $3.0 million for the corresponding period in 2001. For the year ended December 31, 2002, $13.3 million was provided by operations compared with $25.8 million for the corresponding period of 2001, when receivables and pulp inventory levels were reduced following the shutdown of operations of the pulp mill. Net repayments of long-term debt were $1.5 million for each of the two years. Additions to fixed assets amounted to $6.7 million, compared to $5.6 million for the same period in 2001. As at December 31, 2002, the Company's cash and cash equivalents totaled $9.3 million with a working capital deficiency of $39.6 million, for a ratio of 0.54:1, compared to a ratio of 0.63:1 as at December 31, 2001, without considering the default mentioned in note 2 of the attached financial statements. OUTLOOK On October 23, 2002, the Superior Court of Montreal dismissed the proceedings instituted by a group of US Noteholders who were contesting the composition of the class of US Noteholders- creditors and authorized the Company to call the meeting of that class to vote on the Company's amended plan of arrangement. On November 21, 2002, the Company announced that the Quebec Court of Appeal had dismissed the motion presented by a group of US Noteholders for leave to appeal the judgment rendered by the Superior Court of Montreal on October 23, 2002. On November 25, 2002, the Company announced that it had held the meeting of the class of US Noteholders-creditors and that the required majority of creditors had approved its amended plan of arrangement under the 'Companies' Creditors Arrangement Act'. The creditors of the six other classes had already approved the plan at meetings held on August 15, 2001. On December 2, 2002, the Company announced that it had filed a motion asking the Court to sanction and approve its amended plan of arrangement under the 'Companies' Creditors Arrangement Act'. The hearing of this motion was originally fixed on December 11, 2002, but as a result of the contestation of a group of US Noteholders, the Superior Court of Montreal fixed the hearing from March 3 until March 14, 2003. Lumber prices will continue to feel pressure over the coming months because of output exceeding demand, despite the fact that construction activities in both the U.S. and Canada are at historically high levels. The imposition of countervailing duties of 27.2% prompted an increase in production among lumber producers in Western Canada, who are attempting thereby to reduce their production costs in order to lessen the negative impact of those duties. Uniforet Inc., is an integrated forest products company that manufactures softwood and lumber bleached chemi-thermomechanical pulp. It carries on its business through subsidiaries located in Port-Cartier (pulp mill and sawmill) and in the Peribonka area (sawmill). Uniforet Inc.'s securities are listed on the Toronto Stock Exchange under the trading symbol UNF.A for the Class A Subordinate Voting Shares, and under the trading symbol UNF.DB for the Convertible Debentures. At December 31, 2002, Uniforet Inc.'s balance sheet shows that its total current liabilities exceeded its total current assets by about $40 million. The unaudited consolidated balance sheets as at December 31, 2002, and December 31, 2001, and the unaudited consolidated statements of income and deficit and cash flows for the three- month periods and the years ended December 31, 2002 and 2001 have been prepared using the same accounting principles and policies as for the annual financial statements for the year ended December 31, 2000, described therein, including the going- concern assumption about the Company's operations. In 2001, the Company adopted the new recommendation of the Canadian Institute of Chartered Accountants concerning foreign currency translation on long-term assets and liabilities denominated in foreign currencies, especially long-term debt. In addition, these consolidated financial statements do not include any value adjustment or reclassification of assets, liabilities or operating results that may be appropriate given recent events and pursuant to the implementation or the non-implementation of a potential plan of arrangement with creditors or any other reorganization plan, especially for indicated values for fixed assets and future income tax assets. These consolidated financial statements do not include all the information required under generally accepted accounting principles. Accordingly, they must be read in conjunction with the audited consolidated financial statements of the Company as at and for the year ended December 31, 2000, and the notes thereto appearing in the annual report submitted to the shareholders of the Company. DEFAULTS The Company is currently in default on payment of interest under its 11.125% US senior notes and its unsecured subordinated convertible debentures. Under generally accepted accounting principles, these long-term liabilities may have to be reclassified in current liabilities given the Company's default. Uniforet Inc., is currently in default under its bank credit agreement. UNIROYAL TECHNOLOGY: Brings-In Sonnenschein Nath as Counsel ----------------------------------------------------------- Uniroyal Technology Corporation and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the District of Delaware to employ Sonnenschein Nath & Rosenthal as Counsel, nunc pro tunc to December 11, 2002. As Counsel, Sonnenschein Nath will: a) take all necessary action to protect and preserve the estates of the Debtors, including the prosecution of actions on the Debtors' behalf, the defense of any actions commenced against the Debtors, the negotiation of disputes in which the Debtors are involved, and the preparation of objections to claims filed against the Debtors' estates; b) provide legal advice with respect to the Debtors' powers and duties as debtors-in-possession in the continued operation of their businesses and management of their properties; c) negotiate, prepare and pursue confirmation of a plan and approval of a disclosure statement; d) assist with any disposition of the Debtors' assets, by sale or otherwise; e) prepare on behalf of the Debtors, as debtors-in- possession, necessary motions, applications, answers, orders, reports, and other legal papers in connection with the administration of the Debtors' estates; f) appear in Court and to protect the interests of the Debtors before the Court; and g) perform all other legal services in connection with these chapter 11 cases as may reasonably be required. The Debtors assure the Court that Sonnenschein Nath will work closely with The Bayard Firm to ensure that there is no unnecessary duplication of services performed or charged to the Debtors' estates. Sonnenschein Nath's current billing rates range from: Partners $225 to $775 per hour Associates $125 to $400 per hour Paralegals $70 to $230 per hour The professionals who will be primarily responsible on this engagement are: Fruman Jacobson $530 per hour D. Farrington Yates $470 per hour Uniroyal Technology Corporation and its subsidiaries are engaged in the development, manufacture and sale of a broad range of materials employing compound semiconductor technologies, plastic vinyl coated fabrics and specialty chemicals used in the production of consumer, commercial and industrial products. The Company filed for chapter 11 protection on August 25, 2002 (Bankr. Del. Case No. 02-12471). Eric Michael Sutty, Esq., and Jeffrey M. Schlerf, Esq., at The Bayard Firm represents the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $85,842,000 in assets and $68,676,000 in debts. UNITED AIRLINES: Court Okays Amendments to $300MM DIP Financing --------------------------------------------------------------- UAL Corporation, its debtor-affiliates and the Joint Lenders concluded that amendments to the Club DIP Facility were advisable to accomplish a successful syndication. The Final Club DIP Order authorized the Parties to make these amendments. Therefore, the Debtors increased the: -- minimum applicable LIBOR rate from 2% to 3%, -- applicable margin for base rate loans from 3.5% to 5.5%, -- applicable margin for LIBOR Rate loans from 4.5% to 6.5%, and -- minimum cash covenant from $200,000,000 to $300,000,000. James H.M. Sprayregen, Esq., at Kirkland & Ellis, notes that the Bank One DIP Credit Agreement provides "Most Favorable Nation" treatment to Bank One by ensuring that no other DIP Financing will have an interest rate that exceeds the Bank One interest rate. Thus, the Debtors are obligated to amend and conform the Bank One Agreement to reflect amendments made to the Club DIP Facility in recent weeks. The amendments would put the Bank One DIP Facility at par with the Club DIP Facility. Accordingly, Judge Wedoff approves the amendments. (United Airlines Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) USG CORP: Settling Up to $5 Million of Postpetition Tort Claims --------------------------------------------------------------- In the course of their business, USG Corporation and its debtor- affiliates become subject to claims by various parties arising out of their operations. This includes claims relating to car accidents involving vehicles driven by the Debtors' employees, breach of contract disputes, claims relating to unsatisfactory products, and claims relating to non-asbestos personal injury. Since the Petition Date, the Debtors have been named in several lawsuits and may be named in additional complaints in the future. Accordingly, the Debtors sought and obtained the Court's authority to settle these postpetition claims in accordance with the Court-approved settlement procedures. Pursuant to the Settlement Procedures, if the Debtors and a claimant agree in writing that the claimant will have a postpetition claim for $150,000 or less, the parties will enter into a binding Settlement Agreement without further Court order or notice to other interested parties. The Debtors will be bound to make full payment on account of the settled claim. Beginning with the period ending on June 30, 2003, and at quarterly intervals, the Debtors will file a written report with the Court no later than 45 days after the end of each quarter listing all the settlements consummated during the previous quarter. If the Debtors and a claimant agree in writing that the claimant will have a postpetition claim greater than $150,000 but no more than $5,000,000, the Debtors will serve a notice describing the proposed settlement agreement with that Claimant to other parties-in-interest. If the Debtors do not receive an objection within 20 days from the service date of the notice, the Settlement Agreement will be fully binding on the Debtors' estates. However, if an objection is timely received, the Debtors may not consummate the Agreement without further Court order. The Debtors will not enter into any settlement unless it is reasonable in the Debtors' judgment after considering: (a) the probability of success if the claim is litigated or arbitrated; (b) the complexity, expense and likely duration of any litigation or arbitration with respect to the claim; (c) other factors relevant to assessing the wisdom of the settlement; and (d) the fairness of the settlement in relation to the Debtors' estates, creditors and shareholders. The Settlement Procedures do not apply to any asbestos-related personal injury or property damage claims since the Debtors have ceased using asbestos in any of their products for many years now. All asbestos-related claims arise prepetition. (USG Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 609/392-0900) WARNACO GROUP: Goldman Sachs Group Discloses 0.5% Equity Stake -------------------------------------------------------------- On February 11, 2003, Roger S. Begelman of The Goldman Sachs Group, Inc., informs the Securities and Exchange Commission that as of December 31, 2002: A. Goldman, Sachs & Co. beneficially owns 240,436 shares of Class A Common Stock of The Warnaco Group, Inc., giving it 0.5% Shared Voting Power in Warnaco's business; and B. The Goldman Sachs Group, Inc. beneficially owns 240,436 shares of Class A Common Stock of The Warnaco Group, Inc., giving it 0.5% Shared Voting Power in Warnaco's business. (Warnaco Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) WHEELING-PITTSBURGH: Disclosure Statement Hearing Now on Mar. 27 ---------------------------------------------------------------- UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO ______________________________ ) Chapter 11 In re: ) PITTSBURGH-CANFIELD ) Case Nos. 00-43394 to 00-43402 CORPORATION et al., {n1} ) Jointly Administered ) Debtors. ) William T. Bodoh ______________________________) Chief U.S. Bankruptcy Judge NOTICE OF ADJOURNMENT OF HEARING TO CONSIDER APPROVAL OF DISCLOSURE STATEMENT PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE FOR DEBTORS' JOINT PLAN OF REORGANIZATION TO: ALL HOLDERS OF CLAIMS AGAINST AND INTEREST IN THE ABOVE- CAPTIONED DEBTORS AND DEBTORS IN POSSESSION PLEASE TAKE NOTICE that PCC Survivor Corporation (f/k/a Pittsburgh-Canfield Corporation), and its affiliated debtors and debtors in possession (collectively, the "Debtors"), have filed a Joint Plan of Reorganization (as the same may be amended, the "Plan"), and a Disclosure Statement related thereto (as the same may be amended, the "Disclosure Statement"), pursuant to Section 1125 of Title 11 of the United States Code (the "Bankruptcy Code"). PLEASE TAKE FURTHER NOTICE that: 1. A hearing (the "Hearing") had been scheduled before the Honorable William T. Bodoh, Chief United States Bankruptcy Judge, at the United States Bankruptcy Court for the Northern District of Ohio, United States Courthouse and Federal Building, 10 East Commerce Street, Third Floor, Youngstown, Ohio, 44503- 1621, on March 6, 2003 at 1:30 p.m. Eastern Time to consider the entry of an order, among other things, finding that the Disclosure Statement contains "adequate information" within the meaning of Section 1125 of the Bankruptcy Code and approving the Disclosure Statement. 2. This Hearing has been adjourned to March 27, 2003 at 1:30 p.m. Eastern Time. 3. The Hearing may be adjourned by the Debtors from time to time without further notice to creditors or parties in interest other than by an announcement in Bankruptcy Court of such adjournment on the date scheduled for the Hearing. Dated: Cleveland, Ohio March 3, 2003 Respectfully submitted, Michael E. Wiles Richard F. Hahn DEBEVOISE & PLIMPTON 919 Third Avenue New York, New York 10022 Telephone: (212) 909-6000 Facsimile: (212) 909-6836 James M. Lawniczak (0041836) Scott N. Opincar (0064027) CALFEE, HALTER & GRISWOLD LLP 1400 McDonald Investment Center 800 Superior Avenue Cleveland, Ohio 44114 Telephone: (216) 622-8200 Facsimile: (216) 241-0816 Counsel for Debtors and Debtors in Possession _______________ {n1} In addition to Pittsburgh-Canfield Corporation, the debtors are Wheeling-Pittsburgh Corporation, Wheeling-Pittsburgh Steel Corporation, Consumers Mining Company, Wheeling-Empire Company, Mingo Oxygen Company, WP Steel Venture Corp., W-P Coal Company and Monessen Southwestern Railway Company. On July 5, 2001, in connection with the sale of Pittsburgh-Canfield Corporation's assets to a subsidiary of WHX Corporation, Pittsburgh-Canfield Corporation changed its name to PCC Survivor Corporation. WINSTAR COMMS: Chapter 7 Trustee Taps Adelman as Special Counsel ---------------------------------------------------------------- Winstar Communications, Inc.'s Chapter 7 Trustee seeks the Court's authority to employ the firm of Adelman Lavine Gold and Levin, a Professional Corporation as Special Counsel with regard to the investigation and recovery of alleged preferences due from and transferred to certain entities currently represented by Fox, Rothschild, O'Brien & Frankel, LLP. Fox Rothschild has determined that it cannot, due to its current conflict, take further action regarding these alleged preferences. According to Sheldon K. Rennie, Esq., at Fox Rothschild O'Brien & Frankel, LLP, the Trustee seeks to retain Adelman as Special Counsel because of its extensive experience and knowledge in the field of preference actions. Adelman is expected to: A. investigate preferences due from certain entities; B. recover preferences; and C. provide any other assistance that may be necessary and proper in these proceedings. Compensation will be payable to Adelman on an hourly basis at the firm's normal and customary hourly rates, plus reimbursement of actual, necessary expenses and other charges incurred by Adelman. Adelman Shareholder Raymond H. Lemisch assures the Court that Adelman does not hold or represent any interest adverse to the Debtors' estate, and is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. (Winstar Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM INC: Aerotel Demands Prompt $10MM Admin Claim Payment -------------------------------------------------------------- Aerotel, Ltd. asks the Court to allow the payment of its administrative expense claim arising out Worldcom Inc.'s postpetition infringement of its patent. According to Lawrence P. Eagel, Esq., at Bragar Wexler Eagel & Morgenstern, LLP, in New York, Aerotel, is the owner of the patent rights conferred by U.S. Patent No. 4,706,275 issued November 10, 1987 to Zvi Kamil, and all corresponding foreign patents, for an invention titled "Telephone System". The '275 Patent describes and claims a system and method for what is known to the parties as a Prepaid Calling Card. Aerotel claims that one or more of the Debtors sold, and continues to sell postpetition, Prepaid Calling Cards that infringe on Aerotel's patent rights under the '275 Patent. Aerotel claims that the Debtors are liable to Aerotel for damages for the infringement pursuant to applicable law. Mr. Eagel notes that it is essential for the Debtors to continue to operate their businesses to preserve the going concern value of the assets to be sold. "The Debtors were able to accomplish that goal in part by continuing to infringe on the '275 Patent." Mr. Eagel contends that the Debtors' postpetition infringement of the '275 Patent was an actual, necessary cost and expense of preserving the assets of the Debtors' estates. Sales of Prepaid Calling Cards and services have generated substantial revenues for the Debtors' estates during the postpetition period. Thus, Aerotel's claim arises in connection with the postpetition business activities of the Debtors' estates and has lead to continuing benefits to the Debtors' estates. Aerotel makes a claim against each of the Debtors, jointly and severally, for damages measured by a royalty equal to 2.5% of the Gross Sales Receipts received by the Debtors for the use and sale of Prepaid Calling Cards and services from the Petition Date through and including the date of judgment. The term "Gross Sales Receipts" will mean the total compensation received by the Debtors for the sale of Prepaid Calling Cards and services less sales, use or other similar taxes, and less credit for any refunds, returns or chargebacks. Mr. Eagel insists that the 2.5% royalty rate is a reasonable rate based on the royalty rates agreed to by Aerotel and licensees of the '275 Patent for past infringement. Aerotel reserves the right to increase or otherwise modify the royalty rate or to otherwise determine the amount that should be paid by the Debtors to Aerotel for their infringement of the '275 Patent. At this time, Aerotel is unable to determine the amount of Gross Sales Receipts by all of the Debtors, or the Gross Sales Receipts on a debtor-by-debtor basis, based on the information currently available. That information is exclusively within the Debtors' dominion and control. Aerotel has, however, had access to certain public information, which leads Aerotel to believe that the Gross Sales Receipts, collectively for all Debtors, for the six periods prior to the Petition Date is equal to $70,000,000 per month or a total of $420,000,000. As the infringement continues, Mr. Eagel believes that Aerotel's claim will increase and further applications for payment will be made. Accordingly, Aerotel makes a claim against the Debtors for at least $10,500,000 (2.5% multiplied by $420,000,000), plus enhanced damages for willful infringement. Aerotel also asks the Court to require the Debtors to account to Aerotel for the sale of Prepaid Calling Cards and services during the postpetition period to determine with the specificity the amount payable to Aerotel for the Debtors' postpetition infringement of the '275 Patent. (Worldcom Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Worldcom Inc.'s 8.000% bonds due 2006 (WCOE06USR2) are trading at about 22 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOE06USR2 for real-time bond pricing. * PwC Sees 180 Public Co.'s with $240BB in Assets Filing in 2003 ---------------------------------------------------------------- PricewaterhouseCoopers forecasts that public company bankruptcy filings will decline only slightly in 2003 to 180 from 189 in 2002. Total assets of public companies filing for bankruptcy will be $240 billion, down from a peak of $382 billion in 2002. 2003 will represent the third highest total assets at filing in the last 16 years (1987 to 2003). "The bankruptcy picture for 2003 will represent only a slight improvement, rather than the beginning of a return to average historical levels," said Carter Pate, U.S. managing partner of revenue and business development, PricewaterhouseCoopers. To develop these forecasts, PricewaterhouseCoopers created an econometric model designed to quantify the relationship between observed business conditions and the incidence of bankruptcy filings. PricewaterhouseCoopers focused on five factors that influence the level of bankruptcy filings: degree of corporate leverage, cost of borrowing, prevalence of excess production capacity, change in high-yield debt issuance, and aggregate economic activity. Historical time series on bankruptcy filings and assets were from BankruptcyData.com. Industry Outlook 2002 Vs. 2003 PricewaterhouseCoopers determined that in 2003, companies most likely to declare bankruptcy will be concentrated in the following industries: * Energy (mainly in the utilities and oil and gas sectors); * Telecommunications (primarily wirelines and wireless carriers); * Machinery and Equipment Production (primarily semiconductor and communications equipment manufacturing); * Business Services (mainly computer software and management consulting) * Airlines and Aerospace * Industrial Metals and Mining (primarily steel and aluminium) "An inside look at these industries reveals structural changes in sectors such as telecommunications, steel, and energy trading and marketing. Others like high technology (semiconductors, computer manufacturing, and computer software) are recovering from cyclical slumps but face much slower growth trajectories compared to the pace in the 1990s, while others such as the airline and aerospace industries are being forced to undergo changes due to severe contraction in demand amid much higher operating costs," said Mr. Pate. In 2002, in terms of total assets, the five industries with the most assets at Chapter 11 filings were: communications, ($210 billion), insurance carriers ($63 billion), air transportation ($33 billion), general merchandise stores ($15 billion), and business services ($8 billion). Each of these industries, except business services, placed one or more companies on the list of the largest 45 bankruptcies in history. In terms of volume, in 2002, the five industries with the highest number of bankruptcy filings were communications (30 filings), business services (28), electrical and electronic equipment (12), primary metal industries (8), and industrial machinery and equipment (8). * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Advisory Board ABCO (16) 48 (20) Air Canada AC (1,888) 7,816 (821) Alliance Imaging AIQ (79) 658 (25) Alaris Medical AMI (47) 573 129 Amazon.com AMZN (1,353) 1,990 550 Anteon Int'l. Corp. ANT (3) 307 27 Arbitron Inc. ARB (169) 127 (17) Alliance Resource ARLP (46) 288 (16) Altiris Inc. ATRS (6) 13 (8) Actuant Corp ATU (44) 295 18 Avon Products AVP (91) 3,327 73 Saul Centers Inc. BFS (24) 346 N.A. Big 5 Sporting Goods BGFV (23) 252 66 Choice Hotels CHH (114) 314 (37) Campbell Soup Co. CPB (114) 5,721 (1,479) Echostar Comm DISH (778) 6,520 2,024 Dun & Brad DNB (20) 1,431 (82) Euronet Worldwide, Inc. EEFT (8) 61 3 Gamestop Corp. GME (4) 607 31 Graftech Int'l GTI (307) 797 112 Hollywood Casino HWD (92) 553 89 Imclone Systems IMCL (5) 474 295 Gartner Inc IT (5) 824 18 Jostens JOSEA (540) 375 (40) Journal Register JRC (36) 711 (26) Kos Pharmaceuticals KOSP (58) 83 27 Ligand Pharmaceuticals LGND (58) 117 22 Level 3 Comm Inc. LVLT (240) 8,963 581 Mega Blocks Inc. MB (37) 106 56 Memberworks Inc. MBRS (21) 281 (100) Moody's Corp. MCO (304) 505 12 Medical Staffing MRN (33) 162 55 MicroStrategy MSTR (69) 104 23 MTC Technologies MTCT 0 26 10 Petco Animal PETC (86) 473 68 Proquest Co. PQE (45) 628 (140) Per-Se Tech Inc. PSTI (50) 203 24 Qwest Communications Q (1,094) 31,228 (1,167) RH Donnelley RHD (111) 296 0 Sepracor Inc. SEPR (392) 727 430 St. John Knits Int'l SJKI (76) 236 86 Talk America TALK (74) 165 36 United Defense I UDI (166) 912 (55) UST Inc. UST (47) 2,765 828 Valassis Comm. VCI (33) 386 80 Ventas Inc. VTR (54) 895 N.A. Western Wireless WWCA (274) 2,370 (105) ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***