/raid1/www/Hosts/bankrupt/TCR_Public/030328.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, March 28, 2003, Vol. 7, No. 62
Headlines
ACTRADE FINANCIAL: Board Decides to Put Company Up for Sale
ADELPHIA BUSINESS: Creditors Agree to Broad Plan Outline
ADELPHIA BUSINESS: Changes Name to TelCove
ADELPHIA COMMS: Equity Committee Retaining Kagan as Analyst
AHOLD: Will Undertake Further Review of Argentine Unit Disco
ALLEGHENY: Applauds FERC's Indicated Support re Contract Case
ALLIED WASTE: Schedules Q1 Results Conference Call on April 29
AMERICAN AIRLINES: APA Considers Possible Employee Buyout
AMERICAN MEDICAL: Nasdaq Delists Securities from SmallCap Market
AMERIKING: Committee Retains Otterburg Steindler as Counsel
AMERIPOL SYNPOL: Committee Gets Okay to Hire Lowenstein Sandler
ANC RENTAL: Seeks Court Nod on Settlement Agreement with Lehman
A NOVO: Obtains Extension to Decide on Leases through May 19
ANTEX BIOLOGICS: Files for Chapter 11 Protection in Maryland
AQUA VIE BEVERAGE: January 31 Balance Sheet Upside Down by $1.1M
AT&T CANADA: Set to Emerge from CCAA Protection on April 1, 2003
AT&T CANADA: Federal Cabinet Dismisses Price Cap Appeal
AVOTUS FINANCING: Hires Sokoloff to Plan Strategic Alternatives
BERGSTROM: Awaits Shareholder Approval to Liquidate Company
BETHLEHEM STEEL: REBCO Puts Up Health Program for Ex-Employees
BUCKEYE TECH: David Ferraro Succeeds Retiring CEO Robert Cannon
CABLE SATISFACTION: Talking to Lenders to Cure Debt Default
CARAUSTAR: Closes Buffalo Paperboard Mill & Six Other Facilities
CAVALIER HOMES: Successfully Obtains New $35M Credit Facility
CKE RESTAURANTS: January Working Capital Deficit Rises to $71MM
CKE RESTAURANTS: Reports Period Two Same-Store Sales
CMS ENERGY: Secures New Funding For Consumers Energy Subsidiary
CONSECO: S&P Ratchets Ratings on 2 Related Note Classes to D
COVANTA ENERGY: Finalizes Terms of DIP Credit Pact Amendment
CRIIMI MAE: Publishes Fourth Quarter and Year 2002 Results
DIRECTV LATIN AMERICA: Turning to Young Conaway for Advice
DOBSON COMMS: Will Pay 12-1/4% Preferred Dividend on April 15
DYNEX: Closes $9M Sale & 25-Yr Leaseback Deal of English Asset
ENCOMPASS: Wants to Continue Using Current Settlement Protocol
ENCORE ACQUISITION: COO Gene Carlson Leaves Post
ENRON: Mizuho Bank Asks Stay Lift to Foreclose on Collateral
FLEETWOOD ENTERPRISES: Banks Increase Credit Line by $20 Million
FLOW INTL: Receives Nasdaq Notification Due to Late 10-Q Filing
FRESH CHOICE: Opens Another Restaurant in Los Angeles Market
FRONTIER AIRLINES: Will Release 4th Quarter Results on May 22
GENCORP INC: Board Declares Quarterly Dividend Payable on May 30
GENTEK INC: Court Gives Go Ahead for $60 Million DIP Financing
GRAPHIC PACKAGING: Inks $3 Billion Merger with Riverwood Holding
GRAPHIC PACKAGING: Merger Pact Prompts S&P to Watch Ratings
GRUMMAN OLSON: Gets OK to Turn to Murphy Group for Fin'l. Advice
INSIGHT COMMS: Will Announce 1st Quarter Results on May 6, 2003
KEMPER: S&P Cuts Counterparty & Fin'l Strength Ratings to B-
KEY3MEDIA: Receives Final Court Approval of $30MM DIP Financing
KMART CORP: Appaloosa Discloses 0.9% Equity Stake
LTV CORP: Seeks Court Nod to Retain Craig Burman for Tax Work
MAGELLAN HEALTH: Hires PwC to Provide Internal Auditing Services
MED DIVERSIFIED: Retains Gadsby Hannah as Special Counsel
MERISTAR COMMERCIAL: S&P Cuts & Affirms Ratings on 1999-C1 Notes
MERRIMAC PAPER: Case Summary & Largest Unsecured Creditors
NATIONAL CENTURY: NPF XII Subcommittee Seeks to Hire Dinsmore
NATIONAL STEEL: Agrees to Extend Time Periods Related to Auction
NHC COMMUNICATIONS: Shareholders' Equity Deficit Is At C$1 Mil.
NORTHWEST: Fitch Downgrades Ratings of Select EETC Transactions
O'CHARLEY'S INC: Reports Weaker Q1 Sales & Earnings Trends
PHILIP MORRIS: Legal Experts See No Truth in Bankruptcy Claim
POLYONE CORPORATION: Plans to Exit Nevada Engineered Films Plant
RESIDENTIAL ACCREDIT: Fitch Takes Rating Action on 8 Note Series
R.H. DONNELLEY: Consolidating Operations at Raleigh, NC Facility
SAFETY-KLEEN CORP: Asks Court to OK $1M Asset Sale to Oil Filter
SASOL DHB: Plan Confirmation Hearing Scheduled for April 2
SHAW GROUP: Closes $3.6 Million Buy-Out of Envirogen Shares
SOFAME TECH: Four Directors Step Down from Board
SPIEGEL GROUP: Wants to Pay Prepetition Employee Obligations
SUN HEALTHCARE: Wants June 27 Extension to Claims Objection Time
SUN HEALTHCARE: Schedules Q4, FY Results Conference Call Today
TODAY'S MAN: Gets Interim OK to Use Cash Collateral Until Apr. 4
UNITED AIRLINES: Debtor Files February Monthly Operating Results
UNITED DEFENSE: Expects Cash To Last Through December 31, 2003
US STEEL: Chairman Says WTO Decision Re Sec. 201 Tariffs Flawed
VERTEL CORP: Closes $500K Senior Secured Bridge Note Financing
WARNACO GRUOP: Court Stamps Final Amount Approval on GE's Claim
WHEELING-PITTSBURGH: Gets Nod on Revised $250MM Loan Application
WISER OIL CO.: NYSE Accepts Continued Listing Business Plan
WINSTAR: Trustee Gets Nod to Tap Adelman as Special Counsel
WORLDCOM: Wants to Enter Into Amended DAP Pact with Bellsouth
WORLDCOM INC: January 2003 Operating Results Show Profitability
W.R. GRACE: Peninsula Entities Disclose 10.02% Equity Stake
XCEL ENERGY: Board Approves Prelim Settlement with NRG Creditors
* BOOK REVIEW: Land Use Policy in the United States
*********
ACTRADE FINANCIAL: Board Decides to Put Company Up for Sale
-----------------------------------------------------------
Actrade Financial Technologies Ltd. announced that the Company's
Board of Directors has determined to pursue a sale of the
Company as a going concern to maximize value for all of the
Company's creditors and stockholders. In this regard, Andersen,
Weinroth & Partners, LLC, the Company's financial advisor, will
assist the Company in the sale transaction process, including
identifying potential purchasers. Any sale transaction will be
subject to approval by the Bankruptcy Court for the Southern
District of New York.
Pending the outcome of the sale transaction process, the Company
will continue to operate its business, engaging in trade
acceptance draft ("TAD") transactions with existing customers as
well as, potentially, selected new customers.
ADELPHIA BUSINESS: Creditors Agree to Broad Plan Outline
--------------------------------------------------------
Adelphia Business Solutions (ABS) announced that it has reached
agreement in principle with its official committee of unsecured
creditors and its informal committee of holders of the Company's
12-1/4% Senior Secured Notes regarding the general terms and
conditions of a plan of reorganization.
Since late last year, ABS has aggressively revised its business
model to focus on its core customers, core markets, and core
products. The agreement in principle is an endorsement of this
revised business model, and an important step for ABS in its
drive to emerge from Chapter 11 later this year. The agreement
is subject to definitive documentation, as well as Bankruptcy
Court approval.
"The terms of the financial restructuring will dramatically
reduce ABS' debt, enhancing the Company's financial and
operational flexibility," said Bob Guth President and CEO. "ABS
will emerge as a stronger competitor, with greater ability to
provide premium-class services to our existing customer base,
while aggressively marketing to new customers."
"I'd like to acknowledge the resolve shown by our creditor
committees in working with the Company towards this milestone.
Their fundamental belief in this Company has been a significant
contribution to the successful plan formulation process," said
Bob Guth.
ADELPHIA BUSINESS: Changes Name to TelCove
------------------------------------------
Adelphia Business Solutions, on the heels of creditor agreement
regarding the terms of its reorganization plan, announced that
it will immediately begin to conduct business under the name
"TelCove."
"We chose the name TelCove to correspond with the Company's
focus of providing advanced, secure telecommunications services
to our customers," said Sherry Davis, senior director of
marketing and communications for TelCove. "Customers are seeking
a safe, stable business partner for their critical
telecommunications needs -- TelCove is that partner."
About TelCove
Founded in 1991, TelCove is one of the longest-standing
competitive communications providers in the nation, offering
integrated Internet, Data, and Voice service to more than 9,000
customers via its advanced, secure fiber optic network. For more
information on TelCove, and to view the Company's new identity,
visit http://www.telcove.com.
ADELPHIA COMMS: Equity Committee Retaining Kagan as Analyst
-----------------------------------------------------------
The Official Committee of Equity Security Holders in the Chapter
11 cases of Adelphia Communications and its debtor-affiliates
wants to retain Kagan Media Appraisals, a division of Primedia,
to provide expert analysis and testimony with respect to the
valuation of the ACOM Debtors' enterprise, including its
businesses and valuation trends within the cable television
industry. The Equity Committee seeks the Court's authority to
retain Kagan nunc pro tunc to February 25, 2003, the date that
Kagan commenced performing services on the Equity Committee'
behalf.
Norman N. Kinel, Esq., at Sidley Austin Brown & Wood LLP, in New
York, explains that the Equity Committee has selected Kagan
based on its experience as a leading appraisal and consulting
firm specializing in the valuation of media companies,
properties and assets. Furthermore, Kagan's professionals have
extensive experience in providing expert analysis and testimony
in connection with valuation issues related to the cable
television industry as well as other sectors of the media
industry.
Mr. Kinel informs the Court that Kagan will seek compensation
for providing expert analysis and testimony at its standard rate
of $600 per hour with a minimum of $6,000 per day for days in
which testimony is proffered. In addition, Kagan will seek
compensation for preparation of testimony, including research,
review of documents and preparation of any written reports or
trial exhibits at these hourly rates:
Senior Analyst $600
Analyst 400
Associate Analyst 325
Research Associate 250
Support/Assistants 150
Travel Time 300
In addition, Kagan will seek reimbursement of actual and
necessary expenses incurred. The expenses charged to clients
include telephone and telecopier toll charges, mail and express
mail charges, special or hand delivery charges, document
processing and photocopying charges, special research charges,
report productions, travel expenses, expenses for "working
meals" and computerized research costs. Kagan believes that it
is appropriate to charge these expenses to the clients rather
than to increase its hourly rates.
To the extent that Kagan provides advisory services to Sidley in
connection with litigation matters, Mr. Kinel tells the Court
that Kagan's work will be performed at Sidley's sole direction
and will be solely and exclusively for the purpose of assisting
Sidley in its representation of the Equity Committee. As a
result, Kagan's work may be of fundamental importance in the
formation of mental impressions and legal theories by Sidley,
which may be used in counseling the Equity Committee and in the
representation of the Equity Committee. Accordingly, for Sidley
to carry out its responsibilities, it may be necessary for
Sidley to disclose its legal analysis as well as other
privileged information and attorney work product. Thus, it is
critical that the Court order that the status of any writings,
analysis, communications, and mental impressions formed, made,
produced, or created by Kagan in connection with its assistance
of Sidley in the Litigation be deemed to be protected from
discovery, if at all, to the same extent that the law would
provide if Kagan had been employed directly by Sidley. In this
regard, the Equity Committee asks the Court to declare that the
confidential and privileged status of the Litigation Work
Product will not be affected by the fact that Kagan has been
retained by the Equity Committee rather than by Sidley.
Kagan Vice President Robin V. Flynn assures the Court that the
firm has not provided valuation services or expert testimony
for, and has no relationship with, the Debtors, their major
creditors or equity security holders, or any other significant
parties-in-interest in these cases, in any matter relating to
these cases. In addition, Kagan does not have any material
connections with the Debtors, their major creditors or equity
holders, or any party-in-interest, or their attorneys; does not
hold or represent an interest adverse to the estates; and is a
"disinterested person" within the meaning of Section 101(14) of
the Bankruptcy Code. (Adelphia Bankruptcy News, Issue No. 31;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
DebTraders reports that Adelphia Communications' 9.875% bonds
due 2005 (ADEL05USR2) are trading at 39 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL05USR2
for real-time bond pricing.
AHOLD: Will Undertake Further Review of Argentine Unit Disco
------------------------------------------------------------
In light of the ongoing investigations at Ahold (NYSE:AHO), and
in keeping with the company's intent to cooperate with all
regulatory authorities, Ahold has decided to undertake a further
review of certain transactions and related matters at its
Argentine subsidiary Disco. The decision is also intended to
ensure that Disco's books and records are in compliance with all
applicable regulations.
Disco has requested from the Buenos Aires Stock Exchange and the
Argentine Securities Regulatory Authority a further extension to
May 12, 2003, of Disco's 2002 financial statement filing
deadline.
As reported, the results of the initial investigation into
transaction irregularities conducted by Ahold showed that there
was no material adverse impact on Ahold's financial results. The
company has no reason to believe at this time that this further
review will alter this finding.
ALLEGHENY: Applauds FERC's Indicated Support re Contract Case
-------------------------------------------------------------
Allegheny Energy Supply, a subsidiary of Allegheny Energy, Inc.
(NYSE: AYE), is gratified that the majority of the Federal
Energy Regulatory Commissioners and their staff indicated
support for the sanctity of the Company's long-term electricity
supply contract with the California Department of Water
Resources.
The Company looks forward to the FERC issuing an order to
confirm its support as soon as possible.
Discussions at the March 26 meeting also strengthen Allegheny's
position that the claims brought by California against
Allegheny's contract are without merit. This is underscored by
the fact that the Company was not included in the show cause
orders handed down by the Commission, nor was Allegheny
mentioned in the market manipulations report presented by the
FERC staff.
With headquarters in Hagerstown, Maryland, Allegheny Energy is
an integrated energy company with a balanced portfolio of
businesses, including Allegheny Energy Supply, which owns and
operates electric generating facilities and supplies energy and
energy-related commodities in selected domestic retail and
wholesale markets; Allegheny Power, which delivers low-cost,
reliable electric and natural gas service to about three million
people in Maryland, Ohio, Pennsylvania, Virginia, and West
Virginia; and a business offering fiber-optic and data services.
More information about the Company is available at
www.alleghenyenergy.com.
Allegheny Energy Supply Company LLC's 8.250% bonds due 2012
(AYE12USA1), DebtTraders say, are trading between 69 and 71. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AYE12USA1for
real-time bond pricing.
* * *
As reported in Troubled Company Reporter's February 28, 2003
edition, Fitch reported its ratings of the Allegheny group are
as follows:
Allegheny Energy, Inc.
-- Senior unsecured debt 'B+'.
West Penn Power Company
-- Medium-term notes 'BB+'.
Potomac Edison Company
-- First mortgage bonds 'BBB-';
-- Senior unsecured notes 'BB'.
Monongahela Power Company
-- First mortgage bonds 'BBB-';
-- Medium-term notes/pollution control revenue
bonds (unsecured) 'BB';
-- Preferred stocks 'BB-'.
Allegheny Energy Supply Company LLC
-- Senior unsecured notes 'B'.
Allegheny Generating Company
-- Senior unsecured debentures 'B'.
Allegheny Energy Supply Statutory Trust 2001
-- Senior secured notes 'B'.
-- All ratings listed above remain on Rating Watch
Negative.
ALLIED WASTE: Schedules Q1 Results Conference Call on April 29
--------------------------------------------------------------
Allied Waste Industries, Inc. (NYSE: AW) announced that it will
report financial results for the first quarter ended March 31,
2003 after the close of the stock market on April 29, 2003. The
Company has scheduled a conference call to discuss these results
on April 29, 2003 at 5:00 p.m. (Eastern Time).
To hear a simulcast of the call over the internet, access the
Home page of the Allied Waste website at
http://www.alliedwaste.com. An on-line replay will be available
24 hours a day between 7:00 p.m. April 29th and 5:00 p.m. May
13th . A conference call replay will be available after 6:00
p.m. April 29th through 5:00 p.m. May 6th by dialing 402-998-
0854.
Allied Waste Industries, Inc., is the second largest, non-
hazardous solid waste management company in the United States,
providing non-hazardous waste collection, transfer, disposal and
recycling services to approximately 10 million customers. As of
December 31, 2002, the Company operated 340 collection
companies, 175 transfer stations, 169 active landfills and 66
recycling facilities in 39 states.
* * *
As reported, Fitch Ratings has affirmed the ratings on Allied
Waste and related entities, and revised the Rating Outlook to
Stable from Negative. The change in Rating Outlook results from
the company's steady debt reduction, which has occurred despite
a weak operating environment that has impacted margins and
operating cash generation. The company's current level of cash
generation provides a sufficient buffer so that even in the
event of further weakness in economic conditions, the company
should still be in a position to generate positive cash flow and
further reduce debt. The company also retains supplemental
liquidity in the form of unused bank revolving credit
facilities, and has demonstrated continued access to external
capital. Over the intermediate term, any improvement in the
economic conditions should result in margin expansion toward
previous levels, and an acceleration of debt reduction.
Allied's EBITDA margin for 2002 slipped below 32% as compared to
slightly over 35% in 2000, with EBITDA falling 2% in 2002 to
$1.753 billion. Excluding 2001 costs associated with
acquisitions and divestitures, 2002 EBITDA fell 9.3%.
Nevertheless, total debt fell to $8.882 billion from $9.260
billion in 2001 (with net divestitures accounting for less than
$50 million in proceeds).
Allied Waste North America
-- $1.3 billion Senior Secured Credit Facility 'BB';
-- $2.4 billion Tranche A,B,C Loan Facilities 'BB';
-- $3.4 billion Senior Secured Notes 'BB-';
-- $2.0 billion Senior Subordinated Notes 'B'.
Browning Ferris Industries (BFI)
-- $690 million Sr Secured Notes, Debs and MTNS 'BB-'.
AMERICAN AIRLINES: APA Considers Possible Employee Buyout
---------------------------------------------------------
The Allied Pilots Association (APA), collective bargaining agent
for the 13,500 pilots of American Airlines (NYSE:AMR), released
the following statement concerning the ongoing negotiations
between APA and American Airlines management:
"The Allied Pilots Association remains committed to identifying
$660 million in cost savings as part of the collective effort by
the workers of American Airlines to avoid bankruptcy. We
anticipate that our Board of Directors will be voting on a
package of proposed changes to our collective bargaining
agreement no later than Monday, March 31. If the Board approves
the package, our membership will then have 14 days during which
to vote on these proposed changes.
"Unfortunately, it appears that management is now moving the
playing field. Management has indicated it wants to furlough
nearly 1,000 additional pilots without assigning any dollar
value to those furloughs. In other words, their goal now is $660
million plus several hundred additional pilot furloughs.
"We are perplexed by this last-minute change in attitude, and so
are the mediators involved in our negotiations. It appears to us
to be bad-faith negotiations.
"If we are unsuccessful at avoiding bankruptcy, APA is prepared
to consider a variety of alternatives, including a possible
employee purchase of the airline, a different management team,
and other changes."
Founded in 1963, APA is headquartered in Fort Worth, Texas.
American Airlines Inc.'s 11.110% ETC due 2005 (AMR05USR30) are
presently trading at 20 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AMR05USR30
for real-time bond pricing.
AMERICAN MEDICAL: Nasdaq Delists Securities from SmallCap Market
----------------------------------------------------------------
American Medical Technologies received a determination from the
Nasdaq Listing Qualifications Panel that the Company's
securities would be delisted from the Nasdaq SmallCap Market
effective with the open of business on Wednesday, March 26,
2003. The determination was made based on the Company's failure
to meet a minimum bid price for its Common Stock of $1.00 per
share and a minimum market value of publicly held shares of
$1,000,000, and to solicit proxies for and hold an annual
meeting of shareholders in 2002. The Company expects its
securities to be quoted on the OTC Bulletin Board today under
the symbol ADLI.
American Medical Technologies, Inc., headquartered in Corpus
Christi, Texas, develops and manufactures advanced technologies
for dentistry and markets them worldwide. The Company's website
is found at: www.americanmedicaltech.com.
* * *
As reported in Troubled Company Reporter's August 21, 2002
edition, the independent auditors of American Medical
Technologies, Ernst & Young, state in their report for the year
ended December 31, 2001: "The Company was in technical default
on certain financial covenants in connection with its line of
credit. The Company and its bank have entered into a
forbearance agreement, under which the bank has agreed not to
exercise its remedies under the defaulted line of credit until
September 15, 2002. Accordingly, the entire amount outstanding
under the line of credit of approximately $1,750,000 has been
classified as a current liability in the accompanying
consolidated financial statements...These matters raise
substantial doubt about the Company's ability to continue as a
going concern."
AMERIKING: Committee Retains Otterburg Steindler as Counsel
-----------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware gave its
nod of approval to the Official Committee of Unsecured Creditors
of AmeriKing, Inc.'s chapter 11 cases to retain Otterburg,
Steindler, Houston & Rosen, PC as its Counsel.
The Committee says Otterburg Steindler is well qualified to
represent it in these cases in a cost-effective, efficient and
timely manner to:
a) assist and advise the Committee in its consultation with
Debtors relative to the administration of these Chapter
11 cases;
b) attend meeting and negotiate with the representatives of
the Debtors;
c) assist and advise the Committee in its examination and
analysis of the conduct of the Debtors' affairs;
d) assist the Committee in the review, analysis, and
negotiation of any financing agreements;
e) assist the Committee in the review, analysis and
negotiations of any plans liquidation that may be filed
and assist the Committee in the review, analysis and
negotiation of the disclosure statement accompanying any
plans of liquidation;
f) take all necessary action to protect and preserve the
interests of the Committee, including the prosecution of
actions on its behalf, negotiations concerning all
litigation in which the debtors are involved, and review
and analysis of all claims filed against the Debtors'
estates;
g) generally prepare on behalf of the Committee all
necessary motions, applications, answers, orders,
reports and papers in support of positions taken by the
Committee;
h) appear, as appropriate, before this Court, the Appellate
Courts, and the United States Trustee and to protect the
interests of the Committee before the said Courts and
the United States Trustee; and
i) perform all other necessary legal services in these
cases.
Otterburg Steindler's current hourly rates range from:
Partner $415 to $625 per hour
Associate $225 to $450 per hour
Paralegal/Legal Assistant $155 to $175 per hour
AmeriKing, Inc, operates approximately 329 franchised
restaurants through its subsidiaries. The Company filed for
chapter 11 protection on December 4, 2002 (Bankr. Del. Case No.
02-13515). Christopher A. Ward, Esq., and Neil B. Glassman,
Esq., at The Bayard Firm represent the Debtors in their
restructuring efforts. When the Company filed protection from
its creditors, it listed $223,399,000 in assets and $291,795,000
in debts.
AMERIPOL SYNPOL: Committee Gets Okay to Hire Lowenstein Sandler
---------------------------------------------------------------
The Official Committee of Unsecured Creditors of Ameripol Synpol
Corporation and its debtor-affiliates sought and obtained
approval from the U.S. Bankruptcy Court for the District of
Delaware to hire Lowenstein Sandler PC as its counsel in the
company's on-going chapter 11 proceeding.
To enable the Committee to faithfully execute its duties as the
representative of unsecured creditors in the administration of
the estate, Lowenstein Sandler will:
a) provide legal advice as necessary with respect to the
Committee's powers and duties as an official committee
appointed under Section 1102 of the Bankruptcy Code;
b) provide legal advice as necessary with respect to any
disclosure statement and plan filed in this case and
with respect to the process for approving or
disapproving disclosure statements and confirming or
denying confirmation of a plan;
c) prepare on behalf of the Committee, as necessary,
applications, motions, complaints, answers, orders,
agreements and other legal papers;
d) appear in Court to present necessary motions,
applications and pleadings and otherwise protecting the
interests of those represented by the Committee; and
e) perform all of the legal services for the Committee that
may be necessary and proper in these proceedings.
Lowenstein Sandler will bill the Debtor's estate at the Firm's
current standard hourly rates:
Attorneys $140 to $525 per hour
Legal Assistants $ 70 to $140 per hour
American Synpol Corporation, one of the nation's largest
manufacturers of emulsion styrene butadiene rubber, a synthetic
rubber used primarily in the production of new and replacement
tires, filed for chapter 11 protection on December 16, 2002,
(Bankr. Del. Case No. 02-13682). Jeremy W. Ryan, Esq., and
Maria Aprile Sawczuk, Esq. at Young, Conaway, Stargatt & Taylor
represent the Debtor in its restructuring efforts. When the
company filed for protection from its creditors, it listed
assets of more than $100 million and debts of over $50 million.
ANC RENTAL: Seeks Court Nod on Settlement Agreement with Lehman
---------------------------------------------------------------
ANC Rental Corporation and its debtor-affiliates ask the Court
to approve their Settlement Agreement with Lehman Commercial
Paper Inc. and Lehman Brothers, which:
A. reduces Lehman's secured claim from $248,600,000 as of
December 31, 2002 to an allowed $180,000,000 secured
claim, and a $25,000,000 allowed general unsecured claim
as of December 31, 2002;
B. eliminates postpetition interest from the Petition Date
to February 1, 2003;
C. provides adequate protection in the form of superpriority
claims at a per annum rate of 10% of the allowed secured
claims until emergence from bankruptcy with 50% of the
amount accrued each month to be paid each month, and 50%
to be paid at emergence;
D. eliminates a $205,000,000 contractual "make-whole" claim;
and
E. provides for continued payment for account of Lehman's
professional fees and expenses at $250,000 per month,
with the payment of $400,000 on July 10, 2003 on account
of accrued fees and expenses.
William J. Burnett, Esq., at Blank Rome LLP, in Wilmington,
Delaware, informs the Court that after lengthy and extensive
negotiations among the Debtors, the Committee and Lehman, the
Debtors and the Committee agree that the terms of the Lehman
Settlement are in the best interests of the estates and their
creditors. After extensively analyzing the merits of a
potential preference action against Lehman, the Debtors and the
Committee considered the fact that the Settlement substantially
reduces the size of Lehman's claim, and weighed more against the
likelihood of succeeding in a preference action against Lehman.
The Debtors and the Committee considered the status and
timetable of current efforts to sell the Company or obtain an
equity investor to submit a plan of reorganization and their
belief that an emergence in the summer of 2003 was in the best
interests of the Company and its stakeholders.
The Debtors and the Committee also took into account the fact
that a preference action against Lehman would take a significant
amount of time to resolve, and their belief that this process
was antithetical to the intended timing of emergence and that
the Debtors' efforts to obtain an equity sponsor or other
investor who would assist the Debtors in emerging from
bankruptcy would need to be put on hold. Given the risks in
succeeding in a preference action against Lehman, and the
attractiveness of the Lehman proposal, which was enhanced
following negotiations between the Committee and Lehman, the
Debtors and the Committee agreed to accept the Lehman Settlement
proposal.
Mr. Burnett recounts that on June 30, 2000, following the
Debtors' spin-off from AutoNation, the Debtors and Lehman
entered into an Amended and Restated Senior Loan Agreement. The
Senior Loan Agreement provided the Debtors with an unsecured
term loan in an initial aggregate principal amount of
$225,000,000. The proceeds of this loan were intended for use
as non-fleet working capital by the Debtors and for payment of
certain outstanding indebtedness of the Debtors.
In March and April 2001, the Debtors entered into certain real
estate sale-leaseback transactions. The Senior Loan Agreement
provided that $70,000,000 of the proceeds of any transaction
must be used to pay down a portion of the Senior Loan. The
Debtors negotiated with Lehman to defer the payment of the
$70,000,000. Lehman ultimately agreed to defer this repayment on
the condition that the Debtors grant liens in Lehman's favor on
account of all amounts outstanding under the Senior Loan. At
the same time, the Debtors' surety provider, Liberty Mutual
Insurance Company also requested to receive liens to secure its
surety bonds issued on the Debtors' behalf as the price of its
consent to issue new surety bonds.
Based on these transactions, Mr. Burnett relates that the
Debtors and Lehman amended the Senior Loan Agreement on March
29, 2001. The Second Amendment memorialized the parties'
agreement to defer the Debtors' obligations to pay down the
Senior Loan through September 30, 2001 and grant the Lehman
Lien. The Lehman Lien includes a third priority lien on non-
fleet assets of the Debtors and second priority liens on fleet
assets of certain non-debtor special purpose vehicles. Under
the Second Amendment, the grant of the Lehman Lien was to occur
on or before April 30, 2001.
However, as negotiations continued, additional issues raised by
Liberty, Lehman and other parties to the ultimate inter-creditor
agreement delayed documentation of the transaction, and Lehman
and the Debtors entered into weekly amendments of the Senior
Loan Agreement beginning with the Third Amendment on May 11,
2001 and continuing until the Fourteenth Amendment on August 24,
2001, which delayed the grant of security interests to Lehman.
After five months of negotiations with Liberty, Lehman and
others, on August 30, 2001, the Debtors, Lehman and Liberty
executed the Fifteenth Amendment and related security documents,
which granted the Lehman Lien, as well as liens to Liberty.
Ultimately, the Lehman Lien was perfected on September 9, 2001.
As of November 13, 2001, $203,500,000 in principal and interest
was outstanding under the Senior Loan.
On a parallel track commencing in 2001, Mr. Burnett reports that
the Company retained Lehman as investment bankers to sell all or
part of the Company. As of August 30, 2001, these efforts had
resulted in two options that were before the Board. First, the
Company could pursue a three-part sale of its assets for a
projected value to shareholders of between $5.99 per share to
$7.32 per share, reflecting $300,000,000 in equity.
Alternatively, the Company could be sold as a whole in a
different transaction at $5 per share, in a transaction that
Lehman had agreed to finance. The Board elected to pursue the
transaction with a higher value to shareholders.
As of August 30, 2001, in pursuit of the three-part sale, the
Company had received:
A. a fully negotiated term sheet with a very interested
party for the purchase of Alamo and Alamo Local, and the
assumption of their related liabilities;
B. a fully financed offer from International management to
purchase the Company's International business; and
C. several term sheets from substantial, well-financed
parties for the purchase of National and the assumption
of its liabilities.
By the morning of September 11th, the Company had received a
draft purchase and sale agreement from Alamo and Alamo local.
The events of September 11th rendered all these efforts moot,
and the pending offers were withdrawn.
After September 11, 2001, Mr. Burnett tells the Court that the
Debtors soon realized that a bankruptcy filing was likely. As
the Debtors contemplated a Chapter 11 filing, they were mindful
of the fact that the Lehman Liens had been granted on August 30,
2001, and timed their bankruptcy filing to preserve the
presumption of insolvency provided under Section 547 of the
Bankruptcy Code so as to preserve a possible preference claim
against Lehman. However, neither the Debtors nor the Committee
focused on the legal viability of the preference issue until the
fall of 2002.
In March 2002, Liberty, which received its liens on the same
date and in the same transaction as Lehman, had its liens
validated consensually by all parties in exchange for the
agreement by Liberty to provide continued bonding. In the fall
of 2002, the Debtors projected that they would need postpetition
DIP financing in the spring of 2003. At the same time, Lehman
made clear that it would not consent to being primed by a DIP
lender unless its liens were validated. The Debtors and the
Committee therefore decided that a thorough analysis of the
preference claim against Lehman was needed. The Debtors and the
Committee agreed that FTI Consulting, the Committee's financial
advisors, would take the lead in developing a balance sheet
analysis of the Debtors' solvency on August 30, 2001.
Throughout November to mid-December, Mr. Burnett admits that the
Debtors engaged in extended discussions with the Committee and
its advisors regarding the Committee's balance sheet solvency
analysis to determine whether an adjusted balance sheet could be
created to demonstrate the Debtors' insolvency on August 30,
2001 to support a preference action against Lehman. However, as
the Debtors worked with the Committee's advisors, the Debtors
began to differ with the Committee's view as to the Debtors'
ability to demonstrate insolvency on August 30, 2001 on an
adjusted balance sheet basis, let alone from a standpoint of
whether this analysis would be rendered moot by Lehman being
able to demonstrate that as of August 30, 2001, ANC could have
been sold at a positive value.
While these discussions were taking place, Lehman approached the
Debtors with a settlement proposal, agreeing to reduce their
claim. The Debtors' management determined to recommend to the
Board of Directors that they approve the Lehman settlement.
Over the next few weeks, Committee and Lehman engaged in
extensive negotiations aimed at settling the Committee's
objections to the Debtors' proposed initial settlement with
Lehman. Ultimately, Lehman, the Committee and the Debtors
agreed to the terms of the Settlement.
Mr. Burnett notes that the resulting settlement provides the
Debtors, their estates, and their creditors with millions of
dollars of benefit, including the waiver of more than
$52,000,000 in accrued interest through June 30, 2003, as well
as the release of the contractual "make-whole payment." The
timing of the Lehman settlement was initially driven by the need
for DIP financing, which the Debtors anticipated receiving from
either Congress or Congress and Lehman. Either proposal was
contingent on a settlement with Lehman. Although the Debtors
were ultimately able to obtain an attractive DIP financing
proposal that was independent of a Lehman settlement, the need
for prompt resolution of the Lehman Lien issues has not abated
and, indeed, is one of the key factors leading to this motion.
In addition to the benefits to the estate from the claim
reduction proposed by Lehman, the Debtors and the Committee
concur that resolution of the Lehman Lien issues will
significantly aid the Debtors' search for an equity investor to
enable the Debtors to emerge from bankruptcy. The Debtors have
determined that, from a business perspective, it is imperative
that the Debtors emerge from bankruptcy in the next few months.
Major restructuring initiatives are currently under way and the
Debtors have met with and are scheduled to meet with numerous
potential investors. Moreover, competitors like Hertz are
actively misrepresenting the Debtors' financial condition and
the lack of reorganization plans as grounds for customers and
airports to cease doing business with the Debtors. Emergence,
however, is not feasible without resolution of the Lehman Lien
issues.
The Debtors and the Committee also believe that value will be
added to the Debtors' estates through the resolution of the
Lehman Lien issues, allowing the Debtors to emerge from
bankruptcy promptly and allowing unsecured creditors the
opportunity to realize additional value to which they would
otherwise not be entitled. The Debtors and the Committee agree,
after careful analysis of the strengths and weaknesses of a
preference claim, that there is significant risk that a
preference action against Lehman would not be successful.
Mr. Burnett believes that the Lehman Settlement Agreement is
equitable and fair to creditors. With respect to the likelihood
of success, the Debtors and the Committee, after careful
consideration of the strengths and weaknesses of an avoidance
action, have concluded that a preference action against Lehman
faces significant hurdles.
Mr. Burnett contends that the complexity and expense of a
protracted preference action is not in the best interests of
creditors. The Supreme Court requires a bankruptcy court to
carefully consider the expense of litigation and compare it with
the likely outcome. Here, prosecution of a preference action
would be expensive and protracted, and the likely result would
be judicial validation of the Lehman Lien. Moreover, the Lehman
Settlement Agreement will allow potential investors to infuse
new equity or acquire the Debtors' businesses with an accurate
picture of whether the Debtors will be fully able to carry its
debt load going forward.
* * *
Judge Walrath approves the Settlement and the statements made
during the March 19, 2003 hearing (ANC Rental Bankruptcy News,
Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900)
A NOVO: Obtains Extension to Decide on Leases through May 19
------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the District of
Delaware, A Novo Broadband, Inc., obtained an extension of its
lease decision period. The Court gives the Debtors until May
19, 2003, to determine whether to assume, assume and assign, or
reject the unexpired nonresidential real property leases.
A Novo Broadband, Inc., a business engaged primarily in the
repair and servicing of broadband equipment for equipment
manufacturers and operators of cable and other broadband systems
in North America, filed for chapter 11 petition on December 18,
2002 (Bankr. Del. Case No. 02-13708). Brendan Linehan Shannon,
Esq., M. Blake Cleary, Esq., at Young, Conaway, Stargatt &
Taylor represent the Debtor in its restructuring efforts. When
the Company filed for protection from its creditors, it listed
$12,356,533 in total assets and $10,577,977 in total debts.
ANTEX BIOLOGICS: Files for Chapter 11 Protection in Maryland
------------------------------------------------------------
Antex Biologics Inc. (Amex: ANX) announced that it, along with
its wholly-owned subsidiary Antex Pharma Inc., has filed for
protection under Chapter 11 of the U.S. Bankruptcy Code in the
Maryland Court District to facilitate the sale of its assets.
On March 17, 2003, Antex announced that it had entered into a
non-binding letter of intent and a loan agreement with BioPort
Corporation, a privately held company headquartered in Lansing,
Michigan. Pursuant to the non-binding letter of intent, BioPort
would acquire all Antex's assets. The loan agreement provided
for BioPort's discretionary funding of up to $1 million to
support Antex's operations prior to the completion of the
acquisition. BioPort has advanced the Company approximately
$300,000 to date under the loan agreement. The acquisition was
contingent upon, among other conditions, (i) an agreement of
Antex's preferred stockholders to exchange their preferred stock
for future royalties on two of Antex's product candidates and
(ii) the agreement of Antex's trade creditors and note holders
to settle their current claims at significant discounts.
Antex has notified BioPort that it has not been able to obtain
the required agreements from its preferred stockholders and note
holders. As a result, BioPort notified the Company that BioPort
would not proceed with the proposed acquisition and would cease
funding under the loan agreement. Therefore, the Company had no
alternative but to file for bankruptcy protection in order to
preserve its going concern value.
Antex currently anticipates filing a plan of reorganization with
the Court in the near future. As a part of the plan of
reorganization, Antex expects to enter into an agreement with
BioPort under which Antex, subject to Court approval and higher
and better bids, would sell substantially all its assets to
BioPort. The proceeds from the sale would be distributed to
satisfy the claims of its creditors. Remaining assets, if any,
then would be distributed to the Company's stockholders. BioPort
also is proposing to provide certain post-petition "debtor-in-
possession" financing to fund Antex's operations until the
expected reorganization is completed later this year.
AQUA VIE BEVERAGE: January 31 Balance Sheet Upside Down by $1.1M
----------------------------------------------------------------
Aqua Vie Beverage Corporation's sales were flat for the quarter
ended January 31, 2003 compared to the previous quarter and the
year ended July 31, 2002; however, a nationwide store
demonstration program is scheduled to commence in mid-April
2003. Current assets were lower at the end of the most recent
period, and the Company's current liabilities had increased by
about $300,000 over the comparable period in 2002.
During the quarter, the Company began a program to settle or
reduce its payables and other current liabilities aimed at
strengthening its balance sheet and improving its credit in
anticipation of a need for factoring capital and/or lines of
credit to support increased production. In conjunction with
these efforts, a current note due on June 30, 2003 in the
amount of $296,865 was exchanged for restricted stock in March
2003, and the Company also recently reduced accounts payable at
January 31, 2003 of $395,000 by approximately 25% through
conversion into restricted stock.
In Aqua Vie's financial report for the period ending October 31,
2002, the Company stated that it was seeking approximately $2.2
million in additional capital for its plans for early 2003.
Despite the difficult capital markets, which severely hindered
Aqua Vie's operations throughout 2000 and 2001, the Company was
able to secure approximately $800,000 in additional equity
capital during the period July 31, 2002-January 31, 2003.
Subsequent to January 31, 2003, it has received approximately
$750,000 in additional equity capital. As previously noted,
Aqua Vie was able to convert approximately $295,000 in notes
payable and $90,000 in accounts payable in restricted stock. The
additional capital it has received has enabled the Company to
fund current operations, pay for additional production runs, and
engage in an aggressive marketing program. Management believes
that an additional $2,000,000 in capital over the next six
months would be desirable to support additional production runs,
marketing and new product development. Aqua Vie's preliminary
goal is to achieve sustainable current sales sufficient to
support overhead, and to seek additional capital thereafter by
factoring or through a line of credit to support growth. It has
not yet secured this capital, but management has been reviewing
various alternatives to effect these capital objectives. The
capital markets remain difficult due to global uncertainties and
weak short-term economic outlook. Aqua Vie's success in
achieving sustainable production and sales and in the
development of compelling new products, together with
improvement in its current position and the overall market
situation, will determine the extent to which it will be able to
continue acquiring additional capital, and the dilution this may
entail. Assuming increased revenue driven by higher demand and
additional product available for sale, management expects, as a
result of efforts to strengthen the Company's current position,
to be able to present a better balance sheet when seeking
receivables or inventory support financing.
The Company had minimal sales during the period ended January
31, 2003; however, as a result of the sizable capital infusions,
management anticipates additional production runs to support
increasing sales. Expenses have continued however, and Aqua
Vie's deficit increased approximately $1.1 million during the
period. Its accumulated deficit as of January 31, 2003 was
$8,879,626, compared to $7,731,176 as of July 31, 2002 and
$5,204,837 as of January 31, 2002. Although the Company
maintained modest payroll costs, it incurred a substantial
increase for promotional expenses, its most significant cost
item during the quarter. Given the nature of the beverage
industry and Aqua Vie's place in that industry as a "new"
player, the Company expects promotional costs to continue to be
a significant factor in solidifying its corporate identity in
the industry and stimulating product sales.
AT&T CANADA: Set to Emerge from CCAA Protection on April 1, 2003
----------------------------------------------------------------
AT&T Canada confirmed the aggregate amount of cash and Class A
Voting Shares and Class B Limited Voting Shares that the Company
will distribute to its bondholders and other affected creditors
as part of the implementation of the Company's restructuring
plan.
These amounts have been determined in accordance with the terms
of the Company's previously approved restructuring plan. The
allocation of shares is also based on declarations as to
residency status received by the March 25, 2003 record date.
The amount of cash available for distribution is approximately
CDN$233 million. One hundred per cent of the Company's equity
will be distributed to bondholders and other affected creditors
in the form of 1,090,676 Class A Voting Shares and 18,909,324
Class B Limited Voting Shares. In compliance with the Canadian
Telecommunications Act, Canadian resident bondholders and other
affected creditors will receive, in the aggregate, 66-2/3 % of
the Class A Voting Shares and other bondholders and affected
creditors will receive 33-1/3 % of the Class A Voting Shares and
100% of the Class B Limited Voting Shares. No one creditor will
receive greater than 10% of the Class A Voting Shares issued
under the Plan.
For example, a resident Canadian bondholder or other affected
creditor with CDN$1,000 in claims value would receive CDN$49.43
in cash plus 4.22 Class A Voting Shares. A non-Canadian resident
bondholder or other affected creditor with CDN$1,000 in claims
value would receive CDN$49.43 in cash, plus .08 Class A Voting
Shares and 4.14 Class B Limited Voting Shares. The number of
shares issued in each class are subject to adjustment in
accordance with the Plan which is not anticipated to be
significant.
Distribution Process:
- Upon closing, the Company, through CIBC Mellon Trust
Company, will deliver the cash payments, the Class A
Voting Shares and Class B Limited Voting Shares to the
Depository Trust Corporation or the Canadian Depository
for Securities for distribution to bondholders of
record. DTC and CDS will then deliver the cash payments
and Class A Voting Shares and Class B Limited Voting
Shares to DTC and CDS participants in proportion to
their holdings. Bondholders should contact their
financial advisor for further details on the
timing and method of distribution.
- The Company, through CIBC Mellon, will deliver the cash
payments and certificates representing the Class A
Voting Shares and Class B Limited Voting Shares by
courier to Non-Bondholder Affected Creditors with
undisputed claims.
- AT&T Canada said it will maintain a reserve of
approximately CDN$2.8 million of cash and 241,396 Class
B Limited Voting Shares for distributions to affected
creditors with disputed claims.
AT&T Canada is on track to emerge from the CCAA process on April
1 as an independent Company with positive cash flow and net
income, and no long-term debt. The Company will also have
CDN$100 million cash on hand plus an additional CDN$39 million
representing the net working capital adjustment provided for in
the Company's restructuring plan.
On Plan implementation, the Company's Class A Voting Shares and
Class B Limited Voting Shares will be listed on the Toronto
Stock Exchange under the stock trading symbols TEL.A and TEL.B
respectively, and will be quoted through the NASDAQ National
Market System under the stock trading symbols ATTC and ATTCZ
respectively.
AT&T Canada is the country's largest competitor to the incumbent
telecom companies. With over 18,700 route kilometers of local
and long haul broadband fiber optic network, world class managed
service offerings in data, Internet, voice and IT Services, AT&T
Canada provides a full range of integrated communications
products and services to help Canadian businesses communicate
locally, nationally and globally. Please visit AT&T Canada's web
site, http://www.attcanada.comfor more information about the
Company.
AT&T Canada Inc.'s 7.650% bonds due 2006 (ATTC06CAR1),
DebtTraders says, are trading at 21 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ATTC06CAR1
for real-time bond pricing.
AT&T CANADA: Federal Cabinet Dismisses Price Cap Appeal
-------------------------------------------------------
AT&T Canada Inc., Canada's largest competitor to the incumbent
telephone companies, commented on the federal Cabinet's
dismissal of its appeal of the CRTC's Price Cap ruling of May
30, 2002.
John McLennan, Vice-Chairman and CEO of AT&T Canada, said,
"Naturally, we regret that the Government chose to dismiss our
appeal. At the same time, we are encouraged by Minister Rock's
recognition that the regulatory and policy framework are crucial
to fostering true competition in the Canadian telecommunications
industry.
"Our goal in launching this appeal was to focus the attention of
the Government of Canada and the Regulator on the issues and
concerns of competitors like AT&T Canada as we strive to achieve
a competitively neutral regulatory environment in Canada. With
such an environment, we are confident in our ability to be a
prosperous long-term competitor to the former monopolies.
"Minister Rock has clearly expressed the Government's commitment
to real and genuine competition in the industry. As important,
he has indicated that the recent 'pro-competitive momentum' of
the CRTC must continue and that the Government will be
monitoring developments in the coming months.
"Going forward, the Appeal marks only the latest step in an
ongoing process. We will continue to push for the reforms that
enable competitive providers to thrive, not just survive. We
believe that further regulatory relief that benefits competition
and customers is achievable. We look forward to working with the
Regulator to achieve our goal in our ongoing dealings with the
Commission."
McLennan added that the Cabinet decision would not adversely
affect AT&T Canada's current business plan. The plan was
developed on a conservative basis and without any reliance on
additional regulatory relief.
"AT&T Canada expects to emerge from the CCAA process on April 1,
2003 as an independent company with positive cash flow, positive
net income and no long-term debt," McLennan noted. "We will have
a strong financial foundation from which to grow as a highly
competitive leader in Canada's telecom marketplace."
About AT&T Canada
AT&T Canada is the country's largest competitor to the incumbent
telecom companies. With over 18,700 route kilometers of local
and long haul broadband fiber optic network, world class managed
service offerings in data, Internet, voice and IT Services, AT&T
Canada provides a full range of integrated communications
products and services to help Canadian businesses communicate
locally, nationally and globally. Please visit AT&T Canada's Web
site, http://www.attcanada.comfor more information about the
Company.
AVOTUS FINANCING: Hires Sokoloff to Plan Strategic Alternatives
---------------------------------------------------------------
Avotus Corporation (TSX Venture: AVS) released an update
regarding its refinancing activities.
The Company previously disclosed on November 11, 2002, that it
has been reviewing its financing, investment and other strategic
options. This review is not yet completed, however, several
refinancing options have been identified and potential new
investors are being actively pursued.
Background
The Company has three forms of debt: (i) a line of credit with
Royal Bank of Canada; (ii) a promissory note issued to the
founders of MDR Technologies Inc.; and (iii) a subordinated
debenture with RoyNat.
The line of credit through the Bank is a demand facility, and
can be called at any time by the Bank. The Bank has moved the
Company's line of credit to its Special Loans operation, and the
Company suspended payments of principal and interest on both the
Promissory Note and the Debenture. Those debts are now in
arrears, and can also be called at any time. All are secured by
the assets of the Company with the Bank ranking first, the
Promissory Note second and the Debenture third. Since the
Company's last announcement, the Bank has indicated its desire
to terminate its relationship with the Company by no later than
June 16, 2003.
Debt Restructuring
The Company has been actively negotiating with all its debt
holders and the status of those negotiations is as follows.
The Company has now entered into separate forbearance agreements
with the Bank and with the Noteholders with all three debt
holders acknowledging and consenting to each agreement. The
arrangements finalized pursuant to these agreements will enable
the Company to continue its normal business operations as well
as to pursue financial and strategic opportunities.
The forbearance agreement with the Noteholders requires that
payments retiring an aggregate of one-half of the principal
amount outstanding be made to them in April and May, 2003.
Should the Company fail to make these payments when due, the
Noteholders will be in a position to immediately seek the
appointment of a court-appointed receiver based upon the
Company's escrowed consent that was provided as a part of the
Noteholder's forbearance arrangement. Upon making these
payments, the Company will enter into an amended promissory note
for repayment of the remaining one-half of the principal balance
over the subsequent three and one-half years. The Company has
also agreed to issue to the Noteholders warrants to purchase an
aggregate of 1,000,000 common shares no later than May 14, 2003,
at an exercise price which will be not less than the market
price of the Company's common shares on the date prior to
issuance of the warrants.
The forbearance agreement with the Bank extends to June 16th,
2003. Failure to pay out the Bank on or before that date will
give the Bank the right to terminate the forbearance arrangement
and immediately enforce its security.
The TSXV has conditionally approved the Company's entering into
the debt restructuring arrangements, subject to the fulfillment
of certain conditions.
Equity
The Company has reached a tentative agreement with the holders
of the Debenture to convert this debt to equity as part of an
equity refinancing, assuming one is completed.
The Company is continuing to explore the possibility of
arranging new equity financing from either existing or third
party investors through a private placement as allowed by the
TSXV or other arrangement. Several institutions have expressed
interest and the Company is continuing its efforts to structure
any such financing in a manner that will best satisfy its
requirements.
Strategic Options
The Company has retained the services of the investment banking
firm Sokoloff & Company to assist the management team and Board
of Directors in exploring a full range of strategic options for
the Company. Avotus' goal is to enhance business value through a
potential strategic alliance, through joint venture, merger,
acquisition or otherwise.
"Avotus' business strategy is to broaden our product line in the
wireless and Voice over IP markets. At the same time as we are
exploring our financing options, we want to look at all
strategic options to grow our business and strengthen our
competitive advantage" said Fred Lizza, President and CEO of
Avotus.
Sokoloff & Company is an investment banking firm with
specialized expertise in providing advisory services to
telecommunications, Internet, software and security companies.
Sokoloff & Company acts as a catalyst for growth by bringing
together value-added financial and industry partnerships.
"Over the past several quarters, Avotus has streamlined its
operations, increased financial efficiencies across all levels
of the organization and generated profits from operations. These
accomplishments have been significant, especially when viewed
against a backdrop of challenging global economic conditions and
the volatile state of the telecommunications marketplace in
which Avotus competes. Based on these facts, we believe it is
appropriate for Avotus to explore all strategic options
available to broaden the market penetration of our
communications cost management applications, increase revenues
and accelerate our strategy to achieve profitability and
sustained long term growth" said Lizza.
About Avotus Corporation
Avotus Corporation is a world-class enterprise software company.
Our products enable customers to visualize and optimize their
communications assets. Our solutions help reduce costs, provide
better service to customers, enhance employee productivity and
reduce security risks. The company has a premier client base
that includes 42% of the Fortune 100 and 28% of the Global
Fortune 500 companies.
About Peter A. Sokoloff & Co.
Based in Glendale, CA, Peter A. Sokoloff & Co. is the leading
merger and acquisition advisory firm in the specialized sector
of telecommunications Operations Support Systems (OSS), Billing
and Customer Care. The firm has completed numerous transactions
in this segment since 1998. Managing director, Pete Sokoloff,
columnist and industry expert, is quoted regularly in many
industry trade publications. Sokoloff & Co. has provided
strategic merger and acquisition advice to numerous
telecommunications service providers, consultants and software
firms worldwide. For more information, please visit the
company's Web site at http://www.sokoloffco.com
BERGSTROM: Awaits Shareholder Approval to Liquidate Company
-----------------------------------------------------------
Bergstrom Capital Corporation (AMEX:BEM) reported that, upon
approval by stockholders of the liquidation of the Company at
the special meeting called for April 4, 2003, the Board of
Directors will declare an initial cash liquidating distribution
payable April 11, 2003 to stockholders of record on
April 4, 2003.
The ex-dividend date for the distribution is scheduled to be
April 14, 2003. The amount of the distribution will be the net
asset value per share of the Company as of April 3, 2003, less a
reserve of not more than $.50 per share for payment of the
Company's remaining liabilities and expenses. The net asset
value of the Company as of March 25, 2003 was $123.09 per share.
The Company's shares are currently traded on the American Stock
Exchange under the symbol BEM. Because the Company will no
longer meet the Exchange's listing standards following the
initial distribution, trading in the Company's shares on the
Exchange will be suspended as of the close of business on April
30, 2003. It is expected that an additional cash liquidating
distribution, representing any assets left over after payment of
the Company's remaining liabilities and expenses, will be made
on or before August 31, 2003.
The Company is a closed-end, non-diversified investment company
whose principal investment objective was long-term capital
appreciation, primarily through investment in equity securities.
The Company's investments now consist of cash equivalents and
other short-term investments.
* * *
As reported in Troubled Company Reporter's January 20, 2003
edition, the Company announced that after an unsuccessful search
for a suitable merger partner, the Board of Directors voted
unanimously to liquidate the Company, subject to the approval of
the Company's stockholders. A proposal to liquidate the Company
will be submitted to stockholders for their approval at a
meeting of the Company's stockholders currently scheduled for
March 2003. Proxy materials describing the plan of liquidation
will be mailed to stockholders in advance of the meeting. A vote
of two-thirds of the outstanding shares in favor of the
liquidation is required.
In order to preserve the Company's flexibility in structuring a
possible transaction, the Board of Directors had instructed the
Company's investment adviser to refrain from making new equity
investments. As a result, the value of the Company's holdings in
cash equivalents and other short-term investments has increased
to 22.9% of the Company's total investments as of January 15,
2003. In anticipation of liquidation, the Board has further
instructed the Company's investment advisor to commence an
orderly sale of the Company's remaining equity positions. If
stockholders approve the liquidation, the Company will make cash
distributions of all its assets to stockholders, after providing
for the expenses of liquidation and any other liabilities.
BETHLEHEM STEEL: REBCO Puts Up Health Program for Ex-Employees
--------------------------------------------------------------
The Retired Employees' Benefits Coalition (REBCO), an advocacy
organization comprised of Bethlehem Steel Corporation retirees
and spouses has established a Voluntary Employee Beneficiary
Association (VEBA) called REBCO Health Benefits Trust for
Retirees of Bethlehem Steel.
The VEBA will make health and other benefits available to more
than 90,000 eligible retirees and former employees of Bethlehem
Steel. The plans offered include health, life and dental plans.
The VEBA has contracted with National Employee Benefit
Companies, Inc., (NEBCO) as the outreach and service center for
all benefit programs. NEBCO is an American Wholesale Insurance
Group company -- the largest independently owned wholesale
brokerage organization in the country.
Over the past 12 months, the REBCO Board of Directors and NEBCO
have been working to develop a retiree medical program that
would meet the needs of the vast majority of REBCO's members. In
reviewing the program options, it was important that any program
developed meet the following criteria:
-- Guaranteed acceptance
-- No pre-existing condition limitations
-- Prescription drug coverage
-- Affordable monthly payments
-- No gap in coverage as long as participants enroll within
30 days from the date Bethlehem Steel's benefits terminate
The programs developed with NEBCO effectively meet this
criteria. Due to Bethlehem Steel's bankruptcy, the majority of
its retirees and laid-off employees will be left with limited
health plan options including the loss of life insurance and
dental benefits. NEBCO will administer an affordable health
benefits program for both pre- and post-age 65 individuals and
their spouses. These programs will be available to all eligible
participants regardless of their health status.
The Program will provide health and other related benefits at
more affordable rates than would otherwise be available to
retirees under any existing COBRA options. For instance retirees
and/or their spouses over age 65 or older can obtain coverage
for as little as $118 per month with a Generic prescription drug
program. A retiree under age 65 may participate in the program
for as little as $247 per month. During open enrollment,
applicants are covered regardless of any pre-existing medical
conditions (with prior credible HIPAA coverage). Members may
participate beginning April 1, 2003. Bethlehem Steel will
terminate its retirees' health coverage as of March 31, 2003,
per the Bankruptcy Judge's order of March 24, 2003. NEBCO will
also administer other health and life benefits recently
terminated by Bethlehem Steel, including dental and life
(including a senior life plan) benefits.
NEBCO has assisted in the establishment of several other VEBA
plans for thousands of displaced workers from companies facing
financial hardship. REBCO Counsel Bruce E. Davis said his group
was pleased with NEBCO's performance assisting retirees and
former employees from other financially distressed companies.
"Every REBCO member should review the NEBCO program." The rates
are far lower than if someone with a medical problem tried to
shop for health insurance on their own," he said. The program,
which is a self-funded trust, will not be open to non-REBCO
members for about two years, if at all, Davis said.
NEBCO will service members through its state-of-the-art Customer
Care Center, which is staffed with experienced benefits
professionals. In addition, plan members can access their
benefits and a health-information resource center online at
www.MemberNetUSA.net/REBCO. To optimally service former
Bethlehem Steel employees, a dedicated, toll-free number has
been established at: 800-717-7458.
According to Samuel H. Fleet, President and CEO of NEBCO, this
program fits a tight budget for those who have lost their jobs,
had their pensions reduced or are on a limited fixed income.
"Health care is one of the biggest concerns retirees and
displaced workers face. When their health benefits are
terminated, there is a sense of panic and with the cost of
health coverage today, many displaced employees are unable to
afford basic health care coverage. We are pleased to service an
employee benefit plan that is making affordable health benefits
available to so many people who otherwise would go without
coverage or pay exorbitant premiums. Our Customer Care
Representatives have extensive experience servicing retirees and
are particularly sensitive to the feelings of people whose
benefits have been abruptly terminated," said Fleet.
BUCKEYE TECH: David Ferraro Succeeds Retiring CEO Robert Cannon
---------------------------------------------------------------
Buckeye Technologies Inc. (NYSE:BKI) announced that Robert E.
Cannon, Chairman and Chief Executive Officer, will retire in
June, 2003.
Mr. Cannon, who led the leveraged buy-out of Procter & Gamble's
pulp business which resulted in the formation of Buckeye, has
served as the Company's Chairman and CEO since it was
established in 1993. He successfully took the Company public in
1995 and has presided over business growth which has firmly
established Buckeye as a leader in the markets that it serves.
Speaking on behalf of the Buckeye Board of Directors, Samuel M.
Mencoff, Buckeye's longest serving Independent Director,
commented, "Bob Cannon is truly a remarkable individual. He is
not only a visionary leader, but is also an exceptional manager
who has energetically guided the Company's development over the
last ten years."
In anticipation of Mr. Cannon's retirement, the Board has
elected David B. Ferraro, currently Buckeye President and Chief
Operating Officer, to the office of Chairman and Chief Executive
Officer succeeding Mr. Cannon effective April 1, 2003. Other key
management changes being made in accordance with the Company's
succession plan include:
John B. Crowe, currently Buckeye Senior Vice President - Wood
Cellulose, will succeed Mr. Ferraro as President and Chief
Operating Officer.
Kristopher J. Matula, currently Senior Vice President -
Nonwovens, will assume additional strategic planning
responsibilities and will become Senior Vice President -
Nonwovens and Corporate Strategy.
R. Howard Cannon, currently Vice President - Nonwovens Sales,
will become Senior Vice President - Wood Cellulose succeeding
Mr. Crowe.
The other members of Buckeye's Executive Team will continue in
their current roles. Robert E. Cannon will remain on Buckeye's
Board of Directors.
Mr. Robert Cannon commented, "Buckeye is in good hands. Dave
Ferraro has served as our President since the Company was
founded. He is a broadly experienced leader and is intimately
familiar with all aspects of Buckeye's business. John Crowe also
has wide industry experience having held management positions at
Weyerhaeuser and Parsons & Whittemore in addition to our
Company. He too is an outstanding executive. Buckeye's strong
Management Team, supported by our highly skilled and
extraordinarily dedicated employees, will spark a robust
recovery from the depressed economy that has recently impacted
so many firms."
Buckeye, a leading manufacturer and marketer of specialty
cellulose and absorbent products, is headquartered in Memphis,
Tennessee, USA. The Company currently operates facilities in the
United States, Germany, Canada, Ireland and Brazil. Its products
are sold worldwide to makers of consumer and industrial goods.
DebtTraders says that Buckeye Technologies Inc.'s 9.250% bonds
due 2008 (BKI08USR1) are trading between 87 and 89. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BKI08USR1for
real-time bond pricing.
* * *
As previously reported, Standard & Poor's lowered its ratings on
Buckeye Technologies Inc, with negative outlook.
Ratings Lowered
Ratings
Buckeye Technologies Inc. To From
Corporate credit rating BB BB+
Subordinated debt rating B+ BB-
The downgrade reflects Standard & Poor's expectation that debt
will remain elevated over the intermediate term, which will
likely prevent Buckeye from restoring financial flexibility to a
level appropriate for the previous rating. Capital expenditures
should decline substantially now that construction of the
company's new $100 million airlaid nonwovens machine is
complete. However, weak markets, machine ramp-up costs, and
heightened competitive pressures, are likely to dampen near-term
earnings and impede free cash flow generation.
The ratings reflect Buckeye's below-average business profile,
with leading positions in niche pulp markets, and its aggressive
financial profile.
CABLE SATISFACTION: Talking to Lenders to Cure Debt Default
-----------------------------------------------------------
Cable Satisfaction International Inc. announced that its bankers
have extended the waivers pertaining to the maturity date of the
credit facility of its subsidiary Cabovisao - Televisao por
Cabo, S.A. until April 9, 2003, subject to certain conditions.
Further to its decision not to make the scheduled March 3, 2003
interest payment on its 12.75% Senior Notes due 2010, the
Company also announced that it is in discussions with an ad hoc
committee of noteholders. 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.
Csii is engaged in discussions to reach a consensual agreement
with secured lenders, noteholders and potential investors on a
long-term solution to the Company's financial requirements and
those of Cabovisao. There can be no assurance as to the outcome
of these discussions.
The Company also announced the resignation of Guy Laflamme from
the board of directors, effective immediately.
About Csii
Csii builds and operates large bandwidth (750 Mhz) hybrid fibre
coaxial (HFC) 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".
Cable Satisfaction International's 12.750% bonds due 2010
(CSQ10CAR1) are trading at 30 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CSQ10CAR1for
real-time bond pricing.
CARAUSTAR: Closes Buffalo Paperboard Mill & Six Other Facilities
----------------------------------------------------------------
Caraustar Industries, Inc. (Nasdaq: CSAR) announced that, in
line with its previously disclosed restructuring activities to
right size capacity and demand and achieve greater cost
efficiencies for the company and its customers, it has
permanently closed its Buffalo Paperboard mill located in
Lockport, New York. The company also announced the closure of
six tube and core converting facilities consistent with
previously disclosed consolidation objectives following the
September 30, 2002 acquisition of the industrial packaging
operations of Smurfit-Stone Container Corporation.
Acquired in 1992, the Buffalo mill produced a full line of
medium to heavy weight gypsum facing paper products with an
annual capacity of 72 thousand tons. Operations at this mill
have been reduced due to a growing demand by the gypsum
wallboard industry for lighter weight facing paper. Buffalo's
customers will be served by other Caraustar facilities, in
particular, Premier Boxboard Limited LLC, the company's joint
venture with Inland Paperboard, located in Newport, IN, which
produces the next generation of lightweight gypsum facing paper.
he closure will affect approximately 60 employees.
Five tube and core converting facilities will be permanently
closed by March 31, 2003: Philadelphia Tube Plant
(Pennsylvania), Cedartown Tube Plant (Georgia), Jacksonville
Tube Plant (Florida), Eufaula Tube Plant (Alabama) and Saginaw
Tube Plant (Michigan). The sixth facility, Hendersonville Tube
Plant (North Carolina), is expected to permanently close by
August 30, 2003.
Jim Russell, vice president, Industrial & Consumer Products
Group, stated, "We expect to retain all of the business from the
closed converting operations by shifting production and
manufacturing capabilities to our other 41 tube and core plants.
The consolidation of overlapping facilities improves our cost
structure and should make us more competitive in the markets we
serve." The number of employees at the tube and core locations
that will be affected by the closures is approximately 140.
Caraustar expects to incur a pretax charge of approximately $5.0
million, or $0.12 per share, in the first quarter of 2003 to
reflect the costs of permanently shutting down the Buffalo mill,
the closure of the tube and core converting facilities and
providing transition assistance to the affected employees.
Caraustar, a recycled packaging company to which Standard &
Poor's assigned a BB Corporate Credit Rating, is one of the
largest and most cost-effective manufacturers and converters of
recycled paperboard and packaging products in the United States.
The company has developed its leadership position in the
industry through diversification and integration from raw
materials to finished products. Caraustar serves the four
principal recycled paperboard product markets: tubes, cores and
cans; folding cartons and custom packaging; gypsum wallboard
facing paper; and miscellaneous "other specialty" and converted
products.
CAVALIER HOMES: Successfully Obtains New $35M Credit Facility
-------------------------------------------------------------
Cavalier Homes, Inc. (NYSE: CAV) received a commitment from its
primary lender for a $35 million credit facility. This replaces
the existing $35 million facility with which the Company was not
in compliance with certain covenants at December 31, 2002.
The new facility consists of a long-term (14-year), $10 million
real estate loan and a $25 million revolving line of credit. The
maximum available under the revolver will depend on the amount
of eligible accounts receivable and inventories and the amount
of tangible net worth. New covenants were established, with
which Cavalier is in compliance. The maturity date of the
revolver is April 2005. Mike Murphy, Chief Financial Officer,
said he expected the final documents to be executed in the near
future.
Separately, Cavalier reported that it has been advised by the
New York Stock Exchange that it has fallen below the NYSE
continued listing standard requiring total market capitalization
of not less than $50 million over a 30-day trading period and
total stockholders' equity of not less than $50 million. Fourth
quarter 2002 charges of $5.3 million for impairment of assets
and employee severance costs, related to the closing of six home
manufacturing facilities, and the establishment of a valuation
allowance of $15.9 million for the Company's net deferred tax
assets, coupled with the first quarter 2002 charge of $14.2
million for the cumulative effect of a change in accounting
principle in connection with the implementation of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," were primary factors behind the decline in
Cavalier's stockholders' equity to $45.5 million as of the end
of 2002.
As required by the NYSE, Cavalier will be submitting a plan to
the NYSE demonstrating how it plans to comply with its listing
standards over a period of 18 months. If the NYSE accepts the
plan, Cavalier will be subject to quarterly monitoring for
compliance with plan goals and targets. If the NYSE does not
accept the plan, Cavalier will be subject to NYSE trading
suspension and delisting. Should Cavalier's shares cease to be
traded on the NYSE, the Company believes an alternate trading
venue would be available.
Lastly, Cavalier announced that, because of the ongoing impact
of adverse market conditions, including diminished industry
credit capacity for dealers and homebuyers due to the recent
exit of several finance sources, the Company expects revenue to
decline approximately 40% in the first quarter of 2003 from the
year-earlier period, to a range of $55 million to $60 million.
Because of this decline, the Company currently expects to report
a pre-tax loss of between $5 million and $6.5 million for the
first quarter. Because the Company currently does not recognize
a future tax benefit of net operating losses, the expected net
loss for the first quarter will be the same as the pre-tax loss,
or equivalent to a net loss of between $0.28 and $0.37 per
diluted share.
In the first quarter of 2002, Cavalier reported revenue of $94.9
million and pre-tax loss of $2.1 million. The utilization of net
operating loss carrybacks in the first quarter of last year,
along with the cumulative effect of the change in accounting
principle, resulted in a net loss for that period of $13.0
million or $0.74 per diluted share. Cavalier intends to report
its first quarter 2003 results in approximately three weeks.
Cavalier expects a much-improved second quarter compared with
the first quarter of 2003 as the majority of the first quarter
loss is associated with the winding down of the facilities that
Cavalier announced on December 31, 2002, that it would be
closing.
Cavalier Homes, Inc. and its subsidiaries produce, sell, and
finance manufactured housing. The Company markets its homes
primarily through independent dealers, including exclusive
dealers that carry only Cavalier products, and provides
financial services primarily to retail purchasers of
manufactured homes sold through its dealer network.
CKE RESTAURANTS: January Working Capital Deficit Rises to $71MM
---------------------------------------------------------------
CKE Restaurants, Inc. (NYSE: CKR) announced results for the
fourth quarter and fiscal 2003 ended January 27, 2003. The
Company also filed its Report on Form 10-K with the Securities
and Exchange Commission ("SEC") for the fiscal year ended
January 27, 2003.
EXECUTIVE COMMENTARY
Commenting on the company's performance, Andrew F. Puzder,
President and Chief Executive Officer said, "Despite the
challenges faced by our industry this year, we successfully
earned nearly $26 million in income for the year before the
cumulative change in accounting for goodwill -- the first time
we have earned a profit, on any basis, since 1999. Our
performance this year benefited from several non-recurring
transactions, including a $9.2 million one-time income tax
refund and gains of $9.2 million from sales of Checkers Drive-In
Restaurants, Inc. stock, in addition to approximately $3 million
in gains on the retirement of convertible debt."
Continued Puzder, "In the face of margin pressures from rising
insurance and utility costs and heavy competitive discounting,
the Carl's Jr. brand performed well overall this year. Same-
store sales increased 2.1 percent for the fourth quarter and 0.7
percent for the year. Gross margins remained near 22 percent.
Our performance at Carl's Jr. continues to support our premium
product strategy and confirms that there is indeed a segment of
the market that is willing to pay more for exceptional quality
and taste."
"A premium product strategy is also being implemented at
Hardee's where we are currently rolling out our new streamlined
Thickburger(TM) menu," said Puzder. "Over time, we hope this
change -- together with our continued focus on quality, service
and cleanliness -- will help reverse the public's perception of
Hardee's as the discount variety brand to the place to go for
best-in-class premium burgers. If we're successful, our
strategy should build on the brand's already strong breakfast
business by bringing in new customers for lunch and dinner."
"We expect to convert all of our company-operated restaurants to
the new menu by April and the great majority of the franchisee
system by the end of the summer," said Puzder. "Media will be
rolled-out in phases and will coincide with the menu
conversion."
"Consistent with our third quarter SEC filing, we have
accelerated the timeframe within which we file our annual
reports with the SEC," stated Puzder. "We believe our
stakeholders appreciate having more comprehensive information
available earlier. Again, the information previously contained
in our earnings announcements can be found in our Form 10-K
filed with the SEC today. Those filings are available to
investors at http://www.shareholder.com/cke/investors.cfm.
CKE Restaurants, Inc., through its subsidiaries, franchises and
licenses, operates over 3,300 restaurants, including 987 Carl's
Jr. restaurants, 2,229 Hardee's restaurants, and 99 La Salsa
Fresh Mexican Grills in 43 states and in 14 countries.
As of January 31, 2003, the company's working capital deficit is
at $71,452,000 compared to $52,473,000 on January last year.
CKE Restaurants Inc.'s 9.125% bonds due 2009 (CKR09USR1) are
presently trading at 90 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CKR09USR1for
real-time bond pricing.
CKE RESTAURANTS: Reports Period Two Same-Store Sales
----------------------------------------------------
CKE Restaurants, Inc. (NYSE: CKR), announced Period Two same-
store sales, for the four weeks ended March 24, 2003, for each
of its major brands -- Carl's Jr., Hardee's and La Salsa.
PERIOD TWO SAME-STORE SALES
Brand Period Two Year to Date
FY 2004 FY 2003 FY 2004 FY 2003
Carl's Jr. 0.0% +1.9% +0.8% +2.3%
Hardee's -1.2% -0.3% -3.3% -0.2%
La Salsa -2.4% +3.9% +1.1% +3.9%
Commenting on the performance for the period, Andrew F. Puzder,
President and Chief Executive Officer, said, "Comping against
positive same-store sales in the prior year, same-store sales at
Carl's Jr. were flat this period in a very difficult QSR
environment. We continue to promote our newest product, The
Guacamole Bacon Six Dollar Burger(TM), which has been a strong
seller for us and has contributed both to average guest check
and gross margin."
Continued Puzder, "Same-store sales declined at Hardee's this
period but compared favorably to our performance last period
when same-store sales declined 5.3 percent. Same-store sales
have been impacted in recent times both by poor weather
conditions and the deletion of up to 40 menu items in connection
with the roll-out of the Thickburger(TM) menu in many of our
restaurants. As of March 24, 2003, 698, or over 95 percent, of
company- operated restaurants, and 337, or over 20 percent, of
franchised restaurants have been converted to the new menu."
"We will be introducing television and radio advertising on
March 30 in the majority of markets where there are a high
percentage of company-operated restaurants," Puzder continued.
"This initial phase of media is designed to rebuild Hardee's
credibility with consumers and get them to try the Hardee's
Thickburger(TM) -- a process that we expect will take some time.
The various ad spots dramatize the experiences of former
Hardee's customers and take a self-deprecating approach to
acknowledging the brand's prior missteps. Intended to inspire
consumers to give Hardee's another chance, the ads proclaim that
Thickburgers(TM) are how 'the last place you'd go for a burger
will become the first.' We expect to convert all company-
operated Hardee's restaurants to the new menu by April 2003;
franchised restaurants should be completed by the end of the
summer this year."
The Company will report same-store sales for the third period of
fiscal 2004, ending April 21, 2003, on or about April 28, 2003.
CKE Restaurants, Inc., through its subsidiaries, franchises and
licenses, operates over 3,300 restaurants, including 987 Carl's
Jr. restaurants, 2,229 Hardee's restaurants, and 99 La Salsa
Fresh Mexican Grills in 43 states and in 14 countries.
CMS ENERGY: Secures New Funding For Consumers Energy Subsidiary
---------------------------------------------------------------
CMS Energy (NYSE: CMS) announced that it has secured additional
financing that will enhance the liquidity of its principal
subsidiary, Consumers Energy.
A six-year, $140 million loan has been arranged with Beal Bank
of Dallas, Texas, for Consumers Energy. The loan is secured by
the utility's first mortgage bonds. Proceeds from the loan will
be used to support Consumers Energy's liquidity position and for
general corporate purposes.
"This is the initial step of a comprehensive financing plan that
will substantially strengthen the liquidity position of
Consumers Energy and CMS Energy," said Thomas J. Webb, CMS
Energy's executive vice president and chief financial officer.
"Upon completion of the plan, our financing needs for the
immediate future will be addressed."
CMS Energy Corporation is an integrated energy company, which
has as its primary business operations an electric and natural
gas utility, natural gas pipeline systems, and independent power
generation.
As previously reported, ratings for CMS Energy by Fitch are:
Senior unsecured debt 'B+'; Preferred stock/trust preferred
securities 'CCC+'. Outlook is negative.
For more information on CMS Energy, visit:
http://www.cmsenergy.com/
CONSECO: S&P Ratchets Ratings on 2 Related Note Classes to D
------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on two
corporate guaranteed classes of a Conseco Finance Corp.-related
transactions issued by Green Tree Recreational, Equipment and
Consumer Trust 1998-A to 'D' from 'CCC-'.
As reported in the March 2003 distribution reports, the
subordinate B-C and B-H certificateholders of the affected trust
experienced interest shortfalls totaling $37,540. These interest
shortfalls represent rating defaults on the basis that this
transaction failed to pay timely interest to certificateholders.
Additionally, without the guarantee payments deposited by
Conseco, Standard & Poor's believes that interest shortfalls
will continue to be prevalent in the future for these guaranteed
certificates, given the adverse performance trends displayed by
the underlying pool of collateral that secure these classes, as
well as the location of the class B interest at the bottom of
the transaction payment priorities (after distributions of
senior principal).
Conseco filed for Chapter 11 bankruptcy protection Dec. 17, 2002
and began accepting bids for its possible acquisition soon
thereafter. The sale of Conseco was approved by the bankruptcy
court on March 14, 2003 as follows: Conseco's Mill Creek Bank
was acquired by GE Consumer Finance, a unit of the General
Electric Co., and the rest of Conseco's finance unit (including
the servicing platform) was sold to CFN Investment Holdings
LLC, a joint venture between Fortress Investment Group LLC, J.C.
Flowers & Co. LLC, and Cerberus Capital Management L.P. The sale
of Conseco is expected to close by May 2003.
RATINGS LOWERED
Green Tree Recreational, Equipment and Consumer Trust
Pass-through certs series 1998-A
Rating
Class To From
B-C D CCC-
B-H D CCC-
COVANTA ENERGY: Finalizes Terms of DIP Credit Pact Amendment
------------------------------------------------------------
In a supplemental motion, James L. Bromley, Esq., at Cleary,
Gottlieb, Steen & Hamilton, in New York, reports that the
finalized terms of the DIP Amendment in the Chapter 11 cases of
Covanta Energy Corporation and its debtor-affiliates are:
-- The Stated Maturity Date of the DIP Agreement will be
extended from April 1, 2003 to October 1, 2003;
-- The Tranche A Commitments under the DIP Agreement will be
reduced;
-- Certain monthly reporting and financial budget
requirement covenants of the DIP Agreement will be
modified; and
-- A $142,000 fee will be paid to the DIP Lenders, amounting
to 1% of the Tranche A Commitments under the DIP
Agreement following the DIP Amendment.
A free copy of the Sixth DIP Amendment is available at:
http://bankrupt.com/misc/Sixth_DIP_Amendment.pdf
Objections
1. The Official Committee of Unsecured Creditors
The Official Committee of Unsecured Creditors objects to the
Amendment to the extent that the lien waiver is ineffectual as
it "purports to release, terminate or extinguish any prepetition
lien of the Debenture Holders."
Michael J. Canning, Esq., at Arnold & Porter, in New York,
clarifies that the Committee's objection assumes that the
Debenture Holders have a lien in the first place. However, the
Committee has filed an adversary proceeding against Wells Fargo
Bank asserting that no lien exists. In the adversary
proceeding, fact discovery is ongoing while expert discovery is
yet to come. The Committee anticipates filing a summary judgment
motion in the near future.
If the Debenture Holders do not posses a lien, then this
Objection lacks any legal foundation. However, Mr. Canning
clarifies, the parties in the Adversary Proceeding have not yet
presented the Court with briefing of evidence. Thus, Mr.
Canning contends, it is not premature for the Court to
implicitly or explicitly determine whether, in fact, the
Debenture Holders have a lien.
By this objection, the Committee asks the Court to make clear
that its Order on the motion is without prejudice to the
determination of the Adversary Proceeding.
2. Informal Committee of Secured Debenture Holders
Robert H. Pees, Esq., at Akin Gump Strauss Hauer & Feld LLP, in
New York, recounts that both the Debtors and each Prepetition
Secured Party acknowledged in the Final DIP Order that the
Debenture Holders possess equal and ratable liens with each
Prepetition Secured Party. However, in the Debtors' proposed
Sixth Amendment to the DIP Agreement, Section 1.9 -- Limited
Consent Re Prepetition Liens -- it purports to release,
terminate or extinguish any prepetition lien of the Debenture
Holders.
Mr. Pees tells Judge Blackshear that neither the Debtors nor the
Bank of America informed the Informal Committee or the Indenture
Trustee of the proposed Section 1.9 provision prior to the
filing of the motion. Accordingly, the Informal Committee
objects to that portion of the Sixth Amendment.
By this objection, the Informal Committee asks the Court to deny
that portion of the Sixth Amendment relating to the proposed
Section 1.9.
3. Wells Fargo Bank Minnesota, N.A.
Wells Fargo agrees with, and adopts, the Objection presented by
the Informal Committee of the Secured Debenture Holders in its
entirety. (Covanta Bankruptcy News, Issue No. 25; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
CRIIMI MAE: Publishes Fourth Quarter and Year 2002 Results
----------------------------------------------------------
CRIIMI MAE Inc. (NYSE: CMM) reported operating results for its
fourth quarter and year ended December 31, 2002.
Fourth Quarter 2002 Summary
-- GAAP net loss of $34.6 million, including approximately $35.2
million of impairment charges on subordinated CMBS
-- Generated $16.7 million of cash flows available for debt
service on recourse and other debt
-- Secured recourse debt reduced by $8.6 million
-- December 31, 2002 shareholders' equity of $292 million or
book value of $16.32 per diluted share
For the three months ended December 31, 2002, CRIIMI MAE
reported a GAAP net loss to common shareholders of approximately
$34.6 million, or $2.48 per diluted share, including $35.2
million of impairment charges on certain subordinated commercial
mortgage-backed securities ("CMBS"). This compares to the fourth
quarter 2001 net loss to common shareholders of $27.2 million,
or $2.10 per diluted share, which included impairment charges of
approximately $30.8 million on certain subordinated CMBS.
2002 Year End Summary
For the year ended December 31, 2002, the Company's net loss to
common shareholders was approximately $64.2 million, or $4.69
per diluted share, compared to a net loss of approximately $24.2
million, or $2.18 per diluted share, for the year ended December
31, 2001. The increase in the net loss for 2002 was primarily
the result of impairment charges of $70.2 million related to
certain of the Company's subordinated CMBS in 2002 compared to
$34.7 million of impairment charges in 2001.
The Company's overall expected loss estimate related to its
subordinated CMBS, which is expected to occur over the life of
the subordinated CMBS, was increased from $448 million at
September 30, 2002 to $503 million at December 31, 2002. The
impairment charges for the fourth quarter and the year 2002 are
the result of lower estimates of values on certain properties in
special servicing, higher defaults and higher projected loss
severities, which resulted in higher projected loan losses. The
factors negatively impacting the lower valuations include:
-- Poor performance and weak economic conditions in certain
markets;
-- Continued downturn in travel and oversupply of hotel
properties; and
-- Closing of stores by certain national and regional retailers.
$67.3 Million of Cash Flow Available
(after G&A expenses) in 2002
CRIIMI MAE's subordinated CMBS and other assets continue to
generate significant cash flows. The Company received cash of
approximately $17.0 million and $70.6 million from its
subordinated CMBS during the three and twelve months ended
December 31, 2002, respectively. Cash received from other assets
included approximately $1.6 million and $6.4 million during the
three and twelve months ended December 31, 2002, respectively.
These aggregate cash flows, after payment of general and
administrative expenses, were used to pay principal and interest
on the Company's secured recourse debt during 2002.
As previously reported, from April 2001 through January 2003,
the Company was required to use substantially all of its net
cash flows to pay down its secured recourse debt incurred in
connection with its emergence from Chapter 11. From April 2001
through January 2003, over $62.4 million of net cash flow was
applied toward the reduction of principal on this debt. The
balance outstanding was $373 million when the debt was retired
in January 2003.
Barry Blattman, Chairman, Chief Executive Officer and President
stated: "The year 2002 marked a significant turning point for
CRIIMI MAE. Despite a weak economy and depressed hotel market,
our assets continued to generate significant cash and we took a
number of important steps to strengthen the balance sheet and
position the Company for growth. These steps culminated in the
January 23, 2003 closing of our recapitalization, which reduced
our debt load and increased our financial flexibility, allowing
us to pursue our objective of establishing CRIIMI MAE as a
leader in the commercial mortgage industry."
Liquidity
As of December 31, 2002, our total liquidity aggregated
approximately $51.5 million, including approximately $12.6
million of cash held by our servicing subsidiary, CRIIMI MAE
Services. In January 2003, the Company used a portion of its
available cash and liquid assets, in addition to the secured
debt and common equity proceeds from its January 2003
recapitalization to retire its April 2001 secured recourse debt.
As of March 21, 2003, the Company had approximately $17.8
million in liquidity, including approximately $3.4 million in
cash held by CRIIMI MAE Services.
Special Serviced Loans
CRIIMI MAE Services performed servicing functions on commercial
mortgage loans underlying the Company's subordinated CMBS with
aggregate unpaid principal balances totaling approximately $17.4
billion as of December 31, 2002. Defaulted or delinquent
mortgage loans in special servicing at December 31, 2002 were
approximately $810.8 million, or 4.7% of the aggregate $17.4
billion of the mortgage loans underlying the Company's CMBS.
Hotel property mortgage loans accounted for $494.7 million, or
61%, and retail property mortgage loans accounted for $200.8
million, or 25%, of the December 31, 2002 total of specially
serviced loans.
During the fourth quarter of 2002, mortgage loans totaling
approximately $98 million transferred into special servicing and
CRIIMI MAE Services resolved approximately $97 million of
mortgage loans through negotiated workouts, payoffs, sales or
other strategies.
As of February 28, 2003, specially serviced loans totaled
approximately $1.1 billion, or 6.3% of the total mortgage loans
underlying the Company's subordinated CMBS. The net increase
from December 31, 2002 to February 28, 2003 was approximately
$270 million. Transfers of two large hotel portfolios totaling
approximately $212 million, one for imminent payment default and
the other for a non-monetary default, represent the majority of
this increase in specially serviced loans. These defaults were
considered in our December 31, 2002 loss assessment. The $131
million loan in non-monetary default is current for its payments
but was transferred into special servicing due to the borrower's
unauthorized leasing of some of the collateral properties and
unapproved franchise changes.
Decrease in Net Interest Margin for Quarter and Year
Net interest margin was approximately $5.4 million for the
quarter ended December 31, 2002 as compared to approximately
$9.0 million for the fourth quarter of last year. Net interest
margin was approximately $31.8 million for the year ended
December 31, 2002 compared to $36.6 million in 2001. Decreases
in both interest income and interest expense resulted in a
decrease in net interest margin for the three and twelve month
periods in 2002.
Interest income decreased for the quarter and year ended
December 31, 2002 as a result of the reduction in the amortized
cost of the Company's subordinated CMBS, primarily as a result
of the aggregate $65.8 million of impairment charges that were
recognized during the fourth quarter of 2001 through the third
quarter of 2002, and significant prepayments of mortgages
underlying the Company's insured mortgage securities.
The decrease in interest expense for the quarter and year ended
December 31, 2002 was attributable to a lower average debt
balance during 2002 ($975 million) compared to 2001 ($1.1
billion), partially offset by a higher average effective
interest rate on total debt outstanding during 2002 (9.5%)
compared to 2001 (8.9%). In addition, interest expense on the
collateralized mortgage obligations-insured mortgage securities
decreased in 2002 following significant prepayments of mortgages
underlying the insured mortgage securities. For the fourth
quarter of 2002, interest expense on collateralized mortgage
obligations-insured mortgage securities increased primarily due
to additional discount amortization expense as a result of the
underlying mortgage loans prepaying faster than anticipated. For
the year ended December 31, 2002, the overall decrease in
interest expense on collateralized mortgage obligations-insured
mortgage securities was partially offset by the additional
discount amortization expense.
Book Value per Share Increases from 2001 Year End
As of December 31, 2002, shareholders' equity was approximately
$291.7 million or $16.32 per diluted share compared to
approximately $261.0 million or $11.54 per diluted share as of
December 31, 2001. After giving effect to the redemption of the
Series E Preferred Stock and the First Union litigation
settlement which occurred in March 2002, our pro forma book
value per diluted share would have been $14.18 as of December
31, 2001.
The increase in diluted book value per share at December 31,
2002 compared to December 31, 2001 was primarily attributable to
an overall increase in fair values of the Company's CMBS and
insured mortgage securities, partially offset by the net loss to
common shareholders of $64.2 million for the year ended December
31, 2002. The fair values increased primarily due to a reduction
in long-term interest rates as of December 31, 2002 as compared
to 2001 year-end rates.
CRIIMI MAE had 13,945,068 and 15,162,685 common shares
outstanding as of December 31, 2002 and March 26, 2003,
respectively. As of December 31, 2001, the Company had
12,937,341 common shares outstanding. The increase in common
shares subsequent to December 31, 2002 resulted primarily from
the issuance of 1.2 million shares to Brascan Real Estate
Finance Fund I LP ("BREF") in connection with the Company's
January 2003 recapitalization.
Unused NOLs and Remaining Loss Total $343 Million at Year End
For the year ended December 31, 2002, the Company generated a
net operating loss (NOL) for income tax purposes of
approximately $83.6 million compared to a NOL of approximately
$90.6 million for the year 2001. As of December 31, 2002, the
Company's accumulated and unused NOL was $223.8 million.
As a result of the Company's election in 2000 to be taxed as a
trader for federal income tax purposes, CRIIMI MAE recognized a
mark-to-market tax loss on its trading assets on January 1, 2000
of approximately $478 million. The Company has recognized
approximately $358 million of this amount through 2002. The
remaining $119.6 million tax loss is expected to be recognized
in 2003.
Because CRIIMI MAE incurred a net operating loss for tax
purposes in 2002, the Company did not have any taxable income,
and accordingly, was not required to pay dividends to
shareholders in order to maintain its real estate investment
trust (REIT) status.
Unlike most other REITs, CRIIMI MAE is able to distribute or
retain its net cash flows as a result of its NOL carry forwards.
The Company may use its net cash flows after debt service for
acquisitions, hedging activities, or general working capital
purposes.
Strategic and Capital Initiatives
In early 2003, CRIIMI MAE undertook a number of important
initiatives to strengthen its balance sheet and position the
Company for renewed growth. These include:
Recapitalization of the Company
As previously announced on January 23, 2003, CRIIMI MAE
completed a recapitalization that replaced all of the secured
debt incurred upon emergence from Chapter 11 in April 2001 with
the following:
* BREF Equity & Debt
CRIIMI MAE issued approximately $14 million of common equity and
$30 million of 15% secured subordinated debt (two-thirds of the
interest may be deferred until maturity in 2006) to BREF, a
private asset management fund established by Brascan Corporation
(NYSE: BBN; Toronto) and a New York based management team.
* Bear Stearns Debt
A unit of Bear, Stearns & Co., Inc. (Bear Stearns) provided a
three year, $300 million secured financing in the form of a
repurchase transaction (Bear Stearns Debt). The Bear Stearns
Debt bears an interest rate equal to one-month LIBOR plus 3% and
requires quarterly principal payments of $1.25 million.
The overall weighted average effective interest rate on the
Company's Chapter 11 recourse debt was 10.4% during the year
ended December 31, 2002. The estimated overall weighted average
effective interest rate on the aggregate of the Company's BREF
Debt and Bear Stearns Debt was 5.9% as of March 21, 2003.
Additions to Management Team and Board
As part of the Company's January 2003 recapitalization,
management appointments and changes to the Board of Directors
were made. These include:
-- Barry Blattman, who was appointed Chairman of the Board,
Chief Executive Officer and President of CRIIMI MAE. He brings
with him an impressive track record of more than a decade in
senior commercial real estate finance positions at Merrill
Lynch, Salomon Brothers, and Daiwa Securities.
-- Craig M. Lieberman, who was appointed to the newly created
position of Senior Vice President-Chief Portfolio Risk Officer.
Mr. Lieberman is responsible for efforts to maximize the value
of the Company's CMBS portfolio and oversee all of the Company's
servicing operations. He has more than 14 years of experience in
structured finance and commercial real estate as a Director of
Commercial Mortgage-Backed Securitization for First Union
Securities and as a partner in a law firm focusing on securities
offerings and work-outs of distressed commercial real estate.
-- Mark R. Jarrell and Joshua B. Gillon, both of whom were
appointed to the Board. Mr. Jarrell is Senior Vice President and
head of the Debt Group at The Community Development Trust, Inc.,
a New York real estate investment trust focused on financing
affordable housing and community development. Mr. Gillon is
Executive Vice President and General Counsel of Traffix, Inc.
(Nasdaq: TRFX), a leading on-line direct marketing and database
management company.
Preferred Dividends Paid
On March 6, 2003, the Board of Directors declared the payment of
the dividends previously deferred for the second quarter of 2002
on its Series B, F and G Preferred Stock. Holders of record of
these securities on March 17, 2003 will receive $0.68 per Series
B share, $0.30 per Series F share and $0.375 per Series G share
in cash on March 31, 2002. Dividends on Series B, F and G total
approximately $1.7 million per quarter.
Outlook
"With a more solid financial footing following our
recapitalization and the strength and experience of our
management team, we are positioning the Company to maximize the
value of our existing asset base and resume growth. Our goal is
to be a leader in the CMBS market and build long term
shareholder value," concluded Barry Blattman.
DIRECTV LATIN AMERICA: Turning to Young Conaway for Advice
----------------------------------------------------------
Pursuant to Section 327(a) of the Bankruptcy Code, DirecTV Latin
America, LLC seeks the Court's authority to employ Young Conaway
Stargatt & Taylor LLP as its local bankruptcy counsel.
According to Craig D. Abolt, Chief Financial Officer of DirecTV
Latin America, LLC, DirecTV chooses Young Conaway to be its
counsel because of the firm's extensive experience and knowledge
in the field of debtor's and creditors' rights and business
reorganizations under Chapter 11. In addition, Young Conaway's
expertise, experience and knowledge practicing before this Court
will be efficient and cost effective for DirecTV's estate. In
fact, in preparing for this case, Young Conaway has become
familiar with DirecTV's financial affairs and prior business and
many of the potential legal issues, which may arise in the
context of this Chapter 11 case.
Joel A. Waite, Esq., a Young Conaway partner, tells Judge Walsh
that he and his Firm will:
(a) provide legal advice with respect to DirecTV's powers
and duties as debtor-in-possession in the continuing
operation of its business and management of its
properties;
(b) prepare and pursue confirmation of a plan and approval
of a disclosure statement;
(c) prepare on behalf of DirecTV necessary applications,
motions, answers, orders, reports and other legal
papers;
(d) appear in Court and protect the interests of DirecTV
before the Court; and
(e) perform all other legal services for DirecTV which may
be necessary and proper in these proceedings.
Young Conaway will charge DirecTV on an hourly basis and look
for reimbursement of actual, necessary expenses and other
charges it will incur. The principal attorneys and paralegals
presently designated to represent DirecTV and their standard
hourly rates are:
Professional Rate
------------ ----
Joel A. Waite $425
M. Blake Cleary 315
Alfred Villoch, III 204
Stefanie Hubloue 120
Other attorneys and paralegals may from time to time serve
DirecTV in connection with Young Conaway's employment.
Mr. Waite tells the Court that Young Conaway received $100,000
in connection with the planning and preparation of initial
documents for filing this case. A portion of this amount covers
the payment of prepetition fees and expenses while the balance
will be held by Young Conaway as security for postpetition fees
and expenses.
To the best of his knowledge, Mr. Waite says that Young Conaway
has not represented DirecTV, its creditors, or any other
parties-in-interest, or their respective attorneys, in any
matter relating to DirecTV or its estate. If Young Conaway
learns of any connections with other parties-in-interest, the
Firm will make an appropriate disclosure. Mr. Waite is
confident Young Conaway is a "disinterested person" as that
phrase is defined in Section 101(14) of the Bankruptcy Code
(DirecTV Latin America Bankruptcy News, Issue No. 1; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
DOBSON COMMS: Will Pay 12-1/4% Preferred Dividend on April 15
-------------------------------------------------------------
Dobson Communications Corporation (Nasdaq:DCEL) declared a cash
dividend on its outstanding 12 1/4% Senior Exchangeable
Preferred Stock (CUSIP 256072 30 7 and CUSIP 256069 30 3). The
dividend will be payable on April 15, 2003 to holders of record
at the close of business on April 1, 2003.
Holders of shares of 12 1/4% Senior Exchangeable Preferred Stock
will receive a cash payment of $30.625 per share held on the
record date. The cash dividend covers the period from January
15, 2003 through April 14, 2003. The dividends have an annual
rate of 12 1/4% on the $1,000 per share liquidation preference
value of the preferred stock. The dividends have an annual rate
of 12 1/4% on the $1,000 per share liquidation preference value
of the preferred stock.
Dobson Communications is a leading provider of wireless phone
services to rural markets in the United States. Headquartered in
Oklahoma City, the Company owns or manages wireless operations
in 17 states. Dobson has expanded rapidly in recent years
through internal growth and by acquisition. For additional
information on the Company and its operations, please visit its
Web site at www.dobson.net
* * *
As reported in Troubled Company Reporter's February 26, 2003
edition, Moody's Investors Service confirmed its ratings for
Dobson Communications Corporation, and its subsidiaries.
The rating action mirrors Dobson's strong liquidity and modest
near term debt amortization requirements.
Outlook is revised to negative from stable, reflecting the
challenges that the communications business encounters today.
Ratings Confirmed
Dobson Communications Corporation Ratings
* Senior Implied B1
* $300 million 10.875% Senior Notes due 2010 B3
* 12.25% Exchangeable Preferred Stock due 2008 Caa2
* 13.0% Exchangeable Preferred Stock due 2009 Caa2
Dobson Operating Company, LLC
* $925 million secured credit facility Ba3
Dobson/Sygnet Communications Company
* $200 million 12.25% Senior Notes due 2008 B3
DYNEX: Closes $9M Sale & 25-Yr Leaseback Deal of English Asset
--------------------------------------------------------------
Dynex Power Inc., a leading, independent power semiconductor
technology company, announced completion of a sale and
25-year leaseback transaction of its Doddington Road property in
Lincoln, England with the investment arm of the Lincoln Co-
operative Society Limited, Lincoln Corn Exchange and Markets
(1991) Limited. The $8.9 million proceeds are being used by
Dynex to reduce debt and provide working capital liquidity.
"The LCE offer was the best option amongst several we reviewed,"
commented Michael LeGoff, President and Chief Executive Officer
of Dynex. "The LCE professionals proved to be excellent
counterparts. It took a super effort by all involved to complete
this transaction on our time line as the critical centrepiece to
refinancing the company in the first quarter of 2003."
"We are delighted to have completed this transaction with
Dynex," said Kevin Cooke, Chief Executive Designate of Lincoln
Co-op and LCE. "Dynex employs close to 300 people in the Lincoln
City area and we saw this as an opportunity for us to help a
local business while implementing our strategy for the
acquisition of valuable industrial property in Lincolnshire. We
look forward to seeing Dynex grow in the future and to working
with them to ensure they remain a viable part of the future of
our community."
Dynex is one of the world's leading designers and manufacturers
of industrial high power semiconductors. Their unique
capabilities permit the manufacture of both standard bipolar
semiconductors and new generation insulated-gate bipolar
transistors. The Company's products are used to improve
the reliability and quality of power generation, transmission
and distribution systems, marine and rail electric drives,
induction heating applications, industrial motor drives and
controls and the next generation electric vehicle drive
technologies. Dynex also produces a high-end microwave sensor
product used as a security alarm sensor in premier motor cars.
Dynex is headquartered in Lincoln, UK, which houses the
manufacturing, silicon fabrication, marketing and sales, design
and research & development operations. Sales staff are also
located in Ottawa, Canada, Irvine, California and Paris, France.
Lincoln Co-operative Society is a successful Co-operative
business based in Lincolnshire. The mission of the Society is to
provide the widest possible range of services for its members
and maintain quality, value and ethical principles while
building for the future by generating profits to develop
services, pay dividends to members and support local
communities. The Society is one of the largest employers within
Lincolnshire and has a diverse business portfolio including
convenience stores, travel agencies, a productive dairy,
undertakers, post offices, pharmacies, motor dealerships and
department stores. The Society has a turnover of pnds stlg 230
million per annum with a balance sheet value of almost pnds stlg
150 million. Lincoln Corn Exchange & Markets (1991) Ltd. is a
property investment company, which is a wholly ownedsubsidiary
of Lincoln Co-operative Society. LCE has almost pnds stlg
80 million of property investments under its ownership.
ENCOMPASS: Wants to Continue Using Current Settlement Protocol
--------------------------------------------------------------
Before the Petition Date and as part of their ordinary day-to-
day operations, Encompass Services Corporation and its debtor-
affiliates negotiated the settlement of claims with project
owners for the amounts due and payable on account of
disagreements with the Debtors' customers relating to work
performed or services delivered. These Project-Negotiation
Claims may relate to a disagreement over the quality of work
performed on a project, changes to the price for or scope of the
work performed, the level of service provided and authorization
to proceed with work. While some of these Project-Negotiation
Claims, particularly the very large ones, are pursued by the
Debtors through a judicial proceeding, majority are not and are
regularly settled without judicial involvement. These routine
negotiations effectively maximize the Debtors' benefits to the
businesses while minimizing the involvement of costly outside
counsel.
Similarly, the Debtors' management teams, with the assistance of
in-house and outside counsel, also investigated, evaluated and
attempted to resolve certain litigation claims or causes of
action asserted by the Debtors. Depending on the specific facts
and the risks involved in litigating the claims, the Debtors
would make appropriate offers to settle the claims. These
prepetition settlement procedures have successfully spared the
Debtors' businesses from unnecessary litigation costs while
facilitating the collection of amounts owed to them.
Consequently, the Debtors seek the Court's authority to retain
the manner of settling Project-Negotiation and Dispute-Related
Claims, without the need for obtaining further Court approval on
a case-by-case basis.
Due to the customs of the construction industry and the dynamics
of the projects, other than those projects based on hourly
rates, Lydia T. Protopapas, Esq., at Weil, Gotshal & Manges LLP,
in Houston, Texas, tells the Court that the majority of the
Debtors' projects will have some pricing element, which must be
negotiated before final payment may be made on a contract.
Without the Prepetition Settlement Procedures, court approval
will be required on virtually every negotiation that takes place
concerning the pricing elements in the project contracts.
The Debtors intend to implement the Settlement Procedures, based
on the proposed settlement amount agreed to by the parties,
which is the difference -- Documented Difference -- between:
(a) the amount initially sought to be recovered -- the
Debtors' Amount; and
(b) the proposed amount for which the Debtors are seeking
to settle the claim -- the Settlement Amount.
Specifically, the Debtors want to settle, without prior Court
approval or the approval of any other party-in-interest any:
(a) Dispute-Related Claims involving a Documented Difference
of less than or equal to $75,000; and
(b) Project-Negotiation Claims involving a Documented
Difference of less than or equal to $200,000.
In negotiating and settling the Dispute-Related Claims and
Project-Negotiation Claims, Ms. Protopapas relates that the
Debtors will be guided by several factors, including the
likelihood of their success in the pursuit of their Claims and
the estimated costs they would incur in litigating or otherwise
resolving the Claims. The settlement would enable the Debtors
to efficiently and economically resolve numerous claims asserted
by their estates, and, thus, improve their collections of the
Claims. By proceeding in this fashion, postpetition costs
incurred in resolving the Claims would be significantly reduced,
thus increasing the recoveries of all creditors.
To ensure the protection of all parties' interest, the Debtors
will submit:
(1) a notice to the Creditors' Committee's counsel at least
24 hours before accepting:
(i) any Documented Difference over $75,000 for a
Dispute-Related Claim; and
(ii) any Documented Difference over $200,000 for
a Project-Negotiation Claim; and
(2) quarterly status reports indicating the number of the
settled claims and the payments received, to:
(i) the Court;
(ii) the Lenders' counsel;
(iii) the Creditors' Committee's counsel;
(iv) the surety providers' counsel; and
(v) the U.S. Trustee.
Ms. Protopapas explains that holding individual hearings, filing
individual pleadings, and sending notice of each proposed
settlement to every one of the numerous creditors and interested
parties entitled to receive notice in these cases would be an
expensive, cumbersome, and highly inefficient way to resolve
many of the disputed claims. Moreover, the hearings, filed
pleadings, and noticing procedures would exponentially increase
the administrative costs of the estates. (Encompass Bankruptcy
News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
ENCORE ACQUISITION: COO Gene Carlson Leaves Post
------------------------------------------------
Gene R. Carlson, resigned as COO for Encore Acquisition Company
(NYSE:EAC) effective Wednesday, March 26, 2003.
Jon Brumley, CEO, said that "Gene is one of our founders and has
been important to Encore's success. All of us at the Company
wish him the very best. To Gene's credit, he built a wonderful
technical staff and we will be able to cover his
responsibilities from within the Company."
Organized in 1998, Encore is a growing independent energy
company engaged in the acquisition, development and exploitation
of North American oil and natural gas reserves. Encore's oil and
natural gas reserves are located in the Williston Basin of
Montana and North Dakota, the Permian Basin of Texas and New
Mexico, the Anadarko Basin of Oklahoma, the Powder River Basin
of Montana and the Paradox Basin of Utah.
* * *
As reported in the June 21, 2002, issue of the Troubled Company
Reporter, Standard & Poor's assigned its double-'B'- minus
corporate credit rating to Encore Acquisition Company and its
single-'B' rating to Encore's proposed $150 million senior
subordinated notes due 2012. The notes are being offered under
rule 144a with registration rights. Proceeds from the note
offering will be used to reduce outstanding bank indebtedness.
The outlook is stable.
"The ratings of Fort Worth, Texas-based Encore reflect the
company's small to midsize reserve base, limited geographic
diversification, and an aggressive growth strategy," noted
Standard & Poor's credit analyst Brian Janiak. "These weaknesses
are tempered by the company's high percentage of company-
operated properties (90%) that require modest future development
expenses, and its high percentage of proved developed reserves
(85%), which have a long reserve life of about 15 years and
provides the company with meaningful operational and financial
flexibility," Janiak added.
ENRON: Mizuho Bank Asks Stay Lift to Foreclose on Collateral
------------------------------------------------------------
Mizuho Corporate Bank, Ltd.'s predecessor-in-interest, The
Industrial Bank of Japan, Limited, The Chase Manhattan Bank, The
Royal Bank of Scotland plc, and The Bank of Tokyo-Mitsubishi,
Ltd. -- the Bank Group -- loaned, via a Credit and Security
Agreement dated as of June 22, 2001, $375,000,000 to Flagstaff
Capital Corporation, a subsidiary of JP Morgan Chase Bank.
Banco Bilbao Vizcaya Argentaria S.A. acquired an interest in the
Bank Loan after the initial syndication.
Flagstaff in turn loaned $1,400,000,000 pursuant to a Credit
Agreement dated as of June 22, 2001, to Hansen Investments Co.,
a wholly owned subsidiary of Compagnie Papiers Stadacona, a
Canadian non-debtor affiliate of Enron Corporation, upon which
Hansen was to pay interest to Flagstaff during the term of the
loan. Brian M. Cogan, Esq., at Stroock & Stroock & Lavan LLP,
in New York, relates that the Hansen Loan Agreement provides
that, in the event the principal of the loan is prepaid, Hansen
will owe Flagstaff a "Make-Whole Amount," consisting of accrued
and unpaid interest as well as the present value of future
interest that would have been owed had the principal not been
prepaid. This Make-Whole Amount has been calculated to equal
$360,000,000. The Hansen Loan Agreement also provides that an
"Enron Event" is an Event of Default. An Enron Event includes
Enron's insolvency or misrepresentations Enron made. Hansen's
obligations to Flagstaff are also evidenced by a Promissory Note
dated June 22, 2001.
Among the obligations of Hansen to Flagstaff are a certain
warrant and "warrant rights," including the obligation to pay
Flagstaff the Make-Whole Amount. Pursuant to the Warrant
Agreement dated June 22, 2001 -- the Class B Warrant Agreement -
- Hansen granted to Flagstaff a warrant to purchase Class B
Preferred Shares of Hansen, exercisable by Flagstaff at any time
unless and until an Event of Default occurred under the Hansen
Loan Agreement. A transferee from Flagstaff of the Class B
Warrant could exercise the Class B Warrant at any time.
Pursuant to a Put Option Agreement dated June 22, 2001,
Flagstaff was granted the right to "put" to Enron both:
(i) the Class B Warrant; and
(ii) Flagstaff's warrant rights unde3r the Hansen Loan
Agreement, which Warrant Rights include the right to the
Make-Whole Amount.
The "put" payable by Enron under the Put Option Agreement is the
fair market value of the Class B Warrant.
As part of the same transaction, Flagstaff and Enron entered
into a Total Return Swap, dated as of June 21, 2001. The Swap
provides that, on the day Flagstaff either exercises the Class B
Warrant or "puts" the Class B Warrant to Enron, Enron, as Fixed
Rate Payer, will pay to Flagstaff the Make-Whole Amount, and
Flagstaff, as Floating Rate Player, will pay to Enron either:
(i) the fair market value of the Class B Warrant, if
Flagstaff has tendered the Class B Warrant to Enron; or
(ii) the subscription price paid by Flagstaff to acquire the
Class B Shares plus the present value of the cumulative
preferred dividend that has or will occur with respect
to the shares, if Flagstaff has exercised the Class B
Warrant.
Consequently, Hansen loaned $1,400,000,000 to CPS, which used
the proceeds to refinance an existing loan by which CPS acquired
its principal asset -- a paper mill and related assets in
Quebec, Canada. To evidence its obligations on the
$1,400,000,000 loan from Hansen, CPS gave to Hansen a promissory
note payable on demand or, if no demand is made, on June 23,
2006.
Mr. Cogan tells the Court that Flagstaff's obligations to the
Bank Group under the Bank Loan Agreement are secured -- the
Security Interest -- by certain "Pledge Collateral" including,
among other things, Flagstaff's rights under the Hansen Loan
Agreement, Hansen Note, Warrant Agreement, Put Option Agreement,
Swap Agreement and Enron Agreement. This Security Interest is
binding on Flagstaff's successors and assigns, and therefore
exists whether the Pledge Collateral is in the hands of
Flagstaff or Enron. Each member of the Bank Group may
individually pursue the Pledge Collateral and the Security
Interest is not to be released until the Bank Group has been
paid in full.
On June 27, 2001, UCC-1 financing statements covering the Pledge
Collateral were filed with the Secretary of State of New York
and the Secretary of State of Delaware. Further, on July 3,
2001, a UCC-1 financing statement covering the Pledge Collateral
was filed in New York County, New York. Each of these financing
statements names as secured party Chase as collateral agent for
the Bank Group.
On November 30, 2001, Flagstaff delivered to Enron a Put Notice
and Put Assignment under the Put Option Agreement. By the
delivery, Flagstaff purported to "put" the Class B Warrant and
Warrant Rights, including the right to the $360,000,000 Make-
Whole Amount, to Enron pursuant to the Put Option Agreement. If
valid and enforceable, this put would have the effect of
transferring the Class B Warrant and Warrant Rights to Enron.
The transfer would in turn trigger Enron's obligation to make
payment to Flagstaff under the Swap.
Accordingly, pursuant to Sections 105(a) and 362 of the
Bankruptcy Code and Rule 4001 of the Federal Rules of Bankruptcy
Procedure, Mizuho and Banco Bilbao ask the Court to lift the
automatic stay. In the alternative, Mizuho and Banco Bilbao ask
the Court to determine that the put was ineffective to transfer
the warrant and warrant rights to Enron to the extent that they
remain property of Flagstaff, and enforcement of those rights
does not implicate the estate property or the automatic stay.
Mr. Cogan that cause exist for the lifting of the automatic
stay:
(a) Enron has no equity in the property and the property is
not necessary for an effective reorganization; and
(b) Mizuho and Banco Bilbao's interest is not adequately
protected.
For the alternative determination, Mr. Cogan points out that the
Pledge Collateral, including the right to the Class B Warrant
and Warrant Rights, are not property of the Enron estate, either
because:
(a) the purported put was never properly consummated
according to its terms; or
(b) the put occurred postpetition and was therefore void.
Mr. Cogan explains that in order to effectuate a put or transfer
of the Class B Warrant and Warrant Rights from Flagstaff to
Enron, these procedures must be followed:
(i) after the occurrence and during the continuation of an
Event of Default, Flagstaff would deliver a Put Notice
to Enron;
(ii) Enron would calculate the Purchase Price and deliver
notification of the purchase price to Flagstaff on the
same day the Put Notice was delivered;
(iii) failing Enron's timely delivery of the purchase price
calculation, the purchase price would be deemed to be
Hansen's net worth as shown on the most recent financial
statements delivered pursuant to the Hansen Loan
Agreement;
(iv) upon receipt of notification of the purchase price,
Flagstaff would tender delivery of the Class B Warrant
and Warrant Rights pursuant to a put assignment; and
(v) upon tender of the put assignment, Enron would pay the
calculated or deemed purchase price that same day.
However, Mr. Cogan points out that Enron and its affiliates
carried out none of the steps required to effectuate the put.
Enron never delivered a notification of its purchase price
calculation, and as Hansen had never delivered financial
statements, there was no basis on which to arrive at a deemed
purchase price. Moreover, even if the purchase price had been
ascertainable, Enron never paid it.
Furthermore, while a copy of the Put Notice is dated
November 30, 2001, Mizuho and Banco Bilbao do not know whether
the Put Notice was actually delivered to Enron on that date or
thereafter. If the Put Notice was delivered after the Petition
Date, the delivery would have been in violation of the automatic
stay in these cases and therefore void. (Enron Bankruptcy News,
Issue No. 60; Bankruptcy Creditors' Service, Inc., 609/392-0900)
FLEETWOOD ENTERPRISES: Banks Increase Credit Line by $20 Million
----------------------------------------------------------------
Fleetwood Enterprises, Inc. (NYSE: FLE), the nation's leader in
recreational vehicle sales and a leading producer and retailer
of manufactured housing, announced that the lenders in its
syndicated revolving line of credit have agreed to restate the
financial covenant relating to earnings before interest, taxes,
depreciation and amortization (EBITDA).
The Company had previously indicated that it did not expect to
meet that covenant following its fourth fiscal quarter ending
April 27, 2003. Fleetwood now anticipates that it will meet the
revised covenant through the remaining term of the credit
facility, which is scheduled to expire in July 2004. Fleetwood
announced at the same time that it had amended its inventory
financing agreement with Textron Financial, which incorporated
the same covenant.
Fleetwood further announced that the maximum amount of the
revolving line of credit, which is provided by a syndicate of
banks led by Bank of America, N.A. as administrative agent, has
been increased by $20 million to $130 million, reflecting the
return of a former syndicate member to the loan arrangement.
"Earlier this year we had resized the credit line, but in light
of a subsequent increase in our borrowing base and the interest
of a former participant in returning to the syndicate, we
welcomed this opportunity to increase the line by $20 million,"
said Boyd R. Plowman, Fleetwood's executive vice president and
chief financial officer. "This increase will provide additional
liquidity as we move into the strongest selling season in both
our industries."
FLOW INTL: Receives Nasdaq Notification Due to Late 10-Q Filing
---------------------------------------------------------------
Flow International Corporation (Nasdaq: FLOW), the world's
leading developer and manufacturer of ultrahigh-pressure
waterjet technology equipment used for cutting, cleaning
(surface preparation) and food safety applications, announced
that due to its planned delay in filing its Form 10-Q for the
third fiscal quarter ended January 31, 2003, it has received a
Nasdaq Staff Determination letter. The letter indicates that
because of the company's delayed Form 10-Q filing, FLOW is not
currently in compliance with the listing requirements set forth
in Nasdaq's Marketplace Rule 4310(c)(14) and as a result, the
company's stock will trade under the symbol "FLOWE" beginning on
Thursday, March 27, 2003.
The company intends to file its third quarter Form 10-Q by April
1, 2003 satisfying all listing requirements at that time. The
company expects its stock will trade again under the symbol
"FLOW" beginning the week of April 7, 2003.
About Flow International
Flow International Corporation is the world's leading developer
and manufacturer of ultrahigh-pressure (UHP) waterjet technology
for cutting, cleaning, and food-safety applications, as well as
isostatic and flexform presses. FLOW provides total system
solutions for various industries, including automotive,
aerospace, paper, job shop, surface preparation, and food
production. For more information, visit http://www.flowcorp.com
* * *
As of January 31, 2003, Flow International was in default of its
financial loan covenants contained in its senior bank loan
agreement. The loan agreement -- data obtained from
http://www.LoanDataSource.comshows -- provides Flow
International with access to up to $73,000,000 of credit on a
revolving basis from:
Lender Commitment
------ ----------
Bank of America, N.A. $32,490,000
U.S. Bank National Association $21,840,000
KeyBank National Association $18,670,000
-----------
Total Revolving Commitment $73,000,000
BofA serves as the Agent for the lending syndicate. Avure
Technologies, Inc., Hydrodynamic Cutting Services, CIS
Acquisition Corporation, and Flow Waterjet Florida Corporation
guarantee Flow International's obligations to the Lenders.
Financial Covenants
In July 2002, the Company agreed to comply with four key
financial tests at January 31, 2003:
(1) maintain a Fixed Charge Coverage Ratio (Cash Flow
divided by Fixed Charges) of at least .80 to 1;
(2) maintain a Funded Debt Ratio of not more than
24.50 to 1;
(3) maintain a ratio of Debt to Tangible Net Worth of
not more than 2.75 to 1.
(4) maintain Senior Funded Debt Ratio (Senior Debt
divided by EBITDA) of not more than 16.50 to 1
Increased Security
The loan agreement, dated December 29, 2000, has been amended
eight (maybe more) times to date. An Eighth Amendment, dated
October 11, 2002, required the Company to provide the Lenders
with additional security, including bank control agreements,
subsidiary stock pledges and landlord consents.
Continued Availability
All debt outstanding to the Lenders has been classified as
current. To date, the Lenders have not exercised any of their
default rights. The company had $9.8 million of its $113 million
total credit facility available as of January 31, 2003.
Accelerated collections have increased this availability to
$17.3 million as of March 17, 2003.
The Company anticipates the Banks will continue to forebear
through April 30, 2003.
FRESH CHOICE: Opens Another Restaurant in Los Angeles Market
------------------------------------------------------------
Fresh Choice, Inc. (Nasdaq:SALD), which operates self-service
salad buffet style restaurants in three states, has arrived in
Pico Rivera, California. The restaurant is located in the Pico
Rivera Towne Center.
Fresh Choice presents foods in colorful, exhibition-style
arcades. The vast salad bar offers freshly tossed signature
salads from Fresh Choice's extensive list of proprietary
recipes. In addition, more than 60 fresh ingredients allow
guests to "build their own" culinary masterpiece topped off with
a choice of 10 dressings or a selection of specialty oils and
vinegars.
Other arcades feature made-from-scratch soups, hot pasta with a
variety of signature sauces, pizza, hot bakery goods, baked
potatoes, low-fat soft serve and fresh fruit. There are many
low- and non-fat items to satisfy nearly every special dietary
requirement and detailed nutritional information is available
from the Fresh Choice web site at www.freshchoice.com.
Year after year, Fresh Choice continues to be the recipient of
numerous awards, voting them "Best Salad Bar" and "Best Family
Restaurant" throughout California, Washington, & Texas.
Fresh Choice is open seven days a week, typically from 11:00
a.m. to 9:00 p.m. Sunday through Thursday, and from 11:00 a.m.
to 10:00 p.m. on Friday and Saturday.
About Fresh Choice
Fresh Choice, Inc. operates self-service, salad buffet-style
restaurants that emphasize quality, freshness and value. It has
blossomed from a single location opened in 1986 to 52
restaurants under the Fresh Choice and Zoopa brand names in
California (42), the state of Washington (4) and Texas (6). In
addition, the Company operates one Fresh Choice Express
restaurant, two dual branded Fresh Choice Express and licensed
Starbucks retail stores and one stand-alone licensed Starbucks
retail store in Texas.
For more information, please visit the Fresh Choice, Inc. Web
site at www.freshchoice.com or call Diane Manning at 510/533-
9139.
As of September 8, 2002, the company's liquidity is strained
with total current liabilities of $8,052,000 exceeding total
current assets of $6,013,000.
FRONTIER AIRLINES: Will Release 4th Quarter Results on May 22
-------------------------------------------------------------
Frontier Airlines (Nasdaq:FRNT) provided additional earnings per
share guidance for its fiscal fourth quarter ended
March 31, 2003.
The airline had previously estimated that it would report a
fiscal fourth-quarter 2003 loss in a range similar to its fiscal
third-quarter loss of $6.2 million, or $0.21 per common share,
which included a special charge of $1.1 million. The airline
issued additional guidance in order to quantify the effects of a
blizzard in Denver last week that caused Denver International
Airport to shut down for two days. Frontier cancelled 371
flights during the two-day shutdown and, due to associated
passenger re-accommodations, experienced a substantial reduction
in the company's ability to take close-in bookings. As the
result of this revenue loss and costs associated with the
blizzard, along with higher than anticipated fuel costs, the
airline estimates its earnings per share (EPS) for its fiscal
fourth quarter will fall within the range of ($0.34) to ($0.38)
loss per share. The Company plans to release its actual fiscal
fourth-quarter results on May 22, 2003, after the close of
normal and after-hours trading sessions.
The airline also announced that it recently entered into a
marketing program that will enable the airline to receive fees
in the future based on the program's performance. At signing,
the third party paid the airline $10 million, which represents a
pre-payment of some of the fees it is anticipated the airline
will earn through the program's performance. This $10 million
will be reflected as unrestricted cash in the airline's
financial statements for the quarter ended March 31, 2003;
however, that amount will not be taken into income until it is
earned as program fees in accordance with the program agreement.
There are also certain circumstances in the agreement that would
require re-payment of the $10 million in pre-paid fees to the
third party.
Providing updated information related to the airline's fuel
hedging program for its fiscal first quarter FY04, the airline
reported that it has entered into an additional derivative
contract, covering approximately 15 percent of its jet fuel
requirements from April 1 through June 30, 2003, at a price of
$0.7925 per gallon. The Company now has hedged 30 percent of its
fuel requirement for April and May 2003; 20 percent for June
2003; and five percent thereafter through Nov. 30, 2003.
Denver-based Frontier Airlines employs approximately 3,100
aviation professionals and is the second-largest jet service
carrier at Denver International Airport. Frontier and its
regional jet partner Frontier JetExpress offer service to 39
cities. Frontier's fleet consists of 35 aircraft, which feature
a single-class configuration. In 2002, for the fourth
consecutive year, Frontier's maintenance and engineering
department has received the Federal Aviation Administration's
highest award, the Diamond Certificate of Excellence. This award
signifies 100 percent of the airline's maintenance and
engineering employees have completed advanced aircraft
maintenance training programs. In April 2002, Entrepreneur
ranked Frontier one of two "Best Low-Fare Airlines." Frontier
provides capacity information and corporate information on its
Web site, which may be viewed at www.frontierairlines.com.
* * *
As previously reported, Frontier Airlines (Nasdaq: FRNT) has
received conditional approval from the Air Transportation
Stabilization Board for a $63 million federal loan guarantee of
a $70 million commercial
loan facility.
"The events of September 11 and its aftershocks have had a
debilitating effect on the capital markets. We are in the midst
of our fleet improvement/transition plan, and access to capital
is a critical success factor. Obtaining conditional approval for
this government-backed loan helps to ensure that we can continue
our business strategy, bring competitive air travel options to
more communities and preserve competition in the aviation
industry. We are especially grateful for the professional manner
in which the ATSB and their staff conducted this process. We
found their knowledge of our industry and the unique challenges
we face to be thorough and comprehensive, and we thank them for
their efforts," said Frontier President and CEO Jeff
Potter.
Congress enacted the ATSB loan guarantee program in September
2001 in order to provide financial stability for airlines
impacted by the September 11 terrorist attacks.
GENCORP INC: Board Declares Quarterly Dividend Payable on May 30
----------------------------------------------------------------
The Board of Directors of GenCorp Inc. (NYSE: GY) declared a
quarterly cash dividend of three cents per share on the issued
and outstanding ten cents par value common stock of the Company,
payable May 30, 2003 to shareholders of record on May 1, 2003 at
5:00 p.m. Eastern Daylight Time.
GenCorp is a global, technology-based manufacturer with leading
positions in automotive, aerospace and defense and
pharmaceutical fine chemical industries. For more information
on GenCorp visit the Company's Web site at
http://www.gencorp.com
As previously reported in Troubled Company Reporter, Standard &
Poor's assigned its preliminary double-'B' and single-'B'-plus
ratings to senior unsecured and subordinated debt securities,
respectively, filed under GenCorp Inc.'s $300 million SEC Rule
415 shelf registration.
At the same time, Standard & Poor's affirmed its existing
ratings on GenCorp, including the double-'B' corporate credit
rating. The outlook is stable.
GENTEK INC: Court Gives Go Ahead for $60 Million DIP Financing
--------------------------------------------------------------
Judge Walrath acknowledges that GenTek Inc.and Noma Company
require additional financing for their working capital needs
during these Chapter 11 proceedings. In this regard, Judge
Walrath authorizes GenTek to obtain Letters of Credit of up to
$50,000,000. Noma is also permitted to borrow under the DIP
Revolving Credit Facility of up to $10,000,000 at any time.
Judge Walrath grants the DIP Lenders an allowed administrative
expense claim having priority over any other administrative
expenses without limitation to any claims granted under the
Final Cash Collateral Order in respect of the Adequate
Protection Obligations subject only to the Carve-out. (GenTek
Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
GRAPHIC PACKAGING: Inks $3 Billion Merger with Riverwood Holding
----------------------------------------------------------------
Riverwood Holding, Inc., parent company of Riverwood
International Corporation, and Graphic Packaging International
Corporation (NYSE: GPK) jointly announced that they have signed
a definitive merger agreement that will create a global
paperboard packaging company with leading market positions
serving the beverage, food and consumer products industries.
Under the terms of the transaction, Graphic Packaging, the
leader in folding carton consumer products packaging, and
Riverwood, the leader in multi-pack beverage packaging, will
merge in a stock transaction with an enterprise value of
approximately $3 billion.
The combined company will have 2002 pro forma revenues of
approximately $2.3 billion and EBITDA in excess of $400 million.
Management has identified broad-based operating synergies of $55
million per year, which are expected to be fully realized in the
third year after closing. The transaction is expected to be
accretive to earnings for both companies and the new entity is
projected to generate substantial cash flow to reduce debt. The
transaction has been approved by the Boards of Directors of both
companies and by the shareholders of Riverwood.
The new company will have the scale, technologies and rich
product portfolio to enhance both companies' strong
relationships with beverage, food and consumer products
companies worldwide. Graphic Packaging and Riverwood, which have
a successful track record of working together, will benefit
from:
- enhanced growth opportunities;
- broader value-added product lines;
- world-class technology, management expertise and workforce;
- efficient operational practices;
- broad-based synergy opportunities;
- a global delivery network; and
- substantial cash flow to reduce debt.
The merger is expected to greatly expedite the growth of both
companies' existing packaging businesses by combining Graphic
Packaging's sophisticated front-end sales and marketing,
converting operations and strong customer relationships with
Riverwood's experience in providing an integrated, total
packaging systems offering.
According to the terms of the transaction, Graphic Packaging
shareholders will receive one share of Riverwood for each share
of Graphic Packaging they own, following a stock split by
Riverwood. Before closing, all of Graphic Packaging's
convertible preferred stock will be converted into Graphic
Packaging common stock in return for a cash payment. This
payment is expected to be approximately $19 million, based on
the present fair value of future dividends. Riverwood
shareholders will own 57.5% of the new public company, while
Graphic Packaging shareholders will own 42.5%. Shares of the
combined company are expected to trade on the New York Stock
Exchange.
Graphic Packaging Chairman and Chief Executive Officer, Jeffrey
Coors, will serve as Executive Chairman of the combined company,
and Riverwood President and Chief Executive Officer, Steve
Humphrey, will serve as President and Chief Executive Officer.
Graphic Packaging Chief Operating Officer, David Scheible, will
serve as Executive Vice President of Commercial Operations for
the new company. The Board of Directors will consist of nine
members: Mr. Coors, Mr. Humphrey, five independent directors and
two directors nominated by Riverwood's investors. The combined
company will employ more than 8,000 people on four continents
and will be headquartered in Atlanta.
"We are uniting two strong companies that we believe will be the
leading single source provider of innovative paperboard
packaging solutions," said Mr. Coors. "Our objective is to
achieve accelerated growth in the global consumer, food and
beverage packaging industries by capitalizing on the best from
each organization."
"This is a merger of two companies that know each other very
well and share similar operating values," said Mr. Humphrey. "We
will have a global company with the scale and resources to
become a stronger partner with our customers. We believe this is
the best way to ensure future profitable growth and create long-
term value."
The transaction is expected to be completed in the third quarter
of 2003, subject to customary shareholder and regulatory
approvals. Riverwood's investors include funds managed by
Clayton, Dubilier & Rice, Inc., Exor, Brown Brothers and other
institutional investors. Several Coors family trusts, which own
approximately 75% of the outstanding common shares of Graphic
Packaging as converted, will own approximately 30% of the
combined company.
Credit Suisse First Boston acted as financial adviser to Graphic
Packaging, and Goldman, Sachs & Co. acted as financial adviser
to Riverwood.
About Riverwood
Riverwood International Corporation is a leading integrated
provider of paperboard packaging solutions to multinational
beverage and consumer products companies. Headquartered in
Atlanta, Riverwood has annual sales of over $1.2 billion and
approximately 4,100 employees at its operations in six
countries. Riverwood has approximately $900 million in public
debt outstanding and represents substantially all of the
business assets of Riverwood Holding, Inc. A fund managed by
CD&R led the $2.8 billion purchase of Riverwood from Manville
Corporation in March 1996. Additional information about
Riverwood can be found at www.riverwood.com.
About Graphic Packaging
Graphic Packaging, whose corporate credit standing and its $450
million senior secured credit facility are rated by Standard &
Poor's at BB, is the leading North American manufacturer of
folding cartons, making cartons for the food, beverage and other
consumer products markets. The Company has a large recycled
paperboard mill and 17 modern converting plants and
approximately 4,300 employees in North America. Its customers
make some of the most recognizable brand-name products in their
markets.
GRAPHIC PACKAGING: Merger Pact Prompts S&P to Watch Ratings
-----------------------------------------------------------
Standard & Poor's Ratings Services placed its 'BB' corporate
credit rating on folding carton producer Graphic Packaging Corp.
on CreditWatch with negative implications. Standard & Poor's at
the same time placed its 'B' corporate credit rating on
paperboard manufacturer Riverwood International Corp. on
CreditWatch with positive implications.
The rating actions follow announcement by the companies that
they have signed a definitive, stock-for-stock merger agreement.
Standard & Poor's said that the negative implications on the
Graphic Packaging CreditWatch reflect expectations that the
transaction will create a company that is more highly leveraged
than is Graphic Packaging currently. Conversely, the positive
CreditWatch implications on Riverwood indicate that the
transaction could create a company with the ability to generate
greater levels of free cash flow than Riverwood, which would
allow for more rapid debt reduction.
Graphic Packaging had debt outstanding at Dec. 31, 2002, of
about $480 million. Riverwood's debt at Sept. 30, 2002, was
about $1.6 billion. Total debt for the combined company is
initially expected to be about $2.2 billion.
"We believe this merger would be a good strategic combination,"
said Standard & Poor's credit analyst Pamela Rice, "providing
forward integration opportunities, potential accelerated revenue
growth for new consumer packaging applications, expansion of
Riverwood's packaging systems capabilities to Graphic
Packaging's customers, and a reduction in customer
concentration". In addition, the potential realization of $55
million of synergies identified by the companies, the expected
tax benefit of a significant portion of Riverwood's $1.2 billion
of net operating losses, and lower interest expense following
debt refinancing actions should boost free cash flow generation
above the current capabilities of the individual companies.
Nonetheless, the new company would be highly leveraged, with
pro forma debt to EBITDA of 5.2x, excluding synergies.
Graphic Packaging, based in Golden, Colo., is one of the largest
North American folding carton producers, primarily supplying
packaging to the food, beverage, and consumer products markets.
Atlanta, Georgia-based Riverwood, has about a 50% share of the
coated unbleached kraft market, a value-added paperboard used in
beverage, food, and other packaging applications.
Standard & Poor's said that it will meet with management shortly
to discuss the merger, strategic direction of the combined
company, financial policies, potential synergies, and
refinancing plans in order to determine the appropriate rating
for the new company.
GRUMMAN OLSON: Gets OK to Turn to Murphy Group for Fin'l. Advice
----------------------------------------------------------------
Grumman Olson Industries, Inc., sought and obtained authority
from the U.S. Bankruptcy Court for the Southern District of New
York to hire The Murphy Group as Financial Consultants.
The Murphy Group and its employees will perform certain services
typically performed by a controller, including assisting in the
processing of the payroll, accounts payable, billing,
collecting, and accounts receivable of the Debtor and preparing
internal financial reports for management of the Debtor.
The Murphy Group will be paid at an hourly rate of $150 for the
services rendered by Thomas Murphy. At this time, The Murphy
Group intends to provide one other accountant at the rate of $42
per hour. Although The Murphy Group does not anticipate
furnishing any additional employees, The Murphy Group will be
paid for each such employee at a mutually agreed hourly rate,
but not to exceed $150. The Murphy Group estimates that its
total fees and expenses will average approximately $30,000 per
month.
Grumman Olson Industries, Inc., a business which derives its
operating revenues primarily from the sale of truck bodies,
filed for chapter 11 protection on December 9, 2002 (Bankr.
S.D.N.Y. Case No. 02-16131). Sanford Philip Rosen, Esq., James
M. Matthews, Esq., and Carl A. Greci, Esq., at Sanford P. Rosen
& Associates, P.C., represent the Debtor in its restructuring
efforts. When the Company filed for protection from its
creditors, it listed $30,022,000 in total assets and $38,920,000
in total debts.
INSIGHT COMMS: Will Announce 1st Quarter Results on May 6, 2003
---------------------------------------------------------------
Insight Communications Company, Inc. (Nasdaq: ICCI) will
announce its results for the first quarter ended March 31, 2003
on May 6, 2003 after the close of business.
Management will then host a conference call on May 7, 2003 at
9:00 a.m. ET to discuss these results. The conference call will
be simultaneously webcast over the Internet as well. - 0- *T
Call information WHAT: Insight Communications Conference Call
First Quarter 2003 Results WHEN: May 7, 2003 at 9:00 a.m. ET
WEBCAST URL: Visit Insight's Investor Relations page:
www.ir.insight-com.com For those who cannot listen to the live
broadcast, a replay of the webcast will be available beginning
approximately two hours after the event and will be archived on
the company's website. A replay of the call will also be
available as follows: REPLAY TIMES: May 7, from 2:15 PM (ET)
through May 14, at 11:59 PM (ET) REPLAY NUMBER: 800.475.6701
(domestic) 320.365.3844 (international) Access code: 680127 *T
Insight Communications (NASDAQ: ICCI) is the 9th largest cable
operator in the United States, serving approximately 1.4 million
customers concentrated in the four contiguous states of
Illinois, Kentucky, Indiana and Ohio. Insight specializes in
offering bundled, state-of-the-art services in mid-sized
communities, delivering analog and digital video, high-speed
data and the recent deployment of voice telephony in selected
markets to its customers.
Insight Communications' December 31, 2002 balance sheet shows a
working capital deficit of about $33 million.
KEMPER: S&P Cuts Counterparty & Fin'l Strength Ratings to B-
------------------------------------------------------------
Standard & Poor's Ratings Services lowered its counterparty
credit and financial strength ratings on the members of the
Kemper Insurance Cos. Intercompany Pool to 'B-' from 'B+'.
In addition, Standard & Poor's lowered its rating on Lumbermens
Mutual Casualty Co.'s surplus notes to 'C' from 'CCC'. These
ratings remain on CreditWatch with negative implications, where
they were placed on Feb. 18, 2003.
"These ratings actions follow Kemper's announcement on March 25,
2003, that the Illinois Insurance Department had denied Kemper
permission to make the next scheduled interest payments on its
surplus notes," said Standard & Poor's credit analyst John Iten.
Interest on the 8.3% surplus notes and 8.45% surplus notes is
due June 1, 2003, while interest on the 9.15% surplus notes is
due July 1, 2003.
Kemper also announced a tender offer for all notes outstanding
at 10% of face value. If all notes were tendered, Lumbermens
would pay about $70 million to note holders. This action would
eliminate one class of creditors and facilitate creation of a
new entity by a consortium of investors, which will buy the
renewal rights to a portion of the ongoing book of business. The
claims of the note holders on Lumbermens assets, however, are
subordinated to other creditors. Therefore the tender offer will
reduce the amount of cash available to pay policyholder
obligations by a similar amount, though the new entity will pay
Lumbermens $9 million for certain assets and, going forward, a
commission on renewal business. Still to be resolved is whether
the Insurance Department will permit Lumbermens to honor the
letter of intent it signed in December 2002 with Berkshire
Hathaway. Under this agreement Lumbermens is to purchase, for
$125 million, Berkshire Hathaway's 15% equity interest in Kemper
Insurance Group, Inc.
Standard & Poor's expects to resolve the CreditWatch status of
the surplus note ratings as the interest payment dates are
reached. The ratings on these notes will be revised to 'D' on
actual default on these payments. The CreditWatch status of the
counterparty credit and financial strength ratings on the Kemper
Pool will be resolved following additional information on
management's plans for running off the existing liabilities,
including projected cash flows available to fund the orderly
runoff of the Kemper Pool liabilities.
KEY3MEDIA: Receives Final Court Approval of $30MM DIP Financing
---------------------------------------------------------------
Key3Media Group, Inc. (OTCBB:KMED), the world's leading producer
of information technology tradeshows and conferences, received
final court approval for $30 million debtor-in-possession
financing to be provided by Thomas Weisel Capital Partners.
All major creditor constituencies, including the Official
Committee of Unsecured Creditors, supported the DIP financing.
The Company also reached agreement with holders of its senior
secured bank debt with respect to the terms of a plan of
reorganization. Following the reorganization, the banks will
remain lenders to Key3Media under three-year secured notes.
"These developments represent a major milestone in our efforts
to restore the company's financial health," said Fredric D.
Rosen, Chairman and CEO of Key3Media. "Our restructuring process
is advancing very well. All of our conferences and tradeshows
are progressing as planned with strong participation from
customers, and the Company is fully funded through the
reorganization and beyond. We remain committed to delivering the
highest value to all exhibitors and attendees at our industry-
leading events."
Commenting on the reorganization process, Lawrence B. Sorrel,
Managing Partner of Thomas Weisel Capital Partners, said, "We
are pleased that we have been able to work constructively with
Key3Media's other creditors. With their support, we are poised
to execute a smooth and successful reorganization of the company
and position Key3Media for long-term growth in the global IT
tradeshow and conference market."
On February 3, 2003, Key3Media announced a plan of
reorganization, backed by investment funds managed by TWCP,
which own approximately 68% of Key3Media's bank debt and
approximately 38% of its bonds (11.25% senior subordinated notes
due 2011). Through the reorganization, Key3Media will reduce its
total debt by 87% from approximately $372 million to $50 million
and eliminate all of its existing preferred stock and common
equity. Annual interest expense will be cut from approximately
$38 million to $3.4 million.
About Key3 Media Group
Key3Media Group, Inc., produces information technology
tradeshows and conferences. Key3Media's products range from the
IT industry's largest exhibitions such as COMDEX and
NetWorld+Interop to highly focused events featuring renowned
educational programs, custom seminars and specialized vendor
marketing programs. For more information about Key3Media, visit
http://www.key3media.com.
About Thomas Weisel Capital Partners
Thomas Weisel Capital Partners is the merchant banking affiliate
of the investment firm Thomas Weisel Partners LLC. TWCP's
flagship fund, Thomas Weisel Capital Partners, L.P., is a $1.3
billion private equity fund with backing from leading
institutional investors and a current portfolio of over 30
companies primarily focused in the growth sectors of the
economy, including media and communications, information
technology and health care.
KMART CORP: Appaloosa Discloses 0.9% Equity Stake
-------------------------------------------------
In a regulatory filing with the Securities and Exchange
Commission, Appaloosa Management Inc. and David A. Tepper report
that they beneficially own 4,603,874 shares of Kmart Corporation
common stock, representing 0.9% of all shares Kmart issued.
Appaloosa Management is the general partner of Appaloosa
Investment Limited Partnership I, the investment advisor to
Palomino Fund Ltd. David A. Tepper is the sole stockholder and
president of Appaloosa Partners Inc. (Kmart Bankruptcy News,
Issue No. 50; Bankruptcy Creditors' Service, Inc., 609/392-0900)
LTV CORP: Seeks Court Nod to Retain Craig Burman for Tax Work
-------------------------------------------------------------
The LTV Corporation, together with its debtor-affiliates,
collectively ask Judge Bodoh to authorize them to employ Craig
A. Burman to continue services Mr. Burman has been providing
since 1995 to:
(a) review real estate tax assessments by the Cook
County (Illinois) Assessor's Office of certain
Properties owned by the Debtors for the years 1989
through 2002 and
(b) obtain relief in the form of tax refunds or
assessment reductions where appropriate.
Because Mr. Burman's fees are contingent upon the dollar amount
of tax relief secured for the Debtors, it is possible that a
lump sum payment of his fees - in some cases earned over the
past several years - could exceed the average monthly cap
established by the Court's December 2000 order authorizing the
retention of ordinary course professionals. The Debtors
therefore seek to retain Mr. Burman as special counsel nunc pro
tunc to the Petition Date.
Mr. Burman currently is pursuing two separate matters related to
his ongoing retention. The first matter involves real estate
tax refunds for the 1992-1999 tax years. For the last several
years, Mr. Burman has been in the process of negotiating and
obtaining approved settlement proposals from the Cook County
State's Attorney. Once approvals are obtained, the Circuit
Court of Cook County must review and enter judgment on these
proposals. After judgments are obtained, the application for
appropriate real estate tax refunds must be submitted to and
processed by the Cook County Treasurer.
The second matter involves a tax assessment for the 2002 tax
year. Mr. Burman, on behalf of the Debtors, has filed a 2002
Assessor's complaint and full documentation contesting the Cook
County Assessor's opinion of total assessed valuation for the
2002 tax year. Depending upon the result of this action, Mr.
Burman also may need to file:
(i) a "Re-review" application with the Cook County
Assessor;
(ii) a complaint with the Cook County Board of Review;
and
(iii) a specific objection lawsuit in the Cook County
Circuit Court.
Mr. Burman will charge for his legal services based on a
straight percentage fee arrangement in accordance with the
Authorization Form and Fee Agreements dated June 5, 2000, June
10, 1997, and June 27, 1995. Mr. Burman's fee is calculated as
a percentage of tax savings achieved, to refunds obtained, for
the Debtors in a particular tax year. With regard to matters
still being pursued on behalf of the Debtors, Mr. Burman's fees
will equal:
(1) 35% of the Debtors' tax savings for the 2002 tax
year;
(2) 35% of the Debtors' tax refunds for the 1997 through
1999 tax years;
(3) 33.33% of the Debtors' tax refund for the 1994
through 1995 tax years, with Mr. Burman's fees
capped at $125,000 for the 1994 tax year and
$100,000 for the 1995 tax year; and
(4) 40% of the Debtors' tax refunds for the 1992 through
1993 tax years, with Mr. Burman's fees capped at
$100,000 for each tax year.
Mr. Burman's percentage fee in the Retention Letters was
separately negotiated for each tax year, and his customary fee
arrangement is 50% of tax savings or tax refund achieved on
behalf of a client, with no cap on fees, for a given tax year.
During the years immediately preceding the Petition Date, the
Debtors made one payment to Mr. Burman in the amount of $50,000.
Payment was made on June 5, 2000, and the source of this payment
was the Debtors' operating cash. After the Petition Date, the
Debtors made one payment to Mr. Burman in the amount of
$30,019.68 on May 7, 2001. The source of this payment was the
Debtors' operating cash.
Mr. Burman advises that he does not represent, and has not
represented, any entity other than the Debtors in matters
related to these chapter 11 cases or the Retention. However,
Mr. Burman has represented, and likely will continue to
represent, certain creditors of the Debtors in matters unrelated
to the Debtors, these chapter 11 cases, and the Retention. Mr.
Burman assures Judge Bodoh that he does not represent, or hold,
any interest adverse to the Debtors or to their estates with
respect to the matters on which Mr. Burman is to be employed.
(LTV Bankruptcy News, Issue No. 46; Bankruptcy Creditors'
Service, Inc., 609/392-00900)
MAGELLAN HEALTH: Hires PwC to Provide Internal Auditing Services
----------------------------------------------------------------
Magellan Health Services, Inc., and its debtor-affiliates seek
the Court's authority to employ PricewaterhouseCoopers LLP to
provide these internal auditing services:
A. develop the Debtors' internal audit charter and internal
audit plan including:
1. execute an internally developed auditing plan;
2. develop reports regarding the adequacy of the Debtors'
internal procedures, process and controls; and
3. present findings from the results of performance of
the Internal Audit Plan;
B. prepare annual internal audit risk assessments including:
1. present and discuss appropriate audit priorities to
the Debtors' board of directors; and
2. execute a detailed risk assessment of the Debtors;
C. assist in the development and execution of a plan to
develop internal controls regarding financial reporting
and disclosure relating to compliance with Section 404 of
the Sarbanes-Oxley Act of 2002; and
D. perform other related internal audit services for the
Debtors as may be necessary or desirable.
PwC Partner Jeffrey Hoover assures the Court that the partners,
managers, associates and other employees of the firm do not have
any connection with the Debtors, their creditors or any other
party-in-interest, or their attorneys. However, Mr. Hoover
discloses that PwC currently provides or in the past has
provided services to:
A. Unsecured Creditors: Aetna US Healthcare; Commonwealth of
Virginia; Humana Florida; Empire Blue Cross Blue Shield;
Tenet Healthcare Corp.; AT & T; American Continental
Insurance Co. and MTS Health Partners, Inc.;
B. Affiliations of Directors: Texas Pacific Group;
Independence Blue Cross; Continental Airlines, Inc.; On
Semiconductor Corporation; Oxford Health Plans, Inc.;
ProQuest Company; Washington Mutual, Inc.; Seagate
Technology, Inc. and GMP Companies;
C. Professionals retained in the last two years: Alston &
Bird, Baker; Donelson, Bearman & Caldwell; Blank Rome
Comisky & McCauley; Buchanan Ingersoll, Dechert;
Dickstein Shapiro Morin & Oshinsky; Dinsmore & Shohl;
Dow, Lohnes & Albertson, Edwards & Angell; Fiddler
Gonzalez & Rodrigues; Foley & Lardner, Foulston &
Siefkin; Fulbright & Jaworski; Greenberg Traurig; Hogan &
Hartson; Holland & Hart; Hughes & Luce; Hunton &
Williams; King & Spalding; Lathan & Watkins; Littler
Mendelson; McDermott Will & Williams; Neal Gerber &
Eisenberg; Nelson Mullins Riley & Scarborough; Patterson
Belknap Webb & Tyler; Proskauer Rose LLP, Quarles &
Brady; Reed Smith; Ross & Hardies; Sidley, Austin, Brown
& Wood; Torkildson Katz Fonseca Jaffe Moore; Ulmer &
Berne, Willkie Farr & Gallagher; Wilson Elser Moskowitz
Edelman & Dicker;
D. Professionals Retained in the Case: Ernst & Young;
Accenture;
E. Secured Creditors: JPMorgan Chase Bank; Wachovia Bank NA;
JPMorgan Chase; Amsouth Bank of Alabama; Appollo
Advisors; Bank Polska Kasa Opieki SA; Black diamond
Capital Management, LLC; Credit Lyonnais; First American
Bank; Fleet Bank; General Electric Capital Corp.; General
Re New England Asset Mgt., Inc.; Metropolitan Life
Insurance Co.; SunAmerica Life Insurance Co. and USB AG;
Wachovia Bank;
F. Bond Trustees: Marine Midland Bank and HSBC Bank USA;
G. Known Bondholders: Salomon Brothers; Prudential
Insurance; Credit Suisse First Boston; Wells Fargo Bank;
Nuveen Advisory; PMI Management Insurance Company; Prov
Investment; Barclays Global; Colonial Management;
Deutsche Asset; Fidelity Management; Allianz; AXA
Rosenberg; pacific Employers Insurance; Vam Kampen;
Northern Trust; Liberty Mutual Insurance; State Farm
Mutual Auto Insurance; Morgan Stanley; Charles Schwab;
Bisys Fund SVC; Dresdner; SEI Investments; Lincoln
National Life Insurance; Merrill Lynch; Hartford Life
Insurance; AIM Advisors Inc.; Allstate Life Insurance;
Goldman Sachs Asset; Nomura Asset; John Hancock Advisors;
State Street Research and Management; Firemans Fund; New
York Life Insurance; Pacific Life Insurance; Fortis
Insurance Company; Scudder Kemper; Ohio National; Legg
Mason LLC; Diversified Investors; Western Asset
Management; Fortis Benefits; Canada Life Insurance; Banc
One Investors;
H. Significant Stockholders: Dimensional Fund Advisors, Inc.
and Texas Pacific Group; and
I. Major Landlords: Qwest Corporation; Viewpoint; SMI
International; Duke-Weeks Realty; Equitable Life
Assurance Society; Corporate Office Properties Trust; The
Fairways; PERA Northmark I, Inc.; Brandywine Operating
Partnership.
The Debtors propose to compensate PwC, depending on the type of
service, with:
Services Billing Rates
------------------------ ------------
Risk Assessment Services Fixed fee of $55,000
Internal Audit Plan $140 per hour
SO Project $200 per hour for managers,
senior managers and partners and
$140 per hour for senior
associates and associates
In addition to the hourly rates, PwC will seek reimbursement for
reasonable and documented out-of-pocket expenses. It is PwC's
policy to charge its clients in all areas of practice for
expenses incurred in connection with a client's case. The
expenses charged to clients include telephone and telecopier
usage, photocopying charges, travel expenses, expenses for
"working meals," as well as non-ordinary overhead expenses i.e.
secretarial overtime.
Mr. Hoover informs the Court that the aggregate fees for
conducting all of the Internal Auditing Services will range from
$500,000 to $650,000 over the course of the 2003 fiscal year.
PwC has already received a $140,000 retainer from the Debtors.
PwC and the Debtors considered these factors in fixing the
retainer:
A. the size and nature of the Debtors' operations;
B. the projected duration of the Debtors' Chapter 11 cases;
C. the time that PwC will be required to devote to rendering
services to the Debtors; and
D. the time constraints in connection with the commencement
of these Chapter 11 cases.
The retainer received by PwC is to be applied to services
provided and expenses incurred in respect of the representation
of the Debtors.
The Debtors and PwC have agreed to these terms in respect of
resolution of disputes:
A. any controversy or claim with respect to, in connection
with, arising out of or in any way related to this
Application or the services provided by PwC to the
Debtors, as outlined in this Application, including any
Matter involving a successor-in-interest or agent of any
of the Debtors or of PwC, will be brought in this Court
or in the District Court of the Southern District of New
York if the District Court withdraws the reference;
B. PwC and the Debtors consent to the jurisdiction and venue
of the Court as the sole and exclusive forum for the
resolution of the claims, causes of actions or lawsuits;
C. PwC and the Debtors waive trial by jury, and this waiver
is informed and freely made;
D. if the Bankruptcy Court, or the District Court if the
reference is withdrawn, does not have or retain
jurisdiction over the claims and controversies, PwC and
the Debtors will submit first to non-binding mediation,
and, if mediation is not successful, then to binding
arbitration, in accordance with the dispute resolution
procedures; and
E. judgment on any arbitration award may be entered in any
court having proper jurisdiction.
Additionally, PwC has agreed not to raise or assert any defense
based on jurisdiction, venue, abstention or any other defense
questioning the jurisdiction and venue of the Bankruptcy Court
or the District Court to hear or determine any controversy or
claims with respect to, in connection with, arising out of, or
in any way related to this Application or the services provided.
The Internal Auditing Services to be performed by PwC are
necessary to enable the Debtors to effectively operate their
businesses. Effective internal audit capabilities will enable
the Debtors to:
-- manage their strategic, operational, financial and
compliance risk;
-- develop and monitor controls designed to support the
accurate generation and reporting of financial numbers,
both externally and internally;
-- develop controls to ensure compliance with applicable
laws, regulations and internal policies and procedures;
-- identify and improve inefficient or ineffective processes
and controls throughout the entire organization; and
-- develop and test controls designed to support the
accurate generation of appropriate disclosure material in
furtherance of the Debtors' compliance with Section 404
of the Sarbanes-Oxley Act of 2002.
Mark S. Demilio, the Debtors' Executive Vice President and Chief
Financial Officer, reports that PwC has been performing the
Internal Auditing Services and the Risk Assessment Services for
the Debtors since December 2002, and the SO Project since
January 2003. Consequently, PwC is familiar with the Debtors'
business structure, complicated accounting practices and
auditing objectives, and, thus, is uniquely qualified to perform
the necessary Internal Auditing Services, the Risk Assessment
Services and the SO Project for the Debtors.
* * *
On an interim basis, Judge Beatty approves the Debtors'
application. The Court will consider the final approval of
PwC's engagement at the hearing on April 3, 2003. Objections
must be filed by March 31, 2003. (Magellan Bankruptcy News,
Issue No. 3: Bankruptcy Creditors' Service, Inc., 609/392-0900)
MED DIVERSIFIED: Retains Gadsby Hannah as Special Counsel
---------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of New York
gave its nod of approval to Med Diversified, Inc., and its
debtor-affiliates to hire Gadsby Hannah LLP as Special Counsel,
nunc pro tunc to January 3, 2003.
Gadsby Hannah will:
(i) advise and represent the Debtors in connection with
claims, defenses and counterclaims likely to be asserted
by and against the NCFE Entities, including claims raised
by the Debtors in litigation now pending before the
United States District Court for the District of
Massachusetts;
(ii) advise and represent the Debtors in connection with
claims, defenses and counterclaims likely to be asserted
by and against Private Investment Bank Ltd.,
(iii) advise and represent Debtors with respect to claims
raised by the Debtors litigation against Addus
Healthcare, which matter is now pending in the United
States District Court for the Northern District of
Illinois;
(iv) advise and represent the Debtors with respect to general
corporate and securities law matters; and
(v) advise and represent the Debtors with respect to a review
of Medicare/Medicaid billing practices of some of the
Debtors' locations.
John R. Hallal will lead the professionals in this retention.
Mr. Hallal's hourly rates is $375 per hour. Other customary
rates of Gadsby Hannah professionals are:
partners $350 to $450 per hour
Associates $190 to $300 per hour
Paralegals $125 to $150 per hour
Med Diversified, Inc. operates companies in various segments
within the health care industry, including pharmacy, home
infusion, multi- media, management, clinical respiratory
services, home medical equipment, home health services and other
functions. The Company filed for chapter 11 protection on
November 27, 2002 (Bankr. E.D. N.Y. Case No. 02-88564). Toni
Marie McPhillips, Esq., at Duane Morris LLP represents the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed $196,323,000 in
total assets and $143,005,000 in total debts.
MERISTAR COMMERCIAL: S&P Cuts & Affirms Ratings on 1999-C1 Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on three
classes of commercial mortgage pass-through certificates from
Meristar Commercial Mortgage Trust's series 1999-C1. At the same
time, the ratings on three other classes are affirmed from the
same transaction.
The downgrades reflect the deterioration in the pool's overall
operating performance, as evidenced by a decrease in the debt
service coverage and an increase in the loan-to-value ratio
since issuance. This is the result of a 22% decrease in net cash
flow since issuance. However, the rating actions also reflect
the fact that the loan is amortizing on a 25-year schedule and
has paid down by 5% since issuance to $313.3 million. While the
credit profile of the sponsor, Meristar Hospitality Corp., has
weakened, as evidenced by its credit rating declining to 'B-'
from 'BB-' at issuance, this all-hotel transaction continues to
benefit from the brand name recognition of many of its
franchisees, such as Marriott Hotels owned by Marriott
International Inc. ('BBB+'), the Hilton, and Doubletree brand
names which are owned by Hilton Hotels Corp. ('BBB-'), the
Sheraton Hotel brand name, which is owned by Starwood Hotels
& Resorts Worldwide Inc. ('BBB-'), and the Holiday Inns brand
name, which is owned by Six Continents PLC ('A-').
Using results for the year ending Dec. 31, 2002, and accounting
for the business cycle, Standard & Poor's adjusted the
management fees, marketing and advertising expenses, franchise
fees, real estate taxes, as well as the furniture, fixtures, and
equipment reserve contained in the borrower's net operating
income, to arrive at a stabilized NCF of $45.7 million. Using a
blended capitalization rate of 11.69%, the LTV is estimated at
80% and the debt service coverage ratio is 1.39x, based on a
refinance rate of 10.5%. These levels have deteriorated from
those at the 1999 issuance, when the LTV was 65% and the DSCR
was 1.70x. The actual DSCR for 2002 was 1.45x.
This transaction consists of a single fixed-rate loan evidenced
by two notes secured by 19 hotels located in 10 states. One note
is secured by 17 of the 19 hotel properties. This note is cross-
collateralized and cross-defaulted with the other note. The
second note is secured by two of the 19 properties, the Embassy
Suites Center City and the Doubletree Austin. This note is not
cross-collateralized, but is cross-defaulted with the related
note. The two largest assets in terms of allocated loan amounts
in the pool (the Sheraton Fisherman's Wharf in San Francisco and
the Somerset Marriott in northern New Jersey) have seen their
revenue per available room (RevPar) decline by 20% and 28%,
respectively, since issuance. While this portfolio of hotels
does exhibit some diversity by asset as the largest asset (the
Sheraton Fisherman's Wharf in San Francisco) represented just
11% of the pool's total NOI in 2002, there is geographic
concentration with California and Texas representing 33% and
25%, respectively, of total NOI. The properties in this
portfolio are full-service, business-oriented hotels in both
downtown central business district locations as well as suburban
locations that have been affected by the downturn in business
travel. The Somerset Marriott has seen its DSCR (NOI basis)
decline to 0.89x in 2002 from 2.03x in 2001. The DSCR
(NOI basis) for the Crowne Plaza in San Jose declined to 0.73x
in 2002 from 1.72x in 2001. The Sheraton Airport Plaza Hotel in
Charlotte has experienced a 71% decline in NOI since issuance.
As a result, the DSCR (NOI basis) for this hotel has remained
below 1.0x (0.72x in 2000, 0.77x in 2001, and 0.85x in 2002).
The operating performance for this portfolio of hotels has
declined during the past year (overall occupancy at 67.7% at the
average daily rate of $98.95, and RevPar at an ADR of $67.00 in
2002, compared to 68.7% at $107.32 and $73.68, respectively, in
2001). Based on the 2003 budget for this portfolio of hotels and
industry-wide projections, the rating actions reflect the belief
that operating performance will remain at 2002 levels in 2003,
but will begin to recover in 2004 and beyond.
The borrowers in this transaction are required to maintain a
reserve account into which will be deposited, during a low NOI
period, any amounts remaining each month after the payment of
debt service, after the funding of several reserve accounts, and
after payment of fees to any property managers that are not
affiliates of Meristar. A low NOI period is defined as a period
in which:
-- NOI for any quarter on a trailing 12-month basis has
been below $57,032,019 or the DSCR is below 1.5x, or
-- A bankruptcy has occurred with respect to the operating
tenant, Meristar Management Co. LLC.
The subject loan has entered into a low NOI period, and cash is
being trapped as of Nov. 1, 2002. Once the servicer, Midland
Loan Services Inc., has determined that the low NOI period has
ended, the trapped cash will be released to the borrower. As of
March 2003, $8.8 million had been set aside in an escrow
account. The rating actions reflect the benefit of the cash
trapped to date.
RATINGS LOWERED
Meristar Commercial Mortgage Trust
Commercial mortgage pass-thru certs series 1999-C1
Rating Balance
Class To From (mil. $) LTV (%) DCSR (x)
B BBB A 50.0 60 1.85
C BB+ BBB 42.0 71 1.57
D B BBB- 36.0 80 1.39
RATINGS AFFIRMED
Meristar Commercial Mortgage Trust
Commercial mortgage pass-thru certs series 1999-C1
Balance
Class Rating (mil. $) LTV (%) DSCR (x)
A-1 AA 47.3 47 2.35
A-2 AA 138.0 47 2.35
X AA 138.0* N/A N/A
*Notional balance of interest only class equal to the
certificate balance
of class A-2.
MERRIMAC PAPER: Case Summary & Largest Unsecured Creditors
----------------------------------------------------------
Lead Debtor: Merrimac Paper Company, Inc.
9 South Canal St.
Lawrence, Massachusetts 01843
Bankruptcy Case No.: 03-41477
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Holyoke Card Company, Inc. 03-41478
Aquamac Corporation 03-41479
Type of Business: Merrimac Paper Company makes a wide range of
Kraft specialty and technical papers in any
color.
Chapter 11 Petition Date: March 17, 2003
Court: District of Massachusetts (Worcester)
Judge: Joel B. Rosenthal
Debtors' Counsel: Andrew G. Lizotte, Esq.
HANIFY & KING
One Beacon Street
Boston, MA 02108
Tel: 617-423-0400
Estimated Assets: Estimated Debts:
----------------- ----------------
Merrimac Paper Company $10MM to $50MM $10MM to $50MM
Holyoke Card Company $1MM to $10MM $1MM to $10MM
Aquamac Corporation $100K to $500K $100K to $500K
A. Merrimac's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Foley, Hoag & Eliot $168,000
Global Petroleum Corporation $154,643
Bayer Corporation $129,849
Carrier Nationwide $116,507
Monson Companies, Inc. $92,548
Mass Electric $69,915
Rite Industries $67,925
Vulcan Performance Chemicals $67,018
Spruce Falls, Inc. $46,643
A.E. Stanley Manufacturing Company $45,994
The ADI Group $40,552
BASF Corporation $32,658
North Star Pulp & Paper $31,627
North American Paper Company $28,334
Oakite Products, Inc. $28,030
Sensient Technical Colors $25,797
Eldorado Chemical Co., Inc. $24,995
Fortifiber Corporation $22,724
Penford Products $21,755
Cascades-Auburn Fiber, Inc. $19,724
B. Holyoke's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Fibre Leather Mfg. Corp. $63,595
Valentine Paper, Inc. $57,966
National Starch & Chemical $48,152
Matsui International Co., Inc. $46,687
All Energy $46,291
International Paper Products $43,726
Crocker Technical Papers $40,452
Omnova Solutions, Inc. $33,310
Westfield Coatings $25,403
Heucotech Ltd. $24,590
Multi Plastics $19,959
Chemcentral/N.E. Inc. $17,581
ADM Tronics Unlimited, Inc. $17,360
Lux Transportation $15,088
ABF Freight Systems, Inc. $12,613
Western Mask Electric $12,241
Bay State Gas $11,606
Neveon, Inc. $10,080
Northstar Disposal $9,556
Park Builders $9,374
C. Aquamac's Largest Unsecured Creditor:
Entity Claim Amount
------ ------------
CHI Energy $18,260
NATIONAL CENTURY: NPF XII Subcommittee Seeks to Hire Dinsmore
-------------------------------------------------------------
The Official Subcommittee of Noteholders of Debtor NPF XII, Inc.
in the Chapter 11 cases of the National Century Debtors seeks
the Court's authority to retain Dinsmore & Shohl, LLP, nunc pro
tunc to January 10, 2003, as counsel for the Subcommittee in
these cases.
Mohan V. Phansalkar, Executive Vice President of Pacific
Investment Management Company, LLC, relates that Dinsmore &
Shohl is a law firm of over 250 attorneys with offices in
Columbus, Cincinnati, Dayton, Louisville, Lexington, Nashville
and Charleston.
As the Subcommittee's counsel, Dinsmore & Shohl will:
(a) serve as local counsel in Columbus in connection to and
as a supplemental compliment to the representation of
the Subcommittee by Milbank, Tweed, Hadley & McCloy,
LLP;
(b) represent the Subcommittee at all hearings and other
proceedings;
(c) assist the Subcommittee in preparing pleadings and
applications as may be necessary in furtherance of the
Subcommittee's interests and objectives;
(d) advise the Subcommittee with respect to its rights,
powers, and duties in these cases;
(e) assist and advise in consultations with the Debtors and
the Official Committee of Unsecured Creditors relative
to the administration of these cases;
(f) assist the Subcommittee in analyzing the claims of the
Debtors' creditors and in negotiating with creditors;
(g) assist with the investigation of the acts, conduct,
assets, liabilities, and financial condition of the
Debtors and of the operation of the Debtors' businesses;
(h) assist in the analysis of, and negotiations with, the
Debtors, the Official Committee of Unsecured Creditors
or any third party concerning matters related to the
terms of a plan or plans of reorganization for the
Debtors;
(i) assist and advise with respect to communications with
the general creditor body regarding significant matters
in these cases;
(j) review and analyze all applications, orders, statements
of operations, and schedules filed with the Court and
advise the Subcommittee as to their propriety; and
(h) perform other legal services as may be required and
are deemed to be in the interests of the Subcommittee in
accordance with the Subcommittee's powers and duties as
set forth in the Bankruptcy Code.
The Subcommittee believes that Dinsmore & Shohl possesses the
requisite knowledge and expertise in the areas of law relevant
to these cases, and that it is well qualified to represent the
Subcommittee as local counsel.
According to Kenneth R. Cookson, Esq., a partner with Dinsmore &
Shohl, the firm's professional fees are based on the standard
hourly rates of professionals and paraprofessionals. Presently,
Dinsmore & Shohl's current hourly rates are:
Position Rates
-------- -----
Partners $190 - 365
Counsel 130 - 300
Associates 120 - 245
Paralegals 85 - 135
Although there will undoubtedly be other Dinsmore & Shohl
attorneys and paralegals rendering services to the Debtors,
Dinsmore & Shohl has advised the Debtors that the current hourly
rates applicable to the attorneys and paralegals who will
primarily be representing the Subcommittee are:
Name Position Rate
---- -------- ----
Kenneth R. Cookson Partner $235
Kevin P. Braig Associate 195
James Peretzky Paralegal 115
Dinsmore & Shohl intends to apply to the Court for payment of
compensation and reimbursement of expenses in accordance with
applicable provisions of the Bankruptcy Code, the Bankruptcy
Rules, the guidelines promulgated by the Office of the U.S.
Trustee and the local rules and orders of this Court, and
pursuant to any additional procedures that may be or have
already been established by the Court in these cases. The firm
will be compensated at its standard hourly rates, which are
based on the professional's level of experience.
Dinsmore & Shohl has designated Mr. Cookson as the partner
supervising work on this matter and he will undertake to be
certain that all services performed on behalf of the
Subcommittee are rendered by lawyers and paralegals of Dinsmore
& Shohl at hourly rates and experience levels most appropriate
and economical to each service rendered.
Mr. Cookson assures Judge Calhoun that in connection with these
cases, Dinsmore & Shohl does not represent and does not hold any
interest adverse to the Debtors' estates or their creditors in
the matters upon which Dinsmore & Shohl is to be engaged.
(National Century Bankruptcy News, Issue No. 12; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
NATIONAL STEEL: Agrees to Extend Time Periods Related to Auction
----------------------------------------------------------------
National Steel Corporation announced its agreement with AK Steel
Corporation to extend the deadline for the submission of bids
and the date of the auction to be held in accordance with the
bidding procedures previously approved by the U.S. Bankruptcy
Court for the Northern District of Illinois overseeing National
Steel's pending Chapter 11 cases.
At a hearing on March 25, 2003, the Bankruptcy Court approved a
two-week extension of the deadline for the submission of bids,
from March 27, 2003 to April 10, 2003, and a two-week extension
of the date of the auction, from April 2, 2003 to April 16,
2003. The Bankruptcy Court also continued the previously
scheduled hearing to consider approval of the sale of
substantially all of National Steel's assets from April 7, 2003
to April 21, 2003.
National Steel and AK Steel also agreed to extend the date after
which either party would have the right to terminate their
previously announced Asset Purchase Agreement ("APA") in the
event that AK Steel and the United Steelworkers of America have
not entered into a new collective bargaining agreement covering
those represented National Steel employees becoming employees of
AK Steel. As previously announced, the original date of March
17, 2003 had been extended to March 26, 2003, as expressly
contemplated by the APA. The parties have agreed to extend the
date an additional two weeks, or until April 9, 2003.
Pursuant to the APA, National Steel has agreed to sell
substantially all of its principal steelmaking and finishing
assets, as well as its iron ore pellet operations, to AK Steel.
The transaction, which is targeted for completion in the second
quarter of 2003, is valued at approximately $1.125 billion,
consisting of $925 million of cash and the assumption of certain
liabilities approximating $200 million.
Under the terms of the APA, which is subject to the approval of
the bankruptcy court, AK Steel would acquire facilities at
National Steel's two integrated steel plants, Great Lakes in
Ecorse and River Rouge, Michigan, and the Granite City Division
in Granite City, Illinois, the Midwest finishing facility in
Portage, Indiana, the National Steel Pellet Company in Keewatin,
Minnesota, the administrative office in Mishawaka, Indiana,
various subsidiaries and National Steel's share of the Double G
joint venture in Jackson, Mississippi, as well as net working
capital related to the acquired assets.
In addition to the execution and ratification of a new
collective bargaining agreement by the USWA satisfactory to AK
Steel for the National Steel employees who will become employees
of AK Steel, the transaction is subject to a number of
conditions. As previously announced, early termination of the
waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act was granted on February 26, 2003.
Also as previously announced, on February 6, 2003 the Bankruptcy
Court approved the bidding procedures granting AK Steel priority
"stalking horse" status. The APA is subject to higher and better
offers submitted in accordance with the bidding procedures.
National Steel filed its voluntary petition in the U.S.
Bankruptcy Court for the Northern District of Illinois in
Chicago on March 6, 2002.
About National Steel
Headquartered in Mishawaka, Indiana, National Steel Corporation
is one of the nation's largest producers of carbon flat-rolled
steel products, with annual shipments of approximately six
million tons. National Steel employs approximately 8,200
employees. For more information about the company, its products
and its facilities, visit http://www.nationalsteel.com
NHC COMMUNICATIONS: Shareholders' Equity Deficit Is At C$1 Mil.
---------------------------------------------------------------
NHC COMMUNICATIONS INC. (TSE: NHC), a leading provider of
automated mainframe and cross-connect solutions for the copper-
based telecommunications market, reported its results for the
second quarter of fiscal 2003, ended January 31, 2003.
Revenues for the second quarter of 2003 increased 74% to $1.08
million from $0.62 million in the same period in 2002. Moreover,
deferred revenue increased to $20.28 million as of January 31,
2003 (from nil one year ago). Deferred revenue is comprised of
the deliveries invoiced to customers that are not yet recognized
as revenue. Deferred revenue related to products, as well as
deferred expenses related to the same products, will be
recognized when customer's acceptance will be received either
through written confirmation or confirmation by default (the
customer had no complaint during the thirty day period following
installation), provided all other revenue recognition criteria
are met. Deferred revenue related to maintenance and support
arrangements associated with product sales will be recognized on
a straight- line basis over the period of the term of the
programs.
Based on the most recent information provided by one of its
customers with regards to its installation process, and in
accordance with its revenue recognition policy, the Company
expects that all of the total short-term portion of the deferred
revenue of $19.4 million will be recorded by the end of the
fourth quarter of the current fiscal year.
Gross profit increased to $0.52 million, or 48% of revenues,
compared to $0.27 million, or 44% of revenue for the second
quarter of fiscal 2002.
Net loss for the second quarter was $2.13 million or $0.07 per
share, compared with a net loss of $2.92 million or $0.11 per
share for the same period last year.
As of January 31, 2003, the company recorded a total
shareholders' equity deficit of C$1,164,700
Business update
During the first quarter of fiscal 2003, the Company announced
that following a Request for Proposal process, it has been
awarded a multi-year contract for the deployment of its
ControlPoint(TM) solutions by a second US ILEC customer. From
October to December 2002, this contract produced $20.3 million
in purchase orders that were all shipped and billed. As at
January 31, 2003, a remaining balance of $1.68 million was
receivable from the customer.
On October 2, 2002, the Company received $2.4 million in orders
from its major US ILEC customer no. 1. These orders included the
purchase of an undisclosed number of ControlPoint(TM) solutions
following the successful completion of two first office
application (FOAs) field trials at two separate central offices,
as well as an additional order to purchase from NHC its larger
models of the ControlPoint(TM) solution for use in an unmanned
central office for which the installation has recently been
completed. As at January 31, 2003, all of those orders were
shipped, billed and all paid by this customer.
During the first quarter of fiscal 2003, NHC started a field
trial in a Bell Canada remote central office using the Company's
ControlPoint(TM) 800RT solution. The trial has been functioning
as planned with research continuing on the test access and
testing component. Based on the trial data, expected in fiscal
third quarter 2003, the Company looks forward to reaching the
final stages of this ILEC's decision process for the sale of the
ControlPoint(TM) solutions.
NHC is the first company to widely sell and install automated
mainframe solutions in North America. On December 13, 2002, the
Company announced that it was the first automated main
distribution frame vendor to complete the Telcordia(TM) OSMINE
Services Process for its ControlPoint(TM) solution for
Telcordia(TM) FOMS (Frame Operations Management System).
ControlPoint uses software and robotic technology to enable
ILECs to remotely perform key tasks that have historically
required manual on-site management.
By completing the OSMINE process, NHC is helping to ensure
network "flow- through" provisioning and operations efficiency
within the networks of its ILEC customers. Most of the U.S.
telecommunications wireline networks depend on operations
support systems (OSS) software developed and maintained by
Telcordia. The major local exchange carriers manage their
networks using these systems. In addition, the Company has
completed and successfully tested its CMS 3.0 "flow-through"
software with live ControlPoint(TM) solutions. This is another
first in this market and validates the robustness of CMS 3.0 and
the accomplishment of having completed the Telcordia(TM) OSMINE
Services process.
Update on Funding Plan
On March 17, 2003, the Company reached an agreement with one
supplier whereby the supplier has agreed, until July 31, 2003,
to allow the Company to make its payments on the earlier of 90
days after shipments have been made to the Company or the date
on which the Company receives payment from two of its customers.
All of the accounts payable to the supplier related to products
sold to these customer are secured by an assignment of the
Company's accounts receivable from the two customers.
During the second quarter, a debt financing was concluded with a
third party and certain members of senior management pursuant to
which the Company received $1,000,000. As at January 31, 2003,
the debt owed in connection with this financing was fully
repaid.
Also during the second quarter of fiscal 2003, the Company
announced the divestiture of its video product line for total
cash proceeds of $500,000, with $300,000 paid at the closing and
$50,000 payable in four semi-annual installments beginning on
May 15, 2003. The revenues from the four semi-annual
installments will be recognized upon collection. Following the
sale of this non-core operation, the Company's structure has
been focused even more directly on its remotely controlled
physical layer products.
NHC plans to continue to finance its activities from the
collection of sales to its ILEC customers No. 1 and No. 2. In
addition, NHC continues to seek additional long-term financing
to carry out its operations and investing activities.
Additional information, as well as the Management's Discussion
and Analysis of the financial results, will be filed shortly
with the relevant securities regulatory authorities and will be
available on the NHC web site at http://www.nhc.com.
About NHC
NHC Communications Inc. is a leading provider of products and
services enabling the management of voice and data
communications for telecommunication service providers. NHC's
ControlPoint(TM) solutions utilize a high-performance software
driven Element Management System (EMS) controlling an automated,
true any-to-any copper cross-connect switch, to enable incumbent
local exchange carriers (ILECs) and other service providers to
remotely perform the four key tasks that historically have
required manual on-site management. These four tasks fundamental
to all operations are loop qualification, deployment and
provisioning, fallback switching and service migration of Voice
and Data services including DSL and T1/E1. Using
ControlPoint(TM), NHC's customers avoid the risk of human error
and dramatically reduce labour and operating costs. NHC
maintains offices in Montreal, Quebec; Paris, France; and
Manassas, Virginia. "ControlPoint(TM)" is a trademark of NHC
Communications Inc. NHC may be contacted through its Web site:
http://www.nhc.com
NORTHWEST: Fitch Downgrades Ratings of Select EETC Transactions
---------------------------------------------------------------
Fitch Ratings downgrades six Enhanced Equipment Trust
Certificate transactions, five backed by payments from Northwest
Airlines and one by payments from Delta Airlines. These rating
actions are a result of deterioration in the credit quality of
the underlying airlines as well as a decline in the value of the
aircraft supporting the transactions. The rating actions,
detailed below, describe the changes in both factors.
On February 25, Fitch downgraded Northwest Airlines, Inc.
unsecured debt to 'B' from 'B+'. On March 18, Fitch assigned an
initial unsecured debt rating of 'B+' to Delta Air Lines, Inc.
The global aircraft industry has been turbulent during the last
18 months and is likely to remain so in the weeks and months
ahead. Fitch is concerned that the continued weakening of the
airline industry, particularly in North America, has and will
lead to further value impairment of EETC aircraft collateral. In
the evaluation of the collateral, Fitch focused primarily on the
following factors: the supply and demand of the aircraft and
similar aircraft, and the aircraft's importance to an airline's
ongoing operations. The aircraft that Fitch believes vulnerable
to the largest impairment include older vintages from all
manufacturers, and certain mid life to late life Boeing
aircraft.
The aircraft collateral in the NWA Trust #1, NWA Trust #2 and
Northwest 1996-1 transactions (B757-200s, 747-200Bs, B747-400s
and early A320s) are subject to greater impairment than those in
the Northwest 2001-2 and Delta 2001-2 transactions (mostly
A319's, A320's, A330's). In North America, the B757-200 and the
B747 aircraft have come under particular pressure in the last
nine months. For example, United Airlines, as part of its
bankruptcy and fleet consolidation has grounded 747 aircraft and
rejected 757 aircraft while National Airlines ceased operation
of its 15 aircraft B757-200 fleet.
Although the aircraft in the Northwest 2001-2 and the Delta
2001-2 transactions are key to ongoing operations and desirable
to many airlines worldwide, they are subject to some impairment.
The Northwest 2002-1 transaction is currently subject to the
least impairment of the transactions in question. This
transaction was pre-funded and the majority of its collateral is
still in the form of cash.
Ratings downgraded:
Delta Air Lines European Enhanced Equipment Pass Through
Certificates,
Series 2001-2
--Class A to 'AA' from 'AAA'.
Northwest Airlines Pass Through Certificates,
Series 2002-1
--Class C-1 and C-2 to 'BBB-' from 'BBB'.
Northwest Airlines European Enhanced Equipment Trust
Certificates,
Series 2001-2
--Class A to 'A' from 'AA-';
--Class B to 'BB-' from 'BBB'.
Northwest Airlines Pass Through Trusts,
Series 1996-1
--Class A to 'BBB-' from 'A-';
--Class B to 'BB-' from 'BBB-';
--Class C to 'B+' from 'BB';
--Class D to 'B' from 'BB-';
All classes are removed from Rating Watch Negative.
NWA Trust #2
--Class A to 'A-' from 'A+';
--Class B to 'BBB-' from 'BBB+';
--Class C to 'BB+' from 'BBB';
--Class D to 'B+' from 'BB-';
All classes are removed from Rating Watch Negative.
NWA Trust #1
--Class A to 'BB-' from 'A';
--Class B to 'B' from 'BBB-';
All classes are removed from Rating Watch Negative.
O'CHARLEY'S INC: Reports Weaker Q1 Sales & Earnings Trends
----------------------------------------------------------
O'Charley's Inc. (NASDAQ/NM: CHUX), a leading casual dining
restaurant company, announced an update on sales and earnings
trends for the first quarter ending April 20, 2003. The Company
will report results for the first quarter in May 2003.
The Company reported that quarter-to-date same store sales at
O'Charley's decreased approximately 2.0% and Ninety Nine
Restaurant & Pub same store sales increased approximately 0.6%.
The Company estimates that most of the same store sales weakness
at both concepts is due to severe winter weather, exacerbated by
weak consumer confidence.
Commenting on the announcement, Gregory L. Burns, chairman and
chief executive officer of O'Charley's Inc. stated, "Recent
sales trends for the first quarter reflect weak consumer
spending due to the effects of the war on a quarter already
impacted by severe winter weather and a weak economy. We expect
sales trends will remain erratic until a resolution of the
conflict in Iraq is in sight. Despite these external factors, we
are pleased with the strong operating fundamentals at
O'Charley's and Ninety Nine. Improved management and hourly
turnover at both concepts has yielded positive customer
satisfaction scores, evidenced by O'Charley's recent 'Choice in
Chains' ranking in a national consumer survey published by
Restaurants and Institutions. Moreover, we continue to
experience favorable commodity cost trends, offset somewhat by
higher utility costs. In addition, the Ninety Nine integration
remains on track and they are performing in line with our
expectations. We believe these encouraging operating
fundamentals are leading indicators of our future financial
success."
The Company's initial first quarter guidance reflected the weak
economic environment and the harsh winter weather in January.
However, the inclement weather conditions continued to impact
sales trends in February and early March, and combined with
consumers' concerns over the war have resulted in a revision to
first quarter guidance. The Company stated that it now expects
to report net earnings per diluted share of $0.40 to $0.42 for
the first quarter ending April 20, 2003. The Company remains on
schedule for targeted store openings in the first quarter for
both O'Charley's and Ninety Nine.
O'Charley's Inc. operates 189 O'Charley's restaurants in 15
states in the Southeast and Midwest. The menu, with an emphasis
on fresh preparation, features several specialty items such as
hand-cut and aged steaks, a variety of seafood, chicken that is
always fresh and never frozen, popular homemade yeast rolls,
fresh-cut salads with special-recipe salad dressings and their
signature caramel pie. The Company also operates Ninety Nine
Restaurant & Pub in 79 locations throughout Massachusetts, New
Hampshire, Rhode Island, Maine, Vermont and Connecticut. Ninety
Nine has earned a strong reputation for providing great food at
great prices in a comfortable, relaxed atmosphere. The menu
features a wide selection of appetizers, salads, sandwiches,
burgers, entrees and desserts, all served in generous portions.
In addition, the Company currently operates six Stoney River
Legendary Steaks restaurants in Georgia, Illinois, Kentucky and
Tennessee. The dinner-only steakhouse concept appeals to both
upscale casual dining and fine dining customers by offering high
quality food and attentive customer service typical of high-end
steakhouses at more moderate prices.
* * *
As reported, Standard & Poor's Ratings Services assigned its
'BB-' senior secured bank loan rating to casual dining
restaurant operator O'Charley's Inc.'s proposed $285 million
bank loan, which is comprised of a $150 million term loan and a
$135 million revolving credit facility.
Concurrent with the closing of this offering, the company is
acquiring Ninety Nine Restaurant & Pub. The new credit facility
will be used to fund the acquisition, refinance existing debt,
and for general corporate purposes.
Standard & Poor's also assigned its 'BB-' corporate credit
rating to O'Charley's. The outlook is stable.
PHILIP MORRIS: Legal Experts See No Truth in Bankruptcy Claim
-------------------------------------------------------------
Legal experts are questioning the validity of claims made by
Philip Morris USA that the $12 billion dollar appeal bond
ordered last week by Judge Nicholas Byron in the first consumer
fraud judgment on light cigarettes would bankrupt the company.
The lead attorney in the case (Miles v. Philip Morris), Stephen
Tillery of Korein and Tillery, says Philip Morris's claim of
going broke is an attempt to shift the focus from the real issue
at hand.
"Philip Morris would like the world to focus on their financial
woes rather than the court finding that more than a million
consumers of light cigarettes were defrauded, many of whom will
pay with their lives," Tillery said.
Illinois Attorney General Lisa Madigan was quoted in published
reports pointing out that "the bankruptcy threat is hollow and
that the proposed change to state law would unfairly privilege
the company."
"I think Philip Morris is doing all that they can to prevent
paying out money in verdicts and to the State of Illinois,"
Madigan said. "If you look at the stock market and you look at
the stock price for Philip Morris, you'll see that they are not
on the verge of bankruptcy, and they continue to be a healthy
company -- although {it is} not healthy for us to use their
products."
Legal experts also doubted that the posting of the appeal bond
would in any way jeopardize payment of master tobacco settlement
(MSA) funds to the state of Illinois. Special interest
legislation currently pending before the Illinois General
Assembly would seek to limit the size of such bonds, and the
impact would place Illinois behind other states for financial
recovery if Philip Morris did file for bankruptcy.
"This is ill-considered special interest legislation. Philip
Morris made millions deceiving Illinois smokers and now wants
the Illinois legislature to bail it out," said Donald W. Garner,
a professor at the Southern Illinois University School of Law.
"I do not believe that Illinois MSA payments are endangered by
the Miles suit and in all events the legislature has no business
protecting the tobacco industry from the consequences of their
fraud and deceit. The legislature should note that there is
strong Illinois Supreme Court constitutional precedent against
such legislation," Garner added.
"If it is a struggle for them to raise the bond, perhaps they
should have thought of that before they deceptively marketed
light cigarettes," Dr. Garner said.
POLYONE CORPORATION: Plans to Exit Nevada Engineered Films Plant
----------------------------------------------------------------
PolyOne Corporation (NYSE: POL) announced that it intends to
close its Engineered Films plant in Yerington, Nevada, by the
end of second-quarter 2003 if the Company is unable to quickly
sell the facility as an ongoing operation. Yerington, one of
four plants within PolyOne's Engineered Films unit, employs
approximately 85 people.
"Yerington has an excellent record of customer satisfaction, but
we need to reduce excess production capacity and realign
PolyOne's product portfolio to available capacity," said Thomas
A. Waltermire, chairman and chief executive officer. "We are
responding to the continuing slowdown in sales demand for
certain custom film products, as well as low margins in a number
of the markets."
Yerington produces a variety of film products, including film
for bookbinder covers. While PolyOne intends to carefully
transition a number of its Yerington products to other
Engineered Films facilities in either New Jersey, Pennsylvania
or Virginia, it will also cease manufacturing certain products
with low margins.
PolyOne projects that closing the Yerington plant would yield an
annualized pre-tax earnings improvement of $1.8 million because
reduced plant costs exceed the variable margin on exited sales.
Further, PolyOne would monetize an estimated $5 million of
commercial working capital and property and building.
Restructuring costs are projected to total $6.3 million, of
which $2.8 million would be cash closure costs. The Company
estimates the pre-tax earnings charge in the first and second
quarters of 2003 would be approximately $4.5 million and $1.5
million, respectively.
Employees affected by a Yerington closing would be eligible for
severance benefits and outplacement services, and also would be
eligible to apply for any job openings at other locations within
the Engineered Films business group.
About PolyOne
PolyOne Corporation, with 2002 revenues of $2.5 billion, is an
international polymer services company with operations in
thermoplastic compounds, specialty resins, specialty polymer
formulations, engineered films, color and additive systems,
elastomer compounding and thermoplastic resin distribution.
Headquartered in Cleveland, Ohio, PolyOne has employees at
manufacturing sites in North America, Europe, Asia and
Australia, and joint ventures in North America, South America,
Europe, Asia and Australia. Information on the Company's
products and services can be found at http://www.polyone.com
* * *
S&P Credit Rating Remains at BB+
As reported in the September 20, 2002 issue of the Troubled
company Reporter, Standard & Poor's Ratings Services lowered its
corporate credit and senior unsecured debt ratings on PolyOne
Corp., to double-'B'-plus from triple-'B'-minus, citing slower-
than-expected progress in improvement to the financial profile.
The outlook is negative.
"The rating action reflects the deterioration in operating and
financial performance stemming from adverse business conditions,
and the likelihood that needed improvement to the financial
profile could take longer than anticipated," said Standard &
Poor's credit analyst Peter Kelly. The continuation of
challenging industry fundamentals has weakened the financial
profile and is likely to limit the improvement anticipated in
the prior rating. Standard & Poor's recognizes the company's
efforts to reduce costs and manage cash flow, as well as recent
modest improvement in earnings.
RESIDENTIAL ACCREDIT: Fitch Takes Rating Action on 8 Note Series
----------------------------------------------------------------
Fitch Ratings has downgraded eight, affirmed 59 & placed one
class of Residential Accredit Loans Inc. mortgage pass-through
certificates on Rating Watch Negative:
Series 1997-QS5
-- Class A-9 & A-10 affirmed at 'AAA';
-- Class M-1 affirmed at 'AA';
-- Class M-2 affirmed at 'A';
-- Class M-3 affirmed at 'BBB';
-- Class B-1 affirmed at 'BB';
-- Class B-2, rated 'B', is placed on Rating Watch
Negative.
Series 1999-QS5
-- Class CB1,CB-P, NB-1 - NB -3, NB-5, A-P & M-1 affirmed
at 'AAA';
-- Class M-2 affirmed at 'AA';
-- Class M-3 affirmed at 'BBB+';
-- Class B-1 affirmed at 'BB';
-- Class B-2 downgraded to 'B-' from 'B'.
Series 1999-QS10
-- Class A-1, A-2, A-3, A-P, M-1 affirmed at 'AAA';
-- Class M-2 affirmed at 'AA';
-- Class M-3 affirmed at 'BBB';
-- Class B-1 affirmed at 'BB';
-- Class B-2 downgraded to 'CCC' from 'B'.
Series 1999-QS11
-- Class CB, NB-2, NB-3, A-P & M-1 affirmed at 'AAA';
-- Class M-2 affirmed at 'AA';
-- Class M-3 affirmed at 'A-';
-- Class B-1 affirmed at 'BB';
-- Class B-2 affirmed at 'B'.
Series 2000-QS1
-- Class CB, NB-3, A-P & M-1 affirmed at 'AAA';
-- Class M-2 affirmed at 'AA';
-- Class M-3 affirmed at 'BBB';
-- Class B-1 downgraded to 'BB-' from 'BB';
-- Class B-2 downgraded to 'C' from 'CC'.
Series 2000-QS3
-- Class A-3, A-4, A-P & M-1 affirmed at 'AAA';
-- Class M-2 affirmed at 'AA+';
-- Class M-3 affirmed at 'A-';
-- Class B-1 affirmed at 'BB';
-- Class B-2 downgraded to 'B-' from 'B'.
Series 2000-QS5
-- Class A-3, A-4, A-P, M-1 & M-2 affirmed at 'AAA';
-- Class M-3 affirmed at 'A';
-- Class B-1 downgraded to 'BB-' from 'BB';
-- Class B-2 downgraded to 'C' from 'CC'.
Series 2000-QS6
-- Class A-3, A-4, A-P, M-1 & M-2 affirmed at 'AAA';
-- Class M-3 affirmed at 'A-';
-- Class B-1 affirmed at 'BB';
-- Class B-2 downgraded to 'B-' from 'B'.
R.H. DONNELLEY: Consolidating Operations at Raleigh, NC Facility
----------------------------------------------------------------
R.H. Donnelley Corporation (NYSE: RHD) --- whose senior secured
$1.5 billion facility has been rated by Standard & Poor's at BB
-- announced that it is consolidating its publishing operations
as part of its previously announced integration plan for the
Company's acquisition of Sprint Publishing and Advertising,
which closed in January 2003.
R.H. Donnelley will consolidate the majority of the Company's
publishing operations into its existing Raleigh, North Carolina
facility, resulting in the closure of its Blountville, Tennessee
facility, one of two facilities currently operated in the
Bristol/Blountville area. R.H. Donnelley will maintain a
presence in the area by continuing to operate customer service,
white pages production and graphics functions at its Bristol,
Tennessee site. The transition will take place over the next 6
to 9 months, with completion expected by year-end.
The consolidation plans will result in the loss of approximately
110 of R.H. Donnelley's 235 positions in the Bristol/Blountville
area. Some of the affected employees will be offered relocation
opportunities and the Company will provide a comprehensive
severance package based on years of service as well as
outplacement services to all affected employees.
SAFETY-KLEEN CORP: Asks Court to OK $1M Asset Sale to Oil Filter
----------------------------------------------------------------
Safety-Kleen Systems, Inc. and Ecogard, Inc. ask Judge Walsh to:
(1) approve and authorize the sale of certain assets to
Oil Filter Recyclers, Inc. under an Asset Purchase
Agreement dated March 12, 2003; and
(2) authorize their entry into a Transition Services
Agreement and a Collection Agreement.
As part of their overall plan to restructure their operations,
the Debtors have focused on, among other things, identifying and
divesting themselves of under-performing or non-core assets.
Towards this end, the Debtors have determined that the continued
ownership of various assets relating to the Selling Debtors'
bulk used oil filter recycling business are not essential to the
success of their operational restructuring efforts.
Accordingly, the Selling Debtors seek to maximize the value of
their estates by entering into the APA, the Transition Services
Agreement, and the Collection Agreement with Oil Filter
Recyclers.
The Oil Filter Recycling Assets
The assets of the Selling Debtors' Oil Filter Business consist
of approximately 4,400 specially designed bulk filter
containers, 17 specially designed bulk filter trailers, two
straight trucks with specially designed bulk filter bodies, and
filter plant recycling equipment. The bulk filter containers
are placed at customer locations and act as temporary holding
containers for spent used oil filters and absorbents, while the
trucks and trailers are utilized to pick up the used oil filters
and absorbents from customer locations and transport these
materials to Systems' recycling facility in Cincinnati, Ohio.
At the Cincinnati Plant, Systems utilizes specialized equipment
to dismantle the used oil filters and absorbents picked up from
the customers and produces:
(1) metal that is sold to steel mills;
(2) paper fluff that is used as industrial fuel; and
(3) used oil that is recycled into base lubricants or
industrial fuel.
In connection with the review of the Oil Filter Business, the
Debtors analyzed and determined that a sale of various assets
relating to the Cincinnati Plant and the Oil Filter Business
could result in significant operational savings, reductions of
current and future capital expenditures, reduced staffing
requirements and improved customer service.
Pursuant to the sale, Systems will close its bulk used oil
filter recycling facility located in Cincinnati, although the
facility itself is not being sold at this time.
Accordingly, the Debtors entered into negotiations with OFR on
the terms of a sale and a collection agreement. After extended
negotiations, the Selling Debtors have agreed to sell the Oil
Filter Business to OFR and sign the Collection Agreement. The
parties have also agreed to sign a Transition Services
Agreement.
The Debtors believe that the sale of the various assets to OFR
and entry into the Collection Agreement is the best option
available to capture significant savings because OFR currently
provides the services to be performed under the Collection
Agreement to the Debtors' customers located west of the
Mississippi River. Entry into the Collection Agreement simply
will expand the scope of the services to the entire continental
United States. Moreover, the terms of the Collection Agreement
are favorable to the Debtors and are 28% lower than the Debtors'
current internal cost of providing the services.
In addition, the Debtors believe that no other entity would be
willing or able to provide high quality collection and
processing services to the Debtors' customers east of the
Mississippi River on the pricing terms set out in the Collection
Agreement and be interested in the assets at this price. This
is based on the economic and business reality that few companies
provide collection and processing services, and no other company
has the ability to provide these services nationally, or with
the high quality demonstrated by OFR. Furthermore, the pricing
terms negotiated with OFR for those services under the
Collection Agreement are very favorable for the Debtors. The
Debtors believe OFR is a unique strategic buyer for the assets
that brings significant value to the Debtors' business in
addition to the purchase price to be paid for the assets.
Under these Agreements, the Debtors will continue to market,
sell and invoice their bulk used oil filter customers with OFR
being responsible for the pick-up and processing of oil filters
and absorbents.
The Asset Purchase Agreement
The significant terms of the APA are:
(1) Purchase Price. OFR will purchase the Oil Filter
Business' assets for $1,221,017 to be paid in
Installments of:
(i) $919,047 to be paid April 15, 2003; and
(ii) $301,970 to be paid 60 days after the
April Closing Date.
(2) Assets to Be Sold. The Selling Debtors will
transfer and assign to OFR:
(i) the machinery and equipment located at
the Cincinnati Plant;
(ii) the trucks and trailers used in this
business;
(iii) approximately 4,400 bulk filter
containers; and
(iv) Systems' rights, benefits and interests
under a Disposer Agreement with NE
Environmental Services dated
September 19, 2001.
All of these assets, except for the plant equipment,
will be sold to OFR effective as of the April
Closing Date. The plant equipment will be sold and
transferred to OFR effective as of the second
Closing Date.
(3) Buyer Assumed Liabilities. The only liabilities
that will be assumed by OFR are those liabilities
associated with the performance under the Disposer
Agreement as of the April Closing Date.
(4) Indemnification by Selling Debtors. The Selling
Debtors will defend, indemnify and hold harmless
OFR and its affiliates against various liabilities
relating to:
(i) inaccuracies in, breaches of, or non-
fulfillment of any representation, warranty,
agreement or covenant of the Selling Debtors
under the APA;
(ii) third-party claims arising out of occurrences
before the April Closing Date in connection
with the Selling Debtors' use of the assets;
and
(iii) third-party claims arising out of occurrences
on or after the April Closing Date in
connection with the Selling Debtors' use of
the plant equipment; provided, however, that
the Selling Debtors' maximum aggregate
liability for indemnification claims will not
exceed the Purchase Price.
(5) Indemnification by Purchaser. The Purchaser will
defend, indemnify and hold harmless the Selling
Buyers and their affiliates against various
liabilities relating to:
(i) inaccuracies in, breaches of, or non-
fulfillment of any representation, warranty,
agreement or covenant of the Purchaser
under the APA;
(ii) claims arising out of an occurrence on or
after the April Closing Date in connection
with OFR's use of the assets -- other than
the plant equipment; and
(iii) any claim arising out of an occurrence on or
after the Second Closing Date in connection
with OFR's use of the plant equipment or any
portion thereof or interest therein.
(6) Closing Conditions. The conditions to closing of
the sale including conditions customary for this
type of transaction, and entry into a final,
non-appealable order of the Bankruptcy Court
authorizing and approving the APA and the
consummation of the transactions contemplated in
those agreements, which order will establish that
the sale of the assets will be free and clear of
all liens and encumbrances, with all liens and
encumbrances attaching to the proceeds of the sale.
Transition Services Agreement
Systems will sign a Transition Services Agreement with OFR to
govern certain issues associated with the 60-day transition
period between the April Closing Date and the Second Closing
Date. This Agreement will terminate on the Second Closing Date.
(1) Operation of Bulk Filter Routes. During the term of
the Transition Services Agreement, OFR will operate
Systems' bulk filter routes in the eastern United
States and will be responsible for:
(i) supplying the tractors, trailers and other
necessary equipment and materials;
(ii) obtaining the necessary permits; and
(iii) bearing all costs associated with operating
the tractors, trailers and other equipment,
including fuel, taxes, rental charges,
insurance and maintenance expenses.
During the term of the Transition Services
Agreement, OFR's tractors that are used to service
the bulk filter routes will be operated by Systems'
employees. During the first six weeks of the term of
the TSA, OFR will deliver at least 5,000 55-gallon
drum equivalents of bulk used oil filters to the
Cincinnati Plant for processing. Thereafter, all
bulk used oil filters will be transported to OFR's
plant for processing.
(2) Charges. During the term of the TSA, OFR will
reimburse Systems for various salaries and
travel expenses of the tractor drivers and
Systems' transportation manager, as well as drum
processing charges at the Cincinnati Plant.
(3) Indemnification and Limitation of Liability. OFR
will indemnify Systems with respect to claims by
third parties relating to the actions or inactions
of the tractor drivers and OFR's employees and
representatives. Systems' liability under the TSA
will be limited to the total amount of fees
received by Systems attributable to the services
provided under the TSA.
The Collection Agreement
The salient terms of the Collection Agreement are:
(1) Scope of Services. Systems and its affiliates have
contracted or may contract to provide collection
and processing services to the Generators of waste
materials. Under the Collection Agreement, OFR will
have the exclusive right and obligation to perform
various services relating to waste materials of the
Generators and Systems and its affiliates.
(2) Term. The term of the Collection Agreement will be
five years and will automatically renew for
additional three-year terms unless either party
provides the other with written notice of its
desire to terminate the Collection Agreement at
least 24 hours before the end of the original term,
or at least 12 months before the end of any renewal
term.
(3) Compensation. The Collection Agreement provides a
payment schedule subject to OFR's right to:
(i) increase service fees after the first three
years of the initial term of the Collection
Agreement, subject to certain limitations;
and
(ii) impose a fuel surcharge.
(4) License Agreement. Systems will grant OFR a limited
non-exclusive right to use certain "First Recovery"
and "Safety-Kleen" trademarks.
(5) New Generators. Subject to Systems' written
consent, OFR may solicit new Generators for which
OFR will provide collection and processing services.
If OFR retains sole responsibility for a new
Generator, OFR will pay Systems a royalty of $5 for
each equivalent 55-gallon drum of waste received
from the new Generator.
(6) Right of First Refusal; Purchase Option. During the
term of the Collection Agreement, Systems will have
a right of first refusal to purchase any of OFR's
assets that are utilized to provide the collection
and processing services in the event OFR desires to
sell any such assets. In addition, upon termination
of the Collection Agreement, Systems will have the
option to purchase additional new equipment from OFR
and to acquire OFR's oil filter recycling business
for its fair market value. (Safety-Kleen Bankruptcy
News, Issue No. 54; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
SASOL DHB: Plan Confirmation Hearing Scheduled for April 2
----------------------------------------------------------
The U.S. Bankruptcy Court for the District of Minnesota approved
Sasol DHB Holdings, Inc.'s Disclosure Statement. The Court
found the document contains adequate information allowing
creditors to make informed decisions about whether to accept or
reject the company's Chapter 11 Plan of Reorganization. The
Debtor's Plan and Disclosure Statement are available for a fee
at:
http://www.researcharchives.com/bin/download?id=030321203209
and
http://www.researcharchives.com/bin/download?id=030321202947
A hearing to consider confirmation of the Debtor's Plan is
scheduled for April 2, 2003 at 10:30 a.m. in Courtroom 8 West,
U.S. Courthouse, 300 South Fourth Street, Minneapolis, Minnesota
55415.
The Debtor intends to pay all of its administrative costs,
priority claims and non-insider general unsecured claims in
full. The Plan will adjust (and defer) the payment of
obligations due to Sasol Chemical Industries, Limited, Ernest
Schmid and David Bednar, the Impaired Creditors.
The summary of claims and interests as treated under the Plan
are:
Class Category Description Treatment
----- -------- ----------- ---------
1-A Priority all Employees' Paid in Full on the
Claim claims entitled Effective Date
to priority in Sec.
507(a)(3)
1-B Priority all employees' paid in full on the
Claim claims entitled Effective Date
to priority in
Sec. 507(a)(4)
2-A Secured U.S. Bank's Unimpaired and Debtor
Claim claims obligations shall remain liable on
totaling to such guaranty on the
$2,854,459 same terms as before the
filing of the case.
3-A Unsecured all unsecured claims Will receive full
Claim not entitled to payment on the
Priority Effective Date.
3-B Unsecured all Sasol Chemical On the Effective Date,
Claims Industries Limited's the Debtor shall execute
of SCIL claims totaling to a promissory note in
$21,541,494 favor of SCIL in the
amount of $21,541,494
3-C Unsecured unsecured amount This claim shall be
Claims of $4,359,796 reduced to $1,926,755 in
of Ernest part by offsets by the
R. Schmid Debtor of the amount of
$616,872
3-D Unsecured consist of Will be paid by offset
Claims the principal against an obligation of
of David amount of $240,000 Mr. Bednar to the Debtor
H. Bednar in the principal amount
of $460,000.
4-A Equity equity interests of Cancelled
Interests SCIL, consisting of
in Class 490 Class A Common
A Common Shares
Shares
4-B Equity equity interests of Cancelled
Interests SCIL, consisting of
in Class 275 Class B Common
B Common Shares
Shares
Sasol DHB Holdings, Inc., is a holding company for group of
companies engaged in manufacture and distribution of explosives,
chemicals and fertilizers for the mining, industrial and
agricultural markets. The Company filed for chapter 11
protection on December 6, 2002 (Bankr. Minn. Case No. 02-84524).
James L. Baillie, Esq., at Fredrikson & Byron, P.A., represents
the Debtor in its restructuring efforts. When the Company filed
for protection from its creditors, it listed $50,881,436 in
total assets and $28,222,546 in total debts.
SHAW GROUP: Closes $3.6 Million Buy-Out of Envirogen Shares
-----------------------------------------------------------
The Shaw Group Inc. (NYSE:SGR) announced that its subsidiary,
Shaw Environmental & Infrastructure, Inc., acquired all of the
stock of Envirogen, Inc. (Nasdaq:ENVG) for an aggregate price of
approximately $3.6 million dollars. The sale of Envirogen, Inc.
was approved by its shareholders on March 19, 2003.
Envirogen's core business is the application of biotechnology to
remediate contaminated sites and waste streams. Envirogen
specializes in proprietary methods of remediating and treating
complex contaminants including ammonium percholorate (solid
propellant for rockets and missiles), MTBE (fuel additive used
to make gasoline burn cleaner) and 1,4-dioxane (explosives),
many of which are recognized by industry, regulators and the
national press as significant environmental challenges in the
United States. Ammonium percholorate has been the recent subject
of national news including several reports in the Wall Street
Journal and New York Times.
"With the addition of Envirogen, Shaw will have a distinct
technological and competitive edge to address the complex
remediation of ammonium percholorate, MTBE, and other
contaminates," said Tim Barfield, President of Shaw
Environmental & Infrastructure. "This acquisition will allow
Shaw E & I to take a leadership role in these key markets, by
coupling our existing environmental capabilities with a more
cost effective approach than the traditional approaches
available in today's market."
The Shaw Group Inc. offers a broad range of services to clients
in the environmental and infrastructure, power and process
industries worldwide. The Company is a leading provider of
consulting, engineering, construction, remediation and
facilities management services to the environmental,
infrastructure and homeland security markets. The Company is
also a vertically-integrated provider of comprehensive
engineering, consulting, procurement, pipe fabrication,
construction and maintenance services to the power and process
industries. The Company is headquartered in Baton Rouge,
Louisiana with offices and operations in North America, South
America, Europe, the Middle East and the Asia-Pacific region and
employs approximately 17,000 people. For more information please
visit our website at http://www.shawgrp.com
* * *
As reported in Troubled Company Reporter's March 5, 2003
edition, Standard & Poor's Ratings Services lowered its
corporate credit rating on Shaw Group Inc. to 'BB+' from 'BBB-'.
At the same time, Standard & Poor's assigned its 'BB' senior
unsecured rating to the engineering and construction firm's
proposed $250 million note offering due 2010. The notes are
expected to be filed under SEC Rule 144A with registration
rights. The ratings assume the timely syndication and completion
of the financing activities. Proceeds from the note offering are
expected to be used to purchase up to $384.6 million of the
firm's LYONs securities in a "Modified Dutch Auction," which
will run through March 26, 2003.
At November 30, 2002, Baton Rouge, Louisiana-based Shaw Group
had $531 million in debt outstanding on its balance sheet. The
outlook is now stable.
"The rating action reflects Standard & Poor's heightened
concerns that Shaw's liquidity will decline over the next
several quarters, mainly due to working capital usage as the
firm works off its power EPC backlog," said Standard & Poor's
credit analyst Joel Levington. "It also reflects weaker-than-
expected profitability on certain projects, which has led the
company to reduce its earnings guidance to $1.32 per share-$1.37
per share in 2003, versus prior expectations of $1.92-$2.08,"
the analyst continued.
SOFAME TECH: Four Directors Step Down from Board
------------------------------------------------
Sofame Technologies Inc. announces that Mr. Normand Belanger and
Mr. Claude Dugre have resigned from the Board of Directors of
the Corporation as of March 12, 2003, that Mrs. Helene St-Pierre
and Mr. Jacques Charron have resigned from the Board of
Directors of the Corporation as of March 19, 2003, and that Mr.
Rene Bedard resigned as Secretary of the Corporation as of
March 19, 2003.
Sofame Technologies Inc. is a Montreal-based corporation doing
business in the direct contact water heating industry.
Sofame Technologies Inc. is listed on the TSX Venture Exchange
under the SDW symbol and the financial statements are filed on
SEDAR's Web site at http://www.sedar.com
The Corporation is presently under the protection of the
'Bankruptcy and Insolvency Act', and has obtained from the
Superior Court, as of February 13, 2003, an extension of delay
until March 31, 2003, in order to file a proposal to its
creditors under the provisions of the 'Bankruptcy and Insolvency
Act'.
SPIEGEL GROUP: Wants to Pay Prepetition Employee Obligations
------------------------------------------------------------
Continued payment of prepetition wages, salaries and
commissions, when due, and continuation, without interruption,
of Employee compensation and benefits plans, policies, programs
and practices is necessary, William C. Kosturos, The Spiegel
Group's interim Chief Executive Officer and Chief Restructuring
officer tells Judge Blackshear. Employees are vital to the
Debtors' continuing operations and to the ultimate ability of
the Debtors to reorganize in these chapter 11 cases. If they're
not paid, they'll leave; if they leave, there's no business to
restructuring.
Accordingly, by this Motion, and pursuant to section 105(a),
507(a)(3) and 507(a)(4) of the Bankruptcy Code, the Debtors seek
authority, in their discretion and in the exercise of their
business judgment, to (a) pay or otherwise honor, as the case
may be, the Compensation Obligations, Time Off Benefits, Expense
Reimbursements, Severance Benefits, Benefit Obligations, Savings
Obligations, Workers' Compensation Obligations, Other Benefits
Obligations and Administration Obligations to, or for the
benefit of, their Employees and Independent Contractors, as the
case may be, and (b) continue post-petition various Employee
benefit plans, policies, programs and practices that were in
effect immediately prior to the Petition Date.
The Debtors note, for the avoidance of doubt, that the relief
they seek in this Motion is for the benefit of the Debtors only
and not for FCNB or any of the other non-Debtor subsidiaries,
including East Coast Collection Agency, Inc. East Coast
Collection is a non-Debtor subsidiary of Spiegel that provides
debt collection services for FCNB. In addition, while the
Debtors seek authority to pay and continue the Prepetition
Employee Obligations, they are currently reviewing these matters
and reserve their rights with respect to future cessation or
continuation of these programs and to assumption or
rejection of any executory contracts.
Prepetition Employee Obligations
As of the Petition Date, the Debtors have approximately 16,700
employees, including part-time employees, and excutives.
Approximately 50 of the Debtors' Employees are members of the
Warehouse, Mail Order, Office, Technical & Professional
Employees Local 743 union.
To attract and retain the highest quality personnel, the Debtors
provide their Employees with a sophisticated package of
compensation and benefits. However, due to the nature of their
various business activities, the Debtors participate in or are
obligated under various salary and wage and expense
reimbursement plans, insurance plans, savings plans and other
policies, programs and practices designed to provide benefits
for their non-Union and Union Employees.
(A) Wages, Salaries and Commissions, Payroll Taxes and
Other Withholding, and Independent Contractor Fees
(1) Wages, Salaries and Commissions.
The Debtors' average monthly payroll for their salaried and
hourly Employees is approximately $28.7 million. This amount
does not include payroll taxes or any other amounts withheld
from Employee paychecks. The average monthly payroll is higher
during the year-end holiday season. Employees are paid on a bi-
weekly basis approximately one week in arrears. The last payroll
period for substantially all of the Employees ended on March 8,
2003 and was paid by the Debtors on March 14, 2003. The next
payroll period for substantially all of the Employees ends on
March 22, 2003 and is scheduled to be paid by the Debtors on
March 28, 2003. The Debtors estimate that as of the Petition
Date, the accrued but unpaid payroll for Employees totaled
approximately $6.3 million. This amount includes approximately
$14,000 in perquisites paid in the ordinary course to executives
on their bi-weekly paychecks to cover expenses for their
personal vehicle, tax and/or financial planning and does not
include payroll taxes or any other amounts withheld from
Employee paychecks. The average monthly cost of the Executive
Perquisites is approximately $67,000.
A review of the debtors' books and records show that only 16 out
of the 16,700 Employees with accrued but unpaid prepetition
wage, salary and/or commission claims hold claims of more than
$4,650. Each such Employee is an officer of a Debtor. The
officers' claims in excess of $4,650 aggregate $31,080 and range
from a low of $273 to a high of $12,273. The Debtors request
authorization to pay all of the prepetition wage, salary and
commission claims.
(2) Payroll Taxes.
By law, the Debtors must withhold from an employee's wages
amounts related to federal, state and local income taxes, and
social security and Medicare Trust Fund Taxes and remit those to
the appropriate tax authorities. The Debtors are required to
match from their own funds the social security and Medicare
taxes, and pay, based on a percentage of gross payroll,
additional amounts for state and federal unemployment insurance
and to remit the Payroll Taxes to the Taxing Authorities. The
Debtors' average monthly Payroll Taxes are approximately $9.1
million. As of the Petition Date, the Debtors owe approximately
$1.97 million in Payroll Taxes. The Debtors request authority to
pay these prepetition amounts in the ordinary course of
business. To the extent that it is subsequently determined that
additional prepetition Payroll Taxes are owed, the Debtors
request authority to pay such prepetition amounts.
(3) Other Withholding.
In addition, the Debtors regularly, pursuant to court order or
otherwise, withhold wages for Employee's child support or other
garnishments that they are legally required to pay, and union
dues. The Debtors' average monthly Other Withholding is
approximately $86,000. As of the Petition Date, the Debtors are
liable for Other Withholding payments totaling approximately
$19,600.
(4) Independent Contractor Fees.
The Debtors routinely use independent contractors as
merchandisers, designers, planning and inventory trainers and
marketing consultants, and other individuals for certain other
types of work in connection with their business. In connection
therewith, the Debtors pay in the ordinary course Independent
Contractors upon receipt of invoices for their services. The
Debtors estimate that approximately $35,000 exists in accrued
and unpaid Independent Contractor Fees. In addition, it is
difficult for the Debtors to estimate with precision the
Independent Contractor Fees outstanding as of the Petition Date
because there is often a gap between the time the Independent
Contractor performs services and the time the Independent
Contractor submits an invoice. Therefore, to the extent that it
is subsequently determined that additional prepetition
Independent Contractor Fees are owed, the Debtors request
authority to pay those amounts.
(5) Wage and Incentive Policies and Programs.
The Debtors also maintain in the ordinary course various wage
and incentive policies and programs tied to levels of
performance and productivity for non-executive Employees.
Additional amounts in salary and wages for certain Employees in
respect of Wage and Incentive Policies may have been earned
prior to the Petition Date but not reflected until subsequent
postpetition paychecks. The Debtors cannont currently estimate
the cost of the Wage and Incentive Amounts but believe them to
be negligible.
As of the Petition Date, the Debtors estimate that their
obligations for the immediately preceding payroll periods in
respect of accrued and unpaid Payroll, Payroll Taxes, Other
Withholding and Independent Contractor Fees are approximately
$8.3 million.
(B) Time Off Benefits.
The Debtors offer their Employees paid vacations and holidays,
overtime pay and personal and sick leave. These Time Off
Benefits are usual and customary in the industry and must be
continued for the Debtors to retain qualified employees to
operate their businesses. All regular full-time and regular
part-time Employees are eligible to accrue vacation benefits,
personal and sick leave. The Debtors estimate that the total
aggregate cost of accrued and unpaid vacation benefits, and
personal and sick leave to be approximately $8,100,000.
The nature and scope of those benefits vary on a Merchant
Division by Merchant Division basis.
(1) Spiegel Corporate Vacation Benefits.
Employees of Spiegel Management Group, Inc., Spiegel Catalog,
Inc., Ultimate Outlet, Inc. and Spiegel Group Teleservices,
Inc. - Rapid City, SD earn and accrue vacation time, and
personal and sick leave on an annual basis. Generally, full-time
Employees accrue between 10 and 25 vacation days per year which
they may not use until the next fiscal year and which may not be
carried over to the next succeeding fiscal year. Part-time
Employees accrue vacation benefits on a pro-rata basis
predicated upon the number of hours worked. Accrued but unused
vacation days are paid out upon termination of employment even
if termination occurs before the end of the fiscal year. The
information regarding the number of accrued but unused vacation
days for these Employees is not maintained on a centralized
basis. It is kept at the individual department level.
Accordingly, the Debtors cannot estimate the cost of the accrued
and unpaid vacation benefits for Spiegel Corporate Employees.
(2) Spiegel Corporate Personal and Sick Leave.
Spiegel Corporate Employees accrue a maximum of 5 personal days
and an unspecified number of sick days annually. Employees
cannot carry over their unused personal or sick days into the
succeeding fiscal year. If used, the Employees are paid for
their personal and sick days. However, they are not paid for
their unused personal or sick days. Accordingly, the Debtors
estimate that there will be no additional cost to them to honor
Spiegel Corporate's personal and sick leave program.
(3) Eddie Bauer Vacation Benefits.
Employees of Eddie Bauer, Inc. and its subsidiaries and Spiegel
Group Teleservices, Inc. - Bothell, WA, Spiegel Group
Teleservices, Inc. - Canada earn and accrue vacation time, and
personal and sick leave on an annual basis. Generally, full-time
Employees accrue between 10 and 25 vacation days per year and
can carry over up to two years of accrued and unpaid vacation
each fiscal year. Part-time Employees accrue vacation benefits
on a pro-rata basis predicated upon the number of hours worked.
Accrued but unused vacation days are paid out upon termination
of employment even if termination occurs before the end of the
fiscal year. The Debtors' estimate that that the cost of the
accrued and unpaid vacation benefits for Eddie Bauer Employees
is approximately $6.9 million.
(4) Eddie Bauer Personal and Sick Leave.
Eddie Bauer Employees accrue up to 4 personal days and 10 sick
days annually. Employees cannot carry over their unused personal
days into the succeeding fiscal year. Employees are permitted to
carry up to 20 sick days each fiscal year. If used, the
Employees are paid for their personal and sick days. However,
they are not paid for their unused personal or sick days.
Accordingly, the Debtors estimate that there will be no
additional cost to them to honor Eddie Bauer's personal and sick
leave program.
(5) Newport News Vacation Benefits.
Employees of Newport News, Inc. and Spiegel Group Teleservices,
Inc. - Hampton, VA earn and accrue vacation time, and personal
and sick leave on an annual basis. Generally, full-time
Employees accrue between 10 and 25 vacation days per year which
may not be carried over to the next succeeding fiscal year.
Part-time Employees accrue vacation benefits on a pro-rata basis
predicated upon the number of hours worked. Accrued but unused
vacation days are paid out upon termination of employment even
if termination occurs before the end of the fiscal year. The
information regarding the number of accrued but unused vacation
days for these Employees is not maintained on a centralized
basis. It is kept at the individual department level.
Accordingly, the Debtors cannot estimate the cost of the accrued
and unpaid vacation benefits for Newport News Employees.
(6) Newport News Personal and Sick Leave.
Newport News Employees accrue up to 3 personal days and 5 sick
days annually. Employees cannot carry over their unused personal
or sick days into the succeeding fiscal year. If used, the
Employees are paid for their personal and sick days. They are
not paid for their unused personal days. Accordingly, the
Debtors estimate that there will be no additional cost to them
to honor Newport News' personal leave program. Newport News
Employees who have unused sick days at the end of the fiscal
year are paid for such sick days. However, Newport News
Employees who had unused sick days end of the last fiscal year
have already been paid for such sick days. Accordingly, the
Debtors estimate that the cost of honoring Newport News' sick
leave program is negligible.
(7) DFS Vacation Benefits.
Employees of Distribution Fulfillment Services, Inc. (DFS) earn
and accrue vacation time, and personal and sick leave on an
annual basis. Generally, full-time Employees accrue between 10
and 25 vacation days per year can carry over up to two years of
accrued and unpaid vacation each fiscal year. Part-time
Employees accrue vacation benefits on a pro-rata basis
predicated upon the number of hours worked. Accrued but unused
vacation days are paid out upon termination of employment even
if termination occurs before the end of the fiscal year. The
Debtors' estimate that that the cost of the accrued and unpaid
vacation benefits for DFS Employees is approximately $1.2
million.
(8) DFS Personal and Sick Leave.
DFS Employees accrue up to 3 personal days and 15 sick days
annually. Employees cannot carry over their unused personal days
into the succeeding fiscal year. Employees are permitted to
carry over up to 30 sick days each fiscal year. If used, the
Employees are paid for their personal and sick days. However,
they are not paid for their unused personal or sick days.
Accordingly, the Debtors estimate that there will be no
additional cost to them to honor DFS' personal and sick leave
program.
(C) Expense Reimbursements.
Certain Employees and Independent Contractors have not yet been
reimbursed for their business, relocation and automobile
expenses. The Debtors estimate that the total aggregate accrued
and unpaid Employee Business Expenses, Independent Contractor
Business Expenses, Relocation Expenses and Automobile Expenses
owed are approximately $697,000. However, it is difficult for
the Debtors to estimate with precision the amount of Expense
Reimbursements outstanding as of the Petition Date because there
is often a gap between the time the Employee or Independent
Contractor incurs a reimbursable expense and the time the
Employee or Independent Contractor submits a claim. Therefore,
to the extent that it is subsequently determined that additional
prepetition Expense Reimbursements are owed, the Debtors request
authority to pay such amounts.
(1) Employee Business Expenses.
The Debtors routinely reimburse their Employees for certain
expenses incurred within the scope of their employment,
including expenses for travel, lodging, ground transportation,
meals and miscellaneous business expenses. The majority of the
members of the Debtors' Employees who are reimbursed for their
expenses are executives and regional and district directors of
retail stores who must travel in the performance of their jobs.
The Debtors estimate that approximately $210,000 exists in
accrued and unpaid Employee Expenses.
(2) Independent Contractor Business Expenses.
In addition, the Debtors routinely use Independent Contractors
as merchandisers, designers, planning and inventory trainers,
and marketing consultants, and other individuals for certain
other types of work in connection with their businesses. In
connection therewith, the Debtors reimburse in the ordinary
course such Independent Contractors for certain expenses such as
buying samples, travel, lodging, ground transportation, meals,
and other miscellaneous business expenses. During certain times
of the years, mainly in preparation for the major season's
catalogs and retail lines these Independent Contractor Business
Expenses can be costlier to the Debtors than during other
seasons, for example, in connection with their preparation of
the Spring/Summer catalog and retail lines. The Debtors estimate
that approximately $20,000 exists in accrued and unpaid
Independent Contractor Business Expenses.
(3) Relocation Expenses.
At the Company's discretion, the Debtors provide certain key
Employees and new hires with relocation and temporary housing
expenses in order to incentivize such Employees and new hires to
accept and fill certain vacant positions within the Company.
Relocation Expenses include reimbursement, and in some
circumstances advances, for the expenses of shipping household
goods, house hunting, temporary living and closing costs for the
purchase and sale of the Employees' homes. It is critical that
the Debtors be authorized to pay these Relocation Expenses to,
among other things, ensure that items belonging to relocated
Employees will be delivered. The Debtors estimate that
approximately $467,000 exists in accrued and unpaid Relocation
Expenses.
(4) Automobile Expenses.
The Debtors lease a fleet of automobiles from a number of
different dealers, the majority of which are for regional and
district directors for retail stores who are expected to travel
extensively by car in the performance of their jobs. The
Debtors routinely pay expenses incurred in connection with these
cars including, lease payments, maintenance charges, and gas
expenses. The Debtors believe that they are paid current on the
Automobile Expenses.
(D) Severance Plan Benefits.
During the ordinary course of business, the Debtors maintain a
severance policy for eligible non-Union Employees, pursuant to
which Employees who are terminated by a reduction in force or
job elimination receive benefits which may include lump sum
severance pay, continuance of medical and dental benefits under
COBRA for a period of time, outplacement services and a
continuation of services under the Debtors' Employee assistance
program, in exchange for providing the Debtors' with a release
of claims/settlement agreement. Within the 90 days prior to the
Petition Date, the Debtors terminated approximately 103
Employees who may be eligible for Severance Benefits that total
approximately $315,000. In order to maintain morale of the
current Employees, the Debtors seek authority to continue to
provide, in their sole discretion, these recently terminated
employees with Severance Benefits not yet paid. As of the
Petition Date, approximately 82 of these Employees may be
eligible for Severance Benefits not exceeding $4,650 and such
Severance Benefits total approximately $45,371. As of the
Petition Date, approximately 21 of these Employees may be
eligible for Severance Benefits exceeding $4,650 and such
Severance Benefits total approximately $269,829, and range from
a low of $5,000 and a high of $35,460.
The Debtors request explicit authority to (a) continue to accept
releases, (b) continue to pay the Severance Benefits to those
Employees, and (c) continue, in their sole discretion, the
Severance Plan.
(E) Health & Welfare Benefit Plans,
Policies, Programs and Practices.
The Debtors sponsor various health and welfare benefits plans,
policies, programs and practices for the Employees, such as
insurance plans, including medical, vision, prescription,
dental, life, death and dismemberment, short-term and long-term
disability, flexible medical and dependant care spending,
workers' compensation, legal services, travel, and store
discounts, tuition reimbursements and employee assistance
programs.
The Debtors estimate that the total aggregate accrued and unpaid
Spiegel Welfare Claims, Executive Life Premiums, Split Dollar
Premium, Canadian Supplemental Premiums, the Union Short-Term
Disability Claims, the VIP LTD Premium and the Group Legal
Premium owed are approximately $3,700,000 as of the Petition
Date.
(1) VEBA Trust.
The Debtors have established a vested employee welfare benefits
trust to pay the Self-Insured Plan Medical Claims, the Fully-
Insured Plan Medical Premiums, the Voluntary Plan Premiums, the
Dental Claims, the Life and AD&D Insurance Premiums, the Short-
Term Disability Claims and Premiums, the Fully-Insured Short-
Term Disability Premium, the LTD Premium and the FSA Claims
liability pursuant to the Self-Insured Plans, the Fully-Insured
Plans, the Voluntary Benefits Plans, the Spiegel Dental Plan,
the Life Insurance Plan, the Supplemental Life Insurance Plan,
the Short-Term Disability Plan, the Fully-Insured Short-Term
Disability Plan, the Long-Term Disability Plan and the Flexible
Spending Accounts. As of the Petition Date, there is a balance
of approximately $2.0 million in the VEBA Trust.
(2) Medical and Dental Insurance
and Flexible Spending Accounts
(a) Self-Insured Plans.
The Debtors provide medical, vision and prescription benefits to
regular status salaried and hourly Employees who meet certain
eligibility requirements through self-insured plans administered
by Connecticut General Life Insurance Company, Blue Cross Blue
Shield of Illinois, WHP Health Initiatives and Vision Service
Plan Insurance Company. Under the Self-Insured Plans, the
majority of healthcare costs are funded through contributions by
the Debtors and the participating Employees. The cost is borne
primarily by the Debtors, but Employees also make contributions
to the Self-Insured Plans which the Debtors deduct from
participating Employee paychecks on a bi-weekly basis. The
Debtors fund the VEBA Trust with amounts in respect of the
claims and fees (which are paid through the Self-Insured Plan
TPAs). The monthly costs to the Debtors for the Self-Insured
Plans are approximately $2.0 million comprised of, approximately
$1.6 million in medical claims, $30,000 in vision claims,
$220,000 in prescription drug claims and $175,000 in fees paid
to the Self-Insured Plan TPAs for their services. There is
usually a lag time of up to six months in processing medical,
vision and prescription drug claims, and often there is also a
gap between the time the employee incurs a reimbursable expense
and the time the employee or the employee's medical service
provider submits a claim. Thus, as of the Petition Date, the
Debtors will be liable for claims under the Self-Insured Plans
that have been submitted but not paid or that have been accrued
but not submitted.
The Debtors estimate that approximately $3.2 million in medical,
vision and prescription drug claims in respect of the Self-
Insured Plans are accrued and unpaid as of the Petition Date.
(b) Fully-Insured Plans.
The Debtors also provide medical benefits to regular status
salaried and hourly Employees who meet certain eligibility
requirements through fully insured plans administered by Aetna
of Washington, HMO Illinois, HMSA/BCBS Hawaii, Kaiser Foundation
Health Plan Inc., Providence Health Plans, Keystone Health Plan
East, Inc., Optima Health Plans, United Health Care of Ohio,
Alberta Healthcare and British Columbia Medical Plan. The Fully
Insured Plans are funded through contributions by the Debtors
and the participating Employees. The cost of the Fully Insured
Plans are borne primarily by the Debtors through premium
payments, but Employees also make contributions to the Fully
Insured Plans which the Debtors deduct from participating
Employee paychecks on a bi-weekly basis.
The U.S. Debtors fund the VEBA Trust monthly with amounts in
respect of the monthly Premiums and the Trust Fund Payments. The
VEBA Trust then pays the monthly Premiums and the entire month
of Trust Fund Payments owed to the U.S. Medical Providers
generally by the 15th of each month. The Canadian Debtors pay
the Medical Providers directly by the 15th of each month. The
monthly costs to the Debtors for the Fully-Insured Plans are
approximately $935,000, of which approximately 30% constitutes
monthly Trust Fund Payments. Because the Debtors pay the VEBA
Trust and the Medical Providers by the 15th of each month, the
Debtors believe that there are no accrued and unpaid Fully-
Insured Plan Medical Premiums.
(c) Voluntary Benefits Plan.
The Debtors also offer certain Employees who are not otherwise
eligible for benefits provided by the Debtors under the Self-
Insured Plans or the Fully-Insured Plans the opportunity to
enroll in a voluntary benefits plan which provides limited
reimbursement for medical and/or dental and vision expenses.
The Voluntary Benefits Plan is administered by a third-party
administrator, STAR Human Resources Insurance Services (the
"STAR"). The monthly premium payment for this coverage is
approximately $12,500. The costs of the Voluntary Benefits
Plan are borne completely by the participating Employees through
contributions deducted from their paychecks on a bi-weekly basis
in respect of the VBP Premium. The Debtors fund the VEBA Trust
monthly with amounts in respect of the monthly VBP Premium;
however, the Debtors are billed by STAR more than one month in
arrears. Due to this lag time in billing by STAR the Debtors
estimate that that approximately $14,000 in VBP Premium payments
in respect of the Voluntary Benefits Plan are accrued and unpaid
as of the Petition Date.
(d) Eddie Bauer Voluntary Benefits Plan.
The Debtors also offer certain Eddie Bauer Employees the
opportunity to enroll in a voluntary benefits plan which
provides certain reimbursements for accident and/or cancer
expenses. The EB Voluntary Benefits Plan is administered by a
third-party administrator, American Family Life Assurance
Company of Columbus. The monthly premium payment for this
coverage is approximately $4,000. The costs of the EB Voluntary
Benefits Plan are borne completely by the participating EB
Employees through contributions deducted from their paychecks on
a biweekly basis in respect of the EB VBP Premium. The Debtors
fund the VEBA Trust monthly with amounts in respect of the
monthly EB VBP Premium; however, the Debtors are billed by AFLAC
one month in arrears. Due to this lag time in billing by AFLAC,
the Debtors estimate that that approximately $2,000 in EB VBP
Premium in respect of the EB Voluntary Benefits Plan is accrued
and unpaid as of the Petition Date.
(e) Dental Plan.
The Debtors provide dental benefits to regular status salaried
and hourly Employees who meet certain eligibility requirements
through a self-insured plan administered by third-party
administrator, Delta Dental of Illinois. The monthly costs to
the Debtors for the Spiegel Dental Plan are approximately
$165,000 comprised of, approximately $145,000 in dental claims,
and $20,000 in fees paid to the Delta for its services. There is
usually a lag time of up to six months in processing dental
claims, and often there is also a gap between the time the
employee incurs a reimbursable expense and the time the employee
or the employee's dental service provider submits a claim. Thus,
as of the Petition Date, the Debtors will be liable for claims
under the Spiegel Dental Plan that have been submitted but not
paid or that have been accrued but not submitted. In addition,
claims for dental services provided prior to this January 1,
2003 are being administered under the Debtors' agreement with
CIGNA.
The Debtors estimate that approximately $386,000 in dental
claims in respect of the Spiegel Dental Plan are accrued and
unpaid as of the Petition Date, including accrued and unreported
claims under both the Spiegel Dental Plan and the Old Dental
Plan.
(f) Flexible Spending Accounts.
Certain eligible Employees may participate in a Flexible
Spending Account to pay for certain unreimbursed healthcare or
dependent daycare expenses, administered by Ceridian Flexserve.
The maximum annual contribution that can be contributed toward
healthcare costs is $3,000 and toward dependent daycare costs is
$5,000.
The average monthly expenses for FSA are approximately $102,600,
comprised of approximately $100,000 in claims against FSA
contributions and approximately $2,600 in fees to the Ceridian.
The Debtors are current in their funding of Ceridian in respect
of FSA claim amounts because Ceridian will not release the FSA
reimbursement checks to the participants until such funding is
received from Debtors. However, since administration fees are
generally billed one month in arrears, the Debtors estimate that
approximately $3,900 in respect of FSA administration fees are
accrued and unpaid as of the Petition Date.
(3) Life Insurance, Accidental Death & Dismemberment
Insurance, Short- Term and Long-Term Disability
Insurance and Group Legal Services Insurance
(a) Life and AD&D Insurance.
The Debtors offer life insurance and accidental death and
dismemberment insurance administered by the Minnesota Life
Insurance Company to certain current and former Employees that
are eligible for medical benefits. Upon meeting the eligibility
requirements, an Employee is automatically covered by the Life
Insurance Plan. The Life Insurance Plan provides these Employees
with coverage equal to one times their annual base salary. The
cost of the Life Insurance Plan is completely borne by the
Debtors.
In addition, certain eligible Employees may also purchase
supplemental life insurance for themselves and their dependents.
Eligible Employees may purchase up to a maximum of 3 times their
annual base salary for themselves, up to $100,000 for their
spouse and up to $10,000 per child. The costs of the
Supplemental Life Insurance Plan are completely borne by the
participating Employees through deductions in their bi-weekly
paychecks.
The Life Insurance Plan costs the Debtors approximately $29,000
per month in premiums and the Supplemental Life Insurance Plan
costs the Employees approximately $60,000 per month in premiums.
Since these premiums are generally paid by the 15th of the month
in the current month, the Debtors believe that there are no
accrued and unpaid obligations under the Life Insurance Plan and
the Supplemental Life Insurance Plan.
(b) Executive Life Insurance.
The Debtors provide certain key and former executives who are
not eligible for the basic Life Insurance Plan with term life
insurance coverage administered by Minnesota Life Insurance
Company. The costs of this coverage is entirely borne by the
Debtors. Upon meeting the eligibility and waiting period
requirements, the participating executive is automatically
covered by the Executive Life Insurance Plan. Key executives are
provided with coverage equal to four times their annual base
salary. Also under this program, former executives are offered a
fixed amount of term life coverage if they meet their divisions'
retirement eligibility requirements upon their termination of
employment.
The average monthly costs of premiums for the Executive Life
Plan are approximately $4,500. Because the Company generally
pays these premiums after the 15th of the month in the current
month, the Debtors estimate that approximately $4,500 in
premiums in respect of the Executive Life Plan are accrued and
unpaid as of the Petition Date.
(c) Split Dollar Life Insurance Plan.
Although the Spiegel, Inc. Split Dollar Life Insurance Plan has
been eliminated for current executives, participation of certain
retired executives in the plan has been grandfathered.10 The
benefit level is equal to 3 times the participating executive's
annual base salary in effect at the time of their retirement.
Participation in the Split Dollar Life Insurance Plan is
intended to continue until the policy maturity objectives have
been achieved, generally, the later of age 65 or after
participating in the plan for approximately 15 years.
The Debtors pay the annual premiums and the retired participant
reimburses the Debtors for a portion of that annual premium.
Upon maturity of the policies, the Debtors recover the premiums
from the policy that they have paid and ownership is transferred
to the retired participant. Because no premiums are due on these
policies until July, 2003 the Debtors believe that there are no
accrued and unpaid premiums under the Split Split Dollar
Insurance Plan.
Policy Number of Total Annual Retiree
Renewal Date Participants Premium Premium Share
------------ ------------ ------------ -------------
January 1 9 $212,300 $7,655
July 1 11 35,800 5,550
August 1 8 125,700 42,125
-- -------- -------
TOTAL 28 $373,800 $55,330
(d) Canadian Supplemental Insurance.
The Canadian Debtors offer life insurance, accidental death and
dismemberment, medical, dental, short-term and long-term
disability, prescription drug and travel insurance administered
by the Standard Life Assurance Company to eligible Employees.
The coverage costs are borne by the Debtors through premiums and
Employees through deductions from their bi-weekly paychecks.
169. The Canadian Supplemental Insurance Plan costs the Debtors
approximately $57,000 per month, comprised of approximately
$46,000 in premiums and $11,000 in Employee contributions. Since
these premiums are generally paid in the first week of the month
in the current month, the Debtors believe that there are no
accrued and unpaid premiums under the Canadian Supplemental
Insurance Plan.
(e) Short-Term Disability.
The Debtors provide certain Employees that are eligible for
medical benefits with short-term disability benefits through a
self-insured plan administered by The Standard Insurance
Company. Short-Term Disability benefits are paid to an associate
who is unable to work due to a non-work related accident or
illness for up to 26 weeks. The Short-Term Disability benefits
are paid through salary continuation, generally equal to 60% or
100% of their regular base salary depending on their years of
service with the company.
Normal monthly expenses for the self-insured short-term
disability program totals approximately $220,000, comprised of
approximately $210,000 in Disability Payments and approximately
$10,000 in administrative fees to the Short-Term Disability TPA.
Certain of the Debtors' divisions administer the Disability
Payments through payroll while others have contracted with the
Short-Term Disability TPA to pay the claims directly to the
participants. The Debtors reimburse the Short-Term Disability
TPA for any Disability Payments that the Short-Term Disability
TPA has paid to participants. Because the Debtors are required
to have a certain balance on account with the Short-Term
Disability TPA, the Debtors estimate that the amount of accrued
and unpaid Disability Payments is negligible as of the Petition
Date. In addition, because administration fees are generally
paid by the 15th of the month in the current month, the Debtors
believe that there are no accrued and unpaid administration fees
owed to the Short-Term Disability TPA.
(f) Fully-Insured Short-Term Disability.
The Debtors provide certain eligible Employees with short-term
disability benefits through a fully insured plan administered by
Prudential Financial Benefit Services of Hawaii and Hartford
Life and Accident Co. The average monthly premiums for this
coverage are approximately $40,000. Because, the premiums are
normally paid after the 15th of the month in the current month,
the Debtors estimate that approximately $40,000 in premiums in
respect of the Fully Insured Short-Term Disability Plan are
accrued and unpaid as of the Petition Date.
(g) Union Short-Term Disability.
Certain hourly Union Employees are eligible for up to 12 weeks
of salary continuation subject to certain maximums negotiated by
the Debtors and the Union. The average monthly expenses for the
Union Short-Term Disability Plan are approximately $6,000. The
Debtors estimate that approximately $1,500 in claims in respect
of the Union Short-Term Disability Plan is accrued and
outstanding as of the Petition Date.
(h) Long-Term Disability.
The Debtors provide certain eligible Employees with fully
insured long-term disability benefits upon the expiration of the
short-term disability benefits described above, administered by
SIC and Prudential Financial. The majority of eligible
Employees are automatically covered by the Long-Term Disability
Plan. The costs of the Long Term Disability Plan for most
Employees are completely borne by the Debtors. The benefit
available for most Employees is equivalent to 60% of the
associate's base salary up to a maximum of $10,000 per month,
subject to any applicable offsets.
The average monthly premiums for the Long Term Disability Plan
are approximately $45,000. Because the Debtors generally pay
these premiums by the 15th of the month in the current month,
the Debtors believe that there are no accrued and unpaid
premiums in respect of the Long Term Disability Plan.
(i) VIP Long Term Disability.
The Debtors provide certain key executives with fully-insured
disability coverage administered by SIC. These executives are
not eligible for the Long-Term Disability Plan. Eligible
executives are automatically covered and the cost of the VIP
Long Term Disability Plan is completely borne by the Debtors.
The benefit available is equivalent to 60% of the executive's
base salary and a three-year average of annual incentive up
to a maximum of $25,000 per month, subject to any applicable
offsets. The average monthly premiums for the VIP Long-Term
Disability Plan are approximately $5,500. Because the monthly
premium has already been paid, the Debtors believe that there is
no accrued and unpaid premium in respect of the VIP Long-Term
Disability Plan.
(j) Group Legal Services Insurance.
The Debtors offers certain Employees the opportunity to access
group legal services, administered by Hyatt Legal Plans, Inc.
The cost of the premium for the Group Legal Services is borne
entirely by participating Employees through regular monthly
deductions from their paychecks. The average monthly premium
for Group Legal Services is approximately $9,500. Because the
Debtors generally pay this premium during the first week of the
month for the current month, the Debtors believe that there is
no accrued and unpaid premium in respect of Group Legal
Services.
(F) Savings Plans
(1) 401(k) Plan.
The Debtors offer certain salaried and hourly employees savings
and retirement plans through which they can accumulate savings
for their futures. Each year, eligible Employees may contribute
certain percentages of their compensation for investment in a
401(k) Plan. For each dollar contributed by an employee to
the 401(k) Plan, the Debtors pay $1.00 up to the first 3% of the
employee's pre-tax contribution and $0.50 up to the next 3% of
the employee's pre-tax contribution. Pre-tax contributions
beyond 6% of the employee's pre-tax contributions are unmatched
by the Debtors. In addition, the 401(k) Plan allows for an
annual discretionary employer profit sharing contribution
determined by the Debtors' Board of Directors which may equal
between 0% to 10% of an employee's eligible compensation. All
employer contributions are vested on a five-year graded vesting
schedule subject to earnings or losses. Matching contributions
for each month under the 401(k) Plan total approximately
$390,000. Since employer contributions are normally contributed
to participants' accounts within three to five days of payday,
the Debtors will owe approximately $180,000 in matching
contributions as of the Petition Date.
(2) Hourly 401(k) Plan.
The Debtors offer certain hourly employees who have at least one
year of service with the Company and who have worked at least
1,000 hours in the previous plan year a separate savings and
retirement plan. Each year, eligible hourly Employees may
contribute certain percentages of their compensation for
investment in a 401(k) Plan. For each dollar contributed by an
employee to the Hourly 401(k) Plan, the Debtors pay $0.25 up to
the first 6% of the employee's pre-tax contribution. Pre-tax
contributions beyond 6% of the employee's pre-tax contributions
are unmatched by the Debtors. In addition, the Hourly 401(k)
Plan allows for an annual discretionary employer profit sharing
contribution determined by the Debtors' Board of Directors. All
employer contributions are vested on a five-year graded vesting
schedule subject to earnings or losses. Matching contributions
for each month under the Hourly 401(k) Plan total approximately
$35,000. Since employer contributions are normally contributed
to participants' accounts within three to five days of payday,
the Debtors will owe approximately $15,000 in matching
contributions as of the Petition Date.
(3) The Canadian Retirement Plans.
The Debtors offer eligible Employees savings and retirement
plans through which they can accumulate savings for their
futures through contributions of their compensation in the Group
Retirement Savings Plan or the Group Non-Registered Savings
Plan. For each dollar contributed by an Employee to the GRSP,
the Debtors contribute a certain percentage of such dollar to
the Employee's account, in the Registered Pension Plan. In
addition, pursuant to applicable Canadian laws, the Debtors are
required to contribute a percentage of profits to each eligible
Employee's account in the RPP. The Debtors send all Employee
Contributions and Employer Matching Contributions to Group
Retirement Services on the business day after payroll. The
Debtors send all Employer Profit Sharing Contributions to GRS by
the end of the first quarter. Therefore, the Debtors estimate
that approximately $40,000 in Canadian Employer Contributions
are accrued and unpaid as of the Petition Date. The Debtors
estimate that the total aggregate accrued and unpaid Matching
Contributions and Canadian Matching Contributions owed are
approximately $235,000 as of the Petition Date.
Workers' Compensation Obligations
The Debtors provide workers' compensation benefits to all
Employees. These benefits are covered primarily under the
Debtors' fully-insured plans for both primary and excess
coverage, but also assessed through self-insured plans and
several state funds and Canadian government funds. Failure to
maintain this insurance in the various states and Canadian
provinces in which the Debtors do business could result in the
institution of administrative or legal proceedings against the
Debtors and their officers and directors. The average monthly
costs of the premiums in respect of the Fully-Insured Workers'
Compensation Plan are approximately $166,000.
Under the Self-Insured Plans, the Debtors routinely pay claims
within a prescribed period of time pursuant to applicable law.
In addition, where the Debtors are self-insured or may still
have outstanding claims under old Self-Insured Plans, the
Debtors are also required to post a self-insurer's bond for
existing liabilities. The payments paid to the State Funds and
the Canadian Province Funds are paid on monthly, quarterly and
yearly bases.
As of the Petition Date, the Debtors estimate that no Workers'
Compensation Premiums are outstanding. In addition, as of the
Petition Date, a total of 267 workers' compensation claims were
pending against the Debtors in the U.S. for which the Debtors
had reserved $1.6 million in potential liability. The Debtors
hold surety bonds with respect to this liability of roughly $1.8
million. Further, as of the Petition Date, the Debtors estimate
that approximately $50,000 in payments are owed to the State
Funds and approximately $7,000 in payments are owed to the
Canadian Province Funds. However, it is difficult to estimate
with precision the amount due to the State Funds and the
Canadian Province Funds because they are assessed on a monthly,
quarterly or yearly basis and vary from period to period.
Therefore, to the extent that it is subsequently determined that
additional State Fund Payments and Canadian Province Fund
Payments are owed, the Debtors request authority to pay
those amounts. The Debtors estimate that the total outstanding
Workers' Compensation Premiums, U.S. Compensation Claims, State
Fund Payments and Canadian Province Fund Payments are
approximately $1,657,000 as of the Petition Date.
Other Benefits Obligations
addition to the benefits described in the Motion, the Debtors
offer certain other benefit programs to various groups of their
Employees, including but not limited to:
* discounts on purchases in all of the Debtors' retail,
catalog and online businesses,
* tuition reimbursement, and
* an employee assistance program.
The Debtors believe that these programs are important to
maintaining the morale and retention of their Employees. The
cost of such programs to the Debtors each month is negligible.
The Debtors assert that failing to honor such programs would
have an adverse affect on the Debtors' Employees. By this
Motion, the Debtors request authority to continue such programs
in their sole discretion and make payments pursuant to such
programs in the ordinary course.
Administration Obligations
As is customary in the case of most large companies, the Debtors
utilize the services of several professionals and consultants in
the ordinary course of their business in order to facilitate the
administration and maintenance of their books and records, to
assist with legal compliance issues, to assist with outplacement
services, and to conduct special administrative and legal
compliance projects in respect of Employee benefit plans and
programs. For example, the Debtors utilize the services
Ceridian for administering payroll and certain of the Debtors'
accounts payable, Hewitt Associates for certain healthcare
consulting and eligibility processing services, Fidelity
Investments Actuarial and Consulting Services for certain
required actuarial services and retirement plan consulting
services and Vedder Price for services related to new HIPAA
Privacy Regulations and ERISA counsel, for which the Debtors pay
approximately $74,000 per month. The Debtors estimate that
approximately $244,000 of Administrative Obligations are accrued
and unpaid as of the Petition Date. These administrative
services ensure that the Debtors' multiple benefit plans and
programs are operated in the most cost-efficient manner and
comply with certain applicable laws. The Debtors request that
they be authorized to continue to pay the various costs incident
to maintaining or paying third parties to maintain and provide
record keeping, consulting and legal compliance services
relating to the various Employee benefit programs identified
that may be outstanding as of the Petition Date.(Spiegel
Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
SUN HEALTHCARE: Wants June 27 Extension to Claims Objection Time
----------------------------------------------------------------
Mark D. Collins, Esq., at Richards, Layton & Finger PA, in
Wilmington, Delaware, informs the Court that a further extension
of Sun Healthcare Group, Inc. and its debtor-affiliates'
deadline to make claims objections is necessary to give the
Debtors sufficient time to complete their evaluation and
objection to all outstanding claims. The Debtors have already
reconciled a significant number of claims since the last
requested extension. But due to additional personnel turnover,
the deployment of Arthur Andersen, and the limitations imposed
by Rule 3007-1 of the Delaware Bankruptcy Local Rules, Mr.
Collins explains that the Debtors' review and objection process
has not proceeded as quickly as anticipated.
Hence, the Debtors ask the Court to extend their Claims
Objection Deadline through and including June 27, 2003.
Mr. Collins reports that there presently remain un-reviewed and
un-filed claims. However, the Debtors assure the Court that
they will continue to diligently pursue timely and efficient
resolution of the remaining claims.
Local Rule 3007-1(f)(i) and (ii) provides that, unless otherwise
ordered by the Court:
(a) each substantive objection to proofs of claim will be
limited to no more than 150 claims; and
(b) no more than two substantive objections may be filed in
each calendar month.
Judge Fitzgerald will convene a hearing to consider the Debtors'
request at 8:30 a.m. on April 28, 2003 in Delaware. Pursuant to
Del.Bankr.LR 9006-2, the Debtors' Claims Objection Deadline is
automatically extended until the conclusion of that hearing.
(Sun Healthcare Bankruptcy News, Issue No. 51; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
SUN HEALTHCARE: Schedules Q4, FY Results Conference Call Today
--------------------------------------------------------------
Sun Healthcare Group, Inc. (OTC Bulletin Board: SUHG), in
conjunction with its fourth-quarter 2002 earnings announcement,
invites the public to listen to a conference call with its
senior management on Friday, March 28, 2003, at 9 a.m. PST/ noon
EST, to discuss the Company's fourth-quarter and year-end
results.
To listen to the conference call regarding Sun's fourth-quarter
earnings, dial (877) 516-8526 and refer to Sun Healthcare Group.
A recording of the call will be available from 1 p.m. EST on
March 28 until midnight EST on April 4 by calling (800) 642-1687
and using access code 919-9816.
Headquartered in Irvine, California, Sun Healthcare Group, Inc.
owns many of the country's leading healthcare providers.
Through its wholly-owned SunBridge Healthcare Corporation
subsidiary and its affiliated companies, Sun's affiliates
together operate more than 230 long-term and postacute care
facilities in 25 states. In addition, the Sun Healthcare Group
family of companies provides high-quality therapy, pharmacy,
home care and other ancillary services for the healthcare
industry. More information is available at http://www.sunh.com
TODAY'S MAN: Gets Interim OK to Use Cash Collateral Until Apr. 4
----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware gave its
interim nod to Today's Man, Inc., and its debtor-affiliates to
use the cash collateral of Standard Federal Bank National
Association until April 4, 2003.
The Debtors discloses that Standard Federal Bank asserted a
secured claims against the Debtors in the approximate sum of
$7,488,256 as of the Petition Date.
The Court has found out that the Debtors do not have sufficient
unencumbered cash or other assets with which to continue to
operate its business in Chapter 11. As a result, the Debtors
need immediate authority to use cash collateral in order to
continue its business operations without interruption toward the
objective of formulating an effective plan.
The Debtors will use the Lender's Cash Collateral in its
payroll, payroll taxes, employee expenses and other costs. The
amount of Cash Collateral authorized will not exceed $6,291,150
from the Petition Date through April 4, 2003.
Today's Man, Inc., an operator of men's wear retail stores
specializing in tailored clothing, furnishings, sports wear and
shoes, filed for chapter 11 protection on March 4, 2003 (Bankr.
N.J. Case No. 03-16677). Michael J. Shavel, Esq., at Blank,
Rome, Comisky & McCauley represents the Debtors in their
restructuring efforts. When the Company filed for protection
from its creditors, it listed $37,800,000 in total assets and
$36,500,000 in total debts.
UNITED AIRLINES: Debtor Files February Monthly Operating Results
----------------------------------------------------------------
UAL Corporation (NYSE: UAL), the holding company whose primary
subsidiary is United Airlines, filed its Monthly Operating
Report (MOR) for February and said that it met the first
critical requirement of its debtor-in-possession (DIP) financing
by a wide margin. As part of its DIP financing agreements,
United's lenders required the company to achieve a cumulative
EBITDAR (earnings before interest, taxes, depreciation,
amortization and aircraft rent) loss of no more than $964
million between December 1, 2002 and February 28, 2003.
During the period, United's operating results, and therefore its
EBITDAR, benefited from several factors: Bankruptcy-related
booking changes were less than expected, interim wage reductions
were implemented, and the company was able to implement non-
labor cost cutting initiatives more quickly than expected. Cash
flow also was positively affected by these factors and by the
fact that Chapter 11 allowed United to postpone some aircraft
payments for December 2002 and January 2003.
February cash flow results reflect the resumption of certain
scheduled aircraft payments. The company reported that it made
payments of $182 million during the month in connection with
various aircraft financings, which included some payments for
the period from December 2002 through February 2003. United
began February with a cash balance of approximately $1.8
billion, including restricted cash. It reported a decrease in
cash of approximately $300 million for February and ended the
month with a cash balance of approximately $1.5 billion. This
change in cash balance was better than previous company
forecasts due to lower than expected aircraft payments in
February.
The company said that it incurred a loss from operations of $307
million and a net loss of $367 million for February 2003.
United's Executive Vice President and Chief Financial Officer
Jake Brace said, "Our results for the past three months show
that United has made good progress in restructuring its
operations and finances. Cumulative EBITDAR figures for December
through February were an important test of the company's ability
to significantly reduce our costs and effectively manage our
business."
Mr. Brace continued: "However, the war in Iraq presents a number
of serious challenges that are already affecting the industry
and that are expected to negatively impact earnings and cash
flow for United and its competitors. We are moving rapidly to
address those challenges."
United has contingency planning for the war in Iraq in place and
is executing on those plans as appropriate. The company is
reducing capacity by an additional eight percent in April and
will place a portion of its workforce on temporary unpaid leave.
In addition to the company's own initiatives, United is also
actively seeking financial assistance from the U.S. government
for the airline industry as a whole to mitigate the
disproportionate impact the war is having on the industry.
Although United will continue to pursue relief from the
government and other sources, given the uncertain situation,
further temporary reductions in employee compensation may be
needed in the future.
Strong Operational Performance Continues
During the month of February, United's employees continued to
perform well in a number of areas of critical importance to
customers. Preliminary results reflect strong performance in on-
time flights, as well as in customer service and satisfaction.
Pete McDonald, United's Executive Vice President-Operations,
said, "The people of United -- through their hard work and
exceptionally sharp focus on customers -- are stepping forward
to reestablish this company as the world's premier airline.
Though the challenges are formidable, United's employees have
demonstrated the dedication and fortitude necessary to make
United an even more competitive enterprise now and in the long-
term."
United operates more than 1,700 flights a day on a route network
that spans the globe. News releases and other information about
United may be found at the company's Web site at
http://www.united.com
UNITED DEFENSE: Expects Cash To Last Through December 31, 2003
--------------------------------------------------------------
United Defense Industies, Inc.'s revenue for 2002 was $1,725.3
million, an increase of $406.8 million, or 30.9%, from $1,318.5
million for 2001. This increase is attributable to the inclusion
of $255.4 million of United States Marine Repair results in the
Company's Ship Repair and Maintenance segment in 2002 which did
not exist in 2001, and $151.4 million in higher Defense Systems
segment sales in 2002 including a $60.2 million increase in
Bradley vehicles and a $52.8 million increase in M88 tank
recovery vehicles.
Gross profit increased $77.9 million, or 30%, to $336.7 million
for the year 2002 as a result of increased sales. The Defense
Systems segment's gross profit was 20.2% for 2002 compared with
19.6% for the year 2001. The Ship Repair and Maintenance segment
gross profit rate for the year 2002 was 15.4%.
Selling, general and administrative expenses for 2002 were
$142.8 million, a $36.9 million, or 20.5% decrease from $179.7
million for 2001. The decrease was due to lower amortization
costs of intangibles and no amortization of goodwill due to the
non-amortization provision of FAS 142, and the absence of
significant non-recurring charges resulting from the initial
public offering and recapitalization that were incurred in 2001.
These decreases were partially offset by the inclusion of $20.7
million of United States Marine Repair selling, general and
administration costs for the last six months of 2002.
Research and development costs were $27.7 million for 2002, an
increase of $4.0 million, or 16.9%, from the prior year. This
increase resulted from significant spending to develop and build
a wheeled vehicle prototype to be proposed as the wheeled
vehicle platform for the Future Combat Systems program.
Earnings from foreign affiliates in the Defense Systems segment
for 2002 were $13.9 million, net of amounts paid to the
Company's Turkish partner, a $3.7 million increase from the
prior year. This increase was primarily due to increased
earnings from the joint venture in Turkey as production
continues to ramp up to meet contract schedules, which more than
offset the fact that the Company stopped recording its share of
earnings from its joint venture in Saudi Arabia in March 2002
which it agreed to divest.
Net interest expense for 2002 was $28.7 million, a $6.0 million
increase from the prior year. This increase was the result of an
increase in debt associated with the acquisition of United
States Marine Repair and lower interest income due to lower
interest rates and lower average cash balances in 2002.
The provision for income taxes for 2002 was $15.2 million, an
increase of $9.3 million from the prior year. The increase was
due to higher taxable income, net of the impact of the reversal
of the valuation allowance against net deferred tax assets. In
2003, taxes will be fully provided on income at rates
approximating statutory rates.
The Company recorded a charge, net of taxes, of $1.7 million
during the year 2002 for the early extinguishment of debt as it
made $140.9 million of early debt repayments. This compared
favorably to the 2001 extraordinary items totaling $28.2 million
comprised of a tender premium of $18.1 million and
amortization of financing costs for $10.1 million for debt
prepayment.
As a result of the foregoing, United Defense Industries had net
income of $134.6 million for the year ended 2002, a $125.8
million increase from the prior year.
Based on the current level of operations and anticipated
growth, managements states that they believe that cash from
operations, together with other available sources of liquidity,
including borrowings available under the revolving credit
facility, will be sufficient to fund anticipated capital
expenditures and required payments of principal and interest on
debt through at least December 31, 2003. The growth and
acquisition strategy, however, may require substantial
additional capital.
As December 31, 2002, the company reported a total shareholders'
equity deficit of about $30 million.
US STEEL: Chairman Says WTO Decision Re Sec. 201 Tariffs Flawed
---------------------------------------------------------------
Reacting to news reports that the WTO Dispute Settlement Panel
has ruled that the Section 201 tariff measures are inconsistent
with the WTO agreements, Thomas J. Usher, Chairman and CEO of
United States Steel Corporation (NYSE: X), said, "The WTO
decision, as reported, is both inconsistent with the facts and
inconsistent with the law."
Expressing frustration that the WTO continues to systematically
undermine the fair application of the U.S. trade laws, Usher
stated, "The WTO decision appears to be `based on bias, not
fact.' In fact, the U.S. has once again been subjected to the
`double-barreled bias' of an institution set on weakening both
the position of the U.S. in the trading world and the world's
trade laws, regardless of the country trying to enforce them."
For example, to date, WTO dispute settlement panels have struck
down every safeguard measure to come before them.
The Section 201 tariff measures, which were imposed following an
intensive investigation and unanimous affirmative injury finding
by the U.S. International Trade Commission, are in full
compliance with the WTO agreements.
For that reason, Usher stressed that "the United States must
appeal this decision to the WTO Appellate Body while continuing
to fully enforce the tariff measures for the entire three-year
period. What is at stake is the integrity of the President's
steel program and the ability of American steel companies to
complete the needed restructuring that has begun as a result of
the Section 201 tariffs."
The U.S. International Trade Commission conducted the most
exhaustive investigation in history before finding that imports
were a substantial cause of the serious injury suffered by
domestic producers. Following the completion of a three-month
review of the ITC's report by the Executive Branch, the
President implemented temporary import relief.
"This WTO decision raises the question of what it takes to
satisfy a WTO panel with respect to a safeguard measure," said
Mr. Usher. "The answer, it seems, is that it can't be done."
U. S. Steel will work with the government to vigorously defend
the Section 201 tariff measures and urges the Administration to
maintain the remedy measures for the full three years originally
mandated.
* * *
As previously reported, Fitch Ratings has assigned a 'B+' rating
to U.S. Steel's Series B mandatory convertible preferred stock,
which is consistent with current ratings ('BB' for senior
unsecured, 'BB+' for secured bank debt). All ratings remain on
Rating Watch Negative following the company's bid for certain
assets of National Steel. The company has stated that proceeds
from the preferred offering will be used for general corporate
purposes, including funding working capital, financing potential
acquisitions, debt reduction and voluntary contributions to its
employee benefit plans. If the company was successful in
acquiring the assets of National Steel, the proceeds may be used
to finance a portion of the purchase price. The preferred stock
is not being issued to recapitalize the company.
VERTEL CORP: Closes $500K Senior Secured Bridge Note Financing
--------------------------------------------------------------
Vertel Corporation (OTCBB:VRTL), a leading provider of
convergent network mediation and management solutions, announces
the completion, of funding of gross proceeds to Vertel of
$500,000 due to the sale of six-month term senior secured non-
convertible bridge notes.
"The proceeds will assist us in smoothing out our cash flow
timing cycles as we continue to execute on our 2003 operating
plan," said Marc Maassen, Vertel's CEO and President.
Vertel is a leading provider of Network Mediation and Management
solutions. Since 1995, Vertel has provided solutions to over 300
companies, including telecom infrastructure vendors, operators
and service providers such as Alcatel, AT&T, BT, Cingular,
Deutsche Telekom, Lucent, Motorola, Nokia, Nortel, NTT, Samsung,
Siemens, Verizon and WilTel.
Vertel's in-depth knowledge and commitment to industry
standards, combined with experience of working with many
different equipment types, allows the creation of high
performance solutions that enable customers to quickly overcome
technological barriers.
For more information on Vertel or its products, visit
http://www.vertel.com
At December 31, 2002, Vertel's balance sheet shows a total
shareholders' equity deficit of about $630,000.
WARNACO GRUOP: Court Stamps Final Amount Approval on GE's Claim
---------------------------------------------------------------
On June 12, 2002, the Court approved the Warnaco Group Debtors
and General Electric Capital Corporation's Settlement Agreement,
which, among other things, provided that GE Capital will have a
final unsecured claim in the Debtors' cases for $2,349,037,
minus any net rental payment and any net sale proceeds GE
Capital receives on account of the lease or sale of the
Helicopter. The Parties have reached an agreement to determine
and settle the final amount of the Remaining Helicopter
Unsecured Claim.
In a Stipulation Judge Bohanon approved on March 17, 2003, the
Parties agree that:
A. GE Capital will have a final allowed general unsecured claim
for $300,000 with respect to the Helicopter Lease. The
Claim will receive the same treatment as the allowed general
unsecured claims under the Debtors' confirmed Plan of
Reorganization;
B. Except as modified with respect to the Remaining Helicopter
Unsecured Claim, nothing in this Stipulation will affect any
of the provisions of the Settlement Agreement; and
C. Any monies previously, now or hereafter received by GE
Capital for the lease or sale of the Helicopter will not
reduce the amount of the allowed general unsecured claim for
$300,000. (Warnaco Bankruptcy News, Issue No. 46; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WHEELING-PITTSBURGH: Gets Nod on Revised $250MM Loan Application
----------------------------------------------------------------
Wheeling-Pittsburgh Steel Corporation announced that its revised
$250 million loan guarantee application has been approved by the
Emergency Steel Loan Guarantee Board. The announcement comes
less than a month after the company's original application was
rejected. The revised application included substantial
additional contributions from company creditors, suppliers, and
the states of West Virginia and Ohio.
"Approval of the loan guarantee is a milestone event for the
company and its employees," Bradley said. "We have worked long
and hard developing a plan that will make Wheeling-Pittsburgh
Steel competitive over the long-term. I would like to thank
those who contributed to our revised application. Without their
help, we could not have successfully amended our application. I
would also like to thank the members of the Emergency Steel Loan
Guarantee Board for expeditiously reviewing the new
information."
The guaranteed $250 million loan will be used to finance
Wheeling-Pittsburgh Steel's emergence from bankruptcy
protection. It will also fund the company's strategic plan,
which calls for investments in state-of-the-art technology that
will improve its manufacturing efficiency.
A major component of the company's plan of reorganization
remains the installation of a $110 million electric arc furnace
(EAF). The EAF would replace one of the company's two operating
blast furnaces. An EAF typically uses recycled scrap steel and
scrap alternatives as 100 percent of its feedstock. Wheeling-
Pittsburgh Steel, however, will have the capability to feed both
scrap and liquid iron from its remaining blast furnace into its
EAF.
"The Byrd Bill loan guarantee is the foundation on which
Wheeling-Pittsburgh Steel will build its future," Bradley said.
"I have confidence that our new manufacturing configuration,
when combined with the determination and skill of our employees,
will keep steel manufacturing in the Upper Ohio Valley for years
to come.
"Wheeling-Pittsburgh Steel has been through tough times since it
filed for bankruptcy protection in November 2000. Our employees,
though, have been tougher. I am gratified by how much we have
been able to accomplish when we closed ranks and worked together
to ensure the survival of this great company," Bradley said. "We
will work to keep that spirit alive as we transform this company
into a competitive steel manufacturing and metal products
company."
Bradley noted that the company received strong support from the
political leadership of West Virginia and Ohio for its loan
guarantee application.
"Without the leadership of Sen. Robert Byrd, Wheeling-Pittsburgh
Steel's 3,800 employees would be facing a bleak future," Bradley
noted. "By creating and fighting for the Emergency Steel Loan
Guarantee Program, Sen. Byrd has given this company and its
workers the opportunity to build a future for themselves and for
the communities in which they live and work."
Bradley also praised the support of Sen. Jay Rockefeller, West
Virginia Governor Bob Wise and Ohio Governor Bob Taft.
"Sen Rockefeller has aggressively supported the company
throughout its bankruptcy proceedings and has been an
unflinching ally," Bradley said. "Gov. Wise and Gov. Taft played
critical roles during the process of putting together revisions
of our Byrd Bill application. In addition, Sen George Voinovich,
Sen. Mike DeWine, Rep. Alan Mollohan, Rep. Bob Ney and Rep. Ted
Strickland have consistently demonstrated their support of our
loan guarantee application."
Others who have supported the company's application include West
Virginia Representatives Nick Rahall and Shelly Moore Capito.
The Emergency Steel Loan Guarantee Program provides a minimum 85
percent federal loan guarantee for the lender. In addition to
the federal loan guarantee, the states of Ohio and West Virginia
have agreed to provide financing of $12 million and $15 million,
respectively, as part of the loan package. Suppliers have agreed
to finance up to an additional $8 million of the non-guaranteed
portion of the loan.
Royal Bank of Canada (RBC) originally filed the application on
behalf of the company in September 2002. RBC Capital Markets,
the corporate investment banking arm of RBC, will structure and
arrange the loan, with RBC Dain Rauscher acting as advisor to
the company in connection with its restructuring.
Wheeling-Pittsburgh is the nation's eighth largest domestic
steel producer.
WISER OIL CO.: NYSE Accepts Continued Listing Business Plan
-----------------------------------------------------------
The Wiser Oil Company (NYSE:WZR) announced that the New York
Stock Exchange has accepted the Company's business plan for its
continued listing on the exchange.
As a result, Wiser will continue to be listed on the NYSE,
subject to quarterly monitoring to the goals outlined in its
plan presented to the NYSE.
The Company's plan includes steps to comply with the NYSE's
continued listing criteria of maintaining stockholders' equity
of not less than $50.0 million and an average market
capitalization of not less than $50.0 million over a 30 trading-
day period. The Company will work with the NYSE to achieve the
plan's goal by June 30, 2004.
The Company's equity market capitalization at December 31, 2002
was $52.6 million, based on 15.284 million shares of fully-
diluted common stock outstanding on December 31, 2002 with a
closing price of $3.44 per share. Unaudited stockholders' equity
at December 31, 2002 was $36.3 million.
Dallas-based Wiser Oil Company (NYSE:WZR), whose September 30,
2002 balance sheet shows a working capital deficit of about $11
million, is an independent oil and gas exploration and
production company with reserves and production along the Texas
Gulf Coast, the Gulf of Mexico, the Permian Basin of West Texas
and New Mexico, and Alberta, Canada. The Company's total proved
reserves at December 31, 2001 were 212.4 billion cubic feet
equivalent, with natural gas comprising 46% of total reserves.
Wiser's proved reserves at December 31, 2001 were 81% developed,
with approximately 63% located in the United States and 37%
located in Canada.
WINSTAR: Trustee Gets Nod to Tap Adelman as Special Counsel
-----------------------------------------------------------
Winstar Communications, Inc.'s Chapter 7 Trustee sought and
obtained 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.
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.
These are the customary hourly rates of Adelman personnel:
Attorneys
---------
Lewis H. Gold $410.00
Robert H. Levin 410.00
Gary M. Schildhorn 375.00
Barry D. Kleban 375.00
Steven D. Usdin 360.00
Gary D. Bressler 360.00
Raymond H. Lemisch 360.00
Leon R. Barson 325.00
Alan I. Moldoff 310.00
Kathleen E. Torbit 290.00
William Hinchman 275.00
Victoria M. Endriss 275.00
Robert J. Lenahan 260.00
Bradford J. Sandler 250.00
Mark Pfeiffer 215.00
D. Andrew Bertorelli, Jr. 150.00
Jennifer R. Hoover 145.00
Legal Assistants
----------------
Jackie Parsio 130.00
Wendy Raskas Greenberg 120.00
Sandi VanDyk 140.00
Document Clerk
--------------
Briege McKenna $95.00
Emma Garrett 95.00
(Winstar Bankruptcy News, Issue No. 40; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
WORLDCOM: Wants to Enter Into Amended DAP Pact with Bellsouth
-------------------------------------------------------------
According to Lori R. Fife, Esq., at Weil Gotshal & Manges LLP,
in New York, BellSouth Telecommunications Inc., and UUNET
Technologies Inc. entered into a Dial Access Platform Agreement
on September 2, 1998, which was subsequently amended by
Amendment No. 1 on July 20, 2000. On July 9, 2001, UUNET
assigned and transferred to MCI WorldCom Network Services, Inc.,
the DAP Agreement and all of UUNET's rights and obligations
under and interest in the DAP Agreement. A Notice of the
assignment and transfer of the DAP Agreement was provided to
BellSouth by letter dated July 10, 2001. On March 5, 2003, MCI
Network Services, as successor-in-interest to UUNET, and
BellSouth entered into Amendment No. 2 to the DAP Agreement,
wherein MCI Network Services agreed to assume the DAP Agreement,
as amended by Amendment No. 2.
The parties have entered into Amendment No. 2 to:
-- amend, restate, assume, and affirm the DAP Agreement, as
amended by Amendment No. 2; and
-- provide for the final resolution of all disputes, claims
and issues arising from or relating to the DAP Agreement.
Pursuant to Amendment No. 2, MCI Network Services agreed to file
a motion with the Bankruptcy Court seeking entry of an order of
the Bankruptcy Court in a form reasonably satisfactory to both
Parties approving and authorizing assumption of, and the
settlement reflected in, the DAP Agreement, as amended by
Amendment No. 2.
As modified by Amendment No. 2, the salient terms of the DAP
Agreement are:
A. Term: The term of the DAP Agreement, as amended by
Amendment No. 2 will be 24 months from the Amendment No.
2 Effective Date, with several renewal options.
B. Cure: The Parties have agreed to resolve certain
prepetition defaults under the contract in the form of a
cure payment. MCI Network Services will pay to BellSouth
$22,300,000 as a cure amount in full and complete
satisfaction of any and all prepetition defaults under
the DAP Agreement. The parties agree that there will be
no additional prepetition cure obligation other than the
payment of the Cure Amount.
C. Mutual Release: As of the Amendment No. 2 Effective Date,
MCI Network Services and BellSouth are mutually releasing
claims arising under the DAP Agreement, provided,
however, that they are preserving obligations contained
in or which survive Amendment No. 2.
By this Motion, the Debtors seek entry of an order:
A. approving MCI Network Services' assumption of the DAP
Agreement, as amended by Amendment No. 2, and reflecting
the agreed resolution or settlement of issues between the
Parties, and fixing the cure obligations; and
B. authorizing MCI Network Services to enter into and
implement Amendment No. 2.
Section 365(a) of the Bankruptcy Code authorizes a debtor-in-
possession to assume an executory contract or unexpired lease
subject to the bankruptcy court's approval. Section 365(b) of
the Bankruptcy Code provides that a debtor may not assume an
executory contract if there has been a default under the
contract unless, at the time of assumption, the debtor cures the
default.
Once the cure requirement is satisfied, then the standard
applied to determine whether the assumption of an executory
contract or unexpired lease should be approved is the "business
judgment" test, which is premised on the debtor's business
judgment that the assumption is in its best interests. See NLRB
v. Bildisco & Bildisco, 465 U.S. 513, 523 (1984); Orion Pictures
Corp. v. Showtime Networks, Inc. (In re Orion Pictures Corn.), 4
F. 3d 1095, 1099 (2d Cir. 1993); Control Data Cori). v. Zelman
(In re Mines, 602 F.2d 38, 42-43 (2d Cir. 1979). Some courts
have defined the elements of the business judgment standard in
the context of contract assumption as: (a) whether the contract
is profitable or advantageous to the debtor's estate; (b)
whether the contract is necessary to the continued operation of
the business; (c) whether the contract is necessary to the
preservation of estate assets, and (d) whether the estate will
be able to perform its contractual obligations. See In re
National Sugar Refining Co., 26 B.R. 762, 764 (Bankr. S.D.N.Y.
1983); In re National Sugar Refining Co., 26 B.R. 765, 767
(Bankr. S.D.N.Y. 1983); In re Del Grosso, 115 B.R. 136, 138
(Bankr. N.D. Ill. 1990).
Ms. Fife relates that the Parties have agreed that MCI Network
Services will pay to BellSouth $22,300,000 as a cure amount in
full and complete satisfaction of any and all prepetition
defaults under the DAP Agreement. The Cure Amount is to be paid
by MCI Network Services to BellSouth within three days of the
date on which the Approval Order becomes final and
nonappealable. MCI Network Services and BellSouth agree that
there will be no additional prepetition cure obligation other
than the payment of the Cure Amount. This Cure Amount will
constitute BellSouth's sole remedy in this regard.
The DAP Agreement, as amended by the Amendment No. 2, benefits
MCI Network Services in a number of ways including:
-- allowing MCI Network Services to continue to obtain
services from BellSouth and to compete effectively in the
cities serviced by the facilities provided by BellSouth;
-- reducing the term of the commitment;
-- reducing the price per port and the port commitment; and
-- resolution of various prepetition defaults and disputes
between the parties.
As a result of these benefits, the DAP Agreement, as modified by
Amendment No. 2, represents substantial cost savings to MCI
Network Services and the estates.
Accordingly, Ms. Fife contends that the DAP Agreement, as
amended by Amendment No. 2, is a critical asset of the estate,
which is necessary to the generation of significant revenues and
authority should be granted for the Debtors to assume the DAP
Agreement, as amended by Amendment No. 2. The Debtors have
determined in the exercise of their sound business judgment that
the assumption of the DAP Agreement, as amended by Amendment No.
2, is in the best interest of their estates and creditors.
Bankruptcy Rule 9019 governs the procedural requirements to be
followed before a settlement may be approved. Bankruptcy Rule
9019(a) provides in relevant part, that: "[o]n motion by the
trustee and after notice and a hearing, the court may approve a
compromise and settlement." This rule empowers bankruptcy
courts to approve settlements "if they are in the best interests
of the estate." Vaughn v. Drexel Burnham Lambert Group, Inc.
(In re Drexel Burnham Lambert Group, Inc.) 134 B.R. 499, 505
(Bankr. S.D.N.Y. 1991). The settlement need not result in the
best possible outcome for the debtor, but must not "fall beneath
the lowest point in the range of reasonableness." Drexel
Burnham Lambert Group, 134 B.R. at 505. Moreover, Bankruptcy
Code Section 105(a) provides in pertinent part that "[t]he court
may issue any order, process, or judgment that is necessary or
appropriate to carry out the provisions of this title."
Settlements and compromises are "a normal part of the process of
reorganization." Protective Comm. for Indep. Stockholders of
TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 428 (1968)
(quoting Case v. Los Angeles Lumber Prods. Co., 308 U.S. 106,
130 (1939)). A decision to accept or reject a compromise or
settlement is within the sound discretion of the Court. Nellis
v. Shugrue, 165 B.R. 115, 123 (Bankr. S.D.N.Y. 1994); Drexel
Burnham Lambert Group, 134 B.R. at 505; see also 9 Collier on
Bankruptcy T 9019.02 (15th ed. rev. 2001). In exercising its
discretion, the bankruptcy court must make an independent
determination that the settlement is fair and reasonable. Shy,
165 B.R. at 122. The court may consider the opinions of the
trustee or debtor in possession that the settlement is fair and
reasonable. Id.; In re Purofied Down Prods. Corp., 150 B.R.
519, 522 (Bankr. S.D.N.Y. 1993). In addition, the bankruptcy
court may exercise its discretion "in light of the general
public policy favoring settlements." In re 217 B.R. 41 (Bankr.
S.D.N.Y. 1998); see also Shug rue, 165 B.R. at 123.
In determining whether to approve a proposed settlement, courts
have applied the following factors: (a) the probability of
success in litigation, with due consideration for the
uncertainty of fact and law; (b) the complexity and likely
duration of litigation and any attendant expense, inconvenience
and delay; (c) the proportion of creditors who do not object to,
or who affirmatively support the proposed settlement; and (d)
the extent to which the settlement is truly the product of arms'
length bargaining and not the product of fraud or collusion.
See In re Ashford Hotels, Ltd., 226 B.R. 797, 804 (Bankr.
S.D.N.Y. 1998).
Ms. Fife believes that the proposed settlement incorporated into
the DAP Agreement, as amended by Amendment No. 2, is fair and
reasonable under the circumstances, represents the exchange of
reasonably equivalent value between the Parties, and in no way
unjustly enriches any of the Parties. In addition, the
settlement constitutes the contemporaneous exchange of new value
and legal, valid, and effective transfers between the Parties.
Further and perhaps most importantly, the DAP Agreement, as
amended by Amendment No. 2 and incorporating the resolution of
certain issues between the Parties, represents substantial cost
savings to MCI Network Services and the estates.
Absent authorization to enter into and implement the DAP
Agreement, as amended by Amendment No. 2, Ms. Fife is concerned
that the Parties might require extensive judicial intervention
to resolve their many disputes and it is uncertain which of the
Parties would emerge with a favorable and successful resolution
of their claims. This litigation would be costly, time
consuming, and distracting to management and employees alike.
Moreover, approval of the relief requested would eliminate the
attendant risk of litigation and would avoid the delay of the
implementation of the changes effected in, and the cost savings
associated with, Amendment No. 2. (Worldcom Bankruptcy News,
Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WORLDCOM INC: January 2003 Operating Results Show Profitability
---------------------------------------------------------------
WorldCom filed its January 2003 Monthly Operating Report with
the U.S. Bankruptcy Court for the Southern District of New York.
During the month of January, WorldCom recorded $2.16 billion in
revenue versus $2.20 billion in December 2002 and income from
continuing operations of $188 million versus a loss of $47
million in December. Net income for January was $155 million
versus a net loss of $580 million in December.
January reorganization items were $37 million versus $514
million in December. During the restructuring process, certain
business activities will drive one-time costs that will be
recognized in the month in which they were incurred. These
expenses are expected to fluctuate from month to month as the
Company implements its cost reduction plans.
WorldCom ended January with $2.8 billion in cash on hand, an
increase of approximately $300 million from the beginning of the
month. WorldCom's capital expenditures for the month were $34
million, including $19 million for PP&E and $15 million for
related software. January depreciation and amortization was $118
million.
"We still have a lot of work to do, but we are delivering on our
100-day plan," said Michael Capellas, WorldCom chairman and CEO.
"Customer service continues at all time highs, we are making
solid progress on our cost reduction initiatives, and we are
profitable. We remain on track to emerge from Chapter 11
protection later this year."
The financial results discussed in the January 2003 Monthly
Operating Report exclude the results of Embratel. Until WorldCom
completes a thorough balance sheet evaluation, the Company will
not issue a balance sheet or cash flow statement as part of its
Monthly Operating Report.
The Monthly Operating Reports are available on WorldCom's
Restructuring Information Desk at http://www.worldcom.com
Based on current information and a preliminary analysis of its
ability to satisfy outstanding liabilities, WorldCom believes
that when it emerges from bankruptcy proceedings, its existing
WorldCom and Intermedia preferred stock and WorldCom group and
MCI group tracking stock issues will have no value.
About WorldCom, Inc
WorldCom, Inc. (WCOEQ, MCWEQ) is a leading global communications
provider, delivering advanced communications connectivity to
businesses, governments and consumers. With one of the world's
most expansive, wholly-owned data networks, WorldCom provides
innovative data and Internet services that are the foundation
for commerce and communications in today's market. With products
such as The Neighborhood built by MCI and the award-winning
WorldCom Connection -- the industry's first comprehensive
managed voice and data network service -- WorldCom continues to
lead the industry in converged communications solutions for the
21st century. For more information, go to
http://www.worldcom.com.
W.R. GRACE: Peninsula Entities Disclose 10.02% Equity Stake
-----------------------------------------------------------
Peninsula Investment Partners, L.P. and Peninsula Capital
Advisors, LLC, beneficially own 10.02% of the outstanding common
stock of W. R. Grace & Co. represented in the holding of
2,049,900 such shares. Peninsula Investment Partners and
Peninsula Capital Advisors share voting and dispositive powers
over the stock.
W.R. Grace is a leading global supplier of catalysts and silica
products, especially construction chemicals and building
materials, and container products. The Company filed for Chapter
11 protection on April 2, 2001 (Bankr. Del. Case No. 01-01139).
XCEL ENERGY: Board Approves Prelim Settlement with NRG Creditors
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Xcel Energy (NYSE:XEL) announced that its board of directors
approved a tentative settlement agreement with holders of most
of NRG Energy's long-term notes and the steering committee
representing NRG's bank lenders. The settlement is subject to
certain conditions, including the approval of at least a
majority in dollar amount of the NRG bank lenders and long-term
noteholders and definitive documentation.
The terms of the settlement call for Xcel Energy to make
payments to NRG over the next 13 months totaling up to $752
million for the benefit of NRG's creditors in partial
consideration for their waiver of any existing and potential
claims against Xcel Energy.
Under the settlement, Xcel Energy will make the following
payments:
-- $350 million at or shortly following the consummation of a
restructuring of NRG's debt. It is expected this payment
would be made prior to year-end 2003.
-- $50 million on January 1, 2004. At Xcel Energy's option,
it may fill this requirement with either cash or Xcel
Energy common stock or any combination thereof.
-- $352 million in April 2004, at which time Xcel Energy
anticipates receiving a tax refund based on the loss of
its investment in NRG.
"This is a very constructive settlement for us," said Wayne
Brunetti, chairman, president and chief executive officer of
Xcel Energy. "The timing of each payment was scheduled to ensure
Xcel Energy has adequate cash on hand to fund the payment and
maintain an adequate liquidity margin."
As a result of our initiatives to work constructively with NRG's
largest creditors, we were able to reach a solution that should
bring immediate and long-term benefits to our shareholders, our
bondholders and our employees.
-- Our stock price has been negatively affected by the
uncertainty surrounding NRG. We believe that the
settlement should eliminate this uncertainty.
-- This settlement does not require the issuance of
additional equity. We expect to finance the settlement
with cash-on-hand at the Xcel Energy holding company level
and with funds from the tax benefit associated with the
write-off of our investment in NRG.
-- The settlement eliminates the risks and uncertainty
surrounding NRG's current restructuring effort. Although
no one can predict with certainty the outcome of a
restructuring process, we believe the settlement contains
terms that greatly reduce our exposure to any material
claims.
-- The settlement eliminates the significant legal fees and
related costs that would be incurred in a protracted,
adversarial legal proceeding.
-- The settlement frees management to concentrate its
energies on running our core utility business and
restoring our financial strength.
-- It reduces the risk of a credit downgrade. The
deconsolidation of NRG from Xcel Energy's financial
statements will significantly improve Xcel Energy's
financial ratios. In fact, we believe the settlement paves
the way for a potential upgrade of the credit ratings of
our operating utilities and the Xcel Energy holding
company.
-- It should lower our financing costs, which will improve
our credit metrics and reduce the cost of any future debt
financings, including the PSCo and NSP bank lines that
come due this summer.
-- For our employees, the settlement allows them to focus all
their energies on the job at hand rather than the
uncertainty relating to the NRG situation. And, it allows
us to retain and attract talented and valuable employees.
-- And finally, it gives additional assurance to our
regulators that our operating utilities will not be
exposed to any risks related to our disposition of NRG.
Xcel Energy also announced that, as part of completing the 2002
audit of NRG, Xcel Energy expects NRG to record additional
impairment losses, which will cause Xcel Energy's retained
earnings to be negative. NRG will be reporting a significantly
greater loss for 2002 than had been anticipated. Under the
Public Utility Holding Company Act, a registered holding
company, such as Xcel Energy, cannot declare or pay a dividend
when retained earnings are less than the prospective dividend,
unless the company receives a waiver from the SEC. In December
2002, Xcel Energy applied to the SEC for the necessary waiver
permitting Xcel Energy to declare and pay dividends in the event
of negative retained earnings. However, at this time, the SEC
has not ruled on the request.
The financial impact of the tax effects of the settlement and
subsequent deconsolidation of NRG from Xcel Energy's financial
statements are expected to positively impact retained earnings
and may be sufficient to eliminate the negative retained
earnings balance. The company cannot predict with certainty the
precise financial impact of these items at this time. For this
reason and in light of the Public Utility Holding Company Act,
the Xcel Energy board chose to delay a decision on the dividend
until these issues are resolved. The company intends to continue
seeking a waiver from the SEC so the company can pay dividends
notwithstanding negative retained earnings.
"We understand the delay will cause hardship for many of our
shareholders and we are deeply sorry for that," Brunetti said.
"We used our best efforts to avoid this situation, but because
of the uncertainties at this time, the prudent course was to
delay a decision on the dividend."
"Although we are all disappointed by the need to delay in the
first quarter dividend, I want our shareholders to understand
that we intend to make every effort to pay out the full dividend
of 75 cents per share during 2003," Brunetti added.
* BOOK REVIEW: Land Use Policy in the United States
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Author: Howard W. Ottoson
Publisher: Beard Books
Paperback: US$34.95
Review by Gail Owens Hoelscher
Order your personal copy today and one for a colleague at
http://amazon.com/exec/obidos/ASIN/1893122832/internetbankrupt
In 1962, marking the 100th anniversary of the signing of the
Homestead Act by President Lincoln, 20 nationally recognized
economists, historians, a political scientist, and a geographer
presented papers at the Homestead Centennial Symposium at the
University of Nebraska. Their task was to appraise the course
that United States land policy had taken since independence. The
resulting papers are presented in this book, grouped into five
major areas: historical background; social factors influencing
U.S. land policy; past, present and future demands for lands in
the U.S.; control of land resources; and implications for future
land policy.
This book begins with a summary of the Homestead Act, its
antecedents, the arguments of its supporters and detractors, and
its intent versus implementation. The Act offered a quarter
section (160 acres) of public land in the West to citizens and
intended citizens for a $14 filing fee and an agreement to live
on the land for five years. The program ended in 1935.
Advocates claimed that frontier lad had no value to the
government until it was developed and began generating tax
revenue. Opponents feared the Act would lower land valued in the
East and pushed for government sale of the land. In practice,
states, territories, railroads and investors were able to set
aside more land than was eventually handed over to the
homesteaders.
One paper deals with land policy before 1862. From the start,
the U.S. required that "all grants of land by the federal
government should embody a description of the land not merely in
quality, but in place as defined by relation to an actual
survey." This policy avoided countless boundary disputes so
vexing to other countries.
Perhaps most interesting are the social history chapters:
Czechoslovakians pushing wheelbarrows across Nebraska,
"Daughters and Sons of the Revolution.(living) next
to.Mennonites," and "an illiterate.neighborly with a Greek and a
Hebrew scholar from a colony of Russian Jews." Mail-order
brides, "defectors from civilization," the importance of the
Mason jar, the Jeffersonian dream of a nation of agrarian
freeholders, and Santayana's observation that the typical
American skitters between visionary idealism and crass
materialism, all make for fascinating reading.
The land-use policy problems discussed certainly haven't been
solved today. And, although land use conflicts in the U.S.
haven't always been resolved equitably, "the big step forward
taken by the United States during the last one hundred and fifty
years in the age-long struggle of man towards the ideals of
mutuality and equity has been the working out of a system
wherein the sovereign superior who prescribes the working-rules
for land use and decision making have become, himself, a
collective of the citizenry."
A chapter is devoted to the arguments between the family farm ad
the "sentiment against concentration of wealth in the hands of a
few." The discussion of the Land Grant college system and its
contribution to international development closes with a quote
from Chester Bowles:
"Can we, now the richest people on earth, become creative
participants in the unprecedented revolutionary changes of our
era, changes that the most privileged people will oppose tooth
and nail, but which for the bulk of mankind offer the hopeful
prospect of a little more food, a little more opportunity, a
doctor for their sick child, and sense of personal dignity?"
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices
are obtained by TCR editors from a variety of outside sources
during the prior week we think are reliable. Those sources may
not, however, be complete or accurate. The Monday Bond Pricing
table is compiled on the Friday prior to publication. Prices
reported are not intended to reflect actual trades. Prices for
actual trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies
with insolvent balance sheets whose shares trade higher than $3
per share in public markets. At first glance, this list may
look like the definitive compilation of stocks that are ideal to
sell short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true
value of a firm's assets. A company may establish reserves on
its balance sheet for liabilities that may never materialize.
The prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
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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
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The TCR subscription rate is $675 for 6 months delivered via e-
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