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/raid1/www/Hosts/bankrupt/TCR_Public/030404.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, April 4, 2003, Vol. 7, No. 67 Headlines ADELPHIA COMMS: Balks at Sprint's Request for $7MM Claim Payment AES: Completes Consent Solicitations to Amend Debt Indentures AIR CANADA: Jazz Pilots Discuss 'New Model' in House of Commons AIR CANADA: Reports "Business as Usual" Following CCAA Filing AIRLINE TRAINING: Secures Financing to Satisfy Short Term Needs ANC RENTAL: Continuing Cash Collateral Use Until July 19, 2003 ARMSTRONG: Court Sets Non-Current Administrative Claims Deadline ASARCO: Fitch Withdraws DDD Rating after $100M Principal Payment ATLAS AIR: Fails to Beat Form 10-K Filing Deadline AVIANCA: US Trustee Names 7-Member Official Creditors' Committee BIOTRANSPLANT INC: Settles Issues to Preserve MEDI-507 License BOWATER INC: Appoints Gordon D. Giffin to Board of Directors CENTENNIAL HEALTHCARE: Lease Decision Period Extended to May 19 COMDISCO: Completes Partial Redemption of $75-Mill. of 11% Notes CONSECO: Thomas Lee Notifies Court of Substantial Equity Holding CUMULUS MEDIA: S&P Rates Planned $325M Senior Secured Loan at B+ CUMULUS MEDIA: Commences Tender Offer for 10-3/8% Notes Due 2008 DIRECTV LATIN: US Trustee Names Unsecured Creditors' Committee DNA SCIENCES: Chapter 11 Case Summary DTI DENTAL: December 2002 Net Capital Deficit Balloons to $2MM DTI DENTAL: Issues 54,847 Shares to BCMC Capital Entities DYNEGY INC: Completes $1.66 Billion Bank Refinancing Transaction EASYLINK SERVICES: Takes Action to Enjoin AT&T from Selling Note EDAC TECHNOLOGIES: Refinances Debts Owed to Former Lender EDAC TECHNOLOGIES: Fourth Quarter 2002 Net Loss Tops $1 Million ENRON CORP: Wants Approval of Contract Sale Bidding Procedures ETHYL CORPORATION: S&P Assigns B+ Corporate Credit Rating EUROTECH LTD: Carey Naddell Replaces Don Hahnfeldt as New Chair FAO INC: Taps KPMG to Provide Accounting & Tax Advisory Services FEDERAL-MOGUL: Court Clears Sale of OE Lighting Assets to Decoma FLEMING COMPANIES: Receives $50-Mill. Interim Funding Commitment GENUITY INC: Proposes Collection Settlement Procedures to Court GLOBAL CROSSING: Settles Claim Disputes with Asia Global GOODYEAR TIRE: S&P Cuts Certain Sr. Unsecured Debt Ratings to B+ HASBRO INC: Defaults on Licensing Agreement with Go Goddess! HAUSER INC: Voluntary Chapter 11 Case Summary HAWAIIAN AIRLINES: Garden City Appointed as Court Noticing Agent HEALTHSOUTH: S&P Drops Credit Ratings to D After Missed Payment HOLLINGER INT'L: Red Ink Continues to Flow in Full-Year 2002 JSC NORTH-WEST: S&P Raises Long-Term Ratings to B- from CCC JSC SOUTHERN: Rating Raised to B- Due to Consolidation Process KAISER ALUMINUM: Wants Approval for Release Pact with Maxxam KMART CORP: Wants to Dispose of Liability Insurance Proceeds LERNOUT: Committee Wants Court to Set Confirmation Hearing Date LOOMIS SAYLES: S&P Puts BB Class C Note Rating on Watch Negative MAGELLAN HEALTH: Will Honor & Pay Prepetition Provider Claims MOLECULAR DIAGNOSTICS: Makes Final Payment to Round Valley Cap. NANOPIERCE TECHNOLOGIES: Executes Major Financial Restructuring NATIONAL CENTURY: Court Okays Ruscilli as Real Estate Broker NATIONAL SERVICE: Selling Company to California Investment Unit NATIONSRENT: Gets Okay to Pay Exit Financing Lender's Work Fee NAVISITE INC: Completes Acquisition of Conxion Corp. for $2 Mil. NEFF CORP: Potential Debt Default Spurs Ratings Cut & Neg. Watch ON COMMAND: December 31 Balance Sheet Upside-Down by $17 Million OXFORD HEALTH: S&P Affirms BB+ Rating over Sustained Earnings PACIFIC GAS: Judge Montali Stays Confirmation Trial Until May PCD INC: Bringing-In Day Berry as Special Bankruptcy Counsel POLAROID CORP: Wants Plan Filing Exclusivity Extended to July 18 RELIANT RESOURCES: Refinancing Spurs S&P to Ratchet Up Ratings RESOLUTION PERFORMANCE: S&P Pulls Corp. Credit Rating Down to B+ SERVICE MERCHANDISE: Disclosure Statement to be Considered Today SOUTHWEST ROYALTIES: S&P Further Junks Corporate Credit Rating SPIEGEL: Wants Approval of Proposed Reclamation Claims Protocol TRENWICK: S&P Drops Ratings to D over Default on Senior Note UNITED AIRLINES: Sues U.S. Gov't to Recover $50MM in Tax Refunds VARI-L COMPANY: Special Shareholders' Meeting Set for April 28 VENTAS INC: Will Publish First Quarter 2003 Results on April 29 WARNACO: Stipulation Determining GE Capital Claim Amount Okayed WORLDCOM: Church Group Cries for State Regulatory Action W.R. GRACE: Judge Fitzgerald OKs Modified & Amended DIP Facility WYNDHAM INTL: Defaults on Rents Due Hospitality Properties Trust * Robert M. Miller Joins Morgan Joseph's Restructuring Group BOOK REVIEW: AS WE FORGIVE OUR DEBTORS: Bankruptcy and Consumer Credit in America ********* ADELPHIA COMMS: Balks at Sprint's Request for $7MM Claim Payment ---------------------------------------------------------------- The Adelphia Communications Debtors object to Sprint's request to the extent that the amounts asserted as owed to Sprint: -- are obligations of the ABIZ Debtors; -- have been paid or otherwise are disputed by the ACOM Debtors; -- are prepetition claims with respect to the ACOM Debtors; and -- may be offset by amounts owed by Sprint to or are subject to other defenses held by the ACOM Debtors. Paul Shalhoub, Esq., at Willkie Farr & Gallagher, in New York, recounts that on December 23, 2002, this Court approved the ACOM Debtors' retention of Collective Infrastructure Technology, Inc., as telecommunications consultants. As many of the telecommunications services provided to the ACOM Debtors in connection with their CLEC and certain other operations are pursuant to agreements with the ABIZ Debtors, and because the ABIZ Debtors have managed certain elements of payables/receivables and other aspects of the relationships the ACOM Debtors have with providers of these services, the ACOM Debtors retained CIT to analyze the invoices and other records that document the ACOM Debtors' overall relationship with Sprint and other telecommunication providers. Mr. Shalhoub tells the Court that the ACOM Debtors maintain their own records with respect to the ACOM Agreements and are current on their postpetition undisputed obligations to Sprint under those Agreements with the exception of BAN#921317704 amounting to $206,641.42. To respond to Sprint's requests for payment under the ABIZ Agreements and BAN#921317704, however, the ACOM Debtors needed to obtain billing, payment and other records from the ABIZ Debtors to permit the ACOM Debtors and CIT to verify what amounts may be owed in respect of services that benefited the ACOM Debtors under these Agreements and BAN#921317704. Up until as recently as February 17, 2003, the ABIZ Debtors were still providing the ACOM Debtors with additional data needed to verify what obligations and defenses - - i.e., potential offsets and other defenses -- the ACOM Debtors may have with respect to the services provided to them under the ABIZ Agreements and BAN#921317704. (Adelphia Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) AES: Completes Consent Solicitations to Amend Debt Indentures ------------------------------------------------------------- The AES Corporation (NYSE:AES) successfully completed its consent solicitations launched on March 14 and March 26, 2003 associated with twelve issues of debt securities representing approximately $4.1 billion in parent-level debt. Pursuant to the completion of the consent solicitations, the indentures governing these debt securities will be amended to conform the definition of "Material Subsidiary" and certain events of default contained therein to those contained in the indenture governing its recently issued senior secured notes due 2005. As a result of these conforming changes, no subsidiaries of The AES Corporation currently classify as "Material Subsidiaries" for purposes of the subsidiary bankruptcy event of default under the indentures governing these debt securities. Paul Hanrahan, President and Chief Executive Officer of AES, commented, "The success of these consent solicitations provides AES with increased operating and financial flexibility. We appreciate the continued strong show of support from our bondholders." Each of the consent solicitations expired at 5:00 p.m., New York City time, on Tuesday, April 1, 2003. The AES Corporation received the requisite consents for each consent solicitation and has accepted for payment all valid consents received prior to the expiration time. The consents relate to the following debt securities: 8.00% Senior Notes, Series A, Due 2008, 8.75% Senior Notes, Series G, Due 2008, 9.50% Senior Notes, Series B, Due 2009, 9.375% Senior Notes, Series C, Due 2010, 8.875% Senior Notes, Series E, Due 2011, 8.375% Senior Notes, Series F, Due 2011, 7.375% Remarketable or Redeemable Securities Due 2013, 10.25% Senior Subordinated Notes Due 2006, 8.375% Senior Subordinated Notes Due 2007, 8.50% Senior Subordinated Notes Due 2007, 8.875% Senior Subordinated Notes Due 2027, and 4.50% Convertible Junior Subordinated Debentures Due 2005. Salomon Smith Barney acted as solicitation agent with respect to each of the consent solicitations. Questions concerning the consent solicitations should be directed to the solicitation agent: Salomon Smith Barney, 390 Greenwich Street, New York, New York 10013, Attn: Liability Management Group. The solicitation agent can also be reached at 212/723-6106 or 800/558-3745 (toll free). AES Corporation's 10.250% bonds due 2006 (AES06USR1) are trading at about 74 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AES06USR1for real-time bond pricing. AIR CANADA: Jazz Pilots Discuss 'New Model' in House of Commons --------------------------------------------------------------- Representatives of the 1,400 Air Canada Jazz pilots, represented by the Air Line Pilots Association, International, appeared yesterday before the House of Commons Standing Committee on Transport to discuss the involvement of their carrier, a wholly owned subsidiary of Air Canada, Inc., in the parent corporation's bankruptcy filing announced Monday. Air Canada management informed the Jazz pilots' leaders that it plans to operate the business as usual throughout the duration of the bankruptcy proceedings. "We have pursued a campaign of 'constructive engagement' with Jazz management for more than a month, exploring innovative solutions to Air Canada's broken business model," said Capt. Nick DiCintio, chairman of the Air Canada Jazz pilots' unit of ALPA. "Jazz management has responded well to our ideas, which include overall 40 to 60 percent productivity gains as well as 23 to 30 percent pilot unit cost savings. We hope Air Canada corporate management will share our vision," he added. ALPA's address to the Transport Committee will begin with a presentation from the international union's officials on industrywide issues and on all airlines' need for relief from fees, taxes, and surcharges. Additionally, a representative of the Jazz pilots will be available to discuss their proposal for a "New Model" at Air Canada and Jazz. "Although we had hoped the airline could adopt our recommendations and other restructuring measures in time to avoid bankruptcy, we are nonetheless optimistic that our proposals can substantially contribute to the carrier's reorganization, restoration of competitive strength, and emergence from the Court's protection," he said. According to DiCintio, the "New Model" proposal would better exploit Jazz's cost structure and strong domestic network in the overall corporate air-service scheme. Under the proposal, the Jazz pilots would agree to defer scheduled pay raises and provide productivity enhancements through a relaxation of some crew-scheduling rules. As a condition of this contractual relief, the airline would commit to an expansion of Jazz's fleet and services. "To meaningfully improve the corporation's cost-versus-revenue formula, Air Canada must provide Jazz the tools and the opportunity to enhance its role," DiCintio said. "Our proposal is consistent with Air Canada's announcement of fleet- renewal plans involving the introduction of additional 50- and 90-seat small jets," DiCintio said. "The Jazz carrier's ability to seamlessly incorporate those acquisitions into its existing fleet and its simplified, cost-effective pay structure for crews makes the placement of those aircraft with Jazz a sound decision," he added. "This would require a loosening of the restrictions on Jazz's small-jet fleet -- a matter that would require the participation of the Air Canada pilots, whose contract governs those restrictions," DiCintio said. "Given the gravity of the corporation's competitive atrophy, we believe we can work with the involved parties in our common interest -- and the interests of creditors, shareholders, and the communities we serve -- to revitalize Air Canada and Jazz," he added. ALPA's appeared before the Transport Committee in the Centre Block Building. ALPA, the world's oldest and largest union of airline pilots, represents 66,000 pilots at 42 carriers in Canada and the U.S. Air Canada Jazz provides service to more communities in Canada than any other airline. Visit the ALPA Web site: http://www.alpa.org AIR CANADA: Reports "Business as Usual" Following CCAA Filing ------------------------------------------------------------- Air Canada reported business as usual systemwide during its first full day of operations since announcing a corporate restructuring through a filing under the Canadian Companies' Creditors Arrangement Act. Over 1400 Air Canada, Air Canada Jazz, Tango and ZIP flights operated on schedule in the last 24 hours. The airline's reservations centers reported a minimal increase of ten per cent in call volumes, with all calls answered within two minutes on average. Call volumes to Aeroplan call centers increased by seven per cent with calls answered on average within two and a half minutes. Future booking patterns were normal at both Air Canada and at Aeroplan. "Our customers are experiencing business as usual at Air Canada as our operations continue to run smoothly both around the world and around the clock," said Robert Milton, President and Chief Executive Officer. "A normal day of operations after an announcement such as we made yesterday clearly shows that our customers and business partners have confidence in Air Canada's future and that our employees are focused on continuing to deliver the safe, reliable and top-flight service for which Air Canada is renowned," he concluded. AIRLINE TRAINING: Secures Financing to Satisfy Short Term Needs --------------------------------------------------------------- Airline Training International Ltd., (TSX VENTURE EXCHANGE:ATS) has agreed to enter into a series of loan transactions to raise $162,500 to satisfy short term financial needs of the company. The company has agreed to enter into two term loans, the first loan in the amount of $62,500 and the second loan in the amount of $100,000. The First Loan is from a group of related parties to the company, comprising of David Lewis (as to $10,000), Robert Gilson, (as to $22,5000) James Essex (as to $15,000) and Anthony Wilshere (as to $15,000), all of whom are directors of the company. Mr. Gilson, Essex and Wilshere are also officers of the company. The First Loan is to be evidenced by a promissory note from the company to the related parties. The promissory note is unsecured, and bears interest at the rate of 24% per annum, calculated monthly, not in advance, payable interest only monthly, and with the principal balance due six months from the date of advance. Funds are scheduled to be advanced pursuant to the First Loan on April 2, 2003. The Second Loan is from a group comprising of Aviation Equities Limited (as to $65,000) and Aspen PharmaTech, Inc. (as to $35,000). Aspen PharmaTech, Inc. is a related party to the company, in that Robert Gilson, the principal shareholder of Aspen PharmaTech, Inc. is an officer and director of the company. The Second Loan is to be evidenced by a promissory note from the company. The Second Loan bears interest at the rate of 24% per annum, calculated monthly, not in advance, payable interest only monthly for the first four months of the loan, and principal payments of $12,500.00 per month plus accrued interest for the last eight months of the loan with the remaining principal balance due twelve months from the date of advance. Funds are scheduled to be advanced pursuant to the Second Loan on April 2, 2003. It is also a provision of the Second Loan that the principal amount of the Second Loan shall be immediately due and payable, at the option of the Lenders, on the closing date of any loan or Private Placement of Equity Shares or Convertible Securities arranged or obtained by the company prior to April 1, 2004, wherein the principal amount of the loan, or the cash consideration received by the company pursuant to the Private Placement of Equity Shares or Convertible Securities exceed the sum of Three Hundred Thousand Dollars ($300,000). As security for the Second Loan, the company has agreed to provide collateral security for the Second Loan in the form of a General Security Agreement over partnership units owned by the company in ATI Limited Partnership I, a limited partnership registered in Ontario. ATILPI is the owner of a Cessna 172R aircraft which is leased to A.T.R. Seminars Inc., a wholly owned subsidiary of the company. There are currently 9,352 outstanding limited partnership units, of which 6,128 are owned by the company. The company acquired its partnership units for $75,000.00 from the previous owner of the partnership units in a transaction that closed on April 1, 2003. In addition ATR has agreed to provide collateral security for the Second Loan in the form of a General Security Agreement over two aircraft owned by ATR., which will be in second position to an existing first security agreement in favor of the Canadian Imperial Bank of Commerce. The approximate value of the aircraft is $370,000. The General Security Agreement will also be secured against an outstanding shareholder loan owed to ATR by Carlos Monsalve, a Director of the company, and ATR's parts inventory. ATR has also agreed to grant to the Second Loan Group an option to purchase the two aircraft to be pledged at the appraised value of the aircraft, which option expires on August 31, 2003. In the event the option is exercised, the Second Loan Group has agreed to lease back the aircraft to ATR for a three year period. In consideration of the risks jointly taken by the Lenders in granting the First Loan and the Second Loan to the company, the Company has agreed, subject to the company obtaining necessary regulatory approval, and any other approvals as may be required by law, to use its best efforts to issue to the Lenders under the First Loan a bonus in the form of Two Hundred Fifty Thousand (250,000) non-transferrable warrants to purchase common shares in the capital of the Borrower, said warrants to be issued to each of the Lenders in proportion to their Pro-Rata Interest in the First Loan, and to issue to the Lenders under the Second Loan a bonus in the form of Four Hundred Thousand (400,000) non- transferrable warrants to purchase common shares in the capital of the Borrower, said warrants to be issued to each of the Lenders in proportion to their Pro-Rata Interest in the Second Loan. If necessary regulatory approvals are received the warrants issued with respect to each of the loans will be exercisable at a price of $0.10 per warrant exercised, due and payable at the date the warrant is exercised. The warrants shall be exercisable on or before the earlier of that date which is (a) April 1, 2005, and (b) the date on which the principal amount of the loan is paid in full. Any warrants not exercised on or before the Expiry Time shall expire on the Expiry Time. The number of warrants will be reduced or cancelled on a pro rata basis if the loans are reduced or paid out in the first year before the warrants expire. The reduction or cancellation shall take place within 30 days after the reduction or paying out of the loans. In the event that the company does not obtain necessary regulatory approval to issue the Second Loan Warrants, or having obtained approval, does not issue the Second Warrants on or before August 1, 2003, the company has agreed to pay to the Second Loan Lenders on the 1st day of April, 2004, an interest bonus equal to the sum of Ten Thousand Dollars ($10,000). The Loan transactions were approved by the Board of Directors of the company, and by independent Directors of the company, on the basis that the company is in serious financial difficulty, the transactions were designed to improve the financial position of the company , and that the terms of the transactions are reasonable in the circumstances of the company. The company is relying upon the financial hardship exemption of section 5.8 to OSC Policy 61-501 with respect to the obtaining of minority approval for the related party transactions referred to herein. Robert Gilson, President of the company stated: "Substantial increases in insurance premiums for the company's fleet of aircraft, adverse weather conditions during the months of December, January and February which restricted customers and students from flying and unanticipated increases in fuel expenses have resulted in the company requiring short term financing that was not available to the company through institutional lenders. The Lenders under the First Loan and the Second Loan were not willing to grant the loans to the company without the company agreeing to use its best efforts to obtain the necessary regulatory approvals to issue warrants to the Lenders. This financing will allow the company to continue its operations at this time. We expect that anticipated increases in enrollment in the company's pilot training programs will enable the company to return to profitability in the fourth quarter ending June 30, 2003 and meet its obligations under these loans. It was necessary for the company to proceed with these loan transactions on an expedited basis, as it was essential for the company to obtain the required short term financing to meet current obligations that had become due. Accordingly, the company was unable to give advance notice of the loan transactions." The company is a public company trading under the symbol ATS on the TSX Venture Exchange. The company is Canada's first publicly traded company dedicated to pilot training and plans to grow by serving the needs of consumers as private pilots and career oriented pilots. The company seeks to expand by developing strategic alliances and increasing its market share through internal growth and acquisition, and embracing technological advancements in computer-based training, distance education through the Internet, and use of simulators. ANC RENTAL: Continuing Cash Collateral Use Until July 19, 2003 -------------------------------------------------------------- Judge Walrath approves ANC Rental Corporation, and its debtor- affiliates' use of the Secured Creditors' cash collateral until July 19, 2003. As previously reported, the Debtors need to use their Lenders' Cash Collateral to maintain their business operations and continue their reorganization efforts in accordance with Chapter 11 of the Bankruptcy Code. Moreover, the Debtors' use of Cash Collateral in their cases has been instrumental to the implementation of the Debtors' business plan that will result in the streamlining of their businesses and successfully emerging from Chapter 11 as a viable company. (ANC Rental Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARMSTRONG: Court Sets Non-Current Administrative Claims Deadline ---------------------------------------------------------------- The bar date is set as five days after the date scheduled for the commencement of the hearing on confirmation of Armstrong World Industries' proposed Plan. No facsimile transmission will be accepted. * * * Under the Plan, AWI may reserve from Available Cash a reasonable estimate of Administrative Expenses that may become allowed as of the last day of the month immediately preceding the Effective Date, other than professional fees. To properly estimate the amount of this reserve, it is important for AWI to understand what administrative expenses, other than those of a type reflected in AWI's normal payables records, exist. Because the amount of specified administrative expense claims asserted against AWI must be factored in the calculation of Available Cash under the Plan, and because the Plan seeks to discharge all claims against AWI arising before the Effective Date, it is essential that AWI be able to ascertain the amount of administrative expenses before consummation of the Plan. The Court Order does not require that all holders of administrative expenses file a proof of claim by this deadline. Only those persons or entities asserting any of these types of administrative expenses must file proof of the expense by the Administrative Expense Bar Date: (a) Any administrative expense representing personal injury, property damage, or other tort claims against AWI, excluding Asbestos Personal Injury Claims; (b) Any administrative expense for breach of an obligation - contractual, statutory or otherwise -- by AWI, including any environmental liability (but other than any environmental liability with respect to property that is currently owned and operated by AWI; (c) Any administrative expense for amounts incurred by AWI after the Petition Date in the ordinary course of AWI's business if payment for such amounts is alleged to be overdue by at least 60 days as of the Confirmation Date; (d) Any administrative expense incurred by AWI outside the ordinary course of its business or on other than ordinary business terms, except to the extent the incurrence of the administrative expense claim was approved by the Bankruptcy Code (e.g., the DIP Credit Facility Claim, the postpetition COLI loans or any claims under any hedging agreement entered into postpetition), or represents fees and expenses of professionals; (e) Any administrative expense that would not ordinarily be reflected as a payable on AWI's books and records or as a liability on AWI's financial statements; and (f) Any administrative expense representing an employee claim against AWI, other than (i) a claim for wages, benefits, pension or retirement benefits or expense reimbursement by an employee who is employed by AWI as of the Administrative Expense Bar Date; or (ii) a grievance claim under any collective bargaining agreement to which AWI is a party. (Armstrong Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392-0900) ASARCO: Fitch Withdraws DDD Rating after $100M Principal Payment ---------------------------------------------------------------- Fitch Ratings has withdrawn the 'DDD' rating of Asarco Inc.'s notes due in 2003. This rating action is a result of the company's $100 million principal payment on March 31, 2003 on the notes that was originally due February 3, 2003. Asarco has also repaid a $450 million bank loan that was due in November 2002. These two payments were made from the proceeds Asarco received from the sale of its 54% stake in Southern Peru Copper Corporation to its parent company, Americas Mining Corporation, a subsidiary of Grupo Mexico S.A. de C.V. In addition to principal, Asarco also paid in full all accrued interest and the associated fees for each obligation. Fitch maintains the 'C' ratings for Asarco's bonds due in 2013 and 2025 but has changed the Rating Outlook to Stable from Rating Watch Negative. ATLAS AIR: Fails to Beat Form 10-K Filing Deadline -------------------------------------------------- Due to the ongoing re-audit of past financial statements for 2000 and 2001, Atlas Air Worldwide Holdings, Inc. (NYSE: CGO) was unable to file its Annual Report on Form 10-K for 2002 on a timely basis. This inability to file is due primarily to difficulties encountered in obtaining the necessary historical records and data to enable the Company's accountants, Ernst & Young, to re- audit 2000 and 2001 results, which were previously audited by Arthur Andersen. The Company currently anticipates completing its audit for fiscal 2002 during the first half of 2003, but is unable to predict when, or if, Ernst & Young will be in a position to finish the re-audit of the 2000 and 2001 results. The Company's inability to file its Annual Report on Form 10-K for 2002 creates a default under some of its debt and lease obligations. As the Company disclosed last week, however, it is already in negotiations with creditors and lessors regarding the restructuring of its outstanding debt and lease obligations, and the Company has deferred making payments on its bank debt, senior notes and leased aircraft while those negotiations are ongoing. One of the leased aircraft for which the Company had previously suspended payment has now been returned to its lessor, although negotiations are continuing. While negotiations are continuing, the lessor has initiated legal action against the Company, seeking to recover damages under the lease. In addition, on March 21st, the Company received notification from the New York Stock Exchange that its common share price had fallen below the minimum one dollar price required for continued listing on the Exchange. As a result, the Company has six months from receipt of notification to bring its share price, and its average share price measured over the last 30 trading days of the six-month period, back above one dollar or be subject to suspension and de-listing procedures. The Company has notified the Exchange that it intends to take action to rectify the problem within the designated time frame. As part of an ongoing effort to reduce costs, Atlas Air Inc, a wholly owned subsidiary of the Company, announced today that it is reducing its ground staff by approximately 30 percent, including open positions that will not be filled. The majority of the reductions have been implemented today, and the reductions in the aggregate are expected to save the Company $14 million on an annualized run-rate basis. The reductions affect ground staff employees at Atlas Air, Inc.'s Purchase, New York and Miami, Florida facilities. Atlas Air, Inc., is a part of Atlas Air Worldwide Holdings, Inc., and specializes in ACMI (Aircraft, Crew, Maintenance and Insurance) contracts and charter services, utilizing its fleet of Boeing 747 freighter aircraft. Atlas Air Inc.'s 10.750% bonds due 2005 (CGO05USR1) are trading at about 15 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CGO05USR1for real-time bond pricing. AVIANCA: US Trustee Names 7-Member Official Creditors' Committee ---------------------------------------------------------------- Carolyn S. Schwartz, the United States Trustee for Region 2 appointed a seven-member Official Committee of Unsecured Creditors in Aerovias Nacionales De Colombia S.A. Avianca and Avianca, Inc.'s Chapter 11 cases: 1. debis AirFinance B.V. Attn: Martin Wills Evert van de Beekstraat 312 1118 Cx Schipol Airport Amsterdam, The Netherlands Telephone No.: 011-3120-655-9655 2. Banco De Bogota-Colombia Attn: Alejandro Figueroa, President Calle 36 No. 7-47 Piso 14 Bogota, Colombia Telephone No.: 011-057-1-3383405 3. United Aerospace Corporation, Inc. Attn: John P. Yurgealitis, President 9800 Premier Parkway Miramar, Florida 33025 Telephone No.: (954) 364-0085 4. Caja de Auxilios y Prestaciones de Acdac Attn: Monica Romero, President CAXDAC Carrera 10A No. 90-35 Bogota, Colombia Telephone No.: 011-57-1-6180287 5. Monumental Life Insurance Company (f/k/a Peoples Security Life Insurance Company) Attn: Mary T. Pech, Vice-President 4333 Edgewood Rd., N.E. Cedar Rapids, Iowa 52499-5335 Telephone No.:(319) 398-8062 6. Pegasus Aviation Inc. 4 Embarcadero Center Suite 3550 San Francisco, CA 94111 Telephone No.: (415) 743-0257 7. Asociacion Colombiana de Aviadores Civiles Attn: Capitan Alberto Padilla Henao Calle 94 No. 23-16 Bogota D.C. - Colombia Telephone No.: 011-57-1-621-6380 or 011-57-1-621-6398 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtors is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. Aerovias Nacionales de Colombia S.A. Avianca, the oldest airline in the Western Hemisphere, operates a domestic (Colombia) and international airline passenger business, but it also carries mail and freight cargo on its domestic and international routes, filed for chapter 11 protection on March 21, 2003 (Bankr. S.D.N.Y. Case No. 03-11678). Ronald E. Barab, Esq., at Smith, Gambrell & Russell, LLP and Howard D. Ressler, Esq., at Anderson, Kill & Olick, P.C., represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of more than $100 million each. BIOTRANSPLANT INC: Settles Issues to Preserve MEDI-507 License -------------------------------------------------------------- BioTransplant, Inc., (OTC Bulletin Board: BTRNQ.OB) reported several developments that are expected to help position the Company to execute on its strategic objective of maximizing the value of its key assets through divestiture, licensing and partnering arrangements. In particular, the Company announced that it has reached a settlement agreement with the Catholic University of Louvain preserving BioTransplant's exclusive license to MEDI-507 and implemented several measures intended to further reduce the Company's operating expenses. As previously announced, on February 27, 2003, the Company and Eligix, Inc., its wholly-owned subsidiary, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court in Boston Massachusetts. "I believe that we have made key strides over the past twenty- four business days since we filed for bankruptcy. We have moved forward toward achieving our overarching mission - preserving and maximizing the value of our key intellectual property assets - and we expect that the developments reported today will contribute to positioning the Company to realize the value of these assets over the long term," stated Donald Hawthorne, President and Chief Executive Officer of BioTransplant. "In addition, we are committed to moving quickly through bankruptcy proceedings with the objective of emerging as a stronger company capable of accomplishing that mission." The progress reported includes: * Resolution of Disputes with the Catholic University of Louvain The Company reached a resolution of its disputes with the Catholic University of Louvain relating to UCL's license to BioTransplant of the BTI-322 rodent antibody and its human analogue, MEDI-507. As part of the agreement, the Company will retain its exclusive rights to develop and commercialize BTI-322 and MEDI-507. BioTransplant had previously announced that UCL was seeking to terminate the license. The Company has sublicensed BTI-322 and MEDI-507 to MedImmune, Inc., and MedImmune is currently conducting Phase II clinical trials with MEDI-507 for the treatment of psoriasis. MEDI-507 is also an important component of the AlloMune(TM) Systems and BioTransplant has sublicensed its rights to develop MEDI-507 to Immerge Biotherapeutics, its xenotransplantation joint venture with Novartis. * Termination of Facility Lease Obligations The Company announced that it has successfully terminated its lease obligation for its Charlestown, Massachusetts facility. BioTransplant has also reached an agreement in principle for the termination of its lease obligation for its Medford, Massachusetts facility. * Partnering Discussions The Company continues to actively pursue partnering and licensing agreements for its currently unlicensed assets, the Eligix(TM) HDM Cell Separation System and the AlloMune(TM) Systems. * Form 10-K Update The Company has filed a Form 12b-25, Notification of Late Filing, as required by the Securities and Exchange Commission in connection with a delay in the filing of its Annual Report on Form 10-K for its fiscal year ended December 31, 2002. As a result of the demands of the bankruptcy process and the need to have the application to retain independent auditors approved by the Bankruptcy Court, the Company has not been able to complete the Form 10-K disclosures or obtain an audit report in the time required. The Company expects to file its Form 10-K promptly upon completing the required disclosures and receiving the audit report. The Company expects that the net loss per share for the year ending December 31, 2002 will be significantly larger than the net loss per share in the same period of 2001. The change in net loss per share may reflect an additional write-down, or total write-off, of the remaining goodwill and intangible assets of the Eligix business as well as the carrying value of its facility-related property and equipment at December 31, 2002. The Company is not able to estimate the expected change in operating results resulting from the impairment of these non- cash assets as the audit of its financial statements has not yet been completed. BioTransplant Incorporated, a Delaware corporation located in Medford, Massachusetts, is a life science company whose primary assets are intellectual property rights that it has exclusively licensed or seeks to exclusively license to third parties. On February 27, 2003, the Company and Eligix, Inc., its wholly- owned subsidiary, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court in Boston Massachusetts. The Company's strategy is to maximize the potential future value of its licensed intellectual property rights. The Company has exclusively licensed Siplizumab (MEDI-507), a monoclonal antibody product, to MedImmune, Inc. Siplizumab is in Phase II clinical trials for the treatment of psoriasis. The Company's assets also include the AlloMune System technologies, which are intended to treat a variety of hematologic malignancies and improve outcomes for solid organ transplants, and the Eligix HDM Cell Separation Systems, which use monoclonal antibodies to remove unwanted cells from bone marrow, peripheral blood stem cell and donor leukocyte grafts used in transplant procedures. BioTransplant also has an interest in Immerge BioTherapeutics, Inc., a joint venture with Novartis, to further develop both companies' individual technology bases in xenotransplantation. BOWATER INC: Appoints Gordon D. Giffin to Board of Directors ------------------------------------------------------------ The Board of Directors of Bowater Incorporated (NYSE:BOW) appointed Gordon D. Giffin to the company's board effective April 2, 2003. Mr. Giffin, 53, is co-chair of the Public Policy and Regulatory Affairs practice for McKenna Long & Aldridge LLP with offices in Washington, DC and Atlanta, Georgia. His law practice is focused on international transactions and trade matters, government procurement, federal and state regulatory matters and public policy. Mr. Giffin served as U.S. Ambassador to Canada from August 1997 to April 2001. He currently serves on the boards of Canadian Imperial Bank of Commerce, Canadian National Railway Company, Canadian Natural Resources Limited and TransAlta Corporation. He is also a member of the Board of Counselors for Kissinger - McLarty Associates, the Council on Foreign Relations and the Board of Trustees of the Carter Center. Bowater Incorporated, headquartered in Greenville, SC, is a leading producer of newsprint and coated groundwood papers. In addition, the company makes uncoated groundwood papers, bleached kraft pulp and lumber products. The company has 12 pulp and paper mills in the United States, Canada and South Korea and 12 North American sawmills that produce softwood and hardwood lumber. Bowater also operates two facilities that convert a groundwood base sheet to coated products. Bowater's operations are supported by approximately 1.5 million acres of timberlands owned or leased in the United States and Canada and 32 million acres of timber cutting rights in Canada. Bowater is one of the world's largest consumers of recycled newspapers and magazines. Bowater common stock is listed on the New York Stock Exchange, the Pacific Exchange and the London Stock Exchange. A special class of stock exchangeable into Bowater common stock is listed on the Toronto Stock Exchange (TSE: BWX). As reported in the Trouble Company Reporter's February 24, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit ratings on the two largest North American newsprint producers, Bowater Inc., and Abitibi-Consolidated Inc., to non-investment-grade 'BB+' from 'BBB-'. The downgrades reflect expectations that over an industry cycle credit measures for the companies are unlikely to reach average levels strong enough to support the previous ratings. CENTENNIAL HEALTHCARE: Lease Decision Period Extended to May 19 --------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the Northern District of Georgia, Centennial Healthcare Corporation, and its debtor- affiliates obtained an extension of their lease decision period. The Court gives the Debtors until May 19, 2003, to determine whether to assume, assume and assign, or reject unexpired nonresidential real property leases. Centennial HealthCare Corporation, which operates and manages 86 nursing homes in 19 states, filed for Chapter 11 petition on December 20, 2002 (Bankr. N.D. Ga. Case No. 02-74974). Brian C. Walsh, Esq., and Sarah Robinson Borders, Esq., at King & Spalding represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $100 million each. COMDISCO: Completes Partial Redemption of $75-Mill. of 11% Notes ---------------------------------------------------------------- Comdisco Holding Company, Inc., (OTC:CDCO), as previously announced on March 14, 2003, it has completed a partial redemption of its 11% Subordinated Secured Notes (due 2005) in the principal amount of $75 million. The outstanding principal amount of the Subordinated Secured Notes after this redemption is $85 million. The Subordinated Secured Notes were redeemed at a price equal to 100% of their principal amount ($75 million) plus accrued and unpaid interest to the redemption date. Comdisco previously partially redeemed its 11% Subordinated Secured Notes in the principal amounts of $65 million, $200 million, $100 million, $50 million and $75 million on November 14, 2002, December 23, 2002, January 9, 2003, February 10, 2003, and March 3, 2003, respectively. The purpose of reorganized Comdisco is to sell, collect or otherwise reduce to money the remaining assets of the corporation in an orderly manner. Rosemont, IL-based Comdisco -- http://www.comdisco.com-- provided equipment leasing and technology services to help its customers maximize technology functionality and predictability, while freeing them from the complexity of managing their technology. Through its former Ventures division, Comdisco provided equipment leasing and other financing and services to venture capital backed companies. CONSECO: Thomas Lee Notifies Court of Substantial Equity Holding ---------------------------------------------------------------- Thomas H. Lee Equity Fund IV, L.P. and affiliated investors notify the Court that they hold a substantial amount of equity in Conseco Inc. As of February 28, 2003, the Fund beneficially owned 2,684,172.15 shares of the Series F Common-Linked Convertible Preferred Stock of Conseco Inc. (Conseco Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) CUMULUS MEDIA: S&P Rates Planned $325M Senior Secured Loan at B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to Cumulus Media, Inc.'s proposed $325 million senior secured term loan C due 2008. Proceeds are expected to be used to refinance existing debt and fund the company's tender offer for its 10.375% senior subordinated notes due 2008. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating on the company. The outlook is stable. Atlanta, Ga.-based radio operator Cumulus had total debt outstanding of approximately $433.7 million at Dec. 31, 2002. The company owns 268 radio stations in 55 small- and mid-size markets, pro forma for all announced pending acquisitions and divestitures. "The proposed refinancing is expected to lower Cumulus's cost of capital, but it does not reduce aggregate debt levels," said Standard & Poor's credit analyst Alyse Michaelson. Radio advertising enjoyed positive momentum throughout most of 2002, and favorable trends have been expected to continue into 2003. Rising ad demand across a broad range of categories has fueled double-digit national revenue increases and low single- digit local increases. However, near-term visibility is limited because advertising is vulnerable to escalating geopolitical tensions and ongoing economic softness. Given the potential for contracting ad demand, adherence to a de-leveraging financial policy will be important for maintaining the current credit profile. Cumulus is likely to continue consolidating new and existing radio markets, and is expected to use equity financing to help temper potential financial risk. The stable outlook incorporates the expectation that Cumulus will maintain its market positions, key credit ratios, and covenant cushion despite advertising cycles. Debt-financed acquisition activity or a material reversal in operating momentum could destabilize the ratings. CUMULUS MEDIA: Commences Tender Offer for 10-3/8% Notes Due 2008 ---------------------------------------------------------------- Cumulus Media Inc., (Nasdaq:CMLS) has commenced a tender offer for any and all of its outstanding 10-3/8% Senior Subordinated Notes due 2008. In conjunction with the offer, Cumulus is soliciting consents to eliminate substantially all of the restrictive covenants and certain default provisions in the indenture under which the Notes were issued, other than the covenants to pay interest on and principal of the Notes and the related default provisions. Tendering holders who validly tender their Notes (and do not withdraw them) and deliver consents by the Consent Expiration Date will receive the total consideration of $1,067.50 per $1,000 principal amount of Notes, which includes a consent payment of $20.00 per $1,000 principal amount. Holders who validly tender their Notes (and do not withdraw them) after the Consent Expiration Date but prior to the Tender Offer Expiration Date will receive as payment for their Notes the total consideration minus the consent payment. The offer will expire at 12:01 a.m., New York City time, on April 30, 2003, unless extended. Consents may be revoked at any time on or prior to 5:00 p.m., New York City time, on April 15, 2003, unless extended. Tendered Notes may be withdrawn at any time prior to the Tender Offer Expiration Date. The offer is conditioned on, among other things, the receipt of consents from the holders of at least a majority in principal amount of the Notes and the completion of an amendment to Cumulus' credit facility. The exact terms and conditions of the tender offer and consent solicitation are specified in, and are qualified in their entirety by, the Offer to Purchase and Consent Solicitation Statement and related materials that are being distributed to holders of the Notes. Holders who tender their Notes in the offer are required to consent to the proposed amendments to the indenture. For additional information regarding the pricing, tender and delivery procedures and conditions to the offer and consent solicitation, reference is made to the Offer to Purchase and Consent Solicitation Statement and the related transmittal documents, copies of which may be obtained from MacKenzie Partners, Inc., the information agent for the offer and the solicitation, and J.P. Morgan Securities Inc., the dealer manager for the offer and the solicitation agent for the solicitation. Cumulus Media Inc., is the second-largest radio company in the United States based on station count. Giving effect to the completion of all announced pending acquisitions and divestitures, Cumulus Media will own and operate 268 radio stations in 55 mid-size U.S. media markets. The company's headquarters are in Atlanta, Georgia, and its Web site is http://www.cumulus.com DIRECTV LATIN: US Trustee Names Unsecured Creditors' Committee -------------------------------------------------------------- Pursuant to Sections 1102(a)(1) and 1102(b)(1) of the Bankruptcy Code, Acting United States Trustee for the District of Delaware Roberta A. DeAngelis appoints these five creditors of DirecTV Latin America LLC to serve on the Official Committee of Unsecured Creditors in the Debtor's Chapter 11 case: 1. HBO Latin America Media Services Attn: Jose Sariego, Senior Vice President 1 Alhambra Plaza, Penthouse, Coral Gables Florida 33134 2. Buena Vista International, Inc. Attn: Alec M. Lipkind 350 S. Buena Vista Street, Burbank California 91521 3. Music Choice Attn: Kim Murphy, Esq. 300 Welsh Road, #200, Horsham Pennsylvania 19044 4. Infront Sports & Media AG f/k/a Kirch Media AG Attn: Michael Francombe, Esq. Grafenavweg 2, P.O. Box 4442, 6304 Zug Switzerland 5. Thomson Inc. Attn: Nickolas R. Talsma 10330 N. Meridian Street, Indianapolis Indiana 46290 (DirecTV Latin America Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) DNA SCIENCES: Chapter 11 Case Summary ------------------------------------- Debtor: DNA SCIENCES, INC. aka Genetic Information Systems aka Kiva Geneticis, Inc. 6540 Kaiser Dr. Fremont, CA 94555 Type of Business: DNA Sciences, Inc., is a privately held applied genetics company focused on developing DNA diagnostics for critical medical and therapeutic decisions. Bankruptcy Case No.: 03-41843 Chapter 11 Petition Date: March 31, 2003 Court: Northern District of California (Oakland) Judge: Randall J. Newsome Debtor's Counsel: J. Michael Kelly, Esq. Law Offices of Cooley Godward 1 Maritime Plaza 20th Fl. San Francisco, CA 94111-3580 415-693-2000 DTI DENTAL: December 2002 Net Capital Deficit Balloons to $2MM -------------------------------------------------------------- DTI Dental Technologies Inc., (TSX: DTI) announced financial results for the year ended December 31, 2002. Some highlights: - Sales for the year ended December 31, 2002 amounted to $22.5 million, an increase in sales of 90.5% over the same period in 2001. - Internal same lab growth led to a 27.7% increase in sales. - The full year impact of sales from labs acquired in 2001 and acquisitions in 2002 led to a 62.8% increase in sales - Lab income increased 58.1% to $4.7 million in 2002. - DTI generated EBITDA of $1.7 million or 7.7% of sales compared to $1.0 million or 7.6% of sales in 2001. - Net loss of $2.3 million in 2002 ($0.33 per share) compared to $0.9 million ($0.13 per share) in 2001. "We are pleased with our expansion for 2002. We exceeded our internal growth objectives for the year and completed the acquisition of two more labs in the U.S." said Paolo Kalaw, the Company's Chief executive Officer. "The acquisitions expand our presence to five states in the U.S. and three provinces in Canada." Sales for the year ended December 31, 2002 amounted to $22.5 million compared to $13.2 million for the fourteen-month period in 2001. The increase in sales was 90.5% after adjusting the fourteen-month period for 2001to exclude $1.2 million of sales arising in the two months ended December 31, 2000. Of this increase 62.8% related to acquisitions. Internal same lab growth was responsible for the remaining 27.7% increase in sales. Lab income, which in management's opinion is one of the key operating measures for the dental labs, increased 58.1% to $4.7 million in 2002 from $3.0 million for the fourteen-month period in 2001. As a percentage of sales, the lab income amounted to 21.0% compared to 22.6% in 2001. The two labs acquired during the year generated lab income equal to 16.3% of sales from those labs and excluding those results the lab income was 21.8% of sales, a level which is more representative of management's on going expectations. "Laboratory performance during the year demonstrated what can be achieved when we focus on improvement in the operations." said Mr. Kalaw. "One of the expectations for 2003 is improved profitability at the labs acquired in 2002. Both labs have very competent personnel, are located in attractive market areas and will be significant contributors to the future." After acquisition, finance and corporate expenses the company generated operating income before amortization, interest and taxes (EBITDA) of $1.7 million or 7.7% of sales compared to $1.0 million or 7.6% of sales in 2001. Amortization expense for the year amounted to $0.7 million compared to $0.8 million for the fourteen-month period ended December 31, 2001. Changes in accounting rules resulted in the Company discontinuing the amortization of goodwill part way through 2001. Amortization of goodwill in 2001 amounted to $0.2 million. Interest and financing costs on long-term debt amounted to $2.5 million for the year, $0.5 million of which represents non-recurring costs of a financing proposal that did not complete. The remaining $2.0 million reflects interest costs and the impact of the $13.4 million increase in long-term debt during the year. "The strong lab operating income of the Company allowed us to raise $13.0 million in non-dilutive debt in 2002," said Mr. Kalaw. "We raised capital primarily for acquisitions and completed two acquisitions in the summer. We are currently looking at several attractive opportunities and expect to complete further acquisitions in the near term." Non-cash expense arising from the acquisition structure amounted to $1.0 million in 2002 and $0.6 million in 2001. The net loss of the company increased from $0.9 million in 2001 to $2.3 million in 2002. The Company generated operating cash flows of $1.1 million in 2002, $1.3 million of which was provided by changes in working capital compared to a requirement of $0.3 million in 2001 of which $0.7 million was required by changes in working capital. As of December 31, 2002, DTI Dental Technologies Inc.'s total shareholders' deficiency stands at $2,462,401 compared to $147,022 in 2001. DTI is a multi-site operator of premium quality dental laboratories, with eleven labs in five U.S. states and three Canadian provinces. DTI's laboratories design and manufacture custom dental prosthetics including crowns, bridges and orthodontic appliances. DTI's experienced management team is committed to building shareholder value by increasing market share, revenue and cash flow through carefully targeted acquisitions and improved marketing, training, and business processes. DTI is well positioned to capitalize on growing demand by our aging population for high quality cosmetic and restorative dental products. DTI DENTAL: Issues 54,847 Shares to BCMC Capital Entities --------------------------------------------------------- DTI Dental Technologies Inc., whose December 31, 2002 balance sheet shows a total shareholders' equity deficit of about $2.4 million, has issued 31,055 common shares at a deemed issue price of $1.45 per share and 23,792 common shares at a deemed issue price of $1.71 per share in accordance with the terms of convertible debentures previously issued to BCMC Capital Limited Partnership, BCMC Capital II Limited Partnership and Banyan Capital Partners Limited Partnership. The 54,847 common shares represent the payment of a portion of the interest due on the debentures and are subject to a 12 month hold period which expires on March 31, 2004. DTI is a multi-site operator of premium quality dental laboratories, with eleven labs in five U.S. states and three Canadian provinces. DTI's laboratories design and manufacture custom dental prosthetics including crowns, bridges and orthodontic appliances. DTI's experienced management team is committed to building shareholder value by increasing market share, revenue and cash flow through carefully targeted acquisitions and improved marketing, training, and business processes. DTI is well positioned to capitalize on growing demand by our aging population for high quality cosmetic and restorative dental products. DYNEGY INC: Completes $1.66 Billion Bank Refinancing Transaction ---------------------------------------------------------------- Dynegy Inc., (NYSE:DYN) announced that its subsidiary, Dynegy Holdings Inc., has entered into a new $1.66 billion bank credit facility consisting of: -- A $1.1 billion secured revolving credit facility that matures on Feb. 15, 2005; -- A $200 million secured term loan that also matures on Feb. 15, 2005; and -- A $360 million secured term loan that matures on Dec. 15, 2005. This new credit facility replaces DHI's existing $900 million and $400 million revolving credit facilities that were scheduled to mature on April 28 and May 27, 2003, respectively, and a $360 million communications lease, which was scheduled to mature in December 2005. The new facility, which requires no scheduled amortization of principal, will provide funding for the ongoing collateral needs of existing businesses and general corporate purposes. The facility also preserves the commitments of the 21 lenders in the former DHI revolvers and communications lease financings. "[Wednes]day's announcement is more than a significant milestone that solidifies our ability to serve and deliver value to our stakeholders for the long-term. These bank facilities represent the defining point where we transition from building a new Dynegy to operating as the new Dynegy," said Bruce A. Williamson, president and chief executive officer of Dynegy Inc. "We are extremely pleased that, with the full support of our bank team, we were able to complete our refinancing arrangements on acceptable terms well in advance of the maturity dates. Importantly, these new facilities preserve our substantial liquidity, allow us to continue to restore confidence with our employees, customers and suppliers, and provide us with flexibility to build shareholder value," he added. As detailed in the attachments to this news release, the restructured debt is secured by a substantial portion of the available assets and stock of the company's direct and indirect subsidiaries, excluding Illinois Power and Dynegy Global Communications. Other key terms and conditions of the credit facility, including pricing and covenants, are also outlined in the attachments. The credit agreement will be filed in its entirety as an exhibit in Dynegy's 2002 Form 10-K filing. In addition, Dynegy filed a Form 8-K Wednesday that includes the discussion from the 10-K related to the credit agreement. Credit Suisse First Boston, Morgan Stanley and Greenhill & Company were financial advisors to the company. Co-lead arrangers for the lenders were Salomon Smith Barney Inc., Banc of America Securities LLC, and Bank One, NA. 2003 Guidance Interest costs for 2003 are expected to increase above the company's previous estimate of $417 million due to a combination of higher than anticipated interest costs associated with the new facility and an increase in collateral requirements for existing businesses, resulting from the rise in commodity prices. Dynegy's new interest estimate ranges from $450 to $465 million. Despite this increase in interest expense, Dynegy is not revising its previous earnings guidance of $0.08 to $0.15 per share or cash flow guidance of $1.2 to $1.3 billion from its generation, natural gas liquids and regulated energy delivery segments, as the company expects earnings from these businesses to offset the incremental costs due to a favorable pricing environment. First Quarter 2003 Results Dynegy will announce first quarter 2003 results on Tuesday, April 29, 2003, prior to the opening of the New York Stock Exchange. The company will host an analyst conference call to review first quarter results during the morning of April 29. Dynegy Inc., owns operating divisions engaged in power generation, natural gas liquids and regulated energy delivery. Through these business units, the company serves customers by delivering value-added solutions to meet their energy needs. Dynegy Holdings Inc.'s 8.750% bonds due 2012 (DYN12USR1) are trading at about 74 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=DYN12USR1for real-time bond pricing. EASYLINK SERVICES: Takes Action to Enjoin AT&T from Selling Note ---------------------------------------------------------------- On March 17, 2003, EasyLink Services Corporation commenced an action against AT&T Corp., PTEK Holdings, Inc. and Xpedite Systems, Inc. The suit seeks, among other things, to enjoin AT&T from selling an EasyLink promissory note held by AT&T to PTEK, to compel AT&T to participate in EasyLink's current debt restructuring and to enjoin Xpedite and PTEK from making false statements to EasyLink's customers and creditors regarding EasyLink and its financial position. EasyLink commenced this action in response to PTEK's February 28, 2003 announcement that it had entered into an agreement with AT&T to purchase 1,423,980 shares of outstanding Class A common stock of EasyLink held by AT&T and a promissory note of EasyLink held by AT&T. The promissory note, with a principal amount of $10,000,000, represents approximately 13% of the aggregate principal amount of debt that EasyLink has been seeking to restructure pursuant to its debt restructuring plan. EasyLink believes that if the sale of the note to PTEK is permitted to occur, EasyLink's current debt restructuring may be at substantial risk. * * * As previously reported, EasyLink Services said it was seeking to restructure substantially all of approximately $86.2 million of outstanding indebtedness, including approximately $10.7 million of capitalized future interest obligations. The Company is currently in discussions with holders of its debt relating to the proposed restructuring. To date, the holders of approximately 70% of this debt have expressed interest in completing a restructuring on the terms discussed. Management seeks to restructure substantially all of the debt. If all of the debt were successfully eliminated on the currently proposed terms, the Company would pay approximately $2.0 million in cash and issue up to 35 million shares of its Class A common stock, including the shares issued to fund the cash payment. The number of shares to be exchanged for each class of debt was determined based on a deemed per share price of between $2.00 and $3.00. EDAC TECHNOLOGIES: Refinances Debts Owed to Former Lender --------------------------------------------------------- EDAC Technologies Corporation (OTC Bulletin Board: EDAC.OB), a designer and manufacturer of tools, fixtures, jet engine components, injection molds and spindles, reported a refinancing of its existing obligations to the Company's former lender. Prior to the refinancing described below, the Company had recorded outstanding obligations to its former lender, under an Amended and Restated Term Note dated September 29, 2000, in the amount of $9,728,000, including principal, interest and late fees. On April 1, 2003, the Company's former lender agreed to cancel the Original Note in exchange for (i) a new promissory note in the principal amount of $1,325,000 and (ii) a new contingent promissory note in the principal amount of $1,000,000. The $1,325,000 note bears interest at a rate of seven percent, is payable in eighteen equal monthly installments, has a maturity date of October 1, 2004, and is subordinate to the Company's obligations to the Company's primary lender. The $1,000,000 note does not bear interest, is payable only upon the occurrence of certain events on or before March 31, 2005, including a change in control, sale of the Company or liquidation, and is subordinate to other existing and future ordinary course obligations of the Company. All other amounts due under the Original Note have been forgiven by the Company's former lender. The Company's former lender has sold all of its interest in the $1,325,000 note to an unrelated third party. Commenting on the refinancing, Dominick A. Pagano, the Company's Chief Executive Officer said, "The successful restructuring of our bank loans, together with the consolidation of our four operating divisions, we believe will allow us to be in a better position to compete and grow our business when the machine tool and aerospace industries start to rebound." The Company's Gros-Ite Industries primarily offers design and manufacturing services for the aerospace industry in such areas as jet engine parts, special tooling, equipment and gauges and components used in the manufacture, assembly and inspection of jet engines. Gros-Ite Spindle specializes in the design, manufacture and repair of precision spindles, which are an integral part of numerous machine tools, which are found in virtually any type of manufacturing environment. Apex Machine Tool Company is a diversified manufacturing company specializing in high-precision fixtures, gauges, dies and molds. EDAC TECHNOLOGIES: Fourth Quarter 2002 Net Loss Tops $1 Million --------------------------------------------------------------- EDAC Technologies Corporation (OTC Bulletin Board: EDAC.OB), a designer and manufacturer of tools, fixtures, jet engine components, injection molds and spindles, reported results for the fourth quarter of 2002. Fourth quarter 2002 net loss was $1,192,000 versus net income of $1,338,000 for the fourth quarter of 2001. Sales for the fourth quarter 2002 were $6,046,000 versus $10,549,000 for the fourth quarter 2001. The fiscal year 2002 net loss was $13,407,000 versus net income of $5,413,000 for fiscal year 2001. Sales for 2002 were $25,850,000 versus $44,911,000 for 2001. During 2002, the Company completed the initial impairment testing of the goodwill balance as of December 30, 2001 related to the acquisition of Apex Machine Tool in 1998. The test indicated that the goodwill related to such acquisition, was entirely impaired. The Company recorded an impairment charge of $10,381,000 as a cumulative effect of a change in accounting principle in the Company's first quarter of 2002 results. Commenting on the 2002 net loss, Dominick A. Pagano, President and Chief Executive Officer, said, "The fourth quarter concluded one of the most difficult years in the Company's history. The significant downturn in the machine tool industry accompanied by a rapid decline in the commercial jet engine market led to customer schedule changes, shipping delays and reduced orders, and resulted in continued losses. This was further compounded by defaults on certain loan agreements." "But, it was also a time when, having reassessed our position as a manufacturing company, we initiated our "get well" plan by consolidating our four operating divisions into one. This consolidation, which was completed in the first quarter of 2003, we believe, will allow us to reduce overhead, improve operating efficiencies and share resources more effectively. The consolidation together with the successful restructuring of our bank loans, we believe will allow us to be in a better position to compete and grow our business when the aerospace industry starts to rebound." EDAC Technologies Corporation's Gros-Ite Industries primarily offers design and manufacturing services for the aerospace industry in such areas as jet engine parts, special tooling, equipment and gauges and components used in the manufacture, assembly and inspection of jet engines. Gros-Ite Spindle specializes in the design, manufacture and repair of precision spindles, which are an integral part of numerous machine tools found in virtually every manufacturing environment. Apex Machine Tool Company is a diversified manufacturing company specializing in high-precision fixtures, gauges, dies and molds. As previously reported, EDAC Technologies' September 28, 2002 balance sheet shows a total shareholders' equity deficit of about $2 million. ENRON CORP: Wants Approval of Contract Sale Bidding Procedures -------------------------------------------------------------- Pursuant to the proposed sale of the Cash Flow Interest Agreement and the Gas Sales Agreement to Arctas-Paragon Investments LLC, Enron North America Corporation asks the Court to: (i) schedule May 5, 2003, at 10:00 a.m. as the date and time to hold an auction at which ENA will solicit higher or better bids for the sale of the Cash Flow Interest Agreement the Amended and Restated Gas Sales Agreement, and certain related assets; (ii) approve the procedures to be used in connection with the Auction; (iii) approve procedures to determine the amounts, if any, to cure any defaults under the Contracts, if and prior to any Contracts being assumed by ENA and assigned to Arctas; (iv) approve the payment of a termination fee to Arctas; and (v) schedule a hearing on the sale of the Assets free and clear of liens, claims, interests, encumbrances, and rights of setoff, recoupment, netting and deduction. Martin A. Sosland, Esq., at Weil, Gotshal & Manges LLP, in New York, outlines the Bidding Procedures: A. Auction Date and Time. The Auction will be held on May 5, 2003, commencing at 10:00 a.m. New York Time at the offices of Weil, Gotshal & Manges, 767 Fifth Avenue, New York, New York 10153 for consideration of qualifying offers that may be presented to ENA, or at a time and date as ENA may determine, upon prior consultation with the Creditors' Committee. Notice of any changes in the Auction date or time will be filed with the Court and provided to any party known by ENA to have indicated a desire to participate in the Auction as soon as practicable; B. Qualification as Bidder. Any entity that wishes to make a bid for the Assets must provide ENA with sufficient and adequate information to demonstrate, to the satisfaction of ENA, upon consultation with the Creditors' Committee, that it has the financial wherewithal and ability to consummate the sale including evidence of adequate financing, and including a financial guaranty or irrevocable letter of credit, if deemed appropriate, each in a form agreed by ENA, in consultation with the Creditors' Committee; C. Bid Requirements. -- ENA, upon consultation with the Creditors' Committee, will entertain bids that are on substantially the same terms and conditions as those terms set forth in the Purchase Agreement with Arctas; -- Bids must be accompanied by a cash deposit at least equal to 10% of the Competing Bid -- the "Earnest Money Deposit"; -- Prior to the Bid Deadline, the Earnest Money Deposit is to be wire transferred to: JP Morgan Chase Bank 500 Stanton Christiana Road Newark, DE 19713 ABA# 021000021 For Credit To: Weil, Gotshal & Manges LLP Special Account Acct# 0158-37-474 Reference: 43889.0003 M. Sosland -- Onondaga Deposit -- Upon the closing of the Asset Sale, the Earnest Money Deposit is to be applied toward the purchase price, in accordance with the terms of the Purchase Agreement, if ENA, in consultation with the Creditors' Committee, accepts the Competing Bid as the highest or best offer at the conclusion of the Auction and the sale of the Assets to that entity is approved by the Court; -- If one or more bidders, other than Arctas, are not the Winning Bidder, their Earnest Money Deposits will be returned to them as soon as reasonably practicable upon the earlier of: (a) the closing of the sale of the Assets to the Winning Bidder; or (b) at such time as the bids are no longer binding pursuant to the Bidding Procedures as approved by the Court; -- Competing Bids must be in writing, signed by an individual authorized to bind the prospective purchaser and received no later than 4:00 p.m. New York Time on May 2, 2003 -- the "Bid Deadline" -- by: (a) Enron, 1400 Smith Street, Houston, Texas 77002, Attention: Maria E. Grannen, maria.e.grannen@enron.com or Facsimile: 713-646-3253, (b) Weil, Gotshal & Manges LLP, 100 Crescent Court, Dallas, Texas 75201, Attention: Martin A. Sosland, Esq., martin.sosland@weil.com or and Facsimile: 214-746-7777), Attorneys for the Debtor, and (c) Squire, Sanders & Dempsey L.L.P., 312 Walnut Street, Suite 3500, Cincinnati, Ohio 45202, Attention: Stephen D. Lerner, Esq., (slerner@ssd.com or Facsimile: 513- 361-1201), Attorneys for the Creditors' Committee; -- Any Competing Bid must be presented under a contract substantially similar to the Purchase Agreement, marked to show any modifications made to the Purchase Agreement, including the amount of consideration, name of purchaser, and other conforming changes that must be made to reflect the purchaser and its bid, and the bid must not be subject to due diligence review, board approval obtaining financing, or the receipt of any non-governmental consents; -- Initial Overbids. The initial overbid must be at least $228,000 greater than the $4,050,000 Purchase Price in the Purchase Agreement; -- Parties not submitting competing Bids by the Bid Deadline may not be permitted to participate at the Auction; and -- All bids for the purchase of the Assets will be subject to Bankruptcy Court approval; D. Due Diligence and Questions Prior to Submitting Bids. To conduct due diligence regarding the Assets, documents relating to the Assets will be available for viewing at 1400 Smith Street, Houston, Texas or via electronic format. Contact Maria E. Grannen at 713-345-4395 to schedule a time to review the contents of the due diligence room or to receive a copy of relevant documents via electronic format. The due diligence room will be available from April 11, 2003 to May 2, 2003. To access the documents, if not previously executed, parties must sign the Confidentiality Agreements with ENA; E. Auction. -- Evaluation of Highest or Best Offer. ENA will, after the Bid Deadline and prior to the Auction, upon consultation with the Creditors' Committee: (a) evaluate all Competing bids received, (b) invite certain parties to participate in the Auction, and (c) determine, which Competing Bid reflects the highest or best offer for the Assets -- the "Initial Bid". ENA will inform each bidder of the determination during the Auction; -- ENA, in consultation with the Creditors' Committee may reject any Competing Bid not in conformity with the requirements of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules of the Court, the Procedures Order or that is contrary to the best interests of ENA, its estate or creditors; -- Adjournment of Auction. The Auction may be adjourned as ENA, upon consultation with the Creditors' Committee, deems appropriate. Reasonable notice of the adjournment and the time and place for the resumption of the Auction will be given to Arctas, all entities submitting Competing Bids, and the Creditors' Committee; -- Subsequent Bids. Subsequent bids at the Auction must be in an amount that is at least $40,000 more than the Initial Overbid and each subsequent bid; -- Other Terms. All Competing Bids are subject to other terms and conditions as are announced by ENA, in consultation with the Creditors' Committee. The Bidding Procedures may be modified by ENA, in consultation with the Creditors' Committee, as maybe determined to be in the best interests of its estate or creditors; F. Failure to Close. In the event a qualified bidder other than Arctas is the Winning Bidder, and the Winning Bidder fails to consummate the proposed transaction by the Closing Date for any reason, ENA will: -- retain the bidder's Deposit, but not as liquidated damages, and ENA reserves the right to pursue all available remedies, whether legal or equitable, available to it, and -- upon consultation with the Creditors' Committee, will be free to consummate the proposed transaction with the next highest bidder at the highest price bid by such bidder at the Auction without the need for an additional hearing or Court order; G. Non-Conforming Bids. Notwithstanding anything to the contrary, ENA, in consultation with the Creditors' Committee, will have the right to entertain non-conforming bids for the Assets; H. Modifications. In its business judgment and sole and absolute discretion, upon consultation with the Creditors' Committee, ENA may reject any bid at any time before entry of an order by the Bankruptcy Court approving a bid, including, but not limited to those that are: -- not in conformity with the requirements of the Bankruptcy Code, the Bankruptcy Rules or the Local Bankruptcy Rules of the Court, -- contrary to the best interests of ENA, its estate and creditors, and parties in interest, or -- otherwise inadequate or insufficient. No bids will be considered by ENA unless a party submitted an offer in accordance with these Bidding Procedures and participated in the Auction; I. Bids are Irrevocable. All bids are irrevocable until the earlier to occur of: -- the closing of the sale of the Assets, or -- 30 days after the last date of the Auction; J. Non-Solicitation of Third Parties. Buyer, any bidder, or any Of its respective directors, officers, employees, accountants or other agents or representatives will not directly, or indirectly, solicit a bid from a third party to purchase the Assets or engage in or continue any discussion or negotiations with any party that has made or who may bid for the Assets; and K. Expenses. Any bidders presenting bids will bear their own expenses in connection with the sale of the Assets, whether or not the sale is ultimately approved. Pursuant to the Agreement, in the event that the Purchase Agreement is terminated and an Alternative Transaction closes, ENA has agreed to pay to Arctas, as a priority administrative claim, within two business days after the closing of the Alternative Transaction, an amount equal to the greater of $120,000 and 3% of the price at which the Assets are sold pursuant to an Alternative Transaction -- the Termination Fee; provided, however, in no event will the Termination Fee exceed $200,000. Mr. Sosland asserts that the Bidding Procedures should be approved because: (a) it provides a fair and reasonable means of ensuring that the Assets are sold for the highest or best offer attainable; (b) it provides flexibility so as to enable a party interested in bidding an offer to modify the terms of the Agreement and submit a greater purchase price as a result thereof, so long as the offer is on substantially the same terms and conditions as those set forth in the Agreement; (c) the time frame allows ENA to consider and evaluate any offer so as to ensure that the offer satisfies the requirements for Auction participation; and (d) the Termination Fee is fair and reasonable and will initiate an overbid process at a floor that is desirable for ENA's estate, will foster competitive bidding for the Assets, and will confer a benefit to ENA, its estate and creditors. Cure Amount Procedures Even though ENA believes that no Cure Amounts are due under the Contracts, ENA propose that the Cure Amounts, if any, will be established by these procedures: (a) ENA will provide notice of the Cure Amounts to all non-debtor parties to the Contracts on or before April 11, 2003. If a party disagrees with the Cure Amount proposed by ENA, it must file a written response with the Bankruptcy Court with supporting documentation and serve a copy on: (i) Enron North America Corp. 1400 Smith Street, Houston, Texas, 77002 Attention: Maria E. Grannen (ii) Weil, Gotshal & Manges LLP 700 Louisiana, Suite 1600, Houston, Texas 77002 Attention: Martin Sosland, Esq. (iii) Squire, Sanders & Dempsey L.L.P. 312 Walnut Street, Suite 3500 Cincinnati, Ohio, 45202 Attention: Stephen D. Lerner, Esq. The objection should be actually received by the persons No later than May 2, 2003, at 5:00 p.m. New York Time; and (b) If a Cure Amount cannot be resolved consensually and ENA proceeds with the assumption and assignment of the relevant Contract to Arctas, the disputed portion of the Cure Amount will be escrowed pending a determination by the Court of the amount upon notice of a hearing in accordance with the Case Management Order. Mr. Sosland contends that the proposed Cure Amount Procedures provide a fair and reasonable means of ensuring that non-debtor parties to the Contracts receive notice of the assumption and assignment of their Contracts without paying a Cure Amount. (Enron Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 609/392-0900) ETHYL CORPORATION: S&P Assigns B+ Corporate Credit Rating --------------------------------------------------------- Standard & Poor's Ratings Services has assigned its 'B+' corporate credit rating to specialty chemical manufacturer Ethyl Corp. The outlook is stable. At the same time, Standard & Poor's assigned its 'B+' bank loan rating to the company's proposed $50 million senior secured revolving credit facility and $115 million term loan, and its 'B' rating to the company's proposed $150 million senior unsecured notes, based on preliminary terms and conditions. Pro forma for the refinancing, the Richmond, Va.-based, company will have approximately $270 million of debt outstanding. "The rating actions are based on Ethyl's improved financial profile following the proposed transactions offset by a below- average business profile that reflects the highly competitive nature of the global petroleum additives industry and exposure to volatile raw material costs and the vagaries of economic cycles," said Standard & Poor's credit analyst Franco DiMartino. Standard & Poor's said that the ratings are supported by the likelihood of additional, material debt reduction over the next two years, as well as Ethyl's recent success in stabilizing operating results in the still-challenging engine oils sector of the petroleum additives market. These positives should help to offset any near-term increase in raw material costs or a greater than expected reduction in the profitability contribution from lead-based fuel additives. EUROTECH LTD: Carey Naddell Replaces Don Hahnfeldt as New Chair --------------------------------------------------------------- Eurotech, Ltd., (OTC Pink Sheets:EUOT) announced that Mr. Carey Naddell, has been appointed Chairman of the Board of the Company to replace Don Hahnfeldt, who will continue to serve as a director. Mr. Naddell has served as an independent Director of Eurotech since March 2002, and been chairman of Eurotech's Audit Committee. Hahnfeldt said that Mr. Naddell has been selected as a key member of the Company's new management team and will serve as Chief Operating Officer through a transition period up to three months, after which he will become Eurotech's next President and CEO. Mr. Naddell brings a wealth of business experience including over twenty years on Wall Street. Mr. Naddell stated, "I feel that new perspectives and new strategies are needed to guide Eurotech in its forthcoming restructured operations." He went on to say that while he is pleased with the additional assets that recent activities have added to the company's books, he is disappointed with the way the Company's stock has performed. He said with careful restructuring, "I hope to be able to improve the company's outlook and performance. The Company will keep its shareholders informed through news releases with concrete reports and progress updates." He said, "Our job will be to do our best to see that the Company's investments and future acquisitions perform to their maximum potential." During this transition period, Mr. Naddell will be seeking additional new talent for Eurotech's management team and its Board of Directors. In the meantime, Mr. Chad A. Verdi, the Company's Vice Chairman, will step down as a director on April 5th and has volunteered to continue as an advisor to the Company on a month-by-month basis as needed. Mr. Verdi had planned to step down early last year but was unable to, due to unexpected management changes in the Company. Naddell looks forward to working with past-president, Dr. Randolph Graves, Jr., for his scientific know-how and technical support. He also appreciates Mr. Verdi's and Mr. Hahnfeldt's dedication and continued support to the Company. Eurotech is a corporate asset manager seeking to acquire, integrate and optimize a diversified portfolio of technological assets and properties. Eurotech's mission is to build value in our emerging technologies and to add to and broaden the Company's asset base through licensing, joint ventures, and spin-offs, which will provide each asset, technology or property with the resources it needs to realize its strategic business potential. For additional information about Eurotech and its technologies please visit the Company Web site at http://www.eurotechltd.com At September 30, 2002, Eurotech's balance sheet shows that total current liabilities exceeded total current assets by about $2 million. The Company's unaudited condensed consolidated financial statements for the period ended September 30, 2002, have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, for the nine months ended September 30, 2002, the Company incurred a net loss of $7,182,138 and had a working capital deficiency of $2,079,064. The Company has limited finances and requires additional funding in order to market and license its products. There is no assurance that the Company can reverse its operating losses, or that it can raise additional capital to allow it to continue its planned operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. FAO INC: Taps KPMG to Provide Accounting & Tax Advisory Services ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave its nod of approval to FAO, Inc., and its debtor-affiliates' request to retain and employ KPMG LLP as their accountants and tax advisors, nunc pro tunc to January 13, 2003. The Debtors need KPMG to provide accounting and tax advisory services that will be necessary in the retailer's chapter 11 proceedings. Specifically, KPMG will provide: (A) Accounting and Auditing Services i) audit and review examinations of the financial statements of the Debtors as may be required from time to time; ii) analysis of accounting issues and advice to the Debtors' management regarding the proper accounting treatment of events; iii) assistance in the preparation and filing of the Debtor's financial statements and disclosure documents required by the Securities and Exchange Commission; iv) assistance in the preparation and filing of the Debtor's registration statements required by the Securities and Exchange Commission in relation to debt and equity offerings; and v) performance of other accounting services for the Debtors as may be necessary or desirable. (B) Tax Advisory Services i) review of and assistance in the preparation and filing of any tax returns; ii) advice and assistance to the Debtors regarding tax planning issues, including assistance in estimating net operating loss carryforwards, international taxes, and state and local taxes; iii) assistance regarding transaction taxes, state and local sales and use taxes; iv) assistance regarding tax matters related to the Debtor' pension plans; v) assistance regarding real and personal property tax matters, including review of real and personal property tax records, negotiation of value with appraisal authorities, preparation and presentation of appeals to local taxing jurisdictions and assistance in litigation of property tax appeals; vi) assistance regarding any existing or future IRS, state and local tax examinations; and vii) other consulting, advice, research, planning or analysis regarding tax issues as may be requested from time to time. KPMG will bill the Debtors at their customary hourly rates, which are: Partners $500 to $550 per hour Directors/Senior Managers/ $630 to $500 per hour Managers Senior/Staff Accountants $160 to $360 per hour FAO, Inc., along with its wholly-owned subsidiaries, is a specialty retailer of high-quality, developmental, educational and care products for infants and children and high quality toys, games, books and multimedia products for kids through age 12. The Company filed for Chapter 11 protection on January 13, 2003 (Bankr. Del. Case No. 03-10119). Rebecca L. Booth, Esq., Mark D. Collins, Esq., and Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A. and David W. Levene, Esq., and Anne E. Wells, Esq., at Levene, Neale, Bender, Rankin & Brill represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $257,400,000 in total assets and $238,374,000 in total debts. FEDERAL-MOGUL: Court Clears Sale of OE Lighting Assets to Decoma ---------------------------------------------------------------- The U.S. Bankruptcy Court in Wilmington, Delaware, has approved an agreement under which Federal-Mogul Corporation (OTC Bulletin Board: FDMLQ) would sell certain original equipment lighting assembly operations to Decoma International Inc. (Nasdaq: DECA; TSX: DEC.A;). Decoma International is based in Concord, Ontario, Canada. The two companies signed the agreement March 12. The sale is expected to close on April 14, 2003. The transaction, including the value of inventory sold to Decoma and assets retained by Federal-Mogul, will generate approximately US$19 million for Federal-Mogul. Under the sale agreement, Decoma International would acquire Federal-Mogul's original equipment lighting manufacturing facility in Matamoros, Mexico; a distribution center in Brownsville, Texas; and an assembly operation in Toledo, Ohio. Decoma International would also acquire customer contracts and supporting manufacturing equipment at the Federal-Mogul lighting facility in Hampton, Virginia. The facilities produce mainly forward lighting modules for cars and trucks. Federal-Mogul is a global supplier of automotive components and sub- systems serving the world's original equipment manufacturers and the aftermarket. The company utilizes its engineering and materials expertise, proprietary technology, manufacturing skill, distribution flexibility and marketing power to deliver products, brands and services of value to its customers. Federal-Mogul is focused on the globalization of its teams, products and processes to bring greater opportunities for its customers and employees, and value to its constituents. Headquartered in Southfield, Michigan, Federal-Mogul was founded in Detroit in 1899 and today employs 47,000 people in 24 countries. For more information on Federal-Mogul, visit the company's Web site at http://www.federal-mogul.com FLEMING COMPANIES: Receives $50-Mill. Interim Funding Commitment ---------------------------------------------------------------- Fleming Companies, Inc., (NYSE: FLM) announced that in connection with the company's Chapter 11 filing it has received a $50 million interim debtor-in-possession (DIP) financing commitment from its existing lenders as a bridge to a permanent $150 million DIP financing package. "This interim financing represents an important first achievement in our reorganization process," said Peter Willmott, Fleming's Interim President and Chief Executive Officer. "With this financing and the support of our vendors, we can deliver on our commitment to provide Fleming's customers with the goods they need, when they need them. To that end, we are developing, in connection with the permanent DIP facility, a vendor support program that will provide important financial assurances to our trade partners. "We are pleased to have the support of our lenders at this critical time for Fleming. We believe the permanent DIP financing package and vendor support program will provide Fleming with the financing it needs to successfully operate in and exit from Chapter 11. With the anticipated DIP financing package in place and the protection of the court process, we expect to achieve these goals and emerge as a strong competitor." The interim DIP commitment is subject to approval of the Bankruptcy Court, the pledge to the existing lenders of the company's unencumbered assets and other conditions. Under this arrangement, the company will have the right to use cash collateral and the interim DIP prior to the effectiveness of the permanent DIP financing. Motions to approve the interim DIP commitment and use of cash collateral are expected to be heard by the Court on Thursday, April 3, 2003. Fleming and its lenders are in the process of finalizing the permanent $150 million DIP facility which will be subject to a borrowing base. This DIP facility is expected to provide the company with necessary financing throughout the Chapter 11 process. Initial borrowing under this DIP facility would be subject to certain conditions, including the completion of certain due diligence, execution of definitive documentation and receipt of Bankruptcy Court approval. The permanent DIP facility would permit Fleming to establish a vendor support program, including a junior lien on the company's assets in favor of the company's vendors. Participation in the vendor support program, which is subject to Bankruptcy Court approval, would be open to vendors who contractually agree to ship goods on normal trade terms through the pendency of the Chapter 11 proceedings. Fleming is a leading supplier of consumer package goods to retailers of all sizes and formats in the United States. Fleming serves a wide range of retail locations across the country, including supermarkets, convenience stores, discount stores, concessions, limited assortment, drug, supercenters, specialty, casinos, gift shops, military commissaries and exchanges and more. To learn more about Fleming, visit its Web site at http://www.fleming.com GENUITY INC: Proposes Collection Settlement Procedures to Court --------------------------------------------------------------- William F. McCarthy, Esq., at Ropes & Gray, in Boston, Massachusetts, tells the Court that since the Closing Date, Genuity Inc., and its debtor-affiliates have turned their efforts to winding up their businesses and liquidating their remaining assets in orderly fashion. To accomplish the Wind-Up efficiently, and thereby maximize the value of the estates for the benefit of their creditors, the Debtors must seek the highest possible recovery on the collection of their accounts receivable, at the lowest possible cost. The Debtors have outstanding accounts receivable with thousands of customers. Were the Debtors required to seek Court approval for the compromise of each of these accounts, the costs of filing pleadings, holding hearings and sending notice of each compromise to all the creditors and parties-in-interest entitled to receive notice in these cases would counteract the very purpose of the settlements. Accordingly, the Debtors seek the Court's authority to settle: -- most receivables without any further notice or hearing, provided that the settlements are above a certain threshold recovery or are in the ordinary course of business of dealings with collections agencies; and -- most other receivables with notice only to the Creditors' Committee. The proposed procedures to be implemented are: A. Outside Collections Agencies: The Debtors' current use of outside collection agencies for any receivables referred to these agencies prior to the Closing will be approved. The Debtors will also be authorized to pay each collection agency from the proceeds of receivables collected by the agency, without further court approval. The Debtors may refer any additional receivables to collection agencies: -- without further notice to any person if these receivables with a customer are, in the aggregate, less than $100,000; and -- for any other receivables, only after giving five business days' written notice to the Creditors' Committee; provided, however, that if the Creditors' Committee informs the Debtors in writing of its objection to a referral, then the Debtors will not refer this matter without order of the court or agreement from the Creditors' Committee; B. De Minimis Receivables: The Debtors also want to settle without notice, a hearing or further court approval of any kind the receivables with any customer whose aggregate receivable with the Debtors is $100,000 or less. C. Minor Receivables: The Debtors intend to settle without notice, a hearing or further court approval of any kind, any receivables with customers whose Total Receivables exceed $100,000 but are less than or equal to $300,000, except Excluded Customers, provided that the compromise results in receipt by the Debtors of an amount equal to or greater than 2/3 of the Total Receivables for the customer. D. Major Receivables: The Debtors want to settle without notice, a hearing or further court approval of any kind, any receivables with customers whose Total Receivables exceed $300,000 but are less than or equal to $1,000,000, except Excluded Customers, provided that the compromise results in receipt by the Debtors of an amount equal to or greater than the face amount of the receivables minus $100,000. In addition, the Debtors seek Judge Beatty's permission to settle without notice, a hearing or further court approval of any kind, except notice to the Creditors' Committee, any: A. Minor Receivables for an amount less than the Qualifying Minor Receivables Settlement Threshold; B. Major Receivables for an amount less than the Qualifying Major Receivables Settlement Threshold; and C. any receivables with customers whose Total Receivables exceeds $1,000,000 in any other manner, except with Excluded Customers. In any case where these procedures require notice only to the Creditors' Committee, these procedures should govern the notice: A. The Debtors will deliver notice of a proposed Non- Qualifying Receivables Settlement to the Creditors' Committee. Each Receivables Settlement Notice will include: (i) a description of the account; (ii) the amount of the proposed Non-Qualifying Receivables Settlement; (iii) copies of the relevant invoices; (iv) an explanation as to why the Debtors believe a settlement cannot be reached at the Qualifying Receivable Settlement Threshold; and (v) a copy of any proposed settlement agreement. B. The Creditors' Committee will have five business days from the date of receipt of the Receivables Settlement Notice to approve or object to the proposed Non-Qualifying Receivables Settlement. If, at the end of the Receivables Notice Period, the Creditors' Committee has failed to communicate in writing to the Debtors and their counsel their approval of or objection to the proposed Non- Qualifying Receivables Settlement, the settlement will be deemed approved and no further notice or authorization of the settlement will be required. C. If the Creditors' Committee timely objects to a proposed Non-Qualifying Receivables Settlement, the Debtors may file a motion with the Court seeking approval of the proposed Non-Qualifying Receivables Settlement. The Debtors will be authorized to schedule a hearing to consider the motion on shortened notice as early as five business days following the filing of the motion. The only party entitled to object to the Non-Qualifying Receivables Settlement will be the Creditors' Committee. These procedures would not apply to any settlements with either America Online and its affiliates or Verizon Communications Inc. and its affiliates. The Debtors have agreed to cooperate with the Creditors Committee's review of the calculation of the face amounts of receivables. The Debtors submit that the Collections Settlement Procedures will lead to cost-effective collections of accounts receivable that will inure to the benefit of all their creditors. With respect to the Collection Agency Receivables, Mr. McCarthy informs the Court that in the ordinary course of business, the Debtors referred certain accounts receivable to outside collection agencies. The receivables given to collections agencies were typically those deemed uncollectible and were typically "written-down" on the Debtors' books. As of the Closing, these receivables totaled $13,300,000 in face amount. The Debtors submit that their proposed procedures propose a continuation of the ordinary course of business, and use of Rule 9019(b) of the Federal Rules of Bankruptcy Procedure to remove the need for further court approval of these compromises is in the best interests of the estates and their creditors. As part of this ordinary-course process, the Debtors authorized these collection agencies to settle the receivables without the Debtors' prior approval and that these collection agencies could take their fees from amounts recovered. Although these were ordinary-course practices and, therefore, require no further approval under Section 363 of the Bankruptcy Code, they may be considered settlements or compromises requiring court approval under Bankruptcy Rule 9019. However, imposing the formal bankruptcy approval process, even in a limited form, on the collection-agency process will not be cost-effective as it will prevent collection agencies from maximizing recoveries. Furthermore, the collection-agency receivables represent a relatively small amount of the Debtors' total receivables. The Debtors also seek the Court's authority to refer new matters to collection agencies to the extent that the Debtors could settle these receivables without further notice or court approval. With respect to De Minimis Receivables, Mr. McCarthy states that the Debtors require the flexibility to resole those matters quickly and efficiently. De Minimis Receivables involve 3,000 customers, with receivables totaling $30,000,000. A major remaining estate expense is employee salaries, and a significant part of the Debtors' remaining employees are dedicated to receivables collection. It is the Debtors' intention to try to collect receivables rapidly and then to release these employees. The Debtors have already established an incentive program for collections-personnel, approved by the Creditors Committee, to promote rapid collections. With incentives aligned, burdening the settlement process of De Minimis Receivables with notice and hearing requirements serves no useful purpose. With respect to Minor Receivables being settled above the Qualifying Minor Receivables Settlement Threshold and Major Receivables being settled above the Qualifying Major Receivables Settlement Threshold, the same principles apply. According to Mr. McCarthy, Minor Receivables involve 80 customers with an aggregate face amount totaling $14,000,000. Major Receivables involve 30 customers with an aggregate face amount equal to $49,800,000. With incentives aligned, there is no need to further burden the receivables collection process so long as a particular Minor Receivables customer is paying at least two- thirds of the receivable. Similarly, the threshold for Major Receivables gives the Debtors some latitude in settling those receivables, but in no case will the compromise exceed one-third of the face amount of the receivable. In the case of Non- Qualifying Receivable Settlements, notice to the Creditors' Committee, with the Committee able to require a court hearing, provides creditor protection for any comparatively low settlements while permitting an expedited hearing process without large costs of notice that would reduce the de facto recovery. For settlements with customers whose Total Receivables exceed $1,000,000, the Debtors will provide notice to the Creditors' Committee of any proposed receivables settlement. (Genuity Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Settles Claim Disputes with Asia Global -------------------------------------------------------- The Global Crossing Debtors ask the Court to approve an overall settlement that resolves all claims with the Asia Global Crossing Debtors, provides transition services for the AGX Debtors' businesses to facilitate the sale of assets to Asia Netcom, extends and revises certain undersea cable maintenance agreements between the parties, and establishes the terms for a continuing telecommunications business relationship. Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York, informs the Court that Global Crossing owns 58.5% of the common stock of Asia Global Crossing Ltd. Global Crossing and AGX have a long-standing commercial relationship. In particular, Global Crossing uses AGX's pan-Asian telecommunications network to terminate traffic for its customers and AGX uses Global Crossing's network throughout the rest of the world to terminate telecommunications traffic for its own customers. Global Crossing also maintains the AGX network and provides numerous back office services, including billing and accounting functions. AGX has asserted over $1,000,000,000 in prepetition claims against Global Crossing and Global Crossing is prepared to prove that it has over $330,000,000 of claims against certain of AGX's non-debtor subsidiaries. Over the last several months, Global Crossing and AGX have been negotiating to resolve all claims against one another and their subsidiaries and establish the contractual basis for a continuing commercial relationship. The Settlement Agreement has two phases, namely: -- In phase 1, the parties will mutually release their claims and terminate all exclusivity, non-compete and non- solicitation restrictions contained in their agreements. AGX will pay Global Crossing $2,500,000, and the parties will continue to provide services to each other. -- In Phase 2, the parties will execute definitive agreements concerning the provision of services to each other and AGX will pay an additional $2,000,000 to Global Crossing, $1,000,000 of which will be paid after execution of the documents and $1,000,000 after meeting certain milestones. The salient terms of the settlement agreement are: A. Access to the Network: As part of the Transition Services, Global Crossing will continue to allow AGX to access certain of Global Crossing's systems until the later of the mutually agreed on time specified in the Settlement Agreement and April 15, 2003. Thereafter, if AGX transition is not complete, Global Crossing will continue to provide information and services to AGX until the transition is complete provided that AGX cooperates in, and is capable of, receiving this information, and will reasonably cooperate and assist AGX to ensure that all information and services are complete, accurate, and in a format reasonably accessible to AGX. B. Interim Services: Global Crossing will continue to provide network services to AGX, including billing and financial support services, and maintain insurance for AGX, until the earlier of: -- the date on which AGX can provide these services for itself; and -- July 31, 2003. For the months of November and December 2002, the cost of the interim services will be $460,000 per month, plus an additional $40,000 per month in reimbursement of insurance premiums. Beginning in January, the agreed charge for interim services will depend on AGX's actual usage of these services, but will be no more than $460,000 and no less than $350,000. To the extent that the charges in any month are less than $460,000, up to $110,000 can be used by AGX as a credit for access services on Global Crossing's Network. Similarly, once AGX has its own insurance, up to an additional $40,000 per month can be used by AGX as a credit for access services on Global Crossing's Network. The maximum monthly amount of this credit, however, cannot exceed $150,000. Global Crossing will cooperate with AGX to enable AGX to operate its own financial and billing systems. C. Telecommunications Services: AGX and Global Crossing agree to provide telecommunications services to each other until December 31, 2003. Any new circuits purchased by either party could have up to a 12-month term. Each party will pay for these telecommunication services 30 days in advance and provide a 90-day security deposit for all services provided through third-party providers. After either party emerging from bankruptcy, mutually agreed market-based payment terms will apply to services purchased. D. Existing Services: As of January 1, 2003, Global Crossing and AGX will begin invoicing each other for all existing services. Charges for services provided prior to January 1, 2003 are mutually released under the Settlement Agreement. E. Non-Compete and Exclusivity: The parties will mutually release all non-compete and exclusivity conditions, subject to AGX and Global Crossing continuing to honor their confidentiality obligations. F. The Maintenance Agreement with Global Marine Systems Ltd.: AGX agrees to continue to purchase maintenance services from Global Marine Systems Ltd. pursuant to that certain Marine and Maintenance Services Agreement between East Asia Crossing and Global Marine Systems Ltd., dated July 22, 2002, for a one-year term effective March 1, 2003. The payments for the contract term will be $9,000,000 plus a $2,500,000 deferral payment payable, under certain circumstances, at the end of the contract term. In addition, Global Marine Systems Ltd. will have a right of first refusal to extend the agreement for a second year at market price. AGX will cooperate with Global Marine Systems Ltd. to obtain a maintenance contract with Pacific Crossing Ltd. G. EAC Credits: AGX will provide Global Crossing with a $3,000,000 credit and a 30% discount, up to $10,000,000, on market based prices for services on East Asia Crossing's subsea network. This credit and discount will be available to Global Crossing after substantial completion of the transition and separation of AGX. H. The Definitive Agreements: The parties will negotiate in good faith to enter into definitive agreements, including a Master Services Agreement, a Carrier Service Agreement, an Amendment to the Maintenance Agreement, a Capacity Purchase Agreement, and a Transition and Separation Agreement, to carry out the terms of the Settlement within four weeks of the order approving this Settlement Agreement becoming a final order. I. Intellectual Property Issues: Global Crossing agrees that, for a period of three years, it will not use, enter into any agreement or license, with any other person or entity that would provide the person or entity the right to use, the name "Asia Global Crossing Limited." AGX may continue to use the name or mark "Asia Global Crossing Limited" until June 30, 2003, and will, thereafter be precluded from using this name or mark or similar or related name or mark. In addition, AGX agrees to a disclaimer for 180 days after June 30, 2003 to be inserted on any formal contracts and sales or marketing materials to the effect that AGX is not affiliated with Global Crossing or its subsidiaries or affiliates. AGX may also use letterhead and business cards with the "Asia Global Crossing Limited" name through August 1, 2003, for so long as AGX continues to use reasonable commercial efforts to remove these materials. J. Assignment: Either party may assign the Settlement Agreement to its investors or an entity created in connection with its purchase agreement for so long as its investors have executed an Investor Letter Agreement and the entity is capable of and assumes all of the obligations of the assignor. Either party may also assign the Settlement Agreement to a third party so long as they obtain prior written consent from the other, which consent will not be unreasonably withheld, delayed or conditioned. Notwithstanding an assignment of the Settlement Agreement, both the assignor and the assignee will be bound by the terms of the "Mutual Limited Release of Claims" of the Settlement Agreement. K. Releases: Pursuant to the Settlement Agreement, Global Crossing and AGX, on behalf of their Chapter 11 estates and past and current subsidiaries and its and their past and current subsidiaries, successors and assigns agree to fully and finally release, acquit, and forever discharge the other, including the other's Chapter 11 estate and its subsidiaries, successors and assigns from any and all claims, demands, obligations, actions, causes of action, debts, liabilities, costs, expenses, losses, promises, agreements, controversies, rights and damages arising from facts, circumstances, or events existing or occurring at any time prior to or on the date of the Settlement Agreement, in each case under any legal theory, including under law, contract, tort, equity, or otherwise, and of every kind and nature whatsoever, whether currently known or unknown, foreseen or unforeseen, suspected or unsuspected, or asserted or unasserted. Moreover, both parties agree, after the Final Effective Date, to withdraw any default notices, proof of claim, and payment requests previously issued through the date of the Settlement Agreement. Mr. Basta insists that the Settlement Agreement is fair and equitable and falls well within the range of reasonableness as it provides significant benefits to Global Crossing, including: -- It provides the terms for an ongoing commercial relationship with AGX. Global Crossing will receive credits and discounts for future telecommunications services; -- It will result in the payment of over $4,500,000 to Global Crossing; -- Global Crossing will continue to provide undersea cable maintenance through its wholly owned subsidiary, Global Marine Systems, which will result in at least $9,000,000 of revenue; -- The Settlement Agreement will avoid lengthy litigation concerning the validity of Global Crossing's claims against AGX's non-debtor subsidiaries; and -- The Settlement Agreement will result in the elimination of over $1,000,000,000 of prepetition unsecured claims against Global Crossing and terminate exclusivity, non-compete, and non-solicitation provisions in the agreements between the parties. Mr. Basta asserts that the Settlement Agreement also provides significant benefits to AGX as it provides the terms for an ongoing commercial relationship. As a result, AGX's customers will continue to communicate throughout the world. In addition, the Settlement Agreement resolves claims against AGX's non- debtor subsidiaries, which could complicate the sale to Asia Netcom. Finally, it provides for transition services to AGX so that Asia Netcom will be able to develop its own back office systems over a reasonable period of time. (Global Crossing Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) GOODYEAR TIRE: S&P Cuts Certain Sr. Unsecured Debt Ratings to B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on certain senior unsecured debt of Goodyear Tire & Rubber Co., to 'B+' from 'BB-' and removed the ratings from CreditWatch, where they were placed March 7, 2003. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit rating and negative outlook on Goodyear. The downgrade on the senior unsecured notes reflects Goodyear's announcement that it closed on $3.3 billion in secured credit facilities, resulting in a significant increase in the proportion of secured debt in the company's balance sheet. The Akron, Ohio-based tire company has about $5 billion of total debt outstanding. The new, secured facilities effectively rank senior to the unsecured notes. The unsecured notes are now rated one notch below the corporate credit rating, based on the proportion of secured debt. One unsecured issue, the approximately $100 million of Swiss franc-denominated bonds, became secured upon closing of the secured credit facilities, sharing liens on certain U.S. manufacturing facilities. As a result, the rating on this one issue is being affirmed at the equivalent of the 'BB-' corporate credit rating, rather than being lowered with the other unsecured debt. At the same time, Standard & Poor's withdrew its 'BB-' rating on the company's $800 million senior unsecured term loan, which was replaced with the new secured facilities. "We are concerned that material improvement in financial performance could be delayed and that financial flexibility will erode if management's turnaround plan fails to make substantial progress over the next year," said Standard & Poor's credit analyst Martin King. "The ratings could be lowered if the company is unable to demonstrate progress toward achieving and maintaining satisfactory credit protection measures or if liquidity erodes significantly." GOODYEAR: Says S&P's Action Consistent with Mar. 20 Announcement ---------------------------------------------------------------- The Goodyear Tire & Rubber Company (NYSE: GT) said the ratings announcement issued Wednesday by Standard & Poor's Ratings Services is consistent with the agency's March 20 announcement. In its announcement, S&P said its action was the result of the increase in the amount of Goodyear's secured debt following the April 1 completion of a restructuring of the company's credit facilities. Goodyear said the new credit agreements will provide the company with additional flexibility and liquidity as it executes a turnaround of its North American Tire business. Goodyear is the world's largest tire company. The company manufactures tires, engineered rubber products and chemicals in more than 90 facilities in 28 countries around the world. Goodyear employs about 92,000 people worldwide. Goodyear Tire & Rubber's 8.50% bonds due 2007 (GT07USR1) are trading at about 76 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=GT07USR1for real-time bond pricing. HASBRO INC: Defaults on Licensing Agreement with Go Goddess! ------------------------------------------------------------ The creators of the Go Goddess! board game are suing Hasbro Inc. (NYSE:HAS), the world's premiere game manufacturer, for defaulting on a five-year licensing agreement that was established in March 2002. The agreement provides Hasbro with an exclusive right and license to make, distribute and sell the Go Goddess! board game throughout the United States and Canada. The Go Goddess! game is based on the positive experiences of its Miami-based creators, Elaine Berkowitz, Ruth Robles and Kelley Werner, who first organized a meditation group for women called the "Goddess Group" in 1991. The group, which met every other week to participate in exercises and discussions about women's issues, developed into a strong support system that led to tremendous gains in personal growth, insight and positive transformations of character for the women. The Go Goddess principles designed the game, in 1997, to assist others in recreating the Goddess Group experience. Prior to entering into discussions with Hasbro in early 2000, Go Goddess independently launched the Go Goddess! game in October 1999 through select Saks Fifth Avenue, Neiman Marcus, Fred Segal and Henri Bendel retail locations. The game enjoyed instant success, receiving extensive national media coverage from broadcast and print outlets. According to the lawsuit filed by attorneys Abbey L. Kaplan and Michael Chesal with Florida-based Kluger, Peretz, Kaplan & Berlin, PL, Hasbro's commitment included manufacturing, advertising and promoting the board game, resulting in guaranteed minimum royalties of $454,185.00 for the term of the agreement. The suit claims that Hasbro failed to meet several contractual obligations, including paying the minimum royalties for 2002 and using its best efforts to advertise and promote the Go Goddess! game. Hasbro's delays in the manufacturing and delivery of the game resulted in the loss of substantial orders. The suit also claims Hasbro improperly designed and manufactured modifications to the Go Goddess! game, ultimately harming the sales, reputation and future licensing opportunities of the Go Goddess! brand. "It has been heartbreaking for my client to see their creation falter due to lack of action on the part of the 'game experts' at Hasbro," said Kaplan, co-chair of the Litigation & Dispute Resolution Group at Kluger, Peretz, Kaplan, & Berlin. "Despite Hasbro's promises about advertising, promotion and sales, Hasbro utterly failed to fulfill any of its contractual duties. Our hope is that Hasbro will recognize their obligations and embrace the full potential of the Go Goddess! game." Five counts were included in the complaint filed in the Circuit Court of the Eleventh Judicial Circuit in Miami-Dade County. They are: (1) breach of contract, (2) anticipatory breach of contract, (3) negligent inducement, (4) breach of fiduciary duty, and (5) declaratory relief. Kluger, Peretz, Kaplan & Berlin, P.L. -- http://www.kpkb.com-- engages principally in the practice of commercial litigation and dispute resolution, bankruptcy and creditors rights issues, intellectual property litigation and transactions, and corporate and real estate transactions. The firm's headquarters are located at The Miami Center, Seventeenth Floor, 201 S. Biscayne Blvd., Miami, FL 33131. The phone number is 305/379-9000. HAUSER INC: Voluntary Chapter 11 Case Summary --------------------------------------------- Lead Debtor: Hauser Inc. 840 Apollo Street Suite 209 El Segundo, CA 90245 Bankruptcy Case No.: 03-18795 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ Botanicals International Extra 03-18788 Hauser Technical Services 03-18798 Zetapharm Inc 03-18802 Type of Business: Hauser is a leading supplier of herbal extracts and nutritional supplements. Hauser also provides chemical engineering services and contract research and development. Chapter 11 Petition Date: April 1, 2003 Court: Central District of California (Los Angeles) Judge: The Honorable Sheri Bluebond Debtors' Counsel: Christine M. Pajak, Esq. 3699 Wilshire Blvd., Suite 900 Los Angeles, CA 90010 213-251-5100 HAWAIIAN AIRLINES: Garden City Appointed as Court Noticing Agent ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Hawaii gave its stamp of approval to Hawaiian Airlines, Inc.'s application to appoint Garden City Group, Inc., as the official Claims and Noticing Agent in the carrier's chapter 11 case. Utilizing Garden City as the claims and noticing agent will allow the Debtor avoid duplication of effort in claims administration and in providing notices to its creditors. Additionally, the large number of creditors and other parties in interest involved in the Debtor's chapter 11 case may impose heavy administrative and other burdens upon the Court and the Office of the Clerk of the Court. To relieve the Court and the Clerk's Office of these burdens, Garden City will: a) prepare and serve certain required notices in this chapter 11 case, including: (i) notice of the commencement of this chapter 11 case and the initial meeting of creditors under section 341 (a) of the Bankruptcy Code; (ii) notice of the claims bar date; (iii) notice of objections to claims; (iv) notice of any hearings on a disclosure statement and confirmation of a plan of reorganization; and (v) other miscellaneous notices to such entities as the Debtor or the Court may deem necessary or appropriate for an orderly administration of this chapter 11 case; b) within 10 days after the mailing of a particular notice, file with the Clerk's Office a certificate or affidavit of service that includes a copy of the notice involved in a format acceptable to the Clerk's Office, a list of persons to whom the notice was mailed (in alphabetical order) and the date of mailing; c) maintain an official copy of the Debtor's schedules of assets and liabilities and statement of financial affairs, listing the Debtor's known creditors and the amounts owed thereto; d) notify all potential creditors of the existence and the amount of their respective claims as evidenced by the Debtor's books and records and as set forth in the Schedules; e) maintain copies of all proofs of claim and proofs of interest filed; f) maintain official claims registers by docketing all proofs of claim and proofs of interest on claims registers, including the following information: (i) the name and address of the claimant and any agent thereof, if the proof of claim or proof of interest was filed by an agent; (ii) the date filed; (iii) the claim number assigned; and (iv) the asserted amount and classification of the claim; g) image the proofs of claim or proofs of interest and provide both the claims docket and the image of each proofs of claim or proofs of interest on the Website, as defined below; h) make changes in the claims registers pursuant to Court orders; i) implement necessary security measures to ensure the completeness and integrity of the claims registers; j) transmit to the Clerk's Office a copy of the claims registers in a format acceptable to the Clerk's Office and as frequently as requested by the Clerk's Office; k) maintain the official mailing list for all entities that have filed a proof of claim or proof of interest, which list shall be available upon request of a party in interest or the Clerk's Office; l) record all transfers of claims pursuant to Bankruptcy Rule 3001 (e) and provide notice of such transfers as required by Bankruptcy Rule 3001(e); m) comply with applicable federal, state, municipal and local statutes, ordinances, rules, regulations, orders and other requirements; n) provide temporary employees to process claims, as necessary; o) promptly comply with such further conditions and requirements as the Clerk's Office or the Court may at any time prescribe; and p) assist with: (i) the preparation of amendments to the master creditor list, (ii) the reconciliation and resolution of claims, and (iii) the preparation, mailing and tabulation of ballots for the purpose of voting to accept or reject a plan of reorganization; q) 30 days prior to the close of this chapter 11 case, an order dismissing Garden City shall be submitted terminating the services of Garden City upon completion of its duties and responsibilities in this chapter 11 case; and r) at the close of the case, box and transport all original documents in proper format, as provided by the Clerk's Office, to the Federal Records Center or to the Clerk's Office, as directed by the Court. Garden City's hourly rates are: Set-Up Creditor File Manual Entry $45 per hour Produce Schedules $125 to $250 per hour Claims Processing & Docketing $60 per hour Document Management $35 to $75 per hour System Support Programmer $125 to $150 per hour Senior Programmer $150 to $175 per hour General Project Management Clerical $40 to $60 per hour Supervisor $75 to $95 per hour Senior Supervisor/ $95 per hour Bankruptcy Paralegal/ Project Manager Director $175 per hour Quality Assurance $165 per hour Senior VP Systems and $250 per hour Managing Director Hawaiian Airlines Incorporated provides primarily scheduled transportation of passengers, cargo and mail. Flights operate within the South Pacific and to points on the west coast as well as Las Vegas. The Company filed for chapter 11 protection on March 21, 2003 (Bankr. Hawaii Case No. 03-00817). Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed debts and assets of more than $100 million each. HEALTHSOUTH: S&P Drops Credit Ratings to D After Missed Payment --------------------------------------------------------------- Standard & Poor's Ratings Services said that it lowered its corporate credit and senior unsecured ratings on HEALTHSOUTH Corp., to 'D' from 'CCC-'. At the same time, HEALTHSOUTH's subordinated rating has been lowered to 'D' from 'CC'. The ratings are no longer on CreditWatch, where they were originally placed on Aug. 27, 2002. HEALTHSOUTH, based in Birmingham, Ala., had about $3.2 billion of debt outstanding as of Dec. 31, 2002. The downgrade reflects the company's failure to make its required principal and interest payments on about $345 million of subordinated convertible bonds due April 1. "HEALTHSOUTH's bank group determined late last week that the company is in default under the terms of its credit facility," said Standard & Poor's credit analyst David Peknay. "Therefore, the company was given a notice of payment blockage, which precludes any payment of principal and interest on the convertible bonds." HEALTHSOUTH, the largest U.S. provider of rehabilitative health care services, outpatient surgery, and diagnostic imaging with nearly 1,700 facilities, has been accused of massive accounting fraud. HOLLINGER INT'L: Red Ink Continues to Flow in Full-Year 2002 ------------------------------------------------------------ Hollinger International Inc., (NYSE: HLR) announces a net loss for the year ended December 31, 2002 of $238.8 million compared with a restated net loss of $335.1 million in 2001. Fourth quarter net loss was $99.6 million in 2002 compared with a restated net loss of $181.3 million in 2001. Operating Revenue Operating revenue for the fourth quarter of 2002 was $264.0 million, a $13.7 million or 5.5% increase over the fourth quarter of 2001. Of that increase, $13.4 million is attributable to the U.K. Newspaper Group and $3.8 million to the Chicago Group partially offset by declines in revenue at the Canadian Newspaper Group and the Community Group. For the year ended December 31, 2002, operating revenue of $1,006.2 represented a decrease of $140.1 million or 12.2% from $1,146.3 million in 2001, primarily as a consequence of the disposition of certain Canadian publishing assets in 2001 including the Company's remaining 50% interest in the National Post and a drop in advertising revenue in the U.K. due in large part to a slow- down in advertising activity particularly in certain of the higher rate categories, with a partial offset upon translation of the results into U.S. dollars reflecting the strengthening of the British pound against the U.S. dollar. For the year ended December 31, 2002, operating revenue at the Chicago Group of $441.8 million was virtually unchanged from the prior year and at the U.K. Newspaper Group, operating revenue for the year ended December 31, 2002 decreased by $4.9 million or 1.0% to $481.5 million from $486.4 million in 2001. Operating Income (Loss) Operating income in the fourth quarter was $14.4 million in 2002 compared to a restated operating loss of $9.8 million in 2001, an improvement of $24.2 million. For the year ended December 31, 2002, operating income was $57.2 million compared to a restated* operating loss of $36.0 million in 2001, an improvement of $93.2 million. The $93.2 million improvement in operating income for the full year 2002 compared with 2001 is primarily attributable to a $30.7 million improvement at the Chicago Group, a $20.2 million improvement at the U.K. Newspaper Group and a $43.8 million improvement at the Canadian Newspaper Group. The Chicago Group and U.K. Newspaper Group improvements result mainly from lower newsprint unit costs, reductions in compensation and other operating expenses including reductions in infrequent items, decreased amortization expense and a strengthening of the British pound against the U.S. dollar. The Canadian Newspaper Group improvement mainly arises as a consequence of the disposal of publishing properties in 2001. In particular, the Company's remaining 50% interest in the National Post, which incurred a significant operating loss in 2001, was disposed of in the third quarter of 2001. The impact of shedding those losses was partially offset by the disposition of other Canadian operations in 2001 which generated net earnings. In addition to the above, operating income showed year over year improvement as the operating loss in 2001 was adversely impacted by $21.7 million of infrequent items, primarily pension and post retirement plan liability adjustments. Infrequent items in 2002 were only $1.0 million. Further, as noted later in the release, adoption of SFAS No. 142, "Goodwill and Other Intangible Assets" resulted in a substantial decrease in amortization expense in 2002. The $24.2 million improvement in operating income in the fourth quarter of 2002 compared with 2001 results largely from a $6.1 million improvement in operating income at the Chicago Group, a $9.7 million improvement at the U.K. Newspaper Group and a $7.8 million improvement at the Canadian Newspaper Group. The improved fourth quarter results at both the Chicago Group and the U.K. Newspaper Group are a consequence of both increased operating revenues and lower operating costs. The improved fourth quarter operating income at the Canadian Newspaper Group relates almost entirely to an infrequent item of $12.4 million incurred in 2001, being the post retirement pension plan liability adjustment referred to above. Increased operating costs in the Canadian Group partially offset the impact of having no comparable post retirement pension plan liability adjustment in 2002. Amortization in the fourth quarter of 2002 was $5.4 million compared with $8.2 million in 2001, and for the year ended December 31, 2002, was $17.2 million compared with $35.7 million in 2001, decreases of $2.8 million and $18.5 million, respectively. These decreases reflect primarily the adoption, effective January 1, 2002, of SFAS No. 142 - Goodwill and Other Intangible Assets as well as the sale of publishing operations during 2001. The new standard requires that goodwill and intangible assets with indefinite useful lives no longer be amortized but instead be tested for impairment, at least annually. This change in accounting policy cannot be applied retroactively and the related amounts of amortization presented for 2001 have not been restated for the change. Goodwill and intangible assets with indefinite useful lives have not been amortized subsequent to December 31, 2001. Cash provided by operating activities in the fourth quarter of 2002 was $63.0 million compared with cash used in operating activities of $50.4 million in 2001. For the year, cash provided by operating activities was $58.4 million in 2002 compared with cash used in operating activities of $134.2 million in 2001. EBITDA likewise improved substantially in the quarter ended and the year ended December 31, 2002 increasing by $21.9 million to $30.0 million in the fourth quarter of 2002 from $8.1 million in 2001. For the year, EBITDA increased by $73.7 million to $111.4 million in 2002 from $37.7 million in 2001. EBITDA was affected by all the operating income items discussed above except for the impact of SFAS No. 142. EBITDA is calculated as operating income (loss) plus depreciation and amortization. EBITDA is a measure commonly used in the industry to assist the understanding of operating results. The Company uses EBITDA to evaluate its operating results. EBITDA does not, however, have a standardized meaning under GAAP and is not necessarily comparable to similar measures disclosed by other issuers. Accordingly, it is not intended to replace income (loss) from operations, net income (loss), cash flows or other measures of financial performance and liquidity reported in accordance with GAAP. Interest Expense Interest expense in the fourth quarter of 2002 amounted to $16.3 million compared with $19.1 million in the fourth quarter of 2001. For the year ended December 31, 2002, interest expense was $58.8 million compared with $78.6 million in 2001. The decrease is largely a consequence of the retirement of a portion of long-term debt in 2001 and a partial repayment of the Company's 8.625% senior notes in March 2002. Interest and Dividend Income Interest and dividend income in the fourth quarter of 2002 amounted to $4.7 million compared with $0.6 million in 2001, an increase of $4.1 million. In the year ended December 31, 2002, interest and dividend income amounted to $18.8 million compared with $64.9 million in 2001, a decrease of $46.1 million. Interest and dividend income in the year ended December 31, 2001 included interest on debentures issued by a subsidiary of CanWest Global Communications Corp. and a dividend on CanWest shares. In the latter part of 2001, all of the CanWest shares were sold and participation interests were sold in respect of all but approximately $50 million of the CanWest debentures, resulting in significantly lower interest and dividend income in 2002. Most of the proceeds from the disposal of the CanWest investments were retained as short-term investments at low rates of interest until the end of the first quarter of 2002 when a substantial portion of the Company's long-term debt was retired. The increase in interest and dividend income of $4.1 million in the fourth quarter of 2002 over that in the fourth quarter of 2001 relates primarily to a year-to-date adjustment made in the fourth quarter of 2001 to reflect the fair value of interest received in the form of additional CanWest debentures during the course of the year. Foreign Currency Losses Net foreign currency losses were relatively insignificant in the fourth quarter of 2002 and 2001 at $1.0 million and $1.3 million, respectively. For the year ended December 31, 2002, foreign currency losses were $86.8 million compared to $1.3 million in 2001, an increase of $85.5 million. The increase is primarily attributable to the realization of foreign exchange losses of $78.2 million upon the substantial liquidation of the Company's investment in the Canadian Newspaper Group and the related distribution of substantial Canadian dollar cash balances held by the Canadian Newspaper Group to the Company in March 2002. The foreign currency losses arose in prior years as a result of declines in the Canadian dollar and, until realized, were provided for in the accumulated other comprehensive loss component of stockholders' equity. Other Expense, Net Other expense, net decreased by $105.5 million in the fourth quarter to $27.4 million in 2002 from $132.9 million in 2001. For the years ended December 31, other expense, net decreased by $242.7 million to $53.2 million in 2002 from $295.9 million in 2001. Income Taxes (Recovery) Income tax expense for the year ended December 31, 2002 was $67.0 million compared to a recovery of $8.3 million for the year ended December 31, 2001. Income taxes for the fourth quarter of 2002 were $72.0 million compared to $22.9 million in 2001. The tax expense in 2002 differed from the computed "expected" tax recovery of $44.9 million on a 2002 pre-tax loss for the year of $128.4 million primarily due to the after tax impact of: non-deductible expenses for tax purposes of $11.1 million; the non-deductible portion of the aforementioned foreign currency losses on the substantial liquidation of our investment in the Canadian Newspaper Group of $31.3 million; and, the recording of a valuation allowance in respect of Canadian deferred tax assets of $38.8 million. Minority Interest Minority interest in the fourth quarter of 2002 totaled $0.7 million compared to a recovery of $7.3 million in 2001 and for the year ended December 31, 2002, totaled $2.2 million compared to a recovery of $13.8 million in 2001. Minority interest in 2001 included the minority's share of National Post losses until the sale of the Company's remaining 50% interest in the National Post effective August 31, 2001. The minority interest recovery in the fourth quarter of 2001 related primarily to minority interest recoveries on the loss on the sale of CanWest shares and on the sale of participations in the CanWest debentures. Extraordinary Item The extraordinary item of $21.3 million represents the after tax cost of retiring a portion of the Company's 8.625% senior notes in March 2002 including premiums paid on early redemption and the write-off of related deferred financing charges. Cumulative Effect of Change in Accounting Principle The transitional provisions of SFAS No. 142 required the Company to assess whether goodwill was impaired as of January 1, 2002. As a result of this transitional impairment test, the Company has determined that the carrying amount of the Jerusalem Post properties was in excess of the properties' estimated fair value. Accordingly, the value of goodwill attributable to the Jerusalem Post has been written down in its entirety. The writedown of $20.1 million (net of tax of nil) has been reflected in the consolidated statement of operations as of January 1, 2002 as a cumulative effect of a change in accounting principle. Long-Term Debt As announced in late December 2002, the Company's wholly owned subsidiary, Hollinger International Publishing Inc., completed the private placement of $300 million of 9% senior notes due 2010 generating net proceeds of $291.7 million before expenses associated with the offering. Contemporaneously with that placement, HIPI closed an amended $310 million senior secured credit facility consisting of a $45 million revolving credit facility and a $45 million term loan both maturing September 30, 2008 as well as a $220 million term loan maturing September 30, 2009. The Company has not drawn down any amounts under the $45 million revolving credit facility. The proceeds from the 9% Senior Note offering and $265 million borrowed as term loans under the senior secured credit facility, along with cash on hand, have been used, in part, to repay all amounts owed by the Company under its loan facility with Trilon International Inc., to retire its remaining Total Return Equity Swaps, thus canceling seven million Class A common shares, and on January 22, 2003, to redeem the existing senior subordinated notes of HIPI due 2006 and 2007. With the share cancellation on the retirement of the Total Return Equity Swaps, the Company has reduced the number of shares outstanding other than treasury shares by about 21% in the last four years. Excluding treasury shares, shares of Class A Common Stock outstanding at December 31, 2002 were 74.7 million compared to 94.2 million at December 31, 1998. As noted below, the Company repurchased for cancellation a further 2.0 million shares of Class A Common Stock on March 10, 2003 and redeemed 93,206 shares of Series E Preferred Stock. Long-term debt, including the current portion, has increased by $271.7 million from $812.7 million at December 31, 2001 to $1,084.4 million at December 31, 2002. The increase arises as the proceeds from the December 2002 refinancing were held in escrow at year-end and only applied to the repayment of the HIPI notes and related early redemption premium and accrued interest in January 2003. Application of those funds to repayment on January 22, 2003 reduced indebtedness by $504.9 million to $579.5 million. With this repayment, debt has been reduced by almost 70% since the third quarter of 2000. As of December 31, 2002, the company incurred a working capital deficit, posting total current assets of $893,715,000 against total current liabilities of $1,085,618,000. On December 31, 2002 there were 89.7 million Class A and B common shares outstanding. If at December 31, 2002, all potentially dilutive instruments excluding stock options are considered, the total Class A and B common shares outstanding would increase to 90.3 million as set out above. Stock options not exercised at December 31, 2002 totaled approximately 10.4 million of which approximately 4.7 million had vested. As noted, in conjunction with the Company's financing activities in December 2002, the Company redeemed approximately 7.0 million shares of its Class A Common Stock. As previously announced, on March 10, 2003 the Company repurchased for cancellation from a wholly owned subsidiary of Hollinger Inc., 2.0 million shares of its Class A Common Stock at $8.25 per share. The Company also redeemed pursuant to a redemption request from that same subsidiary all of the Company's 93,206 outstanding shares of Series E Preferred Stock at the fixed redemption price of Cdn $146.63 per share for a total of $9.3 million. The subsidiary of Hollinger Inc. used the related proceeds to reduce amounts due by it to the Company. As a result, there was no net impact on the cash balances and cash equivalents held by the Company. After reflecting the above repurchase and redemption, the aggregate Class A and Class B common shares outstanding totaled 87.7 million. Restatement of 2002 Interim Period Results In October 2002, the Emerging Issues Task Force issued EITF Issue No. 02-17 "Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination", which provides guidance as to customer-related intangible assets which must be recognized apart from goodwill. As a result of the new guidance, the Company re-evaluated whether certain of its identifiable assets which existed as of January 1, 2002, totaling $468.5 million, were appropriately reclassified to goodwill at that date. As a consequence of that review, the Company determined that $117.3 million classified as goodwill at January 1, 2002 should be classified as identifiable intangible assets. The effect of this reclassification is to reduce operating income reported for the nine months ended September 30, 2002 by $3.4 million before tax and to increase the net loss after tax by $2.1 million. SEGMENT RESULTS Chicago Group Operating revenues for the Chicago Group were $113.1 million in the fourth quarter of 2002 compared with $109.3 million in 2001, an increase of $3.8 million or 3.5%. For the year, operating revenue was virtually unchanged from the prior year at $441.8 million in 2002 compared to $442.9 million in 2001. Advertising revenue in fourth quarter 2002 was $88.4 million compared with $84.1 million in 2001, an increase of $4.3 million or 5.1%. The increase results from improved retail, national and classified advertising revenues. Increases in retail and national revenues relate primarily to increases in the home improvement, travel & tourism and department store sectors. Increased classified advertising revenue in the real estate and personal sectors offset lower revenues from recruitment advertising. Year over year, advertising revenue increased by $2.8 million or 0.8% from $338.5 million in 2001 to $341.3 million in 2002. Circulation revenue in the fourth quarter of 2002 was $21.6 million compared to $23.1 million in 2001, a decrease of $1.5 million or 6.5%. Circulation revenue for 2002 was $89.4 million compared with $92.7 million in 2001, a decrease of $3.3 million or 3.6%. The decrease for the quarter and for the year ended December 31, 2002 was principally the result of price discounting. Printing and other revenue for the fourth quarter and full year 2002 was $3.1 million and $11.1 million, respectively, compared with $2.1 million and $11.7 million, respectively in 2001. Newsprint expense in the fourth quarter of 2002 was $14.8 million compared with $18.7 million in 2001, and for the year was $63.1 million in 2002 compared with $76.4 million in 2001. Newsprint consumption in the year increased approximately 4% compared with 2001, but the average cost per tonne of newsprint in 2002 was approximately 21% lower than in 2001. Compensation costs in 2002 were $170.9 million compared with $178.7 million in 2001, a decrease of $7.8 million or 4.4%. The decrease is primarily a consequence of staff reductions which took effect during 2002 and the full year impact of reductions implemented in 2001. Operating income in 2002 was $35.7 million compared with $5.0 million in 2001, an increase of $30.7 million. The increase results from lower unit costs of newsprint, lower compensation costs and general cost reductions across other areas. U.K. Newspaper Group Operating revenues for the U.K. Newspaper Group were $128.6 million in the fourth quarter of 2002 compared with $115.2 million in 2001, an increase of $13.4 million or 11.6%. In pounds sterling, operating revenues in the fourth quarter of 2002 were 81.9 million pounds sterling compared with 79.9 million pounds sterling in 2001, an increase of 2.0 million pounds sterling or 2.5%. For the year, operating revenues totaled 320.9 million pounds sterling compared to 337.5 million pounds sterling in 2001, a decrease of 16.6 million pounds sterling or 4.9%. Advertising revenue was 53.0 million pounds sterling in fourth quarter 2002 compared with 51.9 million pounds sterling in 2001, an increase of 1.1 million pounds sterling or 2.1%. Year over year, there was a reduction in advertising revenue of 17.7 million pounds sterling or 7.7% from 228.7 million pounds sterling in 2001 to 211.0 million pounds sterling in 2002. The year over year decline in advertising revenue mainly resulted from a 7.3% decrease in display advertising and a 29.8% decrease in revenues in the recruitment area. In the fourth quarter of 2002, display advertising was up by 8.6% over the prior year quarter and the rate of reduction in recruitment advertising had substantially slowed to only 4.4% below the fourth quarter of 2001. Notwithstanding the operating revenue decline, The Daily Telegraph's market share of national quality newspaper advertising revenue actually increased in 2002 by approximately 1.0%. Circulation revenue was 93.6 million pounds sterling in 2002 compared with 94.5 million pounds sterling in 2001, a decrease of 0.9 million pounds sterling or 1.0%. Lower revenue from the change in the mix of sales between newsstand and subscribers has been partly offset by increased revenue resulting from increases to the price of The Daily Telegraph implemented in September of both 2001 and 2002. In October 2002, the U.K. Newspaper Group significantly reduced the number of newspapers distributed as part of bulk sampling exercises and foreign sales which is expected to reduce costs of bulk and foreign distribution by about 7 million pounds sterling per year with little impact on either advertising or subscription revenue. Newsprint costs for 2002 were 53.8 million pounds sterling compared with 64.7 million pounds sterling in 2001, a decrease of 10.9 million pounds sterling or 16.8%. The decrease results from a 7.8% reduction in consumption due to lower pagination as a result of lower advertising revenue, and a 9.9% reduction in the average price per tonne of newsprint. Compensation costs for 2002 were 62.6 million pounds sterling compared with 64.9 million pounds sterling in 2001, a decrease of 2.3 million pounds sterling or 3.5%. Lower compensation costs in 2002 resulted primarily from reduced staff levels which occurred at the end of 2001 and sustained by a general salary level freeze for 2002. Other operating expenses, in local currency, were 163.1 million pounds sterling in 2002 compared with 172.8 million pounds sterling in 2001, a reduction of 9.7 million pounds sterling or 5.6%. The lower costs result from savings in editorial and production, as well as marketing costs at the Internet division. Operating income was 32.6 million pounds sterling in 2002 compared with 19.1 million pounds sterling in 2001, an increase of 13.5 million pounds sterling, which was primarily the result of savings in newsprint, compensation and other operating expenses offset by lower advertising and circulation revenue. Amortization in 2001 was 6.3 million pounds sterling. As a result of the adoption of SFAS No. 142 with effect from January 1, 2002, amortization was not recorded in 2002. Canadian Newspaper Group Operating revenues in the Canadian Newspaper Group in the fourth quarter of 2002 were $19.2 million compared with $21.8 million in 2001. Operating income was $0.1 million in the fourth quarter of 2002 compared with an operating loss of $7.6 million in 2001. For the full year, 2002 operating revenues and operating loss were $69.6 million and $2.1 million, respectively, versus operating revenue and an operating loss of $197.9 million and $46.0 million, respectively, in 2001. The results for fiscal 2001 included the National Post and other Canadian newspaper properties which were sold during 2001 prior to the fourth quarter. The sales of these newspapers accounted for the majority of the decrease in year over year operating revenue. The net reduction in year over year operating loss also reflects the sales of newspaper properties. Community Group Operating revenue and operating loss for the Community Group was $3.1 million and $2.0 million in fourth quarter 2002 compared with $4.0 million and $2.0 million in 2001. For the year, revenue and operating loss were $13.2 million and $5.2 million compared to $19.1 million and $4.5 million in the prior year. The results for 2001 include the results of the one remaining U.S. Community Group newspaper for the period to August 2001 when it was sold. Investment and Corporate Group Operating loss of the Investment and Corporate Group was $5.1 million in the fourth quarter of 2002 compared with $5.8 million in 2001. The operating loss for all of 2002 was $19.2 compared to $18.4 million in 2001. Outlook for 2003 Hollinger's Chairman and Chief Executive Officer, Lord Black, comments that "At the time we announced our earnings last year, we were looking for an improvement in operating income before charges for depreciation and amortization and absent the number and quantum of infrequent and unusual charges incurred in 2001. We were intent on making the Company as simple, transparent, efficient and debt free as practical. The proceeds from the private placement of our 9% Senior Notes and the amended senior secured bank facility have been applied to that end. The Total Return Equity Swaps, which have been an irritant over the past few years, have now been retired. With the exception of a relatively small amount of notes due in 2005 and a similar amount of miscellaneous other debt, we have retired all of the notes maturing during the period 2005 to 2007, simplified our borrowing covenants and extended by several years our average term to maturity of long term debt while materially reducing our overall rate of interest on debt. Further, in spite of a continuing industry wide pall over the advertising market, we have increased operating income by $93 million to $57 million. We expect operating income to continue to improve as the impact of a September price increase at the Telegraph manifests itself and as the full year impact of aggressive cost reduction measures take hold. Similarly, the retirement of our senior subordinated notes and Total Return Equity Swaps will result in lower interest costs in 2003. Although a turnaround is expected in advertising revenues for the industry, the timing is uncertain and it is too soon to have confidence in any recent encouraging news on that front. Accordingly, we continue to rely on our cost reduction initiatives as a significant source of improved operating results. Rising operating profits in a declining advertising economy indicate the very high quality of our market leading assets. The outlook for 2003 may be tempered by two significant issues. Clearly, the impact of overt action against Iraq will be felt although the degree to which such action may affect results is impossible to assess. Further, newsprint prices were at historically low levels during 2002. The newsprint industry has recently pressed for price increases in the U.S., but the extent and timing of increases, although expected to be moderate, cannot be ascertained in light of a continuing perceived overcapacity in the industry. In the U.K., we anticipate a reduction of about 7% in unit costs of newsprint as a consequence of contracts negotiated for the year. Absent a major disruption from activities in the Middle East and assuming no newsprint price increases of consequence, operating income is expected to be in the range of $65 million to $75 million which would equate to EBITDA of approximately $120 million to $130 million. Any resurgence in advertising during the year would clearly have a favorable impact on such an increase but has not been factored into our expectations." Hollinger International Inc., owns and operates English-language newspapers in the United States, the United Kingdom, Canada and Israel. The Company's principal assets are the Chicago Sun- Times, which has the second highest circulation and the highest readership of any newspaper in the Chicago metropolitan area, more than 100 titles in the greater Chicago metropolitan area, and The Daily Telegraph, the highest circulation broadsheet daily newspaper in the United Kingdom and in Europe, and its related publications in the United Kingdom. The Company also owns The Jerusalem Post in Israel. In addition, Hollinger has a number of minority investments in various Internet and media- related public and private companies. For more information on Hollinger International Inc., visit http://www.hollinger.com JSC NORTH-WEST: S&P Raises Long-Term Ratings to B- from CCC ----------------------------------------------------------- Standard & Poor's Ratings Services said it raised its long-term corporate credit ratings on Russia-based telecommunications services provider JSC North-West Telecom to 'B-' from 'CCC'. At the same time, Standard & Poor's raised its Russian national scale ratings on NWT and the company's Russian ruble 300 million ($10 million) senior unsecured bond issue to ruBBB from ruBB. The rating action reflects the net benefits of the merger of NWT with eight other fixed-line incumbents in the North-West federal region, all of which are controlled by the state-owned holding Svyazinvest. The merger results in a stronger overall competitive position and improved business profile for the company. The outlook is stable. "Compared with the rated predecessor of the same name, the new company--which, pro forma, had about double NWT's revenues of $316 million in 2002--should benefit from its larger scale by receiving better terms from vendors of telecommunications equipment and other economies of scale. The merger will also give it a stronger market position that is less vulnerable to weaknesses in a particular area or customer segment, and easier access to capital markets," said Standard & Poor's credit analyst Michael O'Brien. "Offsetting these gains, to some extent, is the fact that the enlarged service area is weaker and will require integration work and additional investments to reconcile and improve network characteristics to a more uniform level across the whole area." The revised ratings are constrained by: -- Regulatory control of tariffs of core revenue streams; -- Risks involved in consolidating operations of nine newly united units and the continuing need for capital expenditure to upgrade and modernize the network infrastructure; -- NWT's weak competitive position in terms of provision of services to the more lucrative business segment; and -- Increasing competition for more profitable, value-added services. The ratings are supported by NWT's: -- Relatively attractive service area; -- Dominant market share in terms of subscribers in the North-West region fixed telephony market; -- Generation of moderate free operating cash flow in 2002; and -- NWT's plan to refinance maturing foreign denominated debt with rubles, thereby reducing foreign exchange risk. The stable outlook on NWT reflects Standard & Poor's expectation that the company will continue with structural reorganization, management improvement, and network modernization, and that it will operate without materially weakening its financial profile. JSC SOUTHERN: Rating Raised to B- Due to Consolidation Process -------------------------------------------------------------- Standard & Poor's Ratings Services said it raised its long-term corporate credit rating on Russia-based fixed-line telecommunications service provider JSC Southern Telecommunications Co., to 'B-' from 'CCC+'. The rating action reflects the net benefits of the merger of Southern Telecom with nine other fixed-line incumbents in the southern region of Russia that are controlled by the state-owned holding Svyazinvest. The outlook is stable. The merger has resulted in a stronger competitive position and improved business profile for the company. "Compared with the rated predecessor of the same name, the new company--which had approximately 3x greater revenues of about $331 million in 2002 (calculated if the merger had taken place at the beginning of 2002)--should benefit from its larger scale by receiving better terms from vendors of telecoms equipment and other economies of scale," said Standard & Poor's credit analyst Michael O'Brien. "The merger will also give it a stronger market position that is less vulnerable to weaknesses in a particular area or customer segment, and make it easier to access capital markets." Offsetting these gains to some extent is the fact that the enlarged service area has marginally less attractive average market characteristics and will require integration work and additional investments to reconcile and improve network characteristics to a more uniform level across the whole area. "It is expected that Southern Telecom will continue with its structural reorganization, management improvement, and network modernization, and that it will execute its business plan without materially weakening its financial profile and ability to service its debt obligations," said Mr. O'Brien. A manageable increase in debt is already factored into the rating on Southern Telecom. The rating assumes, however, that operating cash flow will be sufficient to service debt in the short-term and that the company can return to free operating cash flow generation in the medium term as network investments are completed. KAISER ALUMINUM: Wants Approval for Release Pact with Maxxam ------------------------------------------------------------ In December 2002, Kaiser Alumina Australia Corporation advised the Court that it has reached an agreement with the Australian Taxation Office to settle all remaining issues relating to a formal audit the ATO initiated in 1998. Based on the ATO Settlement, the Kaiser Aluminum Debtors and MAXXAM Inc. analyzed the potential additional amount that each might owe under a tax allocation agreement. MAXXAM believed that it was entitled to a payment from the Debtors as a result of the ATO Settlement. But the Debtors reached a different conclusion. The Tax Allocation Agreement established a method for allocating MAXXAM's consolidated federal income tax liability to the Kaiser and its U.S. subsidiaries, which MAXXAM acquired through a merger in 1988. The Tax Allocation Agreement also established procedures for the Kaiser subgroup's payment of estimated and actual taxes to MAXXAM in respect of the consolidated tax liability attributable to the Kaiser subgroup. Pursuant to the Tax Allocation Agreement, the Debtors paid MAXXAM generally what the Kaiser subgroup would have paid the Internal Revenue Services had the Kaiser subgroup filed separate consolidated income tax returns and had the Kaiser subgroup never been affiliated with MAXXAM. The Tax Allocation Agreement applied only to U.S. income taxes. Foreign tax liabilities were generally paid directly to the foreign taxing authorities. MAXXAM also filed an adversary proceeding asking the Bankruptcy Court to determine that it has no further obligations under the Tax Allocation Agreements. On January 3, 2003, the Debtors and MAXXAM engaged in a dispute resolution procedure, which culminated in a settlement of all claims with respect to the Tax Allocation Agreement and the Adversary Proceeding. As approved by the Court, the parties agree to simply waive and release all claims against the other party under the Tax Allocation Agreement. In light with Kaiser Australia's settlement with the ATO, the Debtors and MAXXAM will mutually release each other from all present and future claims or obligations arising from or under the Tax Allocation Agreement. MAXXAM will also dismiss the Adversary Proceeding. The Debtors note that there can be no assurance that they would be able to establish that MAXXAM owes a refund under the Tax Allocation Agreement. The disputed tax issues are complex and subject to varying interpretations. The Debtors would also have to overcome MAXXAM's allegations that the Tax Allocation Agreement is no longer enforceable. While they believe that they would prevail in this argument, the Debtors are aware that there is no guarantee that they would, and substantial litigation expenses would likely be incurred. (Kaiser Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) KMART CORP: Wants to Dispose of Liability Insurance Proceeds ------------------------------------------------------------ Kmart Corporation and its debtor-affiliates ask the Court to approve to the disposition of certain liability insurance proceeds in accordance with their stipulation with National Union Fire Insurance Company of Pittsburgh, PA and Liberty Mutual Insurance Company. Under the Stipulation, National Union would pay $25,000,000 to Liberty Mutual pursuant to a certain Commercial Umbrella Policy by which Kmart is a named insured for personal injuries suffered by Messrs. Stanley Kolodziey and Richard Luczak and Mrs. Stanislawa Luczak. Kmart is an insured under a Commercial Umbrella Policy from National Union, effective for policy period January 1, 1993 to January 1, 1994. The limits of liability for the Commercial Umbrella Policy are $25,000,000 in excess of a $2,000,000 retained amount, subject to an endorsement under the Policy affording coverage in addition to the limits under specified circumstances. On May 11, 1993, Messrs. Kolodziey and Luczak sustained personal injuries while performing electrical work on a switch panel located on the premises owned by Westwood Equity, a facility adjacent to the premises Kmart occupied. A week later, Messrs. Kolodziey and Luczak brought an action before the Los Angeles Superior Court for personal injury claims, naming Kmart as one of the defendants. In January 1999, a $26,000,000 judgment was entered against Kmart in the lawsuit. The amount was later increased due to accrued interest. Kmart filed an appeal in May 1999 and obtained a $38,858,896 bond from Liberty Mutual to prevent the execution on the Judgment while the case was on appeal. In December 2001, the California Supreme Court declined to review the decision. With the Bankruptcy Court's approval, on March 26, 2002, the Debtors entered into an agreement with Mr. Kolodziey and the Luczaks partially lifting the automatic stay so the Claimants can enforce the Judgment under the National Union Policy. The Debtors and Liberty Mutual have alleged that National Union was, and continues to be obligated to pay the entire amount of the Final Judgment plus accrued interest, less the retained amount. National Union has disputed the claim. National Union insisted that it is not obligated to pay anything over the $25,000,000 liability limit of the Commercial Umbrella Policy. In April 2002, National Union filed a lawsuit before the Los Angeles County Superior Court against the Claimants and Liberty Mutual seeking a judicial determination that it need not pay the Judgment under the Policy. Consequently, Liberty Mutual has amended its complaint while the Debtors have filed a complaint- in-intervention. These actions are still pending before the California Court. On June 28, 2002, Liberty Mutual paid $34,670,186 to the Claimants for the Judgment, including accrued interest. Liberty Mutual paid the amount pursuant to the terms of Kmart's appeal bond. Liberty Mutual also received an assignment of the Claimants' rights under the Judgment. To facilitate the $25,000,000 payment, under the Stipulation, the Debtors and Liberty Mutual will provide National Union with a limited release under the Policy to the extent of the payment. However, the Debtors and Liberty Mutual will reserve the right to litigate the issues relating to the remaining amounts that they believe are owed over and above the liability limits. The Stipulation will not be deemed as a release by any party, and will not act as estoppel on any party's part with respect to any position, claim or defense that any party has asserted or may assert in the Action. (Kmart Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Kmart Corp.'s 9.000% bonds due 2003 (KM03USR6) are trading at about 16 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for real-time bond pricing. LERNOUT: Committee Wants Court to Set Confirmation Hearing Date --------------------------------------------------------------- The Official Committee of Unsecured Creditors of Lernout & Hauspie Speech Products, NV, represented by Frances A. Monaco, Esq., and Joseph J. Bodnar, Esq., at Monzack & Monaco PA, ask Judge Wizmur to: (1) approve the Committee's Disclosure Statement; (2) set a date for the confirmation hearing; (3) set a deadline by which any objections to confirmation must be filed; (4) set a date by which motions for temporary allowance of claims for voting purposes under Rule 3018 of the Federal Rules of Bankruptcy Procedure must be filed; (5) determine the treatment of certain unliquidated, contingent or disputed claims for notice, voting and distribution purposes only; (6) establish the Record Date for the mailing of materials and for voting purposes; (7) approve the form of notice of the hearing on plan confirmation and the publication notice; (8) approve the procedures for distribution of solicitation packages and the solicitation of votes on the Plan; (9) approve the contents of the solicitation packages; (10) approve the form of Ballot; (11) set the voting deadline for receipt of the ballots; (12) establish the procedures for tabulating the votes; and (13) establish procedures relating to executory contracts and unexpired leases. Approval of the Disclosure Statement Mr. Bodnar notes that the Court has broad discretion to determine whether the Committee's Disclosure Statement has adequate information under the circumstances of L&H NV's case. Mr. Bodnar assures Judge Wizmur that the content of the Disclosure Statement meets the necessary standards, because it: (a) describes L&H NV's operations prior to the commencement of these cases; (b) describes the events leading up to the commencement of this Chapter 11 case and the Belgian insolvency proceeding; (c) describes the significant events in this case and the Belgian case, the various parties- in-interest, DIP financing, professional fees, claims against the estate, significant asset sales, material litigation, and employee issues; (d) contains a summary of the Plan; (e) outlines the voting procedures, requirements and deadlines; and (f) explains the consequences of confirmation, and the alternatives to confirmation. Confirmation Hearing Date The Committee asks Judge Wizmur to fix May 29, 2003, at 10:00 a.m. New York time as the date and time for the commencement of the hearing on confirmation of the Committee's Plan. The Committee points out that this date provides more than the 25- day notice period required. The Committee also notes that the confirmation hearing may be continued from time to time, and seeks the Court's authority to modify the Plan before, during, or as a result of the confirmation hearing without further notice. Objections to Confirmation of the Plan The Committee also asks Judge Wizmur to set May 19, 2003, at 4:00 p.m. New York time as the last date for filing and serving objections to confirmation of the Plan. Objections should be served on each of co- counsel for the Committee, co-counsel for L&H NV, and the United States Trustee. Mr. Bodnar notes that this date is ten calendar days prior to the proposed date for the confirmation hearing, and 33 days after the proposed mailing of solicitation packages. Deadline for Temporary Allowance of Claims For Voting Certain claims are the subject of objections. As a result, these claims will not be deemed "allowed" for purposes of voting, and are therefore not counted when determining whether the requisite number of acceptances has been obtained for confirmation purposes. Therefore, the Committee asks Judge Wizmur to set May 5, 2003, at 4:00 p.m. New York time as the last date for filing and serving motions under Bankruptcy Rule 3018 for temporary allowance of objected-to claims for voting purposes. The Committee further asks Judge Wizmur to set May 9, 2003, at 10:00 a.m. New York time as the date and time on which such motions can be determined if not previously resolved. The Committee asks the Court to consider only those motions, which are timely filed and served by these dates. Persons wishing to change their votes must file motions to that effect by May 23, 2003 at noon New York time. Treatment of Certain Claims for Voting, Noticing and Distribution Any creditor whose claim is not scheduled by the Debtor, or is scheduled and described as contingent, unliquidated or disputed will not be treated as a creditor with respect to that claim for purposes of voting and distribution unless the creditor timely files a proof of claim. Notwithstanding the Order previously entered setting a deadline for the filing of proofs of claim, a number of claimants whose claims were scheduled by the Debtor as contingent, unliquidated or disputed failed to file timely proofs of claim. Thus, the Committee asks Judge Wizmur to specifically order that any creditor in this situation will not be treated as a creditor for the purpose of receiving distributions under or voting on the Plan. The Committee also asks the Court not to treat these creditors as creditors for purpose of receiving notices, other than by publication. The Committee objects -- solely for voting purposes -- to any claim that is: (1) classified in Class 3 Unsecured Claims, and that is (2) in an unliquidated amount or that purports to be contingent or disputed; and (3) that has not previously been the subject of an objection. The Committee asks Judge Wizmur to temporarily allow these claims for purposes of satisfying the "numerosity" requirement for confirmation and, in essence, set the claim amount at zero for the "amount" purposes of determining confirmation, subject to each claimant's right to ask the Court to temporarily set a dollar amount by motion. The Committee asks Judge Wizmur to exercise her equitable authority to order that: (1) the Class 3 Unsecured Claims are deemed to have been objected to by virtue of this Motion; and (2) service of the Notice of Confirmation Hearing, which will also describe the objection, constitutes adequate and sufficient notice of the objection. Moreover, the Committee asks Judge Wizmur to order that, unless the holder of a Class 3 claim brings a timely motion asking for temporary allowance of the claim in an amount deemed proper by the Court, any ballot cast by the claimholder will be counted in the numerosity and amount requirements. The Committee asks Judge Wizmur to expressly except from this procedure any claim, whether classified as a Class 3 claim or otherwise, as to which a separate objection other than the objection in this Motion has been brought. Record Date The Committee asks Judge Wizmur to set March 14, 2003, as the official record date by which the holders of stocks, bonds, debentures, notes and other securities are determined, rather than the date on which an order is entered approving the Disclosure Statement as otherwise provided, for purposes of determining the holders of claims entitled to receive solicitation packages and holders of claims entitled to vote to accept or reject the Plan. Voting Agent The Committee intends to retain Donlin Recano as its voting and information agent for purposes of mailing solicitation packages and receiving, tabulating and reporting on ballots cast for or against the Plan by holders of claims. As Voting Agent, Donlin will be responsible for: (1) tabulating ballots and submitting appropriate voting reports and declarations; and (2) responding to inquiries from claimants and equity interest holders relating to the Plan, the Disclosure Statement, the Ballots, and related materials. The Committee asks the Court to permit L&H NV to compensate and reimburse Donlin Recano's expenses as Voting Agent without further notice or separate application. Notices and Transmittal to Claimants The Committee proposes to transmit to each claimant by mail copies of: (1) the Notice of Confirmation Hearing; (2) the Disclosure Statement; (3) the Plan; (4) the Disclosure Statement Approval Order; and (5) a customized ballot. Claimants receiving these solicitation packages include: (a) claimants holding claims unimpaired by the Plan; (b) claimants holding administrative expense claims; (c) claimants holding claims entitled to vote; and (d) claimants holding claims not entitled to vote under the Plan, although impaired by it -- holders of Securities Laws claims. Transmittal of these packages to the holders of public security claims will be sent in a manner customary in the securities industry. This will include mailing of solicitation packages to the holders of Old Convertible Notes no later than April 16, 2003. As to PIERS claims, a single solicitation package will be sent to Wilmington Trust Company as trustee. No notices will be sent to any entity to whom the notice of the filing deadline for proofs of claim was returned as "undeliverable as addressed", "moved -- left no forwarding address" or "forwarding order expired". Furthermore, the Committee does not intend to mail solicitation packages to holders of Class 5 or Class 7 Equity Interests. These interest holders will not receive any distribution under the Plan and are not entitled to vote, but instead are deemed to have rejected the Plan. Given the number of Equity Interest holders in L&H NV -- a company that formerly had a multi-billion dollar market capitalization -- the Committee submits that noticing all holders would be costly and unnecessarily deplete the estate. Publication Notice The Committee seeks the Court's permission to give publication notice of the voting deadline, the confirmation hearing date, the record date, the confirmation objection deadline, and the Bankruptcy Rule 3018 dates by causing these to be published no later than May 2, 2003, in The Wall Street Journal. The Committee believes that this publication notice will be sufficient to provide notice to all parties not otherwise receiving notice. Voting Deadline To be counted, ballots must be received by May 19, 2003, at 4:00 p.m. New York Time -- this is 33 days after transmittal of the solicitation packages. Counting Ballots The Committee proposes that any ballot timely received that contains sufficient information to permit the identification of the claimant and is cast as an acceptance of the Plan be counted. The Committee also suggests that these ballots not be counted: (1) any ballot received after the Voting Deadline; (2) any ballot that is illegible or contains insufficient information to permit identification of the claimant; (3) any ballot timely received that indicates neither acceptance or rejection of the Plan; (4) any ballot cast by a creditor who has not timely filed a proof of claim with respect to the claim being voted, and whose claim is not scheduled, or is scheduled as contingent, unliquidated or disputed, or a creditor whose claim is the subject of a pending objection; (5) any ballot cast by a person who does not hold a claim in the class that is entitled to vote; and (6) any ballot timely received that indicates both acceptance and rejection of the Plan. Changing Votes Notwithstanding Bankruptcy Rule 3018, the Committee proposes that whenever two or more ballots are cast voting the same claim before the Voting Deadline, the last ballot received before the Voting Deadline will be deemed to reflect the voter's intent and will supersede any prior ballots. This procedure will spare the Court and the Committee the time and expense of responding to motions brought under Bankruptcy Rule 3018 attempting to show cause for changing votes. Cure Costs The Plan provides for the rejection, as of the Effective Date, of all executory contracts and unexpired leases to which L&H NV is a party except for those specifically listed in an Assumption and Assignment Schedule yet to be filed. The Committee promises to file and serve on all parties to executory contracts or unexpired leases a schedule setting out the amount of cure payments to be made on those contracts and leases to be assumed. (L&H/Dictaphone Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) LOOMIS SAYLES: S&P Puts BB Class C Note Rating on Watch Negative ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on the class B-1, B-2, and C notes issued by Loomis Sayles CBO II Ltd., a high-yield arbitrage CBO transaction managed by Loomis Sayles & Co L.P., on CreditWatch with negative implications. At the same time the ratings on the class A-1 and A-2 notes are affirmed. The CreditWatch placements reflect factors that have negatively affected the credit enhancement available to support the notes since the transaction closed in October 2001. These factors include continuing par erosion of the collateral pool securing the rated notes and a decline in the credit quality of the performing assets in the collateral pool. Since origination, the deal has recognized $25.3 million in defaults. Standard & Poor's noted that as a result of asset defaults, the overcollateralization ratios for this transaction have suffered. As of the most recent available monthly trustee report (March 18, 2003), the class A overcollateralization ratio was at 137.4% compared to a ratio of 147.3% at the time of closing; the class B overcollateralization ratio was at 112.3%, compared to a ratio of 120.5% at the time of closing; and the class C overcollaterization ratio was at 107.5%, compared to 115.3% at closing. Standard & Poor's noted that its Trading Model test, a measure of the ability of the credit quality in the portfolio to support the rating on a given tranche, is out of compliance according to the March trustee report. Standard & Poor's will be reviewing the results of current cash flow runs generated for Loomis Sayles CBO II Ltd. to determine the level of future defaults the rated tranches can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. The results of these cash flow runs will be compared to the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the notes remain consistent with the credit enhancement available. Ratings Placed On Creditwatch Negative Loomis Sayles CBO II Ltd. Rating Class To From Current Balance (mil. $) B-1 BBB/Watch Neg BBB 40.0 B-2 BBB/Watch Neg BBB 5.0 C BB/Watch Neg BB 11.0 Ratings Affirmed Loomis Sayles CBO II Ltd. Class Rating Current Balance (mil. $) A-1 AAA 180.00 A-2 AA 22.00 MAGELLAN HEALTH: Will Honor & Pay Prepetition Provider Claims ------------------------------------------------------------- Magellan Health Services, Inc., and its debtor-affiliates sought and obtained the Court's authority to satisfy all Provider Claims and Physician Advisor Claims in the ordinary course of their businesses. Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, in New York, informs the Court that the fundamental nature of the Debtors' business is to provide, or assist in the coordination of, care for their Members through a process of referring their Members to appropriate behavioral health care providers. The Debtors utilize a number of different types of providers, including, individual practitioners or group practices, i.e. psychiatrists, psychologists, licensed clinical social workers, marriage and family therapists, licensed clinical professional counselors, employee assistance program counselors and other behavioral healthcare professionals, and facilities like inpatient psychiatric and substance abuse hospitals, intensive outpatient facilities, partial hospitalization facilities, and other intermediate care and alternative care facilities. Of the Providers used by the Debtors, 40% are under contract with the Debtors and the remaining 60% are non-contract providers. Mr. Karotkin explains that the Debtors pay Contract Providers for their services rendered to Members based on the rates set forth in the contract between the Provider and the applicable Debtor, less amounts that the Member is responsible to pay to the Provider directly. With the exception of contracts with Contract Providers in Massachusetts, which are terminable only for cause, all of the Debtors' contracts with Contract Providers are terminable by the Contract Providers for any reason after 60 or 90 days notice. Substantially all of the Contract Providers are paid on a fee- for-services basis. Contract Providers generally submit an invoice for services rendered after their services have been provided to the Member. On average, the Debtors process payment for invoices in less than 30 days after receipt of the invoice from the Contract Provider. However, the time it takes for a Contract Provider to submit an invoice can vary greatly. Mr. Karotkin relates that a small portion of Contract Providers are paid by the Debtors on a case-rate basis based on the rates set forth in the contract between the Contract Provider and the applicable Debtor. A portion of these case-rate Contract Providers are paid at the beginning of a month or quarter for the estimated cases the Provider will encounter in that month or quarter, as applicable. In the event that this Contract Provider actually encounters more cases than estimated for any given month or quarter, the Debtors may be obligated to reimburse this Contract Provider, after notification that there has been an underpayment. This reconciliation takes place the following month or quarter, as applicable. According to Mr. Karotkin, a small number of Contract Providers are paid on a "capitated" basis. In these cases, the Capitated Providers agree to provide all necessary behavioral health services to certain Members for a fixed per member per month fee. However, a portion of the necessary services will be provided by other Providers to which the Member is referred. In certain circumstances, the Debtors withhold a portion of the Capitated Provider's fixed per member per month fee to use to pay the other Providers. In the event the amount withheld from the Capitated Provider's fee is greater than the actual amount owed to other Providers, the Debtors will pay the excess to the Capitated Provider. The Debtors reconcile the amounts owed to Capitated Providers for excess withholds the following month or quarter, as applicable. In certain circumstances, Mr. Karotkin states that the Debtors will refer their Members to, or their Members will seek care from, Non-Contract Providers. The Debtors pay Non-Contract Providers on a fee-for-services basis based on either billed charges, a negotiated rate or the usual and customary rate for the services for that local area. Non-Contract Providers generally submit an invoice for services rendered after these services have been provided to the Member. On average, the Debtors process payment for the invoices in less than 30 days after receipt of the invoice from the Non-Contract Provider. However, the time it takes for a Non-Contract Provider to submit an invoice can vary greatly. In all of these cases, the Debtors are responsible for payment to Providers for services rendered. Because the Debtors are not aware of services rendered to Members until after an invoice is presented by the Provider, which could be at any time after service to the Member is rendered, the Debtors are not able to ascertain with certainty the precise amount that is owed to Providers at any given time. Mr. Karotkin reports that the Debtors estimate the amount owed to providers for financial statement purposes using accepted actuarial methods. These actuarial methods utilize past claims payment experience, enrollment data, utilization statistics, authorized healthcare services and other factors. The nature of the data and the actuarial methodologies is that estimates included in the financial statements are usually completed 30 to 60 days after the end of the reported period. Based on past experience using these actuarial methodologies, the Debtors estimate that, as of the Petition Date, their obligations to all Providers aggregate $180,000,000. These obligations typically are paid over a period of three to four months, with historical monthly payments to providers averaging about $40,000,000 to $50,000,000. As an integral part of assisting their Members in receiving appropriate mental health care and managing that care, Mr. Karotkin relates that the Debtors have contracts with a network of individual mental health physicians whose primary purpose is to evaluate treatment provided or proposed for Members and make recommendations to the Debtors regarding the medical necessity and appropriateness of that treatment. In total, the Debtors have contracts with 150 active Physician Advisors. Without qualified evaluators, the Debtors would not be able to adequately determine the level or type of medical care necessary and appropriate for their Members, nor would the Debtors be able to maintain and control the cost of care. Moreover, many state utilization review statutes and regulation and accreditation bodies require that only trained and experienced physicians make adverse medical necessity determinations. Additionally, those same state agencies require that appeals of adverse medical necessity decisions be conducted by independent third party Physician Advisors. Mr. Karotkin tells the Court that the Debtors' contracts with the Physician Advisors are "at will" contracts and can be terminated after notice by either party. Pursuant to the terms of these contracts, the Physician Advisors provide evaluations on either an hourly or per case basis and bill the Debtors for their services monthly in arrears. Because the Debtors are billed subsequent to when services are provided, they are unable to determine precisely their obligations to the Physician Advisors at any given time. Based on past experience, the Debtors estimate that, as of the Petition Date, their obligations to the Physician Advisors aggregate $613,000. Mr. Karotkin submits that the core component of the Debtors' business operations is the management of the behavioral health care services of their Members by providing them with access to their network of Contract Providers and paying for a portion of the cost of services provided by the Non-Contract Providers. Consequently, the lifeblood of the Debtors' continued operations is the ability of the Members to have access to Providers. The Debtors believe that failure to pay the prepetition claims of the Providers would significantly impair their relationships with their Providers and likely would result in the wholesale termination by Contract Providers of their contracts with the Debtors or the refusal of Contract Providers and Non-Contract Providers to provide services to the Members or to conduct business with the Debtors in the future. Indeed, due to the Debtors' financial condition and announcements regarding the need to restructure their debts, prior to the Petition Date, many of the Providers indicated their reluctance to provide services to the Members and many of the Debtors' customers expressed concern over the ability of the Debtors to maintain a network of Providers in compliance with their contracts and to arrange, and pay, for the services of their Members. Thus, failure to satisfy the Provider Claims on an ongoing basis would have a Draconian affect on the Debtors' business and essentially stop the reorganization effort in its tracks. Simply stated, a defection of Providers would render it impossible for the Debtors to fulfill their obligations under contracts with customers -- on which they are entirely dependent for revenue. Moreover, Mr. Karotkin adds that the Debtors do not believe that it would be at all feasible to find replacement Providers on a timely basis to avoid the devastating loss in revenue that would result in the absence of obtaining the relief. The process of obtaining qualified providers and credentialing these providers in accordance with applicable law, contractual requirements and sound business practice is a complex and time-consuming ordeal. Indeed, a core asset of the Debtors is having a network of qualified and credentialed Providers that is sufficient to service the varying concentrations of Members in all geographic areas and is broad enough to provide all specialties and levels of care required by Members. In the unlikely event that the Debtors could find qualified replacement providers willing to contract with the Debtors or provide service to Members, the replacement providers nevertheless would be unable to properly service their Members who have been utilizing the services of existing Providers. Furthermore, many of the Debtors' customers would find it necessary, either under law, contract or good business practice, to pay Providers for services that the Debtors failed to pay, which would cause customers to terminate their contracts with the Debtors. Simply stated, unless all payments are made to Providers in accordance with past practices, the Debtors' business operations could come to a standstill, a key asset of the Debtors would be impaired and the reorganization effort will be completely jeopardized. (Magellan Bankruptcy News, Issue No. 3: Bankruptcy Creditors' Service, Inc., 609/392-0900) Magellan Health Services' 9.375% bonds due 2007 (MGL07USA1) are trading at about 83 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=MGL07USA1for real-time bond pricing. MOLECULAR DIAGNOSTICS: Makes Final Payment to Round Valley Cap. --------------------------------------------------------------- Molecular Diagnostics, Inc., (OTCBB:MCDG) has made the final payment to Round Valley Capital, a preferred debt holder whose position was secured by all of MDI's assets. The final closing payment was made in conjunction with a $1,000,000 investment from a current shareholder and company insider. Removal of RVC's position is concurrent with their return of all shares initially granted as part of the initial loan. MDI is now free to develop, license, sell, or otherwise align itself with strategic partners. As previously announced, a number of prominent and mid-sized companies in or related to the cytotechnology space have shown considerable interest in entering into a strategic partnership, or acquiring all or various components of the company's intellectual property. According to Peter Gombrich, President and CEO of MDI, "We are excited to have repaid this debt. This is a major milestone in the company's restructuring. We can now proceed with our key initiatives of establishing strategic alliances and partnerships, as well as completing the clinical trials for InPath Cocktail-CVX System." Molecular Diagnostics develops cost-effective cancer screening systems, which can be utilized in a laboratory or at the point- of-care, to assist in the early detection of cervical, gastrointestinal, and other cancers. The InPath(TM) System is being developed to provide medical practitioners with a highly accurate, low-cost, cervical cancer screening system that can be integrated into existing medical models or at the point-of-care. Other products include SAMBA(TM) Telemedicine software used for medical image processing, database and multimedia case management, telepathology and teleradiology. Molecular Diagnostics also makes certain aspects of its technology available to third parties for development of their own screening systems. Molecular Diagnostics' September 30, 2002 balance sheet shows a working capital deficit of about $12 million, and a total shareholders' equity deficit of about $4 million. NANOPIERCE TECHNOLOGIES: Executes Major Financial Restructuring --------------------------------------------------------------- NanoPierce Technologies, Inc., (OTCBB:NPCT) has implemented a major financial restructuring of the Company and its subsidiaries. Responding to the continuing challenge presented by today's business and economic environment, the Company and its subsidiaries laid off 55% of its work force, implemented additional salary reductions and eliminated or reduced leasehold expenses in an effort to further reduce its overhead and cash burn rate. The Company estimates that because of these and other actions, consolidated overhead has been reduced by approximately 40% to 50%. The remaining employees are capable of carrying forward the business activities of the Company and the core competencies of the management and staff team have been retained. The conditions prevailing in the financial markets and the global semiconductor market presented the Company with little alternative but to implement cost-saving changes in order to enhance its ability to weather the current environment. As part of the changes implemented by the Company, NanoPierce Card Technologies, GmbH, due to the requirements of German law, was placed into receivership. The Company had contemplated the possible dissolution of NanoPierce Card Technologies, GmbH as part of a plan to simplify operations in Germany. The Company intends to focus all activities in Germany into NanoPierce's other German subsidiary, ExypnoTech GmbH, which remains unaffected by the receivership of NanoPierce Card Technologies, GmbH. However, expansion of these activities is heavily dependent upon the Company or ExypnoTech obtaining sufficient financing. NanoPierce's U.S. subsidiary, NanoPierce Connection Systems, Inc., will continue its pursuit of the WaferPierce(TM) opportunity along with other, on-going efforts to commercialize NCS(TM) with industry leaders. The subsidiary will also increase the emphasis given to projects producing shorter-range revenue. Certain former employees have agreed, on request, to assist the Company on a consulting basis on these business activities. The Company also continues to pursue financing for its business operations. Paul H. Metzinger, President and Chief Executive Officer of NanoPierce Technologies Inc., stated: "Regrettably we had to implement this financial restructuring but it was made necessary by existing economic conditions. Tough as it might be, we exercised the discipline required to better enhance the prosperity of the Company." NanoPierce Technologies, Inc., of Denver, Colorado, USA, is traded on the NASDAQ stock market (OTCBB:NPCT) as well as on the Frankfurt and Hamburg exchanges (OTC:NPI). In addition to the 12 patents it owns, NanoPierce has numerous applications pending, others in preparation, and various other intellectual properties related to NanoPierce's proprietary NCS(TM) (NanoPierce Connection System). This advanced system is designed to provide significant improvement over conventional electrical and mechanical interconnection methods for high-density circuit boards, components, sockets, connectors, semiconductor packaging and electronic systems. NanoPierce Connection Systems, Inc., is a 100% subsidiary of NanoPierce Technologies, Inc., located in Colorado Springs, Colorado. NanoPierce Connections Systems, Inc., has been chartered to undertake high-volume production WaferPierce(TM), a revolutionary and enabling semiconductor wafer treatment for ultra-low cost flip-chip without the necessity of wire bonding, conductive adhesives, or soldering. Typical end-use applications of WaferPierce(TM) include Smart Labels, Smart Cards, and LED arrays. ExypnoTech GmbH is a 100% subsidiary of NanoPierce Technologies, Inc., located in Rudolstadt, Germany. ExypnoTech develops, produces and markets components for the RFID market worldwide. In its production of smart inlays, the Company employs flip chip processes based on NanoPierce Technologies patents. For further information on ExypnoTech, log on to http://www.exypnotech.com NATIONAL CENTURY: Court Okays Ruscilli as Real Estate Broker ------------------------------------------------------------ National Century Financial Enterprises, Inc., and its debtor- affiliates obtained the Court's authority to employ Ruscilli Real Estate Services, Inc., as real estate brokers to sell Memorial Drive Office Complex's interest in certain of the office complex buildings in Ohio, pursuant to Section 327 of the Bankruptcy Code, nunc pro tunc to December 10, 2002. The MDOC in Dublin, Ohio, is being used as the Debtors' headquarters. The Debtors and Ruscilli entered into an engagement letter with respect to the sale of the Memorial Drive Properties as of December 10, 2002 wherein Ruscilli would be retained to sell six buildings in the office complex, including: -- Building #2 (6035 Memorial Drive), -- Building #3 (6051 Memorial Drive), -- Building #4 (6075 Memorial Drive), -- Building #6 (6015 Memorial Drive), -- Building #8 (6179-3189 Memorial Drive), and -- Building #9 (6135 Memorial Drive and 3155 Memorial Drive). Pursuant to the Engagement Letter, Ruscilli will have the exclusive right to sell the properties through December 31, 2003. Under the Engagement Letter, Ruscilli will receive a 6% commission of the sale price of any of the Memorial Drive Properties in cash at closing, with the exceptions that: (a) Should RJ Boll Realty acting as buyer enter into a purchase contract and close on any of the properties within 30 days after the effective date of Ruscilli's engagement, Ruscilli will receive a 3% real estate commission, in cash at closing, and (b) Should Meeder Financial, Purcell & Scoot or Dr. Fanning, which are all current tenants of the Memorial Drive Properties, enter into a purchase contract and close on one or more of the properties within 90 days after the effective date of Ruscilli's engagement, Ruscilli will earn a 4% commission. (National Century Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONAL SERVICE: Selling Company to California Investment Unit --------------------------------------------------------------- National Service Industries, Inc., (NYSE: NSI) has entered into a definitive merger agreement providing for the acquisition of NSI by an affiliate of California Investment Fund, LLC, a private investment firm based in San Diego, California. Pursuant to the agreement, each outstanding share of NSI common stock will be converted into the right to receive $10.00 in cash. The transaction originated with an unsolicited offer to NSI by California Investment Fund, LLC. The Board of Directors of NSI has unanimously approved and adopted the merger agreement. SunTrust Robinson Humphrey is serving as financial advisor to NSI. The closing of the transaction is subject to the approval of the NSI stockholders, the receipt of certain financing, and other customary conditions. Commitment letters have been obtained with respect to all necessary financing in connection with the transaction. The transaction is expected to close around midyear in calendar year 2003. Prior to the closing of the transaction, NSI is authorized under the terms of the merger agreement to receive and consider any alternative third-party proposals with respect to the acquisition of NSI. NSI's businesses will continue to operate under the names National Linen Service and Atlantic Envelope Company, and no significant operational or management changes are expected at the business-unit level. Brock A. Hattox, Chairman and Chief Executive Officer of NSI, intends to make his previously announced retirement effective upon consummation of the transaction. "Given the highly competitive industries in which we compete and the escalating costs of operating a public company of our relatively small size, management and the board of directors believe strongly that this transaction represents an excellent value for NSI stockholders," said Hattox, who became CEO following the spin-off of NSI's lighting and specialty chemical businesses to Acuity Brands, Inc. in December 2001. "It also continues the operations of NSI's market-leading operating companies in ways that should be seamless for employees, suppliers and customers." 2nd Quarter Results The Company also reported financial results for the second quarter ended February 28, 2003. Second quarter revenues totaled $121.4 million, down 8 percent from last year's $132.0 million. Net loss for the quarter was $5.2 million, or $0.49 per diluted share, compared to last year's break-even results. The decrease from last year's results is primarily attributable to lower direct mail and credit card solicitation envelope volumes, pricing pressures and lower volumes in the textile rental industry. Textile Rental Segment Textile rental segment second quarter revenues of $76.1 million decreased 1.5 percent from last year's $77.3 million. The reduction in revenues is primarily attributable to the sale of the San Diego business in the first quarter and the discontinuance of a significant health care segment customer at the end of the fourth quarter last year. Additionally, volumes per customer continue to be impacted by soft economic conditions. Operating loss for the quarter was $1.5 million compared to last year's reported profit of $1.3 million. Last year's results included approximately $700 thousand of net gains from a previously divested business and restructuring plans. The decrease in operating results for 2003 is largely due to lower revenues; increased employee benefits costs; one-time restructuring gains in 2002; and unfavorable results from several under-performing linen plants. Envelope Segment The envelope segment second quarter revenues of $45.3 million represent a 17.2 percent decline from last year's $54.7 million and an operating loss of $2.1 million compared to last year's profit of $649 thousand. Operating results decreased largely as a result of the volume reduction. Corporate and Interest Costs Corporate expenses were $4.0 million for the second quarter compared to last year's $1.9 million due primarily to costs associated with the previously announced retirement of the Company's chairman. For the Company's second fiscal quarter ended February 28, 2003, the Company failed to comply with two financial covenants in the Company's $40.0 million unsecured credit facility, which resulted in an event of default under the credit agreement. The covenants in question require the Company, as of the end of each fiscal quarter, to maintain a minimum ratio of Income Available For Fixed Charges to Fixed Charges for the preceding four consecutive fiscal quarters and a minimum amount of Stockholders' Equity (as such terms are defined in the credit agreement). On March 28, 2003, the lender agreed to waive the event of default pursuant to an agreement that will require the Company to obtain the lender's approval of any additional borrowings under the credit facility. As of February 28, 2003 and the date of this release, there were $11.4 million of letters of credit issued under the credit facility, but no other borrowings outstanding under the credit facility. The credit facility is expected to be terminated upon consummation of the proposed merger. Additionally, during the quarter ended February 28, 2003, the Company engaged external consulting economists to review the Company's expected future asbestos claims liabilities. Based on information supplied by this study and management's knowledge and experience regarding its asbestos liabilities, the Company concluded that an increase in its accrued liabilities for asbestos related costs was necessary. The increase in the liabilities resulting from this review process was a minimum increase of $138.0 million to a maximum increase of $209.0 million. Management does not believe any amount in the range is more probable than any other. Therefore, as of February 28, 2003, the Company increased its liabilities for asbestos related costs by approximately $138.0 million, the low end of the range. The Company also believes it has adequate insurance coverage available to cover this increase in liabilities and therefore recorded an additional insurance recovery asset of $138.0 million. Management continues to monitor claims activity, credit worthiness of insurers, the status of lawsuits (including settlement initiatives), legislative developments and costs incurred in order to ascertain whether an adjustment to the existing accruals should be made to the extent that historical experience may differ significantly from the Company's underlying assumptions. As additional information becomes available, the Company will reassess its liability and revise estimates as appropriate. "Conditions in our markets worsened since we reported our first quarter results. Although Atlantic Envelope remains the preferred vendor for a number of large financial services companies, volumes have dropped significantly due to consumer concerns over elevated personal debt levels and the uncertainty of the general economy. Business travel has not recovered from the pre-September 11th levels, placing significant pricing pressure on the fine dining and lodging markets served by National Linen Service. This pressure has limited the ability to increase prices to offset the increased costs of labor, benefits, insurance and fuel. In addition, the inclement weather experienced during the quarter only made our challenges greater," said Hattox. "Given this difficult operating environment, we are continuing to focus our resources on improving our selling efforts, resizing our operations, implementing cost reductions and improving our operating efficiency." First Half Results First half revenues of $241.5 million decreased 9.4 percent over the same period a year ago. Net loss for the first six months of the fiscal year was $7.1 million, or $0.68 per diluted share, compared to a net loss of $28.8 million, or $2.80 per diluted share, in the first six months of 2002. Excluding the loss from discontinued operations of $7.5 million, or $0.73 per share, and the cumulative effect of a change in accounting principle for goodwill impairment of $17.6 million or $1.71 per share, loss from continuing operations for the first half of fiscal 2002 totaled $3.7 million, or $0.36 per diluted share. "In December, we estimated that, absent any further economic deterioration, NSI would incur losses in the first half and experience a profitable second half, resulting in estimated full-year net earnings of between break-even and $3.0 million," Hattox said. "As we begin the stronger half of our fiscal year we anticipate returning to profitability for the third and fourth quarters. However, given the uncertainty of the general economy, conditions are too cloudy at this time to affirm or continue to furnish full-year guidance." Information on the Sale of the Company NSI will file a copy of the definitive merger agreement with the Securities and Exchange Commission as an exhibit to a Current Report on Form 8-K. In connection with NSI's solicitation of proxies with respect to its special meeting of stockholders concerning the proposed merger, NSI will file a proxy statement with the SEC and furnish NSI stockholders with a copy of the proxy statement. NSI stockholders will be able to obtain a free copy of the proxy statement (when available) and other relevant documents filed with the SEC from the SEC's Web site at http://www.sec.gov NSI stockholders may also obtain a free copy of the proxy statement and other documents (when available) by directing a request by mail or telephone to National Service Industries, Inc., 1420 Peachtree Street, Atlanta, Georgia 30309, Attention: Investor Relations, Telephone: (404) 853-1228. National Service Industries, Inc., with fiscal year 2002 sales of $530 million, has two business segments -- textile rental and envelopes. NATIONSRENT: Gets Okay to Pay Exit Financing Lender's Work Fee -------------------------------------------------------------- NationsRent Inc., and its debtor-affiliates obtained the Court's authority to enter into a Letter Agreement with $250 million secured credit facility lenders and implement its terms, including the payment of the Work Fee without further Court order. The Letter Agreement will provide for: -- the payment of a $100,000 Work Fee before the commencement of any due diligence. The reimbursement of expenses will be deducted from the Work Fee; -- the payment for all reasonable out-of-pocket costs and expenses, including the payment of legal fees or third party consulting fees, that the Lender incurred in connection with the Letter Agreement; -- the indemnification of the Lender, its affiliate and their officers, directors, employees and agents for any actions, suits, losses, claims, damages and liabilities arising out of the work performed pursuant to the Letter Agreement or otherwise in connection with the Exit Financing Facility. However, no party will be indemnified for any claims or actions to the extent determined by a final judgment to have resulted from its own gross negligence or willful misconduct; and -- non-binding terms and conditions of the Exit Financing Facility. Any description of the Exit Financing Facility contained in the Letter Agreement will not be binding on the parties until the execution of a commitment letter and the payment of a commitment fee. (NationsRent Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900) NAVISITE INC: Completes Acquisition of Conxion Corp. for $2 Mil. ---------------------------------------------------------------- NaviSite, Inc. (Nasdaq: NAVI), a leading provider of Application and Infrastructure Management Services, has completed the acquisition, first announced on March 27, 2003, of Conxion Corporation, a Silicon Valley-based managed services provider. Under the terms of the agreement, NaviSite will acquire Conxion Corporation through the merger of a NaviSite wholly-owned subsidiary into Conxion. In consideration for the acquisition of Conxion, NaviSite will pay $1.925 million in cash at closing. Concurrent with this transaction, NaviSite and Conxion have also worked together to favorably restructure certain long-term commitments and obligations. Founded in 1995, Conxion brings to NaviSite software distribution services and security expertise for over 195 customers, established channel relationships, and Internet infrastructure throughout the United States and the United Kingdom. "Our customers want services - wrapped around technology - that help them improve their business," said Arthur Becker, CEO of NaviSite. "For nearly a decade Conxion has been recognized as one of the most creative and innovative managed services providers. The acquisition of Conxion is another important step in the execution of NaviSite's mission to deliver an adaptable set of application and infrastructure management services to our expanding customer base." NaviSite is a Service Company providing Application and Infrastructure Management Services for online operations of mid- sized enterprises, business units of larger companies and government agencies. With a world-class group of experienced professionals, NaviSite delivers excellence through a flexible, customizable suite of engineered solutions. NaviSite balances service-centric people and process with cost effective, innovative technology in areas such as Managed Applications, Application Development, Hosting, Security and Infrastructure. NaviSite Application Management Services deliver application development, integration and full-service management, at any of our data centers, a customer's location or even a third-party site. NaviSite manages critical online and enterprise applications through proactive technology and services, providing 24/7 application monitoring, management and maintenance: relieving customers of day-to-day application operations burdens. NaviSite's Infrastructure Management Services provide secure, reliable, high-performance hosting services at data centers serving: Boston, Chicago, Dallas, Las Vegas, Los Angeles, Milwaukee, New York, San Francisco, Syracuse (NY) and Washington, DC. Services include a full array of managed hosting to collocation, coupled with high-performance Internet access and high-availability server management solutions through load balancing, clustering, mirroring and storage services. Founded in 1997, NaviSite, Inc., is publicly traded on Nasdaq as NAVI. For more information, please visit http://www.NaviSite.com NaviSite is headquartered at 400 Minuteman Road, Andover, MA 01810, USA. Conxion Corporation -- http://www.conxion.com-- is one of the reliability and performance leaders in electronic service delivery, or eServices, from advanced hosting and network services, through to content delivery. Featuring an integrated Internet infrastructure that leverages its global IP network, Conxion delivers fully managed solutions from strategically located datacenters in the United States and Europe. Headquartered in Silicon Valley (Santa Clara, Calif.), Conxion is a privately held corporation. * * * Liquidity and Going Concern Uncertainty As of January 31, 2003, the Company had approximately $11.2 million of cash and cash equivalents, working capital of $2.9 million and had incurred losses since inception resulting in an accumulated deficit of $366.9 million. NaviSite's operations prior to September 11, 2002 had been funded primarily by CMGI through the issuance of common stock, preferred stock and convertible debt to strategic investors, the Company's initial public offering during fiscal 2000 and related exercise of an over-allotment option by the underwriters in November 1999. Prior to the acquisition by NaviSite of CBTM on December 31, 2002, CBTM had been funded primarily by its parent company, ClearBlue, through various private investors. For the year ended July 31, 2002, consolidated cash flows used for operating activities totaled $27 million and for the six months ended January 31, 2003 and 2002 consolidated cash flows used for operating activities totaled $5.1 million and $16.5 million, respectively. During the six months ended January 31, 2003, the Company's cash and cash equivalents decreased by approximately $10.6 million. Included in this change was approximately $6.8 million in net cash expenditures that are non-recurring in nature. The $6.8 million in net non-recurring expenditures consists predominantly of: 1) a $3.2 million payment to CMGI for the settlement of intercompany balances reached in fiscal year 2002; 2) a $2.0 million purchase of a debt interest in Interliant, Inc.; 3) a $1.3 million interest payment to ClearBlue related to the $65 million of convertible notes then outstanding (see note 8 for ClearBlue waiver of interest from December 12, 2002 through December 31, 2003); 4) a $770,000 payment to purchase directors and officer's insurance for periods prior to September 11, 2002; 5) a $775,000 unsecured loan to ClearBlue for payroll related costs; 6) $1.3 million in severance payments; 7) a $600,000 settlement payment with Level 3, Inc.; 8) a $490,000 prepayment of directors' and officers' insurance; 9) $403,000 in bonuses related to fiscal year 2002 and 10) a $100,000 payment on behalf of ClearBlue for legal costs; partially offset by: 1) $2.5 million in customer receipts; 2) a $1.0 million receipt from Engage Technologies, Inc. related to a fiscal year 2002 settlement; and 3) a $637,000 reduction in restricted cash due to the decrease in our line of credit. The Company currently anticipates that its available cash at January 31, 2003 combined with the additional funds available, at Atlantic's sole discretion, under the Loan and Security Agreement between NaviSite and Atlantic, (approximately $5.3 million at February 28, 2003), will be sufficient to meet our anticipated needs, barring unforeseen circumstances for working capital and capital expenditures through the end of fiscal year 2003. However, based on our current projections for fiscal year 2004, we will have to raise additional funds to remain a going concern. The Company's projections for cash usage for the remainder of fiscal year 2003 are based on a number of assumptions, including: (1) its ability to retain customers in light of market uncertainties and the Company's uncertain future; (2) its ability to collect accounts receivables in a timely manner; (3) its ability to effectively integrate recent acquisitions and realize forecasted cash-saving synergies and (4) its ability to achieve expected cash expense reductions. In addition, the Company is actively exploring the possibility of additional business combinations with other unrelated and related business entities. ClearBlue and its affiliates collectively own a majority of the Company's outstanding common stock and could unilaterally implement any such combinations. The impact on the Company's cash resources of such business combinations cannot be determined. Further, the projected use of cash and business results could be affected by continued market uncertainties, including delays or restrictions in IT spending and any merger or acquisition activity. To address these uncertainties, management is working to: (1) quantify the potential impact on cash flows of its evolving relationship with ClearBlue and its affiliates; (2) continue its practice of managing costs; (3) aggressively pursue new revenue through channel partners, direct sales and acquisitions and (4) raise capital through third parties. The Company may need to raise additional funds in order respond to competitive and industry pressures, to respond to operational cash shortfalls, to acquire complementary businesses, products or technologies, or to develop new, or enhance existing, services or products. In addition, on a long-term basis, the Company may require additional external financing for working capital and capital expenditures through credit facilities, sales of additional equity or other financing vehicles. Its ability to raise additional funds may be negatively impacted by: (1) the uncertainty surrounding its ability to continue as a going concern; (2) the potential de-listing of the Company's common stock from NASDAQ; (3) its inability to transfer back to the NASDAQ National Market in the future from the NASDAQ SmallCap Market; and (4) restrictions imposed on the Company by ClearBlue and its affiliates. Under our arrangement with ClearBlue, the Company must obtain ClearBlue's consent in order to issue debt securities or sell shares of its common stock to affiliates, and ClearBlue might not give that consent. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of the Company's stockholders will be reduced and its stockholders may experience additional dilution. There can be no assurance that additional financing will be available on terms favorable to the Company, if at all. If adequate funds are not available or are not available on acceptable terms, the Company's ability to fund its expansion, take advantage of unanticipated opportunities, develop or enhance services or products or respond to competitive pressures would be significantly limited and, accordingly, the Company might not continue as a going concern. NEFF CORP: Potential Debt Default Spurs Ratings Cut & Neg. Watch ---------------------------------------------------------------- Standard & Poor's Rating Services lowered its ratings on Neff Corp., including its corporate credit and secured bank loan rating, to 'CCC' from 'B-' and its subordinated debt rating to 'CC' from 'CCC', because of increased concern that Neff may not be able to meet the interest payment on its subordinated debt that is due on June 1, 2003. Ratings remain on CreditWatch with negative implications where they were placed on Nov. 1, 2002. Miami, Fla.-based Neff, a relatively modest-size equipment rental company, has about $280 million of debt outstanding. "Neff has experienced significant financial stress because of the weakness in the equipment-rental business and its heavy debt burden," said Standard & Poor's credit analyst John Sico. Neff has been operating under a forbearance agreement that prevents bank lenders from exercising remedies as a result of Neff's leverage covenant violation. The agreement expires on April 15, 2003, and the company has been negotiating with lenders to remedy the violation, which could include a restructuring of the bank line. Because of the company's bank covenant violations and operating losses, auditors expressed doubt about the company's ability to continue as a going concern. The company has about $8 million in interest payments due on June 1, 2003, for its two subordinated notes that have $155 million outstanding. Standard & Poor's will continue to monitor events, which may result in further rating action. ON COMMAND: December 31 Balance Sheet Upside-Down by $17 Million ---------------------------------------------------------------- On Command Corporation (OTC Bulletin Board: ONCO), a leading provider of in-room interactive services, business information and guest services for the lodging industry, announced its financial results for the three months and year ended December 31, 2002. For the year ended December 31, 2002, the Company generated positive free cash flow from operations of $5.9 million (cash provided by operating activities of $61.7 million less cash used in investing activities of $55.8 million). On Command reported revenue for the fourth quarter and year ended 2002 of $59.2 and $238.4 million respectively. Quarter over quarter revenue increased 6.6% and was flat on a full year basis compared to 2001. EBITDA (defined as revenue less direct costs of revenue and other operating expenses, exclusive of depreciation and amortization, asset impairments and other charges, and relocation and restructuring charges) for the quarter and year end was $16.0 and $65.9 million, respectively, representing increases of 14.4% and 12.7%, respectively, from the corresponding periods in 2001. The Company reported a net loss attributed to common stockholders of $50.8 million and $90.0 million for the twelve months ended December 31, 2002 and 2001, a loss of $1.64 and $2.92 per share, respectively. Revenue per room for the fourth quarter increased to $21.95 from $20.35 for the same period in 2001. A key factor that enabled the company to achieve this increase was its continued strategy of adding proven products to its existing room base to build additional revenue per room while at the same time leveraging capital. During the fourth quarter of 2002, the Company added the digital music product to more than 38,000 rooms and TV Internet service to more than 15,000 rooms. Additional highlights for the fourth quarter include: * Increased quarter over quarter EBITDA margin (defined as EBITDA divided by total revenue) to 27.0% from 25.2%. * Installed Roommate digital platform in 7,600 rooms, bringing the total number of digital rooms to 291,000 or 33% of the total owned room base of 891,000. * Installed a digital upgrade in more than 43,600 hotel rooms, delivering an average uplift in room revenue of 17% compared to tape-based systems without the upgrade. At December 31, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $17 million. "We are pleased to have finished the year 2002 within our established guidance that we communicated at the beginning of the year," said Chris Sophinos, president and chief executive officer of On Command. "Our solid performance in a weak economy is evidence that our strategic direction bore positive results. The modular upgrade program lowers our per room capital costs while increasing services, which raises per room revenue." Business Outlook The Company will not be giving guidance for 2003. On Command Corporation -- http://www.oncommand.com-- is a leading provider of in-room entertainment technology to the lodging and cruise ship industries. On Command is a majority- owned subsidiary of Liberty Satellite & Technology, Inc. (OTC Bulletin Board: LSTTA, LSTTB). On Command entertainment services include: on-demand movies; television Internet services using high-speed broadband connectivity; television email; short form television features covering drama, comedy, news and sports; PlayStation video games; and music-on-demand services through Instant Media Network, a majority-owned subsidiary of On Command Corporation and the leading provider of digital on-demand music services to the hotel industry. All On Command products are connected to guest rooms and managed by leading edge video-on-demand navigational controls and a state-of-the art guest user interface system. The guest menu system can be customized by hotel properties to create a robust platform that services the needs of On Command hotel partners and the traveling public. On Command and its distribution network services more than 1,000,000 guest rooms, which touch more than 300 million guests annually. On Command's direct served hotel properties are located in the United States, Canada, Mexico, Spain, and Argentina. On Command distributors serve cruise ships operating under the Royal Caribbean, Costa and Carnival flags. On Command hotel properties include more than 100 of the most prestigious hotel chains and operators in the lodging industry: Accor, Adam's Mark Hotels & Resorts, Fairmont, Four Seasons, Hilton Hotels Corporation, Hyatt, Loews, Marriott (Courtyard, Renaissance, Fairfield Inn and Residence Inn), Radisson, Ramada, Six Continents Hotels (Inter-Continental, Crowne Plaza and Holiday Inn), Starwood Hotels & Resorts (Westin, Sheraton, W Hotels and Four Points), and Wyndham Hotels & Resorts. OXFORD HEALTH: S&P Affirms BB+ Rating over Sustained Earnings ------------------------------------------------------------- Standard & Poor's Ratings Services said that it affirmed its 'BB+' counterparty credit rating on Oxford Health Plans Inc., based on the company's sustained earnings and liquidity strength as well as its good risk-adjusted capitalization, which are partially offset by the competitive marketplace in which Oxford operates and Oxford's geographic market concentration. Standard & Poor's also said that it assigned its proposed 'BB+' rating to Oxford's $400 million, six-year, fixed-rate term loan facility. In addition, Standard & Poor's affirmed its 'BBB+' counterparty credit and financial strength ratings on Oxford Health Plans (NY) Inc., which is the lead company in the operating subsidiary group. The outlook is stable. For 2003, Standard & Poor's expects Oxford's enrollment to improve modestly. The company's consolidated pretax GAAP earnings are expected to remain extremely strong and in line with recent levels. For 2003, parent-company liquidity is expected to continue to improve, and capital adequacy is expected to remain stable. In addition, for the year-ended 2003, financial leverage and interest coverage are expected to remain extremely strong. Oxford's pretax income was $387 million (including a $151 million legal settlement provision) for the year ended Dec. 31, 2002, compared with $485 million for the prior year. Standard & Poor's believes Oxford's strengthened margins derive mostly from a combination of a disciplined underwriting approach and proactive management of the underlying drivers of medical cost. A significant portion of the holding company's liquidity and financial flexibility derives from dividends received from its New York HMO subsidiary, and the ability to receive dividends beyond an amount that would be payable without prior regulatory approval could be significantly restricted if the company's operating fundamentals were to deteriorate. Oxford is very reliant on its presence in New York State, which exposes it to adverse developments on the legislative, regulatory, and economic fronts. These could include provider contracting restrictions, pricing constraints, and deterioration of general business conditions. PACIFIC GAS: Judge Montali Stays Confirmation Trial Until May ------------------------------------------------------------- At the Honorable Judge Randall J. Newsome's advice, Judge Montali stays all proceedings in the Confirmation Trial of Pacific Gas and Electric Company's reorganization plan for 60 days, effective immediately. All proceedings, including discovery, relating to the Confirmation Trial are stayed. No discovery will be initiated or answered. Deadlines and hearings and "meet and confer" conferences established by the Court are vacated. The status conference set on March 13 and 27, 2003 were canceled. The Court will withhold any ruling on pending discovery disputes. The proceedings related to ordinary case motions, claims objections, and certain other matters not related to the Confirmation Trial are not stayed. On March 10, 2003, PG&E, the California Public Utilities Commission, and certain other parties attended a pre-settlement conference meeting with Judge Newsome to assess whether Judge Newsome would proceed with a judicially supervised settlement conference at which the parties could explore the possibility of resolving differences between PG&E's proposed reorganization plan and the alternative proposed reorganization plan presented by the CPUC and the Official Committee of Unsecured Creditors. Judge Montali will conduct a status conference on May 12, 2003 at 1:30 p.m. to schedule further matters relating to discovery and the resumption of the Confirmation Trial, if necessary. (Pacific Gas Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 609/392-0900) PCD INC: Bringing-In Day Berry as Special Bankruptcy Counsel ------------------------------------------------------------ PCD Inc., asks for permission from the U.S. Bankruptcy Court for the District of Massachusetts to employ and retain the legal services of Day, Berry & Howard LLP as Special Counsel in this chapter 11 case. The Debtor tells the Court that it needs the services of Day Berry to assist with all the postpetition corporate matters and provide administrative support to the Debtor's bankruptcy counsel. Day Berry's attorneys who are likely to represent the Debtor in this case bill at standard hourly rates ranging from $185 to $425 per hour and paralegals bill at $90 and $225 per hour. PCD Inc., designs, manufactures and markets electronic connectors for use in semiconductor burn-in testing interconnect applications, industrial equipment, and avionics. The Company filed for chapter 11 protection on March 21, 2003 (Bankr. Mass. Case No. 03-12310). Charles R. Dougherty, Esq., and Anne L. Showalter, Esq., represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $7,380,250 in assets and $43,722,812 in debts. POLAROID CORP: Wants Plan Filing Exclusivity Extended to July 18 ---------------------------------------------------------------- Polaroid Corporation and its debtor-affiliates and the Official Committee of Unsecured Creditors ask the Court to extend: (a) the exclusive period to file a Plan until July 18, 2003; and (b) the exclusive period to solicit acceptances of that plan to September 17, 2003. Philip Dublin, Esq., at Akin, Gump, Strauss, Hauer & Feld LLP, in New York, relates that the Debtors already filed an Amended Plan that is predicated on the consummation of the Sale, post- sale liquidation of the Debtors' remaining assets and the distribution of the proceeds from the Sale and the other assets in the Debtors' estates to the Debtors' creditors. In fact, the Sale has been consummated and the Debtors have begun to liquidate their estates. However, Mr. Dublin notes that the Debtors and the Committee anticipate the need to revise the Disclosure Statement accompanying the Amended Plan prior to seeking approval of the solicitation procedures with respect to the Amended Plan. The Debtors and the Committee believe that they have resolved their disputes with respect to the Plan and the Sale through the Amended Plan. In addition, the Debtors and the Committee propose to settle all of the potential disputes with the Debtors' Prepetition Lenders through the Amended Plan. Moreover, both the Debtors and the Committee have spent considerable time over the past few months responding to request for the appointment of an examiner. Since the entry of the Examiner Order, the Debtors and the Committee have been compelled to spend additional time preparing for and responding to various information and document requests by the Examiner. Mr. Dublin fears that this obligation may lead to additional, unanticipated delay in connection with the eventual approval and confirmation of the Amended Plan. Also, this Court has indicated that the examination itself might have some effect on the schedule for confirming the Amended Plan. Mr. Dublin reports that the Debtors and the Committee have made substantial progress in these bankruptcy cases: -- the Sale Motion has been approved and closed; -- the Debtors have timely complied with the reporting requirements; -- the Debtors and the Committee have resolved or successfully prosecuted substantial disputes with the Debtors' Prepetition Lenders, the Retiree Committee, certain parties to major leases and executory contracts; -- the Debtors and the Committee have begun to make progress reconciling the thousands of proofs of claims that have been filed in these cases; and -- they have filed the Amended Plan. Thus, given the Debtors and the Committee's substantial efforts since the Petition Date, Mr. Dublin contends that they should be given additional time to finalize the Disclosure Statement and make any necessary amendments to the Amended Plan without the distraction of competing plans filed by other parties-in- interest. Mr. Dublin further argues that the request is warranted because: (a) the Debtors' cases are large and complex and certain, substantial issues remain unresolved, including the issues being investigated by the Examiner; (b) the extension will save the Debtors and their estates the considerable expense and delay that the existence of competing plans would otherwise occasion; and (c) absent an extension, a protracted and contentious confirmation process might evolve that would only increase the administrative expenses and decrease recoveries to the creditors, significantly delay, if not undermining, the Debtors' reorganization efforts. The Court will convene a hearing on April 15, 2003 to consider the Debtors' request. By application of Del.Bankr.LR 9006-2, the current deadline is automatically extended through the conclusion of that hearing. (Polaroid Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) Polaroid Corp.'s 11.500% bonds due 2006 (PRDC06USR1) are trading at about 6 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=PRDC06USR1 for real-time bond pricing. RELIANT RESOURCES: Refinancing Spurs S&P to Ratchet Up Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit ratings on electricity provider Reliant Resources Inc., and three of its subsidiaries, Reliant Energy Mid-Atlantic Power Holdings LLC, Orion Power Holdings Inc, and Reliant Energy Capital (Europe) Inc., to 'B' from 'CCC'. The ratings on each of these companies were placed on CreditWatch with developing implications. In addition, Orion Power's senior unsecured rating was raised to 'CCC+' from 'CC'. The CreditWatch listing for Reliant Energy Power Generation Benelux B.V., was revised to positive from developing. Houston, Texas-based RRI's outstanding debt totaled $7.5 billion, including off balance sheet debt equivalents of $1.8 billion, as of Sept. 30, 2002. The rating actions follow the completion of RRI's $6.2 billion global bank refinancing, which eliminates the immediate threat of insolvency by pushing off any substantial debt maturities to May 2006, and provides RRI with an additional $300 million in liquidity to support collateral postings. It also allows RRI to exercise its option to purchase Texas GenCo Holdings Inc. if it so desires. The CreditWatch developing listing reflects the overhang of the FERC's show cause order relating to power trading during the California energy crisis. The penalty for this may be a revocation of RRI's authority to sell power at market-based rates. RRI has 21 days from the date of the order to show cause as to why its authority should not be revoked. The alternative for selling power at market-based rates is to sell at cost of service-based rates. At this point, it is unclear what the financial effect of such a penalty would be. RRI's ratings may be raised, lowered, or affirmed depending on the resolution of the show cause order and the ultimate effect on RRI's business position. RENAISSANCE CAPITAL: S&P Ups Rating to B- with Stable Outlook ------------------------------------------------------------- Standard & Poor's Ratings Services has raised its long-term counterparty credit rating on Bermuda-domiciled Russian broker- dealer and advisory house Renaissance Capital Holdings Ltd., to 'B-' from 'CCC+'. At the same time, the 'C' short-term counterparty credit rating was affirmed. The outlook is stable. "The rating action reflects RCHL's good commercial prospects, driven by the continued positive development of the Russian economy and capital markets, and the company's improved capital base," said Irina Penkina, a Standard & Poor's credit analyst. The ratings are also supported by the leading position of Renaissance Capital group--of which RCHL is the holding company- -in selling and trading Russian equities and bonds both in and outside Russia, and its growing domestic franchise in investment advisory services. These factors are offset by single-risk concentrations arising from RenCap's investment banking business, and the still volatile and concentrated Russian securities markets. "Standard & Poor's expects that RenCap will increase business flows and improve the strength of its balance sheet as the Russian economy continues to expand," added Ms. Penkina. "Future ratings will be driven by changes in company's risk profile, in particular with respect to single concentrations, and by RenCap's success in controlling costs and managing liquidity. The future development of the Russian securities markets will also affect the ratings on the group." RESOLUTION PERFORMANCE: S&P Pulls Corp. Credit Rating Down to B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Resolution Performance Products LLC to 'B+' from 'BB-', citing weak earnings and a subpar financial profile. The current outlook is negative. In addition, Standard & Poor's said that it has affirmed its 'BB-' bank loan rating on the company's senior secured bank loan facilities. At the same time, Standard & Poor's also assigned its 'B+' rating to the company's proposed $175 million senior second secured notes due 2010, subject to preliminary terms and conditions. Houston, Texas-based Resolution is a leading producer of epoxy resins and has more than $700 million of debt outstanding, including payment-in-kind notes at the a holding company level. "The downgrade reflects weakness in the company's operating results and concerns that difficult business conditions will further delay the expected improvement in the company's financial profile," said Standard & Poor's credit analyst Peter Kelly. Profitability and cash flow have been negatively affected by continued soft demand and high raw material and energy costs. Consequently, Resolution's financial profile will likely remain subpar longer than had been expected, and recent operating pressures have resulted in some deterioration to Resolution's liquidity position. Standard & Poor's recognizes the company's efforts to reduce costs and pay down debt during a difficult operating environment, as well as the company's favorable debt maturity profile. Standard & Poor's said that it affirmed the bank loan rating based on its anticipation that the proposed note issuance will be successful and that a significant portion of outstanding bank loans are prepaid with the proceeds. Said Mr. Kelly, "In evaluating recovery prospects, Standard & Poor's employed its enterprise value methodology. Cash flows were significantly discounted to simulate a default scenario and capitalized at an EBITDA multiple reflective of Resolution's peer group. Under this simulated downside case, we expect that the collateral package would retain sufficient value to cover the fully drawn revolving credit, tranche A term loan and tranche B term loan facilities." Standard & Poor's said that its ratings on privately held Resolution continue to reflect the company's decent business position as a leading producer of epoxy resins, offset by high financial risk. SERVICE MERCHANDISE: Disclosure Statement to be Considered Today ---------------------------------------------------------------- On March 5, 2003, Service Merchandise Company, Inc., a Tennessee corporation and 31 of its affiliates filed with the United States Bankruptcy Court for the Middle District of Tennessee, Nashville Division: (i) a Joint Plan of Service Merchandise Company, Inc. and its Affiliate Debtors and (ii) a Disclosure Statement with Respect to Joint Plan of Service Merchandise Company, Inc. and its Affiliate Debtors. Both the Plan and the Disclosure Statement are subject to modification and alteration and approval of the Bankruptcy Court. A hearing on approval of the Disclosure Statement, as it may be amended or modified is currently scheduled for April 4, 2003. A hearing on confirmation of the Plan is currently scheduled for May 12, 2003. The Plan provides that, among other things, as of the effective date of the Plan, all of the Company's existing securities, including, among other securities, the 8-3/8% senior notes due 2001, the first mortgage secured notes due June 28, 2000, the 9% senior subordinated debentures due 2004, the common stock, the preferred stock, and all options, warrants, calls, rights, puts, awards, commitments, or any other agreements to acquire such common stock or preferred stock, shall be deemed canceled and of no further force and effect. Further, the Plan provides no recovery to the holders of common stock, preferred stock, options, warrants, calls, rights, puts, awards, commitments, or any other agreements to acquire such common stock or preferred stock and the holders of these securities will receive no value for their interests. SOUTHWEST ROYALTIES: S&P Further Junks Corporate Credit Rating -------------------------------------------------------------- Standard & Poor's Ratings Services said that it lowered its corporate credit rating on Southwest Royalties Inc., to 'CC' from 'CCC-'. The rating remains on CreditWatch with negative implications. The downgrade reflects Standard & Poor's expectation that Southwest Royalties will need to recapitalize in the near term, either in or out of bankruptcy. Midland, Texas-based Southwest Royalties is a small, privately- held independent oil and gas company with about $140 million in outstanding debt. Southwest Royalties' $55 million bank credit facility, fully drawn and secured by a first lien on all of the company's oil and gas properties, matures in April 2004. In June 2004, Southwest has a $75 million notes issue that comes due. "With modest cash on its balance sheet and annual revenue of perhaps $60 million under highly favorable commodity price assumptions, it is extremely unlikely that the company will be able to generate cash sufficient to repay both of these issues on time, short of a complete liquidation. Prospects for refinancing with full principal repayment are quite limited," said Standard & Poor's credit analyst John Thieroff. The rating on Southwest Royalties reflects its very small, concentrated reserve base, extremely poor asset coverage, and its onerous debt maturity profile. SPIEGEL: Wants Approval of Proposed Reclamation Claims Protocol --------------------------------------------------------------- The Spiegel Inc., and its debtor-affiliates ask the Court to establish a streamlined process for handling reclamation issues at the outset of these Chapter 11 cases. Pursuant to Section 546(c)(1) of the Bankruptcy Code, vendors who have sold goods to the Debtors in the ordinary course of business may be authorized to reclaim the goods. Thus, it is possible that the vendors may send reclamation demand notices and file reclamation claims against the Debtors since the Debtors receive inventory and supplies shipments at various locations throughout the U.S. on a daily basis, Marc B. Hankin, Esq., at Shearman & Sterling, in New York, says. Mr. Hankin points out that the goods that these vendors provide are essential to the Debtors' business operations. The Debtors' operations will be severely disrupted if the vendors were allowed to reclaim the goods without a uniform procedure that is fair and applicable to all parties. Thus, the Debtors propose to establish that: (a) Any vendor asserting a claim for reclamation must satisfy all requirements entitling it to have a reclamation right under applicable state law and Bankruptcy Code Section 546(c)(1); (b) After receipt of and an opportunity to review the reclamation demands, the Debtors will file a report, on notice to parties-in-interest, listing those valid reclamation claims, if any; (c) Absent further Court order, the Debtors will file the Reclamation Report within 90 days after the Court issues a final order establishing Reclamation Procedures; (d) If the Debtors fail to file the Reclamation Report within the required time period, any reclamation claim holder may bring a motion on its own behalf 90 days after the Final Reclamation Order is entered; (e) All parties-in-interest will have the right and opportunity to object to the inclusion or omission of any asserted reclamation claim in the Reclamation Report; (f) Any reclamation claim that is included in the Reclamation Report and is not the subject of an objection within 20 days after service, will be deemed a valid reclamation claim allowed by this Court; (g) All allowed reclamation claims will be treated as administrative expenses of the Debtors' estates pursuant to Section 503(b) of the Bankruptcy Code, which the Debtors are authorized to pay before the confirmation of a reorganization plan; and (h) In the event that they determine that particular goods are not necessary for their business operations, the Debtors will make the goods available for pick-up by any reclaiming seller: (i) who timely demands in writing the reclamation of its goods; (ii) whose goods the Debtors have accepted for delivery; and (iii) who properly identifies the goods to be reclaimed. (Spiegel Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) TRENWICK: S&P Drops Ratings to D over Default on Senior Note ------------------------------------------------------------ Standard & Poor's Ratings Services said that it removed from CreditWatch its counterparty credit ratings on Trenwick Group Ltd., Trenwick America Corp., and LaSalle Re Holdings Ltd., and revised them to 'D' from 'CCC-' following the announced non-payment of interest and principal on the $75 million senior notes due April 1, 2003. "Although there is an agreement in principal with the beneficial holders of all the senior notes to waive the default and extend the final maturity to Aug. 1, 2003, the prospect for significant recoveries to the senior note holders is very low," said Standard & Poor's credit analyst Karole Dill Barkley. The 'CCC' counterparty credit and financial strength ratings on Trenwick Group Ltd.'s operating subsidiaries remain on CreditWatch with negative implications because of their weakened condition and the possibility of regulatory action. UNITED AIRLINES: Sues U.S. Gov't to Recover $50MM in Tax Refunds ---------------------------------------------------------------- United Airlines complains that the United States of America has wrongfully refused to turnover millions of dollars in tax refunds. Count I James H.M. Sprayregen, Esq., at Kirkland & Ellis, argues that, "[t]he U.S. Government has no legal right to hold on to the estates' property." The U.S. Government claims that it may have prepetition set-offs against the funds. If so, it has the burden -- in a timely fashion -- of specifically proving the extent of that set-off. Instead, the Government has refused to provide documentation supporting its claim. It has conditioned any release of the estates' property on United granting the Government rights to which it would not be entitled to under the Bankruptcy Code. For example, the Government has agreed that it would remit over $50,000,000 if; (a) United would not seek the actual turnover until July 9, 2003 -- 30 days after the Government Bar Date, (b) United waived its right to assert lack of mutuality as a defense, and (c) United authorized the Government to place an administrative freeze on additional amounts that may be due to protect the Government. United offered to permit the Government to holdback $25,000,000 of the funds, which is over five times what the company believes the maximum set-off to be, pending resolution of the set-off. But the Government rejected this proposal. Count II Moreover, the Debtors argue that the Government is violating Section 362 by withholding funds without properly obtaining relief from the automatic stay. The Government may argue that this is an administrative freeze. However, since it is open- ended and excessive in scope, the action violates the stay of Section 362. Mr. Sprayregen argues that the Government is exercising improper control and forbidden self-help over estate property. Summons The United States of America, on behalf of the Internal Revenue Service, is required to serve either a motion or answer to the complaint, by April 3, 2003, to: Mark Kieselstein Kirkland & Ellis 200 East Randolph Dr. Chicago, IL 60601 The Debtors ask the Court to expedite the legal process by consenting to a calendar with all discovery concluded by April 25, 2003. An evidentiary hearing would be scheduled for May 5, 2003. "Given United's financial condition and its need for the Tax Refunds, it is essential that this Court allow immediate discovery, conduct an evidentiary hearing and adjudicate this adversary proceeding on the most expedited timeframe possible consistent with this Court's calendar," the Debtors explain. United desperately needs the funds given the weak revenue environment, increasing costs of jet fuel and the upcoming need to meet its EBITDAR Covenants. (United Airlines Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) United Airlines' 10.670% bonds due 2004 (UAL04USR1) are trading at about 4 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL04USR1for real-time bond pricing. VARI-L COMPANY: Special Shareholders' Meeting Set for April 28 -------------------------------------------------------------- Vari-L Company, Inc. (OTC Bulletin Board: VARL), a leading provider of advanced components for the wireless telecommunications industry, has scheduled a special meeting of shareholders for April 28, 2003 at 2:00 p.m. at Vari-L's offices at 4895 Peoria St., Denver, Colorado. The purpose of the special meeting is to vote upon the sale of substantially all of Vari-L's tangible and intangible assets to a wholly owned subsidiary of Sirenza Microdevices, Inc., and the subsequent dissolution of Vari-L. The close of business on March 7, 2003 is the record date for determining the holders of Vari-L's common stock entitled to vote. Vari-L expects that it will mail proxy statements to all shareholders of record on or about April 4, 2003 and encourages shareholders to complete and return the enclosed proxy card prior to the meeting date. Both the asset sale and the dissolution of Vari-L require the approval of holders of a majority of the common stock of Vari-L outstanding as of the record date. "We strongly encourage shareholders to carefully consider the proposals described in the proxy statement and to cast their vote on the enclosed proxy card whether or not they plan to attend the special meeting," said Chuck Bland, CEO of Vari-L. "If shareholders do not return their proxy cards or instruct their brokers how to vote or vote in person at the meeting, then the effect will be a vote against the asset sale." On December 2, 2002, Vari-L announced a definitive agreement to sell substantially all of its assets to Sirenza. The transaction is subject to several closing conditions, including the approval of Vari-L shareholders, who will vote at a special meeting of shareholders on April 28, 2003. The boards of both companies have approved the transaction. Headquartered in Denver, Vari-L designs, manufactures and markets wireless communications components that generate or process radio frequency and microwave frequency signals. Vari- L's products are used in commercial infrastructure equipment (including GSM/cellular/PCS base stations and repeaters, fixed terminal point to point/multi-point,) consumer subscriber products (advanced cellular/PCS/satellite handsets), and military/aerospace platforms (satellite communications/telemetry, missile guidance, electronic warfare, electronic countermeasures, battlefield communications). Vari-L serves a diverse customer base of the world's leading technology companies, including Agilent Technologies, Ericsson, Harris, Hughes Network Systems, Lockheed Martin, Lucent Technologies, Microwave Data Systems, Marconi, Motorola, Netro, Nokia, Raytheon, Textron, Siemens, and Solectron. As reported in Troubled Company Reporter's January 31, 2003 edition, the net operating loss covenant of the loan agreement requires that Vari-L's cumulative operating loss not exceed a specified amount in any rolling three-month period. The net operating loss covenant is defined as net operating loss excluding costs such as restructuring, severance benefits, extraordinary non-cash charges and legal and accounting fees incurred in connection with the proposed transaction with Sirenza. The maximum permitted operating loss for the three- month period ended December 31, 2002 was $1,585,000. Vari-L's actual operating loss was $1,656,000. Under the terms of the loan agreement, the default interest rate of 30% went into effect on January 1, 2003. In addition, Sirenza has the right to declare all amounts due on the loan immediately due and payable. At this time Sirenza has not taken any action to accelerate the loan, but has reserved the right to do so. Furthermore, Vari-L contractually can draw additional funds under the loan agreement as required to fund operations. As of December 31, 2002, Vari-L has approximately $1,900,000 of remaining availability under the loan agreement. If Sirenza were to exercise its right to declare all amounts due under the loan, Vari-L would likely be required to file for bankruptcy protection and would be unable to consummate the proposed asset sale to Sirenza. Filing for bankruptcy protection could have a material adverse effect on the Company's relationships with its customers, suppliers and employees. VENTAS INC: Will Publish First Quarter 2003 Results on April 29 --------------------------------------------------------------- Ventas, Inc., (NYSE:VTR) will issue its first quarter 2003 earnings on Tuesday, April 29, 2003. A conference call to discuss those earnings will be held that morning at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). The call will be webcast live by CCBN and can be accessed at the Ventas Web site at http://www.ventasreit.comor at http://www.companyboardroom.com Ventas, Inc., whose December 31, 2002 balance sheet shows a total shareholders' equity deficit of about $54 million, is a healthcare real estate investment trust that owns 44 hospitals, 220 nursing facilities and nine other healthcare and senior housing facilities in 37 states. The Company also has investments in 25 additional healthcare and senior housing facilities. More information about Ventas can be found on its Web site at http://www.ventasreit.com WARNACO: Stipulation Determining GE Capital Claim Amount Okayed --------------------------------------------------------------- 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) WORLDCOM: Church Group Cries for State Regulatory Action -------------------------------------------------------- The March 31, 2003 admission by scandal-plagued WorldCom, Inc., that it has uncovered another $2 billion in falsely booked profits makes it "all the more urgent that the state regulators act now" to investigate WorldCom's qualifications to continue operating as a carrier in their states, according to the Rev. Robert Chase, director of the Office of Communication of the United Church of Christ, Inc. Chase said the latest revelations by WorldCom that its false profits now total $11 billion (rather than $9 billion) underscore the harm caused by the corporation's fraudulent activities across the country. The UCC today released twelve state-specific reports documenting the results from its investigation into the serious impact of WorldCom's bankruptcy on the citizens and workers of the targeted states. UCC's state- by-state reports, which find national state pension funds losses of $4.4 billion, can be found at http://www.ucc.org/ocinc/character/reports.htm The Rev. Chase said: "The new admissions by WorldCom make it all the more important that state regulatory utility commissioners initiate a statewide investigation into WorldCom's activities to determine if they have violated the public interest. Last week, the amount of false profits admitted to by WorldCom was $9 billion. This week, it is up to $11 billion and it could still go higher. The WorldCom financial scandal profoundly impacted both baby boomer and senior citizens' retirement investments in all 50 states. We believe that WorldCom should be held accountable by state officials for its actions." Chase said that UCC members in the states are supportive of efforts to better ensure that telecommunications companies are above reproach and can be trusted to act in a responsible manner. He also said that the effort in the states may take the shape of a coalition involving the active support and involvement of other non-church groups. On March 12, 2003, UCC wrote to public utility regulators in all 50 states and urged that they acted to "prevent WorldCom style fraud in the future" by taking the following two steps: "(1) initiate a statewide investigation into the behavior of WorldCom and other companies to determine if they have violated the public interest, and if so, begin appropriate remedial proceedings including revocation of WorldCom's license to operate; and (2) strengthen rules on what constitutes 'minimum corporate character' by adopting tougher corporate character rules, including the elimination of opportunities and incentives to misrepresent material facts before state utility commissions." The new UCC reports being released today find that, in addition to national state pension fund losses adding up to $4.4 billion, consumers also saw WorldCom's MCI division raise its long distance rates numerous times, resulting in average household monthly increases of $11-$23 per month for consumers. Nationwide, investor losses exceed $176 billion. To date, WorldCom has slashed 30,000 jobs, with more layoffs expected, causing difficulties for American families. UCC's new state reports are part of its "Character Counts" campaign kicked off in October 2002, when the church group asked the Federal Communications Commission to ensure that corporate offenders that have the privilege and responsibility of running the nation's telecommunications infrastructure are held to the highest moral and ethical standards. For more information about UCC's broader activity in relation to the WorldCom scandal, go to http://www.ucc.org/ocinc/character/index.html The Office of Communication, United Church of Christ, Inc., is the media advocacy arm of the United Church of Christ, a mainline Protestant denomination of 1.4 million members in more than 6,000 churches, 30 colleges and institutions of higher education, 15 seminaries, and more than 340 health and human service centers in every state and Puerto Rico. UCC pioneered the requirement that broadcasters who use the public airwaves have a responsibility to operate in the public interest. In the 1960s, the UCC earned its place in U.S. broadcasting history by successfully challenging the license of WLBT-TV in Jackson, Miss., for refusing to broadcast news and information about African Americans. This action was taken by the Office of Communication, established by the Rev. Everett C. Parker, to protect the denomination from legal action when it took prophetic risks in the name of justice. UCC continues to fight for corporate responsibility and accountability to the public. DebtTraders says that Worldcom Inc.'s 8.000% bonds due 2006 (WCOE06USR2) are trading at about 27 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOE06USR2 for real-time bond pricing. W.R. GRACE: Judge Fitzgerald OKs Modified & Amended DIP Facility ---------------------------------------------------------------- The W.R. Grace Debtors inform Judge Fitzgerald that the Debtors have continued to engage in arm's-length negotiations with the Agent and the Lenders regarding an amendment of the Post- Petition Credit Agreement. The key terms of the Amendment, as set out in this substantially final form, are: -- The termination date of the Post-Petition Credit Agreement is extended from April 1, 2003, until the earlier of: (i) the Debtors' emergence from bankruptcy, or (ii) April 1, 2006. -- The maximum amount of Letters of Credit provided for the benefit of the Debtors' non-debtor subsidiaries permitted to be outstanding at any one time is increased from $15,000,000 to $25,000,000. -- The upfront fees for the Amendment are: (i) a $1,250,000 Facility Fee; (ii) a $375,000 Syndication Fee; and (iii) a $225,000 Administrative Fee. -- The definition of "Restricted Investment" under the Post- Petition Credit Agreement is modified so as to increase the amount of permitted Restricted Investments not otherwise permitted under the Post-Petition Credit Agreement from $15,000,000 to $20,000,000 net in the first year after the closing of the Amendment, $40,000,000 net in the aggregate during the first two years and $60,000,000 net in the aggregate during the three-year term. Additionally, the Restricted Investments will be limited to a total of $22,500,000 of Restricted Investments without Bankruptcy Court approval. -- The Unused Line Fee is modified from 0.375% per annum to: (i) 0.375% per annum at all times that the Average Daily Outstanding Exposure is equal to or greater than $100,000,000; (ii) 0.50% per annum at all times that the Average Daily Outstanding Exposure is equal to or greater than $50,000,000 but less than $100,000,000; or (iii) 0.625% per annum at all times that the Average Daily Outstanding Exposure is less than $50,000,000. Individual sections of the Post-Petition Credit Agreement have been modified by the Amendment: (1) Section 1.7(c) has been modified to limit required reporting of the location of Collateral. (2) Section 1.7(h)(1) has been modified to exclude certain Intercompany Accounts that are not Eligible Accounts from the representation regarding the Borrowers' Accounts. (3) Section 1.7(i)(1) has been modified to: (i) exclude from the representation regarding Inventory certain goods which, in the ordinary course of business, are damaged or defective or that become obsolete or slow-moving; (ii) permit the Debtors to hold, on a consignment or similar basis, up to $7,500,000 of goods owned by another person; and (iii) exposure is equal to or greater than $100,000. * * * In the absence of any objections, Judge Fitzgerald approves the modified financing, finding that the Debtors do not have sufficient available sources of working capital and financing to carry on the operation of their businesses without the loans and other credit accommodations provided for in the loan agreement as modified and supplemented. (W.R. Grace Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392-0900) WYNDHAM INTL: Defaults on Rents Due Hospitality Properties Trust ---------------------------------------------------------------- Wyndham International, Inc., (AMEX: WBR) failed to pay the rent due on April 1, 2003 to Hospitality Properties Trust (NYSE:HPT). HPT owns 27 hotels that are leased to Wyndham under two combination leases: -- One lease for 15 Summerfield by Wyndham hotels requires minimum rent of $2,083,333/month. -- A second lease for 12 Wyndham hotels requires minimum rent of $1,527,083/month. HPT was holding security deposits for both leases totaling $33.3 million. The notice of default which HPT forwarded to Wyndham earlier today announced that HPT will retain these deposits against the damages it may incur under the leases for lost rent or otherwise. Each of the two leases from HPT is to a so called "bankruptcy remote" subsidiary of Wyndham. The franchise and management contracts for all 27 of these hotels are subordinated to Wyndham's lease obligations to HPT. Accordingly, HPT has the right to rebrand these hotels. HPT stated that it is unclear at this time whether Wyndham has decided to withhold the rents due HPT because it is unable to pay or as a negotiating tactic in order to seek changes in the lease terms. Hospitality Properties Trust is a real estate investment trust headquartered in Newton, Massachusetts which owns 251 hotels located throughout the United States. * Robert M. Miller Joins Morgan Joseph's Restructuring Group ------------------------------------------------------------ Morgan Joseph & Co. Inc., a full-service investment banking firm, announced a major expansion of its bankruptcy and corporate restructuring group with the addition of Robert M. Miller, a nationally prominent expert in the field, and his partner, H. Sean Mathis. Both will become Managing Directors. Mr. Miller, 51, who will also head the firm's restructuring group, has over 20 years experience advising a broad range of companies, creditors and shareholders in bankruptcy and restructuring situations. Mr. Miller previously had been President of Financo Restructuring Group, a division of Financo, Inc., since July 2001. From 1984-1995 Mr. Miller was the Senior Partner of the New York law firm of Berlack, Israels & Liberman, which he built into the one of the country's premier bankruptcy firms. Mr. Miller's restructuring experience includes numerous complex debtor and creditor representations such as Horizon Natural Resources, Macy's, Trump Taj Mahal, Days Inn, Continental Airlines, Insilco, Tracor, Zales, FosterGrant, and Provell, among dozens of other situations. On behalf of Macy's bondholders, Mr. Miller was instrumental in facilitating the sale of Macy's to Federated Department Stores. He also pioneered the representation of institutional bondholders in restructurings. Also joining Morgan Joseph's restructuring group is H. Sean Mathis, who since May 2002 has been a Special Advisor to Financo Restructuring. Mr. Mathis, 55, started his career at Lehman Brothers, and is former President and founder of Litchfield Asset Holdings, Inc., an investment advisory company. Mr. Mathis was Chairman of Allis Chalmers, Inc. from 1996 to 1999, and has headed several other companies, including being President of Ameriscribe Corp., a New York Stock Exchange listed company. Mr. Mathis's restructuring experience includes A.H. Robins, Kasper ASL Ltd., Uniroyal Technologies and Arch Wireless. "Bob Miller's expertise and experience in the field of bankruptcy and restructurings is legendary, and having him as a member of Morgan Joseph will enable our firm to significantly broaden our activities and capabilities in this important area," said John F. Sorte, President and Chief Executive Officer. "Seth Lemler, who has been a Managing Director since July 2001, has contributed importantly to establishing our firm in the restructuring field. This latest move represents an expanded commitment by our firm to provide advice and counseling to a broad cross-section of the market we serve. Bob has enjoyed a highly distinguished career and we are delighted to have him and Sean join Seth in broadening our restructuring business." "Morgan Joseph is an exciting, growing, full service investment banking firm with a broad platform and first-class brand name," said Mr. Miller. "Sean and I are very enthusiastic about the growth opportunities for our practice that will come from our association with the firm and its senior bankers." Mr. Miller received a B.S. degree cum laude from Boston University and a J.D. from St. John's University, where he was Editor of the Law Review. Mr. Mathis holds a B.A. from Allegheny College and an M.B.A. from Wharton Graduate School of Business, University of Pennsylvania. Morgan Joseph & Co. Inc., is a full service investment banking firm serving middle market companies. The firm is involved in providing financial advisory and capital raising services including M&A and restructuring advice, and equity and debt private placements and public offerings. In addition, Morgan Joseph provides equity and high yield debt research and trading for institutional clients. Morgan Joseph's staff includes over 50 investment bankers, who are all highly experienced professionals from major Wall Street firms and intimately familiar with the issues facing middle market companies. Offices are in New York City, Nashville, Tennessee, and Rochester, New York. BOOK REVIEW: AS WE FORGIVE OUR DEBTORS: Bankruptcy and Consumer Credit in America ---------------------------------------------------------------- Authors: Teresa A. Sullivan, Elizabeth Warren, & Jay Westbrook Publisher: Beard Books Softcover: 370 Pages List Price: $34.95 Review by: Susan Pannell Order your personal copy today at http://amazon.com/exec/obidos/ASIN/1893122158/internetbankrupt So you think you know the profile of the average consumer debtor: either deadbeat slouched on a sagging sofa with a three- day growth on his chin or a crafty lower-middle class type opting for bankruptcy to avoid both poverty and responsible debt repayment. Except that it might be a single or divorced female who's the one most likely to file for personal bankruptcy protection, and her petition might be the last stage of a continuum of crises that began with her job loss or divorce. Moreover, the dilemma might be attributable in part to consumer credit industry that has increased its profitability by relaxing its standards and extending credit to almost anyone who can scribble his or her name on an application. Such are among the unexpected findings in this painstaking study of 2,400 bankruptcy filings in Illinois, Pennsylvania, and Texas during the seven-year period from 1981 to 1987. Rather than relying on case counts or gross data collected for a court's administrative records, as has been done elsewhere, the authors use data contained in the actual petitions. In so doing, they offer a unique window into debtors' lives. The authors conclude that people who file for bankruptcy are, as a rule, neither impoverished families nor wily manipulators of the system. Instead, debtors are a cross-section of America. If one demographic segment can be isolated as particularly debt- prone, it would be women householders, whom the authors found often live on the edge of financial disaster. Very few debtors (3.7 percent in the study) were repeat filers who might be viewed as abusing the system, and most (70 percent in the study) of Chapter 13 cases fail and become Chapter 7s. Accordingly, the authors conclude that the economic model of behavior--which assumes a petitioner is a "calculating maximizer" in his in his decision to seek bankruptcy protection and his selection of chapter to file under, a profile routinely used to justify changes in the law--is at variance with the actual debtor profile derived from this study. A few stereotypes about debtors are, however, borne out. It is less than surprising to learn, for example, that most debtors are simply not as well-off as the average American or that while bankrupt's mortgage debts are about average, their consumer debts are off the charts. Petitioners seem particularly susceptible to the siren song of credit card companies. In the study sample, creditors were found to have made between 27 percent and 36 percent of their loans to debtors with incomes below $12,500 (although the loans might have been made before the debtors' income dropped so low). Of course, the vigor with which consumer credit lenders pursue their goal of maximizing profits has a corresponding impact on the number of bankruptcy filings. The book won the ABA's 1990 Silver Gavel Award. A special 1999 update by the authors is included exclusively in the Beard Book reprint edition. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***