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/raid1/www/Hosts/bankrupt/TCR_Public/030512.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, May 12, 2003, Vol. 7, No. 92 Headlines 360NETWORKS: Wants Okay for Stipulation re Manuel Bros.' Claims ACTERNA: Gets Interim Nod to Continue Cash Management System AHOLD: S&P Cuts Ratings Due to Large Accounting Irregularities AHOLD: US Foodservice Forensic Acctg. Investigation Completed AIR CANADA: Court Okays Credit Card Services Bidding Procedures AIR CANADA: Recognizes Formation of Ad Hoc Creditors' Committee ALLEGHENY: S&P Ratchets Corp. Credit Rating Down 2 Notches to B AMKOR TECHNOLOGY: Closes Offering of 7-3/4% Sr. Notes Due 2013 APPLIED DIGITAL: Commencing Offer of 50-Million Common Shares ARCH WIRELESS: Working Capital Deficit Narrows to $6MM at Mar 31 ARMSTRONG HOLDINGS: Overview of AWI's Third Amended Reorg. Plan BASIS100 INC: First-Quarter 2003 EBITDA Enters Positive Zone BAYOU STEEL: Continues Employing Ordinary Course Professionals BETHLEHEM STEEL: ISG Completes Purchase of Debtors' Assets BEVSYSTEMS INT'L: Slashes $1.8M Debt in Final Phases of Workout BIO-RAD.: S&P Ratchets Corp. Credit Rating Up 2 Notches to BB+ BLUE STRIPE: Fitch Affirms BB 2000-1 Class E Notes Rating BOOTS & COOTS: Settles Claims Dispute with Checkpoint Business CABLETEL COMMS: Will Webcast First Quarter Results Tomorrow CALTON INC: Liquidity Concerns Raise Going Concern Uncertainty CORRECTIONS CORP: First Quarter 2003 Financials Show Improvement DAISYTEK INC: Case Summary & Largest Unsecured Creditors DIRECTV: Unsecured Committee Turns to Pachulski Stang for Advice EASYLINK SERVICES: George Abi Zeid Acquires 9.59% Equity Stake DOANE PET CARE: Red Ink Flows in First-Quarter 2003 E-CENTIVES INC: $1 Million Working Capital Deficit at Mar. 31 ELCOM INT'L: Net Capital Nearly Depleted Due to Recurring Losses ENCOMPASS: Selling Residential Assets to Wellspring for $40-Mil. ENRON CORP: Examiner & Committee Move for CSFB Oral Examination FIFTH ERA KNOWLEDGE: Initiates Corp. Restructuring & Name Change FLEMING COMPANIES: Hiring McAfee & Taft as Corporate Counsel FLEMING COMPANIES: Will Close Five Grocery Wholesale Divisions GENERAL CHEMICAL: S&P Assigns Default Ratings & Halts Coverage GENZYME CORP: Board Approves Proposed Tracking-Stock Elimination GLIMCHER REALTY: Retenants Additional Vacant Anchor Space HANOVER COMPRESSOR: Selling California Power Generation Assets HAWAIIAN AIRLINES: Reaches Aircraft Lease Restructuring Pact HAYES LEMMERZ: Furnishing Fin'l Info Re $575MM Debt to Lenders HEALTHSOUTH CORP: Signs-Up PricewaterhouseCoopers as New Auditor INTERPUBLIC: Accelerated Cost Reduction Initiatives Planned INTRAWEST: Holding 3d Quarter Earnings Conference Call Tomorrow J. CREW: S&P Drops Corporate Credit Rating to Selective Default J. CREW: S&P Assigns CCC Rating to $120MM 16% Sr. Sub. Notes J. CREW: Reports Better Revenue Results for April 2003 JMAR TECHNOLOGIES: Transfers Share Listing to Nasdaq SmallCap KEY ENERGY: $150 Million Sen. Unsec. Notes Gets S&P's BB Rating KLEINERTS INC: Files for Chapter 11 Protection in S.D.N.Y. MAGELLAN: Shareholders Want Equity Holders Committee Appointed MEXICANA AIRLINES: Reaches Pacts for Reduction in Labor Costs MIDLAND REALTY: Fitch Upgrades Ratings on Series 1996-C1 Notes MONSANTO CO.: Closes $250-Million 5-Year Public Debt Offering M~WAVE INC: Bank One Agrees to Forbear Until August 31, 2003 NATIONAL CENTURY: Seeks Court Approval for Medshares Claim Sale NEXTEL PARTNERS: S&P Junks Planned $150M Convertible Sr. Notes NORSKE SKOG: Prices $150 Mill. Principal Amount of Senior Notes NVIDIA CORP: Reports Weaker Results for 1st Quarter Fiscal 2004 OHIO CASUALTY: Catastrophe Losses Cause Poorer Financial Results OMNOVA SOLUTIONS: Expects to Lose Up to $6 Million in Fiscal Q2 OMNOVA SOLUTIONS: Offering $165 Million of Senior Secured Notes PAXSON COMMS: Prolonged Credit Ratio Weakness Spurs Rating Cuts PENN TREATY: Look for First-Quarter Results and Form 10-Q Today PENNEXX FOODS: Defaults on Credit Agreement with Smithfield PETROLEUM GEO: Will Publish First Quarter 2003 Results Tomorrow PRIMEDIA INC: Firming-Up Offering of $300 Mill. of Senior Notes PROVIDENCE HEALTH: AM Best Assigns B++ Financial Strength Rating QUEBECOR MEDIA: First Quarter Results Enter Positive Territory REGUS: Serchuck & Zelermyer Serving as Panel's Conflicts Counsel RELIANT RESOURCES: First Quarter Operating Loss Tops $56 Million RENT-WAY INC: Plans to Issue $215 Mill. of Senior Secured Notes REUNION IND.: Changes Shareholder Record Date to May 15 RFS HOTEL: S&P Keeping Watch on Low-B Credit and Debt Ratings SHELBOURNE PROPERTIES: Sells Indianapolis Joint Venture Property SILICON GRAPHICS: Will Commence Exchange Offer for 11.75% Notes SI TECH: Reports Lower Sales Volume for October 2002 Quarter SPIEGEL INC: April 2003 Net Sales Tumble 31% to $115.6 Million STARWOOD HOTELS: Selling $300 Million of Convertible Sr. Notes SWIFT & CO.: Reports Improved Performance for Third Quarter TENNECO AUTOMOTIVE: Neal Yanos Promoted to SVP and Gen. Manager TENNECO AUTOMOTIVE: Will Webcast Shareholders' Meeting Tomorrow UNITED AIRLINES: Court Okays Omnibus Pact with Cendant Affiliate U.S. INDUSTRIES: Sells Swimming Pool Businesses to Polyair WARNACO GROUP: Seeks Court Nod for Prologis Dispute Stipulation WHEREHOUSE: Committee Looks to Ernst & Young for Fin'l Advice WILD OATS: Elects Anne-Marie Stephens to Board of Directors WORLDCOM INC: Seeking Approval for Global Crossing Settlement WORLD HEART CORP: March 31 Balance Sheet Upside-Down by $51 Mil. XOMA LTD: Will Publish First Quarter 2003 Results on Thursday ZI CORP: Eliminates $3.3 Million Secured Credit Facility * Conservatory Measures Set Against Two Bankruptcy Trustees * BOND PRICING: For the week of May 12 - May 16, 2003 ********* 360NETWORKS: Wants Okay for Stipulation re Manuel Bros.' Claims --------------------------------------------------------------- On September 30, 2001, Manuel Bros., Inc. filed Proof of Claim No. 806 against 360networks inc., and its debtor-affiliates asserting a secured claim for $1,451,636, plus additional unliquidated amounts of not less than $217,744 for interest and attorneys' fees. On June 7, 2002, the Court ordered the release of MBI Liens and the provision of adequate protection in connection therewith. Prior to the Petition Date, MBI received certain payments from the Debtors that the Debtors have asserted may be avoided pursuant to Sections 547 and 550 of the Bankruptcy Code -- the Preference Claim. MBI disputes the Preference Claim and asserts that it has affirmative defenses thereto. To resolve the conflict consensually, the Parties entered into a stipulation, which the Court approved, providing that: A. The Debtors will pay to MBI $550,000 in full and final satisfaction of any claims against or interest in fund contained in the Replacement Account. Payment of the Settlement Amount will be by wire transfer; B. Upon payment of the Settlement Amount to MBI: -- MBI will have no further secured claims against the Debtors or their estates; and -- the Debtors are authorized to release to themselves or retain all funds in the Replacement Account, which will constitute the Debtors' property free and clear of any liens or claims of MBI. To the extent the Debtors believe it necessary or appropriate, MBI will take actions as may be reasonably requested by the Debtors to release, or evidence the release of, MBI's asserted lien upon the Replacement Account or any other property of the Debtors; C. MBI's Claim No. 806 will be reduced an allowed as a general unsecured claim for $1,119,381. Any other extant proofs of claim filed in the Debtors' cases by or on behalf of MBI will be deemed withdrawn with prejudice; and D. The Debtors waive the Preference Claim, and MBI will have no liability to the Debtors, their estates, or any party acting on behalf of the Debtors or their estates on account of the Preference Claim. (360 Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) ACTERNA: Gets Interim Nod to Continue Cash Management System ------------------------------------------------------------- To make the most efficient use of their cash, Acterna Corp. and its debtor-affiliates maintain a centralized global cash management system in running their businesses. This Cash Management System comprises the communications test, industrial computing and communications and digital color correction systems business segments. The principal components of the Debtors' Cash Management System are divided into cash collection and concentration and disbursements Cash Collection and Concentration Revenues generated by the Debtors are deposited in three domestic lock-box accounts, one for each business segment. The Debtors maintain one centralized concentration account at Mellon Bank. All available funds held in the Domestic Lock-Box Accounts are transferred at the close of business each day to the Domestic Concentration Account. All available funds held in the Domestic Lock-Box Accounts and Domestic Concentration Account are transferred at the close of business each day to a bank account controlled by JPMorgan Chase Bank. Those funds equal to the amount of the Debtors' daily cash disbursements that will be returned to the Domestic Concentration Account at the start of each business day. The Debtors also maintain an account at Allfirst Bank, where they keep up to $10,000,000 in the bank accounts outside the control of their prepetition lenders. Pursuant to an agreement with the Debtors' lenders, the Debtors will utilize the cash in the operation of their business and transfer substantially all the funds in the account into the Domestic Concentration Account in connection with the commencement of these Chapter 11 cases. Outside the U.S., the Debtors' non-debtor foreign affiliates deposit cash receipts from customers in numerous lock-box and operating accounts located throughout the world. CommerzBank and Hongkong Shanghai Bank manage the foreign lock-box and operating accounts. At the close of each business day, all available funds held in the Foreign Lock-Box Accounts are transferred to either a CommerzBank and Hongkong Shanghai Bank account controlled and managed by the Debtors' treasury team in Germany. Disbursements To the extent funding is required, the Debtors fund essentially all of their global operations through the Concentration Accounts. Funds flow from the Concentration Accounts to the Debtors' subsidiaries and affiliates only if necessary to pay outstanding obligations and fund working capital. When an affiliate or subsidiary lacks sufficient funds to pay an invoice, the Debtors will advance funds to pay the invoice or other operating expense and then internally charges the advance to the appropriate entity. Disbursements are coordinated in each region to maximize efficiency and minimize expenses. Paul M. Basta, Esq., at Weil, Gotshal & Manges LLP, in New York, tells the Court that the Debtors' existing Cash Management System provides significant benefits including allowing the Debtors to: (a) control corporate funds; (b) ensure the maximum availability of funds when and where necessary; and (c) reduce borrowing costs and administrative expenses by facilitating the movement of funds and the development of more timely and accurate account balance information. Mr. Basta asserts that any disruption could have a severe and adverse impact on the Debtors' reorganization efforts. At the first day hearing, the Debtors sought and obtained the Court's permission to continue utilizing their Existing Cash Management System on an interim basis. Judge Lifland directed the Debtors to maintain records of all transfers within the Cash Management System, including all postpetition intercompany claims so that all transfers and transactions will be adequately and promptly documented in, and readily ascertainable from, their books and records, to the same extent maintained prepetition. Judge Lifland will convene a final hearing to consider the Debtors' request, any last minute changes and objections on May 29, 2003 at 10:00 a.m. (Acterna Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) AHOLD: S&P Cuts Ratings Due to Large Accounting Irregularities -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Netherlands-based food retailer and food service distributor Ahold Koninklijke N.V. to 'BB-' from 'BB+', following the announcement by the group that accounting irregularities at its U.S. Foodservice arm were materially larger than expected. In addition, the senior unsecured debt ratings on Ahold were lowered to 'B+' from 'BB+', reflecting structural subordination. At the same time, Standard & Poor's affirmed its 'B' short-term rating on the group. The long-term ratings remain on CreditWatch with negative implications, where they were placed on February 24, 2003, following the disclosure of substantial accounting irregularities. These irregularities have been quantified as a larger-than-expected overstatement of pretax earnings of $880 million over three years and adjustments of $90 million for the opening balances of the group's U.S. Foodservice subsidiary at the date of its acquisition. "The rating actions reflect Ahold's tight liquidity, which will remain so barring major divestments, and as such, the group's liquidity position is no longer reflective of a 'BB+' long-term rating," said Standard & Poor's credit analyst Christian Wenk. The group's tight liquidity is a function of its limited leeway under the currently available secured facilities of $1.3 billion and ?600 million ($680 million); the uncertainties about its ability to access a $915 million unsecured tranche; and the group's debt repayments in the second half of the year, in particular the repayment in September 2003 of a Euro678 million subordinated convertible bond, which will constrain liquidity even if Ahold gets access to the unsecured tranche. To access the unsecured tranche of the bank facility, Ahold must provide: -- The audited 2002 accounts of main subsidiaries Albert Heijn B.V. and Stop & Shop by the end of May 2003; and -- The group's consolidated 2002 audited accounts by the end of June 2003. Ahold's auditor, Deloitte & Touche, has resumed work at Albert Heijn and Stop & Shop. Deloitte & Touche, however, will only resume work on the group's consolidated accounts once Ahold has completed ongoing internal investigations into its main operating subsidiaries. As a result, it remains currently uncertain whether Ahold will be able to provide all audited accounts within the required timeframe. "Failure to get access to the unsecured tranche would put the ratings in jeopardy given Ahold's debt repayments in the second half of the year," added Mr. Wenk. Although Ahold retains an investment-grade business profile in light of its leading positions in food retail on the East Coast of the U.S., as well as in the Netherlands and Scandinavia, liquidity will remain the key driving factor of ratings in the foreseeable future. The next review is expected when audited accounts are provided. DebtTraders reports that Ahold Finance USA Inc.'s 8.250% bonds Due 2010 (AHOD10USR1) are trading below par at 97 cents-on-the-dollar. For real-time bond pricing, go to http://www.debttraders.com/price.cfm?dt_sec_ticker=AHOD10USR1 AHOLD: US Foodservice Forensic Acctg. Investigation Completed ------------------------------------------------------------- Ahold (NYSE:AHO), the international food retailer and foodservice operator, announced that the forensic accounting work being performed by PricewaterhouseCoopers as part of Ahold's internal investigation of its subsidiary U.S. Foodservice is now substantially complete. The results were reported to Ahold's Audit Committee on May 7, 2003. Completion of the U.S. Foodservice forensic accounting work is a required step to recommence audit work at U.S. Foodservice to enable the completion of the Ahold 2002 audit by June 30, 2003. For the period April 1, 2000 (the effective date of Ahold's acquisition of U.S. Foodservice) to December 28, 2002 (the end of Ahold's 2002 fiscal year), PwC has identified total overstatements of pre-tax earnings of approximately USD 880 million. Of this amount, approximately USD 110 million relates to fiscal year 2000, approximately USD 260 million relates to fiscal year 2001 and approximately USD 510 million relates to fiscal year 2002. In addition, PwC identified approximately $90 million of adjustments required to be made to the opening balances for U.S. Foodservice at the date of its acquisition. This consists of a reclassification of such amount from current assets to goodwill primarily as a result of required write-offs of vendor receivables. In connection with the earnings and opening balances adjustments discussed above, corresponding adjustments to the balance sheet of U.S. Foodservice at December 28, 2002 also will be required. These adjustments will consist of approximately $700 million of write-offs of accrued vendor receivables, an approximately $210 million increase in deferred contract revenue liabilities and an approximately $80 million increase in trade payables, as well as a $25 million increase in inventory. Any other adjustments required with respect to U.S. Foodservice, including possible impairment of goodwill or other long-lived assets, will be determined by the company. Although the forensic accounting work at U.S. Foodservice is substantially complete, an internal legal investigation at U.S. Foodservice is ongoing. The Supervisory Board of Ahold will be meeting shortly to determine which actions should be taken with respect to U.S. Foodservice. In addition to the investigation at U.S. Foodservice, Ahold had commenced internal investigations at various Ahold operating companies. Although these investigations are ongoing, the forensic accounting work at Albert Heijn, Stop & Shop, Santa Isabel in Chile, Ahold's operations in Poland and the Czech Republic, and the ICA Ahold Scandinavian joint venture is substantially complete and no evidence of financial fraud has been found at any of those operations. The accounting adjustments that will be required as a result of this forensic accounting work and that at Ahold's other operating companies have not yet been determined. Ahold further announced that Deloitte & Touche has resumed its audit work at ICA Ahold and Santa Isabel. Ahold previously had announced the resumption of audit work at Stop & Shop and Albert Heijn. Ahold management is confident that the company will be able to achieve completion of the remaining audits by June 30, 2003. * * * As previously reported, Fitch Ratings downgraded Koninklijke Ahold N.V. to 'BB-', Rating Watch Negative from 'BBB-'. Fitch's US commercial mortgage-backed securities group has also reviewed its exposure to Ahold in approximately 77 US CMBS deals, including three credit tenant lease transactions. Of these deals, nine have exposure to Ahold in excess of 5% of its respective transaction balance. Although Fitch recently downgraded Ahold, it does not plan to downgrade any of the US CMBS transactions in which subsidiaries of Ahold are tenants at properties securing loans within the transactions. 'There is no need to downgrade due to the diversity of the deals accompanied with the credit enhancement provided by the most subordinate tranches,' said Lauren Cerda, Director, Fitch Ratings. 'Generally, the grocer's stores are located within in-fill locations and have larger floor plates which would be attractive to another grocery store operator.' If the credit rating deteriorates further, Fitch will take a closer look at each store's configuration, market and sales performance and determine the stores' viability and ultimate rating implication on the respective transaction. AIR CANADA: Court Okays Credit Card Services Bidding Procedures --------------------------------------------------------------- At the recommendation of Ernst & Young Inc., Mr. Justice Farley approved a competitive bidding processing to accommodate an offer from an alternative credit card issuer as well as future offers to provide Air Canada and Aeroplan LP with credit card services. Mr. Justice Farley also adjourned the hearing on the Applicants' motion to approve a new credit card agreement and a CCAA financing agreement with Canadian Imperial Bank of Commerce to May 14, 2003 to provide Ernst & Young with additional time to conduct the bidding. Ernst & Young serves as the Court-appointed Monitor for Air Canada. Unsolicited Proposal On April 28, 2003, Aeroplan LP received an unsolicited, non- biding expression of interest from a large, international financial organization to provide credit card services to Aeroplan and Air Canada. The two-page letter is subject to due diligence and a definitive agreement. The proposal includes: (a) a range of potential values for the purchase of points from Aeroplan; (b) general proposals for product development, support, and marketing arrangements; (c) proposals on relationships with other credit cards, retailers, etc; and (d) restrictions on the distribution of the Unsolicited Bid and its contents to parties other than the Monitor, Air Canada and their legal advisors without the consent of The Credit Card Company. The Credit Card Company requested anonymity. Murray A. McDonald, President of Ernst & Young, relates that the Credit Card Company is considering an offer to Air Canada of an advance between $300,000,000 to $350,000,000 that Air Canada will repay over a period of time, possibly through the purchase of points. The Credit Card Company continues to review this financing and remains open to dialogue with Air Canada in this regard. The range of prices proposed in the Unsolicited Bid reflect Credit Card Company's desire to negotiate variable pricing tied into certain benchmarks. The Credit Card Company has considered an upfront fee. The Credit Card Company also offers to pay most of the marketing costs, including the costs of transitioning existing Aeroplan customers and the acquisition of new customers. Air Canada may take part either through smaller funding contributions or allocation of additional points. With the assistance of their financial advisor, Aeroplan LP and Air Canada evaluated the Unsolicited Bid. Consequently, they determined that there are a number of plausible scenarios in which the Unsolicited Bid, if accepted on its face value, would yield the same or greater revenues for Aeroplan before the consideration of the other factors. Alternatives Available Before agreeing to the New CIBC Aerogold Contract, Air Canada's management considered alternative courses with respect to maximizing the revenue from Aeroplan and increasing its long- term value to prospective third party buyers. According to Mr. McDonald, the management considered terminating the Existing CIBC Credit Card Agreements and conducting a tender process or auction to assess market interest. This approach, Mr. McDonald explains, would have allowed other credit card providers to bid on the new agreement with Aeroplan. However, the management believed that a competitive bid process may yield similar or higher prices for points but may not yield more revenues from the sale of points. The management discounted the value of a tender process since: -- the tender process would take several months to administer and up to 4 to 6 months for a winning bidder to be able to implement a new system to manage the relationship. During this period, consumers would likely be unsure of the outcome and this uncertainty would most likely have a detrimental impact on customer loyalty, resulting in lower cash flows to Aeroplan LP and Air Canada during the restructuring period. During the transition period, Aeroplan would also be forgoing the significant increased revenues generated by the New Aerogold Agreement; -- the sale process of a partial interest in Aeroplan LP would be delayed until a new customer credit card relationship was established and was able to demonstrate similar or greater earning power than the New Aerogold Agreement. This would also delay the realization of a potential exit financing as part of the Applicants' Plan of Arrangement. In addition, it is likely that Aeroplan LP's near term value prospects would be negatively affected by the loss of consumer loyalty during the tender process, and therefore, potentially the ultimate value obtained for Air Canada's sale of a partial interest in Aeroplan LP; -- the customer lists and relationship as it relates to the provision of credit card and other financial services is "owned" by CIBC and not by Aeroplan. Therefore, in selecting a new credit card and financial service provider, Aeroplan would be unable to automatically convert existing credit card consumers to the new credit card provider. Ultimately, there would be a loss of consumers who would be enticed to join other loyalty programs, or remain with CIBC as CIBC developed alternative products to replace Aeroplan. Based on prior experience, Aeroplan management estimates customer attrition rates of up to 33%; -- the up-front costs of re-marketing and re-branding the Aeroplan card relationships would be substantial. This would require investment during the restructuring when cash available for re-investment is limited even if the new credit card provider agrees to co-fund a portion of these up front costs that would otherwise be paid directly by Air Canada or Aeroplan; and -- once selected, the new credit card provider would likely take many months, possibly even more than one year, to build a credit card base capable of generating revenues for Aeroplan equal to those revenues currently generated by the New Agreement with CIBC. Although the management has been approached indirectly by other third parties interested in becoming a credit card partner to Aeroplan, Mr. McDonald says most of these third parties have existing conflicting loyalty program affiliations that would have to be amended or terminated entailing additional cost, delay and uncertainty. Moreover, the management considered its ability to negotiate additional upfront fees from CIBC in relation to the New Aerogold Agreement. CIBC would not agree to any up front payments, particularly since CIBC will be unable to collect the full repayment of the unamortized portion of the $200,000,000 Additional Service Fee that it paid in October 1999. Until the anonymous Credit Card Company came along. Mr. McDonald maintains that the Credit Card Company is a credible, bona fide credit card provider that has the necessary financial strength and capability to provide credit card services to Aeroplan. To this end, Ernst & Young believes a bidding process is necessary. Mr. McDonald notes that there is a decrease in urgency to conclude the CIBC Credit Facility now that the Applicants' Credit Facility with GE Capital Corporation is closed. Bid Process The Bid Process requires that: (i) A bid package will be sent to qualified prospective credit card providers. The bid package will contain confidentiality agreements, minimum bid requirements and the rules for the Bid Process; (ii) Once confidentiality agreements are executed, the prospective credit card providers will receive selected confidential information regarding Aeroplan. The Existing CIBC Credit Card Agreement and the New Aerogold Agreement will not be distributed to the prospective credit card providers and will continue to be restricted; (iii) The prospective credit card providers will be required to provide Ernst & Young with their specific proposals by May 10, 2003; and (iv) Ernst & Young will deliver a report to the Court on the Bid Process results in advance of the Applicants' motion to be scheduled on or about May 14, 2003 to seek approval of the CIBC Facility and the New Aerogold Agreement. The Applicants have agreed to cooperate in this Biding Process crafted to flush out the highest and best value for the credit card program. (Air Canada Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) AIR CANADA: Recognizes Formation of Ad Hoc Creditors' Committee --------------------------------------------------------------- Air Canada provides the following update on the airline's restructuring under the Companies' Creditors Arrangement Act: Formation of Ad Hoc Unsecured Creditors Committee Air Canada has recognized the Ad Hoc Unsecured Creditors Committee comprised of holders of in excess of $2.7 billion of Air Canada's unsecured debt. The Committee will have input into the CCAA restructuring process for the purposes of formulating and discussing options to maximize recoveries available to the unsecured creditors as a result of Air Canada's restructuring. The Committee and its advisors will be part of discussions and negotiations with respect to matters pertaining to Air Canada's restructuring plan and any other material transactions proposed during the course of the airline's restructuring. Meetings between the Committee and Air Canada have commenced. The Committee is comprised of 12 major industrial and financial corporations from North America and Europe, including representatives of certain bondholders, banks, lessors and trade creditors of Air Canada. A representative of Airbus has been elected Chairman of the Committee. "Air Canada believes that the Ad Hoc Unsecured Creditors Committee provides an opportunity for its members and indirectly for Air Canada's other unsecured creditors to have a single, well represented voice in the restructuring process, while at the same time allowing management to focus its efforts on the critical restructuring initiatives at hand," said Calin Rovinescu, Chief Restructuring Officer of Air Canada. "The Committee is appropriate to conduct this role as it is composed of creditor constituencies that are of sufficient size and diversity to provide the perspective of unsecured creditors in Air Canada's restructuring proceedings." The Committee has engaged KPMG Inc. as its financial advisor to provide it with, amongst other things, business analysis, restructuring and valuation advice. Global Payments Decision In a decision rendered May 7, Mr. Justice J. Farley of the Superior Court of Justice of Ontario dismissed a request by Global Payments for an order that it was not required to continue the credit card processing services currently provided by Global Payments or for the establishment of a reserve for its potential financial exposure from providing such services. Mr. Justice Farley instead ordered that Air Canada provide reasonable protection to Global Payments with respect to the fees for providing such services. Global Payments is therefore required to continue providing the credit card processing services it currently provides to Air Canada subject to the parties negotiating reasonable protection for its fees for providing such services. Out of Court resolution of outstanding issues with NavCanada Air Canada late yesterday resolved outstanding matters with NavCanada with respect to the payment scheduling issues raised in the motion brought before Mr. Justice Farley on April 22, 2003. ALLEGHENY: S&P Ratchets Corp. Credit Rating Down 2 Notches to B --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit ratings on Allegheny Energy Inc., and its related entities. The corporate credit rating on Allegheny Energy was lowered to 'B' from 'BB-'. All the ratings have been removed from CreditWatch. "The downgrades reflect concerns about the company's ability to sell enough assets or raise enough capital to meet the aggressive amortization schedule as required by the recently negotiated bank loan agreements," said credit analyst Tobias Hsieh. At the same time, Standard & Poor's assigned a rating of 'BB-' and 'B' to Allegheny Energy Supply's first-lien bank loan and second-lien bank loan, respectively. The outlook is negative based on Allegheny's reliance on asset sales under challenging industry conditions to bolster liquidity. Allegheny is a mid-sized utility company based in Hagerstown, Maryland with service territories in Pennsylvania, Maryland, Virginia, West Virginia, and Ohio. The rating downgrades also reflect deteriorating operating performance in 2002, concerns regarding the management's ability to manage the risks associated with its discontinued operations and provide timely financial disclosures - the company has not filed a 10Q or 10K with the SEC in the last 10 months due to accounting calculation errors. Allegheny's liquidity is a key rating constraint. Although the new bank loan agreements provide needed near-term liquidity, burdensome debt maturities in 2004 and 2005 are a concern. The company has received $420 million of additional borrowing as part of its new loan agreement, but faces a total of $365 million of debt maturities for the rest of 2003, another $464 million in 2004, and $1.55 billion in 2005. Standard & Poor's believes the company should be able to meet the upcoming maturities later this year, by drawing on its $420 million of new loan facility and by selling a small amount of readily marketable assets. However, maturities due next year and in 2005 may be more problematic. Ideally, the company would prefer to sell its merchant and trading assets, but their market values are likely to be depressed over the near term, and if sold, may not bring much improvement to the balance sheet. In the meantime, Standard & Poor's expects Allegheny's merchant and trading business to be a continue source of uncertainty. Even though the company has canceled new plant developments and virtually eliminated its speculative trading, the risk and liquidity demands associated with these operations are still considerable. Standard & Poor's notes the following major concerns: Allegheny's 1,700MW of peaking assets in the Midwest will likely generate minimal cash flow for the next few years because that region of the country is heavily oversupplied with generation capacity; hedging its open positions can be very expensive since Allegheny does not have an investment-grade credit rating; and if there is an adverse market price movement, Allegheny's counterparties could still demand additional trade collaterals from Allegheny. Allegheny Energy Inc.'s 7.750% bonds due 2005 (AYE05USR1) are currently trading at 96.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AYE05USR1for real-time bond pricing. AMKOR TECHNOLOGY: Closes Offering of 7-3/4% Sr. Notes Due 2013 -------------------------------------------------------------- Amkor Technology, Inc. (Nasdaq: AMKR) has closed an offering of $425 million of its 7-3/4% Senior Notes due 2013. Amkor also elected to call all of its 9-1/4% Senior Notes due 2006 for optional redemption on June 7, 2003 at a price of 104.625% of the principal amount then outstanding on the Redemption Date, together with accrued and unpaid interest to the Redemption Date, in accordance with the indenture governing the 9-1/4% Senior Notes due 2006. Since the Redemption Date is not a business day, the Redemption Price will be paid (without additional accrued interest) on June 9, 2003 with respect to any 9-1/4% Senior Notes due 2006 surrendered by the Redemption Date. The aggregate Redemption Price on June 9, 2003 is expected to be approximately $448,587,500. Amkor will use the net proceeds of the issuance of the 7-3/4% Senior Notes, together with cash on hand, to redeem the 9-1/4% Senior Notes due 2006. A Notice of Redemption is being mailed by the trustee for the 9-1/4% Senior Notes due 2006 to all registered holders of the 9-1/4% Senior Notes due 2006. The 7-3/4% Senior Notes were sold to qualified institutional buyers in reliance on Rule 144A and outside the United States in compliance with Regulation S under the Securities Act of 1933. The 7-3/4% Senior Notes have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. As reported in Troubled Company Reporter's May 5, 2003 edition, Standard & Poor's Ratings Services assigned its 'B' rating to Amkor Technology Inc.'s proposed $425 million senior notes issue due 2013 and affirmed its 'B' corporate credit and its other ratings on the company. The proposed senior notes are expected to refinance Amkor's existing $425 million senior notes due 2006. The West Chester, Pennsylvania-based provider of outsourced packaging and testing services to semiconductor makers had total funded debt of about $1.8 billion at March 2003. The outlook is stable. APPLIED DIGITAL: Commencing Offer of 50-Million Common Shares ------------------------------------------------------------- Applied Digital Solutions, Inc., has prepared a prospectus relating to the Company's offering of up to 50,000,000 shares of its common stock, par value $.001 per share, at a yet to be announced estimated per share offering price. The Company has entered into a placement agency agreement with J.P. Carey Securities Inc., a registered broker-dealer, under which J.P. Carey Securities will act as underwriter on a "best efforts" basis in connection with the offer and sale of the shares. A "best efforts" underwriting means that J.P. Carey Securities is not obligated to purchase any of the shares offered. There is no minimum number of shares that must be sold in this offering. Applied Digital Solutions' shares are included in the Nasdaq SmallCap Market under the symbol "ADSX." On April 4, 2003, the last reported sale price of the common stock was $0.46 per share. The shares being offered have been approved for quotation on the Nasdaq SmallCap Market. Since January 1, 2000, the Company has filed additional registration statements relating to secondary sales of an aggregate of 222,578,333 shares of its common stock. * * * It was previously reported that under the terms of the Third Amended and Restated Term Credit Agreement with IBM Credit Corporation, Applied Digital Solutions, Inc. was required to repay IBM Credit Corporation $29.8 million of the $77.2 million outstanding principal balance currently owed to them, plus $16.4 million of accrued interest and expenses (totaling approximately $46.2 million), on or before February 28, 2003. The Company did not make the payment by February 28, 2003, and IBM Credit Corporation notified the Company that it must make the payment on or prior to March 6, 2003. Applied Digital didn't make the payment in that 7-day grace period. Instead, Applied Digital filed suit against IBM Credit LLC and IBM Corporation in Florida state court. That lawsuit charges IBM with improperly attempting to takeover the company, conspiracy to commit RICO violations, fraud, breach of good faith and fair dealing, and breach of the Florida Uniform Trade Secrets Protection Act. Unless Applied Digital wins its lawsuit or the IBM Agreement is restructured, Applied Digital says it is likely its business will end. ARCH WIRELESS: Working Capital Deficit Narrows to $6MM at Mar 31 ---------------------------------------------------------------- Arch Wireless, Inc. (OTC Bulletin Board: AWIN; BSE: AWL), a leading wireless messaging and mobile information company, announced consolidated net income of $6.1 million, for the first quarter ended March 31, 2003, compared to net income of $4.5 million, for the first quarter of 2002. Consolidated revenues for the first quarter of 2003 were $165 million while net cash provided by operating activities was $51.2 million. Arch's financial results include separate results and cash flows prior to its emergence from bankruptcy on May 29, 2002 (the Predecessor Company), as well as operating results and cash flows after its emergence from bankruptcy (the Reorganized Company), reflecting the application of "fresh-start" accounting that resulted from Arch's Chapter 11 reorganization. Consequently, and due to other reorganization-related events and adjustments, the Predecessor Company's financial statements for the three-month period ended March 31, 2002 are not comparable to the Reorganized Company's financial statements for the three- month period ended March 31, 2003. Arch reported a net decline of 477,000 messaging units in service during the first quarter of 2003, comprised of 460,000 one-way messaging units and 17,000 two-way messaging units. Direct units in service declined by 281,000 during the quarter while indirect units in service declined by 196,000. Messaging units in service totaled 5,163,000 at March 31, 2003 with 4,031,000 direct units in service and 1,132,000 indirect units in service. During the first quarter average revenue per direct unit in service was $11.70 compared to $3.60 per indirect unit in service. At March 31, 2003, the Company's balance sheet shows that its total current liabilities exceeded its total current assets by about $6 million. C. Edward Baker, Jr., chairman and chief executive officer, said: "Our operating results were consistent with our expectations as we continued to reduce operating expenses and maintained operating margins over the past year." J. Roy Pottle, executive vice president and chief financial officer, said: "The company continued to reduce its debt during the first quarter as our wholly owned subsidiary Arch Wireless Holdings, Inc., completed $26.7 million of additional redemptions of 10% Senior Subordinated Secured Notes due 2007. Upon completion of optional and mandatory redemption payments scheduled for May 15, 2003, AWHI will have redeemed a total of $140 million principal amount of the $200 million of 10% Senior Notes originally issued and will have $60 million principal amount outstanding." Pottle also noted: "Cash and cash equivalents were $60.4 million as of March 31, 2003 resulting in net debt (total debt less cash and cash equivalents) of $133 million compared to $180 million as of December 31, 2002." Arch also announced that it has rescheduled its annual meeting of stockholders, previously scheduled for May 8, 2003, for Thursday, June 12, 2003, at 1:00 p.m. The meeting was rescheduled in order to provide time for the Securities and Exchange Commission to complete its review of Arch's preliminary proxy materials filed on March 18, 2003. Arch expects to mail the definitive proxy materials, together with its annual report, to all stockholders on or about May 9, 2003. Arch Wireless, Inc., headquartered in Westborough, Mass., is a leading wireless messaging and mobile information company with operations throughout the United States. It offers a full range of wireless messaging and wireless e-mail services, including mobile data solutions for the enterprise, to business and retail customers nationwide. Arch provides services to customers in all 50 states, the District of Columbia, Puerto Rico, Canada, Mexico and in the Caribbean principally through a nationwide direct sales force, as well as through indirect resellers, retailers and other strategic partners. Additional information on Arch is available on the Internet at http://www.arch.com ARMSTRONG HOLDINGS: Overview of AWI's Third Amended Reorg. Plan --------------------------------------------------------------- Armstrong World Industries has amended and added to its list of defined terms, which are necessary to make the proposed treatment of creditors' claims comprehensible. These changes in terms are part and parcel of the amendments required by the negotiations between the Debtors and the Official Committees and their constituencies. Many of these terms are interlocking, one term being defined by reference to another. A condensed version of the terms significant to distribution are: * Available Cash: The sum of: (a) all cash on hand of AWI and its subsidiaries as of the last day of the month immediately preceding the Effective Date of the Plan, less the sum of these items as of the Effective Date: (i) $100,000,000.00, or such lesser amount as AWI, in its sole discretion -- after consultation with the Asbestos PI Claimants' Committee, Unsecured Creditors' Committee, and the Future Claimants' Representative -- determines it requires for "working capital purposes," (ii) the Allowed Amount of Allowed Administrative Expenses, (iii) a reasonable estimate by AWI of additional Administrative Expenses -- like professional fees and expenses -- that may become Allowed thereafter, other than Administrative Expenses, which are either: (w) an actual or necessary expense of preserving the estate or operating AWI's business for payment of goods, services, wages or benefits, or for credit extended to AWI, to the extent the expense is "reflected as a postpetition liability in AWI's books and records as of the Effective Date; or (x) in an action against AWI pending as of the confirmation date or which is not required to be filed against AWI under the Administrative Claims Bar Date Order, to the extent it is Allowed -- but if AWI disputes the administrative status of such a claim, not until and then only to the extent the Claim becomes Allowed by a Final Court Order; or (y) a claim of a professional person that is required to obtain court approval, to the extent ordered by the Court; and (z) fees and expenses payable in connection with the Exit Facility, (iv) the Allowed Amount of Allowed Priority Tax Claims, (v) a reasonable estimate by AWI of additional Priority Tax Claims that may become Allowed thereafter, (vi) the Allowed Amount of all Priority Claims, and (vii) a reasonable estimate of all Priority Claims that may became Allowed thereafter. * 144A Debt Securities: Debt securities issued by Reorganized AWI in a 144A Offering, having terms and conditions as determined by AWI and the initial purchasers in their sole discretion; provided, however, that if the 144A Offering Proceeds are less than the Plan Note Amount, then AWI may not issue the 144A Debt Securities without the consent of the Asbestos PI Claimants' Committee, the Future Claimants' Representative, and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee. * 144A Offering: One or more private offerings of 144A Debt Securities, under SEA Rule 144A and/or Regulation S under the Securities Act of 1933, through initial purchasers to institutional and other investors, completed on or after the Effective Date but prior to the Initial Distribution Date. * 144A Offering Proceeds: The amount of the aggregate net cash proceeds of any 144A Offerings. * New Common Stock: Common stock, par value $0.01 per share, of Reorganized AWI which is to be authorized and issued pursuant to the Plan and subject to dilution for equity to be issued under the New Long-Term Incentive Plan and for the New Warrants. * New Long-Term Incentive Plan: The Management Incentive Plan previously discussed, but modified to provide the longer insurance period. * Plan Note Amount: An amount equal to the greater of: (x) $1.125 billion less the amount of Available Cash, and (y) $775 million. * Plan Note Indenture: An indenture by and between AWI, as the issuer, and a trustee selected by AWI before the date of the commencement of the hearing on confirmation of the Plan, under which the Plan Notes will be issued, which will be qualified under the Trust Indenture Act of 1939, as amended. * Plan Notes: Unsecured notes issued under the Plan Note Indenture: (a) in an aggregate principal amount equal to the Plan Note Amount, less the 144A Offering Proceeds, (b) bearing a fixed or floating interest rate based upon U.S. Treasury Notes or three-month U.S dollar LIBOR, respectively, with like maturities plus a spread determined to be the average corporate spread over such Treasury Notes or LIBOR for outstanding issues of comparable maturity and comparably rated U.S. industrial companies over the 30-day period ending on the last day of the month immediately preceding the Effective Date, (c) with a maturity, as selected by AWI, of not less than five years, but not more than ten years and no principal payments required to be paid prior to the maturity date, (d) callable at par at the option of Reorganized AWI, in whole or in part, at any time during the first six months following the Effective Date of the Plan, and (e) having other terms, covenants, and conditions substantially similar to those contained in indentures for issues of comparable maturity of comparably rated U.S. industrial companies and, with respect to any floating rate tranche, structured in a manner similar to, and as liquid as, marketable bank debt. Channeling Injunction and Waiver The channeling injunction is a separate condition to confirmation of the Plan, but its implementation requires that at least 75% of the holders of Asbestos Personal Injury Claims who vote on the Plan must vote to accept the Plan. Moreover, for confirmation of the Plan to occur, the Confirmation Order must contain findings that are consistent with, and those that are required by Section 524(g) of the Bankruptcy Code. Section 524(g) contains requirements for a "channeling injunction" of the type that is provided by this Plan for treatment of asbestos-related claims. However, AWI and the Asbestos PI Claimants' Committee, the Future Claimants' Representative and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee, may waive the satisfaction of any or all of these conditions to confirmation of the Plan. Effective Date of the Plan Following confirmation of the Plan, the Plan's terms will not become effective until the first business day of the month immediately following the date by which all of the conditions precedent to the effectiveness of the Plan have been satisfied or waived or, if a stay of the Confirmation Order is in effect on such date, the first business day of the month immediately following the date of the expiration, dissolution or lifting of such a stay. For purposes of the Disclosure Statement, AWI assumes that the Effective Date will be July 1, 2003, although AWI warns that there can be no certainty that the Effective Date will occur by the July date because the satisfaction of many of the conditions precedent to the occurrence of the Effective Date "are beyond the control of AWI." The Conditions Precedent to Confirmation The occurrence of the Effective Date is subject to these conditions precedent: (a) The Confirmation Order becomes a Final Order; (b) The Bankruptcy Court and/or the District Court, as required, enters the Asbestos PI Permanent Channeling Injunction -- which may be included in the Confirmation Order -- containing terms satisfactory to AWI, the Asbestos PI Claimants' Committee, the Future Claimants' Representative and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee; (c) The Confirmation Order, the Claims Trading Injunction and the Asbestos PI Permanent Channeling Injunction are in full force and effect; (d) No proceeding to estimate any claims is pending; (e) All Asbestos PI Trustees are selected and have signed the Asbestos PI Trust Agreement; (f) If Class 4 votes to reject the Plan and the Asbestos PD Trust is created, all PD Trustees have been selected and have signed the Asbestos PD Trust Agreement; (g) A favorable ruling will have been obtained from the IRS regarding he qualification of the Asbestos PI Trust as a "qualified settlement fund" within the meaning of applicable Treasury section 1.468B-1, or AWI will have received an opinion of counsel with respect to the tax status of the Asbestos PI Trust as a "qualified settlement fund" reasonably satisfactory to AWI, the Asbestos PI Claimants' Committee, the Future Claimants' Representative and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee; (h) Each of the Exhibits to the Plan will be in form and substance acceptable to AWI, , the Asbestos PI Claimants' Committee, the Future Claimants' Representative and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee; and (i) Reorganized AWI has signed and has credit available under a credit facility to provide Reorganized AWI with working capital -- including letters of credit -- in an amount sufficient to meet the needs of Reorganized AWI, as determined by Reorganized AWI. The Exit Credit Facility AWI expects to sign a $300,000,000 credit syndicated bank credit facility at the time of emergence to provide for liquidity through short-term borrowings for working capital and other general corporate purposes, and to permit the issuance of letters of credit. This credit facility will include covenants and terms and conditions that are expected to be similar to comparably rated industrial companies obtaining similarly structured credit facilities at that time. AWI expects that the syndicated credit facility will be unsecured, multi-year in maturity, and permit borrowings both in US Dollars and Euros, priced at applicable margins over the lenders' cost of funds. AWI does not expect any significant borrowings immediately after emergence from Chapter 11, but AWI will use the facility to replace the letters of credit issued under the DIP Credit Facility. In addition, AWI's forthcoming projections will assume that the Debtor will draw $76,000,000 under the credit facility to increase "Available Cash" so that Available Cash totals $350,000,000 on the Effective Date of the Plan. AWI estimates that these borrowings will be repaid by the end of 2003. The Initial Distribution Date to Unsecured Claimants Distributions on account of Allowed Unsecured Claims will be made on the Initial Distribution Date -- a date selected by Reorganized AWI within 15 days after the Effective Date -- or such later date as the Bankruptcy Court may establish upon request by Reorganized AWI for cause shown. However, in no event will the Initial Distribution Date be more than 45 days after the Effective Date. This procedure applies to all subsequent Distribution Dates. Settlement and Release of Intercompany Claims AWI Owes Holdings $12M As of the Petition Date, Holdings and AWWD assert intercompany claims against AWI, and AWI returns the favor by asserting intercompany claims against Holdings and AWWD. These claims arise from various relationships and transactions arising from Holdings' establishment in 2001 as a holding company for AWI, and their subsequent joint operation. Moreover, since the Petition Date, additional claims have been or could be asserted as a result of these relationships and of transactions by Holdings or AWWD against AWI, or vice versa. In the ordinary course of business, these intercompany claims have been recorded on the books and records of the three entities and, assuming that these intercompany claims are valid, the net intercompany claim recorded is in Holdings' favor amounting to $12,000,000. In consideration of AWI's agreement under the Plan to fund the reasonable fees and expense associated with the Holdings Plan of Liquidation, the treatment of Holdings, AWWD, and their officers and directors as PI Protected Parties under the Asbestos Permanent Channeling Injunction, the simultaneous release by AWI of all claims, known and unknown, AWI has against Holdings and AWWD, and the issuance of the New Warrants to AWWD, to avoid potentially protracted and complicated proceedings to determine the exact amounts, nature and status under the Plan of all such claims, and to facilitate the expeditious consummation of the Plan and the completion of Holdings' winding up, Holdings and AWWD will, effective upon and subject to the occurrence of the Effective Date, release all intercompany claims against AWI or any of AWI's subsidiaries. Cloud on the Horizon -- Department of Labor Investigation AWI discloses that, after an audit by the United States Department of Labor, it was informed that the DOL is now investigating the validity of AWI's use of certain employee salary deferrals from 1996 to 2000 in the approximate aggregate amount of $33.4 million, to fund debt payments provided for by the Armstrong Employee Stock Ownership Plan. AWI assures all parties and the Court that it is cooperating with the DOL to address questions and concerns about these transactions with the ESOP, and has made current and former employees and directors available for interviews. AWI "believes that it has fully complied with all applicable laws and regulations governing the ESOP" and that its current and former directors and employees likewise have fully met their obligations -- but if the DOL asserts a claim with respect to the employee salary deferrals, the agency may seek to assert that claim against AWI and its current and former directors and employees -- triggering obligations on AWI's part for payment of expenses and attorney's fees for the individuals as well as payments for its own defense. The DOL has not filed a proof of claim in these Chapter 11 cases; however, AWI signed a tolling agreement with the DOL in which AWI agreed it would not use any delay in filing a late proof of claim during the period from October 17, 2002, to March 1, 2003, as an argument against any attempt by the DOL to file a proof of claim -- but AWI reserved its right to object to any claim on the basis that it was untimely as of October 17, 2002, or as a result of any delay by the DOL in filing the claim after March 1, 2003. AWI believes that: (a) any claim against AWI is barred as a result of the DOL's failure to file a timely proof of claim in these chapter 11 cases; (b) the DOL's claims are barred in part by applicable statutes of limitation; and (c) in any event, the DOL's claims "are otherwise wholly without merit." AWI's fiduciary insurer is providing a defense, subject to a $250,000 deductible, but has preliminarily reserved its rights with respect to coverage of these claims as they are "currently unspecified." Moreover, any claims against any employee or director of AWI or Holdings that served as an officer or director at any time after the Petition Date would be subject to indemnification by AWI under the terms of the Plan.(Armstrong Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392-0900) BASIS100 INC: First-Quarter 2003 EBITDA Enters Positive Zone ------------------------------------------------------------ Basis100 Inc. (TSX: BAS), a business solutions provider for the mortgage lending marketplace, announced its operating results for the three months ended March 31, 2003. In addition, subsequent to the end of the first quarter, the Company has sold its interest in CanDeal.ca, and signed an agreement with FiLogix Inc., to sell its Canadian Lending Solutions division. (All monetary amounts are expressed in Canadian dollars unless specified otherwise). Revenue from continuing operations in the first quarter of 2003 was $10.2 million, an increase of 38 percent over revenues of $7.4 million reported in the first quarter of 2002. U.S. sales accounted for 76 percent of total sales in the period as compared to 67 percent of total sales in the 2002 quarter. Earnings (Loss) Before Interest, Taxes, Depreciation, Amortization and Other Expenses ("EBITDA") for the current quarter was $0.8 million as compared to a loss of $0.1 million for the March 2002 quarter. 2003 revenue includes sales from Mortgage Risk Assessment Corporation. MRAC was acquired in May 2002 and its activities were not included in the first quarter of 2002. For the quarter ended March 31, 2003, the net loss from continuing operations was $2.5 million. Interest, depreciation and amortization costs were $3.4 million including non-cash interest charges of $0.9 million. This compares to a net loss from continuing operations of $2.8 million including non-cash interest charges of $0.3 million for the same quarter in 2002. The Company recorded net income of $0.2 million for the quarter. This compares with a net loss of $3.0 million for the same quarter in fiscal 2002. The Company's revenues generally reflect the seasonality that exists within the mortgage origination and collateral valuation markets. Data Warehousing and Analytic Solutions had revenue of $7.7 million for the March 2003 quarter as compared to $4.9 million for the same period ending March 2002, an increase of 56 percent. The improvement in revenue reflects an expansion in the number of transactions processed and the addition of MRAC revenue of $2.2 million. Prior to the conversion into Canadian dollars, U.S. revenues were $5.1 million USD for the March 2003 quarter, as compared to U.S. revenues of $3.1 million USD for the comparable quarter in 2002. For the purposes of translation into Canadian dollars, the average foreign exchange rate for the March 2003 quarter was 1.51, as compared to 1.59 for the March 2002 quarter. Lending Solutions revenues were $2.5 million for the March 2003 quarter and $2.2 million for the March 2002 quarter. The improvement is attributable to an increase in the number of real estate brokers that have subscribed to the system and a consequent increase in the number of transactions processed. Gross margin from continuing operations in the first quarter was 94 percent of sales compared to 97 percent for the comparable 2002 period. The decrease is attributable primarily to the variable cost associated with certain of MRAC data acquisition contracts, which were not included in the 2002 period. Total operating expenses for the March 2003 quarter increased to $8.7 million from $7.2 million in the comparable quarter in 2002. Included in the March 2003 costs are the operating expenses of MRAC amounting to $1.0 million. MRAC was acquired on May 31, 2002, and its activities are not included in the 2002 period. Prior to the conversion into Canadian dollars, U.S. operating expenses were $3.6 million USD for the March 2003 quarter, as compared to U.S. operating expenses of $2.1 million USD for the comparable quarter in 2002. For the purposes of translation into Canadian dollars, the average foreign exchange rate for the March 2003 quarter was 1.51, as compared to 1.59 for the March 2002 quarter. Research and development costs for the March 2003 quarter were $2.0 million as compared to $2.5 million in March 2002. The reduction of $0.5 million is a continuation of the effort to support products and services that provide an immediate benefit. Projects requiring extensive research and development are evaluated on the basis of cost and related return. Selling and marketing expense was $1.6 million for both the March 2003 and 2002 quarters. The sales and marketing programs initiated during the current quarter included MRAC and were completed without incremental expense. General and administrative expenses for the three months ending March 2003 were $2.4 million, an increase of $1.0 million from the March 2002 quarter. The increase was attributable primarily to salaries and bonus, professional fees, bank charges and expenses attributable to MRAC. Approximately $0.2 million of the increase relates to foreign exchange loss adjustments incurred during the first quarter of 2003. Customer support services in the March 2003 quarter were $2.7 million as compared to $1.7 million. The increase of $1.0 million was principally related to costs for data processing, storage and back-up facilities, as well as additional expenses related to MRAC. At March 31, 2003, current assets were $13.2 million, which included $6.0 million of cash and short-term investments. Current liabilities were $18.2 million, including discontinued operations liabilities of $6.8 million. Long-term debt included capital lease obligations of $0.6 million and the liability portion of the convertible debenture of $17.1 million. The number of shares outstanding at March 31, 2003 was 37.2 million; the number of fully diluted shares outstanding was 58.1 million. Discontinued Operations On October 30, 2002, the EFA Group registered a notice of intent to file a proposal under the Bankruptcy and Insolvency Act of Canada. The purpose of the filing was to provide the EFA Group sufficient time to explore opportunities to sell its business operations and its assets to interested parties, which was expected to be concluded by the end of the first quarter of 2003. On December 16, 2002, a letter of intent on the sale of the EFA Group assets was signed, followed by a definitive agreement to sell on February 7, 2003. The Company subsequently received court approval to sell and closed the transaction on February 27, 2003. The court directed the trustee to distribute the funds from the sale on April 16, 2003. On March 27, 2003, the interim receiver placed the EFA Group into bankruptcy. As a result of this action, all assets and liabilities of the EFA Group were removed from the Company's balance sheet. Basis100 continues to be responsible for certain matters related to the restructuring of the EFA Group. Included in current liabilities of the Company is $ 6,774,264 reflecting amounts provided for in connection with these matters as at March 31, 2003. The Company has recorded potential liabilities for: - performance guarantees and related letters of credit issued to the EFA Group's customers for which the Company provided either a guarantee or indemnity to the EFA Group's customers or debt holders; - employment-related claims; and - associated professional fees related to known and expected legal claims. Management has made certain estimates in calculating the above liabilities. Actual results may differ from such estimates. Due to the uncertain nature of the timing of these liabilities they have been classified as current liabilities in the accompanying Consolidated Balance Sheet. The financial results for the quarter ended March 31, 2002, have been restated to reflect the operations of the EFA Group as discontinued operations. Subsequent Events On April 11, 2003, the Company sold its ownership interest in CanDeal.ca Inc. The proceeds to be received will approximately equal the carrying value of the investment as at March 31, 2003, subject to the determination of certain closing adjustments and transaction costs. In connection with this transaction, the Company will receive payment in full for the subordinated promissory note issued to CanDeal. On April 21, 2003, the company signed a definitive agreement under which the company will sell the Canadian Lending Solutions division. Under the terms of the agreement, the company will sell all the assets of CLS, including rights to its mortgage technology, including MortgageBASE(TM), MortgagePlusBASE(TM), HomeBASE(TM), ConsumerBASE(TM), and LenderBASE(TM) for a purchase price of $16.1 million, subject to certain closing adjustments. The agreement also gives the buyer exclusive usage rights to BasisXpress(TM) in the Canadian market, and the company retains the software rights to all areas outside Canada. The agreement is subject to customary closing conditions and the approval of the transaction by the Company's shareholders and debentureholders at meetings to be held on May 15, 2003. 2003 Outlook Basis100 is focused on delivering shareholder value over the long term. As previously announced, the Company will not be providing forward revenue or earnings guidance. Instead, the Company will provide its outlook on certain key components influencing financial results and will continue to communicate its strategies, and priorities throughout the year via quarterly conference calls and its Annual General and Special Meeting of Shareholders. All amounts are expressed in Canadian dollars unless otherwise noted. Basis100 (TSX: BAS) is a business solutions provider that fuses mortgage processing knowledge and experience with proprietary technology to deliver exceptional services. The company's delivery platform defines industry-class best execution strategies that streamline processes and creates new value in the mortgage lending markets. For more information about Basis100, visit http://www.Basis100.com BAYOU STEEL: Continues Employing Ordinary Course Professionals -------------------------------------------------------------- Bayou Steel Corporation and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the Northern District of Texas to continue the employment of the professionals they utilize in the ordinary course of their businesses, without having to file formal retention or fee applications for each of the Ordinary Course Professionals. On account of the number of Ordinary Course Professionals normally engaged by the Debtors, it would be unduly burdensome to require each individual Ordinary Course Professional and the Debtors to require separate application to this Court for approval of the Ordinary Course Professional's retention and compensation. The Debtors are now authorized to pay, without formal application to the Court by any Ordinary Course Professional, 100% of the fees and disbursements to each of the Ordinary Course Professionals upon the submission to the Debtors an appropriate invoice setting forth in reasonable detail the nature of the services rendered, provided that such fees and disbursements do not exceed a total of $25,000 per month per Ordinary Course Professional, and no more than $300,000 per Ordinary Course Professional for the entire case. Bayou Steel Corp., a producer of light structural shapes and merchant bar steel products, filed for chapter 11 protection on January 22, 2003. Patrick J. Neligan, Jr., Esq., at Neligan, Tarpley, Andrews & Foley, LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $176,113,143 in total assets and $163,402,260 in total debts. BETHLEHEM STEEL: ISG Completes Purchase of Debtors' Assets ---------------------------------------------------------- International Steel Group Inc., has completed the purchase of the assets of the Bethlehem Steel Corporation. "This is an important day for ISG. We are now able to serve our customers with a significantly broader line of products and services through a network of conveniently located facilities. ISG began the transition process over 6 weeks ago with the installation of a Transition Management Team which is maintaining continuity of operation at the former Bethlehem facilities and the satisfaction of customer requirements," said Rodney Mott, president and chief executive officer of ISG. Mr. Mott expressed his appreciation to the employees of Bethlehem Steel for their cooperation and welcomed them to the ISG family. He also praised the leadership of the United Steelworkers of America for their participation in developing a new tentative labor agreement covering the former Bethlehem employees that is consistent with agreements covering ISG employees. He also acknowledged the assistance of UBS Warburg, CIT and Goldman Sachs in developing the financial arrangements related to the purchase. "We are very grateful to our customers," said Mr. Mott, "who have enthusiastically welcomed ISG into their family of vital suppliers. "We also wish to express our appreciation to our suppliers and to the communities and units of government whose ongoing support is critical to our efforts to preserve the jobs of thousands of steelworkers in Indiana, Maryland, Pennsylvania, New York and the other states in which Bethlehem operated," Mr. Mott said. The International Steel Group was organized by WL Ross & Co. LLC in February 2002 to acquire world-class steelmaking assets and, in full cooperation with the United Steelworkers of America, restructure those facilities to be globally competitive. In its role as a leader in the restructuring and consolidation of the North American steel industry, ISG has purchased the principal steelmaking assets of The LTV Corporation in April 2002; the Acme Steel compact strip production facility in Riverdale, Illinois in October 2002; and the assets of Bethlehem Steel Corporation in May 2003. ISG is one of North America's largest integrated producers of steel with annual shipping capability in excess of 16 million tons. ISG has operating facilities in ten states including fully integrated steel works in Cleveland, Ohio; East Chicago, Indiana; Burns Harbor, Indiana; and Sparrows Point, Maryland. BEVSYSTEMS INT'L: Slashes $1.8M Debt in Final Phases of Workout --------------------------------------------------------------- BEVsystems International Inc. (OTCBB:BEVI) has made significant progress towards restructuring its business and reducing its corporate overhead. The Company reduced Compensation expenses by $1.4 million annually and eliminated over $1.8 million in accounts payable and accrued liabilities. Additionally the Company announced that it has entered into agreements for the sale of their manufacturing plant in Clearwater, Florida. When completed this will reduce long-term debt by $720,000. G. Robert Tatum, the Company's Chief Executive Officer hailed these events as "significant progress" towards moving the Company forward under its previously announced restructuring plans. Tatum went on to say that "while there are still many additional challenges as well as some litigation issues that we are currently negotiating, we believe we are in the final phases of getting the Company back on track." BEVsystems now has a co-packer operating the bottling plant. As a result of out-sourcing manufacturing, the cost of goods has decreased by 55%. Under this new agreement, the first ocean- going container of Life O2 was produced last week by the co- packer, and shipped to Panama. The Company has used both cash and stock in negotiating with creditors. Some have converted from debt to equity and many of these agreements call for payouts in restricted shares at significant discounts or payouts over time. The Company stated, that it used its best efforts to not create significant pressure on its stock by the methodology it employed in these negotiated settlements that have resulted in either the issuance of restricted stock or the issuance of shares on a monthly basis which shall be covered under a pending S-8 registration statement. This registration statement, to be filed in the next few days, shall also include amongst other expenses, future professional fees to the Company's attorneys, out-sourced services and other consultants. Miami-based BEVsystems International Inc. (OTCBB:BEVI) is a fast-growing leader in the premium beverage industry. With sales in 22 countries, the success of its flagship Life02 SuperOxygenated Water brand, infused with up to 1,500 percent more oxygen via patented process and technology innovations, underscores BEVsystems' commitment to research and technology to deliver superior quality beverage products. A recently published peer review study in The European Journal of Medical Research details the medical benefits of oxygen-enriched water. Visit http://www.bevsystems.com BIO-RAD.: S&P Ratchets Corp. Credit Rating Up 2 Notches to BB+ -------------------------------------------------------------- Bio-Rad Laboratories, Inc. (Amex: BIO; BIO.B), a multinational manufacturer and distributor of life science research products and clinical diagnostics, announced that Standard & Poor's Ratings Services has raised the company's corporate credit rating to "BB+" from "BB-," its senior secured rating to "BBB-" from "BB-" and its subordinated debt rating to "BB-" from "B." Standard & Poor's rated Bio-Rad's outlook as stable. According to Standard & Poor's, the rating action reflects Bio-Rad's success with integrating the 1999 acquisition of Pasteur Sanofi Diagnostics, more than doubling EBITDA and extending its well- established positions in competitive niche markets. "The current rating provides considerable financial cushion for debt-financed acquisitions, considering that the company's cash flow protection measures are well in excess of parameters typical for the rating category," said Standard & Poor's credit analyst David Lugg. "Standard & Poor's increase in our credit rating reflects our success over the past several years," said Christine Tsingos, Bio-Rad's Vice President and Chief Financial Officer. "We look forward to building upon our solid financial performance and positioning the company for continued growth." Bio-Rad's rating action can be found on Standard & Poor's public Web site at http://www.standardandpoors.com Bio-Rad Laboratories, Inc. -- http://www.bio-rad.com-- is a multinational manufacturer and distributor of life science research products and clinical diagnostics. It is based in Hercules, California, and serves more than 70,000 research and industry customers worldwide through a network of more than 30 wholly owned subsidiary offices. BLUE STRIPE: Fitch Affirms BB 2000-1 Class E Notes Rating --------------------------------------------------------- Fitch Ratings affirms the class A, B, C, D and E notes of Blue Stripe 2000-1 Ltd., which is a collateralized loan obligation established by Deutsche Bank AG to provide credit protection on a $3 billion portfolio of investment grade bank loans. The following security is affirmed: -- $147,300,000 class A notes 'AAA'; -- $66,000,000 class B notes 'AAA'; -- $54,000,000 class C notes 'AA'; -- $51,000,000 class D notes 'BBB'; -- $48,300,000 class E notes 'BB'. Fitch will continue to monitor this transaction. BOOTS & COOTS: Settles Claims Dispute with Checkpoint Business -------------------------------------------------------------- Boots & Coots International Well Control, Inc. (Amex: WEL), has reached a financial settlement with Checkpoint Business, Inc. regarding Checkpoint's option to purchase Boots & Coots' Venezuelan subsidiary. This payment eliminates any and all claims Checkpoint has with the Company. Jerry Winchester, Boots & Coots' CEO, stated, "Checkpoint assisted the Company through a senior participation loan designed to provide us with sufficient working capital for our daily operations. Additionally, the agreement provided for Checkpoint's assistance in restructuring our debt. The agreement was mutually beneficial and we appreciate Checkpoint's assistance during this phase of our restructuring initiatives. We are pleased to have resolved this matter and look forward to the continued dedication of our efforts on operations in Iraq and the continued growth of our prevention services. Management will continue to focus on improving the balance sheet and restructuring the Company's debt obligations. This settlement allows us to concentrate on the business at hand." Boots & Coots International Well Control, Inc., Houston, Texas, is a global emergency response company that specializes, through its Well Control unit, as an integrated, full-service, emergency-response company with the in-house ability to provide its expanded full-service prevention and response capabilities to the global needs of the oil and gas and petrochemical industries, including, but not limited to, oil and gas well blowouts and well fires as well as providing a complete menu of non-critical well control services. Additionally, Boots & Coots WELLSURE(R) program offers oil and gas exploration and production companies, through retail insurance brokers, a combination of traditional well control and blowout insurance with post-event response as well as preventative services. As reported in Troubled Company Reporter's April 1, 2003 edition, Boots & Coots International Well Control, Inc.'s Board of Directors decided against the restructuring proposal from Checkpoint Business, Inc. This proposal would have involved a voluntary Chapter 11 bankruptcy filing by Boots & Coots and the cancellation of Boots & Coots' common equity as part of the bankruptcy process. Additionally, Boots & Coots said that it had paid in full its principal balance and interest outstanding under its Loan Agreement with Checkpoint. CABLETEL COMMS: Will Webcast First Quarter Results Tomorrow ----------------------------------------------------------- Notification of First Quarter Results event: Cabletel Communications Corp. Q1 Earnings Announcement May 13, 2003, 11:00 AM ET To listen to this event, enter http://www.newswire.ca/webcast/viewEventCNW.html?eventID=557040 in your web browser. For a complete listing of upcoming and archived webcasts available through Canada NewsWire, please visit the events calendar at http://www.newswire.ca/webcast CNW's webcast of earnings calls is consistent with Market Regulation Services Inc. initiatives to broaden investor access through the use of new technology. As previously reported, Cabletel Communications Corp. (AMEX:TTV; TSX:TTV), the leading distributor of broadband equipment to the Canadian television and telecommunications industries, entered into a waiver and amendment to its credit agreement with its senior bank lender that has resolved previously announced technical violations with respect to the year ended December 31, 2002. The technical violations had resulted from a variation of the required minimum adjusted net worth, debt service coverage ratio and interest coverage ratio as of December 31, 2002. CALTON INC: Liquidity Concerns Raise Going Concern Uncertainty -------------------------------------------------------------- Calton Inc.'s consolidated financial statements are prepared on a going concern basis, which assumes that Calton will realize its assets and discharge its liabilities in the normal course of business. As reflected in the financial statements, Calton has incurred losses from continuing operations of $646,000 and $1,706,000 during the three months ended February 28, 2003 and 2002, respectively. As of February 28, 2003, the Company had working capital of $1,562,000, which is not sufficient to fund the current operating plan during the fiscal year ending on November 30, 2003. These conditions raise substantial doubt as to the ability of Calton to continue its normal business operations as a going concern. Management's plans to sustain Calton operations include accelerating and augmenting revenue opportunities, principally in the Credit Card Loyalty Business Segment, curtailing operating expenses to the extent appropriate and raise additional debt or equity capital from external sources. During 2002, Calton sold its non-performing interest in Innovation Growth Partners which contributed to the Company's net loss in the amounts of $1,020,000 and $442,000 during the fiscal year ended November 30, 2002, and the quarterly period ended February 28, 2002, respectively. In addition, the Internet development group of eCalton and PrivilegeONE consolidated office space to best cross train and to leverage employee skill sets. While management is actively addressing multiple sources of capital, there are currently no commitments, and there can be no assurances that sufficient capital can be raised under terms acceptable to management. In addition, the Credit Card Loyalty Business Segment is in an early stage of development. Having established technological and market feasibility, management is currently accessing marketing channels and developing strategic partners to support the business. Access to and maintenance of credit card services, such as those provided in the Fleet agreement, are essential to conduct the Credit Card Loyalty Business Segment. Fleet has advised the Company that it wishes to terminate its agreement with the Company and withdraw as the issuer of the PrivilegeONE credit card. Although the Company does not believe that Fleet has the right to terminate the agreement and withdraw as issuer, the Company, with the cooperation of Fleet, is endeavoring to identify a potential successor issuer to Fleet. The failure to enter into an agreement with a successor issuer, if the agreement with Fleet is terminated, would have a material adverse affect on the Company. CORRECTIONS CORP: First Quarter 2003 Financials Show Improvement ---------------------------------------------------------------- Corrections Corporation of America (NYSE: CXW) announced its operating results for the three month period ended March 31, 2003. For the first quarter of 2003, the Company reported net income available to common stockholders of $17.4 million, compared with a net loss available to common stockholders of $46.3 million for the first quarter of 2002. Results for the first quarter of 2002 included the following special items: - A tax benefit of approximately $32.2 million resulting from the enactment in March 2002 of the "Job Creation and Worker Assistance Act", enabling the Company to carryback net operating losses from 2001 to offset taxable income generated in 1997 and 1996. - A favorable change in the fair value of derivative instruments of $3.4 million in accordance with Statement of Financial Accounting Standards No. 133. - A non-cash charge of $80.3 million for the cumulative effect of accounting change for goodwill in accordance with Statement of Financial Accounting Standards No. 142, which established new accounting and reporting standards for goodwill and other intangible assets. There were no special items associated with the first quarter of 2003. Excluding the above mentioned special items affecting the first quarter of 2002, the Company incurred a net loss available to common stockholders of $1.7 million, or $0.06 per diluted share. Operating income for the first quarter of 2003 increased to $42.3 million compared with $29.7 million for the first quarter of 2002. EBITDA for the first quarter of 2003 increased to $55.1 million compared with $45.3 million for the first quarter of 2002. The increases in EBITDA and operating income were generated by higher occupancy levels and operating margins. Adjusted free cash flow also increased for the first quarter of 2003 to $30.5 million compared with $16.4 million for the year earlier period. In addition to higher occupancy levels and operating margins, the increase in adjusted free cash flow was further driven primarily by lower interest expense resulting from the positive effects of the refinancing of the Company's senior debt in May 2002 combined with a lower interest rate environment. Operations Update For the quarters ended March 31, 2003 and 2002, key operating statistics for the continuing operations of the Company were as follows: Three Months Ended March 31, Metric 2003 2002 -------------------------- --------- --------- Average Available Beds 58,505 57,112 Average Compensated Occupancy 91.6% 86.9% Total Compensated Man-Days 4,823,163 4,466,157 Revenue per Compensated Man-Day $50.78 $49.17 --------- --------- Operating Expense per Compensated Man-Day: Fixed 27.91 28.58 Variable 9.59 9.66 --------- --------- Total 37.50 38.24 --------- --------- Operating Margin per Compensated Man-Day $13.28 $10.93 ========= ========= Operating Margin 26.1% 22.2% Total revenues for the first quarter of 2003 increased 11.5% to $250.3 million from $224.4 million in the prior year first quarter, as total compensated man-days increased to 4.82 million from 4.47 million. The Company experienced increases in revenues from each of its major customer classes -- federal, state and local -- as average compensated occupancy for the first quarter of 2003 increased to 91.6% from 86.9% in the prior year first quarter. The Company's revenue per compensated man-day for the first quarter of 2003 increased to $50.78 compared with $49.17 in the prior year first quarter, representing the eighth consecutive quarterly increase in revenue per compensated man-day. Operating margins increased to $13.28 per compensated man-day in the first quarter of 2003 from $10.93 per compensated man-day in the prior year first quarter while the operating margin ratio improved to 26.1% compared with 22.2% for the same period in the prior year. Operating expense per compensated man-day actually declined to $37.50 from $38.24 during the prior year period, attributable primarily to better expense management in staffing and benefits, food, utilities and medical expense. Operating margins during the first quarter were also favorably impacted by the take-or-pay contract at the Company's McRae, Georgia facility, which was 53% occupied as of March 31, 2003 but for which the Company received payment at a guaranteed 95% rate. After taking into account the first quarter effects of the McRae facility, the Company believes that operating margins of approximately 25% are sustainable for the balance of the year. Commenting on the first quarter results, President and CEO John Ferguson stated, "The Company has just completed a solid first quarter reflecting substantial increases in earnings per share, EBITDA and adjusted free cash flow. The results were driven by significant increases in revenues and occupancy, our ongoing efforts to reduce operating expenses and lower interest costs brought about by our 2002 refinancing and a favorable interest rate environment." Ferguson continued, "Our increasing occupancies provide evidence of our belief that the industry environment of ongoing prison overcrowding combined with the budget difficulties faced by our state and federal customers will provide opportunities for the Company to fill its remaining beds as well as to add additional capacity in appropriate situations." Transactions Update On April 2, 2003, the Company initiated a series of transactions intended to enhance its capital structure and to provide it with additional financing flexibility that the Company believes will enable it to more effectively execute its business objectives in the future. Common Stock Offering. On May 7, 2003, the Company completed the sale and issuance of 6,400,000 shares of common stock at a price of $19.50 per share, resulting in net proceeds to the Company of approximately $117.3 million, after the estimated payment of costs associated with the issuance. A selling stockholder of the Company also sold 1,200,000 shares of common stock in the offering. In addition, the underwriters exercised an over- allotment option to purchase an additional 1,140,000 shares from the selling stockholder. The Company did not receive any proceeds from the sale of shares from the selling stockholder. Note Offering. Concurrently with the common stock offering, the Company also completed the sale and issuance of $250.0 million aggregate principal amount of senior notes due 2011. The new senior notes bear interest at the rate of 7.5% per annum and will mature on May 1, 2011. Proceeds from the common stock and note offerings have and will be used to complete the following: Purchase of Shares of Common Stock Issuable Upon Conversion of $40.0 Million Notes. Pursuant to the terms of an agreement by and among the Company and Income Opportunity Fund I, LLC, Millennium Holdings II LLC and Millennium Holdings III LLC, MDP converted the $40.0 million aggregate principal amount of the Company's convertible subordinated notes due 2008 with a stated rate of 10% plus contingent interest accrued at 5.5% into 3,362,899 shares of the Company's common stock and sold such shares to the Company. The aggregate purchase price of the MDP shares, inclusive of accrued interest of $15.5 million, was approximately $81.1 million. Tender Offer for Series B Preferred Stock. On April 2, 2003, the Company announced an offer to purchase up to 90% of its 4.7 million shares of outstanding series B preferred stock. The offer price for the series B preferred stock (inclusive of all accrued and unpaid dividends) is $26.00 per share. The offer to purchase is scheduled to expire at 12:00 midnight, New York City time, on May 13, 2003, unless extended by the Company. Any shares of series B preferred stock tendered on or before the expiration of the offer to purchase will be purchased by the Company promptly following the expiration of the offer to purchase. As of May 7, 2003, approximately 3.7 million shares of series B preferred stock had been tendered and not withdrawn. Redemption of Series A Preferred Stock. Immediately following consummation of the common stock and the note offerings, the Company gave notice to the holders of its outstanding series A preferred stock that 4,000,000 shares of the series A preferred stock will be redeemed at a redemption price equal to $25.00 per share, plus accrued and unpaid dividends to the redemption date. There are currently 4,300,000 shares of series A preferred stock outstanding with a liquidation value of $107.5 million. The redemption will be made pro rata among the holders of such outstanding shares and is expected to be completed in June 2003. Payments on and Amendments to Senior Secured Bank Credit Facility. The Company used the estimated remaining net proceeds of the common stock and note offerings after application as described above, combined with $25.3 million of cash on hand, to pay-down $100.0 million outstanding under the term loan portions of the senior secured bank credit facility. The Company received the requisite consent of the lenders under its senior secured bank credit facility to complete these transactions, and in connection with the consent, obtained modifications to certain covenants under the facility to generally provide the Company with additional borrowing capacity and operational flexibility. Upon completion of the transactions described above, and assuming approximately 80% of the series B preferred shareholders tender their stock, the Company will have approximately 34.6 million shares of its common stock outstanding, approximately 0.9 million shares of its series B preferred stock outstanding and approximately 0.3 million shares of its series A preferred stock outstanding. Contract Update During the fourth quarter of 2002, the Company was notified by the State of Florida of its intention to terminate the Company's contract to manage the 96-bed Okeechobee Juvenile Offender Correctional Center upon the expiration of a short-term extension to the existing management contract, which expired in December 2002. Upon termination, which occurred March 1, 2003, the operation of the facility was transferred to the State of Florida. During the first quarter 2003, the Okeechobee facility generated revenues of $0.8 million and incurred operating expenses of $0.7 million. These results are reported as discontinued operations. On March 18, 2003, the Company was notified by the Department of Corrections of the Commonwealth of Virginia of its intention to terminate the Company's contract to manage the 1,500-bed Lawrenceville Correctional Center upon the expiration of the contract on March 22, 2003. This termination occurred on March 22, 2003. During the first quarter 2003, the Lawrenceville facility generated revenues of $4.6 million and incurred operating expenses of $5.3 million. These results are also reported as discontinued operations. Business Outlook The Company provided initial EBITDA guidance for the first quarter and full year 2003 in the range of $49 to $51 million and $206 to $210 million, respectively. On April 2, 2003, the Company revised its guidance announcing it expected first quarter EBITDA to be in the range of $54 to $55 million and full year 2003 to fall in the range of $215 to $220 million. The Company expects EBITDA for the second quarter 2003 to be in the range of $53 to $55 million, with estimates for the full year unchanged from its April guidance. These results reflect an expected non-cash gain of approximately $2.9 million associated with the issuance and extinguishment of a promissory note expected to occur during the second quarter of 2003 in connection with the settlement of the state portion of the Company's stockholder litigation, offset by a charge of approximately $3.0 million in connection with the aforementioned recapitalization transactions. Supplemental Financial Information The Company has made available on its website supplemental financial information and other data for the first quarter of 2003. The Company does not undertake any obligation, and disclaims any duty, to update any of the information disclosed in this report. You may access this information under the investor section of the Company's Web site at http://www.correctionscorp.com The Company is the nation's largest owner and operator of privatized correctional and detention facilities and one of the largest prison operators in the United States, behind only the federal government and four states. The Company currently operates 59 facilities, including 38 company-owned facilities, with a total design capacity of approximately 59,000 beds in 20 states and the District of Columbia. The Company specializes in owning, operating and managing prisons and other correctional facilities and providing inmate residential and prisoner transportation services for governmental agencies. In addition to providing the fundamental residential services relating to inmates, the Company's facilities offer a variety of rehabilitation and educational programs, including basic education, religious services, life skills and employment training and substance abuse treatment. These services are intended to reduce recidivism and to prepare inmates for their successful re-entry into society upon their release. The Company also provides health care (including medical, dental and psychiatric services), food services and work and recreational programs. As reported in Troubled Company Reporter's April 7, 2003 edition, Standard & Poor's Ratings Services assigned its preliminary 'B'/'B-' senior unsecured/subordinated debt ratings to prison and correctional services company Corrections Corp. of America's $700 million universal shelf registration. In addition, Standard & Poor's assigned its 'B' senior unsecured debt rating to Nashville, Tennessee-based CCA's proposed $200 million senior unsecured notes due 2011, which will be issued under the company's $700 million shelf registration. At the same time, Standard & Poor's raised CCA's senior secured debt rating to 'BB-' from 'B+' and senior unsecured debt rating to 'B' from 'B-'. CCA's 'B+' corporate credit rating has been affirmed and its outlook remains positive. DAISYTEK INC: Case Summary & Largest Unsecured Creditors -------------------------------------------------------- Lead Debtor: Daisytek, Incorporated 1025 Central Expwy., S. Suite 200 Allen, Texas 75013 Bankruptcy Case No.: 03-34762 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Arlington Industries, Inc. 03-34765 B. A. Pargh Company 03-34766 Digital Storage, Inc. 03-34767 Daisytek Latin America, Inc. 03-34768 Tapebargains.com, Inc. 03-34769 Tape Company 03-34770 Type of Business: The Debtor and its affiliates are leading global distributors of computer and office supplies and professional products. Chapter 11 Petition Date: May 7, 2003 Court: Northern District of Texas (Dallas) Judge: Harlin DeWayne Hale Debtors' Counsel: Daniel C. Stewart, Esq. Paul E. Heath, Esq. Richard H. London, Esq. Vinson & Elkins LLP 3700 Trammell Crow Center 2001 Ross Avenue Suite 3700 Dallas, TX 75201 Tel: 214-220-7700 Total Assets: $622,888,416 Total Debts: $450,489,417 A. Daisytek Inc.'s 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ HP-Da Vinci Trade Debt $17,679,720 19320 Pruneridge Avenue Cupertino, CA 95014 Mike Hall North American Credit Mgr. Tel: 281-514-4832 Fax: 281-514-7778 Brother Int'l. Trade Debt $3,350,745 100 Somerset Corporate Blvd. Bridgewater, NJ 08807 Susan Delloiacono Director of Credit Tel: 908-252-3133 Fax: 908-252-3015 Federal Express Trade Debt $2,279,093 Attn: Box 371741 500 Ross St. Room 154-0470 Pittsburgh, PA 15262 David Archibald Tel: 901-395-3022 Fax: 901-395-3081 Lexmark Int'l/A Trade Debt $2,119,817 One Lexmark Center Drive Lexington, KY 40550 Gary Morin, CFO Tel: 859-232-6400 Fax: 800-232-9539 HP Arlington Trade Debt $1,848,155 19320 Pruneridge Avenue Cupertino, CA 95014 Mike Hall North American Credit Mgr. Tel: 281-514-4832 Fax: 281-514-7778 Avery Dennison Trade Debt $1,554,542 Office Products North America 50 Point Drive Brea, CA 92821 Cindy Didomerico Customer Fin'l Service Mgr Tel: 714-674-8117 Fax: 800-662-8379 Epson America Trade Debt $1,525,761 3840 Kilroy Airport Way Long Beach, CA 90806 Joe Cirilo, Dir. Of Credit Tel: 562-290-5066 Fax: 562-290-5079 Sony Composition Trade Debt $1,096,067 1 Sony Drive Park Ridge, NJ 07656 Bob Wellnitz Fin'l Services Manager Tel: 630-773-6163 Fax: 503-685-4988 Xerox Corporation Trade Debt $1,086,862 26600 SW Parkway Wilsonville, OR 97070 Ron Hill. Director of Credit Tel: 503-684-4213 Fax: 503-685-4988 Xerox Service Ctr. Trade Debt $855,097 100 Clinton Avenue South Rochester, NY 14644 Molly Pianosi Tel: 888-771-5225 Fax: 800-831-8647 3-M Trade Debt $843,045 Building 224-5 North 41 3M Center St. Paul, MN 55144 Kathy Dryna, Credit Manager Tel: 651-733-1110 Fax: 651-737-4633 Diversified Data Trade Debt $814,499 Products 1995 Highland Driv-e, Suite D Ann Arbor, MI 48108-2284 Rick Clement, Controller Tel: 734-677-7878 Fax: 734-677-0938 Newell Office Products Trade Debt $599,491 Attn: A/R 29 E. Stephenson Street Freeport, IL 61032-4235 Pam Shippy Tel: 815-233-8939 Fax: 815-233-8639 FUJI Trade Debt $596,338 555 Taxter Road Elmsford, NY 10523 Lou Magarelli, VP Tel: 914-789-7920 Fax: 914-592-1325 Minolta-QMS Trade Debt $581,126 One Magnum Pass Mobile, AL 36618 Brandon Cruthirds Tel: 251-633-4300x1212 Fax: 251-639-3313 Fellowes Trade Debt $519,782 1789 Northwood Avenue Itasca, IL 60143 Rick Reinert Corp. Credit Manager Tel: 630-893-1600 Fax: 630-671-9057 Troy Systems Int'l Trade Debt $432,291 2331 South Pullman Street Santa Ana, CA 92705 Jim Kingler, CFO Tel: 949-250-3280 Fax: 949-250-3001 Canon USA - HOPD Trade Debt $427,385 15955 Alton Parkway Irving, CA 92618 Mike Beason Tel: 949-753-4101 Fax: 949-753-4098 Quality Imaging Trade Debt $404,576 25342 Commercentre Drive Lake Forest, CA 92630-8823 David Berlin, CFO Tel: 800-423-8600 Fax: 949-855-6348 Okidata America Trade Debt $351,138 2000 Bishops Gate Blvd. Mount Laurel, NJ 08054-4603 Steve Boyd, VP Tel: 856-222-7071 Fax: 856-222-5054 B. Arlington's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Sortek, Inc. Trade Debt $1,102,382 7220 N.W. 36th Street Suite 638 Miami, FL 33166 Angel Soler Tel: 787-776-2745 Fax: 787-257-7269 Sharp Electronics Corp. Trade Debt $518,740 Dept. CHI Box 10067 Palatine, IL 60055-0067 Joe Gucwa Tel: 800-892-9204 Fax: 630-759-9443 Techno, Inc. Trade Debt $465,233 145 Eastern Avenue Bellwood, IL 60055-0067 Linda Williams Tel: 708-544-3400 Fax: 708-5844-3401 Tech Trading, Inc. Trade Debt $375,957 500 West Trading, Inc. 500 West Main Street Wyckoff, NJ 07481 Craig De Angelis Tel: 201-560-1888 Fax: 201-560-1889 CSD Imaging Supplies Trade Debt $261,817 2200 Stonington Avenue Suite 110 Hoffman Estates, IL 60195 Raj Sah Tel: 847-843-8533 Fax: 847-843-0364 Brother International Corp Trade Debt $212,817 Quality Imaging Products Trade Debt $207,811 Sotis Business Trade Debt $195,492 Equipment, Ltd. Okidata Trade Debt $163,794 Plus Supply International Trade Debt $160,264 Epson America, Inc. Trade Debt $157,622 New Age Electronics, Inc. Trade Debt $153,638 American Imaging Supplies Trade Debt $149,790 Xerox Omnifax Trade Debt $138,951 Discover Group Trade Debt $123,385 American Toner Products Trade Debt $112,230 Venture Imaging Products, Trade Debt $101,297 Inc. Xerox Trade Debt $99,348 Toner Time, Inc. Trade Debt $89,348 A Toner Warehouse Trade Debt $87,898 C. Tape Company's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Sony Trade Debt $1,520,145 1200 N. Arlington Heights Road Itasca, IL 60143 Mary Pasekel Tel: 630-773-7533 Fax: 630-773-7875 FUKI Photo Film Trade Debt $640,896 Dept. 0480 555 Taxter Elmsford, NY 10523 Tracy Lucas Tel: 800-755-3854 Fax: 914-592-1325 Maxell Corp. Trade Debt $337,888 22-08 Route 208 Fairlawn, NJ 07410 Karla Benavides Tel: 201-794-5954 Fax: 201-796-8497 Panasonic Trade Debt $215,051 Emtec Multimedia Trade Debt $135,964 Enas Cassette World Trade Debt $127,933 Nexpak/Alpha Media Trade Debt $99,395 Quantegy Trade Debt $59,555 PC Connection Trade Debt $47,397 Exclamation Factory Trade Debt $46,442 World Video Group Trade Debt $39,842 Best Buy Cassette Trade Debt $30,823 TDK Elec Corp. Trade Debt $28,397 Imation Trade Debt $26,247 FUJI Pro Motion Pic Trade Debt $21,808 Russ Bassett Trade Debt $19,176 Lakeshore Graph Trade Debt $19,068 The Nextrend Trade Debt $18,141 9 to 5 Computer Supply Trade Debt $16,738 DIRECTV: Unsecured Committee Turns to Pachulski Stang for Advice ---------------------------------------------------------------- The Official Committee of Unsecured Creditors in the Chapter 11 cases of DirecTV Latin America, LLC and its debtor-affiliates desires to retain Pachulski, Stang, Ziehl, Young, Jones & Weintraub PC as its counsel. Pachulski is expected to: (a) provide legal advice with respect to the Committee's powers and duties as set forth in Section 1103 of the Bankruptcy Code, as an official committee appointed under Section 1102 of the Bankruptcy Code; (b) prepare, on the Committee's behalf, necessary applications, motions, objections, opposition, complaints, answers, orders, agreements and other legal papers; (c) provide legal advice with respect to any disclosure statement and plan filed in this case, and with respect to the process for approving or disapproving disclosure statements and confirming or denying confirmation of plans; (d) appear in court to present necessary motions, objections, applications and pleadings and to otherwise protect the Committee's interests; and (e) perform all other legal services for the Committee, which may be necessary and proper in this case. Accordingly, pursuant to Section 328(a) of the Bankruptcy Code, the Committee seeks the Court's authority to retain Pachulski as its counsel, nunc pro tunc to March 27, 2003. The Committee believes that Pachulski is particularly well suited for the type of representation required. Pachulski has offices in Los Angeles, San Francisco, Wilmington, Delaware and New York. Moreover, Pachulski has substantial reorganization and insolvency expertise. In accordance with Section 330(a) of the Bankruptcy Code, compensation will be payable to Pachulski on an hourly basis, plus reimbursement of actual, necessary expenses and other charges Pachulski incurs. Laura Davis Jones, Esq., a shareholder of Pachulski, Stang, Ziehl, Young, Jones & Weintraub PC, informs the Court that their current hourly rates are: Laura Davis Jones $560 Marc A. Beilinson 560 Brad R. Godshall 495 Kathleen Marshall DePhillips 245 Marlene Chappe 125 According to Ms. Jones, expenses that need reimbursement include, among other things, telephone and telecopier toll and other charges, mail and express mail charges, special or hand delivery charges, document retrieval, photocopying charges, charges for mailing supplies, travel expenses and computerized research. Ms. Jones informs Judge Walsh that Pachulski does not hold any interest or represent any other entity having an adverse interest in connection with the Debtor's case. Pachulski has no connection with the Debtor, its creditors, the Office of the U.S. Trustee or any other party with an actual or potential interest in this Chapter 11 case or its attorneys and accountants, except from time to time, Pachulski has represented, and will likely continue to represent, certain creditors of the Debtor and various other parties-in-interest in matters unrelated to this Chapter 11 case. Ms. Jones asserts that Pachulski is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. (DirecTV Latin America Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) EASYLINK SERVICES: George Abi Zeid Acquires 9.59% Equity Stake -------------------------------------------------------------- George Abi Zeid, President of International Operations, EasyLink Services Corporation, beneficially owns 4,123,276 shares of EasyLink Services Corporation common stock, including 268,296 shares issuable upon the exercise of Warrants and 300,000 shares issued to Telecom International, Inc., constituting approximately 9.59% of the outstanding common stock of EasyLink Services Corporation. Mr. Zeid disclaims beneficial ownership of the Telecom International, Inc. shares. Mr. Zeid has sole power to vote, or to direct the vote, and the sole power to dispose, or to direct the disposition of, 4,123,276 shares of the Company's common stock. He has pledged 1,877,617 shares of the Company's common stock to AT&T Corp. to secure a promissory note in the original principal amount of $10 million issued by EasyLink Services Corporation in favor of AT&T Corp. * * * 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. DOANE PET CARE: Red Ink Flows in First-Quarter 2003 --------------------------------------------------- Doane Pet Care Company reported results for its first quarter ended March 29, 2003 and updated its outlook for fiscal 2003. Quarterly Results For the three months ended March 29, 2003, the Company's net sales increased 18.1% (13.3% excluding the positive impact of the foreign currency exchange rate) to $259.9 million from $220.1 million recorded in the first quarter ended March 30, 2002. First quarter 2003 sales performance benefited from increased sales volume primarily from new business awarded in 2002 as well as the favorable currency exchange rate between the dollar and Euro. The Company reported a net loss of $7.9 million for the 2003 first quarter compared to net income of $8.5 million for the 2002 first quarter. The Company's net loss in the 2003 first quarter included an $11.1 million non-cash charge associated with the bond offering and debt refinancing. The Company reported net cash provided by operating activities of $0.1 million for the 2003 first quarter compared to $38.5 million for the 2002 first quarter. The decrease is primarily due to an unusually favorable net change in working capital in the 2002 first quarter. In addition, 2003 included a one time accrued interest payment of $8.3 million on the sponsor facility that was repaid in full with proceeds from the bond offering. The Company believes net cash provided by operating activities is the most directly comparable GAAP financial measure to the non-GAAP Adjusted EBITDA liquidity measure typically reported in its earnings releases. Adjusted EBITDA was $25.8 million for the 2003 first quarter compared to $26.5 million in the 2002 first quarter. The benefit to the 2003 first quarter performance from higher sales volume and a favorable foreign currency exchange rate was offset by higher commodity costs. Doug Cahill, the Company's President and CEO, said, "We are pleased to report first quarter 2003 results in line with our expectations. Our first quarter performance represents a strong start to the year and is a credit to the hard work of our entire organization. We continued to benefit from the new business awarded last year and by the fact that private label programs continue to be supported by retailers in all channels. Despite margin pressures created by significantly higher commodity costs, we were able to deliver solid results because of our Project Focus business strategy, with a continued emphasis on the sales mix and profitability of our business. Our global manufacturing team did a great job satisfying the increased demand with excellent service levels at our targeted costs." Net interest expense for the 2003 first quarter increased $0.7 million to $14.0 million from $13.3 million recorded in the 2002 first quarter primarily due to the higher interest rate on the portion of the Company's outstanding debt that was refinanced. The fair value accounting for the Company's commodity derivative instruments under SFAS 133 resulted in a $0.5 million reduction in cost of goods sold in the 2003 first quarter, compared to a $6.8 million reduction in cost of goods sold in the 2002 first quarter, or a $6.3 million unfavorable impact on operating results. Bond Offering On February 28, 2003, the Company completed its $213.0 million offering of 10-3/4% senior notes due March 1, 2010. The proceeds were used to repay $169.3 million of the outstanding balance under the Company's senior credit facility and $33.3 million was used to repay in full the outstanding principal and accrued interest under the Company's sponsor facility. The balance of the proceeds was used to pay transaction fees and expenses associated with the offering. In connection with the refinancing, the Company incurred a non-cash loss of $11.1 million. See the footnote to the statements of operations table below for the components of this loss. 2003 Outlook and Guidance Cahill concluded, "We believe that our first quarter 2003 performance demonstrates that our global team is successfully executing our Project Focus initiatives. Our manufacturing organization continues its strong performance levels as a result of our ongoing cost control measures. Moreover, our volume growth trend is positive, reflecting the new business awarded last year, continued growth from our top customers and a solid growth trend for private label pet food in both the U.S. and Europe. Nevertheless, we are cautious in our near term outlook because of the potential for further volatility in commodities and natural gas." The Company said that it anticipates annualized net sales growth in the range of 11% to 12% for 2003. The Company also revised its original 2003 Adjusted EBITDA outlook of $105 million to a range of $95 million to $105 million, which reflects the current uncertainty concerning commodity prices. The Company said that the comparable GAAP financial measure, cash flow from operating activities is expected to range between $14.7 million and $56.2 million for fiscal 2003. Cash flow from operating activities is difficult to project with more precision because of the potential volatility in commodity prices and the resulting impact on cash margin requirements for financial derivatives used to hedge certain commodities. This fact, combined with the variability in the timing of cash receipts and disbursements, can have a significant impact on net working capital levels and thus, cash flow from operating activities. For the full year 2003, the Company expects that net changes in working capital will not use or provide any incremental cash, but because of these uncertainties, the net change in working capital could vary up to $15 million. In connection with the Company's outlook of fiscal 2003 Adjusted EBITDA, the Company has assumed higher commodity and natural gas costs in fiscal 2003 over 2002 and an increase in employee- related costs and distribution expenses, partially offset by the impact of increased sales volume, improved operating efficiencies at the Company's manufacturing plants and continued Project Focus related initiatives. The Company's outlook for annualized cash flow from operating activities for 2003 assumes no changes in net working capital from the 2002 level and current income taxes of less than $2 million. The Company's assumption for 2003 annualized cash interest expense reflects the variability in interest expense due to a portion of the Company's debt being subject to variable interest rates and a portion of the Company's debt being Euro-denominated debt and impacted by fluctuations in currency exchange rates. Doane Pet Care Company, based in Brentwood, Tennessee, is the largest manufacturer of private label pet food and the second largest manufacturer of dry pet food overall in the United States. The Company sells to over 600 customers around the world and serves many of the top pet food retailers in the United States, Europe and Japan. The Company offers its customers a full range of pet food products for both dogs and cats, including dry, semi-moist, wet, treats and dog biscuits. For more information about the Company, including SEC filings and past press releases, please visit http://www.doanepetcare.com As reported in Troubled Company Reporter's April 2, 2003 edition, Standard & Poor's Ratings Services affirmed its 'B+' corporate credit and senior secured debt ratings on pet food manufacturer Doane Pet Care Co. The 'B-' subordinated debt rating on the company was also affirmed. These ratings have been removed from CreditWatch, where they were placed on April 3, 2002. At the same time, Standard & Poor's affirmed Doane's 'B-' senior unsecured debt rating, which was not on CreditWatch. The outlook is negative. The affirmation reflects Doane's improved liquidity position after the company's partial debt refinancing, which reduced near-term annual bank debt amortization requirements and provided relief under tight bank covenants. The affirmation also reflects expectations that Doane's improved financial performance will be sustainable. E-CENTIVES INC: $1 Million Working Capital Deficit at Mar. 31 ------------------------------------------------------------- E-centives, Inc. (SWX: ECEN), a leading provider of online direct marketing technologies and services for global marketers, announced financial results for the first quarter of 2003 with these positive upward trends for the company: BUSINESS HIGHLIGHTS - Generated quarter-over-quarter (Q1 '03 vs. Q1 '02) and sequential (Q1 '03 vs. Q4 '02) incremental revenue increases of 21% and 24%, respectively. The majority of this increase relates to the recognition of an entire quarter of revenue for the ConsumerREVIEW.com business unit, purchased by the company in December 2002. - Decreased quarter-over-quarter (Q1 '03 vs. Q1 '02) net loss and adjusted EBITDA loss by $3.7M and $2.7M, respectively, as a result of business restructuring and cost control initiatives, among other things, as referenced in the Company's March 27, 2003 press release discussing its 2002 calendar year financial results. Revenues for Q1 2003 were $1.6M compared to $1.3M in Q1 2002. The company realized a net loss in Q1 2003 of $2.9M or $.08 per diluted share compared to a net loss of $6.5M or $.17 per diluted share in Q1 2002. The company reported a Q1 2003 adjusted EBITDA loss of $1.9M compared to an adjusted EBITDA loss of $4.6M in Q1 2002. Shares used to compute diluted net loss per common share are based on the weighted average number of common shares outstanding at the end of the referenced periods, which periods include 20M additional common shares associated with the company's fourth quarter 2001 rights offering. E-centives Inc.'s March 31, 2003 balance sheet shows that its total current liabilities exceeded its total current assets by about $1 million, while its total shareholders' equity deficit dwindled to about $4 million at December 31, 2002, from $7 a year earlier. "We're seeing continued progress on the revenue side of our business, and are pleased with our pipeline of prospective clients. But sales cycles continue to remain longer than we anticipated," commented Kamran Amjadi, E-centives, Inc.'s Chairman and Chief Executive Officer. "We maintain our focus on delivering best-in-class products and solutions to the market with strong patent protection on key elements of our technologies and with a clear focus on generating positive ROI for our customers." "We carry on our efforts to fine tune the company's operating cost structure to ensure success with all of our business initiatives, and feel comfortable that we can scale the business with minimal incremental overhead increases," added David Samuels, E-centives, Inc.'s Chief Financial Officer. E-centives, Inc. is a leading provider of online direct marketing technologies and services that enable companies to acquire and retain customers and promote more profitable relationships with them. Clients include global businesses from the consumer packaged goods, retail and media industries. Headquartered in Bethesda, MD, just outside Washington, D.C., and with west coast offices in the San Francisco Bay Area, E- centives, Inc. is traded on the SWX Swiss Exchange under the symbol "ECEN". ELCOM INT'L: Net Capital Nearly Depleted Due to Recurring Losses ---------------------------------------------------------------- Elcom International, Inc., announced operating results for its first quarter ended March 31, 2003. As a result of the sale of certain assets and the assignment of the Company's United States information technology products and services business in March 2002, the operating and balance sheet information and financial summary table contained herein has been prepared with all historical results of the IT Products and services business included in discontinued operations. As a result, net sales, gross profit, operating profit and net loss from continuing operations reflect the Company's ongoing U.S. and U.K. eProcurement and eMarketplace technology licensing and consulting businesses. Net sales from continuing operations for the quarter ended March 31, 2003, which represented eProcurement and eMarketplace technology license and related services fees, were $669,000 compared to $599,000 in the comparable quarter of 2002, an increase of $70,000 or 11.7%. Professional Services fees in the U.S. and U.K. increased by $146,000, which more than offset a decrease in License and associated fees, of $76,000. Gross profit for the quarter ended March 31, 2003 decreased to $475,000 from $506,000 in the comparable 2002 quarterly period, a decrease of $31,000 or 6.1% as a result of lower dollar, but higher margin, License and associated fees, offset by higher dollar, but lower margin Professional Services fees. The Company incurred an asset impairment charge of $338,000 in the first quarter of 2002 related to software intended to augment the Company's PECOS technology. The Company reported an operating loss from continuing operations of $1,934,000 for the quarter ended March 31, 2003 compared to $4,168,000 reported in the comparable quarter of 2002, a decrease of $2,234,000 or 53.6%. This smaller operating loss from continuing operations in the first quarter of 2003 compared to the 2002 quarter was due to the reduction in selling, general and administrative expenses and the reversal of a franchise tax accrual of $506,000 as payment was no longer deemed probable as a result of a settlement with the Inland Revenue. A significant portion of the decline in SG&A resulted from the Company's on-going cost containment measures designed to realign its infrastructure costs to reflect lower than anticipated license revenue due to the weak economy while being able to support growing demand for professional services. Reductions in personnel resulted in a decrease in compensation expense in the first quarter of 2003 of approximately $870,000 when compared to the first quarter of 2002. In addition, the Company reduced its expenditures related to facilities and telecommunication costs by approximately $83,000 in the first quarter of 2003 compared to the first quarter of 2002. The Company recorded a net loss from continuing operations for the first quarter of 2003 of $1,445,000 compared to a net loss from continuing operations of $4,174,000 in the first quarter of 2002, representing a decrease of $2,729,000, or 65.4%. This smaller loss included the reversal of a franchise tax accrual of $506,000 as described above and a tax benefit of $492,000 from the reversal of other tax accruals as payment was deemed no longer probable. The Company reported a net loss from discontinued operations of $116,000 in the 2003 quarter compared to a net loss from discontinued operations in the 2002 quarter of $1,420,000. Included in discontinued operations were the financial results related to the IT Products and services business in the U.S. which was sold at the end of the first quarter of 2002. The 2003 quarterly net loss from total operations (including both discontinued and continuing operations) was $1,561,000 compared to $4,914,000 in the 2002 quarter. Basic and diluted net loss from continuing operations per share for the first quarter of 2003 were ($0.05), compared with a basic and diluted net loss from continuing operations per share of ($0.16) in the first quarter of 2002. Cash and cash equivalents as of March 31, 2003 were $.4 million. Although the Company recorded a net loss from total operations of $1.6 million for the three month period ended March 31, 2003, cash and cash equivalents decreased by $1.9 million between December 31, 2002 and March 31, 2003. The principal differences between the net loss and the decrease in cash and cash equivalents during the period were due to recording non-cash expenses of $0.4 million and a net decrease in working capital of $1.0 million. The implementation of cost containment programs has significantly reduced the Company's expenses and cash requirements going forward. The Company believes that it will continue to incur losses throughout 2003. On April 3, 2003, the Company signed an agreement with Cap Gemini Ernst & Young UK Plc whereby CGEY would advance $980,000 in license fees to the Company. The Company believes this license fee(s) will become due during 2003 via its contract with CGEY for the Scottish Executive. Each payment is contingent upon the Company providing assistance to CGEY to set up a duplicate back-up system in Toronto, Canada in order for CGEY to be able to provide Disaster Recovery and Business Continuity Services for Elcom's clients and the Scottish Executive. These Services would be made available to Elcom's clients for a fee and would provide a back-up system to allow CGEY to provide Business Continuity Services (to host, operate and manage), Elcom's eProcurement system if Elcom were unable to do so for any reason. To date, the Company has received approximately $600,000 and expects to fulfill each remaining provision in the agreed to timetable and receive the entire amount by June 30, 2003. As previously reported, on April 28, 2003, the Company closed a private placement of ten-year 10% Senior Convertible Debentures generating net cash proceeds of approximately $700,000 to the Company. Both outside institutional and accredited investors participated in the Offering, with the majority of the investment made by three of Elcom's senior executive team and one of its directors. At March 31, 2003, the Company's balance sheet shows that its total current liabilities eclipsed its total current assets by about $1.4 million. Its total shareholders' equity has further shrunk to about $18,000 from about $1.6 million three months ago. Robert J. Crowell, Elcom International's Chairman and CEO, said, "We are very pleased with our results from the first quarter given overall economic conditions and a weak economy. Our net sales increased and our continuing cost containment programs are keeping the Company's expenses as low as possible while concurrently strengthening our relationship with our channel partners. Most importantly, as previously reported, I am especially pleased that Elcom was able to raise funding of approximately $700,000 (net cash to the Company) from a private placement of convertible subordinated debentures, with some from outside investors, combined with investments from myself and others of the management team and one of the directors. The fact that the Company was able to raise funding during a period of weak capital and economic environments, and also during the war with Iraq, represents a strong measure of confidence in the Company's new operating model and its prospects going forward." John E. Halnen, President and COO added, "We now have sufficient funding to support the time expected to allow us to grow our eMarketplace initiatives with Colectric Partners, a large computer and services company, and a substantial sized value- added reseller in the IT products and services business. We also look forward to generating additional clients as the awareness of the Company increases in the marketplace." Mr. Crowell continued, "We are also very pleased with our expanding relationship with CGEY as previously announced. As this relationship grows, we expect the Company to be introduced to more potential opportunities going forward." Elcom International, Inc. operates two wholly-owned subsidiaries: elcom, inc., a leading international provider of remotely-hosted eProcurement and Private eMarketplace solutions and Elcom Services Group, Inc., which is managing the transition of the recent sale of certain of its assets and the assignment of customers to ePlus. elcom, inc.'s innovative remotely-hosted technology establishes the next standard of value and enables enterprises of all sizes to realize the benefits of eProcurement without the burden of significant infrastructure investment and ongoing content and system management. PECOS Internet Procurement Manager, elcom, inc.'s remotely-hosted eProcurement and eMarketplace enabling platform was the first "live" remotely-hosted eProcurement system in the world. Additional information can be found at http://www.elcominternational.com ENCOMPASS: Selling Residential Assets to Wellspring for $40-Mil. ---------------------------------------------------------------- As a result of the uncertainty associated with these Chapter 11 cases, the value of the Encompass Services Debtors' Residential Services Group has diminished. The Residential Debtors install and maintain HVAC and plumbing in residences and small commercial buildings. The Residential Debtors market their services to local, regional, and national homebuilders. The Residential Debtors include AA Jarl, Inc.; A-ABC Appliance Inc.; A-ABC Services Inc.; Airtron of Central Florida Inc.; Airtron Inc.; Encompass Residential Services of Houston Inc.; Evans Services, Inc.; Hallmark Air Conditioning, Inc.; K&N Plumbing, Heating and Air Conditioning Inc.; Masters Inc.; Paul E. Smith Co. Inc.; Van's Comfortemp Air Conditioning, Inc.; Wade's Heating & Cooling Inc.; Wiegold & Sons Inc.; and Willis Refrigeration, Air Conditioning & Heating Inc. Realizing that time is of the essence in maximizing the value of these businesses, the Debtors began marketing the Residential Debtors' assets in March 2003. As a result of their marketing efforts, the Debtors received bids from at least three independent third parties. After evaluating the offers, the Debtors selected Wellspring Capital Management LLC as the prospective purchaser. The Debtors have determined that to maximize the Residential Debtors' value and to minimize the operational issues facing those businesses, the estates' interests will be best served by rapidly negotiating and consummating the prospective sale to Wellspring. Accordingly, the Debtors and Wellspring entered into a letter of intent concerning the Sale. Pursuant to the Letter of Intent, the Debtors will sell all or substantially all of the Residential Debtors' assets to Wellspring, or its designee, for $40,000,000. The Proposed Sale will take place in accordance with the Debtors' Joint Reorganization Plan. Consequent with the transaction, the Official Committee of Unsecured Creditors has expressed objections to the Proposed Sale in accordance with the Plan. The Committee wants the Sale to occur outside of the Plan pursuant to Section 363 of the Bankruptcy Code. To address the Committee's concerns, the Debtors revised certain terms in the Purchase Agreement. But the Committee continues to object. Pursuant to Section 363(f) of the Bankruptcy Code, Alfredo Perez, Esq., at Weil, Gotshal & Manges LLP, in Houston, Texas, asserts that the Debtors may sell the Residential Debtors' assets free and clear of any lien, claim or interest of their Senior Lenders if the Senior Lenders consent. However, in this case, Mr. Perez informs the Court that the Senior Lenders will not consent to the Proposed Sale taking place under Bankruptcy Code Section 363. Instead, the Senior Lenders have required that the Sale take place in the context of the Plan. In view of these circumstances, the Debtors ask the Court to approve the sale of the Residential Debtors' assets pursuant to the Plan. (Encompass Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Examiner & Committee Move for CSFB Oral Examination --------------------------------------------------------------- Enron Corporation Examiner Neal Batson and the Official Committee of Unsecured Creditors ask the Court to compel the oral examinations of these Credit Suisse First Boston Corporation employees pursuant to Rules 7037 and 9016 of the Federal Rules of Bankruptcy Procedure: (i) Osmar Abib, Managing Director for CSFB Banking team and CSFB Energy Group; (ii) Curt Launer, Analyst, originally with Donaldson, Lufkin & Jenrette and now with CSFB; (iii) Brian McCabe, Vice President for CSFB Corporate Finance, Investment Banking and Energy Groups; (iv) Mary Beth Mandanas, Associate in CSFB Leveraged Finance Group; (v) James Moran, Director for CSFB Energy Group; (vi) Laurence Nath, Managing Director for CSFB Structured Products; and (vii) Adebayo Oghunlesi, Head of CSFB Global Energy Group. Dennis J. Connolly, Esq., at Alston & Bird LLP, in Atlanta, Georgia, informs the Court that on February 28, 2003, the Examiner issued subpoenas to the seven CSFB Deponents. In fact, CSFB counsel agreed to waive certain formalities with regard to the subpoenas, e.g. witness fee checks. However, CSFB counsel informed the Examiner that the CSFB Deponents will not appear for their oral examinations on the ground that the examination should be deferred until the plaintiffs in the class action litigation styled as "Newby v. Enron Corp., et al." pending before Judge Melinda Harmon in the U.S. District Court for the Southern District of Texas can participate in those examinations. Accordingly, the Examiner conferred with the Newby Class Action Plaintiffs on their ability and preparedness to participate in the examinations of the CSFB Deponents. The Newby Class Action Plaintiffs informed the Examiner that they will not be ready for many months to participate in the examination because, pursuant to the Private Securities Litigation Reform Act discovery stay, they have not yet received any documentary discovery from CSFB or any other financial institutions. Mr. Connolly points out that the Examiner is presently required to file the next Interim Report on June 28, 2003. Given this timing, Mr. Connolly explains that it would be impracticable to defer the CSFB Deponents' oral examinations until the Newby Class Action Plaintiffs are in a position to participate in those examinations. Moreover, Mr. Connolly contends that this request should be granted because the examination of the CSFB Deponents will allow the Examiner to determine the scope of the maters concerning the Debtors' SPEs and related prepetition transactions, who was involved in those transactions and to what extent. (Enron Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 609/392-0900) FIFTH ERA KNOWLEDGE: Initiates Corp. Restructuring & Name Change ---------------------------------------------------------------- Fifth Era Knowledge Inc. (FER - TSX-Venture) announced a corporate restructuring and name change to Triton Capital Corporation. This restructuring is necessary to help the Corporation build its core business and participate in additional business activities. The following steps will be taken in the near future and will be subject to regulatory and shareholder approval, as the case may be. The reorganization involves the restructuring of debt, a share consolidation, changes to the board, a private placement and name change to Triton Capital Corporation. Restructuring of Debt with the Royal Bank of Canada On April 30, 2003 the Corporation reached a settlement of all of its liability to the Royal Bank of Canada totaling approximately $602,000. The settlement included a cash payment of $20,000 on May 7, 2003 and the issuance of 6,000,000 common shares at a deemed price of $0.10 per common share. The debt settlement is subject to regulatory approval. Concurrent with the issuance of these common shares and the restructuring, Royal Bank of Canada will own 26.6% of the issued common shares. Reverse Split The Corporation is proposing to consolidate its common shares on a 7:1 basis. Post consolidation on a fully diluted basis there will be approximately 3,211,000 common shares outstanding. Board of Directors As part of the above restructuring the Corporation wishes to announce that Mr. David Mears will join the board of directors and will stand for re-election at the next annual general meeting. Mr. Mears will replace Mr. Peter Stunden who has resigned effective May 6, 2003. Private Placement Concurrent with the above noted restructuring, the Corporation will proceed with a private placement of up to $400,000. This will be a non-brokered private placement. The terms of the placement will be based upon the post consolidation share structure and will be of units at a price of $0.10 per unit. Each unit will be comprised of one post consolidation common share and one half of one warrant exercisable at $0.25 per post consolidation common share for a term of 2 years. Name Change The Corporation will change its name to Triton Capital Corporation. FLEMING COMPANIES: Hiring McAfee & Taft as Corporate Counsel ------------------------------------------------------------ Fleming Companies, Inc., and its debtor-affiliates seek to employ McAfee & Taft, P.C., as special corporate counsel. Ira D. Kharasch, Esq., at Pachuksi Stang Ziehl Young Jones & Weintraub, P.C., in Wilmington, Delaware, relates that the Firm has served as outside counsel to the Debtors for over 25 years in relation to a wide range of legal activities, including general corporate, securities, finance, litigation, real estate, tax and regulatory matters of all types. The Firm is also engaged in 100 pending legal matters on behalf of the Debtors. The Debtors request that the McAfee & Taft render services in matters related to a variety of legal matters in which the Firm represented the Debtors prior to the commencement of these Chapter 11 cases. Specifically, the Debtors intend to employ McAfee & Taft so as to advise them in connection with: (a) general corporate, business, tax and fiduciary matters; (b) customer and vendor supply agreements, arrangements and programs and related financing activities, extensions of secured and unsecured loans and trade credit, and collection matters through litigation and arbitration proceedings; (c) general real estate matters, including lease and sublease arrangements relating to store, warehouse and office properties, and dispositions and acquisitions of real estate; (d) general business litigation; (e) matters pertaining to insurance issues; (f) franchising, licensing and related matters; (g) state, local and federal laws and regulations relating to the protection of the environment and human health and regulations related to their business operations; (h) matters pertaining to all aspects of employment law and related matters, including employment practices and policies, employee terminations and discipline, equal employment, non-competition and other business protection issues; (i) matters pertaining to executive employment packages, stock options, awards, individual severance agreements and releases; (j) matters pertaining to employment-based litigation and arbitration proceedings; and (k) all aspects of the Debtors' employee benefit plans, programs and arrangements, and all the other numerous qualified and nonqualified employee benefit programs sponsored by the Debtors. Also, the Firm will advise and assist the Debtors in the disposition of retail operations, other assets and subsidiaries. Mr. Kharasch states that McAfee & Taft intends to charge the Debtors based on regular hourly rates subject to periodic adjustments, plus reimbursement for out-of-pocket expenses. The current standard hourly rates charged by the Firm are: Partners & Counsel $190-350 Associates $125-175 Legal Assistants $70-80 Louis J. Price, Esq., a McAfee shareholder, informs the Court that his Firm holds a $5,404 prepetition claim against the Debtors for expenses incurred prior to the Petition Date. On March 28, 2003, the Debtors paid the Firm $337,406 for legal fees incurred between February 26, 2003 and March 25, 2003. Also, on March 28, 2003, the Debtors paid to the Firm a retainer of $300,000 to pay for legal services rendered and as reimbursement for expenses incurred after March 25, 2003. Moreover, the Firm billed the Debtors $92,269 of fees and $393 of expenses incurred from March 26, 2003 through March 31, 2003, and debited the Retainer for these amounts. Prior to the filing of the petition, the Debtors replenished the Retainer by payment to the Firm of $92,269. Early on April 1, 2003, McAfee & Taft debited the Retainer for an additional $25,000 as a result of an underestimate of the fees incurred prior to April 1, 2003. Further, Mr. Price adds that the actual amount of unpaid fees and expenses through March 31, 2003, after applying the $92,269 payment, was $30,404. Taking into account the $25,000 payment made in the morning of April 1, 2003, the Debtors still owe the Firm $5,404, which constitutes a prepetition claim. The Retainer has a current balance of $275,000. Despite this claim, Mr. Price maintains that it does not disqualify McAfee & Taft from serving as special counsel in connection with the proposed matters. Mr. Price asserts that neither the Firm, its shareholder, counsel or associate has any connection with the Debtors, their creditors or any other parties-in-interest. However, the firm and certain of its shareholders, counsel and associates may have in the past represented, and may currently represent and likely in the future will represent the Debtors' creditors in connection with matters unrelated to the Debtors' cases. At this time, McAfee & Taft is not aware of any representations. Accordingly, Mr. Price assures the Court that McAfee & Taft will not represent any creditor or party-in-interest in connection with these cases. (Fleming Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Fleming Companies Inc.'s 10.625% bonds due 2007 (FLM07USR1) are trading between 1 and 2 cents-on-the- dollar. For real-time bond pricing, go to http://www.debttraders.com/price.cfm?dt_sec_ticker=FLM07USR1 FLEMING COMPANIES: Will Close Five Grocery Wholesale Divisions -------------------------------------------------------------- Fleming Companies, Inc., consistent with its commitment to improve cost efficiencies, will discontinue operations at five of the company's wholesale divisions. Fleming will focus its resources on the company's other wholesale distribution centers, which have performed at a higher level and shown greater prospects for future growth and profitability. In a separate action, the company is launching operations at its new convenience distribution center in Denver. Certain Wholesale Divisions to be Closed The company is closing its grocery wholesale divisions in Salt Lake City, Utah; Warsaw, North Carolina; Northeast, Maryland; and Phoenix, Arizona. In addition, the company is closing a general merchandise distribution center in King of Prussia, Pennsylvania. Bill May, President and CEO of Wholesale Distribution, said, "While the decision to exit any market is difficult, it makes excellent sense for us to scrutinize our operations and concentrate our human and financial resources on those business units and markets in which performance is highest and opportunities are greatest. The previously announced loss of business at these divisions and their limited growth opportunities has made it impossible for us to continue in these markets as a core part of Fleming operations. "After careful study and consideration, it was decided to take this necessary action to advance our restructuring, which is important to our company and our aggregate customer base." "To minimize disruption to our customers supplied by the closing divisions, we are committed to assisting the affected retail customers in their successful transfer to a new supplier, as practicable," said May. Fleming intends to discontinue operations in the five selected divisions by mid-June, 2003. The company expects to immediately begin transferring inventory from the closing divisions to other Fleming facilities. Collectively, the closing divisions represent approximately $1 billion in annualized revenue. The company's convenience distribution centers are unaffected by the closing of these five wholesale divisions. The company is also reviewing alternatives for its Minneapolis division, which is entirely dedicated to supplying the company's Rainbow Foods stores based in Hopkins, Minnesota. As was previously announced, Fleming has an asset purchase agreement to sell 31 of the stores and has filed a motion with the U.S. Bankruptcy Court to establish an auction for the sale of the stores. New Convenience Division Opening The company is also announcing the opening of its new convenience division in Denver, Colorado. This facility replaces the previous Denver division, which was destroyed by fire in late 2002. In the interim, Fleming has supplied the Denver customers with products from other convenience divisions in the region. Mike Walsh, President and Chief Executive Officer of Convenience Distribution, said, "The entire team did a phenomenal job of re- establishing our successful Denver operations over a very short period of time. I am grateful for the support we received from the community leaders and our customers, and excited about resuming service from the profitable Denver division." The Denver division's official grand opening celebration is scheduled for May 16, 2003. Fleming is a leading supplier of consumer package goods to independent supermarkets, convenience-oriented retailers and other retail formats around the country. To learn more about Fleming, visit http://www.fleming.com GENERAL CHEMICAL: S&P Assigns Default Ratings & Halts Coverage -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on General Chemical Industrial Products Inc. to 'SD', or selective default, from 'CC' and lowered its subordinated debt rating on the company's subordinated notes due 2009 to 'D' from 'C'. Standard & Poor's said that it removed all ratings on General Chemical from CreditWatch and subsequently withdrew them at the company's request. The 'SD' corporate credit rating was assigned to reflect General Chemical's ongoing payments to certain other creditors, including its bank group. "The downgrade reflects General Chemical's decision not to make its May 1, 2003, interest payment on its $100 million 10-5/8% subordinated notes as a condition of the forbearance agreement that it has entered into with its senior bank lenders," said Standard & Poor's credit analyst Peter Kelly. The company will have a 30-day period to cure this situation before it becomes an event of default under the indenture, although payment is unlikely. The company intends to restructure its debt with its senior lenders and representatives of the subordinated note holders over the next several months. General Chemical Industrial Products, based in Hampton, N.H., is a North American producer of soda ash, and had about $146 million of debt outstanding as of Dec. 31, 2002. Soda ash is a chemical used in glass production, detergents, and water treatment. The company's profitability has deteriorated due to the ongoing effect of lower soda ash prices, high energy costs, and the weak economic environment. GENZYME CORP: Board Approves Proposed Tracking-Stock Elimination ---------------------------------------------------------------- Genzyme Corp.'s board of directors has approved the elimination of the tracking stock structure. This will be accomplished through a transaction in which all outstanding shares of Genzyme Biosurgery stock (Nasdaq: GZBX) and all outstanding shares of Genzyme Molecular Oncology stock (Nasdaq: GZMO) will be exchanged for shares of Genzyme General stock (Nasdaq: GENZ) on June 30, 2003. Beginning July 1, Genzyme Corp. will have one outstanding series of common stock, which will continue to trade on the Nasdaq National Market under the ticker symbol GENZ. Holders of Genzyme Biosurgery and Genzyme Molecular Oncology stock will receive shares of Genzyme General stock at an exchange ratio determined under the provisions of Genzyme's corporate charter. Specifically, Genzyme Biosurgery shareholders will receive 0.04914 of a share of Genzyme General stock in exchange for each Biosurgery share, and Genzyme Molecular Oncology shareholders will receive 0.05653 of a share of Genzyme General common stock in exchange for each Molecular Oncology share. Consistent with provisions of the charter, the exchange ratios represent a 30 percent premium to the value of Genzyme Biosurgery and Genzyme Molecular Oncology shares, based on average closing prices for each of the three stocks for the 20- day trading period from March 26-April 23, 2003. Cash will be paid for fractional shares. "The strength of our business has allowed us to take this important step to simplify our capital structure," said Henri A. Termeer, chairman and chief executive officer of Genzyme Corp. "While tracking stocks have enabled us to create tremendous value in the past, current financial market conditions have reduced their ability to raise needed capital. This change in our financial structure will create a simpler, stronger Genzyme for investors. We do not expect to make any major changes within our businesses or research programs at this time, and our earnings per share guidance excluding amortization will continue to be in the range of $1.25-$1.35." Genzyme Corp. markets a large portfolio of products, including important growth drivers Renagel(R) (sevelamer hydrochloride) for patients with end-stage renal disease on hemodialysis; Synvisc (R) (hylan GF-20) for osteoarthritis of the knee; and three products for the treatment of lysosomal storage disorders- Cerezyme(R) (imiglucerase for injection) for Type 1 Gaucher disease, Fabrazyme(R) (agalsidase beta) for Fabry disease, and Aldurazyme(R) (laronidase) for MPS I. Total corporate revenue surpassed $1.3 billion in 2002. Genzyme Corp. has a substantial clinical and research pipeline focused on treatments for genetic disorders, renal disease, orthopedics, immune-mediated diseases, cancer, and heart disease. Genzyme's global infrastructure includes approximately 5,700 employees; extensive manufacturing, regulatory, scientific and clinical operations; and a commercial presence in more than 80 countries. Genzyme Corp. had approximately $1.23 billion in cash and equivalents as of March 31, 2003. Genzyme Corp. Financial Guidance Genzyme Corp. is issuing financial guidance for 2003. This guidance consists of actual first-quarter results and anticipated second-quarter results for Genzyme General, and anticipated results for the Genzyme Corporation for the third and fourth quarters of the year. This guidance does not include expected results for Genzyme's cardiothoracic devices business, which the company has been in the process of divesting in order to maintain its focus on biotechnology products. Complete guidance for 2003 is detailed on an attached chart. Genzyme expects to generate annual revenue growth of approximately 20 percent and earnings-per-share growth of approximately 20-25 percent annually in the near to medium-term. Revenues for the year are now expected to increase to between $1.35-$1.42 billion, reflecting the original guidance for Genzyme General plus the second half revenue of the Biosurgery and Molecular Oncology businesses. Gross margin is expected to be in the range of 75-76 percent of revenue, reflecting changes to the overall product mix. Selling, general and administrative expenses are expected to be in the range of $392-$404 million. Genzyme will continue to hold SG&A spending in line with revenue growth. It anticipates some savings associated with the consolidation of its capital structure. Corporate research and development spending is expected to be in the range of $276-$290 million, reflecting the original guidance for Genzyme General plus the second half spending of the Biosurgery and Molecular Oncology businesses. Genzyme will evaluate and prioritize its current research programs in order to maintain R&D spending at approximately 20 percent of revenue in the near term. It will also continue to evaluate strategic alliances to help accelerate the progress of certain programs. Amortization is expected to be approximately $53 million, or $0.15 per share, primarily reflecting the acquisitions of GelTex Pharmaceuticals and Biomatrix in 2000. GAAP earnings are expected to be in the range of $1.10-$1.20 per diluted share. Excluding amortization, earnings are expected to be in the range of $1.25-$1.35 per diluted share. Genzyme expects to end the year with approximately 224 million diluted shares outstanding, including the approximately 3 million new shares issued in exchange for Genzyme Biosurgery and Genzyme Molecular Oncology shares. The effective net tax rate for the corporation is expected to be approximately 30 percent, compared to prior guidance for Genzyme General of 25-26 percent. Genzyme Corporation is a global biotechnology company dedicated to making a major positive impact on the lives of people with serious diseases and medical conditions. This commitment has driven innovation in treating both widespread diseases and rare genetic conditions, in providing leading diagnostic tests and services, in bringing the benefits of biotechnology to the practice of surgery, and in developing novel approaches to cancer. Genzyme's 5,700 employees worldwide serve patients in more than 80 countries. As reported in Troubled Company Reporter's May 6, 2003 edition, Standard & Poor's Ratings Services revised its outlook on Genzyme Corp., to positive from stable. At the same time, Standard & Poor's affirmed its 'BBB-' corporate credit rating and its 'BB+' subordinated debt rating on the company. "The rating actions reflect investment-grade rated Genzyme's continued strong financial performance, moderate financial policies, and the promise of increased diversification in its product portfolio, factors offset somewhat by the company's still-heavy reliance on its flagship product Cerezyme," said Standard & Poor's credit analyst Arthur Wong. GLIMCHER REALTY: Retenants Additional Vacant Anchor Space --------------------------------------------------------- Glimcher Realty Trust, (NYSE: GRT), one of the country's premier retail REITs, has signed a lease for a 61,000 square foot vacant anchor location. The retenanting of this anchor space in a community center is in keeping with the Company's strategy to retenant or sell vacant anchor locations in its community center portfolio. On May 8, 2003, the Company entered into a lease with Hobby Lobby Stores of Oklahoma City for the vacant former Service Merchandise location consisting of 61,000 square feet at Clarksville Plaza in Clarksville, IN which is a part of the Louisville, KY's metropolitan statistical area. Together with the retenanting of this former Service Merchandise location, and the sales earlier this week of a vacant Kmart location and a vacant Ames location, the Company continues to be successful in its program to retenant or sell the vacant anchor locations in its community center portfolio. As of May 8, 2003, the Company's 23 regional malls represent 19.8 million square feet of gross leasable area and the Company's total portfolio includes 70 properties consisting of 25.1 million square feet of GLA. Glimcher Realty Trust -- a real estate investment trust whose corporate credit and preferred stock ratings are rated by Standard & Poor's at BB and B, respectively -- is a recognized leader in the ownership, management, acquisition and development of enclosed regional and super-regional malls, and community shopping centers. Glimcher Realty Trust's common shares are listed on the New York Stock Exchange under the symbol "GRT." Glimcher Realty Trust is a component of both the Russell 2000(R) Index, representing small cap stocks, and the Russell 3000(R) Index, representing the broader market. Visit Glimcher at: http://www.glimcher.com HANOVER COMPRESSOR: Selling California Power Generation Assets -------------------------------------------------------------- Hanover Compressor Company (NYSE:HC), the leading provider of outsourced natural gas compression services, has entered into an agreement to sell its ownership interests in two power plants located in Fresno County, California. Hanover has agreed to sell its 49% membership interest in Wellhead Power Panoche, LLC and its 92.5% membership interest in Wellhead Power (Gates), LLC to Hal Dittmer and Fresno Power Investors Limited Partnership, who currently own the remaining interests in Panoche and Gates. Panoche and Gates own gas fired peaking power plants of 49 megawatts and 46 megawatts, respectively. Total consideration for the transaction is approximately $28 million consisting of approximately $3.1 million for Hanover's membership interests in Panoche and Gates, $6.9 million for loans from Hanover to Panoche and Gates, and the release of Hanover's obligations under a capital lease from GE Capital to Gates that was included on Hanover's December 31, 2002 balance sheet as a liability held for sale and has a current outstanding balance of approximately $18 million. Hanover will receive approximately $7.2 million in cash and $2.8 million in notes that mature in May 2004. The notes will be secured by the assets and stock of Santa Maria Cogen, Inc., the operator of a 9 megawatt power plant in Santa Maria, California. In addition, upon closing of the transaction, Hanover will be released from a $12 million letter of credit from the company to General Electric that was provided as additional credit support for the Gates capital lease, thus freeing up $12 million in liquidity under Hanover's revolving credit facility. Hanover expects to close the transaction by mid 2003. In December 2002, Hanover classified these operations as discontinued operations and will continue to report the financial results from these operations as discontinued operations in its financial statements until the close of this transaction. Hanover Compressor Company -- http://www.hanover-co.com-- is the global market leader in full service natural gas compression and a leading provider of service, financing, fabrication and equipment for contract natural gas handling applications. Hanover sells and provides this equipment on a rental, contract compression, maintenance and acquisition leaseback basis to natural gas production, processing and transportation companies that are increasingly seeking outsourcing solutions. Founded in 1990 and a public company since 1997, Hanover's customers include premier independent and major producers and distributors throughout the Western Hemisphere. As reported in Troubled Company Reporter's November 18, 2002 edition, Standard & Poor's placed its ratings on Hanover Compressor Co., ('BB' corporate credit rating) on CreditWatch with negative implications, reflecting the company's announcement that the SEC was changing the status of its review of financial restatements to formal from informal. DebtTraders says that Hanover Compressor's 4.750% bonds due 2008 (HC08USR1) are trading at about 70 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=HC08USR1for real-time bond pricing. HAWAIIAN AIRLINES: Reaches Aircraft Lease Restructuring Pact ------------------------------------------------------------ Hawaiian Airlines, Inc., a subsidiary of Hawaiian Holdings, Inc. (Amex: HA; PCX), has reached agreement with Ansett Worldwide, one of its principal aircraft lessors, on a consensual restructuring of the financial terms of the leases for seven Boeing Model 767 aircraft. The agreement is subject to review by Hawaiian Airlines' creditors committee and approval of the Bankruptcy Court. Hawaiian said it intends to assume the leases as part of its plan of reorganization, and will request an expedited hearing from the Bankruptcy Court to consider approval of the restructuring and the assumption of the leases. According to John W. Adams, chairman and CEO of Hawaiian, "This agreement, which grew out of management's initial attempts to create a more viable, competitive business model for the airline, is a significant step toward achieving that goal. Since beginning the restructuring process late last year, our discussions with Ansett have been productive. "We are gratified by Ansett's confidence not only in the future of Hawaiian Airlines, but the timely and successful completion of our restructuring, as well." Hawaiian Airlines filed its voluntary petition for reorganization under chapter 11 of the Bankruptcy Code on March 21, 2003. Founded in Honolulu 73 years ago, Hawaiian Airlines is Hawaii's longest-serving and largest airline. The nation's 12th largest airline, it is also the second-largest provider of passenger service between the West Coast and Hawaii. Hawaiian Airlines currently provides up to 30 nonstop daily flights between nine cities on the U.S. mainland and Hawaii, along with weekly service between Honolulu and American Samoa and Tahiti. The airline also provides charter service between Honolulu and Anchorage, Alaska. In addition, Hawaiian Airlines is participating in the federal government's Civil Reserve Air Fleet, transporting Armed Forces personnel between the U.S. and points in the Pacific and Middle East. Hawaiian Airlines takes pride in its innovative onboard service programs that highlight and promote the people and culture of Hawaii. The airline has earned numerous international awards for service in recent years, including the 2001 Zagat Survey's award for Best Overall U.S. Airline in the Premier category, and the 2001 Diamond Award for In-Flight Service from Onboard Services magazine. Hawaiian Airlines was rated third highest in Travel & Leisure magazine's most recent ranking of the Top 10 U.S. Airlines. Additional information on Hawaiian Airlines is available on the airline's Web site at http://www.HawaiianAir.com HAYES LEMMERZ: Furnishing Fin'l Info Re $575MM Debt to Lenders -------------------------------------------------------------- In connection with its proposed emergence from Chapter 11 bankruptcy proceedings, Hayes Lemmerz International, Inc., is providing certain financial and other business information to prospective lenders in connection with the syndication of a proposed $575 million senior secured credit facility, with Citigroup Global Markets Inc. and Lehman Brothers Inc. as joint lead arrangers and book managers. Such financial and other business information has not been previously disclosed publicly and is being furnished by the Company, to the SEC, pursuant to Item 9 of Regulation FD. The Company had Adjusted EBITDA of $228.5 for the fiscal year ended January 31, 2003, and Adjusted EBITDA of $154.3 and $286.1 for the fiscal years ended January 31, 2002 and 2001, respectively. Of the Company's $228.5 million of Adjusted EBITDA for the year ended January 31, 2003, 41% was derived from the Company's North American business, and 59% was derived from the Company's business outside of North America. Of the Company's $2.0 billion of net sales for the year ended January 31, 2003, 63% was generated in North America and 37% was generated by the Company's business outside of North America. EBITDA, a measure used by management to measure operating performance, is defined as operating income (loss) plus depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items such as: (i) asset impairment losses, restructuring and other charges; (ii) reorganization items; (iii) cumulative effect of changes in accounting principles; and (iv) extraordinary gains or losses. Hayes Lemmerz has referenced these non-GAAP financial measures as a management group frequently in its decision-making because they provide supplemental information that facilitates internal comparisons to historical operating performance of prior periods and external comparisons to competitors' historical operating performance. Institutional investors generally look to adjusted EBITDA in measuring performance, among other things. Hayes Lemmerz bases its forward-looking estimates on Adjusted EBITDA to facilitate quantification of planned business activities and enhance subsequent follow-up with comparisons of actual to planned Adjusted EBITDA. In addition, incentive compensation for management is based on Adjusted EBITDA. The Company has disclosed these non-GAAP financial measures in order to provide transparency to investors. EBITDA and Adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to operating income as indicators of operating performance or to cash flows from operating activities as measures of liquidity. Because not all companies use identical calculations, these presentations of EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. HEALTHSOUTH CORP: Signs-Up PricewaterhouseCoopers as New Auditor ---------------------------------------------------------------- HEALTHSOUTH Corporation (OTC Pink Sheets: HLSH) announced that the Audit Committee of its Board of Directors has appointed PricewaterhouseCoopers LLP as HealthSouth's new independent auditor. The Audit Committee made the appointment following a month-long search and evaluation. PricewaterhouseCoopers replaces Ernst & Young LLP, whose engagement as auditor was terminated by the Audit Committee previously. PricewaterhouseCoopers is the world's largest professional services organization, drawing on the knowledge and skills of more than 125,000 professionals in 142 countries. HEALTHSOUTH is the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, with nearly 1,700 locations in all 50 states, the United Kingdom, Australia, Puerto Rico, Saudi Arabia and Canada. HealthSouth can be found on the Web at http://www.healthsouth.com As reported in Troubled Company Reporter's April 14, 2003 edition, HEALTHSOUTH Corporation and its bank lenders executed a Forbearance Agreement on the Company's $1.25 billion credit facility through May 1, 2003. The agreement provided that the bank lending group, headed by JPMorgan Chase Bank and Wachovia Securities, will forbear from exercising remedies arising from the default of the Company's credit facility, which was announced on March 27, 2003, absent any new defaults under the credit facility or the Forbearance Agreement. INTERPUBLIC: Accelerated Cost Reduction Initiatives Planned ----------------------------------------------------------- The Interpublic Group of Companies reported a net loss of $8.6 million for the quarter ended March 31, 2003, compared to earnings of $59.8 million in the year-earlier quarter. Revenue at many operations continued to reflect weak demand for services, while costs increased, in part due to higher severance expense and professional fees. David Bell, Chairman and CEO, The Interpublic Group, commented: "As I said two months ago on Day One, we have major work ahead of us. Interpublic is - and will remain - a work in progress. "In a short time, we have made significant strides against the top priority I have set for the company. The balance sheet has been strengthened considerably and should be where we want it by year's end. We have also brought on board a Chief Operating Officer who will be vital in driving financial accountability and reliability within operating units. He will be instrumental in planning and implementing a cost savings acceleration program that is required in order to restore competitive margin performance. "Turnarounds take time. I believe our company's operating results in the second half of 2003 and the first half of 2004 will finally provide us with a firm baseline for the future performance of the real Interpublic." Results from Operations First quarter 2003 revenue increased nearly one percent to $1,433.0 million, as the benefit of higher foreign exchange rates masked the continuing softness in demand for advertising and marketing services in international markets. On a constant currency basis, revenue fell 3.6%. Organic revenue fell 5.4% in the period, as uncertainty in the geopolitical arena caused many clients to defer spending and cancel activity, notably in public relations and other project oriented businesses. In its ongoing effort to align costs with revenue, Interpublic continued to reduce its worldwide headcount. Salaries and related expense nevertheless increased 4.5% to $908.2 million. In constant dollars, salary and related expenses declined slightly, including a substantial increase of $13.8 million in severance expense, compared to the year-earlier quarter. At the end of the quarter, worldwide headcount totaled 49,400 compared to 50,800 at year end and 53,000 in March 2002. Office and general expenses were also negatively impacted by higher exchange rates, increasing 15.4% to $484.4 million, including higher bad debt expense, significantly increased professional fees and higher bank costs. In addition, the company recorded an $11.1 million charge related to the impairment of long-lived assets at Motor Sports. This amount reflects $4.0 million of current quarter capital expenditure outlays contractually required to upgrade and maintain certain of its existing facilities, as well as the sale and shut-down of certain other operations. New Business Interpublic's agency brands continued to demonstrate their competitive vitality in the first quarter by posting $888 million of net new business won. New business wins totaled $1.3 billion, including new or additional assignments from AstraZeneca, AT&T, Bank of America, Brown Forman, Budget Rent-a- Car, Genentech, Hewlett Packard, Johnson & Johnson, L'Oreal, Merck, Nikon, Novartis, Pfizer and Siemens. Significant wins already announced in the second quarter include Capital One, Macy's, L'Oreal (Plenitude), Novartis (Lotril) and AG Edwards. Revenue Mix Domestic operations, which constitute 57% of the company's portfolio, generated revenue of $815.8 million, compared to $831.7 in the first quarter of 2002. Organic revenue in the U.S. fell 3.0% in the quarter. U.S. advertising and media revenue decreased 1.9% to $478.0 million, while marketing and communications services declined 2.0% to $337.8 million. International revenue increased 4.9% to $617.2 million, as market weakness notably in the United Kingdom, Brazil, India and Italy was masked by stronger international currencies. International advertising and media revenue increased 0.2% to $356.5 million, while marketing and communications services in overseas markets increased 12.2% to $260.7 million. On a constant currency basis, international revenue declined 5.6%. International organic revenue was 8.5% lower in the first quarter. Non-Operating Expense and Taxes Interest expense increased to $38.8 million in the quarter, partly reflecting the issuance of $800 million 4.5% convertible notes on March 11. A portion of these proceeds were invested until April 4, at which time they were used to fund the repurchase of substantially all of the company's $702 million zero-coupon convertible notes issue due 2021. Interest income increased as a result of higher cash balances in the quarter. In addition, the company recorded an impairment charge related to an unconsolidated affiliate in Brazil. The company's tax rate was 43% in the first quarter of 2003, compared to 38% in the prior year period, reflecting the larger contribution of earnings from the United States. Debt and Liquidity On March 31, 2003, Interpublic's total debt was $3.3 billion, compared to $2.6 billion at yearend 2002 and $2.9 billion a year-earlier. In early April, the company used the proceeds from the issuance of the 4.5% convertible notes to fund the tender offer of its zero-coupon notes, which were valued at $582.5 million. The company has received commitments of $500 million from a syndicate of banks toward the renewal of its 364-day revolving credit facility. The company expects to complete the transaction by May 13. Outlook Interpublic management has indicated that it will be evaluating all of its operating units, as well as the corporate center, and will detail an accelerated cost savings plan when it releases second quarter 2003 results in early August. Despite continuing macroeconomic uncertainty, at this juncture revenue performance is consistent with management's previous estimate of a 1% to 4% decline in 2003, exclusive of asset sales and foreign currency effects. However, cost overhang issues persist at some operating units. Incorporating the savings generated by the cost reduction program, and excluding charges and gains, the company believes its previous 2003 earnings guidance of $.68 - .72 per share remains achievable. The Interpublic Group of Companies is among the world's largest advertising and marketing organizations. Its global operating groups are McCann-Erickson WorldGroup, The Partnership, FCB Group and Interpublic Sports and Entertainment Group. Major global brands include Draft Worldwide, Foote, Cone & Belding Worldwide, Golin/Harris, NFO WorldGroup, Initiative Media, Lowe Worldwide, McCann-Erickson, Octagon, Universal McCann and Weber Shandwick. As previously reported in Troubled Company Reporter, Standard & Poor's Ratings Services assigned its 'BB+' rating to The Interpublic Group of Cos. Inc.'s $700 million 4.5% convertible senior note issue due 2023. At the same time, Standard & Poor's affirmed its 'BB+' long-term corporate credit rating, and withdrew its 'B' short-term corporate credit rating. All ratings were removed from CreditWatch where they were placed on Aug. 6, 2002. The outlook is negative. INTRAWEST: Holding 3d Quarter Earnings Conference Call Tomorrow --------------------------------------------------------------- THERE WILL BE A CONFERENCE CALL TO DISCUSS INTRAWEST CORPORATION'S THIRD QUARTER RESULTS DATE: TUESDAY, MAY 13, 2003 TIME: 8:00 A.M. PT 10:00 A.M. CT 11:00 A.M. ET PLEASE DIAL THE FOLLOWING NUMBER TO BE CONNECTED TO THE CONFERENCE CALL: 1-888-458-1598 Access Code 88228 (ANALYSTS AND INSTITUTIONAL INVESTORS) 1-888-202-2787 Access Code 88228 (MEDIA AND RETAIL INVESTORS) THANK YOU FOR YOUR INTEREST AND COOPERATION THIS CALL WILL REPLAY THROUGH MONDAY, MAY 19, 2003 YOU MAY LISTEN TO IT BY DIALING 1-877-653-0545 (PASSWORD 180287) OR YOU MAY LISTEN TO A LIVE WEBCAST OF THE CALL BY VISITING www.intrawest.com and clicking on "About Us/Investor Relations/Webcasts." The webcast will be archived on http://www.intrawest.com * * * As previously reported, Standard & Poor's Ratings Services revised its outlook on resort developer and operator Intrawest Corp., to positive from stable on the company's intention to separate the real estate construction activity of its business into a new entity called Leisura Development Partnerships. At the same time, the ratings on Intrawest, including the 'BB-' long-term corporate credit rating, were affirmed. J. CREW: S&P Drops Corporate Credit Rating to Selective Default --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on clothing retailer J. Crew Group Inc. to 'SD' (selective default) from 'CC' and the 13-1/8% senior discount debentures due in 2008 to 'D' from 'CC'. At the same time, Standard & Poor's affirmed its 'CC' corporate credit rating on J. Crew Corp. and the 'CC' rating on the company's 10-3/8% senior subordinated notes. All ratings were removed from CreditWatch, where they were placed on April 14, 2003. The downgrade reflects the completion of an exchange offer on the outstanding 13-1/8% senior discount debentures due 2008 issued by the company for 16.0% senior discount contingent principal notes due 2008. "Standard & Poor's believes the offer is distressed; therefore, it is tantamount to a default," stated credit analyst Diane Shand. New York, New York-based J. Crew has $292 million of funded debt outstanding as of Feb. 1, 2003. J. CREW: S&P Assigns CCC Rating to $120MM 16% Sr. Sub. Notes ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'CCC' rating to J. Crew Intermediate LLC's $120 million 16% senior subordinated discount contingent principal notes due in 2008. The notes were issued under rule 144a with registration rights. At the same time, Standard & Poor's raised its corporate credit ratings on J. Crew Group Inc. and J. Crew Corp. to 'B-' from 'SD' and 'CC', respectively. The outlook is negative. The rating action reflects J. Crew's improved near-term financial flexibility due to a sharp cutback in capital expenditures and the exchange of its cash pay 13 1/8% debentures for non-cash pay notes. "These actions should provide the new management with an opportunity to turn around operations," stated Standard & Poor's credit analyst Diane Shand. New York, New York-based J. Crew had $329.3 million of funded debt outstanding as of Feb. 1, 2003. The ratings on J. Crew reflect the high business risk associated with its participation in the intensely competitive apparel retailing industry and leveraged balance sheet. These risks are partially mitigated by the company's good market position in catalog and store retailing. The company's operating performance has been poor for more than two years. Same store sales decreased 10.4% in 2002 following a 15.5% drop in 2001 and operating margins fell to 12.2% in 2002 from 12.3% in 2001 and 14.8% in 2000. The margin erosion is attributable to a lack of sales leverage and higher markdowns. From 1998 to 2000, the company improved its operating performance through a combination of leveraging its core brand across its retail, catalog, Internet, and outlet distribution channels; exiting noncore businesses; higher initial mark-ups on merchandise; and better inventory management. Debt burden is high, with total debt to EBITDA almost 7.9x. therefore, credit protection measures could quickly erode if operating results continue to decline. Ratings could be under pressure if current trends do not reverse and the company is unable to demonstrate signs of a recovery. J. CREW: Reports Better Revenue Results for April 2003 ------------------------------------------------------ J.Crew Group, Inc., reported revenues for the four weeks ended May 3, 2003 of $57.7 million, compared to revenues of $54.8 million for the four weeks ended May 4, 2002, an increase of 5%. Comparable store sales for the Retail division decreased 4% for the four weeks ended May 3, 2003 compared to the same four week period last year. Net sales for the Direct division increased 11% for the comparable four week period. Revenues for the thirteen weeks ended May 3, 2003 decreased 3%, to $161.5 million, compared to $167.1 million for the thirteen weeks ended May 4, 2002. Comparable store sales for the Retail division decreased 11% for the thirteen week period in 2003, compared to the same period last year. Net sales for the Direct division decreased 2% for the comparable thirteen week period. J.Crew Group, Inc. is a leading retailer of men's and women's apparel, shoes and accessories. As of May 3, 2003, the Company operated 154 retail stores, the J.Crew catalog business, jcrew.com, and 42 factory outlet stores. JMAR TECHNOLOGIES: Transfers Share Listing to Nasdaq SmallCap ------------------------------------------------------------- JMAR Technologies Inc. (Nasdaq: JMAR), a developer of advanced lasers, Collimated Plasma Lithography (CPL(TM)) systems and semiconductor production services, announced that its application to transfer the listing of its common stock from the Nasdaq National Market to the Nasdaq SmallCap Market was approved. The transfer became effective at the opening of the market on Friday, May 9, 2003 and the stock will continue to trade under the symbol "JMAR." JMAR transferred its listing to the Nasdaq SmallCap Market in part because its shareholders' equity was below the $10 million minimum requirement of the Nasdaq National Market as of Dec. 31, 2002 and because JMAR's shares have recently traded below the $1.00 per share minimum bid price requirement for continued listing. By transferring to the Nasdaq SmallCap Market, JMAR is required to maintain a $2.5 million shareholders' equity and will be afforded a 180 day grace period in which to satisfy the $1.00 minimum bid price requirement. "This transition to the Nasdaq SmallCap Market from our current NMS status is an acceptable consequence of several tough management decisions made over the past year," said Ronald A. Walrod, JMAR's chief executive officer. "The semiconductor industry economic downturn forced JMAR to discontinue unprofitable operations to stop the cash drain. The decision was made to discontinue its standard semiconductor chip business and its precision systems business, even if it meant falling below the shareholders' equity limit for NMS status. Earlier this year, JMAR completed two financings with Laurus Master Fund to provide it with needed working capital, but elected not to incur additional undue dilution in an effort to stay above the $10 million shareholders' equity limit. Our management approach has consistently been to confront the impact of the semiconductor industry downturn on our operations, take our hits without attempting levitation, and put our energy behind execution of our business plan, going forward on a solid foundation. "The move to SmallCap imposes no restrictions on management's ability to pursue the Company's goals and objectives, nor does it diminish our shareholders' ability to benefit from the convenience and trading dynamics of the Nasdaq Market. In fact, as a SmallCap Nasdaq company, we will have more time to satisfy the $1 per share minimum bid price required to retain our Nasdaq listing in the future," Walrod concluded. The Nasdaq SmallCap Market is fully automated, and provides real-time trade reporting and a marketplace for more than 800 companies. With the recent introduction of the Nasdaq SuperMontage(SM) trading system, securities listed on both the Nasdaq National Market and Nasdaq SmallCap Market share a unified, more liquid and transparent order entry system. Headquartered in San Diego, JMAR Technologies Inc. is the originator of Collimated Plasma Lithography, a next-generation lithography (NGL) alternative designed to deliver affordable, sub-100 nanometer chip-making capability in a compact format to the semiconductor industry. In addition to CPL, JMAR develops other products for the public and private sectors based on its proprietary "Britelight(TM)" laser light source. JMAR's operations include its laser and laser-produced plasma Research Division in San Diego; its Systems Division in Burlington, Vt., where CPL Stepper Systems are designed and manufactured; and its Microelectronics Division, based in Sacramento, Calif., where JMAR provides process integration and maintenance support for the U.S. Government's Defense Microelectronics Activity semiconductor fabrication facility. JMAR Technologies' December 31, 2002 balance sheet shows a working capital deficit of about $1.3 million. Also, the Company's total shareholders' equity diminished to about $3.7 million from about $14 million a year ago. KEY ENERGY: $150 Million Sen. Unsec. Notes Gets S&P's BB Rating --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' corporate credit rating on Key Energy Services Inc. Standard & Poor's also assigned it 'BB' rating to Key's proposed $150 million senior unsecured notes due 2013. The outlook is stable. Midland, Texas-based Key provides oilfield services to the North American onshore petroleum industry and has about $479.4 million in debt outstanding. "The transaction allows Key to repay outstanding indebtedness under its revolving credit facility and refinance higher-cost debt issues," said Standard & Poor's credit analyst Brian Janiak. Standard & Poor's also said that Key has demonstrated notable resiliency in the recent industry downturn. The company has steadfastly applied excess cash flow to debt reduction, bringing total debt to about 41% of total capital as of March 31, 2003. Management has publicly stated that it intends to continue its debt reduction initiatives, targeting a 25% debt-to-capital ratio over the next two years. Key plans to apply the proceeds from its notes issuance to repay the $58 million total outstanding under its revolving credit facility. The company also intends to retire its $97.5 million 14% senior subordinated notes due 2009 or other debt. KLEINERTS INC: Files for Chapter 11 Protection in S.D.N.Y. ---------------------------------------------------------- Kleinerts, Inc., a leading provider of branded and private label children's and infants' sleepwear and playwear, filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the Southern District of New York on May 7, 2003. In conjunction with its filings, the Company has entered into a debtor-in-possession (DIP) revolving credit financing facility with its senior lenders to support its operations going forward. The Company anticipates that during the course of the bankruptcy, it will sell its Buster Brown playwear and Kleinert's sleepwear divisions. Gregory A. Sandfort, Chief Executive Officer, said: "We are very pleased to have the full support of our bank group to finance a successful Chapter 11 process." To assist in its efforts to achieve a quick and successful process, Kleinert's has engaged a team from the turnaround and restructuring firm of Alvarez & Marsal led by Doug Rosefsky. Kleinert's has also engaged a team from the law firm of Morgan, Lewis & Bockius LLP led by Richard S. Toder. Kleinert's, Inc. designs, sources and sells children's and infants' sleepwear and playwear under private labels and the Buster Brown brand name domestically to department stores, mass merchandisers and specialty stores, as well as its ten Buster Brown retail outlet stores. MAGELLAN: Shareholders Want Equity Holders Committee Appointed -------------------------------------------------------------- Certain shareholders of Magellan Health Services Inc.'s common stock want the Court to direct the United States Trustee to appoint an official committee of equity security holders of Magellan pursuant to Section 1102(a)(2) of the Bankruptcy Code. The Shareholders include Bill Fusco, holder of 46,000 shares, Greg Bunting, holder of 90,855 shares, and Prescott Group Capital Management LLC holder of 1,587,500 shares. A formal written request was submitted to the U.S. Trustee on March 26. The request is still pending, and time is of the essence because a plan has been filed and a disclosure statement hearing has been requested for May 22, 2003. The case law suggests that an Equity Committee should be appointed under Section 1102(a)(2) of the Bankruptcy Code if these criteria are met: 1. the case is large and complex; 2. the stock is widely held and actively traded; 3. the interests of shareholders are not otherwise adequately represented; 4. the debtors are not hopelessly insolvent, to the extent that the shareholders appear to have a real economic interest at stake; 5. the timing of the request is appropriate; and 6. the costs of adequate representation do not outweigh the benefits. A. Peter Lubitz, Esq., at Schiff Hardin & Waite, in New York, asserts that this is clearly a large and complex case. The Debtors have over $1,000,000,000 in both assets and liabilities, over 5,000 employees, and there are over 80 filing debtors. The Debtors are the nation's leader in the provision of behavioral managed healthcare services. As of December 31, 2002, Magellan and its subsidiaries had 67,400,000 covered lives under behavioral managed healthcare contracts. This case is also complex from a capital structure viewpoint. Magellan's capital structure includes Senior Notes, Senior Subordinated Notes, preferred stock and common stock. Magellan is a party to numerous complex agreements, including agreements with Aetna, Inc., their most significant customer. In addition, the Debtors have engaged in several prepetition transactions with Aetna and other insiders, which may bear further scrutiny. As reported in Magellan's Form 10-K filed on January 22, 2003, Mr. Lubitz points out that there were over 9,000 record holders of Magellan's common stock as of the beginning of this year. The stock continues to be actively traded on the over-the- counter bulletin board, even after de-listing from the NYSE. Although the stock is currently trading at a depressed level, the stock traded at a high of $8.65 per share during the year 2002, and $13.45 per share during 2001. With 35,000,000 shares of common stock outstanding, this represents a loss of $300,000,000 in market capitalization within the last year, and a loss of nearly $500,000,000 in market capitalization within the last two years. No party adequately represents the shareholders in this case. Current management and directors, aside from insider TPG, hold less than 100,000 shares of stock, so current management has no incentive to represent existing shareholders. Indeed, current management's incentive is to preserve their status, because new management is slated to receive 10% of reorganized Magellan's common stock in the reorganization, according to Magellan's Plan. Mr. Lubitz tells the Court that TPG cannot adequately represent the shareholders' interests because it is a holder of preferred stock, not common stock. It is highly unlikely TPG will choose to convert its preferred stock into common stock under current conditions. Moreover, TPG will receive a substantial distribution under the Plan, and has no incentive to protect common shareholders. The largest non-insider shareholder, Richard Rainwater, also has no incentive to represent the interests of other shareholders. Indeed, Mr. Rainwater's Crescent Companies were parties to a transaction in 1997 whereby Magellan sold its psychiatric hospital facilities to an affiliate of the Crescent Companies for $400,000,000. This transaction occurred while Mr. Rainwater's spouse, Darla Moore, was on the board. Given these facts, Mr. Rainwater's incentives clearly lie in obtaining a broad release exculpating him from any potential liability in connection with the transactions. Mr. Lubitz also asserts that although Magellan has negative book equity, it does not appear to be hopelessly insolvent. The existence of negative book equity is certainly not determinative. For example, in In re Wang Laboratories Inc., 149 B.R.1, Wang's financial disclosures indicated a negative book equity of more than $400,000,000. Notwithstanding that fact, the Bankruptcy Court held that, given the facts before it, Wang was not hopelessly insolvent, and appointed an official equity committee in that case. Wang's shareholders ultimately received a substantial distribution. According to Mr. Lubitz, Magellan's negative book equity was caused by management's writedown of $500,000,000 in goodwill assets. Magellan's other assets, excluding the write-down, are similar to those reported for end of fiscal year 2001, when Magellan's stock had a market capitalization of almost $500,000,000. The Plan provides that holders of existing common stock will receive 0.5% of the new common stock to be issued on the effective date of the Plan, and warrants to purchase an additional 0.5%. Accordingly, it has been established through prepetition negotiation that shareholders have an economic stake in the outcome of this case. Mr. Lubitz points out that analysis of Magellan's cash flow using standard valuation metrics also suggests a positive equity value. According to the 10-K, Magellan's three-year average trailing EBITDA equals $208,000,000. Using a very conservative multiple of 6.5, Magellan has an enterprise value of over $1,350,000. Given Magellan's total funded debt and prepetition accounts payable of $1,060,000,000, its enterprise value would exceed funded debt by nearly $300,000,000, excluding NOLs valued at $200,500,000. Magellan's EBITDA margin of 9.6% is at the top end of its peer group, which suggests that its equity value may be even higher. The Shareholders are aware that Magellan's financial advisers, Gleacher Partners LLC, have published an estimate of "reorganization value" significantly lower than the foregoing. However, this estimate is based wholly on Magellan's future projections, which Magellan recognizes are inherently unreliable. Magellan states in the Disclosure Statement to its Plan that "the actual results achieved during the projection period will vary from the projected results and may vary substantially"; ". . . can be or are being made with respect to the accuracy of the Projections," and that "neither Gleacher nor the Debtors assumes any responsibility for the accuracy of the valuation estimate." Magellan does not endorse the accuracy of the Projections, and the Shareholders submit that the Court should not rely on them either. Mr. Lubitz states that a final indicator of potential equity value is the mental health parity legislation that was reintroduced in Congress in early 2003. This legislation would mandate insurance coverage for mental health treatment on a par with coverage for physical treatment. This legislation would have a significant, though not yet quantifiable, positive future impact on Magellan's value. For these reasons, it cannot be said that Magellan is hopelessly insolvent. Moreover, Mr. Lubitz says, this request certainly does not come too late in the case, and neither does it come too early. Although time is of the essence, no confirmation hearing has been set, and no disclosure statement hearing has yet been set, although one has been requested. If an Equity Committee is appointed promptly, Shareholders will still be capable of having a meaningful voice in this case. Because a fundamental purpose of Section 1102(a)(2) of the Bankruptcy Code is to provide a level playing field for public shareholders, there will be costs. Mr. Lubitz submits that these costs will naturally be monitored by the Equity Committee in the first instance, and by the other parties and by the Court ultimately. There are certainly adequate checks in place to prevent unnecessary expenses. When weighing these costs, it should be kept in mind that Magellan erased nearly $500,000,000 in market capitalization in the last two years. The amount of money invested by public shareholders dwarfs the cost of any committee. "A balance should be struck in favor of shareholder representation," Mr. Lubitz says. Mr. Lubitz alleges that current and former insiders, including Rainwater, Aetna, and TPG have engaged in substantial transactions with the company prepetition that have not been investigated. For example, in 1997, Magellan sold its Psychiatric Hospital Facilities to an affiliate of Rainwater's Crescent companies for $400,000,000, and in 1999, entered into an agreement to sell certain European facilities to Crescent and others for $57,000,000. Rainwater's spouse, Darla Moore, joined the Board in 1996 and resigned in 2002. As another example, in December 1997, Magellan purchased HAI from Aetna for $122,100,000, plus contingent payments totaling $240,000,000 through September 2002. Daniel S. Messina became a director of Magellan in December 1997, while he was an officer of Aetna and continued as an officer of Aetna until 2000. He is still on the Board. As a final example, after TPG affiliates joined the Board, the company engaged in yet another insider transaction, purchasing Vivra, the voting stock of which is owed [sic] 30% by TPG, for $10,000,000. Mr. Lubitz observes that Management is receiving an unusually large proportion of new equity -- 10%. Most important, the plan contemplates an equity investment by two members of the Creditors' Committee, with no evidence that the opportunity to make this investment has been shopped and with no provisions for any potential overbid. This equity investment, which appears to dictate the future control of the company without plan balloting or a plan confirmation hearing, was approved on April 3, 2003. Besides being unsupported by any prior reported decision, Mr. Lubitz argues that the "substantial likelihood" standard is unreasonable because it requires shareholders to prove the ultimate issue in the case as a precondition to receiving adequate representation. The entire purpose of appointing a committee under Section 1102(a)(2) is to provide equal resources -- both financial and informational -- to underrepresented parties, so that they will be on a level playing field with other parties whose fees are subsidized by the estate and who receive full information. The "substantial likelihood" standard fundamentally subverts this purpose. If Section 1102(a)(2) is to mean anything, it cannot be read to require the Shareholders to prove the ultimate issue in this case -- whether they are ultimately entitled to a distribution -- as a precondition to being adequately represented in the determination of that issue. Debtors Object Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, in New York, asserts that there are simply no grounds on which to appoint an official equity committee in these Chapter 11 cases. Contrary to the Shareholders' assertions, the Debtors are hopelessly insolvent. Under any rational analysis, shareholders simply have no economic interest in these cases and are not entitled to any distribution. Although the Debtors' proposed plan of reorganization provides for a small distribution to Magellan's shareholders, this distribution is simply a "gift." It in no way establishes that there is value for existing equity in these cases. Under these circumstances, there is no basis either in law or in fact to appoint an equity committee and saddle the estates and the other parties-in-interest with the obvious delay, fees, costs and expenses necessarily attendant thereto. By letter dated April 14, 2003, Mr. Karotkin recounts that the U.S. Trustee appropriately denied the Shareholders' request to form an equity committee, noting "it does not appear that equity holders would be entitled to a distribution, notwithstanding the proposal in the current proposed plan of reorganization to provide a very small equity distribution to current equity holders with the consent of the higher priority creditors." The denial of the request by the U.S. Trustee prompted the Equity Committee Motion. Section 1102(a) of the Bankruptcy Code states that: "On request of a party in interest, the court may order the appointment of additional committees of creditors or of equity security holders if necessary to assure adequate representation of creditors or of equity security holders. The United States Trustee shall appoint any such committee." Generally, "no equity committee should be appointed when it appears that a debtor is hopelessly insolvent because neither the debtor nor the creditors should have to bear the expense of negotiating over the terms of what is in essence a gift." Moreover, when deciding whether to appoint an equity committee, the Court should consider whether an official committee is necessary to provide adequate representation of the equity holders' interests. Mr. Karotkin insists that it is abundantly clear that based on the applicable authority, the appointment of an equity committee in these cases is neither warranted nor appropriate. In addition, Mr. Karotkin further asserts that: A. Under any rational valuation, the Debtors' liabilities exceed their assets by orders of magnitude. The Debtors' funded debt obligations themselves aggregate $1,200,000,000 and, as reflected in the Debtors' proposed Disclosure Statement, the Debtors' reorganization value is $675,000,000 -- hundreds of millions of dollars less than the amount where existing equity has any right to participate in these cases. B. The Debtors' outstanding bonds clearly are trading at significant discounts -- the 9-3/8 senior notes, in the principal amount of $250,000,000, are trading at a 15% discount and the 9% senior subordinated notes, in the principal amount of $325,000,000, are trading at a 75% discount. C. No significant cash distributions will be made under the proposed Plan. D. The Creditors' Committee believes that the Debtors are insolvent and oppose the appointment of an equity committee. E. The Court already has approved the Debtors' commitment for a significant capital infusion to be made in conjunction with their emergence from Chapter 11. Mr. Karotkin argues that the attempt in the Equity Committee Motion to raise the specter of alleged potential inappropriate transactions that warrant investigation as support for the appointment of an equity committee is equally misguided. The Equity Committee Motion is replete with nothing more than conclusory allegations with not one shred of factual support. Further, even if there were something that warranted investigation, the Creditors' Committee is more than capable of taking whatever action is appropriate. (Magellan Bankruptcy News, Issue No. 7: Bankruptcy Creditors' Service, Inc., 609/392- 0900) MEXICANA AIRLINES: Reaches Pacts for Reduction in Labor Costs ------------------------------------------------------------- Last week, the Association of Aviation Pilots of Mexico (A.S.P.A) and the National Labor Union of Aviation Workers (S.N.T.A.S) agreed to the conditions set by the CEO of Mexicana Airlines for a 10% reduction in labor cost through means of workforce reduction and salary cuts. ASPA and SNTAS represent 894 pilots and 2,333 maintenance, reservation and operation workers. As for the Association of Flight Attendants (ASSA), which represents 1,397 flight attendants, negotiations are still under way and to which an agreement should be reached in the following days. The approved agreements, a landmark move in the history of Mexican Aviation, are designed to maintain the industry afloat and maximize the cash reserve of the company. These new contracts go along with previous measures made by Mexicana to reduce costs with aircraft leaseholders and other major service providers such as EDS, Telmex, Lsg Sky Chef and travel agencies. In addition, Mexicana has completed its fleet renovation plan initiated back in the year 2000. This effort has allowed Mexicana to maintain its position as the leader in innovation with one of the most modern fleets worldwide. Mexicana Airlines is the international leader for travel between the U.S. and Mexico. The Company's fleet is considered one of the most advanced and youngest worldwide, serving fifty-three (53) destinations in North, Central, South America and the Caribbean. As a member of the prestigious Star Alliance, the largest airline network in the world, Mexicana offers its passengers extended benefits, mileage accrual, access to executive lounges and coordinated flight schedules designed to connect with vast networks that include over 720 destinations worldwide. MIDLAND REALTY: Fitch Upgrades Ratings on Series 1996-C1 Notes -------------------------------------------------------------- Fitch Ratings upgrades Midland Realty Acceptance Corp.'s, commercial mortgage pass-through certificates, series 1996-C1 as follows: $26 million class C to 'AAA' from 'AA'; $14.8 million class D to 'AA' from 'A'; $5.6 million class E to 'A+' from 'BBB+'; $7.4 million class F to 'A' from 'BBB'; and $18.6 million class G to 'BBB' from 'BB'. In addition, Fitch affirms the following classes: $45.6 million class A-3, interest-only class A-EC and $20.4 million class B at 'AAA'; and $11.1 million class J at 'B'. The $5.6 million class H, $8 million principal- only class K-1, and interest-only class K-2 are not rated by Fitch. The rating upgrades and affirmations follow Fitch's review of the transaction, which closed in September 1996. The upgrades are attributed to a 30% collateral paydown since Fitch's previous review in September 2002 resulting in increased subordination levels. As of the April 2003 distribution date, the transaction's aggregate principal balance has decreased approximately 56% to $163.2 million from $371.1 million at issuance. The Master Servicer, Midland Loan Services, collected yearend 2002 operating statements for approximately 62% of the loans remaining in the pool. The YE 2002 weighted-average debt service coverage ratio is 1.79 times compared to 1.70x for YE 2001 and 1.37x at issuance for all available loans. Eleven loans (11.5%) are currently in special servicing, including two that are real estate owned (REO). The two REO loans (3.4%) are health care properties. Another specially serviced loan (2.4%) is secured by a single tenant retail property previously occupied by Kmart. Fitch assumed the specially serviced loans will incur losses totaling $3 million. In addition, three loans (7.4%) on Midland's watchlist are of concern to Fitch due to tenants in bankruptcy. The certificates are collateralized by 79 fixed-rate mortgage loans, consisting primarily of retail (36%), multifamily (33%), office (9%), and industrial (7%) properties, with significant concentrations in Texas (13%), New York (9%), Ohio (9%), and Puerto Rico (8%). The upgrades reflect collateral paydown while taking into consideration the expected losses, specially serviced loans, and watchlist loans. Fitch will continue to monitor the performance of this transaction. MONSANTO CO.: Closes $250-Million 5-Year Public Debt Offering ------------------------------------------------------------- Monsanto Company (NYSE: MON) closed its 5-year, $250 million public debt offering. The notes were issued at 99.756 percent, and bear interest at 4 percent resulting in a yield of 4.054 percent. The notes mature on May 15, 2008, with a first interest payment date of Nov. 15, 2003. "This debt offering provides very attractive financing for our business and allows us to reduce our dependence on commercial paper borrowings to finance our seasonal working capital needs," said Monsanto Company Chief Financial Officer Terry Crews. In July 2002, Monsanto's shelf registration became effective, allowing the company to issue debt of up to $2 billion. Since that time, the company has issued debt of $1.05 billion, including this week's bond issue. Monsanto Company is a leading global provider of technology- based solutions and agricultural products that improve farm productivity and food quality. For more information on Monsanto, see: http://www.monsanto.com * * * As previously reported, Monsanto Company undertook a 10-year $200 million public debt offering, as a continuation of its debt restructuring plan. The proceeds of the offering was used to pay down short-term borrowings. In the six-month period ending June 30, 2002, Monsanto reported a $1.5 billion net loss on $2.7 billion of sales. Sales in the second quarter of 2002 trailed sales in the comparable 2001 quarter by a half-billion dollars. Monsanto's June 30 Balance Sheet shows adequate liquidity and significant shareholder equity. M~WAVE INC: Bank One Agrees to Forbear Until August 31, 2003 ------------------------------------------------------------ M~Wave, Inc. (Nasdaq: MWAV), a value added service provider of high performance circuit boards used in a variety of digital and high frequency applications, announced net sales of $3,205,000 for the quarter ended March 31, 2003 and a net loss of $5,371,000 or $1.21 per share compared to net sales of $8,314,000 and a net profit of $343,000 or $0.08 per share for the quarter ended March 31, 2002. The Company recorded a $3,578,000 impairment of building, plant and equipment in the first quarter of 2003 relating to the write down of the West Chicago building and equipment to an estimate of fair market value. The Company estimated the fair market value of the land and building because the appraisal of the land and building will not be completed until May 23, 2003. Thus there could be an additional write down after the appraisal is completed. Cash levels increased from $1,514,000 at December 31, 2002 to $3,372,000 at March 31, 2003. Accounts Receivables were down $121,000, inventories were down $23,000, accounts payable were up $1,044,000 and the Company collected approximately $3,588,000 of income tax refunds during the quarter. The Company purchased $53,000 of property, plant and equipment during the quarter. The Company deposited $325,000 in the first quarter of 2003 and an additional $1,500,000 in April 2003 into the sinking fund for the Company's outstanding industrial bond debt account per the terms of its Forbearance Agreement with Bank One. The outstanding balance of the industrial bond debt dropped to approximately $2,750,000 net of the sinking fund. The Company's cash balance was approximately $456,000 as of May 7, 2003. Under the terms of the Forbearance Agreement, Bank One agreed to comply with all of the terms and conditions contained in the Forbearance Agreement and the Bank agreed to forebear from the date of the Agreement to August 31, 2003 from pursuing its rights under the Reimbursement Agreement (including the right to declare the bond immediately due and payable) provided the Company complies with all of the terms and conditions contained in the Forbearance Agreement. To comply with the Forbearance Agreement, the Company is required to deposit $500,000 into the sinking fund account for the industrial bond debt by June 30, 2003 as well as make its regularly scheduled $325,000 deposit during the second quarter of 2003. Joseph A. Turek, M~Wave's chairman and chief executive officer, indicated, "The Company has attempted to gain financing to satisfy the terms of the Forbearance Agreement and industrial bond. To date no financing has been consummated; however, we now believe that refinancing alone is not the solution and are looking at a top to bottom restructuring and realignment of our business plan." M~Wave announced the following steps it is immediately taking in an effort to reposition the Company and improve its liquidity position: -- the layoff of approximately 44 of the Company's 126 employees, mainly in the production segment of the Company's business; -- pursuing the sale of certain fixed assets no longer being used at the Company's Bensenville facility; -- pursuing hardship requests for accelerated payment of anticipated state tax refunds of approximately $900,000. Mr. Turek continued by saying, "Many of the challenges facing us and our desire to redirect the company toward both survival and renewal requires skills we need to turn to the outside to secure." In line with this objective, Credit Support International, LLC of Texas was brought in to assist M~Wave's management by the board of directors. Jim Mayer, the Managing Member of the firm, said, "M~Wave, like most domestic circuit board companies, has experienced falling demand, lower prices, and increased foreign competition, but the company has positive attributes including its virtual manufacturing expertise which makes M~Wave a potentially attractive strategic partner. Moreover, we plan on dealing with issues of debt both secured and unsecured in a very proactive way." The Company also announced that Robert O'Connell, the chief operations officer, has resigned by mutual agreement from the Company to pursue other interests. In the interim, Mr. Turek will assume Mr. O'Connell's daily responsibilities. M~Wave was notified by Nasdaq National Market that the Company's common stock has not maintained a minimum market value of publicly held shares of $5,000,000 as required for inclusion by Marketplace Rule. On May 8, 2003, the Company was approved for inclusion in the Nasdaq SmallCap Market. The Company's common stock will move from the Nasdaq National Market to the Nasdaq Small Cap Market and will continue under the symbol "MWAV." Mr. Turek announced the signing of Supply Chain Management agreements with Precision Graphics of Somerville, New Jersey and PDM Solutions of San Diego, California. Precision Graphics and PDM Solutions are "World Class" providers of contract manufacturing services for leading Original Equipment Manufacturers in the electronics industry. M~Wave expects to ship approximately $500,000 to $750,000 per year of printed circuit boards in accordance with the terms of those agreements. There can be no assurance that the steps being taken by the Company, even if successfully completed, will enable the Company to comply with the terms of the Forbearance Agreement and/or fund the Company's working capital needs. Moreover, even if the Company is able to comply with the terms of the Forbearance Agreement, there can be no assurance that Bank One and the Company will continue to enter into forbearance agreements beyond August 31, 2003 or that the Company will be able to fund its working capital needs. Established in 1988 and headquartered in the Chicago suburb of West Chicago, Ill., M~Wave is a value-added service provider of high performance circuit boards. The Company's products are used in a variety of telecommunications and industrial electronics applications. M~Wave services customers like Lucent Technologies and Motorola, Inc. with its patented bonding technology, Flexlink II(TM) and its supply chain management program called Virtual Manufacturing. The Company trades on the Nasdaq National market under the symbol "MWAV". Visit the Company on its Web site at http://www.mwav.com NATIONAL CENTURY: Seeks Court Approval for Medshares Claim Sale --------------------------------------------------------------- On July 29, 1999, Meridian Corporation also known as Medshares, Inc. and certain of its affiliates filed for Chapter 11 protection in the United States Bankruptcy Court for the Western District of Tennessee, Western Division. Prior to the Medshares Petition Date, the National Century Debtors purchased accounts receivable from Medshares. After the Medshares Petition Date, certain of the Debtors and Medshares entered into a Sale and Subservicing Agreement -- the Postpetition SSA. Pursuant to the Tennessee Bankruptcy Court's Order, Medshares incurred liabilities under the Postpetition SSA to the Debtors. According to Charles M. Oellermann, Esq., at Jones, Day, Reavis & Pogue, in Chicago, Illinois, these liabilities gave rise to claims with super-priority administrative expense status. In addition, the Debtors were granted liens in substantially all of Medshares' real and personal property. As of December 2002, the outstanding balance of purchases, net of reserves, under the Postpetition SSA was $74,337,800. Also, additional unpaid liabilities amounting to $34,950,093 had been incurred under the Postpetition SSA. Thus, the total amount of the Medshares Claim the Debtors held was $109,287,894 as of December 31, 2002. Despite being in bankruptcy for over three years, Medshares has not yet filed a plan of reorganization and has continued to lose money while operating as a debtor-in-possession in Chapter 11. In the light of this circumstance, Mr. Oellermann relates that Medshares has undertaken an effort to sell substantially all of its assets. Medshares filed a motion for approval of competitive bidding procedures for the sale of its assets. In this regard, Medshares entered into a non-binding letter of intent to sell all of its assets to Intrepid USA. On the other hand, Mr. Oellermann informs the Court, the Debtors engaged in negotiations with potential purchasers, including Todd J. Garamella, for the sale of all or portions of the Medshares Claim. The Debtors' negotiations with Mr. Garamella, who is the CEO of Intrepid, have resulted in the Parties' entry into an Assignment of Claim Agreement -- the Transfer Agreement. Accordingly, the Debtors ask the Court to approve the sale of the Medshares Claim to Mr. Garamella under the terms of the Transfer Agreement, or any other purchaser as is selected pursuant to the Competitive Bidding Procedures. The salient terms of the Transfer Agreement are: A. Sale of the Medshares Claim The Debtors will irrevocably transfer to Mr. Garamella: (1) all of their right, title and interest in and to, arising under or in connection with the Medshares Claim; (2) all rights to receive any cash, securities, instruments, interest, fees, expenses, damages, penalties or other amounts with respect to the Medshares Claim; (3) any and all proceeds of any of the foregoing; and (4) all collateral, liens, security interests, pledge agreements and other rights related to the Medshares Claim. B. Purchase Price The purchase price for the Medshares Claim will be: (1) $6,750,000 in cash or other immediately available funds, which will be paid pursuant to terms set forth in the Escrow Agreement; (2) an amount equal to 50% of collections exceeding $28,000,000 plus the amount paid in settlement of unsecured claims in the Medshares Cases -- the Threshold Amount -- received by Medshares for accounts receivable generated by, owned by or owing to Medshares as of the closing date of the Escrow Agreement -- the Accounts Receivable Portion; and (3) an amount equal to 25% of the difference between $7,000,000 and the amount actually paid by Medshares to fully resolve and settle the claim of the Internal Revenue Service against Medshares, if this settlement amount is less than $7,000,000. C. No Assignment of Prepetition Claims Mr. Garamella will have no rights to the Prepetition Claims. D. Purchase Price Adjustments The Debtors will make immediate proportional restitution and repayment of the Purchase Price to the extent that the Medshares Claim is disallowed, reduced or subordinated due to no fault of Mr. Garamella in whole or in part to an amount less than $70,000,000 -- a Disallowance. E. Free and Clear Sale The Debtors will transfer the Medshares Claim to Mr. Garamella free and clear of any and all liens, claims, security interests or encumbrances of any kind or nature whatsoever. F. Closing Closing of the transfer of the Medshares Claim will occur not later than three business days after the execution of the letter of intent for Intrepid to purchase the Medshares assets and the filing by Medshares of a motion to establish bidding procedures for their claim. G. Covenants of the Debtors The Debtors agree that: (1) they will make all filings and take all actions, at their expense, required to consummate the assignment of the Medshares Claim to Mr. Garamella; (2) they will forward all notices with respect to the Medshares Claim to Mr. Garamella; (3) after the Closing Date, any distribution received by the Debtors on account of the Medshares Claim will constitute property of Mr. Garamella, and the Debtors will hold the property in trust and will promptly transfer and deliver to Mr. Garamella; and (4) as of the Closing Date, the Debtors will request the resignation of any members of Medshares' board of directors previously designated by the Debtors, and the Debtors will cooperate with Mr. Garamella in the designation by Mr. Garamella of replacement Board members. Mr. Oellermann informs the Court that Lawyer's Title Insurance Corporation will act as the escrow agent for the Escrow Account. The salient terms of the Escrow Agreement are: A. Payment to Debtors Upon the entry of a final Court order approving the sale of the Medshares Claim to Mr. Garamella and the filing by Medshares of a motion for the approval of bidding procedures for the sale of substantially all of the Medshares assets with Intrepid as the stalking horse bidder, the Escrow Agent will disburse to the Debtors the Cash Portion plus all interest accrued on that amount from the Closing Date of the Escrow Agreement through the date of payment. B. Payment to Purchaser If Mr. Garamella is not the Successful Bidder, the Escrow Agent must pay the entire amount in the Escrow Account to Mr. Garamella. If any portion of the Medshares Claim becomes subject to a Disallowance, the Escrow Agent must pay to Mr. Garamella an amount equal to the proportionate amount of the Disallowance. C. Deadline for Approval of the Sale The Debtors must obtain approval of the Transfer Agreement by May 23, 2003. D. Actions Regarding the Medshares Claim During the term of the Escrow Agreement, the Debtors agree that, with respect to the administration and prosecution of the Medshares Claim in the Medshares Cases: (1) unless otherwise directed by Mr. Garamella, the Debtors will remain obligated at the Debtors' expense to take necessary and appropriate steps to seek allowance of, defend and compromise the Medshares Claim; (2) the Debtors may not negotiate a reduction in the allowed amount of the Medshares Claim to an amount less than $70,000,000 without Mr. Garamella's express written consent; (3) the Debtors will keep Mr. Garamella fully advised of all material events relating to the Medshares Claim; and (4) except for a reduction in the amount of the Medshares Claim as permitted under clause (2), the Debtors will not voluntarily agree to any modification, amendment or other adjustment to the Medshares Claim without Mr. Garamella's prior written consent. E. Rights of Escrow Agent The Escrow Agent will have the right, but not the obligation, to refrain from taking any action other than to continue to hold the funds on deposit in the Escrow Account under the Escrow Agreement until otherwise directed by a final judgment of a court of competent jurisdiction or by a written agreement signed by the Debtors and Mr. Garamella. F. Release of Escrow Agent The Escrow Agreement will terminate upon the disbursement in full of all amounts on deposit in the Escrow Account, and the Escrow Agent will be deemed fully and completely released from its obligations or liabilities. G. Compensation of Escrow Agent The Escrow Agent will be entitled to $675 in compensation in connection with the performance of its duties and obligations under the Escrow Agreement, with Mr. Garamella and the Debtors each paying half of the amount. Mr. Oellermann asserts that sound business justifications exist for the sale because: (a) if the Medshares Claim is not sold, the Debtors will need to continue to devote substantial time to monitoring and representing the Debtors' interests in the Medshares Cases, at additional cost to the Debtors' estates; (b) the Debtors' recovery on account of the Medshares Claim in the Medshares Cases is uncertain and, in light of the evident administrative insolvency of the Medshares estates, could involve a substantial expenditure of time, effort and resources; (c) the Purchase Price that will be obtained through the Competitive Bidding Procedures will be fair and reasonable under the circumstances; and (d) the parties to the Transfer Agreement and the Escrow Agreement have acted in good faith. (National Century Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) NEXTEL PARTNERS: S&P Junks Planned $150M Convertible Sr. Notes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC+' rating to the proposed $150 million convertible senior notes due 2008 offered under Rule 144A with registration rights by Kirkland- Washington-based wireless service provider Nextel Partners Inc. The company expects the offering of these new notes to close on May 13, 2003. Standard & Poor's also affirmed its 'B-' corporate credit rating on the company. The outlook remains stable. Nextel Partners had total debt of over $1.4 billion at the end of first quarter of 2003, and the rating on the proposed new notes is one notch lower than the corporate credit rating. "The proposed new notes, allowing holders to convert to class A common stock prior to maturity on Nov. 15, 2008, will rank pari passu with all of Nextel Partners' other existing and future senior unsecured debt and have priority over its subordinated debt. The notching of the proposed new notes is based on the limited amount of priority obligations--composed mostly of $475 million in bank loans on a fully drawn basis--relative to our estimate of asset value," said credit analyst Michael Tsao. The ratings reflect its high debt leverage and negative free cash flow prospect, at least in the near term. Nextel Partners acquired substantial debt in the past several years to build out its network. Despite recent efforts to de-leverage through debt- for-equity exchanges, debt-to-annualized EBITDA leverage remained high--at about 13.8x at March 31, 2003. Nextel Partners likely will remain weak with respect to cash flows. In first quarter 2003, EBITDA-to-cash interest coverage was about 1.2x; for the year, Nextel Partners is expected to realize free cash flow loss of about $165 million, assuming $155 million in EBITDA, $110 million in cash interest expense, and $210 million in capital expenditures. The combination of high leverage and continuing cash flow loss does not give it much safety margin against risks relating to competition, wireless number portability, and the economy. Somewhat offsetting these concerns has been Nextel Partners' solid operation to date. Success in targeting the business and public-sector markets, and the unique quality of its two-way radio (i.e., DirectConnect) product allow Nextel to realize industry-leading average revenue per user of $65 and low churn of about 1.7%. With competitors unlikely to materially challenge DirectConnect in the next two years, the company could demonstrate solid operating performance for some time. Nextel Partners has limited safety margin against execution risks given its substantial leverage and prospect of continuing free cash flow loss in the near term--factors somewhat mitigated by adequate near-term liquidity and the expectation that Nextel Partners will be able to maintain strong operating metrics. Standard & Poor's will re-examine ratings and the outlook if there are material changes regarding liquidity, operations, and the company's trajectory toward becoming free cash flow positive in 2004. NORSKE SKOG: Prices $150 Mill. Principal Amount of Senior Notes --------------------------------------------------------------- Norske Skog Canada Limited priced US$150 million aggregate principal amount of 8-5/8% Senior Notes due June 15, 2011. This represents a US$50 million increase in the size of the offering that was originally announced May 7, 2003. The notes were offered at a price of 102.953% of par to yield 8% and will result in net proceeds of approximately US$150 million. The notes will be guaranteed by all of the Company's material wholly-owned subsidiaries. The net proceeds of this issuance are expected to be used to repay outstanding indebtedness under the Company's secured credit facility and for general corporate purposes. The notes have not been, and will not be, registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or applicable exemption from such registration requirements. In February 2003, Standard & Poor's lowered its credit rating of the Company's long-term corporate and senior unsecured debt by one level, from BB+ to BB, and affirmed its existing debt on its senior secured debt as BB+. S&P's outlook for the Company's business is stable. NVIDIA CORP: Reports Weaker Results for 1st Quarter Fiscal 2004 --------------------------------------------------------------- NVIDIA Corporation (Nasdaq: NVDA) reported financial results for the first quarter of fiscal 2004. For the first quarter of fiscal 2004, revenue was $405.0 million, compared to $582.9 million for the first quarter of fiscal 2003. Net income for the first quarter of fiscal 2004 was $19.7 million, compared to net income of $83.2 million for the first quarter of fiscal 2003. "Our key objective for the quarter was to ramp into production our new family of DX9-generation GPUs and bring cinematic computing to the mass market," stated Jen-Hsun Huang, president and CEO of NVIDIA. "We absolutely delivered by deploying the FX architecture simultaneously into our desktop, mobile and workstation product lines. In addition, our NVIDIA nForce(TM) 2 and new NVIDIA nForce 3 platform processors are changing the competitive landscape in the core logic market place. And most importantly, our increased market share demonstrates the strength of the NVIDIA brand and our customers' demand for NVIDIA products on any platform." NVIDIA Corporation, whose corporate credit rating is rated at B+ by Standard & Poor's, is a visual computing technology and market leader dedicated to creating products that enhance the interactive experience on consumer and professional computing platforms. Its graphics and communications processors have broad market reach and are incorporated into a wide variety of computing platforms, including consumer digital-media PCs, enterprise PCs, professional workstations, digital content creation systems, notebook PCs, military navigation systems and video game consoles. NVIDIA is headquartered in Santa Clara, California and employs more than 1,500 people worldwide. For more information, visit the company's Web site at http://www.nvidia.com OHIO CASUALTY: Catastrophe Losses Cause Poorer Financial Results ---------------------------------------------------------------- Ohio Casualty Corporation (Nasdaq:OCAS) announced net income of $19.9 million for the first quarter ended March 31, 2003, compared with $26.9 million in the same quarter of 2002. President and Chief Executive Officer Dan Carmichael, CPCU commented, "We are disappointed with our overall operating results for the first quarter. As we previously reported, catastrophe losses and poor results for workers' compensation and the New Jersey personal auto run-off business negatively impacted the quarter. Our premium volume was lower than we expected as competition in parts of the marketplace is increasing. Fortunately, we still maintained significant price increases for all business segments. A number of our major product lines-personal auto, if you exclude New Jersey, commercial multiple peril and other commercial property business, and all of Specialty Lines-which in total represent approximately half of our premium revenue, had results near or better than break-even in terms of statutory underwriting profit. While some of the other lines did not show improvement during the quarter we have taken actions to improve these lines and expect them to generate better results as the year progresses. We remain convinced that the changes instituted with our strategic plan are moving the company toward the ultimate objective of achieving meaningful underwriting profitability." Consolidated before-tax net investment income for the first quarter of 2003 was $53.2 million compared with $50.9 million in the first quarter of 2002. During the first quarter of 2003, net investment income was positively impacted by a settlement of $1.25 million for the termination of an investment management agreement. Consolidated before-tax realized investment gains amounted to $19.3 million for the quarter ended March 31, 2003. For the three months ended March 31, 2002, before-tax realized investment gains were $22.8 million. The Group continued to reduce its equity holdings in order to reduce the effect on statutory surplus of future stock market volatility. Management of the Corporation believes the significant volatility of realized investment gains and losses limits the usefulness of net income as a measure of current operating performance. Management uses the non-GAAP financial measure of net income before realized gains and losses to further evaluate current operating performance. For the first quarter 2003, consolidated after-tax realized gains positively impacted net income by $12.5 million, compared with $14.8 million for the first three months of 2002. Amortization and impairment write-down of the Corporation's agent relationships intangible asset for the first quarter 2003 totaled $4.8 million before tax, which consisted of $1.9 million in amortization and $2.9 million in impairment. This compares with $8.0 million before tax in the first quarter of 2002, consisting of $2.7 million in amortization and $5.3 million in impairment. This asset is related to the acquisition of the commercial lines business from Great American Insurance Company in 1998 and the amortization and impairment write-down of such assets are non-cash charges. Management uses statutory financial criteria to analyze the Group's property and casualty results and statutory financial measures are required to be reported to insurance industry regulators. Management analyzes statutory results through the use of insurance industry financial measures including statutory loss and loss adjustment expense ratios, statutory underwriting expense ratio, statutory combined ratio, net premiums written and net premiums earned. The statutory combined ratio is a commonly used gauge of underwriting performance measuring the percentage of premium dollars used to pay insurance losses and related expenses. A discussion of the differences between statutory accounting principles and generally accepted accounting principles in the United States is included in Item 15 on pages 67 and 68 of the Corporation's Form 10-K for the year ended December 31, 2002. At March 31, 2003 and 2002, statutory surplus, a financial measure that is required by insurance regulators and used to monitor financial strength, was $733.8 million and $778.7 million, respectively. Statutory surplus has increased $53.9 million since September 30, 2002, including $8.1 million since December 31, 2002. The ratio of twelve months ended net premiums written to statutory surplus as of March 31, 2003 was 1.9 to 1. Property-Casualty Operations The table below summarizes the statutory net premiums written for the operating segments: Statutory Net Premiums Written First Quarter % ($ in millions) 2003 2002 Chg -------------------- ---- ---- --- Commercial Lines $205.1 $192.8 6.4 Specialty Lines 32.9 39.5 (16.7) Personal Lines 114.1 142.6 (20.0) ------ ------ ------ All Lines $352.2 $374.9 (6.1) The net premiums written decline from 2002 was primarily related to the withdrawal from the New Jersey private passenger auto market, which accounted for $25.0 million of the decrease. Net written premiums continue to be positively impacted by price increases, partially offset by more conservative underwriting of workers' compensation and construction classes of business and by changes to reinsurance contracts. Commercial Lines average renewal price increases were 13.2% in the first quarter 2003, only slightly below management's expectations, compared to 14.9% in the same period of 2002 and 14.2% in the fourth quarter 2002. Increased competition in several markets for small to midsized policies and more conservative underwriting of workers' compensation and construction classes of business partially offset the price increases for a net premiums written increase of 6.4% compared to the first quarter 2002. Specialty Lines net premiums written were down $6.5 million compared to prior year as a result of higher reinsurance costs on commercial umbrella. Specialty Line premiums before reinsurance increased 12.6% over first quarter 2002. Higher reinsurance costs were driven by the inclusion of a ceding commission and by increased reinsurance rates per dollar of premium. The addition of ceding commissions on the current contract causes a corresponding increase to ceded premiums. The first quarter 2003 also included an accrual of ceded premiums related to reinstatement of previous reinsurance contracts. Commercial umbrella is the largest Specialty Line product and recognized 20.5% average renewal price increases for the first quarter 2003, compared to 45.1% for the same quarter in 2002 and 33.1% in the fourth quarter 2002. In 2002 the Group instituted significantly higher minimum premiums for small umbrella policies which were not increased in 2003. The first quarter average renewal price increase and gross premiums written were in line with management's expectations. Personal Lines net premiums written declined due to management decisions to cancel certain agents and to withdraw from New Jersey private passenger auto and other selected markets. These actions resulted in a $30.4 million decrease in net premiums written for the first quarter 2003 and explained all of the decline from the same quarter one year ago. The exit from the New Jersey private passenger auto market, which was completed during March 2003, contributed $25.0 million to the decrease. The combined ratio measures the percentage of premium dollars used to pay insurance losses and related expenses and is a commonly used property and casualty insurance industry gauge of statutory underwriting performance. The combined ratio is the sum of the loss ratio, the loss adjustment expense ratio, and the underwriting expense ratio. All references in this press release to combined ratio or its components are calculated on a statutory accounting basis. All combined ratio references in this press release are calculated on a calendar year basis unless specified as calculated on an accident year basis. The table below summarizes the statutory combined ratio results by business unit for recent periods: Calendar Year First Quarter Statutory Combined Ratio 2003 2002 ------------------------ ---- ---- Commercial Lines 111.2% 108.3% Specialty Lines 93.2% 83.4% Personal Lines 110.3% 107.3% All Lines 108.8% 106.5% The first quarter 2003 All Lines combined ratio increased 2.3 points over the first quarter 2002. A number of factors negatively impacted this ratio -- primarily higher catastrophe losses (contributing 2.2 points of the deterioration) and a higher frequency of large non-catastrophe property losses exceeding $250,000 per loss (contributing 1.3 points of the deterioration). These negative factors were partially offset by improvements in other areas related to better pricing and improved underwriting. The All Lines underwriting expense ratio increased 2.1 points for the quarter compared to last year and is explained later in this press release. Also impacting the combined ratio are assessments for the Group's share of underwriting losses on residual market pools for workers' compensation. This negatively impacted first quarter 2003 combined ratio by .8 points versus .6 points in the same quarter in 2002 and .2 points for the year 2002. The first quarter 2003 included an increase in the estimate of losses not yet reported by the pools based on trends in reported results. The Group's reduction in workers' compensation premium writings are expected to mitigate the negative impact of future assessments. The Commercial Lines combined ratio of 111.2% increased 2.9 points compared to 2002 due to a higher frequency of both catastrophe losses and other large property losses as well as underwriting losses related to National Workers' Compensation pools. This included the impact of the residual market pool for workers' compensation of 1.8 points compared to 1.5 points during first quarter 2003 and 2002, respectively. Commercial multiple peril and other commercial property business had good results, with a combined ratio for the quarter of 101.1% despite the negative effects of catastrophes and other large property losses. The Specialty Lines combined ratio of 93.2% increased 9.8 points above last year's first quarter due almost entirely to the ceded premium accrual related to the reinstatement of prior year reinsurance layers. The reinsurance reinstatement impacted Specialty Lines by 8.4 points. The Personal Lines combined ratio increased 3.0 points from 107.3% in the first quarter 2002 driven by poor New Jersey personal auto results. New Jersey personal auto added 4.4 points to the Personal Lines combined ratio in the first quarter 2003 compared to 2.5 points in the first quarter of 2002. The statutory combined ratio for personal auto, our largest single product line, was 108.0%. New Jersey impacted this combined ratio by 7.1 points. Results for personal auto other than New Jersey were favorable with a combined ratio of 100.9% for the quarter. The All Lines loss and loss adjustment expense ratios, which measure losses and LAE as a percentage of net earned premiums, were minimally impacted by adjustments to estimated losses and LAE related to prior years' business. The increase in provisions for prior years' losses and LAE increased the combined ratio by .8 points in the first quarter 2003 compared to 1.2 points in the first quarter 2002. The loss and LAE ratio component of the accident year combined ratio measures losses and LAE arising from insured events that occurred in the respective accident year. The current accident year excludes losses and LAE for insured events that occurred in prior accident years. The table below summarizes the impact of changes in provision for all prior accident year losses and LAE: First Quarter ($ in millions) 2003 2002 --------------- ---- ---- Statutory net liabilities, beginning of period $2,078.7 $1,982.0 Increase in provision for prior accident year claims $2.7 $4.2 Increase in provision for prior accident year claims as % of premiums earned 0.8% 1.2% The statutory loss adjustment expense ratio for the first three months of 2003 was 13.6%, .7 points lower than the first quarter 2002 loss adjustment expense ratio of 14.3%. The decrease is primarily a result of efforts to more effectively manage claims legal expenses. During the first quarter of 2003, the Group announced a reorganization of its claims operations, including a reduction in staff, which was effective in March 2003. The reduction will result in a net savings of approximately $1.8 million in 2003, after a first quarter 2003 charge of approximately $1.0 million for severance pay and other related expenses. Catastrophe losses in the first quarter of 2003 were $10.7 million, an increase of $7.4 million from the same period of 2002. Catastrophe losses added 3.1 points to the statutory combined ratio in the first three months of 2003, above the .9 point catastrophe impact in the first three months of 2002. For the full year 2002, catastrophes added 1.4 points to the combined ratio. The first quarter 2003 statutory underwriting expense, which measures underwriting expenses as a percentage of net written premiums, was 35.6% or 2.1 points higher than 33.5% in the comparable quarter of 2002 and .7 points higher than the full year 2002 ratio of 34.9%. Although the Corporation continues to monitor and manage expenses closely, the expense ratio increased resulting from higher expenses related to investment in technology, the impact of lower net premiums written, and increased premium related taxes and assessments. In 2002, the Group completed for Commercial Lines its multi-year development of software for policy administration and rating, known as P.A.R.I.S.(SM). During the development stage, information systems personnel costs were capitalized. In 2003, P.A.R.I.S.(SM) is expected to be rolled out for all commercial lines products. Information systems personnel costs related to the roll out and maintenance of the software were expensed during the first quarter of 2003. This shift from development to roll out and maintenance caused the majority of the increase in software expenses. This higher expense plus amortization of expenses capitalized in prior years increased the first quarter 2003 underwriting expense ratio by 1.1 points over the first quarter 2002. The Group's remaining non-commission and tax related underwriting expenses of $49.4 million decreased $4.0 million in the first quarter 2003 compared to the first quarter 2002, but this positive impact on the expense ratio was largely offset by lower net premiums written. The impact of the decline in premium volume on these expenses is .9 points. These expenses are primarily comprised of personnel related expenses and the reduction reflects the continued decline in the employee count. During the first quarter 2003, premium related taxes and assessment payments for the current quarter were higher than similar taxes and assessments in the first quarter of last year. The payments were primarily related to state insurance funds such as guaranty funds and workers' compensation second injury funds. The increased premium related taxes and assessments increased the underwriting expense ratio by .7 points for the first quarter 2003 compared to the same quarter a year ago. The employee count continues to decline. As of March 31, 2003, the employee count was 2,859, compared with 3,233 at March 31, 2002 and approximately 3,000 at December 31, 2002. Assets, Investments and Shareholders' Equity Consolidated corporate assets were $4.83 billion on March 31, 2003, compared with $4.78 billion at December 31, 2002. Investments in securities were $3.15 billion at cost, with an estimated fair market value of $3.51 billion at March 31, 2003, compared with $3.12 billion at cost, with an estimated fair market value of $3.50 billion at December 31, 2002. Shareholders' equity was $1.07 billion at March 31, 2003, compared with $1.06 billion at December 31, 2002. Book value per share at March 31, 2003 was $17.58, compared with $17.43 at December 31, 2002. Supplemental financial information regarding the Corporation's first quarter results can be accessed at Ohio Casualty Corporation's Web site at http://www.ocas.comand was also filed on Form 8-K with the Securities and Exchange Commission. Ohio Casualty Corporation is the holding company of The Ohio Casualty Insurance Company, which is one of six property- casualty subsidiary companies that make up Ohio Casualty Group. The Ohio Casualty Insurance Company was founded in 1919 and is licensed in 49 states. Ohio Casualty Group is ranked 40th among U.S. property/casualty insurance groups based on net premiums written (Best's Review, July 2002). The Group's member companies write auto, home and business insurance. Ohio Casualty Corporation trades on the NASDAQ Stock Market under the symbol OCAS and had assets of approximately $4.8 billion as of March 31, 2003. As reported in the Troubled Company Reporter's November 4, 2002 issue, Standard & Poor's revised its outlook on Ohio Casualty Corp., which has a double-'B' counterparty credit rating, and related operating companies to negative from stable. OMNOVA SOLUTIONS: Expects to Lose Up to $6 Million in Fiscal Q2 --------------------------------------------------------------- OMNOVA Solutions Inc. (NYSE: OMN), an innovator of decorative and functional surfaces, emulsion polymers, and specialty chemicals, expects to report a net loss of $4.0 million to $5.9 million for the fiscal second quarter ending May 31, 2003. Excluding unusual charges, net of tax, of approximately $3.4 million, the net loss is estimated to be $0.6 million to $2.5 million, in line with consensus expectations. Earnings per diluted share is expected to be in the range of negative $0.10 to negative $0.15, while earnings per diluted share excluding unusual items is estimated to be negative $0.01 to negative $0.06 per share. The unusual charge is for the non-cash write-off of existing deferred financing costs in conjunction with the Company's planned refinancing activities, plus costs associated with a previously announced workforce reduction and the closure of a design center building, offset by an anticipated gain on the sale of the building. Sales are estimated to be in the range of $173.0 million to $177.0 million, up 12 to 14 percent compared with first quarter 2003. "After a very difficult operating environment in our first quarter, we are generating improved results. We are encouraged to see growth in our Performance Chemicals and Building Products revenue this quarter, as volumes have improved and pricing actions have been implemented. Cost reduction actions initiated in the previous quarter are starting to provide benefits. Though raw material costs in the current quarter will be approximately $10.0 million higher than last year's second quarter, oil and natural gas prices have recently declined from multi-year highs. Consistent with industry forecasts, we believe our key raw materials have peaked in the second quarter. We expect further operating profit improvement in May as the costs of our raw materials begin to decline," said Kevin McMullen, Chairman and Chief Executive Officer. OMNOVA Solutions Inc. is a technology-based company with 2002 sales of $681 million and 2,350 employees worldwide. OMNOVA is a major innovator of decorative and functional surfaces, emulsion polymers and specialty chemicals. As reported in Troubled Company Reporter's Friday Edition, Fitch Ratings changed the Outlook on OMNOVA Solutions Inc.'s ratings to Negative from Stable. The current rating on the company's senior secured debt is 'BB+'. Omnova's ratings are based on the company's strong market positions, its size, liquidity and financial performance. The company is a leader in areas such as commercial vinyl wallcovering, vinyl and urethane fabrics, and styrene-butadiene latex. In addition, OMNOVA has been able to remain cash flow positive at the trough of the business cycle. However, the company's cash flows are relatively small and EBITDA has weakened. Moreover, the February 2003 amendment to the existing credit facility has reduced facility commitments to $180 million in May and increased interest rates. For the trailing twelve months ended Feb. 28, 2003, EBITDA-to-interest incurred was 4.0x and total debt (including the A/R program balance)-to-EBITDA was 5.4x. The Negative Rating Outlook reflects the uncertainty of demand improvement in the near-term and the potential for higher average raw material costs for 2003. Omnova has been negatively affected by price increases in styrene, butadiene, and polyvinyl chloride; higher average raw material costs may continue to pressure operating margin. In addition, the company awaits an improvement in refurbishment activity, but the pace and strength of improving demand in the near-term remains unclear. OMNOVA SOLUTIONS: Offering $165 Million of Senior Secured Notes --------------------------------------------------------------- OMNOVA Solutions Inc. (NYSE: OMN), an innovator of decorative and functional surfaces, emulsion polymers, and specialty chemicals, is planning an offering of $165 million of Senior Secured Notes -- recently rated at BB+ by Fitch Ratings -- in an offering exempt from the registration requirements of the Securities Act of 1933. The offering is contingent upon the concurrent closing of a new $100 million three-year asset-based bank credit facility. The Company intends to use the proceeds from the offering to repay outstanding amounts under its existing revolving credit facility, to terminate its receivables sale program and to pay related fees and expenses. These Notes to be offered will not be or have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. OMNOVA Solutions Inc. is a technology-based company with 2002 sales of $681 million and 2,350 employees worldwide. OMNOVA is a major innovator of decorative and functional surfaces, emulsion polymers and specialty chemicals. PAXSON COMMS: Prolonged Credit Ratio Weakness Spurs Rating Cuts --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Paxson Communications Corp., including its long-term corporate credit rating to 'B' from 'B+', due to prolonged weakness in the company's credit ratios and expectations of an extended period of high financial risk. At the same time, Standard & Poor's removed all ratings from CreditWatch. The outlook is negative. West Palm Beach, Florida- based television station owner and operator Paxson had approximately $900 million of debt outstanding on Dec. 31, 2002. The rating action is based on expectations that Paxson's leverage will remain excessive while it strives to build EBITDA from negative levels and to narrow discretionary cash flow deficits. "Lower syndicated programming payments and operating expenses are boosting cash flow, however, the substantial cash flow generation, required to reduce debt and restore credit ratios commensurate with prior ratings, is not likely in the near term," said Standard & Poor's credit analyst Alyse Michaelson. She added that, "The improvement in weak credit ratios is being delayed by slower-than-anticipated advertising revenue growth at the still-developing network." Maintaining compliance with financial covenants could also be difficult given Paxson's minimal revenue growth prospects. Asset sales have bolstered near-term liquidity, but the company's cash cushion could dwindle in the long term if it is unable to achieve the expected ramp-up in cash flow and curb discretionary cash flow losses. Infomercials, which run during non-primetime periods, generated almost half of Paxson's 2002 total revenue and represent a highly profitable revenue base because of the absence of programming expense. Primetime audience ratings have shown gradual improvement, but the network's revenue and cash flow generating ability are not yet well established. To address primetime profitability, Paxson's programming efforts now are focused on lower-cost, original productions rather than on expensive syndicated product. Despite the network's under- performance, Paxson's broadcast, cable and satellite assets continue to be a valuable programming distribution platform. NBC made a $415 million convertible preferred investment in Paxson in 1999, and has been instrumental in strengthening the company's sales efforts. Standard & Poor's believes that Paxson is a strategic, albeit very small, investment for NBC and has value for that company's long-term, multi-channel programming strategy. In the event that NBC operational control does not occur due to regulatory restrictions, Paxson is likely to seek another strategic partner, investor, or buyer for the company. PENN TREATY: Look for First-Quarter Results and Form 10-Q Today --------------------------------------------------------------- Penn Treaty American Corporation (NYSE: PTA) intends to release its 1st quarter 2003 earnings and file its Form 10-Q for the period ending March 31, 2003 today. In addition, the Company will hold an investor conference call to discuss its results tomorrow, at 2:00 p.m., EDT. Investors and analysts may participate by calling 1.888.428.4479. As reported in Troubled Company Reporter's April 9, 2003 edition, A.M. Best Co., affirmed the financial strength ratings of B- (Fair) of the subsidiaries of Penn Treaty American Corp (Allentown, PA). The subsidiaries are: Penn Treaty Network America Insurance Co, American Network Insurance Company (both of Pennsylvania) and American Independent Netwk Ins Co of NY (New York). Over the past year, Penn Treaty has executed many of the critical tasks it needed to complete, including refinancing the majority of its outstanding debt originally due in 2003, raising additional capital and has a quota share reinsurance agreement currently in place for up to 50% of its new business. However, A.M. Best believes it still faces an uphill battle if it is to have once more a meaningful presence in the long-term care market. PENNEXX FOODS: Defaults on Credit Agreement with Smithfield ----------------------------------------------------------- Pennexx Foods, Inc. (OTC BB:PNNX), a leading provider of case- ready meat to retail supermarkets in the Northeast, reported financial results for the first quarter ended March 31, 2003. Pennexx also announced that its lender, Smithfield Foods, Inc., has sent Pennexx a notice of default under the Credit Agreement between the two parties. Revenues for the three months ended March 31, 2003 were $12.8 million compared to $10.9 million in the comparable period of 2002, an increase of $1.9 million or 17.4%. The Company had a net loss of $3.1 million in the three months ended March 31, 2003 compared to net income of $0.007 million in the comparable period of 2002. Management attributes the magnitude of the loss primarily to extremely poor yields on meat products due to the start-up of the new plant, and to a material increase in Indirect and General and Administrative expenses, offset in part by labor efficiencies due to the usage of the automated equipment. As a result of the first quarter loss and continuing losses subsequent to the end of the quarter, the Company has virtually depleted its cash resources. By letter received by Pennexx on May 8, 2003, Smithfield advised the Company that Smithfield believed Pennexx to be in default of several provisions of the Credit Agreement and that Smithfield intended to exercise its remedies thereunder. The Company has opened a dialogue with potential investors and the Board of Directors of Pennexx is meeting to consider the Company's options. Established in 1999, Pennexx Foods, Inc. is a leading provider of case-ready meat to retail supermarkets in the northeastern U.S. The company currently provides case-ready meat within a 300-mile radius of its plants to customers in the Northeast in order to assure delivery of product with an extended shelf life. The company cuts, packages, processes and delivers case-ready beef, pork, lamb and veal in compliance with the United States Department of Agriculture regulations. Pennexx customers include many significant supermarket retailers. PETROLEUM GEO: Will Publish First Quarter 2003 Results Tomorrow --------------------------------------------------------------- Petroleum Geo-Services ASA (OSE:PGS) (Pink Sheets:PGOGY) expects to announce its first quarter 2003 financial results at approximately 3:30 p.m. Central European Time (9:30 a.m. Eastern Time) tomorrow. A press conference will be arranged in the PGS offices at Lysaker, Oslo tomorrow at 3:30 p.m. CET. A presentation will be given to analysts at 4:30 p.m. CET in the same location. Live audio together with the presentation will be broadcasted on the PGS web site, starting promptly at 4:30 p.m. CET. Please go to: http://www.PGS.comand click on the link, at least 15 minutes before, to register and download and install any necessary audio software. Petroleum Geo-Services is a technologically focused oilfield service company principally involved in geophysical and floating production services. PGS provides a broad range of seismic and reservoir services, including acquisition, processing, interpretation, and field evaluation. PGS owns and operates four floating production, storage and offloading units. PGS operates on a worldwide basis with headquarters in Oslo, Norway. For more information on Petroleum Geo-Services visit http://www.pgs.com * * * As reported in Troubled Company Reporter's February 5, 2003 edition, Fitch Ratings affirmed Petroleum Geo-Services ASA senior unsecured debt rating at 'C'. The ratings remain on Rating Watch Negative. This affirmation follows the payment by PGO of interest related to PGO's 6-5/8% senior notes due 2008 and its 7-1/8% senior notes due 2028. PGO finds itself in the same situation it was in last month as it has utilized a 30-day grace period to make an $8.2 million interest payment on its 8.15% senior notes due 2029. This grace period expires Feb. 15, 2003. DebtTraders reports that Petroleum Geo-Services' 7.500% bonds due 2007 (PGSA07NOR1) are trading between 44.5 and 45.5 cents- on-the-dollar. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=PGSA07NOR1 PRIMEDIA INC: Firming-Up Offering of $300 Mill. of Senior Notes --------------------------------------------------------------- PRIMEDIA Inc. (NYSE: PRM) is in the process of completing an offering of $300 million in aggregate principal amount of its 8% Senior Notes due 2013. The senior notes will be guaranteed by PRIMEDIA's wholly-owned domestic subsidiaries fully, unconditionally, joint and severally and secured equally and ratably with PRIMEDIA's outstanding senior notes and indebtedness under its credit facilities. The net proceeds of the offering will be used by PRIMEDIA Inc. principally to repay its outstanding 8-1/2% Senior Notes due 2006. The notes have not been registered under the Securities Act of 1933, as amended, and will be offered pursuant to applicable exemption from the registration requirements under the Securities Act. PRIMEDIA is the largest targeted media company with leading positions in consumer and business-to-business markets. Our properties deliver content via print, along with video, the Internet and live events and offer highly effective advertising and marketing solutions in some of the most sought after niche markets. With 2002 sales from continuing businesses of $1.6 billion, PRIMEDIA is the #1 special interest magazine publisher in the U.S. with more than 250 titles. Our well known brands include Motor Trend, Automobile, New York, Fly Fisherman, Power & Motoryacht, Ward's Auto World, and Registered Rep. The company is also the #1 producer and distributor of free consumer guides, including Apartment Guides. PRIMEDIA Television's leading brand is the Channel One Network and About is one of the largest sources of original content on the Internet. PRIMEDIA's stock symbol is: NYSE: PRM. More information about the company can be found at http://www.primedia.com As reported in Troubled Company Reporter's Friday Edition, Standard & Poor's Ratings Services revised its outlook on publisher PRIMEDIA Inc., to stable from negative. At the same time, Standard & Poor's assigned its 'B' rating to PRIMEDIA's $300 million, privately placed, Rule 144A senior notes due 2013. In addition, Standard & Poor's affirmed its 'B' corporate credit and other outstanding ratings on New York City- based PRIMEDIA. Total debt and preferred stock as of March 31, 2003, totaled about $2.4 billion. PROVIDENCE HEALTH: AM Best Assigns B++ Financial Strength Rating ---------------------------------------------------------------- A.M. Best Co. has assigned an initial financial strength rating of B++ (Very Good) to Providence Health Plan (Providence) (Beaverton, OR). The rating outlook is stable. The rating reflects Providence's strategic role as the managed care affiliate of Providence Health System-Oregon, a not-for- profit integrated health delivery organization. The rating also recognizes a return to profitability after transition to the new Exclusive Provider Organization health plan model, the company's strong balance sheet fundamentals and the benefits from the association with the Providence brand name. Partially offsetting these strengths are the adverse economic and regulatory environment and previous operating losses, primarily in the Providence Health Plan of Washington, which has been dissolved. Established in 1985, Providence Health Plan is Oregon's third largest commercial health insurer offering benefit plans to employer groups and retirees. Recently, Providence completed a transition of its HMO enrollment to the EPO product with Personal Option and Open Option. A comprehensive product selection that features access to an extensive network of providers and hospitals has supported a market position of over 180,000 enrolled members. Strong retention rates and trend pricing improved the financial performance with reduction in the medical loss ratio and administrative expense ratio. Cash from operations support a strong working capital position and overall liquidity. Capital position was strong and improved in 2002 with the repayment of surplus notes. Earnings growth is expected to be challenged by adverse economic conditions. The Portland-Metro region, the center for the state's health services, continues to experience an unemployment rate higher than the national average. Furthermore, the government budget pressures increased regulatory oversight of sponsored insurance programs. The economic and regulatory uncertainty is mitigated by product diversification and consistent underwriting. A.M. Best recognizes Providence's administrative capacity to work through the economic uncertainty and to modify plan options with flexible spending and cost sharing to sustain profitable growth. QUEBECOR MEDIA: First Quarter Results Enter Positive Territory -------------------------------------------------------------- Quebecor Media Inc., reported total revenues of $550.2 million for the first quarter of 2003, compared with $549.5 million for the same quarter of 2002. Operating income rose $13.1 million or 10.1% to $142.7 million due to stronger profits in the Cable Television segment and a notable improvement in operating results in the Web Integration/Technology and Internet/Portals segments. The operating losses of those two segments were virtually eliminated. These improvements more than offset the decrease in operating income in the Business Telecommunications segment. Net income was $7.6 million in the first quarter of 2003, compared with a net loss of $22.1 million in the same quarter of 2002. It was the Company's best earnings performance in more than two years. Financial expenses decreased by $11.1 million from $80.2 million in the first quarter of 2002 to $69.1 million in the same quarter of 2003, due primarily to the favorable impact of the conversion of the unhedged portion of the long-term debt and to a net gain on settlement of debt, which was realized on the refinancing of Sun Media Corporation's debt and on the voluntary repayment of a portion of Videotron's debt. Unusual items (reserve for restructuring, write-down of temporary investments, non-monetary compensation charge, write-down of goodwill and gains (losses) on sales of businesses and other assets) amounted to $0.9 million in 2003, compared with $17.9 million in 2002. Star Academie: the Power of Convergence One of the highlights of the quarter was the television program Star Academie, broadcast on the TVA network between February 16 and April 20, 2003. The program's resounding success demonstrated the originality and scope of Quebecor Media's convergence strategy. According to BBM's People Meter ratings, the 90-minute Star Academie special on Sunday, April 13, 2003 was seen by over 3 million viewers, an all-time record for a program broadcast on the TVA network. The following week, the final episode captured 83% of the viewing audience during its time slot. At its height, Star Academie was seen by nearly half (47.4%) of Quebec's French-speaking population (aged 2 and over). TVA Publishing's celebrity weeklies covered the event and reaped significantly increased newsstand sales. For example, sales of 7 Jours magazine were up more than 44% from the same period of 2002. The program also received daily coverage in Le Journal de Montreal and Le Journal de Quebec. Subscribers to Videotron's high-speed Internet service had exclusive access to webcams providing live backstage feeds. The unique advantage brought Videotron a significant number of new customers. For its part, Netgraphe developed tools to support voting, video feeds, interactivity and chat sessions with the contestants. During the program's run, Netgraphe logged more than 304,000 registrations on the Star Academie site, 5.9 million unique visitors and over 135 million page views. The project generated revenues of more than $400,000 for Netgraphe. Meanwhile, the Videotron Telecom subsidiary created a new Video Streaming service to meet the short-term needs of major projects such as Star Academie. Select, Archambault Group's music distribution arm, distributed the Star Academie CD, which was certified platinum (100,000 copies sold) out of the box and quintuple platinum (500,000 copies sold) by April 20, 2003, the date of the grand finale, making it the fastest selling quintuple platinum album ever in Canada. The CD was prominently displayed at all Archambault locations and at more than a hundred Le SuperClub Videotron locations. Cable Television The Cable Television segment's first quarter 2003 revenues amounted to $180.4 million, compared with $179.9 million in the same quarter of 2002. Revenue increases of $11.8 million from the high-speed cable Internet access service and $6.7 million from the illico digital television service more than compensated for lower revenues from analog cable television, dial-up Internet access, installation and other services. At quarter end, there were 182,000 subscribers to the illico service, an increase of 50% from the same date of the previous year. Subscriptions to the high-speed Internet service grew 33% from 251,000 to 334,000 over the same period. Videotron signed up 11,000 new subscribers to illico during the quarter and lost 18,000 customers to its analog cable television service, for a net loss of 7,000 customers, compared with a net loss of 26,000 customers during the same period of 2002. Videotron also gained 23,000 new customers for its Internet access services during the quarter. Operating income amounted to $70.8 million, compared with $67.3 million in the first quarter of 2002, an increase of $3.5 million or 5.2%. The rise in operating income resulted primarily from the growth in the customer base for the high-speed Internet access service and higher operating margins for that service, generated by increased rates and lower bandwidth costs. Reduced operating expenses and improved productivity were also factors in the increase in operating income. Videotron's average operating margin for all operations increased from 37.4% in the first quarter of 2002 to 39.2% in the same quarter of 2003. On March 20, 2003, Videotron and its employees in the Montreal and Quebec City areas reached an agreement in principle on renewal of their collective agreements, ending the labour dispute that began on May 8, 2002. The new labour contracts signed on April 29, 2003 will enable Videotron to reduce costs, enhance productivity, and exercise greater flexibility in the management of its operations. Newspapers Sun Media Corporation reported first-quarter revenues of $201.3 million, an increase of $1.3 million from the same period of 2002. A 2.7% increase in advertising revenues was partially offset by lower circulation, distribution and printing revenues. First-quarter operating income increased $0.6 million, or 1.3%, from $44.6 million to $45.2 million, mainly as a result of lower newsprint prices. Sun Media Corporation undertook the refinancing of its debt at the beginning of the quarter. The subsidiary subsequently announced an increase in the amount of the refinancing in view of the positive response from investors. On February 7, 2003, it closed a private placement of Senior Notes in the net amount of US$201.5 million and contracted new bank credit facilities totalling $425.0 million. These funds were used to pay down Sun Media Corporation's loans in full and to pay a $260 million dividend to Quebecor Media, of which $150.0 million was used to reduce Videotron ltee's long-term debt. Broadcasting TVA Group's revenues totalled $84.3 million in the first quarter of 2003, up 9.1% from $77.3 million in the same quarter of 2002. The increase was due to growth in broadcasting revenues and the inclusion of Publicor's results since its acquisition by TVA Publishing in the second quarter of 2002. These two factors outweighed the decrease in revenues from production and international distribution operations resulting from TVA's repositioning in this area. Operating income rose 9.0% from $13.3 million to $14.5 million, due mainly to the improved profitability of TVA's publishing operations as a result of synergies yielded by the integration of Publicor in May 2002. Leisure and Entertainment The Leisure and Entertainment segment reported quarterly revenues of $51.6 million, compared with $57.4 million in the same quarter of 2002, a 10.1% decrease. The lower figures were due to the transfer of the Publicor magazines from the Leisure and Entertainment segment to the Broadcasting segment in the second quarter of 2002, and lower revenues in the Books segment as a result of the sale of Editions Wilson & Lafleur in the fourth quarter of 2002. Archambault Group and Le SuperClub Videotron reported revenue increases of 7.3% and 7.1% respectively. The segment's operating income amounted to $5.5 million, compared with $5.7 million in the same period of 2002. The growth in operating income at Archambault Group and Le SuperClub Videotron, as well as a smaller operating loss in the Books segment, almost entirely offset the impact of the removal of magazines from the segment. The highlights of the first quarter included the retail success of the Star Academie CD, the excellent performance of Archambault Group's retail network, increased sales of Videotron products at Le SuperClub Videotron locations, and lower administrative expenses following the reorganization of the general literature publishing houses under Editions Quebecor Media. Business Telecommunications Videotron Telecom Ltd. (VTL) recorded first quarter 2003 revenues of $21.8 million, compared with $22.2 million in the same period of the previous year. The positive impact of the acquisition of the assets of Stream Intelligent Networks in Ontario did not entirely compensate for the sharp decrease in Internet-related revenues as a result of the renegotiation of the service agreement with Videotron and other factors. The segment's operating income amounted to $5.8 million, compared with $7.5 million in the same quarter of 2002. The $1.7 million decrease was caused mainly by the lower Internet revenues and increased operating expenses resulting from the acquisition of Stream Intelligent Networks. Web Integration/Technology The Web Integration/Technology segment reported quarterly revenues of $17.1 million versus $20.8 million in the same quarter of 2002, a 17.8% decrease. The lower revenues reflect soft demand in the IT and Internet advertising markets, the sale of the Nurun Technologies office in Paris, and the closing of the Mindready Solutions office in Paignton, Great Britain. The segment's operating loss was only $88,000, compared with a loss of $8.0 million in the first quarter of 2002. The improvement resulted primarily from the recording under operating expenses in the first quarter of 2002 of special charges related to the restructuring of Mindready's operations. Cost reductions and improved productivity at all Mindready and Nurun offices (except Milan) were also factors. Nurun signed several major contracts during the quarter, including a three-year exclusive agreement with Bombardier Recreational Products to develop and maintain its Web sites, confirmation of a contract extension with Evian in the US following the joint venture agreement between Evian and Coca- Cola, and a contract with a major customer of Quebecor World in partnership with its Q-Net MediaTM subsidiary. Internet/Portals The Internet/Portals segment's first-quarter revenues totalled $7.0 million, compared with $7.4 million in the same quarter of 2002. The special-interest portals MatchContact.com, Autonet.ca and Jobboom.com continued posting strong growth, with an 18.5% increase in revenues. The robust performance did not entirely make up for the decrease in revenues from the general-interest portals, particularly in English-language markets, and the closing or sale of CANOE's European portals. The segment has broken even in terms of operating income for the past three quarters. In the first quarter of 2003, it generated operating income of $0.4 million, compared with an operating loss of $1.8 million in the same period of 2002. The strong performance was mainly the result of the decisive restructuring measures introduced since the second quarter of 2001 and the improved profitability of the special-interest portals, particularly Jobboom.com. Financial Position At March 31, 2003, the Company and its subsidiaries had cash, cash equivalents and liquid investments with remaining maturities greater than three months totalling $175.3 million, consisting mainly of short-term investments. The Company and its wholly owned subsidiaries also had unused lines of credit of $240.0 million available, for total available liquid assets of $415.3 million. At the same date, the consolidated debt, including the short-term portion of the long-term debt but excluding redeemable preferred shares, totalled $3.15 billion, including Sun Media Corporation's $623.4 million debt, Videotron ltee's $951.3 million debt, TVA Group's $49.4 million debt, and Quebecor Media's own debt, which includes Senior Notes in an aggregate amount of $1.31 billion and a term loan of $212.8 million. At the beginning of 2003, Quebecor Media issued redeemable preferred shares in the amount of $216.1 million. On April 22, 2003, these shares were converted to common shares. On the same date, Quebecor Media issued common shares totalling $214.3 million. The proceeds from these stock offerings were used to pay down in full the $429.0 million term loan coming due on April 23, 2003. Operating income The Company defines operating income (or loss) as earnings (or loss) before amortization charges, financial expenses, reserves for restructuring of operations and special charges, write-downs of goodwill, gains (losses) on the sale of businesses and other assets, income taxes, and non-controlling interest. Special charges include write-downs of temporary investments and non- monetary compensation charges. Operating income (or loss) as defined above is not a measure of results that is consistent with generally accepted accounting principles. It is not intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity. It is not intended to represent funds available for debt service, dividends, reinvestment or other discretionary uses, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Operating income (or loss) is used by the Company because management believes it is a meaningful measure of performance. Operating income (or loss) is commonly used by the investment community to analyze and compare the performance of companies in the industries in which the Company is engaged. It facilitates year-over-year comparison of results since operating income (or loss) excludes, among other things, unusual items that are not readily comparable from year to year. The Company's definition of operating income may not be identical to similarly titled measures reported by other companies. Quebecor Media Inc., a subsidiary of Quebecor Inc. (TSX: QBR.A, QBR.B), operates in Canada, the United States, France, Italy and the UK. It is engaged in newspaper publishing (Sun Media Corporation), cable television (Videotron ltee), broadcasting (TVA Group Inc.), Web technology and integration (Nurun Inc. and Mindready Solutions Inc.), Internet portals (Netgraphe Inc.), magazines (TVA Publishing Inc.), books (a dozen associated publishing houses), distribution and retailing of cultural products (Archambault Group Inc. and Le SuperClub Videotron ltee) and business telecommunications (Videotron Telecom Ltd.). As reported in Troubled Company Reporter's February 13, 2003 edition, Standard & Poor's Ratings Services removed its ratings on diversified media company, Quebecor Media Inc., from CreditWatch with negative implications, where they were placed on Sept. 16, 2002, following the completion of Sun Media's refinancing that was carried out largely as expected. In addition, outstanding ratings on Quebecor Media, including the 'B+' long-term corporate credit rating, along with all ratings on subsidiaries Sun Media Corp., and Videotron Ltee, were affirmed. The outlook is stable. At the same time, ratings on Sun Media's US$97.5 million 9.5% senior subordinated notes due February 2007, and US$53.5 million 9.5% senior subordinated notes due May 2007, were withdrawn to reflect Sun Media's intention to call these notes in the near term. "The ratings affirmations reflect improved financial flexibility at Sun Media and Quebecor Media, due to the easing of covenant restrictions on free cash flows and a light amortization schedule following the refinancing," said Standard & Poor's credit analyst Barbara Komjathy. REGUS: Serchuck & Zelermyer Serving as Panel's Conflicts Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of the chapter 11 cases of Regus Business Centre Corp., seeks permission from the U.S. Bankruptcy Court for the Southern District of New York to retain and employ Serchuck & Zelermyer, LLP as Special Conflicts Counsel. The Committee, through its counsel, Kaye Scholer LLP, reports that Regus Business Centre Corporation, one of the Debtor, maintains, among others, a principal operating account, out of which it manages cash receipts and disbursements, an investment sweep account, where funds from the principal operating account are allowed to accrue interest overnight, and a deposit account, into which RBCC has deposited a certificate of deposit for the cash collateralization of the letters of credit that RBCC has posted for the benefit of certain of its landlords, with JP Morgan Chase. Based on these relationships, Chase has asserted that it is a secured creditor of the Debtors and their affiliates. The United States Trustee requests the Committee to retain conflict counsel to deal with Chase. Accordingly the Committee seeks to retain and employ Serchuck & Zelermyer as special conflicts counsel to handle any matters that may arise whereby the Committee finds it necessary to take a position adverse to Chase. The current hourly rates charged by Serchuck & Zelermyer for professionals and paraprofessionals employed in its offices are: Partner $375 - $465 per hour Counsel $285 - $350 per hour Associates $220 - $325 per hour The attorney currently expected to have primary responsibility for providing services to the Committee is David M. Pollack, Esq., with current hourly rate of $310 hour. Regus Business Centre Corp., filed for chapter 11 protection on January 14, 2003 (Bankr. S.D.N.Y. Case No. 03-20026). Karen Dine, Esq., at Pillsbury Winthrop LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed debts and assets of: Total Assets: Total Debts: ------------- ------------ Regus Business Centre Corp. $161,619,000 $277,559,000 Regus Business Centre BV $157,292,000 $160,193,000 Regus PLC $568,383,000 $27,961,000 Stratis Business Centers Inc. $245,000 $2,327,000 RELIANT RESOURCES: First Quarter Operating Loss Tops $56 Million ---------------------------------------------------------------- Reliant Resources, Inc. (NYSE: RRI) reported a loss from continuing operations of $56 million for the first quarter of 2003, compared to income from continuing operations of $81 million for the same period of 2002. Excluding an accrual of $47 million, pre-tax ($29 million, or $0.10 per share, after- tax) for the payment that will be due to CenterPoint Energy in 2004 under Texas' deregulation legislation, the loss from continuing operations in the first quarter of 2003 was $27 million. Effective February 2003, Reliant Resources began reporting its European energy segment as discontinued operations. This change is a result of the company's agreement to sell its European energy operations to nv Nuon, a Netherlands-based electricity distributor. Reliant Resources expects to close this transaction in the summer of 2003. In addition to the accrual for the payment to CenterPoint Energy, Reliant Resources' 2003 first quarter loss reflected a decline in wholesale earnings due to significantly lower trading margins, including a previously disclosed trading loss of approximately $80 million, continued weakness in the wholesale markets and hedge ineffectiveness losses. Additionally, the company incurred an increase in interest expense, primarily associated with the acquisition of Orion Power Holdings and amortization and expensing of financing costs associated with the company's recently announced financings. These items were partially offset by a reversal of California-related reserves and continued strong performance in the company's retail electric operations in Texas. "Our first quarter was one of progress and accomplishment despite the earnings performance," said Joel Staff, chairman and CEO. "We closed a new financing package that has stabilized the company's capital structure, and we are now positioned to transition our capital structure to one that reflects our business profile. The agreement to sell our European business and the decision to discontinue proprietary trading were important steps in our ongoing effort to sharpen our strategic focus. By aligning our business activities with the commercial opportunities in today's market, we are positioning the company to survive the difficult period in the business cycle and to benefit from future improvements in wholesale market conditions," Staff added. "Our top priorities going forward will be to achieve resolution of outstanding legal and regulatory issues and to accelerate the momentum we have begun to see in regaining our corporate credibility." SEGMENT EARNINGS DETAILED Retail Energy The company's retail energy segment produced earnings before interest and taxes (EBIT) of $23 million in the first quarter of 2003, compared to $46 million of EBIT in the first quarter of 2002. Excluding the $47 million accrual for a payment to CenterPoint Energy, which is discussed below, EBIT for the first quarter of 2003 would have been $70 million. The first quarter 2003 EBIT, excluding the accrual for the payment to CenterPoint Energy mentioned above, benefited from a full month of usage during January, which was a month of customer transition from the regulated utility in 2002; the contribution from Texas generating units that began commercial operations after the first quarter of 2002; revised estimates for electric sales related to prior periods and higher margins due to improvements in the management of supply costs relative to the first quarter of 2002. These improvements were partially offset by customer attrition, primarily in the small commercial customer class, and increased expenses to support the expanded retail business. Payment to CenterPoint Energy: Texas deregulation legislation requires an affiliated retail electric provider to make a payment in 2004, not to exceed $150 per customer, if 40 percent of the residential and small commercial customers' load in the affiliated transmission and distribution utility's service territory has not switched to an alternative electric provider by the end of 2003. The payment is individually calculated for the two customer classes. Through the first quarter of 2003, Reliant Resources has recorded $175 million for the estimated payment the company expects to make to CenterPoint Energy in 2004. The accrual was based on the maximum payment of $150 per residential customer retained. The company does not anticipate making a payment for the small commercial class. Accounting change: Due to changes in accounting rules (EITF No. 02-03), the results of operations related to our contracted electricity sales to large commercial, industrial and institutional customers and the related supply costs are not comparable between the first quarter of 2002 and the first quarter of 2003. Prior to 2003, the company used mark-to-market accounting for earnings of its contracted electricity sales and recognized a $2 million loss related to these contracts during the first quarter of 2002. The company has discontinued the use of mark-to-market accounting for these contracts. Earnings related to contracted electricity sales are now recognized as the volumes are delivered, and the corresponding unrealized gains recorded in prior periods are reversed. During the first quarter of 2003, the company reversed $20 million of previously recognized unrealized earnings. As of March 31, 2003, our retail energy segment had $83 million of unrealized gains recorded in prior years that will reverse upon the delivery of related volumes ($54 million in the remainder of 2003 and $29 million in 2004 and beyond). Wholesale Energy The wholesale energy segment reported a loss before interest and taxes of $10 million in the first quarter of 2003 that included a $61 million reversal of California-related reserves, compared to EBIT of $115 million in the first quarter of 2002, which included a $33 million California credit reserve reversal. The decrease compared to the first quarter of 2002 was primarily the result of significantly lower trading margins including a previously disclosed trading loss of approximately $80 million, increased losses associated with hedge ineffectiveness and continued weakness in wholesale energy market conditions primarily in the west. Partially offsetting the declines were the reversal of California-related provisions mentioned above and improved margins from the coal plants in the Mid-Atlantic region due to higher power prices that resulted from increased natural gas prices. Other Operations The company's other operations segment recorded a loss before interest and taxes of $10 million for the first quarter of 2003, compared to a loss before interest and taxes of $10 million in the first quarter of 2002. Discontinued Operations Effective February 2003, Reliant Resources began reporting its European energy segment as discontinued operations. This is a result of the company's agreement to sell its European energy operations to nv Nuon, a Netherlands-based electricity distributor. Reliant Resources expects to close this transaction in the summer of 2003. The company recorded a loss from discontinued operations of $381 million for the first quarter of 2003 compared to earnings of $15 million in the first quarter of 2002. The loss for the first quarter of 2003 includes a $384 million charge related to the estimated loss on disposal. Outlook for 2003 The company expects 2003 income from continuing operations to be between $0.50 and $0.70 per share. This guidance excludes the impact of transitioning from mark-to-market to accrual accounting (EITF Issue No. 02-03), ($0.15); the accrual for payment to CenterPoint Energy under Texas deregulation legislation, ($0.10); and the reversal of California-related reserves, $0.15. Reliant Resources, Inc., based in Houston, Texas, provides electricity and energy services to retail and wholesale customers in the U.S. and Europe, marketing those services under the Reliant Energy brand name. The company provides a complete suite of energy products and services to approximately 1.7 million electricity customers in Texas ranging from residences and small businesses to large commercial, industrial and institutional customers. Its wholesale business includes approximately 22,000 megawatts of power generation capacity in operation, under construction or under contract in the U.S. The company also has nearly 3,500 megawatts of power generation in operation in Western Europe. For more information, visit http://www.reliantresources.com As reported in Troubled Company Reporter's April 4, 2003 edition, 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. RENT-WAY INC: Plans to Issue $215 Mill. of Senior Secured Notes --------------------------------------------------------------- Rent-Way, Inc. (NYSE: RWY) plans to offer $215 million of senior secured notes. Rent-Way intends to use the net proceeds of the offering, together with borrowings under a proposed new revolving bank credit facility, to repay all amounts outstanding to its current bank group. The notes have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Rent-Way is one of the nation's largest operators of rental- purchase stores. Rent-Way rents quality name brand merchandise such as home entertainment equipment, computers, furniture and appliances from 753 stores in 33 states. As reported in Troubled Company Reporter's January 13, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit and bank loan ratings on Rent-Way Inc. to 'CCC' from 'CCC+'. Standard & Poor's also removed the ratings from CreditWatch with negative implications. The outlook is developing. The Erie, Pa.- based company had $277 million of debt outstanding on the bank loan as of Sept. 30, 2002. "The rating action is based on our ongoing concern about Rent- Way's ability to refinance its bank loan that matures in December 2003 amid the uncertain outcome of federal investigations and class action lawsuits against the company," said Standard & Poor's credit analyst Robert Lichtenstein. "The ratings could be downgraded if the outcome of the investigations and lawsuits are to the detriment of the company, negatively impacting its ability to refinance its bank loan. However, if the company is able to refinance its bank loan or obtain cash from other sources, the ratings could be upgraded," added Mr. Lichtenstein. REUNION IND.: Changes Shareholder Record Date to May 15 ------------------------------------------------------- Reunion Industries, Inc., has changed the date of record for determining stockholders entitled to notice of, and to vote at, the Company's 2003 Annual Meeting of Stockholders to May 15, 2003 from April 15, 2003. The meeting, previously announced as being set for Thursday, June 26, 2003, to be held at the Company's offices at 11 Stanwix Street, Pittsburgh, Pennsylvania 15222, remains unchanged. As previously reported, Reunion Industries, Inc.'s negative working capital position of $52.4 million at September 30, 2002, and the defaults of the Bank of America Financing and Security Agreement and the 13% senior notes indicate that the Company may not be able to continue as a going concern for a reasonable period of time. RFS HOTEL: S&P Keeping Watch on Low-B Credit and Debt Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB-' corporate credit and 'B+' senior unsecured ratings for RFS Hotel Investors Inc. on CreditWatch with developing implications. This action follows the announcement that CNL Hospitality Properties, Inc., an unrated lodging REIT, has agreed to acquire RFS for approximately $383 million in cash plus the assumption of debt, for total consideration of approximately $687.6 million. "The developing implications reflect the absence of information on privately held CNL," said Standard & Poor's credit analyst Stella Kapur. Under the terms of the agreement, CNL plans to acquire all of the outstanding common stock of RFS and outstanding partnership units of RFS's operating partnershipfor $12.35 per share or unit in cash at closing, which is expected early in the third quarter of 2003. At closing, CNL will also assume all outstanding RFS debt. RFS will cease to exist as a separate corporation. As a result of the transaction, RFS's hotel portfolio will be owned by CNL's subsidiary. This transaction is not contingent upon CNL obtaining financing. A significant portion of the purchase price will be financed on a secured basis by an affiliate of Bank of America utilizing the available secured debt capacity under the terms of RFS's 9.75% senior notes due 2012. Additionally, the acquisition will constitute a change of control, therefore CNL is required to offer to repurchase the senior notes at 101% of principal value, plus accrued and unpaid interest. Should the bonds be fully redeemed, Standard & Poor's would withdraw its ratings on RFS and remove them from CreditWatch. SHELBOURNE PROPERTIES: Sells Indianapolis Joint Venture Property ---------------------------------------------------------------- Shelbourne Properties III, Inc. (Amex: HXF) announce that Indiana Market, Ltd., a joint venture in which Shelbourne holds a 50% interest, has consummated the sale of its shopping center property located in Indianapolis, Indiana commonly referred to as Indiana Market Place for a purchase price of $700,000. After closing costs and adjustments, net proceeds were approximately $600,000, approximately $300,000 of which is allocable to Shelbourne. The Board of Directors and Shareholders of Shelbourne has previously approved a plan of liquidation. As a result of the sale of Indiana Marketplace, the remaining properties owned by Shelbourne are a shopping center located in Las Vegas, Nevada, and a 70.34% interest in two industrial buildings in the Columbus, Ohio area. For additional information concerning the proposed liquidation including information relating to the sale of Indiana Market Place and the properties owned by Shelbourne please contact John Driscoll at (617) 570-4609 and for information with respect to the outstanding shares of the Shelbourne please contact Beverly Bergman at (617) 570-4607. SILICON GRAPHICS: Will Commence Exchange Offer for 11.75% Notes --------------------------------------------------------------- Silicon Graphics Inc. is offering to exchange $1,000 principal amount of its 11.75% Senior Notes Due 2009, referred to as the New Notes, or $1,000 principal amount of its 6.50% Senior Convertible Notes Due 2009, referred to as the New Convertible Notes and, together with the New Notes, referred to as the 2009 Notes, for an equal principal amount of its 5.25% Senior Convertible Notes Due 2004, referred to as the Old Notes, that is properly tendered and accepted for exchange on the terms set forth in the Company's prospectus. Persons may choose to exchange their Old Notes entirely for New Notes, entirely for New Convertible Notes or for any combination thereof. If more than $120 million aggregate principal amount of Old Notes are tendered for New Convertible Notes, the Company will accept Old Notes for exchange on a prorated basis. Old Notes not exchanged for New Convertible Notes because of proration will be exchanged for New Notes. The exchange offer is subject to important conditions, including that at least 90% in principal amount of the Old Notes are properly tendered by the expiration of the exchange offer. Highfields Capital Management LP, which holds approximately $68 million principal amount of the Old Notes representing approximately 29% of the total Old Notes outstanding, has agreed to tender its Old Notes for New Notes. The exchange offer will expire at midnight New York City time on May 16, 2003, unless extended it. The Company will announce any extensions by press release or other permitted means no later than 9:00 a.m. on the day after expiration of the exchange offer. Persons may withdraw any notes tendered until the expiration of the exchange offer At March 28, 2003, Silicon Graphics Inc.'s balance sheet shows a total shareholders' equity deficit of about $142 million. SI TECH: Reports Lower Sales Volume for October 2002 Quarter ------------------------------------------------------------ SI Technologies, Inc., operates in two reportable business segment: (1) industrial measurement, and (2) industrial automation. The Company's reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations. Included in the industrial measurement segment are industrial sensors and control products consisting of a wide range of NTEP and OIML approved, EX, Factory Mutual and IP rated load cells, transducers, translators and sensors. When matched with microprocessor-controlled digital electronics, they measure forces such as pressure, weight, mass and torque. Weighing Systems' products constitute the combination of load cells and microprocessor-controlled digital electronics that in combination provide for an integrated system providing weight data in both dynamic and static industrial weighing applications. The industrial automation segment consists of load handling, moving and positioning equipment and systems for applications in manufacturing, construction and other environments in which heavy bulky materials are being transported and positioned. Reporting in thousands, the Company's net sales decreased by 8.2% to $7,836 for the quarter ended October 31, 2002 from $8,536 for the same period in the prior fiscal year. The industrial measurement product line declined 4% and the industrial automation line declined 23%. The decrease in sales is primarily attributable to continuation of the global manufacturing recession's impact on capital equipment markets. Although the Company has a lower sales volume noted above, gross profit in the first quarter increased by 2% to $3,035 from $2,978 when compared to the gross profit reported for the same period in the prior fiscal year. Gross profit as a percentage of sales was 39% in this year's first quarter, as compared to 35% for the same period of the prior fiscal year. The gross profit increase resulted from the benefits of the cost reductions and outsourcing of manufacturing in the Company's industrial measurement product line resulting in a 6% improvement in gross margin. The industrial automation gross margin declined 2% due to a change in mix to higher cost custom products. Selling, General and Administrative Expenses increased 13% to $2,135 in the quarter October 31, 2002 as compared to $1,893 for the same period in the prior fiscal year. The S G & A expense increase of $242 is the result the expansion of the Company's marketing efforts including staff additions of $63, new promotional programs of $48 and an increase in trade show and publication exposure. Additional costs of $40 resulted from a restructuring realignment of certain staff members from manufacturing overhead positions to administrative functions as a result of the change in the manufacturing function. Research, Development and Engineering Expenses expenditures decreased by 19% to $340 for the quarter ended October 31 2002, as compared to $420 for the same period in the prior fiscal year. In house engineering support of formerly outsourced activities allowed the Company to reduce RD&E expense $35, and reduction of other staff levels resulting in $37 of savings from similar levels of the prior year. Interest Expense for the three months ended October 31, 2002 was $261 and $277. The decrease in interest expense was due to debt reduction of $1,027 during the past twelve months. Income tax expense for the three months ended October 31, 2002 and 2001 was $11 and $0 due to recognition of the deferred tax asset. At October 31, 2002 the Company's cash position was $301 compared to $238 at July 31, 2002. Cash available in excess of that required for general corporate purposes is used to reduce borrowings under the Company's line of credit. Working capital improved to $1,140 at October 31, 2002 from $1,125 at July 31, 2002. The Company's existing capital resources consist of cash balances and funds available under its line of credit, which are increased or decreased by cash provided by or used in operating activities. Cash provided by operating activities for the three months ended October 31, 2002 was $385 as compared with $414 for the same period in the prior fiscal year. Cash provided by operating activities consists of net income, primarily increased or decreased by the collection of trade accounts receivable and accounts payable. The Company's trade accounts receivable are generally collectable within 60 days, while account payable are settled in 56 days. The Company's cash requirements consist of its general working capital needs, capital expenditures, and obligations under its leases and notes payable. Working capital requirements include the salary costs of employees and related overhead and the purchase of material and components. The Company anticipates capital expenditures of approximately $200 in fiscal 2003 as compared to $118 in fiscal 2002. SPIEGEL INC: April 2003 Net Sales Tumble 31% to $115.6 Million -------------------------------------------------------------- The Spiegel Group (Spiegel, Inc.) reported net sales of $115.6 million for the four weeks ended April 26, 2003, a 31 percent decrease from net sales of $167.0 million for the four weeks ended April 27, 2002. For the 17 weeks ended April 26, 2003, net sales declined 25 percent to $529.2 million from $704.0 million in the same period last year. The company also reported that comparable-store sales for its Eddie Bauer division decreased 16 percent for the four-week period and 12 percent for the 17-week period ended April 26, 2003. The Group's net sales from retail and outlet stores fell 16 percent compared to last year, reflecting a decline in comparable-store sales and a reduction in the number of stores. Net direct sales (catalog and e-commerce) decreased 42 percent compared to last year, primarily due to lower customer demand and a planned reduction in catalog circulation. In addition, the company believes that direct sales and, to a lesser extent store sales, have been adversely impacted by the company's decision in early March to cease honoring the private- label credit cards issued by First Consumers National Bank to customers of its merchant companies (Eddie Bauer, Newport News and Spiegel Catalog). As previously disclosed, the company has selected Alliance Data Systems to establish new private-label credit card programs for the company's merchant divisions. The new credit card programs were launched May 3, 2003. The Spiegel Group is a leading international specialty retailer marketing fashionable apparel and home furnishings to customers through catalogs, specialty retail and outlet stores, and e- commerce sites, including eddiebauer.com, newport-news.com and spiegel.com. The Spiegel Group's businesses include Eddie Bauer, Newport News and Spiegel Catalog. Investor relations information is available on The Spiegel Group Web site at http://www.thespiegelgroup.com STARWOOD HOTELS: Selling $300 Million of Convertible Sr. Notes -------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc., (NYSE: HOT) has agreed to sell $300 million aggregate principal amount of convertible senior notes due 2023 (plus an option to the initial purchasers to acquire up to an additional $60 million principal amount of the notes) in a private placement transaction. The notes will be convertible into shares of Starwood's stock at a conversion price of $50.00 per share, which represents a 83.96 % premium on the closing price of Starwood's stock on Thursday, May 8 of $27.18. The notes will bear interest at 3.50 % per annum. The Company may not redeem the notes prior to May 23, 2006, but may at the option of the holders be required to purchase the notes on May 16 of each of 2006, 2008, 2013, 2018. So long as Starwood's closing price exceeds 120% of the conversion price, the notes will be convertible into 7.2 million shares assuming the initial purchasers' option is exercised. Upon redemption, repurchase or maturity, Starwood may choose to pay the purchase price in cash, Starwood shares or any combination thereof at the Company's option. The offering is scheduled to close on May 16, 2003. Starwood expects to use the net proceeds from the offering to repay indebtedness under its existing revolving credit facility and for general corporate purposes. Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with more than 750 properties in more than 80 countries and 105,000 employees at its owned and managed properties. With internationally renowned brands, Starwood is a fully integrated owner, operator and franchiser of hotels and resorts including: St. Regis(R), The Luxury Collection(R), Sheraton(R), Westin(R), Four Points(R) by Sheraton, W(R) brands, as well as Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. For more information, visit the Company's Web site at http://www.starwood.com As reported in Troubled Company Reporter's March 8, 2003 edition, Standard & Poor's Ratings Services lowered its ratings for Starwood Hotels & Resorts Worldwide Inc., including its corporate credit rating to 'BB+' from 'BBB-'. At the same time, the ratings were removed from CreditWatch where they were placed on Dec. 20, 2002. The outlook is stable. Total debt outstanding as of March 31, 2003, was $5.5 billion. "The rating actions stem from Starwood's lack of progress in improving credit measures during the last several quarters amid a challenging lodging operating environment," said Standard & Poor's credit analyst Craig Parmelee. "In addition, our expectations are that credit measures will not improve to levels more consistent with the ratings in the near term, despite significant planned asset sales," added Mr. Parmelee. SWIFT & CO.: Reports Improved Performance for Third Quarter ----------------------------------------------------------- Swift & Company reported its third quarter financial results which include net sales in the 13 weeks ended February 23, 2003, of $ 2.024 billion and net income of $ 3.5 million. The Company also reported its year-to-date earnings for the 158 days ended February 23, 2003, which include net sales of $ 3.556 billion and net income of $ 20.8 million. The Company also reported that year-to-date pro forma EBITDA for the 39 weeks ended Feb. 23, 2003, was up 6.8 percent over the same period a year ago despite a slight drop-off in sales. EBITDA performance in the third quarter jumped 11.7 percent over the prior year, spurred by a 10.7 percent increase in net sales. The company's year-to-date pro forma EBITDA for the first three quarters of the current fiscal year, which ends May 25, 2003, was $182.2 million versus $170.6 million on a predecessor entity basis for the same period in the prior year. In the third quarter, which is traditionally a slower quarter for sales, EBITDA increased $4.6 million from $39.4 million last year to $44.0 million. Pro forma net sales for the first 39 weeks of the current fiscal year were $6.197 billion versus $6.329 billion in the corresponding 2002 period on a predecessor company basis -- a decline of 2.1 percent. However, net sales in the third quarter grew to $2.024 billion compared to $1.824 billion a year ago on a predecessor entity basis based on stronger volume and overall price increases driven by higher cattle prices, which resulted in higher beef cutout values. Senior Debt Reduced Senior debt, which was $270 million at Sept. 19, 2002, the date on which the transaction creating Swift & Company was completed, was paid down to $199.5 million in the third quarter with cash flow from operations. Capital spending has totaled $32.6 million for the year to date, with full-year spending projected in the range of $55 million to $60 million, including $7 million for stand-alone, one-time transition costs related to information systems. Major growth capital committed for FY04 includes expansion projects at Worthington, Minnesota; Iowa; Hyrum, Utah; Greeley, Colo., and Dinsmore, Australia. Each of these projects meets the company's criteria for a two-year or faster payback for growth capital. "Our business model has continued to perform well this fiscal year and our financial performance is in line with our expectations," said John Simons, president and CEO of Swift & Company. "We are continuing to focus on the business model we publicly described last fall -- one of a non-vertically integrated, diversified protein processing business that operates in all U.S. distribution channels and has a significant focus on the international and foodservice market segments. Additionally, our industry-leading Australian beef business provides us with global diversification and a strong platform for continued growth in the Pacific Rim marketplace." Sales Up for Value-Added, Consumer-Ready Products "We are continuing to focus on growing volume in specific products and channels," Simons continued. "I am pleased to report a last-twelve-months (LTM) increase of 27.1 percent in value-added products. Equally important is a 32.8 percent increase in consumer-ready products, such as pork tenderloins and seasoned marinated pork." In the international channel, Simons reported a 6.8 percent volume increase on an LTM basis, driven by growth in Korea, Mexico and Japan. The company also reported the successful integration of the foodservice sales force from ConAgra's Signature Meats into Swift & Company, giving the company a fully integrated sales force across all channels in the red meat category. At the same time, LTM volume in food service rose 1.5 percent. Simons also stated that Swift & Company continues to take a leadership role in food safety. "Last summer, Swift & Company was the first major processor to implement testing for E. coli 0157:H7 on 100 percent of lots of beef trimmings used to make ground beef," he said. "And Swift was the first major processor to implement a 'test and hold' protocol so product is kept under the company's control until it is cleared for shipment. We also introduced irradiated beef products at the retail level to provide customers additional choice, and we continue to make physical improvements to our meat processing plants that are designed to enhance both food and employee safety." Swift & Company is proceeding on plan with its migration from ConAgra systems to its own in-house back office systems. "We expect to be off of ConAgra systems by the Sept. 19 anniversary date of the transaction," Simons said. "It has been eight months since we began as Swift & Company," Simons said. "In that short time frame, we have successfully established our processes as a stand-alone company, repaid in excess of $70 million of senior debt, and reorganized our domestic business into a North American red meats company. We are on track to meet our internal plans for year one, and we continue to focus on growing our business in support of our diversified business model." As reported in Troubled Company Reporter's March 20, 2003 edition, Standard & Poor's Ratings Services assigned its 'B' rating to beef and pork processor Swift & Co.'s $150 million senior subordinated notes due 2010, issued under Rule 144A with registration rights. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit, 'BB' senior secured bank loan, and 'B+' senior unsecured debt ratings on Swift. TENNECO AUTOMOTIVE: Neal Yanos Promoted to SVP and Gen. Manager --------------------------------------------------------------- Tenneco Automotive (NYSE: TEN) announced that Neal Yanos has been promoted to senior vice president and general manager, responsible for both the company's North American original equipment ride control and North American aftermarket businesses. The promotion is effective immediately. Since December 2000, Mr. Yanos has been responsible for the company's North American original equipment ride control business unit, which serves major light vehicle and heavy duty vehicle manufacturers in North America with ride control products and systems. Since taking charge of the business unit, Yanos and his team have restored profitability to the shock product line business and have grown the elastomers' product line book of business. The business unit also improved its position in the heavy duty and specialty markets during the past two years. "Neal Yanos has done an outstanding job in turning around our North American original equipment ride control business and I am looking forward to his disciplined leadership in meeting the many challenges of the North American aftermarket," said Mark P. Frissora, chairman and CEO, Tenneco Automotive. "We intend to capitalize on engineering and manufacturing synergies between the OE and aftermarket businesses and continue to leverage our technology advances between the two groups." "Bringing these two business units under one general manager will help bring a more integrated approach to solutions for our ride control customers while at the same time, strengthening our strategies for growth in the exhaust aftermarket through a more product-focused structure," said Frissora. Mr. Yanos joined Tenneco Automotive in 1988 and has held a broad range of management assignments supporting both the Aftermarket and OE businesses, including product engineering, manufacturing, marketing, strategic planning and finance. Prior to being named vice president of the company's North American original equipment ride control business unit in late 2000, Yanos was director of the North American original equipment General Motors and VW business. Mr. Yanos holds a bachelor's degree in engineering from Purdue University and a master's degree in business from the University of Toledo. Neal Yanos is on the company's senior management team and will continue to report to Chairman and CEO Mark Frissora. He will remain located at the company's North America original equipment headquarters in Monroe, Michigan. Tenneco Automotive, whose December 31, 2002 balance sheet shows a total shareholders' equity deficit of about $94 million, is a $3.5 billion manufacturing company headquartered in Lake Forest, Ill., with 19,600 employees worldwide. Tenneco Automotive is one of the world's largest producers and marketers of ride control and exhaust systems and products, which are sold under the Monroe(R) and Walker(R) global brand names. Among its products are Sensa-Trac(R) and Monroe(R) Reflex(TM) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(TM) mufflers and Dynomax(TM) performance exhaust products, and Monroe(R) Clevite(TM) vibration control components. TENNECO AUTOMOTIVE: Will Webcast Shareholders' Meeting Tomorrow --------------------------------------------------------------- Tenneco Automotive (NYSE: TEN), a global supplier of automotive parts, will hold its annual meeting of stockholders tomorrow at 10:00 a.m. CT at its corporate headquarters in Lake Forest, IL. Holders of common stock of record at the close of business on March 21, 2003, will be entitled to vote at the meeting or by proxy on the items of business as set forth in the proxy statement dated April 3, 2003. In addition to the formal business matters, Mark P. Frissora, Tenneco Automotive's chairman and chief executive officer, will review financial results and achievements for the year ended December 31, 2002, and the first quarter of 2003. He will also address the company's strategic priorities for the remainder of 2003. To access Tenneco Automotive's listen-only annual meeting webcast, go to the financial page of the company's website at http://www.tenneco-automotive.comat least 15 minutes prior to the event to register and download any necessary software. The webcast will include an audio transmission of the proceedings, as well as slides used in the speaker presentation. Voting will not be available electronically through the webcast. Tenneco Automotive is a $3.5 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 19,000 employees worldwide. Tenneco Automotive is one of the world's largest producers and marketers of ride control and exhaust systems and products, which are sold under the Monroe(R) and Walker(R) global brand names. Among its products are Sensa- Trac(R) and Monroe(R) Reflex(TM) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(TM) mufflers and DynoMax(R) performance exhaust products, and Monroe(R) Clevite(TM) vibration control components. UNITED AIRLINES: Court Okays Omnibus Pact with Cendant Affiliate ---------------------------------------------------------------- UAL Loyalty Services, a debtor-in-possession, asks Judge Wedoff for authority to enter into an omnibus agreement with Neat Acquisition Corporation, a wholly owned subsidiary of Cendant Travel Inc. In February 2001, ULS purchased 3,000,000 shares of Neat for $3,000,000. Neat and ULS entered into a distribution agreement where Neat granted ULS a license to use its proprietary technology. In October 2001, Neat Research Ltd., an Israeli company, sold to ULS senior secured convertible notes for $3,000,000. The Notes were secured by Neat's cash and equivalents, tangible property, accounts, inventory, intangibles, intellectual property, instruments and chattel paper. Simultaneously, Neat deposited certain of its proprietary technology into escrow with DSI Technology Escrow Services. In November 2002, Neat sold $1,000,000 worth of unsecured notes with a warrant purchase agreement to investors. ULS holds about $308,000 of this total. Neat Acquisition Corp. has agreed to purchase all of Neat's assets. This purchase contemplates the assignment of the Distribution Agreement from Neat to NAC. However, the Purchase Agreement is conditioned upon modification of the Distribution Agreement under which ULS must consent to the contemplated transactions. ULS is scheduled to receive its pro rata share of the sale proceeds on account of the Notes it holds and NAC will assume the Distribution Agreement. James H.M. Sprayregen, Esq., at Kirkland & Ellis, tells Judge Wedoff that the transactions are in the Debtors' best interests because: -- the Debtors will be performing under a contract with NAC, an affiliate of Cendant, which is more financially sound that Neat; -- the favorable Distribution Agreement is to be extended for two years; and -- the Debtors will receive several payments representing their pro rata share of the Notes. Accordingly, Judge Wedoff grants the Debtors' request. (United Airlines Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) U.S. INDUSTRIES: Sells Swimming Pool Businesses to Polyair ---------------------------------------------------------- U.S. Industries, Inc. (NYSE:USI), a leading manufacturer of bath and plumbing products -- led by the JACUZZI(R) and ZURN(R) brand names, and premium RAINBOW(R) vacuum cleaner systems -- has completed the previously announced sale of its non-core swimming pool and pool equipment businesses to Polyair Inter Pack Inc. (TSE/AMEX:PPK) of Toronto, Canada. Total consideration for the sale was U.S. $41.2 million (subject to post-closing adjustments), comprised of U.S. $30 million cash, a short-term promissory note and a six-year, 6% note convertible into 598,802 shares of Polyair stock at a price per share of U.S. $8.35. Net cash proceeds of approximately $20 million, after transaction costs and payment of retained liabilities, will be used to reduce USI's corporate debt. U.S. Industries owns several major businesses selling branded bath and plumbing products, along with its consumer vacuum cleaner company. The Company's principal brands include JACUZZI(R), ZURN(R), SUNDANCE(R) Spas, ELJER(R), and RAINBOW(R) Vacuum Cleaners. Learn more at http://www.usindustries.com As reported in Troubled Company Reporter's February 18, 2003 edition, Fitch Ratings assigned 'B' ratings to U.S. Industries, Inc.'s 11.25% senior secured notes and its senior secured bank facilities and upgraded the rating on USI's 7.25% senior secured notes to 'B' from 'B-' and removed it from Rating Watch Negative. Fitch Ratings has also assigned an indicative senior unsecured rating of 'B-' to USI. The Rating Outlook is Stable. In addition, Fitch's 'D' rating on USI's 7.125% senior secured notes was withdrawn. The rating actions affect approximately $580 million of debt. The 'B' ratings recognized USI's leading brands in its bath and plumbing segment, the strong operating results of the Rexair segment and the company's early success at turning around the Jacuzzi operations. The ratings also considered USI's sensitivity to changes in levels of consumer spending and construction activity. The Rating Watch Negative was based on the execution risk related to the debt restructuring and is removed as USI has successfully restructured its debt, reducing outstanding balances and extending the maturities by several years. WARNACO GROUP: Seeks Court Nod for Prologis Dispute Stipulation --------------------------------------------------------------- Debtor Calvin Klein Jeanswear Company, a debtor-affiliate of The Warnaco Group, Inc., is a subsidiary of Designer Holdings Ltd. CK Jeans and Floor Ready Apparel Company, LLC, are parties to a distribution agreement dated January 6, 2002, which is set to expire in January 2004. Under the Distribution Agreement, Floor provided CK Jeans with merchandise processing and distribution services, including facilities, material handling equipment, labor, security, management and operating supplies. Floor is a party to a lease dated November 18, 1996 with ProLogis, as landlord, good for 10 years. Under the terms of the Lease, Floor leased about 500,000 square feet of space located at 1000 New Country Road in Secaucus, New Jersey for the purposes of receiving, storing, shipping, selling and distributing CK Jeans' Project. The current monthly rental obligation under the Lease is $207,583, and $56,234 in monthly operating expenses. Designer guaranteed Floor's lease obligations under a Lease Guaranty dated November 12, 1996. On June 7, 2002, ProLogis filed Claim No. 2164, asserting a contingent and unliquidated unsecured claim against Designer. The Debtors objected to the Claim. ProLogis asked the Court for a hearing to estimate the Proof of Claim pursuant to Section 502(c) of the Bankruptcy Code to reflect the appropriate amount of damages that ProLogis may suffer in connection with Floor's potential future default under the Lease and Designer's obligation under the Guaranty. After significant arm's-length negotiations between the Parties, they agreed to resolve the dispute amicably to avoid the costs and risks of a protracted litigation. In a Court-approved Stipulation, the Parties agree that: A. ProLogis' Proof of Claim will be allowed as a non-priority general unsecured claim for $2,500,000 and will be classified and will receive the treatment set forth in Class 5 under the Plan. ProLogis will be entitled to participate in the first distribution of stock to unsecured creditors under the Plan; and B. ProLogis fully, finally and forever releases and discharges the Debtors of and from any further claims, obligations and liabilities arising from the Proof of Claim, the Lease and the Guaranty. Notwithstanding, nothing in this Stipulation will operate to release Floor from its obligations under the Lease. (Warnaco Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service, Inc., 609/392-0900) WHEREHOUSE: Committee Looks to Ernst & Young for Fin'l Advice ------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in Wherehouse Entertainment, Inc.'s chapter 11 cases, sought and obtained approval from the U.S. Bankruptcy Court for the District of Delaware to retain and employ Ernst & Young Corporate Finance LLC as its Financial Advisors. Ernst & Young is expected to: a) analyze the current financial position of the Debtors; b) analyze the Debtors' business plans, cash flow projections, restructuring programs, and other reports or analyses prepared by the Debtors or their professionals in order to advise the Committee on the viability of the continuing operations and the reasonableness of projections and underlying assumptions; c) analyze the financial ramifications of proposed transactions for which the Debtors seek Bankruptcy Court approval including, but not limited to, DIP financing, assumption/rejection of contracts, asset sales, management compensation and/or retention and severance plans; d) analyze the Debtors' internally prepared financial statements and related documentation, in order to evaluate the performance of tire Debtors as compared to its projected results on an ongoing basis; e) attend and advise at meetings with the Committee, its counsel, other financial advisors, and representatives of the Debtors; f) assist and advise the Committee and its counsel in the development, evaluation and documentation of any plan(s) of reorganization or strategic transaction(s), including developing, structuring and negotiating the terms and conditions of potential plan(s) or strategic transactions) and the consideration that is to be provided to unsecured creditors; g) render testimony in connection with its services; and h) provide such other services, as requested by the Committee and agreed by EYCF. Ernst & Young's current hourly rates for work of this nature are: Managing Directors $575 - $595 per hour Directors $475 - $545 per hour Vice Presidents $375 - $440 per hour Associates $320 - $340 per hour Analysts $275 per hour Client Service Associates $140 per hour Wherehouse Entertainment, Inc., sells prerecorded music, videocassettes, DVDs, video games, personal electronics, blank audio cassettes and videocassettes, and accessories. The Company filed for chapter 11 protection on January 20, 2003, (Bankr. Del. Case No. 03-10224). Mark D. Collins, Esq., and Paul Noble Heath, Esq., at Richards Layton & Finger represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $227,957,000 in total assets and $222,530,000 in total debts. WILD OATS: Elects Anne-Marie Stephens to Board of Directors ----------------------------------------------------------- Wild Oats Markets, Inc. (Nasdaq: OATS), a leading national natural and organic foods retailer, announced Ann-Marie Stephens has been elected to serve on the Company's Board of Directors. Ms. Stephens brings more than 20 years of business management experience with leading consumer products and retail corporations to further add depth to the Wild Oats Markets Board of Directors. Ms. Stephens currently serves as Senior Vice President, Strategy and Business Development at Circuit City Stores, Inc. (NYSE: CC) where she is responsible for revitalizing the company's strategy and direction for sustainable business results. She is an integral member of an executive team that directs the company's strategic planning initiatives. Shortly after joining the company, Ms. Stephens led the effort to revitalize the Circuit City logo and brand to reflect a more contemporary, relevant and approachable retailer to the company's target consumers. She has also managed the company's Construction, Real Estate, Maintenance, Store Design, Visual Merchandising and Store Innovation functions. Prior to joining Circuit City in 1999, Ms. Stephens was Vice President of Marketing for the Frito-Lay Company where she directed the company's snack food marketing initiatives and led the development of several successful product launches and minority marketing programs. She also directed new product development and product research functions at Frito Lay. Ms. Stephens started her career at the Procter & Gamble Company, where she served in a variety of roles, including product development, market research and organizational development. Ms. Stephens received her Master of Business Administration degree in Finance and Entrepreneurial Management from the Wharton School of Business at the University of Pennsylvania and her Bachelor of Engineering Degree in Chemical Engineering from the City College of New York. She was honored by Dollars & Sense Magazine in its 1994 "Tribute to America's Best & Brightest Business and Professional Men and Women," and received the 1997 Jim O'Neal Award for "Minority & Women Business Development." "We believe we have built a strong Board of Directors that brings a breadth of retail, consumer and natural products, financial, and nutritional experience to oversee the direction of Wild Oats," said John Shields, Chairman of the Board of Wild Oats Markets. "Ms. Stephens helps to round out the strength of our Board with her deep marketing expertise and her background in research and development for leading food and consumer products companies." John Shields continues to serve as the Chairman of the Wild Oats Markets Board of Directors. Other Board members include: David Chamberlain, Chief Executive Officer and Chairman of the Stride Rite Corporation; Dr. Stacey Bell, Vice President of Medical Research and Education at Sears Labs; Brian Devine, Chairman, President and Chief Executive Officer of Petco Animal Supplies, Inc.; David Gallitano, President and Chief Executive Officer of APW, Ltd.; James McElwee, General Partner of Weston Presidio Capital; Mark Retzloff, Chief Executive Officer and Chairman of the Board of Rudi's Organic Bakery and co-founder of Horizon Organic Dairy; and Perry Odak, President and Chief Executive Officer of Wild Oats Markets, Inc. Wild Oats Markets, Inc., whose December 28, 2002 balance sheet shows a working capital deficit of close to $30 million, is a nationwide chain of natural and organic food markets in the U.S. and Canada. With annual sales of nearly $920 million, the Company currently operates 101 stores in 25 states and British Columbia. The Company's natural food stores include Wild Oats Natural Marketplace, Henry's Marketplace, Nature's -- a Wild Oats Market, Sun Harvest and Capers Community Markets. For more information, please visit the Company's Web site at http://www.wildoats.com WORLDCOM INC: Seeking Approval for Global Crossing Settlement ------------------------------------------------------------- Worldcom Inc. and its debtor-affiliates seek the Court's authority pursuant to Section 363(b) of the Bankruptcy Code and Rule 9019 of the Federal Rules of Bankruptcy Procedure to: (a) compromise claims asserted against certain Global Crossing Entities; (b) enter into a settlement agreement with the Global Crossing Entities; and (c) enter into a new Digital Services Agreement and a new Telecommunications Services Agreement for certain Services provided currently to the Global Crossing Entities by WorldCom. Timothy W. Walsh, Esq., at Piper Rudnick LLP, in New York, informs the Court that WorldCom and its affiliates and certain Global Crossing Entities are parties presently to various agreements relating to the purchase and sale of telecommunications services, most notably, the Wholesale Services/Emerging Markets Digital Services Agreements and a Telecommunication Services Agreement. The Global Crossing Entities are substantial wholesale customers of WorldCom, accounting for annual revenue over $100,000,000. WorldCom asserted prepetition claims for services rendered, including under the Existing Contracts, of over $27,500,000. The Global Crossing Entities disputed over $9,500,000 of the WorldCom claim and asserted certain defenses and set-off rights. Since the Petition Date, Mr. Walsh relates that the Global Crossing Entities have continued to utilize WorldCom services in the conduct of their postpetition operations. WorldCom and the Global Crossing Entities have had certain disputes concerning the amounts that are due and owing for postpetition services rendered to the Global Crossing Entities. In connection with its Plan, the Global Crossing Entities proposed a $5,600,000 cure payment to WorldCom for assumption of the Existing Contracts and a distribution on account of all prepetition claims. After the Global Crossing Entities made their proposal to resolve prepetition claims, Mr. Walsh reports that the parties engaged in a protracted and complex claim reconciliation process and negotiation. Ultimately, WorldCom and the Global Crossing Entities were able to reach a settlement of all open issues, by a written agreement, dated March 28, 2003, relating to resolution of WorldCom's prepetition claims, and by a Memorandum of Understanding, also dated March 28, 2003, relating to a resolution of postpetition billing disputes. Viewed together, these agreements evidence a comprehensive resolution of: (a) all prepetition claims asserted by WorldCom against the Global Crossing Entities; and (b) all postpetition billing disputes relating to telecommunications services provided to the Global Crossing Entities after the Petition Date through the February 10, 2003 billing cycle. The Memorandum of Understanding also provides for the execution of a new Digital Services Agreement and a new Telecommunications Services Agreement, each with a two-year term, commencing as of April 1, 2003 and a substantial annual minimum revenue commitment. These agreements enable the parties to avoid the expense, inconvenience and uncertainty of complex, "paper intensive" claims litigation, and establish the framework for a substantial forward business relationship on terms favorable to WorldCom. By this motion, WorldCom asks the Court to approve the Settlement Agreement and the Memorandum of Understanding. Mr. Walsh contends that the approval of the Settlement Agreement is important and beneficial to the WorldCom bankruptcy estate. Under the terms of the Settlement Agreement, the Global Crossing Entities agree to assume the Existing Contracts, and pay $9,100,000 as an agreed cure amount and settlement of all prepetition claims asserted by WorldCom. This settlement amount will be paid through: (a) a $2,275,000 initial payment within five business days of the effective date of the Global Crossing Entities' Plan; and (b) the balance payable in 12 equal and consecutive monthly installments commencing on the first day of the month immediately following the month in which the effective date of the Plan occurs. The Settlement Agreement also provides for accelerated invoice payment terms for a 12-month period following the effective date of the Global Crossing Entities' Plan. Moreover, WorldCom receives a broad release from the Global Crossing Entities of all claims against it through the date of the Settlement Agreement. The Settlement Agreement will result in significant cost savings in terms of legal fees and related expenses, and will remove the uncertainty associated with the numerous pending claim and billing disputes. WorldCom and the Global Crossing Entities believe that the resolution of these disputes will allow the parties to move forward with their business relationship. Mr. Walsh asserts that the Settlement Agreement is fair and equitable and falls well within the range of reasonableness. In the event the Existing Contracts were rejected by the Global Crossing Entities, WorldCom would be entitled to a recovery of less than 5% of its prepetition claim and it would have lost a substantial wholesale customer on a going forward basis. Also, the Settlement Agreement avoids potential litigation between WorldCom and a substantial wholesale customer concerning the cure amount required under Section 365 of the Bankruptcy Code prior to the assumption of the existing Wholesale Services/Emerging Markets Digital Services Agreements and the existing Telecommunications Services Agreement. This litigation would be complex, costly and protracted. Mr. Walsh believes that the recovery embodied in the Settlement Agreement compares favorably with the settlements achieved by other major access providers with the Global Crossing Entities. Indeed, according to WorldCom's calculations, it represents a 33% recovery of WorldCom's gross prepetition claim, and 85% of WorldCom's claim adjusted for dispute items and net of carrier access billings. Moreover, the Settlement Agreement is instrumental to securing new contracts with the Global Crossing Entities rather than having the Global Crossing Entities migrate business to another carrier after expiration of the Existing Contracts later this year. Under the Settlement Agreement, WorldCom and the Global Crossing Entities agree to release any and all claims against each other arising prior to the Petition Date. This release dispels the threat of potential litigation and facilitates resumption of a positive business relationship. Mr. Walsh states that the Memorandum of Understanding evidences a negotiated compromise of substantial billing disputes related to invoices issued after the Petition Date, as well as an agreement to enter into a new Digital Services Agreement and a new Telecommunications Services Agreement, each with an effective date of March 28, 2003, and substantial minimum revenue commitments. Moreover, the Global Crossing Entities have agreed to shift certain access services and traffic to WorldCom in exchange for certain credit related to early termination liability for circuits and trunks no longer in use. This arrangement presents a substantial opportunity for incremental revenue. Subject to receipt of payment of the $3,500,000 compromise amount and court approval of the Memorandum of Understanding, WorldCom will issue credits in an amount sufficient to reach a "zero balance" for all billings through the February 10, 2003 billing cycle, effectively resolving all billing disputes with the Global Crossing Entities through this date. WorldCom submits that the New DSA/TSA Agreements constitute ordinary course business transactions that do not require Bankruptcy Court approval or authorization. Nevertheless, because these contract transactions are tied to the settlement and compromise of disputed claims against another debtor, out of an abundance of caution, WorldCom seeks Court authorization to enter into the New DSA/TSA Agreements. Mr. Walsh insists that the New DSA/TSA Agreements represent an exercise of the Debtors' sound business judgment. These Agreements provide significant benefits to WorldCom and its estate, as it will allow WorldCom to continue to sell substantial services to the Global Crossing Entities and retain a significant and profitable revenue stream. Under the terms of the Memorandum of Understanding, Mr. Walsh notes that the Global Crossing Entities have agreed to pay $3,500,000 to resolve billing disputes arising from invoices issued by WorldCom since the Petition Date through the February 10, 2003 billing cycle totaling $9,600,000, and the adjusted amount, after taking into account certain potentially valid dispute items, of $5,800,000. Thus, according to WorldCom's calculations, the payment under the Memorandum of Understanding represents a recovery of 60% of the adjusted amount. As is the case with the claims resolved through the Settlement Agreement, a negotiated resolution will enable WorldCom to avoid protracted, expensive and "paper-intensive" claims litigation. The claim compromise evidenced by the Memorandum of Understanding satisfies the applicable standards for approving compromise under Bankruptcy Rule 9019, particularly when it is evaluated as a component of a comprehensive resolution of issues and disputes with a major wholesale customer. The claim compromise embodied in the Memorandum of Understanding is a necessary precondition for the New DSA/TSA Agreements; and it too represents an exercise of sound business judgment that is in the best interests of WorldCom's bankruptcy estate and creditors. (Worldcom Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLD HEART CORP: March 31 Balance Sheet Upside-Down by $51 Mil. ---------------------------------------------------------------- World Heart Corporation (OTCBB: WHRTF, TSX: WHT) released its unaudited consolidated financial results for the quarter ended March 31, 2003, and commented on the progress of both its HeartSaverVAD(TM) (ventricular assist device) and Novacor(R) LVAS (left ventricular assist system). In the first quarter of 2003, the Corporation reported record revenues from operations of $3,149,491, compared with $2,619,084 for the same quarter last year, which represents an increase of 20%. Gross margin was $560,900 for the quarter, compared with a gross margin of $39,092 in the first quarter of 2002. Net loss for the quarter was down 35% to $8,576,472, or $0.42 per share, compared with a net loss of $13,148,925, or $0.77 per share for the same period in the previous year. The net loss for this quarter included a one-time charge of $1,670,000, reflecting a reserve recorded against previously accrued Ontario Business Research Institute tax credits. Excluding this non-recurring charge, net loss for the quarter was reduced by $6,247,453, representing an improvement from the same quarter last year of 48%, to $6,906,472, or $0.33 per share. Research and development expenses for the quarter were $6,811,284, compared with $7,377,304 for the same period last year. The OBRI tax credit charge was included in R&D expenses. Before the one-time charge, these expenses were $5,141,284 for the quarter. In the first quarter a year ago, gross R&D expenses were $8,816,666, which included a reduction for contributions from Technology Partners Canada in the amount of $1,439,362, bringing net R&D expense a year ago to $7,377,304. Ongoing R&D expenses, prior to government credits or funding, declined by 42% from the same period last year. Total cash applied to operations during the period was $9,862,654, including approximately $3 million applied to reduce accounts payable balances outstanding. Total cash applied to operations during the period, excluding the reduction in payables, was approximately $7 million. For the same quarter in 2002, $9,378,548 was applied to operations. Cash totaled $198,964 at March 31, 2003, compared with $248,181 at December 31, 2002. As previously announced, the Corporation received approximately $1.6 million after the quarter-end from a private placement of common shares. The Corporation expects to increase its financial resources during the second quarter of 2003. During the quarter, sales of the Novacor LVAS outside of the United States increased significantly to 26 units from 16 in the previous quarter, and 17 in the first quarter of last year. Continued positive clinical results in Europe and Canada from implants utilizing the ePTFE inflow conduit contributed to that growth. In the United States, the ePTFE inflow conduit received Food and Drug Administration approval in late January and the positive impact of that approval is expected to be felt beginning in the second quarter. The final step to permit the commercial sale of Novacor LVAS in Japan was achieved in the first quarter with the issuance of an import license. Three systems were sold to Japan in the quarter. Significant sales depend upon approval for reimbursement under the national health care program, which is scheduled for April 2004. Another record for patient support was set by Novacor LVAS during the quarter, with Mr. Giordano Luppi celebrating his fifth anniversary of life with Novacor LVAS. Mr. Luppi continues to be active in the operation of his restaurant business, with his family and his personal interests. His original device was replaced in a scheduled procedure more than four years after the initial implant. As previously announced, WorldHeart is preparing additional information and analyses in response to a letter from the FDA in the course of the continuing review of the Premarket Approval (PMA) Supplement filed by the FDA on November 22, 2002, requesting Destination Therapy approval for Novacor LVAS. Discussions are continuing with the FDA. The next generation, HeartSaverVAD, continued to progress toward initial in vivo tests in the third and fourth quarter of this year. The fully pulsatile device will be one half the size of the Novacor LVAS and the absence of bearings is expected to contribute to device durability exceeding the industry leading performance of the Novacor LVAS. Clinical trials of HeartSaverVAD are expected to commence in 2005. World Heart Corporation, a medical device company based in Ottawa, Ontario and Oakland, California, is currently focused on the development and commercialization of pulsatile ventricular assist systems. Its Novacor LVAS is already well established in the marketplace and its next generation technology, HeartSaverVAD, is a fully implantable assist device intended for long-term support of patients with heart failure. XOMA LTD: Will Publish First Quarter 2003 Results on Thursday ------------------------------------------------------------- XOMA Ltd. (Nasdaq:XOMA) will announce its first quarter 2003 financial results Thursday, May 15, 2003. The announcement will be followed by a live webcast at 4:00 p.m. Eastern (1:00 p.m. Pacific) by XOMA management discussing the financials and other business milestones. The webcast can be accessed via XOMA's Web site at http://www.xoma.comand will be archived and available for replay until close of business on May 22, 2003. To obtain phone access to the live audiocast, dial 1-877-356-2902 (U.S./Canada) and 1-706-643-3700 (International); Conference ID number 32246. An audio replay will be available beginning three hours following the conclusion of the webcast through 12 a.m. Eastern (9:00 p.m. Pacific) on May 22-23, 2003. Access numbers for the replay are 1-800-642-1687 (U.S./Canada) or 1-706-645-9291 (International); Conference I.D. number is 32246. XOMA, whose December 31, 2002 balance sheet shows a total shareholders' equity deficit of about $11 million, develops and manufactures antibody and other protein-based biopharmaceuticals for disease targets that include cancer, immunological and inflammatory disorders, and infectious diseases. XOMA's programs include collaborations: with Genentech, Inc. on the Raptiva(TM) antibody for psoriasis (BLA submission), rheumatoid arthritis (Phase II), psoriatic arthritis (Phase II) and other indications; with Baxter Healthcare Corporation to develop NEUPREX(R) (rBPI-21) for Crohn's disease (Phase II) and other indications; with Millennium Pharmaceuticals, Inc. on two biotherapeutic agents, CAB-2 and MLN01, for certain cardiovascular inflammation indications (preclinical); and with Onyx Pharmaceuticals, Inc. on its ONYX-015 product for various cancers (current activities suspended, pending partnership discussions). Earlier-stage development programs focus on antibodies and BPI-derived compounds developed at XOMA for the treatment of cancer, retinopathies, and acne. For more information about XOMA's pipeline and activities, visit XOMA's Web site at http://www.xoma.com/ ZI CORP: Eliminates $3.3 Million Secured Credit Facility -------------------------------------------------------- Zi Corporation (Nasdaq: ZICA) (TSX: ZIC), a leading provider of intelligent interface solutions, has paid and discharged its US$3.3 million secured credit facility due May 7, 2003. Zi has entered into a new secured short term credit facility in the amount of US$1.94 million which is due and repayable by June 30, 2003. Zi Corporation -- http://www.zicorp.com-- is a technology company that delivers intelligent interface solutions to enhance the user experience of wireless and consumer technologies. The company's intelligent predictive text interfaces, eZiTap and eZiText, simplify text entry to provide consumers with easy interaction within short messaging, e-mail, e-commerce, Web browsing and similar applications in almost any written language. eZiNet(TM), Zi's new client/network based data indexing and retrieval solution, increases the usability for data-centric devices by reducing the number of key strokes required to access multiple types of data resident on a device, a network or both. Zi supports its strategic partners and customers from offices in Asia, Europe and North America. A publicly traded company, Zi Corporation is listed on the Nasdaq National Market (ZICA) and the Toronto Stock Exchange (ZIC). Zi Corporation's December 31, 2002 balance sheet shows a working capital deficit of about $2 million, while total shareholders' equity has dwindled to about $5 million from about $44 million as recorded a year ago. GOING CONCERN BASIS OF PRESENTATION The Company's consolidated financial statements are prepared on a going concern basis, which assumes that the Company will be able to realize its assets at the amounts recorded and discharge its liabilities in the normal course of business in the foreseeable future. The Company has incurred operating losses over the past three years. On December 5, 2002, the Company borrowed US$3.3 million (before fees and expenses) through the issuance of a note payable, originally due March 5, 2003 and subsequently extended to April 30, 2003. At present, Zi has not arranged replacement financing to repay the note and there can be no assurance that Zi will be successful in its efforts to complete such refinancing. On December 6, 2002, the Company settled a judgment in favor of Tegic Communications Inc., a division of AOL Time Warner. Under the terms of the settlement agreement, the Company, among other things, is obliged to pay a further US$1.5 million comprised of three installments between June 2003 and January 2004. Continuing operations are dependent on the Company being able to refinance its borrowings due April 30, 2003, pay the remaining installment payments due under the settlement agreement with AOL, increase revenue and achieve profitability. These financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that may be necessary should the Company be unable to pay the remaining installment payments due under the terms of the settlement agreement with AOL, raise additional capital to meet the repayment of the note payable, increase revenue and continue as a going concern. * Conservatory Measures Set Against Two Bankruptcy Trustees ----------------------------------------------------------- The Office of the Superintendent of Bankruptcy, in the context of a professional conduct investigation, has instituted conservatory measures, on April 3, 2003, to protect the bankruptcy and insolvency estates administered by corporate trustee Henry Sztern & Associes Inc., and individual trustee Henry Sztern. A follow-up on complaints regarding those trustees revealed significant deficiencies in their administration of bankruptcy and insolvency estates, which necessitated conservatory measures to safeguard assets under their control. The measures, imposed by the Deputy Superintendent, Programs, Standards and Regulatory Affairs of the Office of the Superintendent of Bankruptcy, were aimed at bankruptcy offices in the Province of Quebec. These offices had been directed not to appoint trustees Henry Sztern & Associes Inc., and Henry Sztern in respect of any new estates. Other measures were intended for the financial institution with which the trustees did business, enjoining it from honoring cheques or any other means of payment drawn on the bank accounts of bankruptcy and insolvency estates, unless those cheques or other means of payment were first countersigned by individuals mandated for that purpose by the Deputy Superintendent. These individuals had also been directed to ensure that all payments from these accounts were well founded and justified before approving them. Furthermore, another individual had been mandated to make copies of all computer files relating to these accounts. The trustees, however, continued to administer files opened prior to April 3, 2003. Since the imposition of these measures, the Office of the Superintendent of Bankruptcy has uncovered new deficiencies with regards to the trustees' banking operations. In fact, the trustees provided to the Office of the Superintendent of Bankruptcy information they knew to be erroneous and incomplete, as well as falsified documents concerning the content of their trust accounts and the funds deposited therein. Following these discoveries, the Deputy Superintendent imposed new measures aimed at ensuring the safeguard of estate assets under the control of the trustees by directing H.H. Davis & Assoc. Inc., as agent of the Office of the Superintendent of Bankruptcy, to administer all bankruptcy and insolvency estates currently under the responsibility of trustees Henry Sztern & Associes Inc. and Henry Sztern, in accordance with the duties and obligations of bankruptcy trustees as stipulated in the Bankruptcy and Insolvency Act. Representatives of the firm H.H. Davis & Assoc. Inc., named pursuant to the directions, are the only authorized signatories with the financial institution. These measures are effective immediately and will remain in effect until otherwise ordered. The Office of the Superintendent of Bankruptcy is an agency of Industry Canada mandated to maintain the confidence of lenders and investors in the Canadian market by protecting the integrity of the bankruptcy and insolvency system. The Bankruptcy and Insolvency Act confers on the Superintendent of Bankruptcy the mandate to monitor and supervise the administration of matters and estates governed by the Act. * BOND PRICING: For the week of May 12 - May 16, 2003 ----------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Abgenix Inc. 3.500% 03/15/07 74 Adelphia Communications 3.250% 05/01/21 8 Adelphia Communications 6.000% 02/15/06 8 Adelphia Communications 10.875% 10/01/10 46 Advanced Micro Devices Inc. 4.750% 02/01/22 73 Alamosa Delaware 12.500% 02/01/11 49 Alamosa Delaware 13.625% 08/15/11 51 Alexion Pharmaceuticals 5.750% 03/15/07 71 American & Foreign Power 5.000% 03/01/30 67 Amkor Technology Inc. 5.000% 03/15/07 68 AMR Corp. 9.000% 09/15/16 32 AnnTaylor Stores 0.550% 06/18/19 64 Aquila Inc. 6.625% 07/01/11 70 Axcelis Technologies 4.250% 01/15/07 75 BE Aerospace Inc. 8.000% 03/01/08 66 Best Buy Co. Inc. 0.684% 06/27/21 72 Burlington Northern 3.200% 01/01/45 53 Burlington Northern 3.800% 01/01/20 74 Calpine Corp. 4.000% 12/26/06 75 Calpine Corp. 8.500% 02/15/11 65 Calpine Corp. 8.625% 08/15/10 63 Capstar Hotel 8.750% 08/15/07 70 Charter Communications, Inc. 4.750% 06/01/06 32 Charter Communications Holdings 8.250% 04/01/07 59 Charter Communications Holdings 8.625% 04/01/09 60 Charter Communications Holdings 9.625% 11/15/09 62 Charter Communications Holdings 10.000% 04/01/09 62 Charter Communications Holdings 10.000% 05/15/11 57 Charter Communications Holdings 10.250% 01/15/10 57 Charter Communications Holdings 10.750% 10/01/09 61 Charter Communications Holdings 11.125% 01/15/11 60 Cincinnati Bell Telephone (Broadwing) 6.300% 12/01/28 73 Comcast Corp. 2.000% 10/15/29 25 Conexant Systems 4.000% 02/01/07 60 Conexant Systems 4.250% 05/01/06 67 Conseco Inc. 8.750% 02/09/04 17 Continental Airlines 4.500% 02/01/07 45 Cox Communications Inc. 0.348% 02/23/21 72 Cox Communications Inc. 2.000% 11/15/29 32 Cox Communications Inc. 3.000% 03/14/30 47 Crown Cork & Seal 7.375% 12/15/26 72 Crown Cork & Seal 8.000% 04/15/23 71 Cummins Engine 5.650% 03/01/98 65 Delta Air Lines 7.700% 12/15/05 62 Delta Air Lines 9.250% 03/15/22 46 Delta Air Lines 10.375% 02/01/11 52 Dynegy Holdings Inc. 6.875% 04/01/11 74 Dynex Capital 9.500% 02/28/05 2 Elwood Energy 8.159% 07/05/26 66 Finova Group 7.500% 11/15/09 37 Fleming Companies Inc. 10.125% 04/01/08 14 Ford Motor Co. 6.625% 02/15/28 72 Gulf Mobile Ohio 5.000% 12/01/56 66 Health Management Associates Inc. 0.250% 08/16/20 64 HealthSouth Corp. 3.250% 04/01/49 22 HealthSouth Corp. 7.375% 10/01/06 59 HealthSouth Corp. 8.375% 10/01/11 56 HealthSouth Corp. 8.500% 02/01/08 57 I2 Technologies 5.250% 12/15/06 54 Incyte Genomics 5.500% 02/01/07 67 Inhale Therapeutic Systems Inc. 3.500% 10/17/07 57 Inhale Therapeutic Systems Inc. 5.000% 02/08/07 62 Inland Steel Co. 7.900% 01/15/07 68 Internet Capital 5.500% 12/21/04 36 Isis Pharmaceutical 5.500% 05/01/09 65 Kmart Corporation 9.375% 02/01/06 14 Kulicke & Soffa Industries Inc. 4.750% 12/15/06 66 Kulicke & Soffa Industries Inc. 5.250% 08/15/06 70 Lehman Brothers Holding 8.000% 11/13/03 62 Level 3 Communications 6.000% 09/15/09 60 Level 3 Communications 6.000% 03/15/10 59 Liberty Media 3.500% 01/15/31 65 Liberty Media 3.750% 02/15/30 55 Liberty Media 4.000% 11/15/29 58 LTX Corp. 4.250% 08/15/06 74 Lucent Technologies 6.450% 03/15/29 66 Lucent Technologies 6.500% 01/15/28 66 Magellan Health 9.000% 02/15/08 25 Manugistics Group Inc. 5.000% 11/01/07 55 Mirant Corp. 5.750% 07/15/07 55 Missouri Pacific Railroad 4.750% 01/01/20 74 Missouri Pacific Railroad 4.750% 01/01/30 72 Missouri Pacific Railroad 5.000% 01/01/45 62 NTL Communications Corp. 7.000% 12/15/08 19 Natural Microsystems 5.000% 10/15/05 64 NGC Corp. 7.625% 10/15/26 65 Northern Pacific Railway 3.000% 01/01/47 50 Northwest Airlines 7.625% 03/15/05 56 Northwest Airlines 7.875% 03/15/08 47 Northwest Airlines 8.875% 06/01/06 52 Northwest Airlines 9.875% 03/15/07 50 Quanta Services 4.000% 07/01/07 71 Regeneron Pharmaceuticals 5.500% 10/17/08 68 Ryder System Inc. 5.000% 02/25/21 72 SBA Communications 10.250% 02/01/09 74 SCG Holding Corp. 12.000% 08/01/09 69 Tenneco Inc. 10.000% 03/15/08 70 Tenneco Inc. 10.200% 03/15/08 70 Transwitch Corp. 4.500% 09/12/05 59 United Airlines 10.670% 05/01/04 5 Universal Health Services 0.426% 06/23/20 57 US Timberlands 9.625% 11/15/07 73 Weirton Steel 10.750% 06/01/05 46 Weirton Steel 11.375% 07/01/04 58 Westpoint Stevens 7.875% 06/15/08 26 Xerox Corp. 0.570% 04/21/18 65 ********* 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 ***