/raid1/www/Hosts/bankrupt/TCR_Public/030530.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, May 30, 2003, Vol. 7, No. 106
Headlines
3DO COMPANY: Files for Chapter 11 Reorganization in California
3DO COMPANY: Voluntary Chapter 11 Case Summary
ACTERNA CORP: First Creditors' Meeting Slated for July 31, 2003
AIR CANADA: FTQ Union Negotiates Terms of Tentative Agreement
AIR CANADA: Reaches Tentative Agreement with Flight Attendants
AIR CANADA: Earns Blessing to Fund Pension Plan Obligations
AIR CANADA: March 31 Net Capital Deficit Slides-Up to $2.5 Bill.
AMERCO: Adds Paul A. Bible to Independent Governance Committee
AMERICAN COMMERCIAL: Hiring Ponader as Conflicts Counsel
ANC RENTAL: Has Until June 16, 2003 to File Creditors' Claims
ARMSTRONG HOLDINGS: AWI Balks at Patricia Barnes' $10-Mil. Claim
ATLANTIC COAST: Enters Pact with Bombardier on Aircraft Delivery
BOYD GAMING: Promotes Paula Eylar to VP for Internal Audit
BRIDGES.COM INC: Taps ThinkEquity Partners as Investment Banker
BURLINGTON INDUSTRIES: Qualified Bids Due July 10, 2003
CABLE SATISFACTION: Loan Maturity Waiver Extended Until June 11
CABS II: Fitch Places BB- Preference Shares Rating on Watch Neg.
CONE MILLS: Lenders Extend Credit Facilities to March 15, 2004
CONMED: S&P Affirms BB- Sr. Sec. Rating on $165M Credit Increase
CONSECO INC: Trump Loses Latest Round in GM Building Dispute
CYPRESS SEMICONDUCTOR: Issuing $500MM Conv. Subordinated Notes
DELTA AIR LINES: Prices $300 Million of Convertible Senior Notes
DIMON: S&P Revises BB Senior Notes' Rating Outlook to Positive
DIRECTV: Has Until August 15 to Make Lease-Related Decisions
ENRON CORP: Taps Michael Fox Int'l to Sell Power Services Assets
ENRON CORP: EPMI Unit Sues Old Dominion to Recover $10 Million
FLEMING: 43 Franchisees Intends to Set off $4.7 Million Claim
GENUITY INC: Brings-In Kirkland & Ellis as Special Counsel
GMAC COMMERCIAL: Fitch Junks $17 Million Class J Notes at CCC
GMAC MORTGAGE: Fitch Affirms B Class B2 Notes Rating
GOAMERICA INC: Has Until August 25 to Meet Nasdaq Requirements
HAYES LEMMERZ: Inks Stipulation to Resolve Overbeck Claims
HQ GLOBAL WORKPLACES: Files Reorg. Plan and Disclosure Statement
I-TRAX INC: Negative Cash Flows Raise Going Concern Doubt
IMPAC: Fitch Takes Several Rating Actions on Two Issues
JAMES RIVER COAL: Court Clears BSI's Appointment as Claims Agent
KAISER: Committee Balks at PwCS' Engagement by Futures Rep.
KCS ENERGY: Appoints Joseph T. Leary Vice President and CFO
LEAP WIRELESS: Gets Okay to Hire Ordinary Course Professionals
LUCENT TECHNOLOGIES: Offering Conv. Senior Debt to Raise $1.3BB
MAGELLAN HEALTH: Seeks Approval of Onex Corp's Equity Investment
MAGELLAN HEALTH: Onex to Acquire Controlling Equity Interest
MAGELLAN HEALTH: Asks Court to Approve Group Practice Settlement
MEASUREMENT SPECIALTIES: Grant Thornton Airs Going Concern Doubt
MEDCOMSOFT INC: March 31 Balance Sheet Upside-Down by $1.5 Mill.
MOODY'S CORP: CEO Speaks at Lehman Bros. Conference on Thursday
MOSAIC GROUP: Selling Sales Solutions Business for C$105 Million
MOUNT SINAI MED: Outlook Revised to Stable on Turnaround Efforts
NAT'L CENTURY: Hires Gibbs & Bruns as Special Litigation Counsel
NATHANIEL ENERGY: Abrams & Company Expresses Going Concern Doubt
NORTEL: Enters Supply Agreement with Cincinnati Bell Wireless
NRG ENERGY: Outlines Salient Terms of Proposed Chapter 11 Plan
OMNOVA SOLUTIONS: Completes $165MM Senior Secured Notes Offering
ONE VOICE TECHNOLOGIES: Ability to Continue Operations Uncertain
ORION REFINING: Secures Okay to Pay Prepetition Vendors' Claims
PLYMOUTH RUBBER: Fails to Comply with AMEX Listing Standards
PRINCETON VIDEO: Files for Chapter 11 Protection in New Jersey
PRINCETON VIDEO: Case Summary & 20 Largest Unsecured Creditors
RECIPROCAL OF AMERICA: Liquidation Hearing Set for June 19, 2003
RITE AID: Completes New $1.85BB Senior Secured Credit Facility
SEQUA CORP: Adequate Liquidity Spurs S&P to Affirm BB- Rating
SOYO GROUP: Needs to Improve Liquidity to Continue Operations
SPATIALIGHT: Completes $5 Million Private Equity Placement
SPECTRASITE: Taps Daniel Wojciechowski as VP Network Operations
SYBRON DENTAL: Inks Agreement to Acquire Spofa Dental a.s.
TOWER AUTOMOTIVE: Offering $250 Million of Senior Notes Due 2013
TOWER AUTOMOTIVE: Rating Cut to BB- on Expected Weak Performance
UCFC MANUFAC. HOUSING: Fitch Affirms & Cuts Various Note Classes
UNIDIGITAL: Debtor Excused from Appearing at Creditors' Meeting
UNITED AIRLINES: April 2003 Net Loss Stands at $375 Million
UNITED AIRLINES: 1994-A Jets Administrative Cost Payment Sought
VENTAS INC: Will Present at NAREIT Investors Forum on Wednesday
WEIRTON STEEL: Wins OK to Honor Prepetition Employee Obligations
WESTAFF: Violates Certain Fin'l Covenants Under Credit Facility
WHEELING-PITTSBURGH: Gets Nod to Extend DIP Maturity & Pay Fees
WILLIAMS: Closes Sub. Convertible Debenture Private Placement
WINDSOR WOODMONT: Chapter 11 Case Raises Going Concern Doubt
WORLDCOM INC: Judge Gonzalez Approves Innisfree's Appointment
W.R. GRACE: Urges Court to OK Deloitte's Engagement as Advisors
* Huron Consulting Group Adds Financial Investigations Expert
* BOOK REVIEW: Hospitals, Health and People
*********
3DO COMPANY: Files for Chapter 11 Reorganization in California
--------------------------------------------------------------
The 3DO Company, a Delaware corporation (Nasdaq: THDO), and The
3DO Company, a California corporation and wholly-owned
subsidiary of the Company, have filed voluntary petitions for
relief under Chapter 11 of Title 11 of the United States Code in
the United States Bankruptcy Court for the Northern District of
California.
"This filing gives us more time to complete transactions in the
interest of our stakeholders," said Trip Hawkins, Chairman and
CEO. "While we hope that this news will generate additional new
opportunities, at this point we are focused on pursuing either
the sale of the entire company or the sale of its assets."
The Company will continue to manage their properties and operate
their businesses in the ordinary course of business as "debtors-
in-possession" subject to the supervision and orders of the
Bankruptcy Court pursuant to the Bankruptcy Code.
The 3DO Company, headquartered in Redwood City, Calif.,
develops, publishes and distributes interactive entertainment
software for personal computers, the Internet, and advanced
entertainment systems such as the PlayStation(R)2 computer
entertainment system, the Xbox(TM) video game system from
Microsoft, and the Nintendo GameCube(TM) and Game Boy(R) Advance
systems. More information about The 3DO Company and 3DO products
can be found on the Internet at http://www.3do.com
3DO COMPANY: Voluntary Chapter 11 Case Summary
----------------------------------------------
Lead Debtor: 3DO Company
200 Cardinal Way
Redwood City, California 94063
Bankruptcy Case No.: 03-31580
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
3DO Company 03-31581
Type of Business: The Debtor develops, publishes and
distributes interactive entertainment
software for personal computers, the
Internet, and advanced entertainment systems
Chapter 11 Petition Date: May 28, 2003
Court: Northern District of California (San Francisco)
Judge: Dennis Montali
Debtors' Counsel: Penn Ayers Butler, Esq.
Law Offices of Brooks and Raub
721 Colorado Ave. #101
Palo Alto, CA 94303-3913
Tel: (650) 321-1400
Total Assets: $29,327,000 (as of Dec. 31, 2002)
Total Debts: $22,208,000 (as of Dec. 31, 2002)
ACTERNA CORP: First Creditors' Meeting Slated for July 31, 2003
---------------------------------------------------------------
Carolyn S. Schwartz, the United States Trustee for Region II,
has called for a meeting of Acterna Corp., and its debtor-
affiliates' creditors pursuant to Section 341(a) of the
Bankruptcy Code to be held on July 31, 2003 at 2:00 p.m. at
80 Broad Street, Second Floor, in New York.
All creditors are invited, but not required, to attend. This
Official Meeting of Creditors offers the one opportunity in a
bankruptcy proceeding for creditors to question a responsible
office of the Debtors under oath. (Acterna Bankruptcy News,
Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900)
AIR CANADA: FTQ Union Negotiates Terms of Tentative Agreement
-------------------------------------------------------------
The 15,000 members from the most important union at Air Canada,
the one for mechanics, baggage handlers and other airport ground
employees will have to ratify the agreement recommended by the
negotiation committee by June 30th, says M. Marcel St-Jean
president from local lodge 1751 (Montreal) of International
Association of Machinists and Aerospace Workers (IAMAW), an
affiliated FTQ union.
The agreement will cover a six year period. A specific clause
allow a reopening of the agreement in 3 years for wages
negotiation. Following are the major terms of the agreement :
- Previously negotiated 2.5% wage increase for 2003 and 2004
will be foregone;
- 1.5% salary reduction immediately;
- One week vacation removed for all members. (with respect
for minimum allowable vacations weeks from Canadian labor
code);
- No paid lunch;
- 2 statutory holidays per year removed;
- Sick days reduced to half;
- All shift premiums eliminated;
- Overtime paid time and a half.
AIR CANADA: Reaches Tentative Agreement with Flight Attendants
--------------------------------------------------------------
CUPE's Air Canada Component representing 8,300 Flight Attendants
has reached a tentative agreement with the national carrier. The
agreement was reached following a stressful and arduous round of
bargaining involving the union, the company, Justice Warren
Winkler and the Monitor in the CCAA process.
"This has been an extremely difficult process for everyone
involved," said Air Canada Component president Pamela Sachs,
"but we feel we have done the best job possible with the company
potentially facing liquidation."
Recommendation of this agreement by the Bargaining Committee
will follow agreement on final language.
AIR CANADA: Earns Blessing to Fund Pension Plan Obligations
-----------------------------------------------------------
Air Canada is the administrator and sponsoring employer of ten
pension plans registered under the Pension Benefits Standards
Act, 1985 (Canada). Air Canada also maintains a number of
unregistered supplementary pension plans, and Jazz maintains a
number of registered pension plans.
Each of the Pension Plans is a defined benefit plan. Therefore,
Air Canada must conduct from time to time an actuarial valuation
in respect of each Pension Plan setting forth the assets and
liabilities of that plan as of the valuation date. The
valuation determines the financial position of the Pension Plan
and sets out the funding requirements for the plan. The
actuarial valuation reports must be prepared at least once every
three years.
With one exception, the most recent reports for each of the
Pension Plans were prepared variously as of July 1, 2000 or
January 1, 2001. Hence, fresh valuations would not ordinarily
be required until July 1, 2003 or January 1, 2004, as the case
may be. The Valuation Reports demonstrated that each of the
Pension Plans stood in surplus as of the valuation dates. In
consequence, and in accordance with actuarial practice and the
terms of the Pension Plans and the PBSA, the Applicants have not
made employer contributions to most of the plans in 2001 or
2002. The Applicants have contributed during this period to two
of the Pension Plans, though, based on the particular results of
the Valuation Reports for those plans.
The Pension Plans registered under the PBSA are regulated by the
Office of the Superintendent of Financial Institutions. The
PBSA requires actuarial valuation reports to be filed with OSFI.
Air Canada filed each of the Valuation Reports with OSFI upon
completion.
A confluence of unfavorable economic conditions, namely
declining interest rates and declining stock markets, caused the
financial position of many Canadian pension plans, including Air
Canada's Pension Plans, to deteriorate in 2001 and 2002. M.
Robert Peterson, Air Canada's Executive Vice-President and Chief
Financial Officer, explains that these events followed several
consecutive years of favorable economic conditions, which had
caused outstanding pension fund performance. The periodic
fluctuations in pension fund performance of this sort are not
uncommon, according to Mr. Peterson, but the impact of such
short-term fluctuations is usually limited by the fact that
Pension Plans constitute long-term obligations. Air Canada has
regularly and publicly reported both the extent of the changes
in the funded status of the plans in accordance with GAAP in its
financial statements and the fact that it has continued to take
"contribution holidays" in respect of some plans.
While the status of each Pension Plan is different, Mr. Peterson
relates that the solvency deficits as of January 2003 are
estimated to be in the range of approximately 15% if one were to
assume an immediate wind-up of the Pension Plans. This
corresponds to an estimated aggregate solvency deficit for all
the Pension Plans of approximately $1,300,000,000. This number
varies from time to time in accordance with market forces.
Obviously, the status of the Pension Plans is going to be a very
important issue to a large number of stakeholders. Mr. Peterson
points out that Air Canada is in no position to fund the
deficits, which new valuations of the Pension Plans would reveal
if made in existing market conditions. As a result, Air Canada
proposes that the only fair way to deal with this issue is to
defer it to a special hearing before the Court. Air Canada
intends to restructure the Pension Plans and other retirement
income arrangements to address fairly the interests of the
Applicants and each member group.
Air Canada is currently in discussions with OSFI regarding the
communication to be made to members of the various Pension
Plans.
If a basis to continue some or all Pension Plans can be
negotiated and once Air Canada's financial situation and
operations have been stabilized, Mr. Peterson says, Air Canada
is prepared to resume contributions of the current service costs
of the continuing plans from the date of the CCAA filing and
subject to the Court's directions within the limits of its
available liquidity.
In the interim, Air Canada has entered into an interim
arrangement with OSFI regarding its funding obligations. Air
Canada hopes that the magnitude of the solvency deficits will be
reduced as negotiations towards a definitive plan of compromise
involving all creditors progress, but obviously, no assurances
can be given in that regard.
Consequently, at the Applicant's behest, Mr. Justice Farley
authorizes the Applicants to pay all outstanding and future
pension benefits payable to former employees. Notwithstanding,
the Applicants may immediately cease making contributions to
funded pension plans pending further Court order. (Air Canada
Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
AIR CANADA: March 31 Net Capital Deficit Slides-Up to $2.5 Bill.
----------------------------------------------------------------
On May 13, 2003, Air Canada, on an exceptional basis, released
preliminary unaudited consolidated operating results for the
first quarter 2003 and for April 2003. The objective of the
early release was to ensure that Air Canada stakeholders would
have its financial results on as current a basis as possible
while Air Canada is developing its restructuring plan. The
airline also released an aggressive action plan to reduce
operating costs until traffic levels stabilize.
As previously announced, for the first quarter ended March 31,
2003, Air Canada reported an operating loss of $354 million, a
$194 million deterioration from the same quarter in 2002. The
average operating loss for the quarter amounted to just under $4
million per day. Loss before foreign exchange on long-term
monetary items and income taxes was $415 million versus a loss
of $246 million in 2002. The net loss amounted to $270 million
compared to a net loss of $219 million in the first quarter of
2002.
On April 1, 2003, Air Canada obtained an order from the Ontario
Superior Court of Justice providing creditor protection under
the Companies' Creditors Arrangement Act (CCAA). Air Canada also
made a concurrent petition under Section 304 of the U.S.
Bankruptcy Code.
As previously reported in the May 13, 2003 press release, the
downturn experienced in the first quarter intensified in April
2003 primarily as a result of the SARS outbreak in Toronto, Air
Canada's main hub, which was estimated to have negatively
impacted revenues by more than $125 million for the month. The
April 2003 preliminary unaudited operating loss is expected to
be $152 million or $123 million worse than the corresponding
period last year. The airline's inability to offset April's
revenue loss with corresponding cost reductions resulted in an
operating loss of just over $5 million per day. At the time of
the May 13th release, traffic on Asian routes was experiencing a
decline of approximately 60 per cent and Toronto enplanements
were significantly down. On a network-wide basis, forward
bookings for May, June and July were reported down by 20 to 25
per cent year-over-year. Based on May 2003 traffic and on
forward bookings to date, these adverse revenue and traffic
trends are expected to continue, which further underscores the
urgency to restructure under the CCAA process.
As a result of this deteriorating revenue and traffic
environment, Air Canada also announced, on May 13, 2003, the
implementation of a number of actions to reduce operating costs
until traffic levels stabilize:
- Reducing overall capacity by 17 per cent year-over-year for
June, July and, on a preliminary basis, August. Asian and
transborder routes are primarily affected with a 60 per cent
and 25 per cent reduction, respectively.
- Canceling or temporarily suspending services on 13 city pair
routes.
- Grounding of approximately 40 aircraft including both widebody
and narrowbody aircraft at the Mainline carrier and turbo prop
aircraft at Air Canada Jazz.
OPERATING RESULTS
Compared to the 2002 quarter, first quarter 2003 consolidated
passenger revenues declined $112 million or 6 per cent on a 2
per cent reduction to available seat mile capacity. Increased
competition, the build-up of the war in Iraq and the first stage
of the SARS crisis, all contributed to a passenger traffic
decline of 6 per cent. Passenger yield per revenue passenger
mile was unchanged from the first quarter of 2002 while
passenger revenue per available seat mile for the quarter was
down 4 per cent.
First quarter consolidated domestic passenger revenues were down
$101 million or 12 per cent on a 6 per cent reduction to ASM
capacity. Reflecting significantly increased domestic low cost
competition, uncertainty regarding the Iraq war, higher security
charges, and the first stage of the SARS crisis, domestic
passenger revenues at Mainline, including Tango and ZIP,
declined $95 million or 15 per cent. Total consolidated domestic
passenger traffic declined 11 per cent. Domestic yield per RPM
was 2 per cent lower and domestic RASM declined 7 per cent over
2002.
Mainline US transborder passenger revenues were 9 per cent below
the prior year due mainly to lower yields per RPM with increased
fare competition, and due to reduced traffic on non-leisure
markets and the reallocation of some short-haul transborder
flying to Air Canada Jazz. Consolidated US transborder passenger
revenues declined 5 per cent.
Other international passenger revenues were up $16 million or 3
per cent. While Atlantic and Pacific passenger revenues in the
fourth quarter of 2002 reflected a year-over-year improvement,
the trend was reversed in the first quarter of 2003. Atlantic
revenues declined 1 per cent with ASM capacity unchanged from
the prior year and Pacific revenues declined 4 per cent on a 4
per cent reduction to flying capacity. South Pacific, Caribbean,
Mexico and South America revenues were up 22 per cent due mainly
to increased revenue from Caribbean markets, many of which were
served in conjunction with Air Canada Vacations.
Cargo revenues improved $14 million or 11 per cent. Other
revenues were up $23 million or 8 per cent largely as a result
of increased revenues from Air Canada Vacations, partially
offset by a reduction in third party maintenance revenues in the
Technical Services division.
For the quarter, total operating revenues declined $75 million
or 3 per cent compared to the first quarter of 2002.
OPERATING EXPENSES
With significantly higher fuel prices, operating expenses
increased $119 million or 5 per cent from the first quarter of
2002 on a 2 per cent reduction to ASM capacity. Salaries, wages
and benefits expense was up $31 million or 4 per cent of which
$16 million was due to higher employee benefits including future
employee benefits and pension expenses. Fuel expense rose $53
million or 18 per cent in spite of reduced ASM capacity.
Aircraft maintenance materials and supplies expense was up $25
million or 21 per cent. The lower level of maintenance materials
expense in the prior year was mainly the result of the temporary
parking of a number of high maintenance aircraft in 2002.
Airport and navigation fees increased by $5 million on reduced
aircraft departures, reflecting continued cost increases for
landing fees and general terminal charges. Commission expense
was below the prior year by $14 million or 15 per cent resulting
from lower commission rates and reduced passenger revenues.
Other year-over-year cost reductions were recorded in
communications and information technology, and food, beverages
and supplies expenses. The "other" expense category increased
$29 million or 7 per cent due largely to Air Canada Vacations'
expanded tour operations.
Unit cost, as measured by operating expense per ASM, was up 5
per cent from the prior year for the Mainline-related operations
(up 2 per cent, excluding fuel expense).
NON-OPERATING EXPENSE
Non-operating expense amounted to $61 million in the quarter,
down $25 million with net interest expense unchanged from the
prior year. In the first quarter of 2002, the Corporation
recorded, in "other" non-operating expense, a $37 million charge
related to the disallowance, by the Government of Canada, of a
portion of Air Canada's 2001 claim for $105 million of
government assistance pertaining to the closure of Canada's
airspace following the September 11, 2001 terrorist attacks.
In the 2003 quarter, Air Canada recorded $132 million of income
from foreign exchange fluctuations on long-term monetary assets
and liabilities. This compares to income of $21 million in the
first quarter of 2002.
CASH FLOW
Cash flows used for operations amounted to $56 million, a $27
million deterioration from the 2002 quarter. This was mainly due
to deteriorating operating results and declining advance ticket
sales partly offset by changes in trade balances (accounts
receivable, accounts payable and spare parts, materials and
supplies).
Air Canada's 2003 first quarter results are being made available
on Air Canada's Web site http://www.aircanada.caand at
http://www.SEDAR.com A copy may also be obtained on request by
contacting the office of Air Canada's Shareholder Relations
department at (514) 422-5787 or 1-800-282-7427.
Air Canada's March 31, 2003 balance sheet shows a working
capital deficit of about $1.4 billion, and a total shareholders'
equity deficit of about $2.5 billion.
FIRST QUARTER 2003
Creditor Protection and Restructuring
On April 1, 2003, Air Canada obtained an order from the Ontario
Superior Court of Justice providing creditor protection under
the Companies' Creditors Arrangement Act. The initial order was
amended by the Court on April 25, 2003 and may be further
amended by the Court throughout the CCAA proceedings based on
motions from Air Canada, its creditors and other interested
parties. On April 1, 2003, Air Canada, through its court-
appointed Monitor, also made a concurrent petition for
recognition and ancillary relief under Section 304 of the U.S.
Bankruptcy Code. The CCAA and U.S. proceedings cover Air Canada
and the following of its wholly-owned subsidiaries: Jazz Air
Inc., ZIP Air Inc., 3838722 Canada Inc., Air Canada Capital
Ltd., Manoir International Finance Inc., Simco Leasing Ltd., and
Wingco Leasing Inc. Aeroplan Limited Partnership, Touram Inc.
and Destina.ca Inc., are not included in the filings.
The Court order and U.S. proceedings provide for a general stay
period that expires on June 30, 2003, subject to extension as
the Court may deem appropriate. This stay generally precludes
parties from taking any action against the Applicants for breach
of contractual or other obligations. The purpose of the stay
period order is to provide the Applicants with relief designed
to stabilize operations and business relationships with
customers, vendors, employees and creditors. During the stay
period, Air Canada is developing its revised business plan and
negotiating new arrangements with creditors (including aircraft
lessors) and labor unions with a view to having those
arrangements completed prior to proposing a final plan of
arrangement.
The Applicants continue operations with the consent and
assistance of the Court-appointed Monitor and under the
provisions of the Court orders. The Applicants are undertaking
an operational, commercial, financial and corporate
restructuring and will propose a plan of arrangement, which will
be submitted to the Court for confirmation after submission to
any required vote to creditors for approval. Under the plan of
arrangement, claims against and interests in the Applicants will
be divided into classes according to their seniority or
similarity of interests and each class of creditors will vote on
the plan of arrangement as it pertains to that class. No rulings
have yet been made on the classification of affected creditors.
The filings triggered defaults on substantially all of the
Applicants' debt and lease obligations. The stay period order
stays most actions against the Applicants, including employee
group actions and most actions to collect pre-filing
indebtedness or to exercise control over the Applicants'
property. The order also grants the Applicants with the
authority to, among other things, a) pay outstanding and future
employee wages, salaries and employee benefits and other
employee obligations; b) honour obligations related to airlines
tickets and Aeroplan redemptions; and c) honour obligations
related to the Applicants' interline, clearing house, code
sharing and other similar agreements.
Basis of Presentation
While the Company has filed for creditor protection, these
financial statements continue to be prepared using the generally
accepted accounting principles applied by the Company prior to
its filings for creditor protection. Accordingly, the financial
statements presented have been prepared using the same
principles as those for a going concern. The creditor protection
proceedings provide for a period of time for the Company to
stabilize its operations and develop a plan of reorganization.
As noted below, the DIP financing has been approved by the
courts. Management is currently developing a plan to restructure
the operations under creditor protection expecting a plan to
continue the operations as a going concern. During this period,
management will continue to operate the businesses within the
constraints of the court orders. The plan is targeted to be
filed with the courts in the third quarter of 2003. Management
believes that these actions make the going concern basis
appropriate, however, it is not possible to predict the outcome
of these matters and there is substantial doubt about the
Corporation's ability to continue as a going concern. There can
be no assurance that the results of these actions will improve
the financial condition of the Corporation. If the going concern
basis is not appropriate, adjustments may be necessary in the
carrying amounts and/or classification of assets, liabilities,
revenues and expenses in these financial statements. These
financial statements do not reflect any adjustments related to
subsequent events related to conditions that arose subsequent to
March 31, 2003.
During the periods while the Company is under creditor
protection, the Company will reclassify certain amounts within
its financial statements to reflect the financial evolution of
the operations during the proceedings to distinguish
transactions and events that are directly associated with the
reorganization from the ongoing operations of the business. In
addition, allowed claims under the proceedings may be recorded
as liabilities. If the restructuring and reorganization is
successful and there is a substantial realignment of the non-
equity and equity interests in the Corporation, the Corporation
will be required to adopt "fresh start" reporting. Fresh start
reporting requires a comprehensive revaluation of the assets and
liabilities of the Corporation based on the reorganization value
established and confirmed in the Plan. These financial
statements do not give effect to any adjustments that may be
required during the period in which the Company is under
creditor protection or as a result of fresh start reporting.
Financing During CCAA Proceedings
GE DIP Financing
In conjunction with the filing, the Corporation has arranged for
debtor-in-possession secured financing. On May 1, 2003, the
Court approved the Credit Agreement between Air Canada, as
Borrower, and General Electric Canada Finance Inc., as
Administrative Agent, Collateral Agent and Revolving Lender. The
Credit Agreement also includes the Air Canada subsidiaries
included in the filing, as well as Aeroplan, Air Canada
Vacations and Destina, as credit parties to the agreement. The
facility will be secured by all of the unencumbered present and
future assets of Air Canada and its direct and indirect
subsidiaries. Each of the credit parties to the agreement has
guaranteed payment of the Borrower's obligations.
The Credit Agreement is made up of a Credit Advance facility and
a Letter of Credit facility, with a maximum aggregate borrowing
under the Credit Agreement of US$700. The Credit Agreement can
be drawn in either US or Canadian funds and will be available in
stages. The initial funding period is a Credit Advance and
Letter of Credit obligation in an aggregate amount of up to
US$400. The second funding period is a Credit Advance and Letter
of Credit obligation in an aggregate amount of up to US$700,
including amounts drawn under the initial funding period. The
availability of funds under the initial funding period is
subject to certain conditions, including the maintenance of a
loan collateral ratio. The availability of funds under the
second funding period is subject to the conditions of the
initial funding period and additional conditions, including the
maintenance of a minimum EBITDAR (earnings (operating income)
before depreciation, amortization, obsolescence and aircraft
rent); minimum cash balance requirements and; the approval of
the business plan by the lender. As at May 28, 2003, no funds
have been drawn against this facility.
Under the Credit Agreement, availability of funds is determined
by a formula based on a percentage of eligible assets. The
eligible assets consist of certain previously unencumbered
aircraft, equipment, spare parts, real estate, takeoff and
landing slots, gates and routes, and accounts receivable. The
underlying value of the eligible assets may fluctuate
periodically and such fluctuations in value may have an impact
on the availability of funds under the Credit Agreement.
The Credit Agreement will have a term of up to the earliest of
(a) the effective date of a plan of arrangement in the CCAA
proceeding and (b) the prepayment in full by the Corporation of
all amounts outstanding under the Credit Agreement and the
termination of the lender's commitments under the agreement. The
Credit Agreement may be accelerated upon the occurrence of an
event of default under the Credit Agreement and contains
customary mandatory prepayments including, among other things,
the occurrence of certain asset sales and the issuance of
certain debt or equity securities.
US dollar borrowings under the Credit Advance bear interest at
rates per annum equal to either the US index rate plus 5% or the
LIBOR rate plus 6.5%, at the borrower's option. Canadian dollar
borrowings under the Credit Advance bear interest at rates per
annum equal to either the Canadian Index rate plus 5% or the BA
rate plus 6.5% at the borrower's option.
Closing and commitment fees under the Credit Agreement are
US$40. An unused facility fee is payable at 0.5% on unused
facility less than US$100, at 0.75% for unused facility between
US$100 and US$200 and 1.0% for unused facility greater than
US$200. Outstanding letters of credit draw a fee of 4%. An
annual collateral monitoring fee of US$0.5 is payable up until
the effective date of a plan of arrangement.
CIBC Financing
On April 17, 2003, the Corporation reached an agreement with
CIBC on a new contract with respect to the CIBC Aerogold Visa
card program. As part of the new contract, CIBC would make a
miles prepayment of $350 to the Corporation and pay a higher
price per Aeroplan Mile acquired. The terms of the contract also
call for an extension to 2013.
The Corporation received on April 28, 2003, an unsolicited and
non- binding expression of interest for a credit card agreement
with Aeroplan from a third party who has requested that its
identity not be disclosed. Following the Monitor's review of the
proposal, the Monitor issued a report in which it recommended
that the motion to approve the CIBC credit card agreement and
related financing facility be adjourned in order to provide the
Monitor with additional time to conduct a process in which
additional expressions of interest from alternative credit card
providers could be obtained. The Court granted the Monitor's
request to adjourn the motion to approve the CIBC agreements and
approved the bid process recommended by the Monitor. The bid
process ended May 10, 2003. Several financial institutions
submitted their bids for a credit card agreement with Aeroplan.
On May 14, 2003, the Corporation announced that it had reached
an agreement with CIBC that provided for certain improvements to
the contract renewal previously announced. The Monitor supported
the Corporation's acceptance of the CIBC proposal and
recommended court approval based on an improved price per mile
to be received from CIBC and the availability of the $350
prepayment. Further supporting the Monitor's recommendation, the
new agreement has been amended to enable the Corporation to
complete a definitive agreement with an additional card
provider. On May 14, 2003, the Court granted approval of the
amended new contract between the Corporation and CIBC. As at May
28, 2003, no funds have been drawn against the prepayment
financing facility.
Contributing Factors
During 2002 and continuing in 2003, the airline industry has
suffered from a weak economic environment and competitive
pressures resulting from excess capacity, lower demand and lower
fares. In addition, the industry has experienced challenging
operating conditions from increased security measures, increased
user fees and insurance costs and high fuel prices. The outlook
for the industry remains uncertain reflecting decreasing demand
for air travel caused by continuing concerns over security,
international conflicts, the impact of Severe Acute Respiratory
Syndrome ("SARS") on the travel industry and general economic
conditions. During 2002, two major North American airlines
commenced bankruptcy proceedings. The current situation and
potential future adverse events will likely result in continued
financial difficulties for airlines.
The Corporation became significantly leveraged in recent years.
The 1999 share buy back which used $1,100 of cash, before
partner contributions and other funding arrangements of $705,
and the unfavourable market conditions affecting all major North
American airlines resulting from the September 11, 2001
terrorists attacks were contributing factors. The Corporation
had significant debt as outlined in notes 7 through 9 of its
2002 annual financial statements. At March 31, 2003, the
aggregate carrying value of the Corporation's debt was $4,431.
Further, the Corporation had significant commitments related to
operating leases and purchase commitments and employee benefit
plans. Also contributing to the liquidity concerns, on March 21,
2003, the Office of the Superintendent of Financial Institutions
issued a Temporary Direction instructing Air Canada to make
pension contributions in an amount equal to the contribution
holidays taken in 2002 and to cease taking contribution holidays
(see further discussion under Pension Plans below). In addition,
the Corporation had fully utilized its existing credit lines.
In recent years, liquidity requirements were met in part by
certain financing transactions involving unencumbered assets and
the sale and leaseback of aircraft. These transactions had the
impact of increasing future charges such as lease and interest
expense.
Beginning in 2002, Management undertook a plan designed to
improve liquidity, increase revenues and reduce costs including:
(a) increased participation and more effective competition in
the low fare market through the expansion of Tango and the
launch of ZIP, (b) reducing distribution costs through the use
of new distribution models and c the launch of a Six Sigma
program, focusing on cost reduction, cash flow improvement and
process re- design. However these initiatives were not enough to
overcome the significant cost and liquidity challenges faced by
the Corporation.
Ancillary Impacts of CCAA
Associated with the restructuring and the filings as described
above, the Applicants are reviewing the operational, commercial,
financial and corporate structure of the Corporation and will
propose a plan of reorganization. Certain disclosures in these
notes and in the Corporation's annual consolidated financial
statements for the year ended December 31, 2002 contain forward
looking information that may no longer be applicable and the
status of which will be determined by the outcome of the
restructuring process under the filings. Amongst other things,
this uncertainty applies to disclosures regarding commitments to
purchase aircraft and other purchase commitments, the status of
the lease deposits and aircraft lease payments in excess of rent
expense, the funding requirements of the Corporation's pension
plans and the status of the Corporation's outstanding derivative
hedging instruments. In addition, financing commitments
previously available related to aircraft deliveries may no
longer be available. Financing commitments related to the sale
and leaseback of cargo facility related equipment are no longer
available.
Goodwill is tested annually for impairment unless an event or
circumstance occurs that more likely than not reduces the fair
value of a reporting unit below its carrying amount. Under
Canadian generally accepted accounting principles, goodwill
should continue to be reported while an entity is under creditor
protection, subject to no impairment having occurred in the fair
value of goodwill. The filing of the CCAA is an event, in
management's view, that triggers a requirement to test the
goodwill balance for impairment as of the date of the filing.
Consistent with current accounting practice of other entities
under creditor protection, the impairment test was done based on
current and projected discounted cash flows using a going
concern assumption. The cash flow analysis was prepared based on
a number of assumptions as to the Corporation's ability to
achieve targeted cost reductions and its ability to achieve a
sustainable capital structure. Based on the results of this
assessment, no impairment loss has been recorded. As discussed
above, the application of fresh start accounting on the
successful completion of a restructuring will result in the
write off of any goodwill balance and may materially impact the
value of other reported assets and liabilities.
Pension Plans
On March 21, 2003, the Office of the Superintendent of Financial
Institutions (OSFI) issued a Temporary Direction instructing Air
Canada to make contributions in excess of the minimum required
under the regulations and legislation. Specifically, Air Canada
was requested to remit an amount approximately equal to the
contribution holidays taken in 2002, and to cease taking
contribution holidays.
Pursuant to Air Canada's filing for court protection from its
creditors under the Companies' Creditors Arrangement Act, the
Court Order currently in effect allows Air Canada to cease
making contributions to funded pension plans, pending further
order of the Court. Pension benefit payments from the registered
pension plans continue to be paid.
Following these events, Air Canada conducted an update on the
financial position of its pension plans as of January 1, 2003 to
determine the funded status of its pension plans. Due to the
impact of the negative stock market returns and declining
interest rates, the financial update reports revealed solvency
deficits equal to approximately $1,300 for all domestic
registered pension plans on a combined basis.
The Company intends to discuss the future of the pension plans
with its stakeholders. It is uncertain at this time what the
outcome of these discussions will be. The funding requirements
as well as the accounting implications vis-a-vis the pension
plans will largely depend on the outcome of these discussions.
AMERCO: Adds Paul A. Bible to Independent Governance Committee
--------------------------------------------------------------
AMERCO (Nasdaq: UHAL) announced that Paul A. Bible, 62, a
partner in the Reno-based law firm of Bible, Hoy & Trachok, has
accepted an invitation to serve as a member of the Company's
Independent Governance Committee.
Mr. Bible currently serves as the Chairman of the Compliance
Committee for H Group Holding, Inc., the holding company of
Hyatt Corporation. He also serves as Chairman of the Compliance
Committee for Jacobs Entertainment, Inc., the holding company of
Black Hawk Gaming & Development Company, Inc. He is the former
Chairman of the Board of Trustees of the University of Nevada,
Reno, Foundation, and is the former Chairman of the Nevada
Gaming Commission.
The Independent Governance Committee is co-chaired by two
independent members of the Company's Board of Directors, James
J. Grogan and John P. Brogan. The Company has previously
announced that Thomas W. Hayes, the former State Treasurer of
the State of California, has accepted an invitation to serve as
a member of the Committee. Both Mr. Hayes and Mr. Bible qualify
as "independent" under the applicable SEC, New York Stock
Exchange and NASDAQ rules and regulations.
As stated in the Charter that was approved by the Board, "The
Independent Governance Committee will monitor and evaluate the
Company's corporate governance principles and standards and
propose to the Board any modifications thereto as deemed
appropriate for sound corporate governance. In addition, the
committee will review potential candidates for Board membership.
The committee may review, or choose not to review, other matters
as referred to it by the Board. The committee shall have the
authority to and a budget from which to retain professionals.
The committee membership term shall be one year and each member
shall be determined by the Board to be free of any relationship
that would interfere with their exercise of independent judgment
as member of this committee."
"We are very pleased that Paul Bible has accepted the invitation
to serve as a member on our Independent Governance Committee. He
has extensive experience in corporate governance issues and has
earned respect among his peers for his civic, political and
public service activities in Nevada," stated an AMERCO
spokesperson.
AMERCO is the parent company of U-Haul International, Inc.,
Republic Western Insurance Company, Oxford Life Insurance
Company and Amerco Real Estate Company. For more information
about AMERCO, visit http://www.uhaul.com
As reported in Troubled Company Reporter's May 22, 2003 edition,
Standard & Poor's Ratings Services lowered its corporate credit
rating on AMERCO, parent of U-Haul International Inc., to 'D'
from 'SD' (selective default).
At the same, Standard & Poor's lowered its unsecured debt rating
on AMERCO to 'D' from 'CC' and removed it from CreditWatch,
where it was placed July 10, 2002. The downgrades follow the
company's failure to meet a $175 million debt maturity on May
15, 2003. The corporate credit rating was lowered to 'SD' on
Oct. 16, 2002, after AMERCO failed to meet a $100 million debt
maturity. Subsequently, the company also failed to make
preferred stock dividend payments. Approximately $1.8 billion of
rated debt is affected.
"AMERCO's failure to meet the debt maturity due May 15, 2003,
continues a pattern of defaults on certain debt payments that
began in October 2002," said Standard and Poor's credit analyst
Betsy Snyder.
AMERICAN COMMERCIAL: Hiring Ponader as Conflicts Counsel
--------------------------------------------------------
American Commercial Lines LLC and its debtor-affiliates wants to
employ Ponader & Associates, LLP as their Co-Counsel in their
on-going chapter 11 cases. The Debtors tell the U.S. Bankruptcy
Court for the Southern District of Indiana that they wish to
employ Wendy W. Ponader, attorney at Ponader & Associates, as
co-counsel with Baker & Daniels, which serves as lead counsel.
The Debtors want Ponader & Associates to act primarily as
conflict counsel and represent the Company on matters from which
Baker & Daniels may be precluded by reason of a conflict of
interest.
To the best of the Debtors' knowledge, Ponader & Associates does
not hold or represent any interest that is materially adverse to
the Debtors' estates, their creditors, or any other party in
interest or its attorneys or accountants concerning the matters
upon which Ponader & Associates is being retained.
The Debtors expects Ponader & Associates to:
i) serve as conflict counsel on behalf of Debtors; and
ii) assist, as may be requested, in:
a) the preparation and filing of Debtors' Chapter 11
petitions;
b) approval of Debtors in possession financing;
c) advise the Debtors with respect to their Chapter 11
rights, powers and duties and continued operation of
their business and management of Applicants' property
as debtors in possession;
d) representation of the Debtors in the Chapter 11 cases
and in any adversary proceeding commenced in or in
connection with the Chapter 11 cases;
e) preparation, on behalf of Debtors, applications,
answers, proposed orders, reports, motions and other
pleadings and papers that may be required in the
Chapter 11 cases;
f) the preparation and submission of a Chapter 11 plan;
g) cooperation with any special counsel employed by
Debtors in connection with the Chapter 11 cases; and
iii) perform any other legal services as counsel for the
debtors in possession that may be required by the
Debtors or the Bankruptcy Court.
The Debtors relate that they desire to employ Ponader on an
hourly fee basis at its rates for similar employment, plus
reimbursement of all actual and necessary expenses. However, no
specific hourly rates are disclosed. The Debtors disclose that
they paid Ponader & Associates a retainer of $20,000 for the
services rendered from January 23, 2003 to January 29, 2003.
Additionally, on January 30, 2003 the Debtors paid Ponader &
Associates $5,300 as additional retainer.
American Commercial Lines LLC, an integrated marine
transportation and service company transporting more than 70
million tons of freight annually using 5,000 barges and 200
towboats in North and South American inland waterways, filed for
chapter 11 protection on January 31, 2003 (Bankr. S.D. Ind. Case
No. 03-90305). American Commercial is a wholly owned subsidiary
of Danielson Holding Corporation (Amex: DHC). Suzette E.
Bewley, Esq., at Baker & Daniels represents the Debtors in their
restructuring efforts. As of September 27, 2002, the Debtors
listed total assets of $838,878,000 and total debts of
$770,217,000.
ANC RENTAL: Has Until June 16, 2003 to File Creditors' Claims
-------------------------------------------------------------
ANC Rental Corporation and its debtor-affiliates obtained the
Court's approval extending the period set forth in Rule 3004 of
the Federal Rules of Bankruptcy Procedure within which they may
file claims on a creditor's behalf to June 16, 2003. (ANC Rental
Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ARMSTRONG HOLDINGS: AWI Balks at Patricia Barnes' $10-Mil. Claim
----------------------------------------------------------------
Armstrong World Industries objects to the allowance of the claim
filed by Patricia Barnes on August 9, 2001, and asks the Court
to disallow and expunge Ms. Barnes' claim or, in the
alternative, rule that any allowed Barnes Claim will have no
priority of payment.
AWI also seeks to enforce the automatic stay with respect to an
action commenced postpetition by Ms. Barnes' estate and next of
kin.
The Barnes Claim
In her claim, Ms. Barnes alleged that she had sustained a non-
asbestos personal injury in March 2001. As a basis for her
claim, the Barnes Claim indicates simply, "Litigation-PCB." The
total quantum of damages alleged in the Barnes Claim is
$10,000,000. The Barnes Claim contains no additional supporting
documentation and does not assert any entitlement to priority
status.
The Suit
On December 12, 2002, AWI was served with an Amended Complaint
filed in the United States District Court for the District of
New Jersey styled "Diana Biehn and Lisa Barnes Schuyler,
Executrixes of the Estate of Patricia Barnes and Herbert Friese,
Individually v. AWI." The suit filed by the Barnes Plaintiffs
alleges that Ms. Barnes was diagnosed with lung cancer on March
9, 2001, and died on some unspecified date. The suit further
alleges that, in 1970, AWI designed, manufactured, assembled
and/or distributed ceiling tiles that were coated with Aroclor
1254, a substance containing polychlorinated biphenyl, or PCG.
In the suit, the Plaintiffs further assert that, as a result of
alleged negligence on AWI's part in the design, manufacture,
assembly and/or distribution of these ceiling tiles, Ms. Barnes
was caused to contract cancer and sustained a variety of
injuries and expenses.
The suit contains a separate count asserting that AWI's failure
to notify customers of known, potential health risks to people
exposed to Aroclor 1254 was reckless, intentional, willful and
in wanton disregard of the health of Ms. Barnes and others,
purportedly justifying an award of punitive damages.
The 1995 New Jersey Case
In accord with the Local Rules of Court, the Barnes Plaintiffs'
counsel certified in an attachment to the Complaint that there
are two previously filed actions against AWI that are pending
and that involve the same subject matter as the Barnes
Complaint. One of the two previous cases identified was filed
against AWI originally in 1995 under the caption "Joan Maertin
et al v. AWI."
Notably, Ms. Barnes was one of approximately 50 plaintiffs in
the Prepetition Maertin Case, and in that case, Ms. Barnes made
virtually identical allegations to those asserted in the Barnes
Case. Both cases involve injuries and claims allegedly arising
as a result of exposure by a group of claimants to PCBs at
Burlington County College in New Jersey, which exposure
allegedly occurred many years before December 6, 2000, when AWI
filed its petition for relief.
The Objection
AWI asserts that the Barnes Claim is not a valid claim because
it does not contain any supporting documentation. Therefore,
the Barnes Claim contains insufficient factual statements or
documentation on which this Court could reasonably rely to
accept the proof of claim as evidence that Ms. Barnes has a
valid claim. Furthermore, AWI's books and records do not
evidence or support the Barnes Claim. Because the Barnes Claim
is unsubstantiated, no prima facie validity attaches to the
Claim and it should be disallowed.
Ms. Booth argues that any injuries Ms. Barnes may have received
in the fall were the result of materials other than those that
were contained in or on the ceiling tiles allegedly supplied by
AWI to BCC, and in whole or part by prior or subsequent
injuries, illnesses or bodily conditions for which AWI is not
legally responsible. If that doesn't knock out the claim, Ms.
Booth says, Ms. Barnes' injuries were the result of intervening
or superseding causes for which AWI is not legally responsible.
Furthermore, AWI did not design, manufacture or market Aroclor
1254, the chemical product that is alleged to have caused Ms.
Barnes' injury.
Finally, the Barnes Claim is barred, in whole or in part, by the
applicable statute of limitations, waiver, estoppel, lack of
privity of contract, failure of consideration, and assumption of
the risk or laches.
This Objection is made without prejudice to the right of AWI or
any other party-in-interest to object to the Barnes Claim on any
other grounds whatsoever. (Armstrong Bankruptcy News, Issue No.
41; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ATLANTIC COAST: Enters Pact with Bombardier on Aircraft Delivery
----------------------------------------------------------------
Atlantic Coast Airlines, the Dulles, VA-based United Express and
Delta Connection regional carrier (Nasdaq: ACAI)
(S&P: B-/Negative/-), has agreed with Bombardier Aerospace on a
revised schedule for its remaining CRJ-200 aircraft originally
scheduled to be delivered through April 2004 for its United
Express program. The new schedule is as follows:
-- 6 will be delivered immediately
-- 2 will be delivered during the fourth quarter 2003
-- 6 will be delivered during the fourth quarter 2004
-- 28 will be delivered in 2005
Financing has been arranged for the eight aircraft to be
delivered in 2003 using a mix of traditional and non-traditional
financing sources. ACA anticipates that it will be the equity
owner of at least six of these aircraft. The arrangement with
Bombardier also provides ACA with further flexibility with
respect to the aircraft now scheduled for delivery after 2003,
dependent on its reaching a satisfactory arrangement with United
Airlines.
The company anticipates that it will remove six of its J-41
turboprop aircraft from its United Express service in the coming
months.
ACA operates as United Express and Delta Connection in the
Eastern and Midwestern United States as well as Canada. The
company has a fleet of 142 aircraft -- including a total of 112
regional jets -- and offers over 825 daily departures, serving
84 destinations.
Atlantic Coast Airlines employs over 4,800 aviation
professionals. The common stock of parent company Atlantic Coast
Airlines Holdings, Inc. is traded on the Nasdaq National Market
under the symbol ACAI. For more information about ACA, visit its
Web site at http://www.atlanticcoast.com
BOYD GAMING: Promotes Paula Eylar to VP for Internal Audit
----------------------------------------------------------
Boyd Gaming Corporation (NYSE: BYD) recently promoted Paula
Eylar to Vice President of Internal Audit. Eylar, 40, has the
primary responsibility of managing the Company's internal audit
function and regulatory compliance requirements.
Eylar, who joined the Company in 1995, was previously the
Director of Internal Audit for the Rio Suite Hotel and Casino.
She received her bachelor's and master's degrees in Hotel
Administration from the University of Nevada, Las Vegas and is a
Certified Internal Auditor.
Commenting on the appointment, William S. Boyd, Chairman and
Chief Executive Officer of Boyd Gaming, said, "Internal Audit
has always been an integral part of our operations, and Paula's
promotion reinforces our commitment to this area. With 16 years
of gaming and hospitality experience, Paula brings to her new
position a thorough knowledge of our business."
Headquartered in Las Vegas, Boyd Gaming Corporation (NYSE: BYD)
is a leading diversified owner and operator of 12 gaming
entertainment properties located in Nevada, Mississippi,
Illinois, Indiana and Louisiana. Boyd Gaming is also developing
"Borgata" (AOL keyword: borgata or http://www.theborgata.com),
a $1 billion entertainment destination hotel in Atlantic City,
through a joint venture with MGM MIRAGE. Boyd Gaming press
releases are available at http://www.prnewswire.com
Additional news and information on Boyd Gaming can be
found at http://www.boydgaming.com
* * *
As reported in Troubled Company Reporter's December 18, 2002
edition, Standard & Poor's assigned its 'B+' rating to Boyd
Gaming Corp.'s $300 million senior subordinated notes offering.
Standard & Poor's also affirmed it 'BB' corporate credit rating
on Boyd. The outlook is stable.
BRIDGES.COM INC: Taps ThinkEquity Partners as Investment Banker
---------------------------------------------------------------
Bridges.com, Inc. (TSX: BIT), North America's leading provider
of career and educational management solutions, has retained the
services of ThinkEquity Partners to advise the Board of
Directors of the Company with respect to strategic alternatives
to enhance shareholder value. Alternatives under consideration
may include the sale of the Company or some other form of merger
or partnership.
"We have entered into a new era of accountability in education
that is creating new product opportunities in the education
market", said John Simmons, CEO of Bridges. "Bridges has
tremendous relationships with high schools, colleges and other
career related institutions that we think can be very valuable
to those who produce these new products."
There can be no certainty as to the timing or outcome of this
process, which may or may not ultimately lead to a sale of the
Company. The Company will advise of further developments, as
they become known.
Bridges is North America's leading provider of career and
educational management solutions. Over 15,000 schools,
libraries, employment centers, military sites, post-secondary
schools and rehabilitation facilities subscribe to Bridges'
customized products. Bridges serves the needs of millions of
people seeking educational or career planning assistance. For
more information, visit http://www.bridges.com The Company is
listed on the Toronto Stock Exchange under the symbol: BIT.
ThinkEquity Partners is a research-centric institutional
investment bank focused on the growth economy. The information
revolution that began with the birth of the PC has evolved into
a knowledge revolution fueled by brainpower, ideas and
entrepreneurial pursuits. ThinkEquity Partners is dedicated to
providing focused insight, advisory services and capital to
institutional investors and corporate constituents in the
knowledge economy's key growth verticals including education,
technology health care, and out-sourced business services.
ThinkEquity's partnership structure is designed to leverage deep
domain expertise across brokerage, investment banking and asset
management businesses. With our focused knowledge, ThinkEquity
aims to become an essential partner with the leading growth
companies of today and tomorrow. For more information on
ThinkEquity Partners visit http://www.thinkequity.com
BURLINGTON INDUSTRIES: Qualified Bids Due July 10, 2003
-------------------------------------------------------
Burlington Industries, Inc., continues to solicit offers for,
alternatively, the sale of all of the issued and outstanding
capital stock of the reorganized company or the sale of
substantially all of the assets of the company, pursuant to the
company and its debtor-affiliates' Plan of Reorganization.
As approved by the U.S. Bankruptcy Court for the District of
Delaware, the Debtors will conduct an auction of the company
among Qualified Bidders on July 21, 2003, at 10:00 a.m. Eastern
Time, at the offices of the Debtors' Co-Counsel, Jones Day,
located at 222 East 41st Street, New York, NY 10017-6702.
Qualified bids must be received on or before July 10.
A subsequent hearing to consider the approval of the Auction
results will be heard before the Honorable Randall J. Newsome,
on July 31, at 2:00 p.m. Eastern Time.
All inquiries concerning the bidding procedures, the Auction and
the Company should be made to:
a. Burlington Industries, Inc.
c/o Miller Buckfire Lewis
1301 Avenue of the Americas
New York, NY 10019
Tel: 212-895-1805
b. Counsel to Burlington
Jones Day
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Attn: David G. Heiman, Esq.
Tel: 216-586-3939
Burlington Industries, Inc. is one of the world's largest
manufacturers of softgoods for apparel and interior furnishings.
The company filed for Chapter 11 protection on November 15,
2001, (Bankr. Del. Case No. 01-11282). Daniel J. DeFranceschi,
Esq., and Rebecca L. Booth, Esq. at Richards, Layton & Finger
and David G. Heiman, Esq., Michelle Morgan Harner, Esq., and Gus
Kallergis, Esq., at Jones Day represent the Debtors in their
restructuring efforts.
CABLE SATISFACTION: Loan Maturity Waiver Extended Until June 11
---------------------------------------------------------------
Cable Satisfaction International Inc. said that its bankers
have extended the waivers pertaining to the maturity date of the
credit facility of its subsidiary Cabovisao - Televisao por
Cabo, S.A. until June 11, 2003, subject to certain conditions.
The Company is pursuing constructive discussions with secured
lenders, noteholders, suppliers and potential investors to reach
a consensual agreement on a long-term solution to its financial
requirements and those of Cabovisao. There can be no assurance
as to the outcome of these discussions.
Csii builds and operates large bandwidth (750 Mhz) hybrid fibre
coaxial networks and, through its subsidiary Cabovisao -
Televisao por Cabo, S.A. provides cable television services,
high-speed Internet access, telephony and high-speed data
transmission services to homes and businesses in Portugal
through a single network connection.
The subordinate voting shares of Csii are listed on the Toronto
Stock Exchange under the trading symbol "CSQ.A".
CABS II: Fitch Places BB- Preference Shares Rating on Watch Neg.
----------------------------------------------------------------
Fitch Ratings has placed the following classes of CABS II CDO on
Rating Watch Negative:
Collateralized Assets Backed Securities Trust II (CABS II):
-- Class C notes 'BBB';
-- Preference shares 'BB-'.
CABS II is a structured finance collateralized debt obligation
managed by Structured Finance Advisors. The portfolio supporting
the CDO is comprised of residential mortgage-backed securities,
general asset-backed securities, commercial mortgage-backed
securities and CDOs. Fitch has reviewed the credit quality of
the individual assets comprising the portfolio and has conducted
cash flow modeling of various default timing and interest rate
scenarios. As a result, Fitch has determined that the original
ratings assigned to the class C notes and preference shares of
CABS II may no longer reflect the current risk to noteholders
and shareholders.
The rating actions are based on a number of factors including
substantial downward rating migration in the credit quality of
the portfolio and a reduction in excess spread. As of the April
reporting date, the Fitch WARF was 16.62 ('BBB'/'BBB-') and the
class A notes had paid down 1.7% due to a failure of the class C
overcollateralization test. Fitch is investigating whether these
factors have negatively impacted the expected performance of the
transaction to the point where the available credit enhancement
levels may no longer support the original ratings.
CABS II holds a number of securities that Fitch has identified
as having the potential for adverse impact on the ability of the
CDO to pay ultimate principal and interest on the C notes. More
than 12% of the collateral pool is currently rated in the non-
investment grade category. In addition, the portfolio has
experienced significant credit deterioration in various sectors
including aircraft and mutual fund fee securitizations.
Fitch Ratings will continue to monitor this transaction.
CONE MILLS: Lenders Extend Credit Facilities to March 15, 2004
--------------------------------------------------------------
Cone Mills Corporation (NYSE: COE) announced that on May 27,
2003, it amended agreements with its lenders extending its
existing credit facility and senior note obligations through
March 15, 2004. With the amendments, the outstanding balance of
the senior note is $22 million with an interest rate of 14.2%,
and the existing revolving credit agreement has been split into
two components. The first component is a $25 million, 12%
senior note and the second component is a $31 million revolving
credit facility priced at LIBOR + 6.75% (currently approximately
8.10%).
The agreements call for monthly amortizations of $833,333,
beginning in July 2003. As a part of the extension, Cone
settled the Equity Appreciation Rights, which were contingent
rights that were granted as a part of the November 2001
agreements, for $4.1 million. The rights were paid 50% in cash
($2.1 million), the entering into new senior notes of $1.8
million and the election by two lenders to receive approximately
169,000 shares of Cone common stock. The company will recognize
a pre-tax charge of $4.1 million in its second quarter financial
statements to reflect the settlement of these contingent rights.
As of the date of closing, the company had cash and availability
under its credit facilities in excess of $20 million.
Chief financial officer, Gary L. Smith, commented, "This
transaction provides the time necessary to evaluate potential
business opportunities that would allow us to execute our
strategic vision and propose a comprehensive plan for a long-
term capital structure. It also provides the necessary
liquidity and flexibility for the company to operate during
these uncertain economic conditions."
Founded in 1891, Cone Mills Corporation, headquartered in
Greensboro, NC, is the world's largest producer of denim fabrics
and the largest commission printer of home furnishings fabrics
in North America. Manufacturing facilities are located in North
Carolina and South Carolina, with a joint venture plant in
Coahuila, Mexico.
As previously reported, Standard & Poor's Ratings Services
placed its 'CCC+' long-term corporate credit and senior secured
debt ratings on textiles manufacturer Cone Mills Corp., on
CreditWatch with negative implications.
Cone Mills Corp.'s 8.125% bonds due 2005 (CONE05USR1) are
trading at about 77 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CONE05USR1
for real-time bond pricing.
CONMED: S&P Affirms BB- Sr. Sec. Rating on $165M Credit Increase
----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB-' rating on
medical equipment maker ConMed Corp.'s senior secured credit
facility, after the company proposed increasing the size of the
facility by adding a $165 million tranche B term loan. At the
same time, Standard & Poor's affirmed its 'BB-' corporate credit
rating on ConMed. Proceeds will be used to retire the company's
$113 million of subordinated notes and repay balances
outstanding under its revolving credit facility. Standard &
Poor's will withdraw its 'B' rating on the subordinated notes
upon their retirement.
The outlook on ConMed remains stable.
ConMed had approximately $285 million of debt outstanding as of
March 31, 2003, which should not change materially as a result
of the transaction.
"The speculative-grade ratings on Utica, New York-based ConMed
Corp. reflect Standard & Poor's concern that the company,
although well established in its niche surgical markets, faces
the ongoing challenge of competing against larger, better-
financed companies in all of its markets," said credit analyst
Jordan Grant.
ConMed is a leading manufacturer of arthroscopic and powered
surgical instruments and electrosurgical systems. By focusing on
niche areas within operating room services, and establishing
relationships with physicians through a sizable sales force, the
company has the second-largest U.S. market share in four of its
five product lines. Disposable and consumable products,
accounting for about 75% of sales, lend some earnings
predictability.
Standard & Poor's expects operating performance to remain
steady, given ConMed's established position in niche markets,
and future acquisitions to be limited. Liquidity, which has been
enhanced by ConMed's revolving credit facility, should remain
adequate over the medium term.
CONSECO INC: Trump Loses Latest Round in GM Building Dispute
------------------------------------------------------------
Conseco, Inc. (OTCBB:CNCEQ) reported that a panel of arbitrators
has resolved the long-standing dispute between Conseco and
Donald Trump relating to the parties' joint investment in the
General Motors Building at 767 Fifth Avenue in New York City.
The arbitrators awarded in favor of Conseco, directing Trump to
transfer his 50 percent interest in the building to Conseco
consistent with the buy/sell process contained in the parties'
agreement.
Conseco President and CEO Bill Shea said, "The arbitration award
moves Conseco one step closer to putting the value of one of our
companies' largest investments to work toward a successful
restructuring. We are pleased with the panel's prompt resolution
of this dispute. We have asked the Bankruptcy Court to confirm
the award and we look forward to taking ownership of 100 percent
of the investment. We plan to put the property up for sale as
soon as practicable."
CYPRESS SEMICONDUCTOR: Issuing $500MM Conv. Subordinated Notes
--------------------------------------------------------------
Cypress Semiconductor Corporation (NYSE: CY) -- whose corporate
credit position is rated by Standard & Poor's at B+ -- intends
to offer, subject to market and other conditions, $500 million
aggregate principal amount of convertible subordinated notes due
2008 through an offering to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933. The
number of shares issuable upon conversion of the notes is to be
determined by negotiations between the company and the initial
purchasers of the notes.
The company stated that it expects to grant the initial
purchasers an option to purchase up to an additional $100
million principal amount of notes.
Cypress intends to use the net proceeds of the offering to
redeem at least $400 million of its outstanding 4% and 3.75%
convertible subordinated notes, to repurchase shares of its
common stock and for other general corporate purposes, which may
include other debt repayment. The company also intends to use a
portion of the proceeds to purchase issuer call spread options
with respect to its common stock.
DELTA AIR LINES: Prices $300 Million of Convertible Senior Notes
----------------------------------------------------------------
Delta Air Lines (NYSE: DAL) announced the pricing of its
offering of $300 million aggregate principal amount of
Convertible Senior Notes due 2023, to qualified institutional
buyers pursuant to Rule 144A, and to non-U.S. persons pursuant
to Regulation S, under the Securities Act of 1933, as amended.
The sale of the notes is expected to close on June 2, 2003.
Delta has granted the initial purchasers of the notes a 30-day
option to purchase up to an additional $50 million principal
amount of the notes.
Interest on the notes will be 8 percent per $1,000 principal
amount and will be payable in cash in arrears semi-annually
through June 3, 2023. Each note will be convertible into Delta
common stock at a conversion price of $28 per share (equal to an
initial conversion rate of approximately 35.7143 shares per
$1,000 principal amount of notes), subject to adjustment in
certain circumstances. Holders of the notes may convert their
notes only if (i) the price of Delta's common stock reaches a
specified threshold; (ii) the trading price for the notes falls
below certain thresholds; (iii) the notes have been called for
redemption; or (iv) specified corporate transactions occur.
Delta may redeem all or some of the notes for cash at any time
on or after June 5, 2008, at a redemption price equal to the
principal amount of the notes plus any accrued and unpaid
interest to the redemption date. Holders may require Delta to
repurchase the notes on June 3 of 2008, 2013 and 2018, or in
other specified circumstances, at a repurchase price equal to
the principal amount due plus any accrued and unpaid interest to
the repurchase date.
Delta plans to use the net proceeds from the offering for
general corporate purposes.
The notes being offered and the common stock issuable upon
conversion of the notes have not been registered under the
Securities Act, or any state securities laws, and unless so
registered, 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.
Delta Air Lines, the world's second largest airline in terms of
passengers carried and the leading U.S. carrier across the
Atlantic, offers 5,386 flights each day to 435 destinations in
78 countries on Delta, Song, Delta Express, Delta Shuttle, Delta
Connection and Delta's worldwide partners. Delta is a founding
member of SkyTeam, a global airline alliance that provides
customers with extensive worldwide destinations, flights and
services. For more information, please go to
http://www.delta.com
DIMON: S&P Revises BB Senior Notes' Rating Outlook to Positive
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB' senior
unsecured debt rating to the second-largest independent leaf
tobacco processor DIMON Inc.'s $125 million senior notes due
2013. Proceeds from this issue will be used to redeem the
company's existing $125 million 8.875% senior notes due
June 1, 2006.
At the same time, the outlook is revised to positive from
stable. In addition, Standard & Poor's affirmed its 'BB'
corporate credit rating on the company.
Danville, Virginia-based DIMON has about $490 million of rated
debt.
"The outlook revision reflects improved operating performance
and the related improvement in profitability and cash flow
measures," said Standard & Poor's credit analyst Jayne M. Ross.
In addition, DIMON continues to reduce debt. However, further
upgrade potential will depend on the company exceeding, on
average, Standard & Poor's expectations for the company's credit
protection measures in the intermediate term.
The ratings reflect the challenging business environment in
which DIMON operates, including global competition, political
unrest in certain leaf-tobacco producing countries, better
balance in worldwide leaf tobacco supply and demand, declining
U.S. cigarette consumption, a changing U.S. leaf-tobacco market
and a leveraged financial profile. In addition, there is
customer concentration risk. These concerns are somewhat
mitigated by the company's position as the world's second-
largest independent leaf tobacco merchant, its sourcing
diversification, strong customer relationships with the leading
cigarette manufacturers, and its ability to manage through the
changing market conditions.
DIRECTV: Has Until August 15 to Make Lease-Related Decisions
------------------------------------------------------------
Alfred Villoch, III, Esq., in Young Conaway Stargatt & Taylor
LLP, in Wilmington, Delaware, informs Judge Walsh that to date,
DirecTV Latin America, LLC is a party to two unexpired non-
residential real property leases in Fort Lauderdale, Florida:
Lessor Location Use
------ -------- ---
CB Richard Ellis 2400 East Commercial Blvd. Corp. office
Iron Mountain New Town Commercial Center warehouse
Section 365(d)(4) of the Bankruptcy Code provides, in relevant
part:
"[If] the trustee does not assume or reject an Unexpired
Lease of nonresidential real property under which the
debtor is the lessee within 60 days after the date of the
order for relief, or within such additional time as the
court, for cause, within such 60-day period fixes, then
such lease is deemed rejected, and the trustee shall
immediately surrender such nonresidential real property
to the lessor."
Thus, DirecTV asks the Court to extend the date by which it is
required by Section 365(d)(4) to assume or reject the Unexpired
Leases up to and including August 15, 2003.
Mr. Villoch asserts that the Court should grant to DirecTV the
extension because:
(a) the Unexpired Leases are valuable assets of DirecTV's
estates and are integral to the continued operation of
its business pending its efforts to formulate and
ultimately confirm a plan of reorganization;
(b) forcing DirecTV to reject the Unexpired Leases and seek
new office and storage space would be extremely
disruptive to its business and to its reorganization
efforts; and
(c) the lessors will not be prejudiced by the extension since
DirecTV has performed and will continue to perform in a
timely manner its postpetition obligations under the
Unexpired Leases.
The Court will convene a hearing on June 3, 2003 to consider
DirecTV's request. By application of Del.Bankr.LR 9006-2, the
lease decision deadline is automatically extended through the
conclusion of that hearing. (DirecTV Latin America Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
ENRON CORP: Taps Michael Fox Int'l to Sell Power Services Assets
----------------------------------------------------------------
Michael Fox International, a division of GoIndustry company, one
of the largest asset management and disposition firms in the
world, has been appointed by the District Court of Rotterdam,
the Netherlands, to sell the assets of bankrupt Enron Power
Services B.V.
The bankrupt company's assets consist of a stock of steel
currently stored in a warehouse in Houston, Texas. The inventory
consists of over 781 pieces of A553 Type I steel plate with
sizes ranging from (5 mm x 2,500 mm x 6,000 mm) up to (27.42 mm
x 2,905 mm x 11,815 mm). The total weight of the material is
approximately 1,935.15 Metric Tons with individual plates
weighing as much as 7.4 tons per piece.
Mr. M. Windt, the court-appointed Trustee, has authorized
Michael Fox International to conduct a Sealed Bid Sale, giving
interested potential buyers the opportunity to make an offer to
buy all of the assets. Offers to Purchase can be made until May
30, 2003 at 5:00 PM EDT. The entirety bids are to be prepared
and submitted in writing to the offices of Michael Fox
International, 11425 Cronhill Drive, Owings Mills, MD 21117,
Attn: Bill Mooney. All submitted bids will be reviewed and the
successful bidder/purchaser will be contacted via telephone.
Additional sale information is available at
http://www.michaelfox.com
Enron Power Services B.V. was a subsidiary of Enron Corp.
Michael Fox International Inc., is the United States leader in
the liquidation, auction and appraisal of machinery and
equipment, inventories, business assets, and real estate. Part
of GoIndustry, one of the world's largest industrial asset sales
and service companies, with over 240 employees in 16 countries
and 35 offices, Michael Fox offers North American service with
global reach. Serving the corporate, financial and legal
communities, Michael Fox provides asset disposition systems and
services that can be tailored to the unique needs of each
client. Not only is Michael Fox an expert in traditional
auctions, but as a division of GoIndustry, it also has the
world's leading web-based asset management and disposition
system. Michael Fox's unique technology enables it to sell
assets via Intranet or Internet using web-based and webcast
sales.
DebtTraders reports that Enron Corp.'s 9.875% bonds due 2003
(ENRN03USR3) are trading at about 17 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR3
for real-time bond pricing.
ENRON CORP: EPMI Unit Sues Old Dominion to Recover $10 Million
--------------------------------------------------------------
Enron Power Marketing, Inc. entered into a Master Power Purchase
and Sale Agreement on May 9, 2001 with Old Dominion Electric
Company. The Agreement sets forth the basic terms pursuant to
which:
(i) the parties may engage in subsequent individual
transactions to buy and sell wholesale electricity at
specified prices and for fixed delivery terms, and
(ii) the parties may enter into options for the purchase of
wholesale electricity.
Pursuant to the Agreement, the parties entered into transactions
under which:
(i) EPMI agreed to sell, and ODEC agreed to buy, wholesale
electricity at specified prices and for fixed periods of
time, and
(ii) EPMI agreed to sell, and ODEC had the option to buy,
wholesale electricity at specified prices and for
periods of times set forth in each option.
In addition, the parties agreed that if a party's conduct
triggers an Event of Default, the Non-Defaulting Party may
declare an Early Termination Date, and one party would have to
pay the other a Termination Payment. The Agreement expressly
provides that the Termination Payment must be paid to whomever
it is owed, regardless of which party committed the default.
Jonathan D. Polkes, Esq., at Cadwalader, Wickersham & Taft, in
New York, relates that on November 28, 2001, all three major
credit rating agencies downgraded Enron Corp.'s credit rating
from investment grade rating to non-investment grade. As a
result of this downgrade, ODEC had the option to request that
EPMI provide Performance Assurance and declare an event of
default in the event EPMI failed to provide the performance
assurance. However, ODEC did not make any such request at that
time. Rather it continued to perform under the Agreement as if
there were no defaults by EPMI, including continuing to accept
wholesale electricity delivered by EPMI through December 14,
2001.
With EPMI's Chapter 11 filing, on December 20, 2001, ODEC sent a
letter to EPMI stating that EPMI was in default pursuant to
Section 5.1(d) of the Agreement and that ODEC was declaring
January 10, 2002 as the Early Termination Date. ODEC also
claimed that EPMI was in default for failure to deliver
wholesale electricity to ODEC after December 14, 2002.
On April 25, 2002, ODEC informed EPMI that based on its
calculation, ODEC owed EPMI a $3,974,378 termination payment.
However, Mr. Polkes points out that ODEC's calculation of the
payment is incorrect in that it is incorrectly calculated in the
settlement amounts and included costs not recoverable under the
agreement. When properly calculated, the aggregate settlement
amount for all terminated transactions owed by ODEC to EPMI is
$9,474,738 as of the early termination date, plus interest at
the interest rate provided for under the Agreement.
Accordingly, on June 19, 2002, EPMI sent a letter to ODEC
disputing ODEC's calculation of the termination payment and
demanding immediate payment of the correct termination payment.
Thereafter, on November 6, 2002, EPMI sent a letter to counsel
for ODEC detailing EPMI's right to termination payment and
setting forth the basis for EPMI's position that the termination
payment owed by ODEC as of November 15, 2002, including at the
interest rate, was $11,031,379.
To date, Mr. Polkes informs the Court that ODEC has refused to
make any termination payment. Rather, in a letter dated
November 25, 2002, ODEC's counsel states that ODEC refuses to
pay EPMI the termination payment because ODEC was allegedly
fraudulently induced into entering into the agreement and, thus,
the Agreement is allegedly void and unenforceable.
The November 6, 2002 letter to counsel for ODEC also demanded
payment of the $914,400 owed for wholesale electricity delivered
to ODEC during the period from December 1 through December 14,
2001. However, to date, ODEC has not paid EPMI the amount and
thus, has breached the agreement.
In addition, ODEC owes EPMI $29,593 as a result of ODEC's
postpetition breach of the Agreement by not accepting delivery
of wholesale electricity EPMI had scheduled for delivery
pursuant to the transactions after the date of ODEC's notice of
termination but before the early termination date. To date,
ODEC has not paid EPMI this amount.
The Agreement contains a clause providing for the arbitration of
disputes among the parties. Mr. Polkes explains that it is
imperative that the Court resolves core bankruptcy issues in the
Debtors' complaint despite the existence of the arbitration
clause. In addition to the other claims for relief asserted by
the Debtors, EPMI seeks a declaration that the arbitration
provision within the agreement should not be enforced.
Accordingly, the Debtors seek a Court judgment:
(1) ordering ODECA to turnover property amounting to at
least $10,418,731, plus interest, belonging exclusively
to EPMI's estate pursuant to Section 542(b) of the
Bankruptcy Code;
(2) declaring that any claim by ODEC for fraud in the
inducement and rescission of the Agreement is a core
claim involving property of the estate under Section
541(c) of the Bankruptcy Code;
(3) declaring that ODEC is not entitled to rescission of the
Agreement since it cannot establish the elements of
fraud in the inducement, cannot establish that it is
entitled to the equitable remedy of rescission and
cannot establish that it has not ratified the Agreement
and waived any right to rescission after receiving
knowledge of the alleged fraudulent acts;
(4) declaring that the arbitration provision within the
Agreement should not be enforced since the allegations
under this Complaint implicate core Bankruptcy Code
provisions;
(5) declaring that ODEC violated the automatic stay
provided for by Section 362 of the Bankruptcy Code when
it exercised control over estate property by wrongfully
suspending performance under the Agreement and by
failing to pay amounts due under the Agreement;
(6) awarding damages of at least $10,418,731, plus interest
at the interest rate from the Early Termination Date,
resulting from ODEC's breach of contract with its:
-- failure to pay EPMI the Termination Payment,
-- failure to pay EPMI for the wholesale electricity
delivered during the period December 1, through
December 14, 2001, and
-- failure to accept and pay for the delivery of
wholesale electricity EPMI scheduled for delivery
prior to the Early Termination Date;
(7) awarding damages resulting from ODEC's unjust enrichment
when it withhold funds owed by EPMI's estate;
(8) awarding EPMI interest; and
(9) awarding EPMI its attorneys' fees and other expenses
incurred in this action. (Enron Bankruptcy News, Issue
No. 66; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
FLEMING: 43 Franchisees Intends to Set off $4.7 Million Claim
-------------------------------------------------------------
Fleming Companies, Inc., and its debtor-affiliates have a
variety of business relationships with 43 business entities that
operate 53 supermarkets under the brand name "Sentry" in
southern and eastern Wisconsin, including:
-- The Debtors sell products to the Franchisees which the
Franchisees resell to the public;
-- The Debtors are the franchisor and license the Sentry name
to the Franchisees;
-- The Debtors lease real property and improvements from third
parties, and sublease the real property and improvements to
many of the Franchisees;
-- The Debtors process accounts payable for products and
services delivered to the Franchisees by direct store
delivery vendors, and act as the paying agent for the
Franchisees' expenses or Pass-Through Monies, such as
payroll, utilities and Leases; and
-- The Debtors provide financial accounting, payroll payment
and processing, unemployment compensation, and coupon
processing services to many of the Franchisees.
To facilitate the numerous relationships maintained between the
Debtors and the Franchisees, the Debtors had access to the
Franchisees' bank accounts to withdraw payments for themselves
and for the Pass-Through Monies, which were obligated to third
parties. The funds taken from the bank accounts would be
matched to specific purchases of goods and services provided to,
or other expenses on behalf of, the Franchisees. Before the
withdrawal of these funds, the Debtors would provide statements
to the Franchisees outlining the purchases, or other expenses,
which they intended to make payments toward.
The Franchisees are: F.A. Lobdell & Son, Inc.; Schneider Foods,
Inc.; Richter Foods - Lake Geneva, Inc.; Nemecek Markets, Inc.;
Daniels Sentry of Whitewater, L.L.C.; RML Foods, Inc.; Richter
Foods, Inc.; FRB Property Management, Inc.; Majdecki Foods,
Inc.; Seftar & Son Foods, Inc.; Muskego Marketplace Foods,
L.L.C.; T&C Foods, Inc.; Majdecki Foods of Sussex, Inc.; BKT
Enterprises, Inc.; Albrecht Foods, Inc.; Conrads, Inc.; Doll
Foods, Inc.; Prochnow Foods, Inc.; Daniels Sentry of Janesville,
L.L.C.;
Nemecek Foods, Inc.; Metcalfe Foods - Waunakee L.L.C.; Richter
Foods - Burlington, Inc.; M&T Enterprises, Inc.; Walders Sentry,
Inc.; Allison Foods, Inc.; R&M Markets, Inc.; C&J Foods, L.L.C.;
T&J Foods, Inc.; Conrad's Sentry, Inc.; Daniels of Janesville,
L.L.C.; Metcalfe, Inc.; W.C. Foods, Inc.; Daniels Sentry of
Walworth L.L.C.; Grundl Foods, Inc.; Town & Country Super
Markets, Inc.; Vos Foods, Inc.; Daniels Sentry of Elkhorn,
L.L.C.; Reid Foods, Inc.; Daniels of Brodhead, L.L.C.; Metcalfe
Markets, Inc.; Daniels Foods, Inc.; and Jim & Judy's Foods, Inc.
Duane D. Werb, Esq., at Werb & Sullivan, in Wilmington,
Delaware, reports that between March 23 and April 2, 2003, the
Debtors withdrew the Pass-Through Monies earmarked for payment
to third parties from the Franchisees' bank accounts. They
removed a significant amount of Pass-Through Monies from the
Franchisees' bank accounts on the eve of, or immediately after,
their filing for bankruptcy protection.
If the third party suppliers are not paid in the immediate
future, those suppliers may -- as some have already done --
cease to do business with the Franchisees. Worse, the suppliers
may sue the Franchisees to recover funds they believe are owed
them. This could jeopardize the existence of the Franchisees as
a profitable division of the Debtors. The failure to continue
the Pass-Through Monies payment program will also result in a
disruption of the payment of wages to the Franchisees'
employees.
According to Mr. Werb, the Franchisees assert a setoff right for
the $5,000,000 they owed to the Debtors prepetition as against
the $4,700,000 the Debtors owe to them for the Pass-Through
Monies. The total amount the Franchisees owe the Debtors on the
Debtors' own account exceeds by $300,000 the Pass-Through Monies
the Debtors currently owe to the Franchisees.
The Franchisees also assert that all Pass-Through Monies paid to
the Debtors are the subject of a constructive trust. The
Franchisees believe that the Pass-Through Monies are either cash
collateral for the use of which they cannot be adequately
protected except by payment of the Pass-Through Monies to the
intended recipients, or the Pass-Through Monies are not property
of the estate.
Because of the pressing need to ensure the continuation of the
vitality of the Franchisees as one of the Debtors' most
profitable business partners, the parties agree to resolve any
dispute with respect to their individual obligations with the
other. Pursuant to a Court-approved stipulation, the Debtors
and the Franchisees agree:
(a) to offset the prepetition amounts against each other;
(b) that the Debtors will pay to the intended recipients all
Pass-Through Monies they previously obtained;
(c) the Franchisees will pay to the Debtors all prepetition
amounts owing to the Debtors;
(d) the Franchisees will continue to pay, on a timely basis
consistent with the prepetition course of dealing as to
timing, for goods and services that they receive from the
Debtors and for other goods and services as they continue
to have paid through the Debtors; and
(e) the Franchisees will waive any and all prepetition claims
against the Debtors arising out of the Debtors failure to
pay the Pass-Through Monies.
The Debtors do not concede that the Pass-Through Monies are
subject to a constructive trust or either cash collateral for
the use of which the Franchisees cannot be adequately protected
except by payment of the Pass-Through Monies to the intended
recipients, or the Pass-Through Monies are not property of the
estate. Nevertheless, the Debtors reserve all of their rights
with respect to the Franchisees' assertions. (Fleming Bankruptcy
News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
GENUITY INC: Brings-In Kirkland & Ellis as Special Counsel
----------------------------------------------------------
Genuity Inc., and its debtor-affiliates seek the Court's
authority to employ the firm of Kirkland & Ellis, as of the
Petition Date, to represent them as their Special Counsel in
connection with their Chapter 11 cases.
D. Ross Martin, Esq., at Ropes & Gray, in Boston, Massachusetts,
explains that the Debtors have selected Kirkland & Ellis as
their Special Counsel because of the firm's prepetition
experience with and knowledge of the particular matters on which
it is being retained, as well as its experience and knowledge in
the field of general litigation practice. The Debtors submit
that Kirkland and Ellis' continued representation is critical to
the expeditious resolution of certain of their contractual
disputes because the Firm is uniquely familiar with those
disputes and changing counsel would impose unnecessary costs on
the estate.
Since June 2000, Kirkland & Ellis has performed extensive legal
work for the Debtors in connection with certain litigation
matters. As a result of representing the Debtors on these
matters, Kirkland & Ellis has acquired extensive knowledge of
the Debtors and their businesses.
Kirkland & Ellis will continue to render various services to the
Debtors regarding certain matters that have been pending since
before the Petition Date and that continue to be active, as well
as proofs of claim and disputes as to cure amounts in the
Genuity case that overlap with prepetition litigation,
including:
A. 360 Networks Bankruptcy: Kirkland & Ellis is representing
Genuity as a creditor in the 360 Networks bankruptcy
proceedings.
B. Netnitco Service Agreement: Kirkland & Ellis is
representing Genuity in the enforcement of a service
agreement with Netnitco through negotiation and, if
necessary, through litigation.
C. Global Crossing: Kirkland & Ellis is representing Genuity
as a creditor in the Global Crossing Ltd. bankruptcy
proceedings pending in the United States Bankruptcy Court
for the Southern District of New York.
D. Capital Printing: Kirkland & Ellis is defending Genuity
against claims brought against it by Capital Printing and
is asserting counterclaims for payment of termination
fees. Kirkland & Ellis may also represent Genuity in
objecting to any proof of claim filed by Capital
Printing.
E. Nortel Take or Pay Contract: Kirkland & Ellis is
representing Genuity regarding a breach of contract suit
against Nortel Networks Inc. and Nortel Networks
Corporation seeking $14,000,000 owed by Nortel to Genuity
under a "take or pay" contract that Nortel breached.
F. Nortel Qtera: Kirkland & Ellis is advising Genuity
regarding various commercial disputes between Genuity,
Nortel, and Nortel's subsidiary, Qtera.
G. Nortel Proofs of Claim: Kirkland & Ellis is defending
Genuity against claims made by Nortel in its proofs of
claim filed against the Debtors. The proofs of claim
include the same contract as the Take-or-Pay litigation,
as well as other outstanding disputes between the
parties. Kirkland & Ellis will assist in preparing
objections to those claims and asserting counterclaims
against Nortel on Genuity's behalf and will, if
necessary, represent Genuity in the litigation of those
claims. The Debtors' primary bankruptcy counsel, Ropes &
Gray LLP, will handle plan objections, if any, by Nortel.
Ropes & Gray and Kirkland & Ellis will coordinate their
efforts to avoid duplication and appropriately coordinate
litigation.
H. Starnet, Inc. Bankruptcy: Kirkland & Ellis is
representing Genuity Solutions, Inc. as a creditor in the
bankruptcy filings of the International Intelligence
Agency, Inc. and Starnet, Inc. Both cases are pending
before the Bankruptcy Court for the Northern District of
Illinois.
I. John Does 1 through 46 and Unknown Illinois State
University Football Players vs. Franco Productions, Dan
Franco, et al.: The Debtors were dismissed from this case
by the United States District Court for the Northern
District of Illinois. The plaintiffs have appealed that
decision to the Seventh Circuit. The Debtors have
consented to stay relief to allow that appeal to proceed,
and desire to have Kirkland & Ellis represent them since
Kirkland & Ellis is familiar with the case. Kirkland &
Ellis may also assist the Debtors' bankruptcy counsel,
Ropes & Gray, with objecting to proofs of claim filed by
the plaintiffs.
It is necessary and essential that the Debtors, as debtors-in-
possession, employ attorneys to render the Services. Kirkland &
Ellis has been and continues to be willing to act on behalf of,
and render such Services to, the Debtors.
Kirkland and Ellis Partner Peter E. Doyle assures the Court that
the Firm does not hold or represent any interest adverse to the
Debtors or the estates and that neither the Firm nor any
attorney at the firm holds or represents an interest adverse to
the Debtors' estates. Kirkland & Ellis has further informed the
Debtors that neither the Firm nor any attorney at the firm is or
was a creditor or an insider of the Debtors, except that it has
previously rendered legal services to the Debtors for which it
was compensated. However, Kirkland & Ellis has represented,
represents and likely will represent certain creditors and other
parties-in-interest in matters unrelated to the Debtors, these
Chapter 11 cases or the entities' claims against or interests in
the Debtors, including:
A. Unsecured Creditors: Allegiance Telecom, Inc.; Ameritech;
AT&T; The Bank of New York; BNP Paribas; Bell South
Corporation; The Chase Manhattan Bank; Citicorp USA,
Inc.; Comdisco, Inc.; Credit Suisse First Boston; Focal
Communications Corporation of Illinois; The Industrial
Bank of Japan; Level 3 Communications LLC; MFS; NCR
Corporation; Nortel Networks; PricewaterhouseCoopers LLP;
QWEST Communications Corporation; SBC Communications;
Silicon Graphics, Inc.; Sprint; Sun Microsystems; Toronto
Dominion (Texas), Inc.; Verizon Communications; Wachovia
Bank, N.A.;
B. Professionals: Alvarez & Marshal; Baker & McKenzie;
Debevoise & Plimpton; Deloitte & Touche; Ernst & Young;
Kramer Levin Naftalis & Frankel LLP; Lazard Freres & Co.;
LeBoeuf Lamb Green & MacRae LLP; Morrison & Foerster LLP;
PricewaterhouseCoopers LLP; Ropes & Gray; Shearman &
Sterling; Skadden Arps.
C. Major Litigation Partners: Verizon Communications; UST,
Inc.;
D. Underwriters: Credit Suisse First Boston; JP Morgan
Chase; Morgan Stanley; Salomon Smith Barney;
E. Major Shareholders: Verizon Communications;
F. Indenture Trustee: State Street Bank and Trust Company;
and
G. Landlords: QWEST Communications Corporation; Sherwood
Partners, Inc.
Throughout the time that Kirkland & Ellis has been providing
legal services to the Debtors, Mr. Doyle states that Kirkland &
Ellis submitted invoices to the Debtors on a regular, periodic
basis for professional fees and expenses, and the Debtors paid
these invoices in the ordinary course of business. Since June
2000, the Debtors have paid $331,996.20 to Kirkland & Ellis for
professional fees and expenses incurred through the Petition
Date.
According to Mr. Doyle, Kirkland & Ellis was listed as an
Ordinary Course Professional to be employed by the Debtors. The
Debtors have paid Kirkland & Ellis $5,233.64 for services
rendered since the Petition Date. However, through an
oversight, Kirkland & Ellis never filed its Declaration with the
Notice Parties. Accordingly, the Debtors now seek to employ
Kirkland & Ellis as Special Counsel, in part, to obtain nunc pro
tunc authorization to make that payment, as well as the
authority to compensate Kirkland & Ellis for the $233,538.52
worth of services that the Firm has provided to the Debtors
since the Petition Date, but for which Kirkland & Ellis has not
yet been compensated. Although Kirkland & Ellis has submitted
invoices to the Debtors for those postpetition amounts, these
invoices have not yet been paid pending the approval of the Firm
as special counsel.
Kirkland & Ellis has informed the Debtors that it will be
providing the Services to the Debtors under its ordinary rate
schedules, which include separate rates for certain professional
staff and clerical personnel who record time spent working on
matters for the Debtors. Presently, Kirkland & Ellis's hourly
rates range from:
Attorneys $140 - 640
Legal Assistants 80 - 180
The hourly rates are subject to periodic increases in the normal
course of Kirkland & Ellis's business, often due to the
increased experience of the particular professional. (Genuity
Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
GMAC COMMERCIAL: Fitch Junks $17 Million Class J Notes at CCC
-------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc.'s mortgage pass-
through certificates, series 1997-C1, $17 million class J is
downgraded to 'CCC' from 'B-' and has been removed from Rating
Watch Negative by Fitch Ratings. In addition, Fitch affirms the
$114.3 million class A-2, $724.1 million class A-3, and
interest-only class X certificates at 'AAA'. Fitch also affirms
the following classes: $67.9 million class B certificates at
'AA+', $50.9 million class C certificates at 'AA', $50.9 million
class D certificates at 'A+', $93.3 million class E certificates
at 'BBB', $25.5 million class F certificates at 'BBB-' and $84.8
million class G certificates at 'BB'. Class A-1 paid off and the
rating has been withdrawn. Fitch does not rate the $59.4 million
class H and $33.9 million class K certificates. The downgrade
and affirmations actions follow Fitch's annual review of the
transaction, which closed in September 1997.
The downgrade is primarily attributed to the anticipated loss
associated with the Westside Multi-Care Center loan, which is 2%
of the transaction. The loan is currently secured by five
skilled nursing facilities located in Connecticut. The loan was
originally secured by six facilities; however, one of the
facilities was sold in March 2003. The sole lessee of the
properties filed for Chapter 11 bankruptcy protection in May
2001. Subsequently, the State of Connecticut became the manager
of the facilities, which have experienced a significant
deterioration in performance since issuance. Currently, purchase
offers for the remaining facilities indicate a 95% loss.
Fitch has concerns about the deteriorating performance of
several other loans in the pool. As of the May 2003 distribution
date, one loan (0.3%) is 60 days delinquent, three (3.3%) loans
are 90+ days delinquent, one loan (0.5%) is in foreclosure, and
three loans (0.3%) are real estate owned (REO). In addition, 76
loans (23.1%) are on the master servicer's watchlist.
The subordination levels of the senior classes remain adequate
as the deal has paid down 22.1% since issuance. Fitch will
continue to monitor the transaction, as surveillance is ongoing.
GMAC MORTGAGE: Fitch Affirms B Class B2 Notes Rating
----------------------------------------------------
Fitch Ratings affirmed and removed from Rating Watch Negative
one class of GMAC Mortgage Corporation's mortgage pass-through
certificates, series 2000-J2:
GMAC Mortgage Corporation, mortgage pass-through certificates,
series 2000-J2
-- Class B2, rated 'B', affirmed and removed from Rating Watch
Negative.
This rating action is being taken based upon additional
information provided to Fitch by GMAC Mortgage Corp. As of the
May 25, 2003 distribution, two loans are in bankruptcy and are
currently paying according to their bankruptcy payment plan. The
two loans that were in Foreclosure as of the April 25, 2003
distribution date have cured. There are no loans currently in
real estate owned (REO).
GOAMERICA INC: Has Until August 25 to Meet Nasdaq Requirements
--------------------------------------------------------------
GoAmerica, Inc. (Nasdaq: GOAM), a leading developer and
distributor of wireless data technology, announced that Nasdaq
granted the Company an additional 90-day grace period, until
August 25, 2003, to regain compliance with Nasdaq Marketplace
Rule 4450(a)(5) which requires that a listed company maintain a
minimum bid price of $1.00 per share.
In order to regain compliance with this Marketplace Rule and
remain listed on the Nasdaq SmallCap Market, GoAmerica's share
price must close at a minimum of $1.00 per share for 10
consecutive trading days prior to the end of the grace period.
If the Company does not regain compliance, the Nasdaq Staff may
provide GoAmerica with a written determination that the
Company's securities will be delisted. At that time, GoAmerica
may appeal the Staff's determination to a Listing Qualifications
panel. In that event, GoAmerica's shares would continue to trade
on the SmallCap Market until the Listing Qualifications panel
ruled on the Company's appeal. In the event of an adverse
determination, GoAmerica's shares could still trade on Nasdaq's
Over- The-Counter Bulletin Board or similar system.
Nasdaq has proposed further extensions of grace periods for
companies that fail to meet Nasdaq Marketplace Rule 4450(a)(5),
including those that can be accessed at Nasdaq's Web site
http://www.nasdaq.com/about/ProposedRuleChanges.stm If
implemented prior to August 25, 2003, these proposals -- as well
as other potential actions -- may provide GoAmerica with one or
more additional grace periods to regain compliance with this
listing requirement. At this point in time, there can be no
guarantee that these measures will be implemented prior to
August 25th, 2003, or at all, or that they will beneficially
impact GoAmerica.
GoAmerica, Inc. is a leading developer and distributor of
wireless data technology based in Hackensack, NJ. GoAmerica's
proprietary Go.Web technology enables corporate customers to
access remotely corporate databases and intranets, email and the
Internet across a wide variety of mobile computing and wireless
network devices. Through its Wireless Internet Connectivity
Center and strategic alliances with companies such as EarthLink,
Dell and IBM, GoAmerica offers its customers comprehensive and
flexible mobile data solutions for wireless Internet access by
providing wireless data software, network services, mobile
devices and customer support. For more information, visit
http://www.goamerica.net
* * *
Liquidity and Capital Resources
In its most recent Form 10-Q filing, the Company reported, thus:
"Since our inception, we financed our operations through private
placements of our equity securities and our redeemable
convertible preferred stock, which resulted in aggregate net
proceeds of approximately $18.4 million through December 31,
1999. During the first quarter of 2000, we issued and sold
648,057 shares of Series B Preferred Stock for net proceeds of
approximately $24.6 million. In April 2000, we consummated our
initial public offering of 10,000,000 shares of our common
stock at a price to the public of $16.00 per share, all of which
were issued and sold for net proceeds of $146.2 million. As
of March 31, 2003, we had $2.8 million in cash and cash
equivalents and a working capital deficit of $2.6 million.
"We have incurred significant operating losses since our
inception and as of March 31, 2003 have an accumulated deficit
of $259.2 million. During the three months ended March 31,
2003, we incurred a net loss of $3.0 million and used $3.8
million of cash to fund operating activities. As of March 31,
2003 we had $2.8 million in cash and cash equivalents ($2.0
million at April 30, 2003), exclusive of $596,000 in restricted
cash supporting certain letters of credit. During 2002 and into
2003, we took steps to reduce our annual payroll by more than
40% and took further actions to reduce sales and marketing
expenses. In addition, on September 25, 2002, we formed a
comprehensive strategic alliance with EarthLink by entering
into a series of agreements. Pursuant to these agreements, we
may generate revenues from three primary sources, (i) recurring
service revenue; (ii) software revenue; and (iii) activation
bounties. The Earthlink agreements also enable us to reduce our
costs of subscriber airtime. Our 2003 operating plan includes
further reductions in headcount as well as additional
reductions in sales and marketing expenditures from levels
incurred during 2002. Additionally, we are actively working to
renegotiate our long term lease obligations. We currently
anticipate that our available cash resources will be sufficient
to fund our operating needs for at least the next four months.
For us to remain in business beyond such four month period,
we will likely require additional financing. At this time, we
do not have any bank credit facility or other working capital
credit line under which we may borrow funds for working capital
or other general corporate purposes. We may not be able to
raise funds on terms favorable to us, or at all. As a result of
these and related considerations, our independent auditors have
issued a going concern opinion in connection with our 2002
financial statements."
HAYES LEMMERZ: Inks Stipulation to Resolve Overbeck Claims
----------------------------------------------------------
Hayes Lemmerz International, Inc., and its debtor-affiliates ask
the Court to approve a certain Stipulation of Settlement, dated
April 28, 2003, compromising various claims and settling certain
pending litigation between the Debtors and Joseph C. Overbeck.
Anthony W. Clark, Esq., at Skadden Arps Slate Meagher & Flom
LLP, in Wilmington, Delaware, relates that Mr. Overbeck filed
proof of claim number 2687 for $5,345,071.01 representing
deferred compensation obligations under a Motor Wheel
Corporation supplemental executive retirement plan that was
enacted prior to the Petition Date. The Debtors objected to the
Proof of Claim as overstated and misclassified in their
Sixteenth Omnibus Objection to Claims. The present value of the
future obligation shown as owing to Mr. Overbeck under the SERP
pursuant to the Debtors' books and records is $2,912,366. The
Claim Objection is pending.
On July 1, 2002, Mr. Clark recounts that Mr. Overbeck filed a
Complaint for Declaratory Relief and Turnover of Non-Real Estate
Assets, Adv. Proc. No. 02-04615, pursuant to which Mr. Overbeck
claimed that he owned the remaining amounts due him under the
SERP, and that the Debtors held any funds in connection
therewith in trust for his benefit. In addition, Mr. Overbeck
asserted an ownership interest in a certain annuity contract
that Motor Wheel had purchased to fund its SERP obligation to
Mr. Overbeck, which the Debtors cashed in 1999. The Annuity had
a $750,000 principal balance at the time that the Debtors
redeemed it. Mr. Overbeck contended that the Debtors had no
authority to redeem the Annuity and also sought a constructive
trust on the proceeds.
The Debtors answered the complaint, denying the material
allegations and raising certain affirmative defenses. In the
absence of the Settlement, significant discovery remains to be
completed, including an estimated seven to eight depositions.
Mr. Overbeck also filed an objection to confirmation of the
Debtors' plan of reorganization, wherein he disputed the
termination of the SERP and the proposed treatment of his
claims.
The Stipulation settles the Adversary Proceeding, Claims
Objection and Plan Objection by:
A. requiring the Debtors to pay Overbeck $105,000 in cash;
B. granting Overbeck an allowed general unsecured claim
for $2,807,366;
C. resolving the pending Claim Objection;
D. resolving the pending Plan Objection; and
E. affording a mutual and general release for any claims or
causes of action known or which reasonably could have
been known.
Mr. Overbeck will withdraw his Plan Objection and will file with
the Court a dismissal with prejudice with respect to the
Adversary Proceeding.
The Debtors believe that under the current circumstances, the
Stipulation represents a fair and reasonable compromise of the
Claim Objection and the Adversary Proceeding and provides a
result that is beneficial to the Debtors' estates.
Mr. Clark notes that the terms and conditions of the Settlement
were reached only after arm's-length negotiations between the
parties and resolves actual and potential disputes and
controversies that, if permitted to continue, would involve
potentially time-consuming and expensive legal proceedings and,
thus, expose the Debtors to significant litigation costs, as
well as the possibility of adverse judgments.
The Debtors believe that if the Adversary Proceeding were to
reach trial they would likely be successful on the merits.
However, the time and expense to the estates to defend the
Adversary Proceeding through trial would significantly exceed
the costs associated with the Settlement under the terms of the
Stipulation. Accordingly, the Settlement represents a favorable
economic outcome for the Debtors' estates. Moreover, this
favorable outcome obviates any risk of an adverse judgment, no
small consideration given the inherent uncertainties of
litigation. (Hayes Lemmerz Bankruptcy News, Issue No. 33;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
HQ GLOBAL WORKPLACES: Files Reorg. Plan and Disclosure Statement
----------------------------------------------------------------
HQ Global Workplaces has filed its initial Plan of
Reorganization and Disclosure Statement with the U.S. Bankruptcy
Court.
Commenting on the news, Jon Halpern, Chief Executive Officer,
said, "With [Wednes]day's filing we begin a new chapter in the
life of HQ. After a challenging 14 months, characterized by hard
work and enormous sacrifices, we have filed a Plan to emerge
from Chapter 11 with a more resourceful, efficient and client-
focused organization. HQ dramatically reduced operating costs
and closed redundant business centers in various markets. We now
have a strong portfolio of more than 200 business centers across
the country producing in excess of $250 million in revenues. Our
Plan will allow us to emerge with positive operating cash flow
and the opportunity for long-term financial stability.
"During the past year, HQ revitalized the business by empowering
local management, driving down decision-making and bringing the
Company closer to clients. Having altered our culture and
revised our business model, we are looking toward the future
with new energy and enthusiasm - and a renewed commitment to
providing clients with excellent service. We place great value
on the support that we have received throughout this process
from our clients, as well as our employees, landlords and
vendors."
The capital structure and distributions included in the Plan
were the result of extensive negotiations with HQ's Committee of
Unsecured Creditors and bank lenders, both of whom have
indicated their support for the Plan. The Company intends to
seek approval of the Disclosure Statement at a hearing scheduled
for July 16, 2003. Once approved, HQ will distribute the
Disclosure Statement to all creditors entitled to vote to
solicit their approval of the Plan.
Under the proposed Plan, preferred and common stock will be
issued to creditors, and some of the Company's existing bank
lenders will provide a new credit facility of at least $20
million. In addition, the proposed Plan contemplates that the
Company will undertake a series of restructuring transactions
designed to simplify its corporate structure.
As the nation's largest provider of shared office space in the
business center industry, HQ Global Workplaces (www.HQ.com)
offers a flexible and cost-effective alternative to traditional
office leasing for Fortune 100 corporations, small- to mid-size
companies and independent entrepreneurs. Through its network of
more than 200 business centers, HQ provides its clients with
furnished private offices, team rooms and meeting rooms along
with essential business services including administrative
support. HQ also offers a variety of state-of-the-art,
technology-based productivity tools including high-speed
Internet access, videoconferencing and advanced
telecommunications services.
I-TRAX INC: Negative Cash Flows Raise Going Concern Doubt
---------------------------------------------------------
I-trax, Inc. was incorporated in the State of Delaware on
September 15, 2000. On February 5, 2001, the Company and I-
trax Health Management Solutions, Inc. (formerly known as I-
Trax.com, Inc.) completed a holding company reorganization. The
holding company reorganization was accomplished through a merger
under Delaware law. At the effective time of the
reorganization, all of the stockholders of Health Management
became the stockholders of the Company and Health Management
became a wholly owned subsidiary of the Company. The Company's
common stock is quoted on the Over-the-Counter Bulletin Board
under the symbol "IMTX."
As of June 30, 2002, the Company had one wholly owned
subsidiary, Health Management, and two single member limited
liability companies, iSummit Partners, LLC and WellComm Group,
LLC. The Company acquired iSummit Partners, LLC in February
2001. iSummit Partners, LLC does not conduct any operations but
+maintains ownership of certain intellectual property. The
Company formed WellComm Group, LLC to conduct the activities of
WellComm Group, Inc., which the Company acquired on February 6,
2002. The Company conducts its operation through Health
Management and WellComm Group, LLC.
The Company's most recent financial statements have been
prepared assuming the Company will continue as a going concern,
which contemplates continuity of operations, realization of
assets, and liquidation of liabilities in the normal course of
business. However, as of June 30, 2002, the Company's
accumulated deficit was $25,964,524 and its working capital
deficiency was $2,128,726. In addition, the Company has had
negative cash flows from operations of $4,900,000 and $4,600,000
for the years ended December 31, 2001 and 2000, respectively,
and $2,800,000 for the six months ended June 30, 2002. As a
result of these factors, the auditor's report on the
December 31, 2001 financial statements included a paragraph
indicating that there was substantial doubt about the Company's
ability to continue as a going concern.
The Company expects that in the near future additional cash will
be required to fund these deficits and enable it to continue the
development of its core products to meet customer demand,
liquidate its short-term liabilities and continue to implement
its marketing strategy. The Company has, is and will continue
to explore opportunities to obtain funds to meet the projected
shortfall. First, the Company is intensifying its sales
efforts to continue to grow its revenues. Second, the Company
has engaged investment professionals to assist the Company in
raising capital through debt or equity sales. Third, the Company
is exploring extending existing credit facilities and
establishing new credit facilities with present and new banks.
And fourth, the Company's principal executive officers are
prepared to fund any shortfalls by lending funds to the Company.
The Company's continuation as a going concern is dependent upon
the Company's ability to successfully close new sales contracts
and negotiate financing arrangements either through equity
transactions or debt agreements. Although no assurances can be
given, the Company is reasonably confident that it will be able
to continue to operate as a going concern.
IMPAC: Fitch Takes Several Rating Actions on Two Issues
-------------------------------------------------------
Fitch Ratings-NY-May 28, 2003: Fitch has taken rating actions on
the following two Impac issues:
Impac ICIFC, mortgage pass-through certificates, series 1997-1
-- Class B1 upgraded to 'AAA' from 'AA';
-- Class B2 upgraded to 'AA' from 'A';
-- Class B3 affirmed at 'BBB';
-- Class B4, rated 'BB', remains on Rating Watch
Negative;
-- Class B5 downgraded to 'D' from 'C'.
Impac SAC, mortgage pass-through certificates, series 2000-3
-- Class M1 affirmed at 'AA';
-- Class M2, rated 'A', placed on Rating Watch Negative;
-- Class M3 downgraded to 'B' from 'BBB' and removed
from Rating Watch Negative;
-- Class B1 downgraded to 'D' from 'C'.
These actions are taken due to the high delinquencies in
relation to the applicable credit support levels as of the May
25, 2003 distribution.
JAMES RIVER COAL: Court Clears BSI's Appointment as Claims Agent
----------------------------------------------------------------
James River Coal Company sought and obtained approval from the
U.S. Bankruptcy Court for the Middle District of Tennessee to
appoint Bankruptcy Services LLC as Claims and Noticing Agent.
In this retention, BSI is expected to:
a) prepare and serve required notices in these chapter
cases, including:
- notice of the commencement of these chapter 11 cases
and the initial meeting of creditors under section
341(a) of the Bankruptcy Code;
- notice of the claims bar date once such date is
ordered by the Court;
- notice of the Debtors' objections to claims;
- notice of any hearings on approval of a disclosure
statement and confirmation of a chapter 11 plan; and
- such other miscellaneous notices as the Debtors or the
Court may deem necessary or appropriate for an orderly
administration of these chapter 11 cases;
b) within five days after the mailing of a particular
notice, file with the Clerk's Office a certificate or
affidavit of service that includes:
i) a copy of the notice served;
ii) an alphabetical list of persons upon whom the
notice was served; and
iii) the date and manner of service;
c) maintain copies of all proofs of claim and proofs of
interest filed in these cases;
d) maintain official claims registers in these cases by
docketing all proofs of claim and proofs of interest in
a claims database that includes the following
information for each claim or interest asserted:
- the name and address of the claimant or interest
holder and any agent thereof, if the proof of claim or
proof of interest was filed by an agent;
- the date the proof of claim or proof of interest was
received by BSI and, if applicable, the Court;
- the claim number assigned to the proof of claim or
proof of interest;
- the asserted amount and classification of the claim;
and
- the applicable Debtors against which the claim or
interest is asserted;
e) implement necessary security measures to ensure the
completeness and integrity of the claims registers;
f) transmit to the Clerk's Office a copy of the claims
registers on a weekly basis, unless requested by the
Clerk's Office on a more or less frequent basis;
g) maintain an up-to-date mailing list for all entities
that have filed proofs of claim or proofs of interest in
these cases and make the list available upon requests to
the Clerk's Office or at the expense of any party in
interest;
h) provide access to the public for examination of copies
of the proofs of claim or proofs of interest filed in
these cases, without charge during regular business
hours;
i) record all transfers of claims pursuant to Bankruptcy
Rule 3001(e) and provide notice of such transfers to the
extent required by Bankruptcy Rule 3001(e);
j) provide temporary employees to process claims, as
necessary;
k) promptly comply with such further conditions and
requirements as the Clerk's Office or the Court may at
any time prescribe; and
l) provide such other claims processing, noticing, and
related administrative services as may be requested from
time to time by the Debtors.
BSI's professional hourly fees for professionals anticipated to
perform in these cases are:
Kathy Gerber $210 per hour
Senior Consultants $185 per hour
Programmer $130 to $160 per hour
Associate $135 per hour
Data Entry/Clerical $40 to $60 per hour
Schedule Preparation $225 per hour
James River Coal Company, together with its debtor-affiliates,
is one of the leading coal producers in the Central Appalachian
coal region. The Company filed for chapter 11 protection on
March 25, 2003 (Bankr. M.D. Tenn. Case No. 03-04095). Paul
Jennings, Esq., and Gene L. Humphreys, Esq., at Bass Berry &
Sims PLC represent the Debtors in their restructuring efforts.
KAISER: Committee Balks at PwCS' Engagement by Futures Rep.
-----------------------------------------------------------
The Official Committee of Unsecured Creditors of Kaiser Aluminum
Corporation and its debtor-affiliates wants the Futures
Representative's retention of PricewaterhouseCoopers Securities
LLC denied for two reasons:
1. It is Unclear Why the Futures Representative Needs to Retain
a Financial Advisor
Rafael X. Zahralddin-Aravena, Esq., at Ashby & Geddes, in
Wilmington, Delaware, explains that the Futures Representative
has not offered any justification for the necessity to retain a
financial advisor. The Creditors' Committee is very concerned
that the work done by PwCS will be duplicative of the services
rendered by the other financial advisors already retained in
these cases by the Creditors' Committee, the Asbestos
Claimants' Committee and the Debtors. The proposed payment of
substantial monthly fees without a compelling need for PwCS'
services is wholly inappropriate -- especially when the total
fees for retaining PwCS for even just the rest of this year is
$1,100,000. Mr. Zahralddin-Aravena maintains that the Debtors'
estates, which are already regularly losing money, simply cannot
afford to fund duplicative and unnecessary services.
2. Even if the Court Deems the Retention to be Appropriate, the
Proposed Monthly Fee for PwCS is Excessive, Onerous and
Burdensome to the Debtors' Estates
Mr. Zahralddin-Aravena points out that PwCS' services will be
extremely limited. Assuming that PwCS is retained to assist the
Futures Representative, the Creditors' Committee alternatively
submits that the payment of a $125,000 monthly non-refundable
fee for the first six months of the engagement and another
$90,000 per month thereafter is quite excessive, when examined
in light of the limited role that the firm should have in these
cases.
Compared to the monthly fees received by the Asbestos Claimants'
Committee's asbestos expert, L. Tersigni Consulting, the
Creditors' Committee believes that Tersigni's fee is
appropriate. Tersigni's role in these cases has been very
limited, and its monthly fees have averaged less than $31,000
per month for the first nine months of these cases. In its most
recent monthly invoice, Tersigni's fees were $25,000 for January
2003. (Kaiser Bankruptcy News, Issue No. 27; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
KCS ENERGY: Appoints Joseph T. Leary Vice President and CFO
-----------------------------------------------------------
KCS Energy, Inc. (NYSE: KCS) announced that Joseph T. Leary, 54
has been appointed Vice President and Chief Financial Officer of
the Company to add to its existing management team.
Mr. Leary brings over 18 years of finance and treasury
experience in the energy industry. From 1996 through 2002, he
was Vice President - Finance and Treasurer at EEX Corporation,
an oil and gas exploration company located in Houston, TX, which
was recently acquired by Newfield Exploration Company. Prior to
that time, he was with ENSERCH Corporation, an integrated
natural gas utility company in Dallas, TX, where he held several
positions, including Treasury Officer. Mr. Leary also spent 10
years in merchant and commercial banking having held positions
at Banque de la Societe Financiere Europeenne, New York and Bank
of America, New York.
Commenting on Mr. Leary's appointment, James W. Christmas,
Chairman and Chief Executive Officer of KCS Energy said, "We are
delighted to welcome Joe to our management team. He brings both
extensive industry and banking experience to the role of CFO.
Everyone at KCS is very enthusiastic about the growth the
Company is experiencing and Joe's knowledge and capabilities
will further strengthen our ability to execute our business
strategy. I look forward to working with him in accomplishing
our goals."
Mr. Leary has a BBA Finance from the University of Notre Dame,
South Bend, Indiana and an MBA from Pace University Graduate
School of Business, New York, NY.
KCS is an independent energy company engaged in the acquisition,
exploration and production of natural gas and crude oil with
operations in the Mid-Continent and Gulf Coast regions.
KCS Energy's March 31, 2003 balance sheet shows a working
capital deficit of about $13 million, and a total shareholders'
equity deficit of about $24 million.
LEAP WIRELESS: Gets Okay to Hire Ordinary Course Professionals
--------------------------------------------------------------
Leap Wireless International Inc., and its debtor-affiliates
obtained the Court's authority to employ and compensate the
Ordinary Course Professionals in the ordinary course of
business, without compliance with the requirements of Sections
327 or 330 of the Bankruptcy Code.
As previously reported, the Debtors currently employ various
professionals to render services relating to numerous issues
that arise in their business. These Ordinary Course
Professionals are generally engaged in connection with various
accounting, tax, regulatory and legal matters. The Ordinary
Course Professionals are not "professional persons" within the
meaning of Section 327 of the Bankruptcy Code given the limited
and discrete nature of the services which they provide, the
minimal effect of the services provided on the administration of
the estates, and the ancillary nature of the Ordinary Course
Professionals' role to the reorganization.
The Debtors will pay to each Ordinary Course Professional, on a
monthly basis 100% of the fees and disbursements incurred and
without any interim or final application to the Court by the
professional. These payments would be made in the ordinary
course of the Debtors' business following the submission and
approval of an appropriate monthly invoice setting forth in
reasonable detail the nature of the services rendered and the
disbursements actually incurred; if any professional's fees and
disbursements exceed $40,000 per month, then the payments to the
professional for fees and disbursements in excess of this amount
will be subject to prior Court approval in accordance with
Sections 330 and 331 of the Bankruptcy Code, the Federal Rules
of Bankruptcy Procedure, the Local Bankruptcy Rules for the
Southern District of California, orders of this Court, and the
Fee Guidelines promulgated by the Executive Office of the United
States Trustee.
To ensure that the retention and compensation of the Ordinary
Course Professionals does not result in a side-stepping of the
formalities of Sections 327 through 331 of the Bankruptcy Code,
the Court approved these terms and procedures for the retention
of their Ordinary Course Professionals:
A. The Debtors may, in the reasonable and ordinary conduct of
business as debtors and debtors-in-possession, retain and
employ professional persons for the performance of tasks
related to their ordinary course of business.
Professionals utilized by the Debtors to handle matters in
connection with these bankruptcy proceedings, the plan of
reorganization, or related litigation, other than ordinary
course or ministerial matters, will be retained pursuant to
individual retention applications;
B. The acceptance of employment by Ordinary Course
Professionals will constitute a representation by the
Debtors and the involved professionals that:
1. to the best of the Debtors' knowledge, after reasonable
inquiry, the Ordinary Course Professionals do not
represent or hold any interest adverse to either the
Debtors or to their estates with respect to the matters
on which the professionals are to be employed;
2. the arrangement for postpetition compensation reached
between the Debtors and the Ordinary Course
Professionals is reasonably based on the nature, extent,
and value of services, the time spent on services, and
the cost of comparable services other than in a case
under the Bankruptcy Code, and reimbursement of
disbursements will be for only actual and necessary
expenses not exceeding the value of expenses; and
3. all transactions between the Debtors and the Ordinary
Course Professionals will be subject to Section 329 of
the Bankruptcy Code as well as to all other provisions
of the Bankruptcy Code regulating the fairness and
reasonable worth of services rendered by professionals
seeking and receiving compensation;
C. Ordinary Course Professionals retained and employed will be
authorized to draw down any retainers in payment of fees
and expenses without further Court order; and
D. No firm or individual will be entitled to payments of more
than $40,000 for any one-month, without further Court
order. If an Ordinary Course Professional seeks more than
$40,000 for any one month, then the payments to this
professional for the excess amounts will be subject to
prior Court approval in accordance with Sections 330
and 331 of the Bankruptcy Code, the Bankruptcy Rules, the
Local Bankruptcy Rules for the Southern District of
California, orders of this Court and the Fee Guidelines
promulgated by the Executive Office of the United States
Trustee.
The Debtors also obtained Judge Adler's permission to employ and
compensate additional Ordinary Course Professionals as needed.
The Additional Ordinary Course Professional will be identified
by filing and serving a supplement on these parties:
(i) the Office of the United States Trustee;
(ii) counsel to the Informal Vendor Debt Committee; and
(iii) the official committee of unsecured creditors. (Leap
Wireless Bankruptcy News, Issue No. 4; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
LUCENT TECHNOLOGIES: Offering Conv. Senior Debt to Raise $1.3BB
---------------------------------------------------------------
Lucent Technologies (NYSE: LU) announced a public offering of
convertible senior debt expected to raise approximately $1.3
billion. The company expects to apply the net proceeds toward
the repayment or possible repurchase of certain short- and
medium-term obligations over time, as well as for general
corporate purposes.
"This offering is part of our overall effort to strengthen the
balance sheet and will provide us with added flexibility to
retire or satisfy certain debt, preferred stock and other
obligations at significantly lower interest rates," said Lucent
Technologies Chairman and CEO Patricia Russo.
Lucent Technologies Chief Financial Officer Frank D'Amelio
pointed out that the proceeds from this offering were not
included in the company's previous cash projections. Any
portion of the proceeds from this offering that is not used by
Sept. 30, 2003, would have an incremental impact on the
company's year-end cash balance.
The offering, which will be made off of the company's existing
universal shelf registration statement, will consist of two
series of debt with expected maturity dates of 2023 and 2025, as
well as various preset dates when the securities may be redeemed
at the option of either the holder or the company. Additionally
under certain circumstances, the securities may be converted
into Lucent common stock at a preset value that is expected to
represent a significant premium over the stock's current trading
price.
The joint book-running managers for the offering are Citigroup
Global Markets and JPMorgan. In addition, HSBC is a joint-lead
manager for the offering.
In addition to the offering, Lucent announced that it has
entered into new senior secured credit facilities totaling $595
million. These facilities allow the company to issue up to $245
million in new letters of credit, renew up to $350 million of
existing letters of credit, and secure certain other
obligations. Under the terms of the facilities, Lucent may
issue or renew letters of credit with a term of up to 12 months
at any time during the availability period, which runs through
Dec. 31, 2004. The facilities may grow as more banks enter the
agreement and include certain financial covenants.
A prospectus related to this offering may be obtained from
Citigroup Global Markets, Equity Syndicate Desk, 388 Greenwich
Street, New York, N.Y., or J.P. Morgan Securities, 277 Park
Avenue, New York, N.Y.
Lucent Technologies, headquartered in Murray Hill, N.J., USA,
designs and delivers networks for the world's largest
communications service providers. Backed by Bell Labs research
and development, Lucent relies on its strengths in mobility,
optical, data and voice networking technologies as well as
software and services to develop next-generation networks. The
company's systems, services and software are designed to help
customers quickly deploy and better manage their networks and
create new, revenue-generating services that help businesses and
consumers. For more information on Lucent Technologies, visit
its Web site at http://www.lucent.com
Lucent Technologies' 7.700% bonds due 2010 (LU10USR1) are
trading at about 75 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=LU10USR1for
real-time bond pricing.
MAGELLAN HEALTH: Seeks Approval of Onex Corp's Equity Investment
----------------------------------------------------------------
Magellan Health Services, Inc. (OCBB:MGLH) has secured a
commitment from Onex Corporation to provide Magellan with an
equity investment of $150 million upon consummation of its
Chapter 11 reorganization. Upon approval by the U.S. Bankruptcy
Court for the Southern District of New York, the new commitment
will replace a previous $50 million equity commitment from
certain unsecured creditors, thereby providing reorganized
Magellan with a stronger balance sheet and greater financial
flexibility than it would have had under the prior equity
commitment.
Onex has further agreed to purchase an additional $50 million of
equity in reorganized Magellan to fund cash payments to holders
of certain general unsecured claims who elect to receive cash in
lieu of a portion of the common stock that they would otherwise
receive under the Company's existing Plan of Reorganization.
Magellan stated that, upon approval of the Onex commitment by
the Bankruptcy Court, it will amend its Plan of Reorganization
and Disclosure Statement to reflect the Onex commitment, and it
continues to believe that it will emerge from Chapter 11 by the
end of September 2003. The Onex equity commitment has the
support of the Official Committee of Unsecured Creditors
appointed in its Chapter 11 case and Magellan's largest
customer, Aetna. Magellan stated that the other provisions of
its Plan will remain largely unchanged and that it continues to
expect that upon emergence from Chapter 11, Magellan's more than
$1 billion of overall indebtedness will be reduced by
approximately $500 million.
Steven J. Shulman, chief executive officer of Magellan Health
Services, stated, "The commitment by Onex to invest in Magellan
is a tremendous vote of confidence in our Company and our
future. With the substantially larger equity investment,
Magellan will have an even stronger financial foundation when we
exit Chapter 11.
"We also are fortunate to gain a valuable partner in Onex, which
has a very successful track record of identifying sound
businesses in attractive markets and providing long-term
strategic support to enhance their value. I am gratified that
the dedicated efforts of Magellan's employees and the great
potential of Magellan's business have earned the strong support
of Onex. I also appreciate the support of our creditors who
provided our initial equity commitment. Their support for
Magellan helped enable us to secure this improved transaction,"
Mr. Shulman concluded.
Robert LeBlanc, managing director of Onex Corporation, stated,
"Magellan is the market leader in managed behavioral health
care, and its management is working aggressively to capitalize
on excellent opportunities to operate more efficiently, provide
greater value to customers, providers and members, and expand
its business. We are very pleased to be investing in and
partnering with Magellan and its management team."
"Onex's commitment to make a large equity investment in Magellan
confirms our view that Magellan has an attractive business, and
gives us even greater confidence that Magellan will deliver on
its potential," said Saul E. Burian, director of Houlihan Lokey
Howard & Zukin, which is the financial advisor to the Official
Committee of Unsecured Creditors.
Summary Terms of the Onex Equity Commitment
The Onex equity commitment contains three principal components.
First, Onex will invest $100 million in reorganized Magellan in
exchange for new equity that will represent approximately 29.9%
of the outstanding common equity of reorganized Magellan.
Second, Onex has agreed to purchase $50 million of equity of
reorganized Magellan to the extent such equity is not purchased
by the Company's general unsecured creditors or holders of note
claims, who will be offered such equity by the Company under the
Plan. The equity issued pursuant to this rights offering will
equal approximately 14.9% of the equity of reorganized Magellan.
Under the third component of the Onex commitment, the Plan will
be amended to provide holders of unsecured claims the
opportunity to elect to receive cash in lieu of a portion of the
shares of reorganized Magellan that they would otherwise be
entitled to receive, up to a maximum of $50 million for the
class. Those holders who elect the Cash Option will receive
their pro rata share of up to $50 million in cash, which will
reduce their distribution of common stock in reorganized
Magellan by a number of shares that is equal in value to the
cash received, based upon an equity valuation of reorganized
Magellan of $150 million. This cash payment of up to $50 million
will be funded by Onex and by general unsecured creditors and
holders of note claims who wish to participate in purchasing
such shares.
Of the total investment of $150 million in the Company, at least
$25 million will be used under the Plan to make a cash
distribution to holders of general unsecured claims and holders
of the Company's senior notes in lieu of distributing to them
new senior subordinated notes of reorganized Magellan. This cash
distribution will reduce on a dollar for dollar basis the
principal amount of such new senior subordinated notes that
otherwise would have been distributed under the Plan. The
proceeds of the $150 million equity investment not used to
reduce debt will be available to the Company for general
corporate purposes.
If creditors elect to receive $50 million in cash under the Cash
Option and no creditors elect to participate in the rights
offering or to purchase equity in connection with the Cash
Option, Onex would make a total equity investment of $200
million in equity of reorganized Magellan. If no creditors elect
the Cash Option and creditors participate fully in the rights
offering by investing $50 million in the Company, Onex's total
investment would be $100 million.
Under the Onex commitment, the equity Onex acquires initially
will have 50% of the voting rights with respect to matters to be
voted on by common equity holders. Onex also will have the right
to elect three of the seven directors of reorganized Magellan,
common equity holders other than Onex will have the right to
elect two directors, and all common equity holders voting
together (with Onex having 50% of the vote) will have the right
to elect two directors. Onex's voting rights will not be
transferable upon the sale of any of its shares, and Onex will
be subject to certain minimum equity ownership thresholds and
mandatory conversion triggers, as detailed in the commitment
letter.
The Onex commitment is subject to certain conditions as set
forth in the commitment letter, including approval by the
Bankruptcy Court having jurisdiction over Magellan's Chapter 11
case. The implementation of the investment by Onex and the
effectiveness of Magellan's restructuring are conditioned on
confirmation and consummation of the Plan in accordance with the
U.S. Bankruptcy Code.
Gleacher Partners LLC is serving as financial advisor to
Magellan Health Services, and Weil, Gotshal & Manges LLP is
bankruptcy counsel to Magellan Health Services.
Onex Corporation is a diversified company with annual
consolidated revenues of approximately $23 billion and
consolidated assets of approximately $18 billion. Onex is one of
Canada's largest companies with global operations in service,
manufacturing and technology industries. Its subsidiaries
include Celestica Inc., Loews Cineplex Entertainment
Corporation, ClientLogic Corporation, Lantic Sugar Limited,
Rogers Sugar Ltd., Dura Automotive Systems, Inc., J.L. French
Automotive Castings, Inc., Bostrom Holdings, Inc., InsLogic
Corporation, Performance Logistics Group, Inc., Radian
Communication Services Corporation and Galaxy Entertainment Inc.
Onex shares trade on the Toronto Stock Exchange under the stock
symbol OCX.
Headquartered in Columbia, Md., Magellan Health Services (OTCBB:
MGLH), is the country's leading behavioral managed care
organization, with approximately 65 million covered lives. Its
customers include health plans, corporations and government
agencies.
Magellan Health Services' 9.375% bonds due 2007 (MGL07USA1) are
trading at about 91 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=MGL07USA1for
real-time bond pricing.
MAGELLAN HEALTH: Onex to Acquire Controlling Equity Interest
------------------------------------------------------------
Onex Corporation has entered into an agreement to acquire a
controlling equity interest in the reorganized Magellan Health
Services, Inc., pursuant to a plan of reorganization to be filed
with the Bankruptcy Court under Chapter 11 of the United States
Bankruptcy Code. As part of the proposed plan, Onex would invest
up to approximately C$275 million in the reorganized Magellan.
(All amounts in Canadian dollars unless otherwise stated).
Magellan is the largest behavioral managed care organization in
the United States, and represents approximately 63 million
covered lives. The company offers a variety of services to its
clients including: administrative services, where Magellan
administers the delivery of care, including referrals, care
management, and claims processing; risk-based services, where
the company assumes all or a portion of the responsibility for
both the cost of providing treatment and the coordination of
patient care; and employee assistance program services, which
are offered by employers to employees needing help with everyday
life issues that may affect productivity. Magellan's customers
include health plans, government agencies, unions and
corporations. Magellan generated approximately $2.8 billion in
revenues in 2002.
"Magellan represents an exciting new opportunity for Onex in an
attractive industry," said Robert Le Blanc, an Onex Managing
Director. "Magellan is the market leader in the behavioral
managed health care industry, which has grown 11% annually over
the last 10 years."
Onex' commitment is subject to a number of customary terms and
conditions, including Bankruptcy Court approval of the plan of
reorganization substantially in accordance with the terms set
forth in the agreement. Magellan intends to file the plan of
reorganization with the Bankruptcy Court within the next several
weeks and it expects the Court to confirm the plan by early fall
2003.
Onex Corporation is a diversified company with annual
consolidated revenues of approximately $23 billion and
consolidated assets of approximately $18 billion. Onex is one of
Canada's largest companies with global operations in service,
manufacturing and technology industries. Its subsidiaries
include Celestica Inc., Loews Cineplex Entertainment
Corporation, ClientLogic Corporation, Lantic Sugar Limited,
Rogers Sugar Ltd., Dura Automotive Systems, Inc., J.L. French
Automotive Castings, Inc., Bostrom Holdings, Inc., InsLogic
Corporation, Performance Logistics Group, Inc., Radian
Communication Services Corporation and Galaxy Entertainment Inc.
Onex shares trade on the Toronto Stock Exchange under the stock
symbol OCX.
MAGELLAN HEALTH: Asks Court to Approve Group Practice Settlement
----------------------------------------------------------------
Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, in New
York, informs the Court that on November 1, 2000, debtor New
GPA, Inc., a Debtor, and Group Practice Affiliates, LLC entered
into that certain Asset Purchase Agreement, whereby GPA sold,
among other things, several business units to Group Practice
LLC.
As full payment for the assets sold under the APA, Group
Practice executed and delivered to GPA that certain unsecured
promissory note dated November 1, 2000 in the original principal
amount of $2,000,000. The term of the Note is 15 years and it
bears interest at the rate of 7% per annum, paid in arrears
semi-annually, with no principal due until 2015. However,
principal under the Note is subject to reduction based on the
occurrence of certain events. The note has a current principal
balance of $1,250,000.
Under the terms of the Note, Mr. Karotkin relates that the
unpaid principal amount was reduced by $200,000 because of the
occurrence of certain events related to that certain memorandum
of understanding, dated November 1, 2000, between Group Practice
Arizona, Inc., a subsidiary of Group Practice, and Human Affairs
International, Inc., a Debtor. More specifically, the
outstanding principal under the Note was to be reduced $50,000
if either Human Affairs or Group Practice Arizona exercised its
termination right under the MOU. The outstanding principal
amount under the Note was to be further reduced by $150,000 if
Group Practice determined that one of its outpatient facility
must be closed as a result of Human Affairs exercising its
termination rights under the MOU. In December of 2001, Human
Affairs exercised its termination rights under the MOU, thereby
allowing Group Practice to close its Arizona facility. In March
of 2002, Group Practice closed the Arizona facility. These
events triggered the net $200,000 reduction of the principal
balance of the Note.
Reductions of $534,000 of principal due under the Note were
triggered by operation of two provisions of that certain Program
Participation Agreement dated November 1, 2000 entered into by
Magellan Behavioral Health, Inc., a Debtor affiliate of GPA, and
Integrated Mental Health Services, Inc., an affiliate of Group
Practice.
Pursuant to the Provider Agreement, Mr. Karotkin explains that
Magellan Behavioral guaranteed a minimum amount of visits by
subscribers to Integrated per year. Unpaid principal due under
the Note would be reduced by a certain specified amount if
Integrated did not receive the guaranteed minimum amount of
visits by subscribers. Since November of 2000, Magellan
Behavioral was unable to refer a sufficient number of plan
subscribers to satisfy the minimum amount of visits under the
Provider Agreement. For each of the periods of November 1, 2000
to October 31, 2001 and November 1, 2001 to October 31, 2002,
Magellan Behavioral owed $138,000 to Integrated as a result of
this guaranteed minimum. It is projected that Magellan
Behavioral will owe an additional $138,000 for the period of
November 1, 2002 to October 31, 2003. Accordingly, Magellan
Behavioral's failure to meet its referral requirements under the
Provider Agreement amounts to $414,000, which is to be applied
to reduce the principal amount of the Note.
Further, under the Provider Agreement, Magellan Behavioral was
required to pay Integrated for claims arising from the provision
of services by Integrated to its' members according to the rates
set forth in Magellan Behavioral's standard fee schedule, less
any applicable co-payments, coinsurance or deductible. However,
notwithstanding amount of the Standard Fee, Magellan Behavioral
also promised to pay Integrated $65 per visit by a member,
regardless of the actual cost of the Standard Fee. The Provider
Agreement required Magellan Behavioral and Integrated
periodically to reconcile the difference between the Target Fee
and the Standard Fee. If the Standard Fee was less than the
Target Fee, Magellan Behavioral was required to pay Integrated
the difference.
Mr. Karotkin reports that since November of 2000, both the
Debtors and Integrated believe that the Standard Fee was less
than the Target Fee. However, no Reconciliation was done by
either party, notwithstanding the requirements of the Provider
Agreement. Nevertheless, Magellan Behavioral estimates that,
under a reconciliation as provided under the Provider Agreement,
it would be obligated to pay Integrated $120,000. In addition,
a portion of the Note was guaranteed by individual members of
Group Practice, under which they agreed to guarantee repayment
of $200,000 of the principal due under the Note.
The outstanding principal amount of the Note has been reduced
from $2,000,000 to $1,250,000. In order to convert the Note to
cash and avoid the risks associated with its long-term nature,
Magellan Behavioral entered into discussions with the other
parties. As a result of these discussions, Group Practice, GPA
Inc., Magellan Behavioral, Integrated and the Guarantors have
agreed, subject to the approval of the Court, to settle all
obligations under the Note on the terms set forth in the
settlement agreement dated as of March 17, 2003.
The salient terms of the Settlement Agreement are:
A. Group Practice will pay GPA $741,830 after entry of an
order authorizing the Settlement Agreement.
B. GPA will release, discharge, acquit and forgive Group
Practice from any and all claims, actions, suits,
demands, liabilities, judgments, and proceedings, both at
law and in equity, related to or arising from the Note.
C. GPA will release, discharge, acquit and forgive the
Guarantors from any and all claims, actions suits,
demands, liabilities, judgments, and proceedings, both at
law and in equity, related to or arising from the
Guaranty.
D. Group Practice and its affiliate, Integrated, and GPA and
its affiliate, Magellan Behavioral Health, acknowledge
and agree that the $741,830 payment amount takes into
account any payments owed by to Integrated or by
Integrated to MBH pursuant to the Reconciliation and to
the minimum referrals of subscribers. Group Practice and
Integrated settle, waive and discharge any claims against
Magellan Behavioral or GPA with respect to the
Reconciliation and the minimum referral obligations and
Magellan Behavioral and GPA settle, waive and discharge
any claims against Group Practice or Integrated with
respect to the Reconciliation and the minimum referrals
of subscribers.
E. The Reconciliation provisions and the minimum subscriber
referrals are deleted from the Provider Agreement
effective November 1, 2002 and thereafter.
Mr. Karotkin asserts that the Settlement Agreement is fair and
equitable, and falls well within the range of reasonableness.
First, and perhaps foremost, the Settlement Agreement provides
for an immediate cash payment to the Debtors of $741,830.
Absent settlement, the Debtors would not be entitled to be paid
the entire principal amount of the Note until 2015 and would be
required to bear the credit risk attendant to an unsecured long-
term note. Further, the Settlement Agreement modifies the
Provider Agreement so that Magellan Behavioral no longer has to:
1. guarantee a minimum number of visits by Magellan
Behavioral members; and
2. cover the difference between the Standard Fee and the
Target Fee on a go-forward basis.
This provision will enable the Debtors to shed significant costs
associated with the Provider Agreement.
Although the amount due under the Note is being significantly
discounted pursuant to the Settlement Agreement, the Debtors
nevertheless believe the settlement is appropriate. The
discount is not unreasonable in view of the tenor of the Note
and an immediate cash infusion to the Debtors is assured.
Moreover, the Debtors will entirely eliminate all of the risks
of collection and associated ongoing monitoring. Under the
circumstances, the Debtors believe the settlement is eminently
reasonable and should be approved. (Magellan Bankruptcy News,
Issue No. 8: Bankruptcy Creditors' Service, Inc., 609/392-0900)
MEASUREMENT SPECIALTIES: Grant Thornton Airs Going Concern Doubt
----------------------------------------------------------------
Measurement Specialties, Inc. (Amex: MSS), a designer and
manufacturer of sensors and sensor-based consumer products,
reported financial results for its fourth fiscal quarter and
twelve-month period ended March 31, 2003. Results (unless
otherwise specified) exclude Terraillon Holdings Limited and
Schaevitz/UK, that are classified as discontinued operations.
Fourth Quarter Results
For the three months ended March 31, 2003, net sales increased
13% to $23.4 million, as compared to $20.7 million for the three
months ended March 31, 2002. For the three months ended March
31, 2003, net sales in the Consumer Products division increased
16.7% to $11.2 million, as compared to $9.6 million for the
three months ended March 31, 2002, while net sales in the Sensor
division increased 9.9% to $12.2 million for the current fiscal
quarter, as compared to $11.1 million for the three months ended
March 31, 2002. For the fiscal quarter ended March 31, 2003, the
Company reported a net loss from continuing operations of $4.2
million, or $0.35 per share, as compared to a net loss of $15.4
million, or $1.30 per share, for the same period last year.
For the three months ended March 31, 2003, gross profit
increased $4.6 million to $8.8 million (37.6% of net sales) from
$4.2 million (20.3% of net sales) for the three months ended
March 31, 2002. For the current fiscal quarter, the Company
recorded a charge of $0.6 million, or 2.6 gross margin points,
associated with the write-off of inventory in connection with a
customer specific sensor program that management deemed
unrecoverable.
Operating expenses were $12.6 million for the three months ended
March 31, 2003, as compared to $11.9 million for the three
months ended March 31, 2002. Included in the current quarter's
operating expense is an accrual of $3.6 million associated with
certain legal matters. Additionally, the Company estimates
approximately $1.3 million of the $1.9 million incurred for
professional fees was associated with the restructuring program
and certain legal proceedings.
Fiscal 2003 Results
Net sales for the twelve months ended March 31, 2003 increased
11.5% to $107.9 million, as compared to $96.8 million for the
same period last year. For the twelve months ended March 31,
2003, net sales in the Consumer Products division increased
16.3% to $55.7 million, as compared to $47.9 million for the
twelve months ended March 31, 2002, while net sales in the
Sensor division increased 6.8% to $52.2 million for the current
fiscal year, as compared to $48.9 million for the twelve months
ended March 31, 2002. For the fiscal year ended March 31, 2003,
the Company reported a net loss from continuing operations of
$6.3 million, or $0.53 per share, as compared to a net loss from
continuing operations of $24.2 million, or $2.30 per share, for
the same period last year. Including the loss from discontinued
operations of $2.8 million, the Company reported a consolidated
net loss for the twelve months ended March 31, 2003 of $9.1
million, or $0.76 per share.
Frank Guidone, CEO stated "discounting the impact of the
litigation accruals and certain restructuring and legal
professional fees, the performance for the quarter was solid,
and in-line with management's expectations. Gross margins
continued to improve, partially due to the mix of higher sensor
sales, as compared to consumer sales for the quarter, as well as
continued progress in our cost reduction efforts." He continued,
"additionally, as a result of the negotiated renewal of our
directors and officers insurance policy, AIG, our primary
insurance carrier, agreed to provide coverage -- up to the
primary policy limits of $5 million -- for the ongoing class
action lawsuit. AIG is in active discussions with the plaintiffs
in this matter. As we have previously stated, resolving the
class action lawsuit remains a primary objective for the
Company."
Measurement Specialties is a designer and manufacturer of
sensors, and sensor-based consumer products. Measurement
Specialties produces a wide variety of sensors that use advanced
technologies to measure precise ranges of physical
characteristics, including pressure, motion, force,
displacement, angle, flow, and distance. Measurement Specialties
uses multiple advanced technologies, including piezoresistive,
application specific integrated circuits, micro-
electromechanical systems, piezopolymers, and strain gages to
allow their sensors to operate precisely and cost effectively.
Measurement Specialties' independent accountants Grant Thornton
LLP, in its Auditors' Report dated May 20, 2003, stated:
"The accompanying [sic] consolidated financial statements have
been prepared assuming that the Company will continue as a going
concern...[T]he Company incurred net losses of $9,097,000 and
$29,047,000 for the fiscal years ended March 31, 2003 and 2002,
respectively. Additionally, the Company is a defendant in a
class action lawsuit and is also the subject of investigations
being conducted by the Division of Enforcement of the United
States Securities and Exchange Commission and the United States
Attorney for the District of New Jersey. These factors, among
others, raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from
the outcome of this uncertainty."
MEDCOMSOFT INC: March 31 Balance Sheet Upside-Down by $1.5 Mill.
----------------------------------------------------------------
MedcomSoft Inc. (TSX - MSF) announced financial and operating
results for its fiscal third quarter ended March 31, 2003.
Overview of the Third Quarter Activities
During this fiscal third quarter, MedcomSoft continued its
operational and financial stabilization efforts.
- Within six months of recalling its core development team, the
Company produced on schedule the commercial release of new and
advanced versions of its US flagship EMR product MedcomSoft
Record 1.3 and its Canadian practice management system
MedWorks 4.0.
- Raised net proceeds in cash of $722 thousand by way of private
placement financings and settled debts with certain creditors
and former managers amounting to $259 thousand with the issue
of common shares, resulting in $156 thousand in debt
forgiveness.
- Completed the re-engineering of its US market penetration and
sales strategies and introduced to its resellers several new
sales tools to accelerate the sales cycles and provide better
qualification, follow-up and monitoring of sales
opportunities.
- Added two National distributors and several Value Added
Resellers to the Company's distribution channel.
Results of Operations
Revenue for the quarter was $121 thousand compared to $401
thousand for the third quarter last year. For the quarter, the
gross margin was $114 thousand or 94% of revenue compared to
$318 thousand or 79% of revenue for the third quarter in the
prior year. Revenues recognized during the quarter included $53
thousand from utilization fees in Canada and the remainder was
attributed to the sale of MedcomSoft Record licenses and related
services in the United States.
Loss from operations in the third quarter was $371 thousand
compared to a loss from operations of $4.3 million in the third
quarter of last year. The Company realized a net loss after tax
in the third quarter of $371 thousand or $0.01 per common share,
compared to a net loss after tax of $4.3 million or $0.17 per
share for the third quarter of last year. There was no tax
expense recorded in the third quarter.
During the quarter, the Company recorded, as a reduction of
expenses, $156 thousand relating to the issue of 412,000 common
shares in settlement of certain debts amounting to approximately
$259 thousand.
At March 31, 2003 cash and short-term investments were $294
thousand compared to $13 thousand at the June 30, 2002 year-end,
an increase of $281 thousand. Accounts receivable increased to
$67 thousand compared to $29 thousand at the year-end due to
renewal billings of second year maintenance for existing
customers for calendar 2003 and the resultant timing of
collections. Prepaid expenses of $119 thousand increased by $69
thousand compared to the $50 thousand balance at year-end due to
the timing and recognition of certain prepayments made during
the quarter. Certain prepayments amounting to $50 thousand were
returned to the Company immediately subsequent to the March 31,
2003 quarter-end. The Company continues to maintain inventories
sufficient to support immediate sales activities.
Deferred revenue decreased to $147 thousand compared to $572
thousand at the year-end. This decrease was mainly attributable
to the recognition of income of $483 thousand on the software
license agreement with Lamsak Pty. Limited and its affiliates in
Australia, net of deferred revenue arising on software licenses,
maintenance, and training sold to United States physician
customers, for which revenue has not been recorded. A pro-rata
portion of maintenance and training contracts relating to third
quarter activity were recorded in revenue in the third quarter,
with the balance remaining in deferred revenue.
As a result of MedcomSoft's financing activities during the
third quarter, a debenture obligation amounting to $231 thousand
resulted as at March 31, 2003, which is more fully described in
the notes to the consolidated financial statements for the three
months ended March 31, 2003.
At March 31, 2003, the Company's balance sheet shows a working
capital deficit of about $1.4 million, and a total shareholders'
equity deficit of about $1.5 million.
Outlook
MedcomSoft intends to increase its market presence in the
healthcare efficiency industry with a continued focus in North
America. MedcomSoft continues to believe that re-establishing
its sales and marketing efforts in North America will result in
growth for the Company.
The Company's priorities focus on:
- re-achieving profitability by growing top line sales and
aligning its expenditures to expected sales levels;
- securing additional financing to provide it with sufficient
working capital to execute its sales strategy resulting in
growth of its funnel of sales opportunities;
- seeking continued financial support from its suppliers;
- growing its VAR distribution channel in the United States to
achieve wider customer access;
- enhancing strategic alliances and relationships which
promote the MedcomSoft Record brand and provide continued
enhancement of the Company's core products offerings;
- pursuing partnerships that can promote our core business by
adding unique functionality to its products; and
- ensuring that MedcomSoft remains at the technological
forefront of the healthcare industry
Global developments, a fragile US economy, and weak capital
markets have been suppressing consumer and corporate confidence.
Any adverse trends in these variables could have unfavorable
impacts on our business.
After two years of profitable operations in fiscal 2000 and
2001, the Company incurred a significant operating loss in
fiscal 2002, which resulted in a capital deficiency of $2.5
million and a working capital deficiency of $2.9 million as at
June 30, 2002. The Company currently has a capital deficiency of
$1.5 million and a working capital deficiency of $1.5 million as
at March 31, 2003. The Company's continued existence is
dependent upon its ability to achieve and maintain profitable
operations and obtain financing. The Company has made efforts to
restore profitable operations and continues to pursue various
options with its creditors. However, there can be no assurance
that the Company will achieve profitable operations or that
additional financing efforts will be successful.
MOODY'S CORP: CEO Speaks at Lehman Bros. Conference on Thursday
---------------------------------------------------------------
John Rutherfurd, Jr., President and CEO of Moody's Corporation
(NYSE: MCO), will speak at the Lehman Brothers 2003 Global
Services Conference on Thursday, June 5, 2003 in New York.
Mr. Rutherfurd's presentation will begin at approximately 9:20
AM Eastern Time and will be webcast live. The webcast can be
accessed at Moody's Shareholder Relations website,
http://ir.moodys.com
Moody's Corporation (NYSE: MCO), whose March 31, 2003 balance
sheet shows a total shareholders' equity deficit of $327
million, is the parent company of Moody's Investors Service, a
leading provider of credit ratings, research and analysis
covering debt instruments and securities in the global capital
markets, and Moody's KMV, a leading provider of market-based
quantitative services for banks and investors in credit-
sensitive assets serving the world's largest financial
institutions. The corporation, which employs approximately 2,100
employees in 18 countries, had reported revenue of $1.0 billion
in 2002. Further information is available at
http://www.moodys.com
MOSAIC GROUP: Selling Sales Solutions Business for C$105 Million
----------------------------------------------------------------
Mosaic Group Inc. (TSX: MGX) has entered into a definitive
agreement with an affiliate of JLL Partners for the sale of the
assets and other direct and indirect interests of the Company in
its Mosaic Sales Solutions business, for a purchase price of
approximately C$105 million, subject to certain conditions. The
transaction was entered into as part of the Company's ongoing
and comprehensive capital and debt restructuring efforts
pursuant to which it retained, in January 2003, Lazard Freres &
Co. LLC, New York, as investment banker to assist in the
possible sale of all or part of the Company. As previously
announced, the Company believes that, based on its current
assessment of possible transactions, there will be no recovery
for its shareholders.
In December, 2002, the Company and certain of its Canadian
subsidiaries and affiliated companies obtained an order from the
Ontario Superior Court of Justice under the Companies' Creditors
Arrangement Act (Canada) to initiate the restructuring of its
debt obligations and capital structure. Additionally, certain of
the Company's US subsidiaries commenced proceedings for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in
the United States Bankruptcy Court for the Northern District of
Texas in Dallas. Pursuant to these filings, the Company and its
relevant subsidiaries continue to operate under a stay of
proceedings. The Company has previously announced it had sought
and obtained from the Ontario Superior Court of Justice an order
granting it and certain of its Canadian subsidiaries and
affiliated companies an extension of protection under the
Companies' Creditors Arrangement Act (Canada) to June 16, 2003.
The sale of the assets of and interests in the Mosaic Sales
Solutions business is subject to the receipt of all necessary
consents and approvals including the approval of the United
States Bankruptcy Court and the granting of certain relief by
the Ontario Superior Court of Justice. As is customary in
connection with a sale of assets of a company that is under the
protection of Chapter 11 of the U.S. Bankruptcy Code, the sale
of assets of and interests in the Mosaic Sales Solutions
business to JLL shall be subject to the receipt by the Company
of higher or better offers at an auction to be scheduled by
further order of the Bankruptcy Court which should be within the
next 20 days.
Mosaic Group Inc., with operations in the United States and
Canada, is a leading provider of results-driven, measurable
marketing solutions for global brands. Mosaic specializes in
three functional solutions: Direct Marketing Customer
Acquisition and Retention Solutions; Marketing & Technology
Solutions; and Sales Solutions & Research, offered as integrated
end-to-end solutions. Mosaic differentiates itself by offering
solutions steeped in technology, driven by efficiency and
providing measurable and sustainable results for our Brand
Partners. Mosaic trades on the TSX under the symbol MGX.
Further information on Mosaic can be found on its Web site at
http://www.mosaic.com
MOUNT SINAI MED: Outlook Revised to Stable on Turnaround Efforts
----------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook to stable
from negative on the Miami Beach Health Facilities Authority,
Fla.'s hospital revenue bonds outstanding, issued for the Mount
Sinai Medical Center, due to the scope and strength of Mount
Sinai's recent turnaround from numerous problems in late 2001,
among other factors.
In addition, Standard & Poor's affirmed its 'BB' rating on the
bonds, which include series 2001A, 2001B, 2001C and 1998, and
make up a total of approximately $277 million in outstanding
debt.
"The outlook revision reflects the scope and strength of Mount
Sinai's turnaround since numerous problems emerged at the
medical center in 2001, a rebound that has been bolstered by the
ongoing efforts of a new management team," said Standard &
7Poor's credit analyst Martin Arrick. "After new management
started in late 2001 they implemented a comprehensive
improvement program that covers all facets of the operation,
including revenue enhancements, supply chain initiatives, and
staffing and productivity." A higher rating is currently
precluded by a weak balance sheet, an expectation that losses
will continue in 2003 even though underlying performance is
expected to improve, and soft patient volumes.
Mount Sinai currently has approximately $277 million in
outstanding debt. In terms of future debt plans, Mount Sinai is
seeking to refund or restructure the series 2001B and 2001C
bonds, but has no plans for additional borrowing in the near
term.
Mount Sinai Medical Center's rating was downgraded to 'BB' from
'BBB-' in December 2001 after large unexpected losses emerged
during the fourth quarter of that year, resulting in sharply
higher leverage, replacement of the senior management team, and
the engagement of a consultant team to help the new management
team with the turnaround.
NAT'L CENTURY: Hires Gibbs & Bruns as Special Litigation Counsel
----------------------------------------------------------------
Pursuant to Sections 327 and 328 of the Bankruptcy Code,
National Century Financial Enterprises, Inc., and its debtor-
affiliates seek the Court's authority to employ Gibbs & Bruns,
LLP as special litigation counsel in these Chapter 11 cases on
the terms and conditions described in the engagement letter
between both parties.
Gibbs & Bruns is a civil litigation boutique with over 25
attorneys located in Houston, Texas that specializes in complex
commercial litigation. Gibbs & Bruns has extensive experience
in a wide variety of civil litigation matters, including cases
involving breach of contract disputes, insurance coverage,
lender liability, director and officer liability, securities
fraud and professional malpractice. In the light of its
litigation experience and recognized success, Gibbs & Bruns is
particularly well suited to serve as special litigation counsel
in these cases.
Under the terms of the Engagement Letter, Gibbs & Bruns will
serve as special litigation counsel to the Debtors to
investigate and bring on behalf of the Debtors' estates any
claims against third parties that belong to the Debtors'
estates, including, without limitation transfer avoidance causes
of action under Chapter 5 of the Bankruptcy Code and causes of
action based on breach of duty, fraud or similar theories
against indenture trustees, placement agents, structuring
agents, ratings agencies, law firms, accounting firms and their
affiliates, against Lance Poulsen, Barbara Poulsen, Donald
Ayers, Rebecca Parrett and entities utilized to hold their
assets and against the officers and members of the Debtors'
boards of directors, save and except for these Excluded Claims:
(a) Claims on behalf of one or more of the Debtors against
one or more of the other Debtors;
(b) Claims by one or more of the Debtors against the health
care providers that have or had business relationships
with one or more of the Debtors, including those
providers that have filed for bankruptcy and those that
have not, which claims arise out of or relate to
accounts receivables financing, lease or promissory note
arrangements between the Debtors and the Provider;
(c) Claims held by the Providers or their bankruptcy
estates, as applicable, against the Providers'
directors, officers and agents; and
(d) Preference or other Bankruptcy Code avoidance action
claims against Credit Suisse First Boston Corporation or
ING Barings, Inc.; provided, however, that if these
claims have not been resolved to the Debtors'
satisfaction, the Debtors may engage Gibbs & Bruns to
pursue those claims on mutually agreeable terms to be
negotiated at a later date.
According to Charles M. Oellermann, Esq., at Jones, Day, Reavis
& Pogue, in Columbus, Ohio, Gibbs & Bruns will not serve as
special litigation counsel to the Debtors in connection with the
Excluded Claims. Under the terms of the Engagement Letter,
Gibbs & Bruns and the Debtors agree that the Debtors, in
consultation with Gibbs & Bruns, will designate which of the
Debtors' claims within the scope of Gibbs & Bruns' engagement
will be pursued for purposes of settlement; or prosecuted in
litigation, provided that:
(a) Gibbs & Bruns, in consultation with the Debtors, may
exercise its reasonable judgment to elect not to pursue
or litigate, as applicable, any Designated Claims, and
(b) any election reached by Gibbs & Bruns, in consultation
with the Debtors, will not constitute a material breach
of the Engagement Letter or cause for termination of
Gibbs & Bruns' engagement.
In the Engagement Letter, Gibbs & Bruns acknowledges that third
party claims belonging to the Debtors that are the subject of
its engagement, or the proceeds thereof, may subsequently be
assigned as part of a plan of liquidation to a litigation trust
or other entity for the benefit of the Debtors' creditors, which
would include, among other creditors, holders of the notes
issued by NPF VI and NPF XII.
The Engagement Letter also acknowledges that, concurrently with
the Special Counsel Representation, Gibbs & Bruns already
represents or may in the future represent certain holders of
notes issued by NPF VI and NPF XII in the pursuit of claims
owned by the Individual Clients individually, as distinguished
from the Debtors, that arise from or relate to the Debtors'
collapse. The retention of any Individual Client will be
subject to substantially the same terms and conditions set forth
in the Engagement Letter.
Gibbs & Bruns has not been engaged to represent in the
Individual Representations and will not agree to represent any
of these parties: CSFB, ING, Bank One, JP Morgan Chase or any
health care provider or its affiliates that have or had a
business relationship with one or more of the Debtors. No
Individual Representation will include any attempt by an
Individual Client to assert fraudulent transfer or derivative
claims of the Debtors; rather, the Individual Representations
will include only claims personal to the Individual Clients
themselves.
Under the Engagement Letter, Mr. Oellermann continues, Gibbs &
Bruns will be entitled to fees under the two-prong structure for
the Special Counsel Representation. The claims encompassed
within the Special Counsel Representation are divided into two
categories, which are:
(a) Avoidable Preference and Fraudulent Transfer Claims Other
Than the Excluded Claims; and All Claims Against Lance
Poulsen, Barbara Poulsen, Donald Ayers and Rebecca Parrett
and Entities Utilized to Hold Their Assets. This category
of claims includes:
(1) all preference and fraudulent avoidance claims, other
than the Excluded Claims; and
(2) all claims against Lance Poulsen, Barbara Poulsen,
Donald Ayers and Rebecca Parrett and any entities
utilized by or on behalf of one or more of the Founders
primarily to protect or preserve the Founders' assets
against claims or causes of action to recover the
assets. The fee for this category of claims will be
10% of the total net amounts recovered by way of
litigation or settlement, determined after
reimbursement of the Debtors for all applicable
expenses paid to or on behalf of Gibbs & Bruns
under the expense reimbursement provisions of Section
5.1 of the Engagement Letter, or $50,000,000, whichever
is less.
(b) All Other Claims Belonging to the Estates Other Than the
Excluded Claims
This category of claims includes all claims encompassed
within the Special Counsel Representation other than those
described in subparagraph (a). The fee for this category
of claims will be owed separately and will be calculated
based on the total net amounts recovered by way of
litigation or settlement by the Individual Clients and the
Debtors on an aggregate basis, after reimbursement of their
expenses under the Individual Client engagement agreements
and the expense reimbursement provisions of Section 5.D of
the Engagement Letter -- the Net Recovery. The fee for
this category of claims will be 18% of the first
$100,000,000 of the aggregate Net Recovery, 15% of the next
$400,000,000 of the aggregate Net Recovery and 10% of the
portion of the aggregate Net Recovery in excess of
$500,000,000.
Furthermore, the Debtors have agreed, and Gibbs & Bruns has
acknowledged that the Individual Clients have agreed or will
agree that in the event of a dispute among all or any of them
concerning the relative portion of Gibbs & Bruns' fees to be
allocated to the Debtors or the Individual Clients, Gibbs &
Bruns' fee will be paid immediately upon the receipt of any
proceeds from the claims without the need to await resolution of
that dispute. Any remaining sums will be placed in an interest
bearing escrow account pending the resolution of the dispute.
The Debtors have also agreed to pay the reasonable out-of-pocket
expenses incurred by Gibbs & Bruns incurred in the Special
Counsel Representation. Mr. Oellermann emphasizes that Gibbs &
Bruns must segregate or allocate the expenses owed by the
Debtors from the expenses owed by the Individual Clients. The
Debtors have agreed to post a $500,000 retainer to be held as
security for Gibbs & Bruns' expenses.
Accordingly, the Debtors ask Judge Calhoun to approve the Fee
Structure and the expense reimbursement provisions of the
Engagement Letter. Mr. Oellermann asserts that the Fee
Structure is fair and reasonable and should be approved under
Section 328(a) of the Bankruptcy Code. It is designed to
reflect the varying levels of time, effort and risk involved in
establishing liability and collecting on judgments for the
different types of claims included in the Special Counsel
Representation.
Kathy D. Patrick, Esq., a member of the firm, assures the Court
that Gibbs & Bruns has no connection with the Debtors, their
creditors, the U.S. Trustee or any other party with an actual or
potential interest in these Chapter 11 cases except as set forth
in these instances:
(a) Gibbs & Bruns has been engaged or may be engaged in the
future by certain of the Debtors' individual noteholders
to pursue claims arising from their purchase of notes
issued by NPF VI and NPF XII that are not claims
belonging to the Debtors;
(b) Gibbs & Bruns serves as lead counsel to the outside
directors of the Enron Corporation in the defense of the
many lawsuits filed against them;
(c) Gibbs & Bruns represents Standard & Poor's and the
McGraw Hill Companies in the defense of an indemnity and
contribution action filed against them in connection
with notes issued by Commercial Financial Services;
(d) Gibbs & Bruns has various loans and bank accounts with
Bank One in Houston, Texas;
(e) Gibbs & Bruns formerly represented PaineWebber, Inc. in
broker customer and related insurance disputes. Gibbs &
Bruns has advised UBS Paine Webber, Inc., the successor
to Paine Webber, Inc., that it will not accept any
further engagements from that firm;
(f) Gibbs & Bruns currently represents Howrey, Simon, Arnold
& White LLP, which is counsel in certain litigation a
portion of the proceeds of which has been assigned to
the Debtors;
(g) Gibbs & Bruns currently represents First Union
Securities, an affiliate, as a holder of notes issued by
NPF VI or NPF XII, in a small litigation matter not
related to these cases;
(h) Certain of Gibbs & Bruns' lawyers have bank accounts,
lines of credit, credit cards or investment accounts
with Bank One, Citibank N.A. -- which is listed as a
holder of notes issued by NPF VI or NPF XII; American
Express -- an affiliate of which is listed as a holder
of notes issued by NPF VI or NPF XII and another
affiliate of which has been retained as accounts
receivable consultant by the Debtors; and Northern Trust
Company, which is listed as a holder of notes issued by
NPF VI or NPF XII;
(i) Gibbs & Bruns currently uses FTI Consulting, Inc., which
has been retained as financial advisors to the
Creditors' Committee, as an expert witness in litigation
not related to these cases or the Debtors;
(j) Gibbs & Bruns currently uses PricewaterhouseCoopers,
which prior to the Petition Date performed accounting
services for the Debtors, as an expert witness in
litigation not related to these cases or the Debtors;
and
(k) From time to time, Gibbs & Bruns likely has represented,
and likely will continue to represent, certain other
creditors of the Debtors and various other parties
actually or potentially adverse to the Debtors in
matters unrelated to the Debtors or these chapter 11
cases.
Ms. Patrick emphasizes that Gibbs & Bruns represents no interest
adverse to the Debtors or their estates in the matters for which
Gibbs & Bruns is to be retained. Ms. Patrick asserts that Gibbs
& Bruns is a "disinterested person" as that term is defined in
Section 101(14) of the Bankruptcy Code and as required by
Section 327 of the Bankruptcy Code. (National Century Bankruptcy
News, Issue No. 17; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
NATHANIEL ENERGY: Abrams & Company Expresses Going Concern Doubt
----------------------------------------------------------------
The independent Auditors Report of Abrams & Company, P.C., of
Melville, New York, dated April 4, 2003, reflected the following
concerning the financial condition of Nathaniel Energy: "[T]he
Company has incurred a significant loss approximating $5.4
million for the year ended December 31, 2002 and incurred losses
for the two years ended December 31, 2001. In addition, the
Company has a deficiency in working capital at December 31, 2002
approximating $6.7 million and a deficiency in stockholders'
equity approximating $11.0 million. The above conditions raise
substantial doubt about the Company's ability to continue as a
going concern. Subsequent to December 31, 2002 the Company
acquired Keyes Helium Company LLC, which the Company expects to
provide adequate profits and cash flow to sustain the Company."
During 2002, Nathaniel Energy's operations were limited to a
tire processing and reclamation facility which sells its output
of shredded rubber and steel wire to others primarily for use as
fuel and recycling into steel products. Nathaniel Energy's short
term objective is to utilize this and planned additional tire
shredding facilities as a fuel supply for its planned Thermal
Combustor operations. Nathaniel Energy's planned Thermal
Combustor operations will enable it to expand its business into
the sale of byproducts, including electric power, and the sale
of agricultural produce from greenhouses. Nathaniel Energy has
one wholly owned and one majority owned subsidiary. MNS is
wholly owned by Nathaniel Energy and is not engaged in any
business. MCNIC is fifty-one percent owned by Nathaniel Energy
and has an 18.55 percent interest in Keyes Helium Company, LLC,
a helium production company located in Keyes, Oklahoma. If the
opportunity were to present itself, Nathaniel Energy would like
MCNIC to acquire ownership of the entire facility. Subsequent to
year-end, on April 3, 2003, Nathaniel Energy acquired through a
newly organized, wholly owned subsidiary the joint venture in
which MCNIC participates, together with other assets, with the
intent to merge MCNIC into that subsidiary, Nathaniel Energy
Oklahoma Holdings Corporation. Nathaniel Energy is obligated to
cause Nathaniel Energy Oklahoma Holdings Corporation to issue
forty-nine percent of its stock to Nathaniel's stockholder,
Richard Strain, as part of the financing transaction for the
acquisitions, which Mr. Strain provided. Nathaniel Energy will
retain a fifty-one percent interest in the subsidiary. The
acquisition puts Nathaniel Energy in the business of helium
production and natural gas collection and sales.
For the year ended December 31, 2002 revenue decreased from
$417,152 in 2001, to $175,662, a decrease of $241,490, or 60.1
percent. This decrease in revenue is primarily due to Nathaniel
Energy's suspension of new tire receipts in the Dallas facility
during the months of April through December 2002. This
suspension was a result of making design changes required by
Texas for the re-issuance of permits to operate the facility.
The decrease was partially offset by increased sales of tire
shreds from existing inventory.
Cost of sales increased from $383,217 in 2001 to $449,229 in
2002, a increase of $66,012, or 17.2 percent. The increase is
primarily due to an increase in wages and equipment repairs
during the period.
As of December 31, 2002, Nathaniel Energy had outstanding notes
payable of $4,095,470, including installment notes with
financial institutions secured by equipment totaling $654,000,
with an average interest rate of 11.1%. The remaining $4,196,000
in outstanding notes consist of secured and unsecured term loans
from individuals with an average interest rate of 12.1%. Of this
amount, $247,000 is due immediately since the notes are past
their scheduled due dates. In April 2002, the holder of
$1,350,000 in loans converted this amount, plus interest of
$300,000, to equity at $0.20 per share. The 8,250,000 shares
have been issued to this creditor and various persons designated
by him. The remaining $3,950,000 is to be repaid in varying
installments beginning in 2003.
NORTEL: Enters Supply Agreement with Cincinnati Bell Wireless
-------------------------------------------------------------
Cincinnati Bell Wireless has selected Nortel Networks
(NYSE:NT)(TSX:NT) to plan, design and deliver a GSM (Global
System for Mobile Communications) and GPRS (General Packet Radio
Service) core wireless data network.
Under an agreement announced today, Nortel Networks will provide
circuit and IP (Internet Protocol) core networking equipment for
an overlay of Cincinnati Bell's existing TDMA wireless network
spanning Ohio, Kentucky and Indiana. The upgrades will position
Cincinnati Bell Wireless to drive increased network capacity and
reduced cost of transporting network traffic, and to offer new
data services.
"Cincinnati Bell has a very proud legacy as a leading provider
of data services," said Dennis Hinkel, senior vice president,
Network Planning and Operations, Cincinnati Bell. "We are now
taking our expertise in data to the next level as we role out
next generation wireless capabilities that will provide new
services for our customers and ensure consistent voice and data
capabilities."
Nortel Networks Univity GPRS Wireless Data Network equipment
supports data services like Web browsing, streaming audio and
video, multimedia messaging, location-based services, m-
commerce, Virtual Private Networks, and other high-speed
wireless data services. These types of personalized service
offerings can position Cincinnati Bell to attract new customers,
enhance loyalty with existing customers, and drive new revenues.
"We are very proud to have been selected to deploy the IP core
network that will position Cincinnati Bell to meet growing
subscriber demand for wireless voice and data services," said
Alan Pritchard, vice president, GSM/GPRS/EDGE Americas, Nortel
Networks. "This TDMA to GSM/GPRS upgrade represents another new
core IP customer and continued momentum for Nortel Networks as a
leading core provider."
Nortel Networks is an industry leader in migrating TDMA wireless
networks to support more efficient and higher-capacity GSM, GPRS
and EDGE technologies. Earlier this year, Nortel Networks
secured a contract with Eastern New Mexico Rural Telephone, a
rural provider of wireless services in eastern New Mexico and
western Texas. At the end of 2002, CORR Wireless, Alabama's
first digital wireless provider; Union, a regional wireless
provider servicing subscribers in Wyoming, Colorado and Utah;
and Highland Cellular, a Cellular One wireless provider serving
West Virginia, selected Nortel Networks to migrate their TDMA
networks to GSM/GPRS technologies. In June 2002, Triton PCS,
serving the southeastern United States and EDGE Wireless,
serving the western United States, selected Nortel Networks for
their GSM/GPRS network builds.
GSM and GPRS equipment to be deployed for Cincinnati Bell
includes Univity Gateway GPRS Service Node (GGSN), Univity GSM
Serving GPRS Service Node (SGSN), and Univity Mobile Switching
Center (MSC). Nortel Networks GSM infrastructure is designed to
easily support GPRS and EDGE with only card and software
upgrades, which helps minimize capital expenses and protects
network investments when migrating to next generation
technologies.
Nortel Networks will also provide on-site network support,
logistical planning, installation and support services through
its "Build, Launch and Transfer" program. This program,
developed to minimize the challenges of launching new wireless
technology and get the most out of existing network resources,
will assist Cincinnati Bell with the transition to the new
GSM/GPRS wireless data network.
Globally, Nortel Networks has deployed 80 GSM/GPRS networks in
more than 50 countries, and is supplying GSM/GPRS systems to
enable Wireless Data Network services for more than 50
operators. Nortel Networks is the industry's only supplier with
Wireless Data Networks operating in all three advanced
technologies - GPRS, CDMA2000 and UMTS.
Cincinnati Bell (NYSE:CBB) is one of the nation's most respected
and best performing local exchange and wireless providers with a
legacy of unparalleled customer service excellence. Cincinnati
Bell provides a wide range of telecommunications products and
services to residential and business customers in Ohio, Kentucky
and Indiana. In recent studies by J.D. Power and Associates, the
company ranked highest in customer satisfaction for Wireless
Telephone Service in Cincinnati, Local Residential Telephone
Service and Residential Long Distance Service among Mainstream
Users making it the only company to ever receive all three
awards.
Cincinnati Bell Wireless is an AT&T Wireless Affiliate and Joint
Venture between Cincinnati Bell and AT&T Wireless.
Nortel Networks is an industry leader and innovator focused on
transforming how the world communicates and exchanges
information. The Company is supplying its service provider and
enterprise customers with communications technology and
infrastructure to enable value-added IP data, voice and
multimedia services spanning Wireless Networks, Wireline
Networks, Enterprise Networks, and Optical Networks. As a global
company, Nortel Networks does business in more than 150
countries. More information about Nortel Networks can be found
on the Web at http://www.nortelnetworks.com
As previously reported, Moody's Investors Service lowered the
senior secured and senior implied ratings on the securities of
Nortel Networks Corp., and its subsidiaries to B3 and Caa3 from
Ba3 and B3 respectively.
Outlook is negative.
The rating action reflects the lack of Nortel's financial
flexibility and the decline of its revenue base. The downgrade
also takes into account the company's planned lapse of its $1.5
billion in credit facilities due on December. However the rating
action is offset by its substantial cash, modest near-term debt
maturities, and the progress the company has made in
streamlining its expenses.
Nortel Networks Ltd.'s 6.125% bonds due 2006 (NT06CAN1) are
trading at about 95 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NT06CAN1for
real-time bond pricing.
NRG ENERGY: Outlines Salient Terms of Proposed Chapter 11 Plan
--------------------------------------------------------------
NRG Energy delivered its Chapter 11 plan to the Bankruptcy
Court. Scott J. Davido, Senior Vice President of NRG Energy,
relates that the Plan is built around three cornerstones:
First, the Plan implements a global settlement -- the Xcel
Settlement of all disputes between NRG Energy, the Global
Steering Committee, the Noteholder Group and Xcel, on terms that
materially enhance the recovery of NRG Energy's unsecured
creditors and provide significant value to NRG Energy, which is
essential to the success of its reorganization and the viability
of its post-reorganization business operations. Pursuant to the
terms of the Xcel Settlement, among other things, NRG Energy and
existing unsecured creditors of NRG Energy will receive:
(a) in consideration in the aggregate amount of
$752,000,000, up to $200,000,000 of which can be XEL
Stock;
(b) New NRG Senior Notes with an aggregate value of
$500,000,000; and
(c) 100% of the New NRG Common Stock, with a mid-point
aggregate value of approximately $2,404,000, all of
which will be distributed in strict accordance with the
terms of the Plan. In exchange for the consideration,
the parties will deliver the releases described in the
Plan.
Second, NRG Energy believes that several NRG Energy projects
will be restructured without the need for the entities to seek
Chapter 11 protection, which will enable the entities to
continue to operate their respective businesses in the ordinary
course outside of the bankruptcy.
Third, holders of trade claims of Continuing Debtors
Subsidiaries will be paid in cash in the ordinary course of
business, in an amount equal to the amount of the claims.
A full-text copy of NRG's Plan -- a huge 5.8 megabyte file -- is
available at no charge at:
http://www.kccllc.net/documents/0313024/0313024030514000000000052.pdf
A full-text copy of NRG's Disclosure Statement -- a huge 6.9
megabyte file that contains the information necessary to
understand the Plan -- is available at no charge at:
http://www.kccllc.net/documents/0313024/0313024030514000000000051.pdf
(NRG Energy Bankruptcy News, Issue No. 2; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
OMNOVA SOLUTIONS: Completes $165MM Senior Secured Notes Offering
----------------------------------------------------------------
OMNOVA Solutions Inc. (NYSE: OMN), an innovator of decorative
and functional surfaces, emulsion polymers, and specialty
chemicals, has sold $165 million of 11.25% Senior Secured Notes
due 2010 in an offering exempt from the registration
requirements of the Securities Act of 1933. The offering was
contingent upon the concurrent closing of a new $100 million
three-year, asset-based bank credit facility, which has been
completed.
The Company has used 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 will not be and 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.
As reported in Troubled Company Reporter's May 13, 2003 edition,
Fitch Ratings assigned a 'BB' rating to OMNOVA Solutions
Inc.'s proposed $165 million senior secured notes due 2010 and a
rating of 'BB+' to Omnova's proposed senior secured credit
facility.
ONE VOICE TECHNOLOGIES: Ability to Continue Operations Uncertain
----------------------------------------------------------------
One Voice Technologies, Inc. (formerly Conversational Systems,
Inc.) was incorporated under the laws of the State of California
on April 8, 1991. The Company commenced operations in 1999. The
Company is a developer of 4th Generation voice solutions for the
Wireless, Telematics, TV/Internet appliance and Interactive
Multimedia markets. The Company is a voice recognition
technology company with over $26 Million invested in Research
and Development and more than 20 Million products distributed
worldwide in seven languages. To date, its customers include T-
Mobile and Warner Brothers with strong technology and business
partnerships with Philips Electronics and IBM. Based on its
patented technology, One Voice offers voice solutions for the
Telecom, Motion Picture DVD Entertainment and PC markets. Its
solutions allow mobile and residential phone users to Voice
Dial, Group Conference Call, Read and Send E-Mail and Instant
Messages all by voice. The Company offers these solutions
through both domestic and international wireless and wireline
carriers. It also offers the motion picture industry's only
voice interactive DVD movies included in over 20 million copies
distributed worldwide in seven languages. It offers PC
manufacturers the ability to bundle a complete voice interactive
computer assistant allowing PC users to talk to their computers
to quickly launch applications, websites, read and send E-mails
and dictate letters. The Company feels it is strongly positioned
across the Telecom and PC markets with its patented technology.
However, the Company incurred a net loss of $1,431,407 during
the three months ended March 31, 2003 and had an accumulated
deficit of $27,958,443. The Company had a working capital
deficit of $428,302 at March 31, 2003. Cash flows used for
operations amounted to $621,910 for the three months ended March
31, 2003. These factors raise substantial doubt about the
Company's ability to continue as a going concern unless the
Company enters into a significant revenue-bearing contract.
The Company's net loss for the three months ended March 31, 2003
was $1,431,407 compared to the net loss of $1,633,657 for the
same period in 2002. At March 31, 2003, it had a negative
working capital of $428,302 as compared to working capital of
$725,547 at March 31, 2002.
ORION REFINING: Secures Okay to Pay Prepetition Vendors' Claims
---------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approved
Orion Refining Corporation's request to pay the prepetition
claims of its critical vendors to maintain its prepetition
favorable terms.
The vendors' materials, goods and services are essential to the
Debtor's operations. These five groups of vendors are:
a) vendors who are the sole source of supply for certain
materials, goods and services;
b) vendors who are the sole vendor able to supply the
Debtor with adequate amounts or quantities of certain
materials or goods;
c) vendors who possess unique knowledge of the Debtor's
business operations or equipment;
d) vendors who provide critical services to the Debtor; and
e) vendors who transport materials and goods to the Debtor
and who aid in transporting products in fulfillment of
customer orders.
The Debtor believes that the payment of the Critical Vendor
Claims is specifically necessary to continue operations at the
Debtor's refinery located in Norco, Louisiana, preserve the
Debtor's enterprise value and successfully consummate the sale
of the Debtor's assets and business in a manner that will
maximize value for the Debtor's estate, creditors and other
stakeholders. The Debtor estimates that the maximum aggregate
value of Critical Vendor Claims that may be paid pursuant to
this Motion is approximately $5 million.
The Debtor further wants to condition the payment of Critical
Vendor Claims on the agreement of individual Critical Vendors to
continue supplying materials, goods and services to the Debtor
on the same trade terms.
The Debtor anticipates that, among other things, Critical
Vendors:
a) may refuse to deliver materials, goods and services
without payment of their prepetition claims;
b) may refuse to deliver materials, goods and services on
reasonable credit terms absent payment of prepetition
claims, thereby effectively refusing to do business with
the Debtor; or
c) may suffer significant financial hardship, such that the
Debtor's non-payment of prepetition claims would destroy
a Critical Vendor's business and therefore its ability
to supply the Debtor with materials, goods and services.
It is in cases like these - where non-payment of Critical
Vendors' claims would lead to the interruption of the delivery
of necessary materials, goods and services - that the Debtor
seeks to exercise its discretion to pay Critical Vendor Claims.
Orion Refining Corporation filed for chapter 11 protection on
May 13, 2003 (Bankr. Del. Case No. 03-11483). Daniel B. Butz,
Esq., Gregory Thomas Donilon, Esq., and Gregory W. Werkheiser,
Esq., at Morris, Nichols, Arsht & Tunnell represent the Debtor
in its restructuring efforts. When the Company filed for
protection from its creditors, it listed estimated debts and
assets of more than $100 million each.
PLYMOUTH RUBBER: Fails to Comply with AMEX Listing Standards
------------------------------------------------------------
Plymouth Rubber Company, Inc. (Amex: PLR.A, PLR.B) announced
that on May 23, 2003, it received notification from the American
Stock Exchange that, as of the first quarter of fiscal 2003,
Plymouth is not in compliance with AMEX listing requirements,
due to shareholders' equity less than $2,000,000 and losses from
continuing operations and/or net losses in two of its three most
recent fiscal years. In order to maintain the listing of
its common stock, Plymouth must submit a plan by June 23, 2003,
subject to acceptance by AMEX, describing actions to be taken to
bring it into compliance with listing requirements within 18
months. The Company expects to file such a plan and is
evaluating its alternatives.
Plymouth Rubber Company, Inc. manufactures and distributes
plastic and rubber products, including automotive tapes,
insulating tapes, and other industrial tapes and films. The
Company's tape products are used by the electrical supply
industry, electric utilities, and automotive and other
original equipment manufacturers. Through its Brite-Line
Technologies subsidiary, Plymouth manufactures and supplies
highway marking products.
* * *
Liquidity and Capital Resources
Prior to December, 2002, the Company's term debt agreements had
contained various covenants specifying certain financial
requirements, including minimum tangible net worth, fixed charge
and EBITDA coverage ratios, working capital and maximum ratio of
total liabilities to net worth. In addition, the revolving
working capital credit facility and the real estate term loan
contain an acceleration provision, which can be triggered if the
lender determines that an event of default has occurred.
As of each quarter end from September 1, 2000 through August 30,
2002, the Company had been in violation of certain covenants of
its term debt facility and therefore, due to a cross default
provision, the Company had not been in compliance with a
covenant under its revolving working capital credit facility and
real estate term loan. As a result, all of the Company's term
loans (except for that of its Spanish subsidiary) had been
classified as current liabilities on the Company's Consolidated
Balance Sheet at the end of each fiscal quarter end. In
addition, during July 2002, the Company received a demand from
its primary term debt lender for the payment of their
outstanding loan balances in the amount of $8,658,000, which
represented the total of all future payments and accumulated
late fees, and a demand letter from a smaller equipment lender
for approximately $69,000 of payments due.
During 2002, the Company negotiated with these lenders and, in
November 2002, reached formal agreement to obtain relief from
their demands and to restructure existing term debt facilities.
Under the new arrangements, the term debt lenders accepted
significantly reduced principal payments over the next three
years, eliminated financial covenants, waived existing defaults
and rescinded demands for accelerated payment, in return for
enhanced collateral positions.
As of February 28, 2003, the Company had approximately $744,000
of unused borrowing capacity under its revolving line of credit
with its primary working capital lender, after consideration of
collateral limitations.
The Company's working capital position decreased from a negative
$2,339,000 at November 29, 2002 to a negative $3,600,000 at
February 28, 2003, due to a $1,846,000 increase in accounts
payable, a $822,000 decrease in accounts receivable, a $254,000
increase in the current portion of long term borrowings, a
$199,000 increase in short term debt, a $159,000 decrease in
prepaid and other current assets, and a $34,000 decrease in
cash, partially offset by a $1,283,000 increase in inventory,
and a $770,000 decrease in accrued expenses.
During the second quarter of 2002, the Company received a
funding waiver from the Internal Revenue Service for the
$855,000 payment due to its defined benefit plan for the year
ended November 30, 2001, conditioned on the Company satisfying
the minimum funding requirements for the plan years ending
November 30, 2002 and November 30, 2003. The Company had
notified the Pension Benefit Guarantee Corporation that the
Company intended to make the $1,262,000 contribution for the
plan year ending November 30, 2002 by the final due date of
August 15, 2003, instead of on a quarterly basis. During the
first quarter of 2003, the Company requested a partial funding
waiver from the Internal Revenue Service for $1,030,000 of the
$1,262,000 payment due for the plan year ending November 30,
2002.
The Company's financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of
business. The negative working capital position of $3,600,000,
the funding requirement for the defined benefit plan of
$1,262,000 for the plan year ending November 30, 2002, the lack
of sales growth, and the overall risks associated with the
fiscal 2003 plan may indicate that the Company will be unable to
continue as a going concern for a reasonable period of time.
PRINCETON VIDEO: Files for Chapter 11 Protection in New Jersey
--------------------------------------------------------------
Princeton Video Image, Inc. (OTCBB: PVII) has filed a voluntary
petition for relief under Chapter 11 of the U.S. Bankruptcy
Code.
PVI has entered into an agreement with PVI Virtual Media
Services, LLC, a newly formed entity owned by PVI's two secured
creditors and largest stockholders, that, subject to Bankruptcy
Court approval, will provide PVI with interim financing to fund
post-petition operating expenses. PVI expects this debtor-in-
possession financing, if consummated, to allow the delivery of
services to PVI's customers and clients to continue without
interruption during the bankruptcy process.
PVI has also entered into an agreement with PVI Virtual Media
Services, LLC to sell substantially all of its assets to PVI
Virtual Media Services, LLC pursuant to Section 363 of the
Bankruptcy Code, subject to a competitive bidding procedure and
court approval in accordance with bankruptcy law. PVI expects
that if the asset sale is consummated PVI would be liquidated
pursuant to a plan of liquidation which would be subject to the
approval of the bankruptcy court. In the event of a liquidation,
any recovery for shareholders of PVI would be highly unlikely
and would depend on the outcome of the competitive bidding
procedure.
PVI's Chapter 11 filing is for PVI only and does not include
Publicidad Virtual, PVI's Mexican subsidiary, or any of its
other subsidiaries, all of which will continue to provide
services and operate in the ordinary course of business. During
the bankruptcy process, PVI expects that the debtor-in-
possession financing, if consummated, will allow it to continue
to provide services and operate in the ordinary course of
business as well.
Princeton Video Image, Inc., provides real-time virtual
advertising, programming enhancements, virtual product
integration and targeted interactive services for televised
sports and entertainment events. PVI services the advertising
industry with its proprietary, Emmy award-winning technology.
Headquartered in New York City and Lawrenceville, New Jersey,
PVI has offices in Los Angeles, Toronto, Tel Aviv, and Mexico
City.
PRINCETON VIDEO: Case Summary & 20 Largest Unsecured Creditors
-----------------------------------------------------------
Debtor: Princeton Video Image, Inc.
15 Princess Road
Lawrenceville, New Jersey 08648
Bankruptcy Case No.: 03-27973
Type of Business: The Debtor is a leading developer of virtual
image technology that enables the insertion
of computer-generated images into live or
pre-recorded video broadcasts.
Chapter 11 Petition Date: May 29, 2003
Court: District of New Jersey (Trenton)
Judge: Kathryn C. Ferguson
Debtor's Counsel: Hal L. Baume, Esq.
Teresa M. Dorr, Esq.
Fox Rothschild LLP
Princeton Pike Corporate Center
997 Lenox Drive, Building 3
Lawrenceville, New Jersey 08648-2311
Tel: (609) 896-3600
Total Assets: $7,245,504
Total Debts: $13,678,161
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Sarnoff Corporation $800,000
CN 5300
Princeton, NJ 08540
NFLI $750,000
330 Fellowship Road
Mount Laurel, NJ 08054
Smith, Stratton, Wise $234,235
Denny Wilkinson $143,717
Lon Rosen $112,500
GE Royalties $96,803
Southern Progress Corporation $92,673
Chubb Group of Insurance Co's $91,216
Evertz Microsystems Ltd. $82,513
Larry Epstein $82,500
PriceWaterhouse Coopers Tax Services $66,404
Kramer Levin Naftalis $63,773
McLarty Management Co., Inc. $62,500
NFL Films, Inc. $53,512
Fried Frank Harris Shriver $51,479
Edelman Public Relations $43,887
United Healthcare $38,993
NASDAQ Stock Market Inc. $32,069
Woodbridge & Associates $24,900
First Industrial, L.P. $23,117
RECIPROCAL OF AMERICA: Liquidation Hearing Set for June 19, 2003
----------------------------------------------------------------
On January 29, 2003, the Circuit Court of the City of Richmond,
Virginia, issued its Final Order appointing Receivers for
Rehabilitation or Liquidation for Debtors Reciprocal of America
and The Reciprocal Group.
Appointed were the Commission of the Commonwealth of Virginia as
Receiver, Alfred W. Gross, the Commissioner of the Bureau of
Insurance, as Deputy Receiver, and Melvin J. Dillon as Special
Deputy Receiver of the Companies, in accordance with Title 38.2,
Chapter 12 and 15 of the Virginia Code.
The Commission has scheduled a hearing of the Debtors'
Application for Liquidation on June 19, 2003, at 10:00 a.m., to
convene at State Corporation Commission, Tyler Building, 2nd
Floor, 1300 East Main Street, Richmond, Virginia.
Any party opposed to a finding of insolvency, Order of
Liquidation, continuation of the Disability Payments to the
cancellation of the direct insurance policies of ROA must
present their objections on the hearing. Complete Statement of
Opposition copies must be sent to the Deputy Receiver, Alfred W.
Gross, and Counsel for the Deputy Receiver, Patrick H. Cantilo,
no later than 10 days before the hearing, at:
4200 Innslake Drive,
Glen Allen, Virginia 23060,
Fifteen copies must also be submitted to Clerk of the
Commission, addressed to:
State Corporation Commission
1300 East Main Street
P.O. Box 1197
Richmond, Virginia 23218;
Reciprocal of America, in Receivership, is a reciprocal
insurance company, providing professional, workers' compensation
and other liability coverage for health systems, hospitals,
health professionals, managed care organizations and other
health care providers.
RITE AID: Completes New $1.85BB Senior Secured Credit Facility
--------------------------------------------------------------
Rite Aid Corporation (NYSE, PCX:RAD) has completed a new $1.85
billion senior secured credit facility. The facility consists of
a $1.15 billion term loan and a $700 million revolving credit
facility that will mature in April 2008.
The proceeds of the new facility will be used to repay the
company's existing $968.6 million senior secured credit facility
due March 2005 and its $107 million synthetic lease due March
2005 and to replace the company's existing $407.5 million
revolving credit facility.
The new $700 million revolving credit facility, which was not
drawn down at closing other than to support letters of credit,
is $150 million less than previously announced as a result of
the company's recently completed $150 million offering of 9.25%
Senior Notes due 2013.
"The refinancing of our credit agreement is another positive
development for Rite Aid," said Bob Miller, Rite Aid chairman
and chief executive officer. "The new facility gives us greater
flexibility to operate our business because it extends the
maturity of a significant portion of our debt by an additional
three years and provides more capital to retire shorter
maturities and invest in our business. The fact that we were
able to complete the refinancing so far ahead of schedule is a
tribute to the improvement we continue to make in our operating
results."
Rite Aid Corporation is one of the nation's leading drugstore
chains with annual revenues of nearly $16 billion and
approximately 3,400 stores in 28 states and the District of
Columbia. Information about Rite Aid, including corporate
background and press releases, is available through the
company's Web site at http://www.riteaid.com
As reported in Troubled Company Reporter's April 25, 2003
edition, Standard & Poor's Ratings Services raised the corporate
credit rating on Rite Aid Corp. and Rite Aid Lease Management
Co. to 'B+' from 'B', and the ratings on the senior secured
second-lien notes to 'B+' from 'B-'.
At the same time, Standard & Poor's assigned its 'BB' rating to
Rite Aid's pending $2.0 billion senior secured credit facility,
which matures in 2008. Concurrently, Standard & Poor's affirmed
its 'B-' rating on senior unsecured notes and its 'CCC+' rating
on Rite Aid's preferred stock. All ratings were removed from
CreditWatch where they were placed April 14, 2003. The outlook
is stable. The Camp Hill, Pennsylvania-based company has $3.8
billion of funded debt as of March 1, 2003.
SEQUA CORP: Adequate Liquidity Spurs S&P to Affirm BB- Rating
-------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings,
including the 'BB-' corporate credit rating, on Sequa Corp. All
ratings are removed from CreditWatch, where they were placed on
March 18, 2003. The outlook is negative. Rated debt is about
$700 million.
At the same time, Standard & Poor's assigned its 'BB-' rating to
Sequa's proposed $100 million 8-7/8% senior unsecured notes due
2008 offered under Rule 144A with registration rights, with
proceeds to be used for general corporate purposes.
"The affirmation is based on Sequa's adequate liquidity and
expectations that the company's financial profile will gradually
improve in the intermediate term to a level appropriate for the
rating," said Standard & Poor's credit analyst Roman Szuper.
The ratings for New York, New York-based Sequa reflect subpar
credit protection measures, stemming from low profitability and
fairly high debt levels, and exposure to the ailing airline
industry. Those factors are partly offset by the firm's adequate
liquidity and major positions in several niche markets.
The largest unit, Chromalloy Gas Turbine, accounting for about
40% of revenues and 48% of total operating income in 2002, is a
leading independent supplier in the repair and remanufacture of
blades, vanes, and other components of gas turbine engines,
particularly those used on commercial aircraft. Meaningful
business diversity is provided by Sequa's nonaerospace
operations that include coating systems for steel and aluminum
coils used in industrial construction, specialty chemicals
(detergent additives), equipment for the paper printing
industry, airbag inflators for car manufacturers, and can
machinery. Certain of those operations are cyclical and their
contribution to earnings has been mixed in recent years.
The Sept. 11, 2001, events, a soft global economy, the lingering
effects of the Iraq war, and the recent outbreak of severe acute
respiratory syndrome have resulted in a material decline in air
travel and massive losses at many airlines, especially in the
U.S. Those developments have had serious adverse consequences
for aerospace suppliers, such as Chromalloy, which provides
products and services primarily to the airline industry. Demand
for engine repair and overhaul has also declined due to fewer
jetliners in service, fewer hours flown, and an increase in
parked planes. Challenging industry conditions are likely to
continue in the intermediate term, and the prospects for a
recovery remain uncertain. Moreover, the sluggish economy has
had an adverse impact on Sequa's nonaerospace businesses.
In response, Sequa has undertaken several restructuring actions
and other initiatives that reduced costs, improved working
capital management, and increased productivity and efficiency.
While those efforts have helped the firm to stabilize
performance, difficult conditions in most markets will limit the
degree of improvement.
A difficult operating environment, coupled with a fairly heavy
debt burden, will challenge management to improve subpar credit
protection measures to a level consistent with current
expectations. Failure to do so could lead to a downgrade.
SOYO GROUP: Needs to Improve Liquidity to Continue Operations
-------------------------------------------------------------
Effective October 24, 2002, Vermont Witch Hazel Company, Inc., a
Nevada corporation, acquired Soyo, Inc., a Nevada corporation,
from Soyo Computer, Inc., a Taiwan corporation, in exchange for
the issuance of 1,000,000 shares of convertible preferred stock
and 28,182,750 shares of common stock, and changed its name to
Soyo Group, Inc. The 1,000,000 shares of preferred stock were
issued to Soyo Taiwan and the 28,182,750 shares of common stock
were issued to certain members of Soyo Nevada management.
Subsequent to this transaction, Soyo Taiwan maintained an equity
interest in Soyo, continues to be the primary supplier of
inventory to Soyo, and was owed $24,803,935 at December 31,
2002. In addition, there was no change in the management of
Soyo and no new capital invested, and there is a continuing
family relationship between certain members of the management of
Soyo and Soyo Taiwan. As a result, this transaction was
accounted for as a recapitalization of Soyo Nevada, pursuant to
which the accounting basis of Soyo Nevada continued unchanged
subsequent to the transaction date. Accordingly, the pre-
transaction financial statements of Soyo Nevada are now the
historical financial statements of the Company.
In conjunction with this transaction, Soyo Nevada transferred
$12,000,000 of accounts payable to Soyo Taiwan to long-term
payable, without interest, due December 31, 2005.
Soyo Taiwan also agreed to continue to provide computer parts
and components to Soyo on an open account basis at the
quantities required and on a timely basis to enable Soyo to
continue to conduct its business operations at budgeted 2003
levels, which is not less than a level consistent with the
operations of Soyo Nevada's business in 2001 and 2000. This
supply commitment is effective through December 31, 2005.
The Company sells computer components and peripherals to
distributors and retailers primarily in North, Central and
South America, and Taiwan. The Company operates in one business
segment. A substantial majority of the Company's products are
purchased from Soyo Taiwan pursuant to an exclusive distribution
agreement effective through December 31, 2005, and are sold
under the "Soyo" brand.
Soyo Nevada was a wholly-owned subsidiary of Soyo Taiwan during
the years ended December 31, 2000 and 2001, and the period from
January 1, 2002 through October 24, 2002.
The Company sells to both distributors and retailers. Sales to
distributors were $1,870,020 (19.5%) during the three months
ended March 31, 2003, as compared to $2,673,747 (17.4%) for the
three months ended March 31, 2002. Sales to retailers were
$7,714,366 (80.5%) during the three months ended March 31, 2003,
as compared to $12,664,937 (82.6%) for the three months ended
March 31, 2002.
During the three months ended March 31, 2003, the Company had
two customers that accounted for revenues of $2,871,751 and
$1,286,767, equivalent to 30.0% and 13.4% of net revenues,
respectively. During the three months ended March 31, 2002,
the Company had one customer that accounted for revenue of
$4,182,334, equivalent to 27% of net revenues.
During the three months ended March 31, 2003, revenues from
North America, and Central and South America were $8,437,361
(88.0%) and $1,147,025 (12.0%), respectively. During the three
months ended March 31, 2002, revenues from North America,
Central and South America, Taiwan and Other were $14,058,770
(91.7%), $1,047,841 (6.8%), $212,500 (1.4%) and $19,573 (0.1%),
respectively.
Financial Outlook
During the years ended December 31, 2000 and 2001, the Company
generated sales in excess of $62,000,000 in each such year, with
gross margins ranging from 5% to 7%. The Company incurred a net
loss and a negative cash flow from operations in each such year.
During the year ended December 31, 2002, the Company had sales
of $49,664,417, a negative net margin of $4,003,972, and a net
loss of $10,733,459. Operations during 2002 indicated a
developing negative trend, with a negative gross margin and an
increasing net loss. During the three months ended December 31,
2002, the Company experienced extreme pressures on its sales and
gross margin as a result of the effect of the West Coast dock
strike in September and October 2002. The impact of the initial
supply interruption, combined with the abrupt release of large
amounts of inventory, caused a short-term price war in November
and December 2002. This price war resulted in the Company
having to sell inventory at below cost. The price war abated
during January 2003, and the Company's gross margin has returned
to more normal levels.
As of March 31, 2003 and December 31, 2002, the Company was
reliant upon the cash flows from its operations. The Company
does not have any external sources of liquidity, other than
advances from an officer, director and major shareholder. To
the extent that the Company's operations or liquidity does not
improve, the Company may be forced to reduce operations to a
level consistent with its available working capital resources.
The Company may also have to consider a formal or informal
restructuring or reorganization.
As a result of these factors, as of December 31, 2002, the
Company's independent accountants expressed substantial doubt
about the Company's ability to continue as a going concern.
SPATIALIGHT: Completes $5 Million Private Equity Placement
----------------------------------------------------------
SpatiaLight, Inc. (Nasdaq: HDTV) has completed a private
placement of $5.15 million of SpatiaLight common shares and
warrants to institutional investors and Robert A. Olins, Chief
Executive Officer of the Company. SpatiaLight's Board of
Directors approved the private placement transaction in order to
enhance the Company's liquid capital resources, thereby giving
it a stronger financial platform to expand its business of
manufacturing and selling its proprietary SpatiaLight
imagEngine(TM) LCoS microdisplays and other microdisplay
products.
Mr. Olins stated, "This investment will provide SpatiaLight with
additional working capital to meet manufacturing demand from the
Company's recent agreement with Skyworth Display and prospective
agreements with other customers. My confidence in the future of
LCoS technology and SpatiaLight's proprietary imagEngine(TM)
LCoS microdisplays has prompted me to invest $2.5 million in
this private placement upon the same terms and conditions as the
institutional investors. I believe that this new institutional
sponsorship reflects confidence in the development of the
Company and in its transition from end-stage product testing to
production ramp-up and full-scale manufacturing."
Under the terms of the private placement agreement, SpatiaLight
has sold 2,798,913 shares of its restricted common shares at a
price of $1.84 per share, equal to a 20% discount to the
trailing 30-day average closing price of SpatiaLight's common
shares through May 13, 2003. In conjunction with the financing,
the investors will also receive 699,728 warrants to purchase
SpatiaLight common shares at an exercise price of $2.65 per
share, equal to a 15% premium to the foregoing 30-day average
closing price of the shares. Capstone Investments acted as
placement agent for the Company with respect to the
institutional investors in this transaction.
SpatiaLight, Inc. is a manufacturer of state-of-the-art liquid
crystal on silicon microdisplay devices for use in rear
projection monitors and High Definition televisions. The
Company's proprietary SpatiaLight imagEngine(TM) LCoS
microdisplays represent a solution for OEMs of large-screen rear
projection monitors, home theater projection systems, video
projectors, and other display applications. SpatiaLight is
committed to developing microdisplay technologies that will
become the standard for the next generation of rear projection
display devices and to providing OEMs with the most cost
effective, high resolution microdisplays in the industry. For
more information about SpatiaLight, see the Company Web site:
http://www.spatialight.com
SpatiaLight Inc.'s March 31, 2003 balance sheet shows a working
capital deficit of about $6 million, and a total shareholders'
equity deficit of about $5 million.
SPECTRASITE: Taps Daniel Wojciechowski as VP Network Operations
---------------------------------------------------------------
SpectraSite Communications, Inc., a subsidiary of SpectraSite
Inc., (Ticker Symbol: SPCS) announced the addition of a new Vice
President of Network Operations, Daniel Wojciechowski, who will
lead the design, deployment, and network optimization of
SpectraSite's in-building distributed antenna installations. He
will report directly to Dale Carey, President of SpectraSite
Leasing.
"Dan is a critical addition to the SpectraSite team, as we
continue to leverage our assets in the in-building arena," said
Carey. "We have over 20 distributed antenna systems up and
running, with exclusive agreements to build hundreds more over
the next five years. Dan has a great deal of experience in
wireless network engineering and implementation. I am confident
that his leadership in system design, deployment and
optimization will have a tremendous impact on the success of our
in-building program moving forward."
Wojciechowski is a ten-year industry veteran. From 1995 to 2001,
he served as the Director of Engineering and Network Operations
for Alltel Communications Southern Region, responsible for
engineering, network operations and planning, advanced
technology and in-building applications.
Dan also provided leadership to Crown Castle International and
SiteSafe as their Vice President of Network Engineering. His
primary responsibility was managing and directing wireless
engineering and operations, overseeing all aspects of wireless
network design, research, and planning activities. Prior to his
tenure at Alltel and Crown Castle, Dan worked at Trident Data
Systems, General Dynamics and Northrop Corporation in various
management and RF Engineering roles.
Wojciechowski will work closely with Ted Abrams, SpectraSite's
Vice President of Technology, on the design and implementation
of in-building systems.
"With Ted and Dan, we have a leading technologist and a top
engineer on our team," Carey added. "We have the premier
portfolio of sites for in-building wireless, dedicated
leadership, and a full staff of experienced professionals
working to carry out our business plan."
Wojciechowski earned his Bachelor of Science degree in
Electrical Engineering at Texas A&M University and his Master of
Science degree in Engineering Management at the University of
Southern California in Los Angeles, California.
SpectraSite, Inc. -- http://www.spectrasite.com-- (Ticker
symbol: SPCS) based in Cary, North Carolina, is one of the
largest wireless tower operators in the United States. At March
31, 2003, SpectraSite owned or operated over 18,000 sites,
including 7,488 towers primarily in the top 100 markets in the
United States. SpectraSite's customers are leading wireless
communications providers and broadcasters, including AT&T
Wireless, ABC Television, Cingular, Nextel, Paxson
Communications, Sprint PCS, Verizon Wireless and T-Mobile.
As reported in Troubled Company Reporter's May 15, 2003 edition,
Standard & Poor's Ratings Services assigned its 'CCC+' senior
unsecured rating to Cary, North Carolina-based tower operator
SpectraSite Inc.'s $150 million senior notes due 2010, to be
issued under Rule 144A, with registration rights. Proceeds will
be used to repay a portion of the company's secured bank
debt.
At the same time, Standard & Poor's affirmed its 'B' corporate
credit rating on SpectraSite and its 'B+' secured bank loan
rating on wholly owned operating subsidiary SpectraSite
Communications Inc. As of March 31, 2003, the company had about
$707 million of total debt outstanding. The outlook is stable.
"The unsecured debt issue is two notches lower than the
corporate credit rating, reflecting the significant
concentration of secured bank debt in the capital structure, at
approximately $560 million, pro forma for pay-down, with
proceeds from this new unsecured debt issue," said credit
analyst Catherine Cosentino.
The 'B' corporate credit rating reflects the lower relative debt
levels of SpectraSite compared with its rated peers after its
emergence from bankruptcy. As a result, all of the other tower
operators are rated 'B-' or lower. A favorable risk factor is
that wireless companies may have few feasible alternatives to
using SpectraSite's towers: existing tenants might choose to
build their own towers (an expensive undertaking), or lease from
another company, but both could involve major system
reengineering.
SYBRON DENTAL: Inks Agreement to Acquire Spofa Dental a.s.
----------------------------------------------------------
Sybron Dental Specialties, Inc. (NYSE: SYD), a leading
manufacturer of value-added products for the dental and
orthodontic professions and products for use in infection
prevention, announced that its subsidiary Kerr Corporation,
through one of Kerr's subsidiaries, entered into an agreement to
acquire Spofa Dental a.s., a leading manufacturer of consumable
dental supplies in Central and Eastern Europe. The acquisition
is subject to approval by the Czech Republic's Office for the
Protection of Competition. For the calendar year 2002, Spofa
generated between $10 and $15 million in sales.
Spofa offers a broad range of consumable and non-metallic
products to dentists and dental technicians, with a particular
focus on impression materials, filling materials, and artificial
teeth. It has captured more than 30% of the market in the Czech
Republic, Bulgaria and Slovakia, and has a strong presence in
Ukraine, Romania, Poland, Russia, and Hungary.
"Spofa Dental represents an important strategic acquisition for
Sybron that will provide the Company with an expanded presence
in key Central and Eastern European markets," said Floyd W.
Pickrell, Jr., Chief Executive Officer of Sybron Dental
Specialties. "Spofa's well established sales organization and
reputation will enable Sybron to immediately penetrate markets
where we currently have only a minor presence, and provides a
strong foundation for future growth."
Sybron will finance the acquisition through its existing cash on
its balance sheet. The Company expects the acquisition to be
accretive within the first year of operations.
Key anticipated benefits of this transaction include:
* Addition of a leading brand name and a substantially
increased presence in Central and Eastern European
markets
* An extensive, well established sales organization to
represent Kerr products in these markets
* More efficient distribution for Kerr products in Central
and Eastern Europe, including lower transportation costs
* Opportunities to rationalize manufacturing and make
greater use of lower-cost facilities
* Additional revenue generated in countries with more
favorable tax rates
"Using conservative assumptions for cost savings and revenue
growth, this transaction is expected to generate a rate of
return above our cost of capital and is an excellent use of our
cash," said Mr. Pickrell. "We believe we have a good
opportunity to outperform our conservative assumptions, and over
the long-term, the Central and Eastern European markets will be
an important growth vehicle for the Company."
Spofa Dental is a portfolio company of The Riverside Company,
the New York based private equity firm that has owed Spofa
Dental through its Central European buyout fund since 1998.
Harris Williams & Co. acted as financial advisors to Spofa
Dental. The terms of the transaction have not been disclosed.
Sybron Dental Specialties and its subsidiaries are leading
manufacturers of value-added products for the dental and
orthodontic professions and products for use in infection
control. Sybron Dental Specialties develops, manufactures, and
sells through independent distributors a variety of consumable
general dental and infection prevention products to the dental
industry worldwide. It also develops, manufactures, markets and
distributes an array of consumable orthodontic and endodontic
products worldwide.
* * *
As previously reported, Standard & Poor's assigned a single-'B'
rating to Sybron Dental Specialties Inc.'s $150 million 10-year
senior subordinated notes. Sybron, a leading manufacturer of
professional dental products, plans to use the proceeds from
this offering to repay bank debt and lengthen its maturity
schedule. At the same time, Standard & Poor's assigned a double-
'B'-minus rating to Sybron's $350 million dollar senior secured
credit facility.
TOWER AUTOMOTIVE: Offering $250 Million of Senior Notes Due 2013
----------------------------------------------------------------
Tower Automotive, Inc. (NYSE:TWR) (S&P/BB-/Stable) announced
that, subject to market and other conditions, it intends to
offer an aggregate of approximately $250 million of senior notes
due 2013 though its wholly owned subsidiary, R.J. Tower
Corporation, in an unregistered offering pursuant to Rule 144A
and Regulation S under the Securities Act of 1933. Tower
Automotive intends to use the net proceeds from the offering to
repay amounts outstanding under its senior credit facility, to
pay related fees and expenses and for general corporate
purposes.
The senior notes will not be registered under the Securities Act
of 1933 or the securities laws of any state, and may not be
offered or sold in the United States or outside the United
States absent registration or an applicable exemption from
registration requirements under the Securities Act and any
applicable state securities laws. Tower Automotive intends to
offer to exchange the unregistered senior notes for
substantially identical registered senior notes following the
completion of the offering.
TOWER AUTOMOTIVE: Rating Cut to BB- on Expected Weak Performance
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on Tower Automotive Inc. to 'BB-' from 'BB' on the
expectation that difficult industry conditions will lead to
continued weak operating performance and credit statistics for
the near to intermediate term.
Grand Rapids, Michigan-based Tower is a supplier of automotive
structural components and assemblies and has total debt
(including operating leases and sold accounts receivable) of
about $1.3 billion.
The senior unsecured rating on Tower was lowered by three
notches, to 'B' from 'BB', because of the downgrade of the
corporate credit rating and the substantial amount of priority
liabilities in the company's capital structure, including off-
balance sheet items and the liabilities of non-guarantor
subsidiaries. The outlook is stable.
"Tower's weak operating results are being caused by a decline in
industry demand, with North American automotive production
expected to fall 10% during the second quarter of 2003 compared
with last year, and soft retail sales have persisted, despite
the escalation of manufacturer purchasing incentives," said
credit analyst Martin King. Inventory levels are abnormally
high, which may lead to further production cuts in the second
half of 2003. Tower also is being affected by difficult pricing,
higher program management and launch costs, and production
inefficiencies.
The ratings on Tower reflect its position as a niche supplier of
components to the cyclical and highly competitive automotive
supply industry, and its aggressive financial profile. Tower's
below-average business assessment reflects the risks associated
with the high fixed cost and capital-intensive nature of its
business; ongoing pricing pressure; cyclical demand; and strong,
well positioned competitors, partially offset by the company's
leading position in the fragmented structural components.
New business opportunities, a disciplined growth strategy, and
commitment to debt reduction should result in stronger credit
statistics during the next few years consistent with the
revised rating.
UCFC MANUFAC. HOUSING: Fitch Affirms & Cuts Various Note Classes
----------------------------------------------------------------
As a result of the poor performance of the underlying
collateral, Fitch Ratings downgrades eighteen classes from eight
UCFC Manufactured Housing issues. In addition, Fitch affirms
fifteen classes:
Since UCFC's exit from the manufactured housing business in
October 1998 and the company's subsequent chapter 11 bankruptcy
filing, Fitch has taken numerous rating actions on the company's
manufactured housing bonds. The rating actions reflected the
poor performance of the loans as well as the uncertainty
surrounding the status of the servicing operation due to the
bankruptcy.
In December 2000, EMC Mortgage Corp acquired the servicing
rights for UCFC's manufactured housing portfolio. Due to the
difficult environment in the manufactured housing industry, loss
severities continue to be high.
The poor performance has caused significant interest shortfalls
to both the non-investment grade as well as the investment grade
bonds. Fitch's rating actions reflect the poor performance,
particularly with regard to the magnitude of interest
shortfalls.
Series 1996-1:
-- Classes A-4 - A-6 affirmed at 'AAA';
-- Class M downgraded to 'BB-' from 'BBB-' and removed from
Rating Watch Negative;
-- Class B-1 downgraded to 'CC' from 'B'.
Series 1997-1:
-- Class A-4 affirmed at 'AAA';
-- Class M downgraded to 'B-' from 'BB-' and removed from Rating
Watch Negative;
-- Class B-1 downgraded to 'D' from 'CCC'.
Series 1997-2:
-- Class A-4 affirmed at 'AAA';
-- Class M downgraded to 'B-' from 'BB-' and removed from Rating
Watch Negative;
-- Class B-1 downgraded to 'CC' from 'CCC'.
Series 1997-3:
-- Classes A-3 & A-4 affirmed at 'AAA';
-- Class M downgraded to 'BB-' from 'BBB-' and removed from
Rating Watch Negative;
-- Class B-1 downgraded to 'C' from 'CCC'.
Series 1997-4:
-- Classes A-3 & A-4 affirmed at 'AAA';
-- Class M downgraded to 'BBB-' from 'A-' and removed from
Rating Watch Negative;
-- Class B-1 downgraded to 'CC' from 'CCC'.
Series 1998-1:
-- Classes A-2 & A-3 affirmed at 'AAA';
-- Class M downgraded to 'B-' from 'BB-' and removed from Rating
Watch Negative;
-- Class B-1 downgraded to 'CC' from 'CCC'.
Series 1998-2:
-- Classes A-2 - A-4 affirmed at 'AAA';
-- Class M-1 downgraded to 'A-' from 'AA-';
-- Class M-2 downgraded to 'BBB-' from 'A';
-- Class B-1 downgraded to 'B-' from 'BBB' and removed from
Rating Watch Negative;
Series 1998-3:
-- Class A-1 affirmed at 'AAA';
-- Class M-1 downgraded to 'A' from 'AA';
-- Class M-2 downgraded to 'BBB-' from 'A';
-- Class B-1 downgraded to 'B-' from 'BBB';
Fitch will continue to monitor the performance of the collateral
pools backing the securities as well as the status of the
servicing platform.
UNIDIGITAL: Debtor Excused from Appearing at Creditors' Meeting
---------------------------------------------------------------
Judge Walrath rules that the requirement that the debtor, or its
principal officer in this case, appear at a formal meeting of
creditors is waived in Unidigital, Inc., and its seven debtor-
affiliates' chapter 7 cases.
Unidigital, Inc., and its seven affiliates filed for chapter 11
protection on September 29, 2000. On April 5, 2001, the U.S.
Bankruptcy Court for the District of Delaware converted those
cases to liquidation proceedings under chapter 7 of the U.S.
Bankruptcy Code. Montague S. Claybrook serves as the Chapter 7
Trustee to wind-up Unidigital's affairs.
Mr. Claybrook's hit a roadblock. The United States Trustee is
required to convene a meeting of a debtor's creditors pursuant
to 11 U.S.C. Sec. 341(a) and 11 U.S.C. Sec. 343 requires the
debtor to appear at that meeting. The U.S. Trustee convened a
meeting on June 6, 2001. The Debtor didn't appear. Mr. Ehud
Aloni, Unidigital's founder and Chairman, the Trustee
understands, was not in the United States in June 2001, hasn't
returned, and isn't planning on coming back. There are no other
corporate representatives with the capacity to testify at a Sec.
341 Meeting.
To solve this problem, Jason W. Staib, Esq., at Blank Rome LLP,
representing the Trustee, urged Judge Walrath to waive the
requirement that the Debtor appear at a Sec. 341 Meeting in
Unidigital's cases.
Unidigital, Inc. (AMEX:UDG) (Bankr. Del. Case No. 00-03806), was
a major, multinational, media services company, listing $143.2
million in assets and debts of $222.7 million in its chapter 11
petition which included $77.6 million in secured debt and $21.6
million in unsecured debt.
UNITED AIRLINES: April 2003 Net Loss Stands at $375 Million
-----------------------------------------------------------
UAL Corporation (OTC Bulletin Board: UALAQ), the holding company
whose primary subsidiary is United Airlines, filed its April
Monthly Operating Report with the United States Bankruptcy
Court, and said that it met the third monthly requirement of its
debtor-in-possession financing. As part of its DIP financing
agreements, United's lenders required the company to achieve a
cumulative EBITDAR (earnings before interest, taxes,
depreciation, amortization and aircraft rent) loss of no more
than $849 million between December 1, 2002 and April 30, 2003.
The company reported a loss from operations of $297 million and
a net loss of $375 million for April. The revenue environment
for the entire airline industry was very difficult during the
month, due to the full impact of the war in Iraq and the fear of
SARS in Asia.
UAL improved its cash position for the month and reported an
increase in cash of approximately $150 million for April, ending
the month with a cash balance of approximately $1.7 billion,
which included $651 million in restricted cash (filing entities
only). During the month of April, the company made a $64 million
quarterly retroactive wage payment, including taxes and
interest, to employees who are members of the International
Association of Machinists and Aerospace Workers union. The
company also received a $365 million tax refund from the
Internal Revenue Service. UAL began April with a cash balance of
approximately $1.6 billion, which included $633 million in
restricted cash (filing entities only). Excluding the tax refund
and the quarterly IAM retro payment, the company's cash balance
decreased approximately $150 million for the month.
United's Executive Vice President and Chief Financial Officer
Jake Brace said, "April marked the high point of the Iraq War
and SARS impacts on revenue. Our cash burn was significantly
higher in April as compared with March. We are pleased that our
cash receipts have now returned to pre-war levels. We have
stayed on track with our efforts to reduce our cost structure
significantly and we continue to move our business forward.
Early planning for the effects of the war in Iraq and our new
flexibility to respond to market shifts helped us to meet our
cumulative EBITDAR requirements and maintain a healthy cash
position. We are confident at this point that we will also meet
our EBITDAR requirements for May."
Brace continued: "We are pleased to have recently announced the
resumption in June of 162 flights and are encouraged by bookings
for the summer months. However, the revenue environment
continues to be challenging."
In May, the company announced the appointment of John Tague as
executive vice-president-Customer, and the company plans to
dedicate significant resources to re-engaging its core customer
base.
Tague said, "The company has made enormous progress in
restructuring its costs. Looking forward, United is now turning
its full attention toward revenue enhancement. The company is
currently finalizing aggressive and focused plans across all of
its revenue disciplines so that we can fully address visible
opportunities for improvement through refining and investing in
our marketing and revenue management strategy."
United's operations continued to demonstrate strong on-time
performance, as well as improvements in customer service and
satisfaction. In addition, United is continuing to demonstrate
its commitment to investing in customers through a number of
recently announced enhancements to the travel experience,
including the introduction of online Web check-in (EasyCheck-in
Online) for customers, the accelerated introduction of
EasyCheck-in self-service kiosks, and the reconfiguration of our
remaining 777 aircraft to deploy Economy Plus seating, and to
increase leg room and increase seat recline in Business Class.
United is also introducing JetConnect technology, so passengers
can send and receive email from the plane.
United operates more than 1,550 flights a day on a route network
that spans the globe. News releases and other information about
United may be found at the company's Web site at
http://www.united.com
UNITED AIRLINES: 1994-A Jets Administrative Cost Payment Sought
---------------------------------------------------------------
The 1994-A Jets Transaction financed seven aircraft in United's
fleet. A Trust was established on April 19, 1995, which issued
Notes that were purchased by investors. The assets of the Trust
consisted of loan certificates issued by United Obligation
Trusts and U.S. Bank as Trustee. United entered into separate
lease agreements with the owner trusts. The leases and rights
to payment were assigned to the U.O. Trusts, which were further
assigned to the JETS Trustee to provide funds to pay the
principal and interest due on the Notes.
Edward Zujkowski, Esq., at Emmet, Marvin & Martin, tells Judge
Wedoff that United has breached the obligations under the 1994-A
JETS Transaction that they elected to perform under Section
1110(a). Therefore, the Bank of New York and U.S. Bank,
pursuant to the Jet Equipment Trust Series 1994-A Senior Notes
Indenture and the Collateral Agency Agreement, ask Judge Wedoff
to compel United to pay $15,400,000 in administrative expenses
now due.
The Debtors were required by the Aircraft Financing Documents to
make scheduled payments to the JETS Trustee by March 26, 2003,
or be in default. The Debtors did not make this payment but
continue to use the Aircraft.
According to Mr. Zujkowski, the Debtors entered into a Section
1110 Agreement with the Aircraft Financiers without any
intention of making the attendant payments. The Debtors are
doing their best to prevent the Financiers from exercising
remedies and now default that payments are due. "This abuse of
the 1110(a) Election is unprecedented under the law," Mr.
Zujkowski says.
The affected Aircraft and the amounts due are:
Tail Number Amount Due
----------- ----------
N177UA $0
N181UA 8,033,795
N389UA 1,549,509
N390UA 1,549,509
N391UA 1,420,451
N392UA 1,420,451
N393UA 1,420,451
(United Airlines Bankruptcy News, Issue No. 19; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
VENTAS INC: Will Present at NAREIT Investors Forum on Wednesday
---------------------------------------------------------------
Ventas, Inc. (NYSE:VTR) announced that Chairman, President and
Chief Executive Officer Debra A. Cafaro and Senior Vice
President and Chief Financial Officer Richard A. Schweinhart
will make a presentation regarding the Company at the National
Association of Real Estate Investment Trusts (NAREIT) 2003
Institutional Investor Forum in New York City on Wednesday,
June 4, 2003 at 10:30 a.m. Eastern Time.
The presentation is being audio webcast and can be accessed at
the Ventas Web site at http://www.ventasreit.comor at
http://www.companyboardroom.com Any written materials
accompanying the presentation will also be available on Ventas's
website at the time of the presentation. The webcast and any
written materials accompanying the presentation will be archived
at www.ventasreit.com for 30 days after the event.
Ventas, Inc. is a healthcare real estate investment trust that
owns 44 hospitals, 220 nursing facilities and nine other
healthcare and senior housing facilities in 37 states. The
Company also has investments in 25 additional healthcare and
senior housing facilities. More information about Ventas can be
found on its Web site at http://www.ventasreit.com
As previously reported, Standard & Poor's affirmed Ventas Inc.'s
corporate credit ratings at BB-. At March 31, 2003, the
Company's balance sheet shows a total shareholders' equity
deficit of about $43 million.
WEIRTON STEEL: Wins OK to Honor Prepetition Employee Obligations
----------------------------------------------------------------
Arch W. Riley, Jr., Esq., at Bailey, Riley, Buch & Harman, L.C.,
in Wheeling, West Virginia, informs the Court that Weirton Steel
Corporation's workforce includes 3,523 hourly and salaried
employees who work either full-time or part-time. Weirton also
utilizes the services of 52 or more independent contractors in
various administrative roles. The continued and uninterrupted
service of the Employees and Independent Contractors is
essential to Weirton's ongoing operations and its ability to
reorganize.
As of the Petition Date, many of the Employees and Independent
Contractors were owed or had accrued various sums for ordinary
course wages and salaries, healthcare and life insurance and
other benefits in accordance with the Weirton Benefit Programs,
as well as expenses incurred for Weirton's benefit on a
prepetition basis, including but not limited to American Express
expenses guaranteed by individual Employees. In addition, as of
the Petition Date, Weirton had obligations in respect of
Prepetition Compensation for deductions from Employees' pay used
to make payments on the Employees' behalf for or with respect
to:
1. 401 (k) savings programs, other savings plans, benefit
plans, insurance programs, union dues, charitable
contributions, employee credit union deposits, personal
insurance, United States savings bonds, garnishments or
support payments and other similar programs on account of
which Weirton deducts a sum of money from an Employee's
paycheck and pays that amount to a third party; and
2. withholdings from Employees' paychecks on account of
various federal, state and local income, FICA, Medicare
and other taxes for remittance to the appropriate
federal, state or local taxing authority.
According to Mr. Riley, the Prepetition Compensation,
Prepetition Benefits, Prepetition Business Expenses, Deductions
and Withholdings were due and owing as of the Petition Date
because, among other things:
1. Weirton filed its Chapter 11 petition in the midst of its
regular and customary payroll periods, as well as in the
midst of its regular reimbursement cycle for Employee and
Independent Contractor business expenses;
2. certain checks issued by Weirton to the Employees and
Independent Contractors prior to the Petition Date have
not yet been presented for payment or have not yet
cleared the banking system and, accordingly, were not
honored and paid as of the Petition Date;
3. the Employees or Independent Contractors have not yet
been paid certain of their salaries, contractual
compensation, commissions and wages for services
previously rendered to Weirton or have not yet been
reimbursed for business expenses previously advanced on
behalf of Weirton; and
4. certain other forms of compensation related to
prepetition services have not yet been paid to or for the
benefit of Employees because the amounts, although
accrued either in whole or in part prior to the Petition
Date, were not payable at the time, but rather will
become payable in the future in the ordinary course of
Weirton's business.
Accordingly, Weirton seeks the Court's authority, in its sole
discretion, to pay all:
1. Prepetition Compensation;
2. Prepetition Business Expenses;
3. Deductions; and
4. Withholdings attributable to the period prior to the
Petition Date.
Weirton estimates that, as of the Petition Date, $22,279,6351 in
Prepetition Compensation, $75,000 in Prepetition Business
Expenses and $906,280 in Deductions had accrued but remained
unpaid. In addition, Weirton estimates that the amount of
Withholdings attributable to compensation earned prior to the
Petition Date, but not yet been remitted to the applicable
taxing authorities is $1,587,581.
Due to the nature and magnitude of its business activities, Mr.
Riley states that Weirton has a significant number of employee
benefit programs, including, inter alia, health, dental, drug,
vision, life insurance, various forms of disability insurance,
and other similar programs. Weirton is also the sponsor of a
401(k) savings plan and a pension plan. With respect to the
401(k) savings plan, Weirton has no matching obligation. With
respect to the pension plan, in which hourly and salaried
employees participate, Weirton has obtained a forbearance of
statutory contributions by the Internal Revenue Service for the
calendar year 2002 and the first quarterly payment for the 2003
calendar year.
In addition to the Weirton Benefit Programs, Weirton was also
contractually obligated, on a prepetition basis, to pay certain
other benefits to Weirton retirees, including, inter alia,
various forms of health and pharmacy coverage as well as life
insurance coverage. As of the Petition Date, $9,100,467 in
these Benefits were owed but remained unpaid because certain
obligations under the Weirton Benefit Programs and Retiree
Benefits accrued whether in whole or in part prior to the
Petition Date, but will not become payable in the ordinary
course of Weirton's business until a later postpetition date.
Weirton seeks the Court's authority to pay all Benefits that, as
of the Petition Date, had accrued but remained unpaid. The
Benefits that Weirton seeks to pay include, inter alia, those
owing under these types of Benefit Programs:
A. Self-Insured Welfare Programs: Weirton maintains self-
insured plans that provide general health, prescription
drug, dental, vision, and disability programs. Under the
Self-Insured Plans, Weirton assumes liability for and
pays certain Benefits, rather than paying premiums for
independent insurance coverage. Various third parties
serve as claims agents for, and process and pay, all
medical, dental and prescription drug presented by
covered Employees. These third parties subsequently are
reimbursed for claims paid under the Self-Insured Plans.
Weirton anticipates that various claims that accrued
under the Self-Insured Plans prior to the Petition Date
will continue to be submitted postpetition based on the
historical levels of unfiled claims. Weirton estimates
that, as of the Petition Date, approximately $8,703,672
in prepetition claims under the Self-Insured Plans will
be submitted by Employees postpetition.
B. Third-Party Insured Programs: Weirton also maintains
certain insured benefit plans under which Weirton, the
Employees or both contribute to the payment of premiums
for insurance or other coverage provided by third
parties. The Insured Plans include but are not limited
to:
1. health maintenance organization medical coverage for
retirees;
2. optional retiree major medical coverage;
3. retiree life insurance;
4. life insurance for active Employees;
5. long-term disability insurance; and
6. accidental death and dismemberment coverage for active
Employees.
Based on the historical levels of premiums under the
Insured Plans, Weirton estimates that the aggregate
amount of its accrued but unpaid share of premium
contributions is $380,611 as of the Petition Date.
C. Company-Sponsored Benefit Programs: Weirton also
maintains certain other Benefit Programs under which
Weirton, the Employees or both contribute to the Benefits
provided to Employees. The Non-insured Programs include:
1. tuition reimbursement;
2. wellness programs; and
3. employee assistance programs.
Based on the historical levels of participation in the
Non-insured Programs, Weirton estimates that its accrued
but unpaid obligations under the Non-insured Programs is
$16,184 as of the Petition Date.
Mr. Riley contends that any delay or disruption in the provision
of wages and benefits will destroy Weirton's relationship with
the Employees and the collective bargaining units that represent
Employees as well as Retirees and their dependents. The
Weirton's failure to make these payments would irreparably
impair workforce morale at the very time when the dedication,
confidence and cooperation of these Employees are most critical.
Weirton faces the imminent risk that its operations may be
severely impaired if authority is not immediately granted for
Weirton to make these payments in the ordinary course of its
business.
At this critical early stage of this Chapter 11 proceeding,
Weirton simply cannot risk the substantial disruption to its
business operations that inevitably would occur or any decline
in workforce morale attributable to Weirton's failure to pay
Prepetition Compensation, Prepetition Business Expenses,
Deductions, Withholdings and Benefits in the ordinary course of
its business. Furthermore, bolstering Employee morale will
assist Weirton in maintaining a "business as usual" atmosphere
and, in turn, facilitate Weirton's efforts to emerge from
Chapter 11 without significant delay. To maintain necessary
oversight and quality control and to enable many key Employees
and Independent Contractors to perform their jobs effectively,
Weirton must continue its corporate policy of permitting certain
Employees and Independent Contractors to incur business-related
expenses on Weirton's behalf, and thereafter seek reimbursement
by submitting appropriate invoices or vouchers evidencing the
out-of-pocket disbursements.
Because the amounts represented by Prepetition Compensation,
Prepetition Business Expenses, Deductions, and Benefits are
absolutely essential to enable the Employees, Independent
Contractors and Retirees to meet their own personal obligations,
Mr. Riley is concerned that absent the relief requested, the
Employees, Independent Contractors and Retirees will suffer
undue hardship and, in many instances, serious financial
difficulties. As the second largest private employer in the
State of West Virginia, Weirton's inability to pay Prepetition
Compensation, Prepetition Business Expenses, Deductions,
Withholdings and Benefits would have negative implications for
the entire State of West Virginia.
The amounts owed to Employees, Independent Contractors and
Retirees within these statutory priority amounts must ultimately
be paid to the Employees, Independent Contractors and Retirees
in any event in connection with Weirton's plan of
reorganization. Therefore, the payment of these amounts would
not deplete assets otherwise available to other unsecured
creditors.
In most cases, Mr. Riley relates that the amount of prepetition
wages, salaries and contractual compensation owing to or on
account of any particular Employee, Independent Contractors or
Retiree will not exceed the $4,650 allowable as a priority claim
under Sections 507(a)(3) or 507(a)(4) of the Bankruptcy Code.
Certain of Weirton's Employees, however, likely will have
outstanding prepetition wage and benefit claims exceeding, in
the aggregate, the statutory priority amounts as a result of:
1. Weirton's compensation and benefit structure, which is
dictated in substantial part by collective bargaining
agreements with the Independent Steelworkers Union; and
2. the length of the Weirton's typical payroll cycle.
Nonetheless, to the extent that Weirton may owe an aggregate
amount exceeding $4,650 in combined Prepetition Compensation,
Prepetition Business Expenses and Benefits to or on account of
certain Employees, Weirton should be permitted to pay those
amounts.
Weirton also requests permission, in its sole discretion, to pay
all costs incident to Prepetition Compensation and Deductions,
i.e. processing costs and the employer portion of payroll-
related taxes, as well as accrued but unpaid prepetition charges
for administration of the Benefits. Weirton estimates that the
aggregate amount of Prepetition Processing Costs accrued but
unpaid as of the Petition Date is $300,000.
Mr. Riley insists that the payment of the Prepetition Processing
Costs is justified because the failure to pay any amounts might
disrupt services of third-party providers with respect to
Prepetition Compensation, Deduction and Benefits. By paying the
Prepetition Processing Costs, Weirton will avoid even temporary
disruptions of critical services, thereby ensuring that the
Employees, Independent Contractors and Retirees obtain all
compensation and benefits without interruption.
In addition, program administration charges may be entitled to
priority under Section 507(a)(4) of the Bankruptcy Code.
Amounts paid on account of the Prepetition Processing Costs may
not otherwise be available for distribution to unsecured
creditors.
Weirton further requests that all applicable banks and other
financial institutions be authorized and directed, when
requested by Weirton in its sole discretion, to receive,
process, honor and pay any and all checks drawn on Weirton's
accounts in respect of Prepetition Compensation, Prepetition
Business Expenses, Deductions, Withholdings, Benefits and
Prepetition Processing Costs, whether the checks were presented
prior to or after the Petition Date, provided that sufficient
funds are available in the applicable accounts to make the
payments. These checks are drawn on identifiable payroll and
disbursement accounts and can be readily identified as relating
directly to the authorized payment for Prepetition Compensation,
Prepetition Business Expenses, Deductions, Withholdings,
Benefits and Prepetition Processing Costs. Accordingly, Weirton
submits that checks other than those relating to authorized
payments will not be honored inadvertently.
Convinced by the Debtor's arguments, Judge Friend grants the
request. (Weirton Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WESTAFF: Violates Certain Fin'l Covenants Under Credit Facility
---------------------------------------------------------------
Westaff, Inc. (Nasdaq:WSTF), a leading provider of temporary
light industrial, clerical/administrative and call center staff,
reported financial results for its second fiscal quarter, which
ended April 19, 2003.
Revenues for the second quarter increased from $109.7 million in
fiscal 2002 to $116.4 million in fiscal 2003, an increase of
6.2%. The Company's continued focus on sales and growth
initiatives, coupled with favorable exchange rates, contributed
to the revenue increase. Revenue increased 3.6% for domestic
operations and 19.4% for international operations. Excluding the
effect of exchange rate fluctuations, international revenues
increased 3.8% for the quarter.
"I am pleased with the overall increase in revenues for the
quarter," said Westaff President and CEO Dwight S. Pedersen. "We
are continuing to focus on improving sales and gross margins by
aggressively marketing our Trak products and direct hire
programs and by targeting select national accounts."
Gross margin declined from 18.8% in the second quarter of fiscal
2002 to 17.0% in the second quarter of fiscal 2003. This decline
was due largely to the highly competitive pricing environment
within the temporary staffing industry as well as increased
costs, primarily for workers' compensation, state unemployment
insurance benefits and general liability claims. As a result of
unfavorable trends in claims development, primarily for policy
years 1998 and 1999, the Company recorded $750,000 in additional
charges for workers' compensation and general liability claims
in the second quarter of fiscal 2003.
Selling and administrative expenses for the second quarter of
fiscal 2003 were $17.2 million compared to $16.9 million in the
fiscal 2002 quarter. The increase is due to the higher exchange
rates for international operations noted above. As a percentage
of revenues, selling and administrative expenses were down from
15.4% in the fiscal 2002 quarter to 14.8% in fiscal 2003.
The Company reported an operating loss from continuing
operations of $2.3 million for the second quarter of fiscal
2003. The loss compares to a $1.1 million operating loss from
continuing operations for the corresponding fiscal 2002 quarter.
The fiscal 2003 loss reflects the effects of lower gross margins
and increases in selling and administrative expenses.
"The most recent monthly trends have shown a softening in
economic activity, which is impacting our sales," Pedersen said.
"These trends, coupled with a reduction in sales for some high
volume, low margin government business, are expected to result
in a year over year sales decline for the third quarter of
fiscal 2003.
"In light of the soft economy, we are continuing our efforts to
identify cost reductions where appropriate," he said. "We
recently initiated a restructuring of our field organization
designed to streamline reporting, strengthen our geographic
sales team and reduce costs. We are continuing to closely
monitor field office performance and are closing or
consolidating offices where warranted.
"I am also very pleased to report that we have successfully
completed beta testing of our new proprietary front-office
system, which we fully developed in-house," he added. "The
results from the six beta test offices indicate significant
improvements in productivity, functionality and accuracy in
information processing. We plan to start an aggressive roll-out
of the system in early June and anticipate completing conversion
of well over half of our domestic offices by the end of the
fiscal year."
For the first 24 weeks of 2003, revenues increased $17.6 million
or 8.1% over the same period in fiscal 2002. The Company
reported an operating loss from continuing operations of $2.5
million as compared to an operating loss of $5.4 million for the
first 24 weeks of fiscal 2002. Included in the fiscal 2002 loss
were restructuring charges of $1.9 million.
As a result of the Company's adoption of SFAS No. 142 "Goodwill
and Other Intangible Assets," and in accordance with its
provisions, the Company performed a transitional evaluation for
impairment of its recorded goodwill. The evaluation resulted in
an impairment loss of $670,000 that was identified for the
goodwill associated with the Company's Australian operations.
Pursuant to SFAS No. 142, this transitional impairment charge
was recognized as of the beginning of fiscal 2003 as a
cumulative effect of a change in accounting principle and
resulted in a restatement of the Company's net loss for the
first fiscal quarter ended Jan. 25, 2003. The effect of the
change was to increase the net loss for the quarter by $670,000,
or $0.04 per share.
As of the end of the second quarter of fiscal 2003, the Company
was not in compliance with certain financial covenants within
its revolving credit facility. The Company is currently working
with its lenders on a Second Amendment to its Multicurrency
Credit Agreement to obtain waivers of certain EBITDA covenant
violations, reset financial covenants going forward and increase
borrowing reserves and expects to complete this process
promptly.
Westaff provides staffing services and employment opportunities
for businesses in global markets. Westaff annually employs
approximately 150,000 people and services more than 15,000
clients from 290 offices located throughout the U.S., the United
Kingdom, Australia, New Zealand, Norway and Denmark. For more
information, visit its Web site at http://www.westaff.com
WHEELING-PITTSBURGH: Gets Nod to Extend DIP Maturity & Pay Fees
---------------------------------------------------------------
Wheeling-Pittsburgh Steel Corp., and its debtor-affiliates
obtained Bankruptcy Court Judge Bodoh's permission to execute
and perform under another amendment to the DIP Credit Agreement,
and pay certain fees in that connection.
These are the key provisions of the Amendment:
(a) Termination Date: The Termination Date will be
extended from May 17, 2003 to August 17, 2003.
(b) Amendment to Article VI: Section 6.22 will be
amended and restated in its entirety:
"6.22 Cooperation with Agent. Upon the occurrence
of any of the following events:
(i) the decision by the Emergency Steel
Loan Guaranty Board to provide
financial assistance to the Borrowers
pursuant to the Emergency Steel Loan
Guarantee Act shall be revoked or
modified so as to require additional
material conditions; or
(ii) the Bankruptcy Court shall have failed
to enter an order confirming the
Borrowers' plan of reorganization
within four Business Days after the
hearing at which such matter is first
presented;
then, the Borrowers agree to cooperate fully with
the Agent and the Lenders to implement a chapter 11
plan acceptable to the Agent and to act as directed
by the Agent with respect to the administration of
the Borrowers' estates, including supporting any
motion or application filed by the Agent in
connection with the foregoing."
(c) Amendment Fee: The Debtors agree to pay to the Agent
for the benefit of each Lender which executes and
delivers this Amendment an amendment fee in the
amount of 0.25% -- based on each such Lender's
Commitments -- payable on the Amendment Effective
Date.
(d) Agent's Fees, Costs and Expenses: The Debtors will
pay all fees, costs and expenses of the Agent in
connection with the preparation, execution, delivery
and administration of this Amendment in accordance
with the terms of Section 10.4 of the DIP Credit
Agreement, including, without limitation, an Agent's
Fee payable pursuant to a fee letter dated as of
April [__], 2003, on the effective date of the
Amendment to the Agent, solely for its own account.
Backgrounder
The DIP Credit Facility for Wheeling-Pittsburgh Steel Corp., and
its debtor-affiliates consists of a term loan facility for
$35,000,000 and a revolving credit facility for $160,000,000.
The term loan and revolving loan are secured by first-priority
liens on the Debtors' assets -- subject to valid liens existing
on the Petition Date -- and are entitled to superpriority
administrative status, subject to certain carve-outs for fees
payable to the United States Trustee and professional fees.
Under the terms of the DIP Credit Agreement, the commitments in
respect of both revolving loan and term loan will terminate, and
such loans will be due and payable, on May 17, 2003.
As of March 31, 2003, $35,480,000 was outstanding under the term
loan facility and $147,300,000 in loans and $2,820,000 in
letters of credit were outstanding under the revolving credit
facility. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 40;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
WILLIAMS: Closes Sub. Convertible Debenture Private Placement
-------------------------------------------------------------
Williams (NYSE: WMB) has closed its previously announced $300
million private offering of junior subordinated convertible
debentures due 2033.
Williams intends to use substantially all of the approximately
$290 million of net proceeds from the offering to fund its
previously announced repurchase of the convertible preferred
stock currently held by a subsidiary of MidAmerican Energy
Holdings Company.
The convertible debentures sold to certain institutional
investors 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.
Williams, through its subsidiaries, primarily finds, produces,
gathers, processes and transports natural gas. Williams' gas
wells, pipelines and midstream facilities are concentrated in
the Northwest, Rocky Mountains, Gulf Coast and Eastern Seaboard.
As reported in Troubled Company Reporter's Tuesday Edition,
Standard & Poor's Ratings Services affirmed its 'B+' long-term
corporate credit rating on energy company The Williams Cos. Inc.
Ratings on Williams and its subsidiaries were removed from
CreditWatch with negative implications, where they were placed
July 23, 2002. The outlook is negative.
In addition, Standard & Poor's raised its rating on Williams'
senior unsecured debt to 'B+' from 'B' Standard & Poor's also
assigned its 'B-' rating to $300 million junior subordinated
convertible debentures at Williams. The rating on the junior
debentures is two notches below the corporate credit rating to
reflect structural subordination to the senior debt.
Tulsa, Oklahoma-based Williams has about $13 billion in
outstanding debt.
WINDSOR WOODMONT: Chapter 11 Case Raises Going Concern Doubt
------------------------------------------------------------
Windsor Woodmont Black Hawk Resort Corp., a Colorado
corporation, was incorporated on January 9, 1998. Windsor
Woodmont, LLC was formed as a limited liability company, under
the laws of the State of Colorado, on July 17, 1997. These
companies were formed for the purpose of developing an
integrated limited stakes gaming casino, entertainment and
parking facility in Black Hawk, Colorado, which opened
December 20, 2001. Prior to December 20, 2001, the Company and
the LLC were development stage enterprises.
The Company was a wholly owned shell company subsidiary of the
LLC with no significant assets, liabilities or operating
activity. In connection with Private Placement and other
financing transactions, the LLC contributed all of its assets
and liabilities to the Company in exchange for stock of the
Company and the contribution has been accounted for as a
recapitalization of entities under common control whereby the
assets and liabilities are recorded at the historical cost basis
of the LLC. The Company completed the development of the
Project, and operates the Project under a management agreement
with Hyatt Gaming Management, Inc. The LLC's ownership in the
Company was subsequently reduced through the refinancing of the
LLC's debt by conversion into the Company's common stock and the
issuance of additional common stock for cash.
BANKRUPTCY PROCEEDINGS
On November 7, 2002, Windsor Woodmont Black Hawk Resort Corp.
filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code, in the United States Bankruptcy
Court for the District of Colorado as Case No. 02-28089-ABC in
order to facilitate the restructuring of the Company's debt,
trade liabilities and other obligations. The Company is
currently operating as a debtor-in-possession under the
supervision of the Bankruptcy Court. The bankruptcy petition was
filed in order to preserve cash and to give the Company the
opportunity to restructure its obligations.
The Company's most recent financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America applicable to a going
concern, and do not purport to reflect or to provide for all of
the possible consequences of the ongoing Chapter 11 Case.
Specifically, the financial statements do not present the amount
which will ultimately be paid to settle liabilities and
contingencies which may be required in the Chapter 11 Case or
the effect of any changes which may be made in connection with
the Company's capitalization or operations resulting from a plan
of reorganization. The Debtor has not filed a plan of
reorganization as of this date, but expects to file one in the
near term. The plan, when filed, is subject to acceptance by the
Company's compromised creditors and stockholders and approval by
the Bankruptcy Court.
Because of the ongoing nature of the Chapter 11 Case, the
outcome of which is not presently determinable, those financial
statements are subject to material uncertainties and may not be
indicative of the results of the Company's future operations or
financial position. No assurance can be given that the Company
will be successful in reorganizing its affairs within the
Chapter 11 Case.
As a result of the above, there is substantial doubt about the
Company's ability to continue as a going concern. The ability of
the Company to continue as a going concern is dependent upon,
but not limited to, formulation, approval, and confirmation of a
plan of reorganization, adequate sources of capital, customer
and employee retention, the ability to provide a high quality
gaming experience and the ability to sustain positive results of
operations and cash flows sufficient to continue to operate.
Substantially all of the Company's assets are pledged as
collateral for long-term debt. On October 15, 2002, the Company
failed to make the interest payments initially due on September
15, 2002, that it had elected to defer until October 15, 2002 on
the First Mortgage Notes and Second Mortgage Notes. The
Company's failure to pay the interest constituted an "Event of
Default" under the applicable agreements. As a result of the
failure to make required interest payments, and the filing of
the bankruptcy petition, the Company was not in compliance with
all of its debt covenants.
On December 13, 2002, the Company filed a motion for court
approval of the rejection of the Hyatt Management Agreement. The
rejection of the Hyatt Management Agreement would eliminate the
payment of the Hyatt Management fee, thereby reducing operating
costs and increasing net revenue. On April 10, 2003, the Company
entered into a settlement agreement with Hyatt wherein Hyatt
would not contest the rejection of the Hyatt Management
Agreement. On April 25, 2003, the Bankruptcy Court entered an
order approving the Hyatt Settlement and Release Agreement. The
order approving the Hyatt Settlement and Release Agreement will
be entered as a final order on the Rejection Date. The Rejection
Date was currently set for May 6, 2003, however, Windsor
Woodmont Black Hawk Resort Corp. entered into a stipulation with
Hyatt to extend the Rejection Date to be on the fourth business
date after the Company provides written notice to Hyatt, but in
any event not be later than May 19, 2003. The Company entered
into this stipulation with Hyatt to provide additional time for
the orderly transition for the management of operations. On May
7, 2003, Windsor Woodmont provided written notice to Hyatt
electing May 14, 2003 (a date which was four business days after
the date of the notice) as the Rejection Date. On May 14, 2003,
Windsor Woodmont assumed management of the casino and the casino
name was changed to the Mountain High Casino
Under the terms of the Hyatt Settlement and Release Agreement,
the Hyatt Management Agreement will be deemed rejected and Hyatt
shall hold an allowed pre-petition unsecured claim in the
Bankruptcy Case in the amount of $18,318,368. This claim
includes the following: (i) rejection damage claim in the amount
of $ 5,000,000, (ii) Second Mortgage Note claim in the amount of
$ 10,877,791, including accrued interest, (iii) pre-casino
opening expenses claim in the amount of $ 1,532,921, and (iv)
post opening expenses claim in the amount of $ 907,657. Windsor
Woodmont agrees to commence making interest only payments at a
rate of 6% one month after the effective date of the
reorganization plan. The interest only payments will continue
until Windsor Woodmont generates excess cash flow (as defined in
the Hyatt Settlement and Release Agreement) to pay the pre-
petition unsecured claim until paid in full. Windsor Woodmont
agrees to restrict dividends to its equity holders until Hyatt's
pre-petition unsecured claim is paid in full. Hyatt agrees to
support a plan of reorganization in the Chapter 11 Case and
agrees to waive any claim or interest in and to any funds it
possesses from the operation of the Casino. Under the Hyatt
Settlement and Release Agreement, Hyatt agrees to fully
cooperate in the transition of the Casino to Windsor Woodmont.
Total revenue for the quarter ended March 31, 2003 was
$14,838,904, $13,777,706 net of promotional allowances. This
included $12,964,834 in casino revenue, $1,630,323 in food and
beverage revenue, and $243,747 of other revenue. This compares
to total revenue for the quarter ended March 31, 2002 of
$17,683,336, $16,940,655 net of promotional allowances. This
included $15,831,611 in casino revenue, $1,656,898 in food and
beverage revenue, and $194,827 of other revenue.
Food and beverage expenses for the quarter ended March 31, 2003
totaled $1,340,336, including $800,005 in cost of goods sold.
This compares to Food and beverage expenses for the quarter
ended March 31, 2002 totaling $1,730,111, including $983,925 in
cost of goods sold. The decrease is primarily due to reduced
payroll and benefit costs and reduced cost of goods sold. Other
food and beverage expenses consist principally of salaries,
wages and benefits, and other operating expenses of the food and
beverage operations.
Other operating expenses for the quarter ended March 31, 2003
totaled $304,535 versus $482,933 for the quarter ended March 31,
2002, and consists of salaries, wages and benefits, contract
entertainment expense, and other operating expenses. The
decrease is primarily due to reduced payroll and benefit costs.
General and administrative expenses for the quarter ended March
31, 2003 totaled $2,435,410 versus $2,847,667 for the quarter
ended March 31, 2002, and consists of salaries, wages and
benefits, utilities, insurance, property taxes, contract
services, maintenance and repairs, cleaning supplies, and other
operating expenses. The net reduction is due to decreases in
payroll and benefit costs and in contract services costs,
partially offset by increases in property taxes.
Depreciation and amortization expense for the quarter ended
March 31, 2003 totaled $2,086,441 versus $2,060,245 for the
quarter ended March 31, 2002. These expenses relate to property
and equipment in service and vary with the addition or
replacement of new items of property and equipment.
Interest expense for the quarter ended March 31, 2003 totaled
$621,653, including $59,097 in amortization of debt issuance
costs. This compares to interest expense for the quarter ended
March 31, 2002, which totaled $4,818,593, including $414,005 in
amortization of debt issuance costs. The reduction in interest
expense is a result of interest not being accrued on the First
and Second Mortgage Notes payable during the course of the
bankruptcy proceedings, and the write-off at December 31, 2002
of unamortized debt discount and deferred
financing costs related to the First and Second Mortgage Notes.
Reorganization expenses for the quarter ended March 31, 2003
totaled $910,413. This includes costs incurred for legal,
financial advisor services received in connection with debt
restructuring efforts, travel related expenses and other costs
directly related to the debt restructuring efforts. There were
no similar costs during the quarter ended March 31, 2002.
The Company's future operating results will be subject to
significant business, economic, regulatory and competitive
uncertainties and contingencies, many of which are beyond
Company control. While Windsor Woodmont believes that its casino
will be able to attract a sufficient number of patrons and
achieve the level of activity and revenues necessary to permit
it to meet payment obligations, there is no assurance that the
Company will achieve these results.
LIQUIDITY AND CAPITAL RESOURCES
The Chapter 11 Case may have a material adverse effect on
relationships with suppliers or vendors. While this has not been
experienced, any significant disruption in the relationships
with its suppliers or vendors may find the Company having
difficulty maintaining existing or creating new relationships
with suppliers or vendors as a result of the Chapter 11 Case.
Suppliers and vendors could stop providing supplies or services
or provide such supplies or services only on "cash on delivery,"
"cash on order," or other terms that could have an adverse
impact on short-term cash flows.
The adequacy of Windsor Woodmont's capital resources is limited
and the Company has limited access to additional financing. In
addition to the cash requirements necessary to fund ongoing
operations, the Company currently is incurring and anticipates
that it will incur significant professional fees and other
restructuring costs in connection with the Chapter 11 Case and
the restructuring of its operations. However, as a result of the
uncertainty surrounding its current circumstances, it is
difficult to predict actual liquidity needs at this time.
Although, based on current and anticipated levels of operations,
and efforts to increase the number of gaming patrons and
customers to the Casino, the Company believes that its cash flow
from operations will be adequate to meet anticipated cash
requirements during the pendency of the Chapter 11 Case.
Ultimately such amounts may not be sufficient to fund operations
until such time as it is able to propose a plan of
reorganization that will receive the requisite acceptance by
creditors and equity holders and be confirmed by the Bankruptcy
Court. In the event that cash flows are insufficient to meet
future cash requirements, the Company may be required to reduce
planned capital expenditures or seek additional financing.
Therefore, the Company indicates it can provide no assurance
that reductions in planned capital expenditures would be
sufficient to cover shortfalls or that additional financing
would be available or, if available, offered on acceptable
terms. As a result of the Chapter 11 Case and the circumstances
leading to the filing thereof, Company access to additional
financing is, and for the foreseeable future will likely
continue to be limited. As the foregoing indicates, the long-
term liquidity requirements and the adequacy of its capital
resources are difficult to predict at this time, and ultimately
cannot be determined until a plan of reorganization has been
developed and is confirmed by the Bankruptcy Court in the
Chapter 11 Case.
WORLDCOM INC: Judge Gonzalez Approves Innisfree's Appointment
-------------------------------------------------------------
Worldcom Inc., seeks entry of an order authorizing the
employment and retention of Innisfree M&A Incorporated as
solicitation agent, tabulator and consultant in connection with
the balloting and tabulation and balloting of votes on the
Debtors' plan of reorganization, nunc pro tunc to April 11,
2003.
According to WorldCom CFO Victoria Harker, the Debtors have 31
issues of publicly traded bonds, over 10 issues of publicly
traded preferred stock and two issues of publicly traded common
stock, with over 1.5 million holders in "Street" name. Even if
the identity of all those entitled to receive materials were
easily accessible, gathering the information would be a daunting
task. Typically, however, public securities are primarily held
in "Street" name by a custodian, which maintains the identity of
the individual owners on a confidential basis.
The procedures for transmitting documents to beneficial owners
of securities require specialized knowledge of custodial holders
and the specific measures necessary to transmit documents to
beneficial owners. Because of the large number of outstanding
publicly traded securities of the Debtors, the solicitation
process for the Debtors will be very complex.
Ms. Harker explains that the Debtors seek to retain Innisfree as
their solicitation and tabulation agent because, among other
things, Innisfree is an international counseling firm whose
employees are experienced in all areas pertaining to the
identification and solicitation of holders of securities.
Innisfree has a state-of-the-art mailing facility and tabulation
system and is highly experienced in dealing with the back
offices of the various departments of the banks and brokerage
firms. Jonathan Sullivan, who would be the individual with the
primary responsibility of handling the Debtors' solicitation and
vote, tabulation, has over 20 years of experience in public
securities solicitations and other transactions and has
specialized in bankruptcy solicitations since 1991. Mr.
Sullivan has worked on over 45 bankruptcy solicitations
including Pacific Gas and Electric, Global Crossing, Fruit of
the Loom, Regal Cinemas, Chiquita Brands, Armstrong World
Industries, Kmart, America West Airlines, Barney's, Eagle-Picher
Industries, Federated Department Stores, First RepublicBank,
I.C.H. Corporation, MCorp, and Resorts International.
Specifically, pursuant to the Agreement, it is anticipated that
Innisfree will perform these services during the Debtors'
Chapter 11 cases:
a. provide advise to the Debtors and its counsel regarding all
aspects of the plan vote, including timing issues, voting
and tabulation procedures, and documents needed for the
vote;
b. review the voting portions of the disclosure statement and
ballots, particularly as they may relate to beneficial
owners of securities held in street name;
c. work with counsel and the claims agent to request
appropriate records for any claims not based on securities;
d. work with the Debtors to request appropriate information
from the trustees of the Debtors' bonds, the equity
transfer agents and The Depository Trust Company;
e. mail voting and non-voting documents to creditors whose
claims are not based on securities, along with any
registered record holders of securities;
f. coordinate the distribution of voting documents to street
name holders of voting securities by forwarding the
appropriate documents to the banks and brokerage firms
holding the securities, who in turn will forward to the
beneficial owners;
g. coordinate the distribution of notice documents to street
name holders of any non-voting securities by forwarding
the appropriate documents to the banks and brokerage firms
holding the securities, who in turn will forward to the
beneficial owners;
h. coordinate the dissemination of any voting or non-voting
materials to the international clearinghouses, like
Euroclear, CREST, or Clearstream, for any International
Securities Identification Numbers;
i. distribute copies of the master ballots to the appropriate
nominees so that firms may cast votes on behalf of
beneficial owners;
j. prepare a certificate of service for filing with the Court;
k. handle requests for documents from parties in interest,
including brokerage firm and bank back-offices and
institutional holders;
l. respond to telephone inquiries from holders regarding the
disclosure statement and the voting procedures;
m. if requested by the Company, make telephone calls to
confirm receipt of the plan documents and respond to
questions about the voting procedures;
n. if requested by the Company, assist with an effort to
identify beneficial owners of the Debtors' bonds;
o. receive and examine all ballots and master ballots cast by
creditors, including date- and time-stamping the originals
of all ballots and master ballots after receipt;
p. tabulate all ballots and master ballots received prior to
the voting deadline in accordance with established
procedures, and prepare a vote certification for filing
with the Court; and
q. undertake any other duties as may be agreed on by WorldCom
and Innisfree.
The Debtors have retained various professionals in these cases,
including Bankruptcy Services LLC as the Debtors' claims agent.
Ms. Goldstein states that BSI will continue to serve as the
Debtors' claims and general noticing agent. Innisfree, on the
other hand, will assist the Debtors in connection with the
solicitation of votes on their proposed a plan of
reorganization. The Debtors believe that this division of labor
enables both entities to focus on their relative core
competencies in their respective areas of expertise. Inasmuch
as BSI and Innisfree would be performing discrete and distinct
tasks, the danger of duplication of services and attendant
duplicative costs is eliminated. The services provided by
Innisfree to the Debtors will not be unnecessarily duplicative
of those provided by any of the Debtors' professionals, and
Innisfree will coordinate any services performed at the Debtors'
request with them, BSI and any other financial advisors and
counsel, as appropriate, to avoid unnecessary duplication of
effort.
The Debtors have agreed to compensate Innisfree for professional
services rendered under the Agreement:
-- A project fee of $25,000.
-- For the mailing to registered holders of voting securities
and other creditors, estimated labor charges of $1.75-$2.25
per package, depending on the complexity of the mailing,
with a $500 minimum for each class, or for classes with
public securities, each CUSIP or ISIN. The charge
indicated assumes a package that would include the
disclosure statement, a ballot, a return envelope and one
other document.
-- $3.75 per call plus toll charges for calls to or from
creditors and interest holders.
-- The cost of a stockholder identification program, if
needed, would be based on the security or securities in
question.
-- A charge of $100 per hour for the tabulation of ballots and
master ballots, plus set up charges of $15,000. Standard
hourly rates will apply for any time spent by senior
executives reviewing and certifying the tabulation and
dealing with special issues that may develop.
-- Consulting hours will be billed at a rate lower than
Innisfree's standard hourly rates or at the standard hourly
rates for other professionals that may work on the case.
Consulting services by Innisfree would include:
* the review and development of materials, including the
disclosure statement, plan, ballots, and master ballots;
* participation in telephone conferences, strategy
meetings or the development of strategy relative to the
project;
* efforts related to special balloting procedures,
including issues that may arise during the balloting, or
tabulation process;
* computer programming or other project-related data
processing services;
* visits to cities outside of New York for client meetings
or legal or other matters;
* efforts related to the preparation of testimony and
attendance at court hearings; and
* the preparation of affidavits, certifications, fee
applications, if required, invoices, and reports.
The hourly rates of Innisfree currently range from:
Practice Director and above $275
Director $250
Account Executive $225
Staff Assistant $150
Further, Innisfree will seek reimbursement of actual and
necessary out-of-pocket expenses incurred in connection with the
representation of the Debtors, including, inter alia, travel
costs, postage, messengers and couriers, expenses incurred in
obtaining or converting depository participant, creditor,
shareholder and lists of Non-Objecting Beneficial Owners, and
appropriate charges for supplies, in-house photocopying, and
telephone usage.
Innisfree Director Jonathan Sullivan assures the Court that
Innisfree is a "disinterested person" as that term is defined in
Section 101(14) of the Bankruptcy Code, as modified by section
1107(b) of the Bankruptcy Code. In addition, Innisfree does not
hold or represent an interest adverse to the Debtors' estates
that would impair the Firm's ability to objectively perform
services for the Debtors, in accordance with Section 327 of the
Bankruptcy Code. However, the Firm currently provides, or in
the past has provided services in unrelated matters to these
parties: Alcatel USA Marketing Inc., American Express, AOL,
AT&T, AT&T Corp., CenturyTel Solutions LLC, Chase Manhattan,
Compaq Computer Corp., Global Crossing, Hewlett Packard, JP
Morgan Chase, McLeod USA, Nortel Inc., Quest Communications
International Inc., Qwest Communications Corp., Sprint
Communications, SunTrust Bank, Time Warner Communications, and
Verizon Communications Inc.
The Debtors submit that the retention of Innisfree will inure to
the benefit of the Debtors and their estates by expediting the
solicitation process and permitting such to be conducted in a
cost-effective manner by a firm with proven abilities in
providing these services.
* * *
Judge Gonzalez authorizes the employment of Innisfree as
solicitation and tabulation agent to the Debtors, provided,
however, that the Debtors are authorized to indemnify and hold
harmless Innisfree and its affiliates, their respective
directors, officers, members, agents, employees and controlling
persons, and each of their respective successors and assigns,
pursuant to the indemnification provisions of the Agreement and,
during the pendency of these bankruptcy proceedings, subject to
these conditions:
A. all requests of Indemnified Persons for payment of
indemnity, contribution or otherwise pursuant to the
indemnification provisions of the Agreement will be made by
means of an interim or final fee application and will be
subject to the approval of, and review by, the Court to
ensure that payment conforms to the terms of the Agreement,
the Bankruptcy Code, the Bankruptcy Rules, the Local
Bankruptcy Rules, and the orders of this Court and is
reasonable based on the circumstances of the litigation or
settlement in respect of which indemnity is sought;
provided, however, that in no event will an Indemnified
Person be indemnified or receive contribution to the extent
that any claim or expense has resulted from the bad-faith,
self-dealing, breach of fiduciary duty, if any, gross
negligence or willful misconduct on the part of that or any
other Indemnified Person;
B. in no event will an Indemnified Person be indemnified or
receive contribution or other payment under the
indemnification provisions of the Agreement if the Debtors,
their estates, or the statutory committee of unsecured
creditors assert a claim, to the extent that the Court
determines by final order that the claim arose out of bad-
faith, self-dealing, breach of fiduciary duty, if any,
gross negligence, or willful misconduct on the part of that
or any other Indemnified Person;
C. in the event an Indemnified Person seeks reimbursement
for attorneys' fees from the Debtors pursuant to the
Agreement, the invoices and supporting time records from
these attorneys will be annexed to an interim or final fee
application seeking the indemnification, and the invoices
and time records will be subject to the United States
Trustee's guidelines for compensation and reimbursement of
expenses and the approval of the Bankruptcy court under the
standards of Section 330 of the Bankruptcy Code without
regard to whether the attorney has been retained under
Section 327 of the Bankruptcy Code. (Worldcom Bankruptcy
News, Issue No. 29; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
W.R. GRACE: Urges Court to OK Deloitte's Engagement as Advisors
---------------------------------------------------------------
W.R. Grace & Co., joined by its related and affiliated Debtors,
seek the Court's authority to employ Deloitte & Touche LLP as
customs services providers and as tax and compensation advisors
to the Debtors, nunc pro tunc to February 4, 2003.
According to Paula A. Galbraith, Esq., at Pachulski Stang Ziehl
Young Jones & Weintraub PC, in Wilmington, Delaware, Deloitte is
expected to provide these services:
(a) compensation and benefits services, including
services pertaining to assisting the Debtors in
reviewing and analyzing their current employee
retention and incentive programs, and in developing
new employee retention and incentive programs;
(b) tax advisory services, including services pertaining
to assisting the Debtors by consulting on various
corporate and sales tax issues, and in reviewing and
analyzing the tax implications of various inter-
company transactions; and
(c) customs review and compliance services, including
services pertaining to assisting the Debtors with
the upcoming Focused Assessment to be conducted by
the United States Customs Service.
The Debtors have signed engagement letters dated April 14, 2004,
regarding provision of the customs services; April 8, 2003,
pertaining to Deloitte's provision of the tax services; and
March 14, 2003, regarding Deloitte's compensation services.
Certain professionals who were formerly associated with Arthur
Andersen have joined Deloitte. While at Andersen, certain of
these professionals worked on matters pertaining to the Debtors.
The Debtors anticipate that certain of these professionals will
provide services to the Debtors in these Chapter 11 cases.
However, the services included in these three engagement letters
are new and will not be a continuation of the Andersen services.
Deloitte, at the Debtors' request, will also render additional,
related support deemed appropriate and necessary by the Debtors
for the benefits of their estates.
Compensation
Deloitte's fees will be based on the time that Deloitte
necessarily spends in providing its tax services to the Debtors,
multiplied by its hourly rates. The normal hourly rates charged
by Deloitte personnel are:
Staff Classification Hourly Billing Rate
-------------------- -------------------
Partner/Principal/Director $350 - 660
Senior Manager 250 - 550
Manager 180 - 430
Senior Accountants/Consultants 135 - 340
Staff Accountants/Consultants 100 - 180
The range of hourly rates reflects, among other things,
differences in experience levels within classifications,
geographic differentials and differences between types of
services being provided. In the normal course of business,
Deloitte revises its regular hourly billing rates to reflect
changes in responsibilities, increased experience, and increased
costs of doing business. Accordingly, the Debtors seek the
Court's permission to revise these rates to the hourly rates
that will be in effect from time to time.
Deloitte had previously been providing services to the Debtors
as an ordinary course professional. In this capacity, Deloitte
performed certain compensation plan implementation, tax
advisory, and SAP environmental control services. These
services were completed on January 15, 2003, before the date for
which Deloitte's nunc pro tunc retention is sought. Deloitte
incurred fees totaling approximately $191,000 in connection with
its services as an OCP.
Nunc Pro Tunc Retention
Because the Debtors required Deloitte's immediate assistance in
connection with the performance of certain of the Deloitte
services, and the Debtors believed that it would have been
potentially detrimental to the Debtors' estates and creditors if
work on these services did not commence before this Court's
approval of Deloitte's employment to serve the Debtors in these
Chapter 11 cases, Deloitte agreed to begin performing these
services with the expectation that its employment would be
granted nunc pro tunc approval.
Deloitte's provision of the tax services began on February 4,
2003, the date for which nunc pro tunc retention approval is
sought. Deloitte began providing compensation services on
March 24, 2003, and has just begun providing customs services.
Deloitte Is Disinterested
Larry D. Ishol, a member of Deloitte & Touche LLP, in McClean,
Virginia, tells Judge Fitzgerald that Deloitte is a
"disinterested person" within the meaning of Section 101(14) of
the Bankruptcy Code, and holds no interest adverse to the
Debtors or their estates for the matters for which Deloitte is
to be employed.
Mr. Ishol further assures the Court that Deloitte has no
connection to the Debtors, their creditors or their related
parties except that:
(a) Deloitte provides services in matters unrelated to
these Chapter 11 cases to the Debtors' twenty largest
unsecured creditors, but will not serve these
entities in these Chapter 11 cases;
(b) Deloitte has provided, currently provides, and may
in the future provide, services to Kirkland & Ellis,
Latham & Watkins, and Stroock Stroock & Lavan, and
each of these has provided, or may provide in the
future legal services to Deloitte or to its affiliated
entities, but in each case in matters unrelated to
these Chapter 11 proceedings;
(c) Bank of America NA, Barclays Bank PLC, Citigroup Inc.
HSBC Bank, JP Morgan Chase, and Wachovia Corporation
or their respective affiliates, are parties
interested in these cases, and have relationships
with Deloitte. For example, BofA is a significant
lender to Deloitte or its affiliates or to their
members. Other interested entities also have lending
relationships with Deloitte;
(d) JP Morgan and affiliates are significant clients of
Deloitte's affiliate Deloitte Consulting LP, for
which Deloitte Consulting LP provides a variety of
services in matters unrelated to these Chapter 11
cases; and
(e) Prior to Deloitte's provision of any services to the
Debtors in these Chapter 11 cases, Deloitte was
approached by certain parties concerning a prospective
litigation services engagement in a matter potentially
adverse to the Debtors. Deloitte engaged in
preliminary, high-level discussions with these parties
regarding Deloitte's possible provision of services.
During the course of these preliminary discussions,
"certain information, including certain information
that may not have been publicly available, regarding
the litigation services, was provided to Deloitte.
Deloitte declined the potential engagement to provide
the litigation services on May 25, 2002, and was
never retained to provide any such services. Deloitte
returned all of the written information provided to
it pertaining to Deloitte's provision of these
services.
Mr. Ishol emphasizes to Judge Fitzgerald that no member of the
engagement team anticipated to provide services included in this
application was involved in discussions regarding the
prospective provision of litigation services, and none of the
Deloitte personnel involved in those discussions have provided,
are currently providing, or are anticipated to provide services
to the Debtors as part of the engagement teams on the services
described in this application.
Mr. Ishol tells Judge Fitzgerald that Deloitte will "maintain
its customary ethical wall and confidentiality safeguards" with
respect to its provision of services to the Grace Debtors.
Deloitte provided no services to the Grace Debtors prior to the
Petition Date. (W.R. Grace Bankruptcy News, Issue No. 41;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
* Huron Consulting Group Adds Financial Investigations Expert
-------------------------------------------------------------
Huron Consulting Group announced that Stephen J. Burlone has
joined the company as a managing director to assist clients with
financial investigations, complex accounting issues and purchase
price disputes. Although Burlone will be based in the company's
Boston office, he will assist clients nationwide.
"Steve's expertise in accounting and financial investigations
will greatly benefit our clients," said George Massaro, Chief
Operating Officer for Huron's Financial and Economic Consulting
practice. "When assisting clients with complex financial
matters, it is essential to have accounting and financial
experts who understand the relevant accounting and business
issues."
Prior to joining Huron, Burlone was a partner in the Boston
office of Ernst & Young. He has worked with both public and
private manufacturing and technology companies. Burlone has
significant experience advising clients on mergers and
acquisitions, various public offerings, and compensation
arrangements. In addition, he has authored several publications
and regularly presents at seminars on current developments in
the accounting industry. Before joining Ernst & Young, Burlone
was a partner at Andersen.
"Given the challenges facing the financial markets today, I am
very excited to join Huron and assist clients in addressing
complex accounting and other financial issues," said Burlone.
Burlone is a graduate of Marquette University. He is also a
member of the American Institute of Certified Public Accountants
and the Massachusetts Society of CPAs.
Huron Consulting Group is a 400-person business consulting
organization created on the belief that our people are our
greatest asset and that our clients deserve the very best in
terms of effort, care, and intellectual capacity - delivered
objectively.
Huron Consulting Group provides valuation, corporate finance,
restructuring, and turnaround services to companies and lenders.
It performs financial investigations, litigation analysis,
expert testimony and forensic accounting for attorneys. Huron
provides strategic planning, operational consulting, strategic
sourcing, and organizational and technology assessments in a
variety of industries including manufacturing, healthcare and
pharmaceutical, higher education, law firm and corporate law
departments, transportation, and energy.
Huron Consulting Group operates nationwide with offices in
Boston, Charlotte, Chicago, Houston, Miami, New York, San
Francisco and Washington, D.C.
* BOOK REVIEW: Hospitals, Health and People
-------------------------------------------
Author: Albert W. Snoke, M.D.
Publisher: Beard Books
Softcover: 232 pages
List Price: $34.95
Review by Francoise C. Arsenault
Order your personal copy today at
http://www.amazon.com/exec/obidos/ASIN/1587981610/internetbankrupt
Hospitals, Health and People is an interesting and very readable
account of the career of a hospital administrator and physician
from the 1930's through the 1980's, the formative years of
today's health care system. Although much has changed in
hospital administration and health care since the book was first
published in 1987, Dr. Snoke's discussion of the evolution of
the modern hospital provides a unique and very valuable
perspective for readers who wish to better understand the forces
at work in our current health care system.
The first half of Hospitals, Health and People is devoted to the
functional parts of the hospital system, as observed by Dr.
Snoke between the late 1930's through 1969, when he served first
as assistant director of the Strong Memorial Hospital in
Rochester, New York, and then as the director of the Grace-New
Haven Hospital in Connecticut. In these first chapters, Dr.
Snoke examines the evolution and institutionalization of a
number of aspects of the hospital system, including the
financial and community responsibilities of the hospital
administrator, education and training in hospital
administration, the role of the governing board of a hospital,
the dynamics between the hospital administrator and the medical
staff, and the unique role of the teaching hospital.
The importance of Hospitals, Health and People for today's
readers is due in large part to the author's pivotal role in
creating the modern-day hospital. Dr. Snoke and others in
similar positions played a large part in advocating or forcing
change in our hospital system, particularly in recognizing the
importance of the nursing profession and the contributions of
non-physician professionals, such as psychologists, hearing and
speech specialists, and social workers, to the overall care of
the patient. Throughout the first chapters, there are also many
observations on the factors that are contributing to today's
cost of care. Malpractice is just one example. According to
Dr. Snoke, "malpractice premiums were negligible in the 1950's
and 1960's. In 1970, Yale-New Haven's annual malpractice
premiums had mounted to about $150,000." By the time of the
first publication of the book, the hospital's premiums were
costing about $10 million a year.
In the second half of Hospitals, Health and People, Dr. Snoke
addresses the national health care system as we've come to know
it, including insurance and cost containment; the role of the
government in health care; health care for the elderly; home
health care; and the changing role of ethics in health care. It
is particularly interesting to note the role that Senator Wilbur
Mills from Arkansas played in the allocation of costs of
hospital-based specialty components under Part B rather than
Part A of the Medicare bill. Dr. Snoke comments: "This was
considered a great victory by the hospital-based specialists. I
was disappointed because I knew it would cause confusion in
working relationships between hospitals and specialists and
among patients covered by Medicare. I was also concerned about
potential cost increases. My fears were realized. Not only
have health costs increased in certain areas more than
anticipated, but confusion is rampant among the elderly patients
and their families, as well as in hospital business offices and
among physicians' secretaries." This aspect of Medicare caused
such confusion that Congress amended Medicare in 1967 to provide
that the professional components of radiological and
pathological in-hospital services be reimbursed as if they were
hospital services under Part A rather than part of the co-
payment provisions of Part B.
At the start of his book, Dr. Snoke refers to a small statue,
Discharged Cured, which was given to him in the late 1940's by a
fellow physician, Dr. Jack Masur. Dr. Snoke explains the
significance the statue held for him throughout his professional
career by quoting from an article by Dr. Masur: "The whole
question of the responsibility of the physician, of the
hospital, of the health agency, brings vividly to mind a small
statue which I saw a great many years ago.it is a pathetic
little figure of a man, coat collar turned up and shoulders
hunched against the chill winds, clutching his belongings in a
paper bag-shaking, tremulous, discouraged. He's clearly unfit
for work-no employer would dare to take a chance on hiring him.
You know that he will need much more help before he can face the
world with shoulders back and confidence in himself. The
statuette epitomizes the task of medical rehabilitation: to
bridge the gap between the sick and a job."
It is clear that Dr. Snoke devoted his life to exactly that
purpose. Although there is much to criticize in our current
healthcare system, the wellness concept that we expect and
accept today as part of our medical care was almost nonexistent
when Dr. Snoke began his career in the 1930's. Throughout his
50 years in hospital administration, Dr. Snoke frequently had to
focus on the big picture and the bottom line. He never forgot
the importance of Discharged Cured, however, and his book
provides us with a great appreciation of how compassionate
administrators such as Dr. Snoke have contributed to the state
of patient care today.
Albert Waldo Snoke was director of the Grace-New Haven Hospital
in New Haven, Connecticut from 1946 until 1969. In New Haven,
Dr. Snoke also taught hospital administration at Yale University
and oversaw the development of the Yale-New Haven Hospital,
serving as its executive director from 1965-1968. From 1969-
1973, Dr. Snoke worked in Illinois as coordinator of health
services in the Office of the Governor and later as acting
executive director of the Illinois Comprehensive State Health
Planning Agency. Dr. Snoke died in April 1988.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices
are obtained by TCR editors from a variety of outside sources
during the prior week we think are reliable. Those sources may
not, however, be complete or accurate. The Monday Bond Pricing
table is compiled on the Friday prior to publication. Prices
reported are not intended to reflect actual trades. Prices for
actual trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies
with insolvent balance sheets whose shares trade higher than $3
per share in public markets. At first glance, this list may
look like the definitive compilation of stocks that are ideal to
sell short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true
value of a firm's assets. A company may establish reserves on
its balance sheet for liabilities that may never materialize.
The prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter
A. Chapman, Editors.
Copyright 2003. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers. Information
contained herein is obtained from sources believed to be
reliable, but is not guaranteed.
The TCR subscription rate is $675 for 6 months delivered via e-
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are $25 each. For subscription information, contact Christopher
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*** End of Transmission ***