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/raid1/www/Hosts/bankrupt/TCR_Public/030711.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, July 11, 2003, Vol. 7, No. 136 Headlines AIRNET COMMS: Receives Additional Nasdaq Listing Extension ALASKA AIR: Will Publish Second Quarter 2003 Results on July 22 ALLEGHENY TECH.: Will Webcast Q2 Conference Call on July 23 AMERALIA INC: Extends Short-Term Financing Due Date to July 31 AMERCO: Wants Blessing to Hire Ordinary Course Professionals ARVINMERITOR: Commences Cash Tender Offer for Dana Corp. Shares ASIA GLOBAL CROSSING: Robert Geltzer Appointed as Ch. 7 Trustee AVALON DIGITAL: Completes Sale of Certain Assets to Silverpop BANKUNITED: Preferreds Redeemed & Fitch Withdraws Rating BASIS100 INC: Robert J. Smith Resigns as Chief Financial Officer BAUSCH & LOMB: Will Host Investor Conference Call on July 24 BIOSPECIFICS TECH.: Cash Resources Insufficient to Fund Ops. BREAKWATER RESOURCES: Reduces Term Credit Loan by $5 Million CABLEVISION SYSTEMS: S&P Places Low-B Ratings on Watch Negative C-BASS CBO: Low-B Ratings Assigned to Class E Notes & Preferreds CALL-NET ENTERPRISES: Will Publish Q2 2003 Results on July 30 CHART INDUSTRIES: Wants More Time to File Schedules & Statements CLAYTON HOMES: Brandywine Balks at Berkshire Hathaway's Offer CNE GROUP: Reports Share Issuances Pursuant to SRC Merger Deal CONSOLIDATED FREIGHTWAYS: Auctioning-Off Woodinville Facility COVENTRY HEALTH: Acquiring Altius Health Plans for $41 Million CROWN CASTLE: S&P Assigns CCC Rating to Convertible Senior Notes CRUM & FORSTER: Fitch Assigns & Withdraws B Senior Debt Rating DENBURY RESOURCES: Completes Exchange of B-Rated 7-1/2% Notes DETROIT MEDICAL: S&P Hatchets Revenue Bond Rating to B from BBB- DIRECTV: Removal Period Extension Hearing Slated for August 6 DUANE READE: Appoints Timothy R. LaBeau as SVP of Merchandising EASYLINK SERVICES: Sets Annual Shareholders' Meeting for Aug. 7 ENRON CORP: Judge Gonzalez Clears Austin Energy Settlement Pact EPICOR SOFTWARE: Completes Acquisition of ROI Systems for $20MM EXIDE TECH.: Committee Wants to Investigate Insurance Assets FACTORY 2-U: Reports Slight Decrease in Sales for June 2003 FLEMING: Herbert Baum et al. Want Advance Defense Costs Payment FLEXIINTERNATIONAL: Brings-In Kingery Crouse as New Accountants FOCAL COMMS: Fitch Ups & Withdraws Junk Sr. Sec. Facility Rating FURR'S RESTAURANT: COLP Selling Assets to CIC-Buffet for $30MM GENUITY INC: Plan Filing Exclusivity Extended to August 6, 2003 GLOBAL CROSSING: Court Extends Plan Filing Exclusivity to Oct 28 GOLDENTREE LOAN: S&P Assigns Three Prelim. BB Class Note Ratings GREEN POWER ENERGY: Watts & Scobie Expresses Going Concern Doubt HEADWAY CORPORATE: Section 341(a) Meeting to Convene on Aug. 13 IMCLONE SYSTEMS: Regains Compliance with Nasdaq Requirements ISTAR FIN'L: Fitch Rates 7-7/8% Series E Preferreds at BB JWS CBO: Fitch Affirms B+ Class D Senior Secured Note Rating KAISER ALUMINUM: US Bank Has Until July 18, 2003 to File Claims KMART CORP: Hires Fredrikson & Byron as Property Tax Counsel L-3 COMMS: Will Publish Second Quarter Results on July 23, 2003 LNR PROPERTY: Calls 9-3/8% Sr. Subordinated Notes for Redemption LTV: Copperweld Signs-Up Standard & Poor's as Valuation Advisors LYONDELL CHEMICAL: Board Declares Regular Quarterly Dividend MAGELLAN HEALTH: Wachovia Seeks Stay Relief to Prosecute Claims MENNONITE GENERAL: Fitch Slashes Revenue Bond Rating to B+ MESA AIR: Inks LOI with USAir for Up to 55 CRJ-700 Regional Jets MINERS FUEL: William Schwab Appointed as Chapter 11 Trustee MITEC TELECOM: Bolts from BEVE Buy-Out Talks with Partnertech AB MORGAN STANLEY: S&P Cuts Ratings on Series 2000-XLF Note Classes NATIONAL EQUIPMENT: Has Until August 26, 2003 to File Schedules NEW WORLD RESTAURANT: Completes Debt Refinancing Transactions NEW WORLD RESTAURANT: S&P Assigns B- Rating over Industry Risks NRG ENERGY: Files Second Amended Plan and Disclosure Statement OWENS & MINOR: Names Mark A. Van Sumeren as SVP, OMSolutions(SM) PACIFIC MAGTRON: Sells LiveMarket Unit's Assets to LiveCSP Inc. PG&E NATIONAL: Asks Court to Restrict Trading to Preserve NOLs POLAROID CORP: Challenges California Tax Claim's Validity POLYONE CORP: Reduces Earnings Outlook for Second-Quarter 2003 PROVANT INC: Selling Certain Assets to Shed Debt Burden RELIANT RESOURCES: Selling Desert Basin Plant for $288 Million ROBOTEL ELECTRONIQUE: Liquidating Assets Due to Insolvency STELCO INC: Pursuing Cost-Reduction Talks with U.S.W.A. Leaders STELCO: Steelworkers Driven to Develop Own Cost-Cutting Plans TELENETICS CORP: Peter E. Salas Discloses 9.999% Equity Stake TRANSTEXAS GAS: Files First Amended Plan & Disclosure Statement TRANSWITCH: Nasdaq Approves Listing Transfer to National Market TY COBB HEALTHCARE: Fitch Cuts $17.8-Million Bonds Rating to BB+ UNITED AIRLINES: US Bank Seeks Stay Relief to Control LA Deposit UNITED AIRLINES: Terminating Employee Stock Ownership Plan UPC POLSKA: S&P Drops Corp. Credit Rating to D Over Bankruptcy UPC POLSKA: Wants Approval to Hire Baker & McKenzie as Counsel VICWEST CORP: Creditors Will Vote on CCAA Plan on August 1 WACKENHUT CORRECTIONS: Completes 8-1/4% Sr. Unsec. Note Offering WACKENHUT CORRECTIONS: Buys-Back Group 4 Falck Controlling Stake WEIRTON STEEL: Secures Court Nod to Hire Procurement Specialty WESTPOINT STEVENS: Court Approves BSI as Ballot & Notice Agent WORLDCOM INC: Selling Douglas Lake Ranch for $68.5 Million YAHOO! INC: Reports Improved Second Quarter Financial Results * Ernst & Young Strikes Merger with Blair Crosson in B.C. Canada * Kristin Going Joins Gardner Carton's Restructuring Practice * Tracy Treger Joins Gardner Carton's Restructuring Practice * Morgan Lewis Elects 17 Lawyers as New Partners *BOOK REVIEW: Lost Prophets -- An Insider's History of the Modern Economists ********* AIRNET COMMS: Receives Additional Nasdaq Listing Extension ---------------------------------------------------------- The Nasdaq Listing Qualifications Panel has granted AirNet Communications Corporation (Nasdaq:ANCC) an additional extension to regain $1.00 closing bid price compliance. On or before August 15, 2003, AirNet must evidence a closing bid price of at least $1.00 per share and, immediately thereafter, a closing bid price of at least $1.00 per share for a minimum of ten consecutive trading days. In the event AirNet fails to comply with any of the terms of the exception or if the Company falls out of compliance with other requirements, its securities may be transferred to The Nasdaq SmallCap Market provided the Company is able to evidence compliance, as well as an ability to sustain compliance, with all requirements for continued listing on that Market. Otherwise, AirNet's securities will be delisted from The Nasdaq Stock Market. The Panel determined that an additional short extension was merited given the Company appears to have diligently pursued its plan on compliance as presented to the Panel. The Company requested the extension from July 31, 2003 to August 15, 2003 in order to give its shareholders sufficient time to consider all proposals at the upcoming shareholders meeting. The Company announced that it plans to hold its annual meeting of stockholders in Melbourne, Florida at the Rialto Hilton on Friday, August 8, 2003 at 10:00 A.M. With regard to the previously announced investment agreement for $16M in Senior Secured Convertible Notes, AirNet also announced that the investors have agreed to extend the closing until no later than August 15, 2003. AirNet Communications Corporation is a leader in wireless base stations and other telecommunications equipment that allow service operators to cost effectively and simultaneously offer high-speed data and voice services to mobile subscribers. AirNet's patented broadband, software-defined AdaptaCell(R) base station solution provides a high capacity base station with a software upgrade path to high speed data. The Company's Digital AirSite(R) Backhaul Free(TM) base station carries wireless voice and data signals back to the wireline network, eliminating the need for a physical backhaul link, thus reducing operating costs. AirNet has 69 patents issued or pending. More information about AirNet may be obtained by visiting the AirNet Web site at http://www.airnetcom.com * * * Liquidity and Going Concern Uncertainty In its Form 10-K filed on April 1, 2003, the Company stated: "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; and, as a consequence, the financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern. We have experienced net operating losses and negative cash flows since inception and, as of December 31, 2002, we had an accumulated deficit of $225.4 million. Cash used in operations for the years ended December 31, 2002 and 2001 was $1.1 million and $48.2 million, respectively. We expect to have an operating loss in 2003. At December 31, 2002, our principal source of liquidity was $3.2 million of cash and cash equivalents. Such conditions raise substantial doubt that we will be able to continue as a going concern without receiving additional funding. As of March 28, 2003 our cash balance was $3.7 million, after the draw of $4.8 million against our Bridge Loan for interim funding. The amounts drawn against the bridge loan are due and payable on May 24, 2003. In addition, on the same date we had a revenue backlog of $5.3 million. Our current 2003 operating plan projects that cash available from planned revenue combined with the $3.7 million on hand at March 28, 2003 will not be adequate to defer the requirement for additional funding. We are currently negotiating additional financing of $16 million with two Investors, which if successful, (a portion will be used to pay off the bridge loan) would provide the capital we require to continue operations. There can be no assurances that the proposed financing can be finalized on terms acceptable to us, if at all, or that the funding negotiated will be adequate to sustain operations through 2003. "Our future results of operations involve a number of significant risks and uncertainties. The worldwide market for telecommunications products such as those sold by us has seen dramatic reductions in demand as compared to the late 1990's and 2000. It is uncertain as to when or whether market conditions will improve. We have been negatively impacted by this reduction in global demand and by our weak balance sheet. Other factors that could affect our future operating results and cause actual results to vary from expectations include, but are not limited to, ability to raise capital, dependence on key personnel, dependence on a limited number of customers (with one customer accounting for 49% of the revenue for 2002), ability to design new products, the erosion of product prices, ability to overcome deployment and installation challenges in developing countries which may include political and civil risks and risks relating to environmental conditions, product obsolescence, ability to generate consistent sales, ability to finance research and development, government regulation, technological innovations and acceptance, competition, reliance on certain vendors and credit risks. Our ultimate ability to continue as a going concern for a reasonable period of time will depend on our increasing our revenues and/or reducing our expenses and securing enough additional funding to enable us to reach profitability. Our historical sales results and our current backlog do not give us sufficient visibility or predictability to indicate when the required higher sales levels might be achieved, if at all. Additional funding will be required prior to reaching profitability. To obtain additional funding, we have entered into discussions with SCP II and TECORE concerning a proposed financing of $16,000,000 discussed below. No assurances can be given that either the proposed financing or additional equity or debt financing will be arranged on terms acceptable to us, if at all. "If we are unable to finalize the proposed financing, we will have to seek additional funding or dramatically reduce our expenditures and it is likely that we will be required to discontinue operations. It is unlikely that we will achieve profitable operations in the near term and therefore it is likely our operations will continue to consume cash in the foreseeable future. We have limited cash resources and therefore we must reduce our negative cash flows in the near term to continue operations. There can be no assurances that we will succeed in achieving our goals or finalize the proposed financing, and failure to do so in the near term will have a material adverse effect on our business, prospects, financial condition and operating results and our ability to continue as a going concern. As a consequence, we may be forced to seek protection under the bankruptcy laws. In that event, it is unclear whether we could successfully reorganize our capital structure and operations, or whether we could realize sufficient value for our assets to satisfy fully our debts. Accordingly, should we file for bankruptcy there is no assurance that our stockholders would receive any value. "Prior to our initial public offering in December 1999, which raised net proceeds of $80.4 million, we funded our operations primarily through the private sales of equity securities and through capital equipment leases. At December 31, 2002, our principal source of liquidity was $3.2 million of cash and cash equivalents. "On May 16, 2001, we issued and sold 955,414 shares of preferred stock to three existing stockholders, SCP Private Equity Partners II, L.P., Tandem PCS Investments, LP and Mellon Ventures LP, at $31.40 per share for a total face value of $30 million. The preferred stock is redeemable at any time after May 31, 2006 out of funds legally available for such purposes and initially each share of preferred stock is convertible, at any time, into ten shares of our common stock. Dividends accrue to the preferred stockholders, whether or not declared, at 8% cumulatively per annum. The preferred stockholders are entitled to votes equal to the number of shares of common stock into which each share of preferred stock converts and collectively to designate two members of the Board of Directors. Upon liquidation of the Company, or if a majority of the preferred stockholders agree to treat a change in control or a sale of all or substantially all of our assets (with certain exceptions) as a liquidation, the preferred stockholders are entitled to 200% of their initial purchase price plus accrued but unpaid dividends before any payments to any other stockholders. In association with this preferred stock investment, we issued immediately exercisable warrants to purchase 2,866,242 shares of our common stock for $3.14 per share, which expire on May 14, 2011. The proceeds from the sale of the preferred stock were used to fund our operations from May 2001 into 2002. Effective October 31, 2002, the preferred stockholders irrevocably and permanently waived the right of optional redemption applicable to the Series B Preferred Stock as set forth in the Certificate of Designation and the right to treat a specific proposed "Sale of the Corporation" as a "Liquidation Event," to the extent that such treatment would entitle the Series B Holders to receive their "Liquidation Amount" per share in a form different from the consideration to be paid to holders of our common stock in connection with such Sale of the Corporation. "On January 24, 2003, we entered into a Bridge Loan Agreement with SCP II, an affiliate of our Chairman, James W. Brown, and TECORE, Inc., our largest customer based on revenues during the fiscal year ended December 31, 2002, and a supplier of switching equipment to us. We issued two Bridge Loan Promissory Notes under the Bridge Loan Agreement, each in a principal amount of $3.0 million. The Bridge Notes carry an interest rate of two percent over the prime rate published in The Wall Street Journal and become due and payable on May 24, 2003. The Bridge Loan Agreement provides that the Bridge Notes are secured by a security interest in all of our assets including, without limitation, our intellectual property. To date, we have received advances totaling $4.8 million under the Bridge Notes. We are currently negotiating a definitive funding agreement, under which SCP II and TECORE would provide us financing of $16.0 million in the form of secured notes convertible into our common stock. The proceeds of this proposed financing would be used to refund the advances under the Bridge Loan Agreement and to fund our operations." ALASKA AIR: Will Publish Second Quarter 2003 Results on July 22 --------------------------------------------------------------- Alaska Air Group, Inc. (NYSE:ALK) the parent company of Alaska Airlines, Inc. and Horizon Air Industries, Inc., will announce its second quarter 2003 financial results on Tuesday, July 22, 2003. Interested parties may listen to the company's earnings release conference call at 8:30 a.m. PT via webcast at http://www.alaskaair.com As reported in Troubled Company Reporter's March 21, 2003 edition, Standard & Poor's Ratings Services assigned its 'B+' rating to Alaska Air Group Inc.'s $150 million floating rate senior convertible notes due 2023. The issue is a Rule 144A private placement with registration rights. Standard & Poor's placed the rating on these notes on CreditWatch with negative implications. Standard & Poor's existing ratings on Alaska Air Group and subsidiary Alaska Airlines Inc., including the 'BB' corporate credit rating, remain on CreditWatch with negative implications, where they were placed on March 18, 2003. The CreditWatch listing reflects risks relating to an apparently imminent attack by the U.S. and its allies against Iraq. The CreditWatch listing is part of a broader industry review that covers nine U.S. and three European passenger airlines, already battered by the effects of the Sept. 11, 2001, attacks and their aftermath, now face further financial damage from a war," said Standard & Poor's credit analyst Betsy Snyder. "The airlines have already been hurt by high fuel prices and the depressing effect of uncertainty on business activity," the credit analyst continued. ALLEGHENY TECH.: Will Webcast Q2 Conference Call on July 23 ----------------------------------------------------------- Allegheny Technologies (NYSE:ATI) will provide live Internet listening access to its conference call with investors and analysts scheduled for July 23, 2003 at 1 p.m. ET. The conference call will be conducted after the Company's planned release of second quarter 2003 earnings. The conference call will be broadcast at http://www.alleghenytechnologies.com To access the broadcast, select "Second Quarter Conference Call". In addition, the conference call will be available through CCBN.com. The conference call will be available on both Web sites for 30 days. Allegheny Technologies Incorporated (NYSE:ATI) is one of the largest and most diversified specialty materials producers in the world with revenues of approximately $1.9 billion in 2002. The Company has approximately 9,650 employees world-wide and its talented people use innovative technologies to offer growing global markets a wide range of specialty materials. High-value products include nickel-based and cobalt-based alloys and superalloys, titanium and titanium alloys, specialty steels, super stainless steel, exotic alloys, which include zirconium, hafnium and niobium, tungsten materials, and highly engineered strip and Precision Rolled Strip(R) products. In addition, we produce commodity specialty materials such as stainless steel sheet and plate, silicon and tool steels, and forgings and castings. The Allegheny Technologies Web site can be found at http://www.alleghenytechnologies.com As reported in Troubled Company Reporter's June 26, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit rating on Allegheny Technologies Inc., out of investment grade to 'BB+' from 'BBB' based on ongoing weak financial performance. The current outlook is stable. At the same time, Standard & Poor's lowered Allegheny's senior unsecured debt rating to 'BB', one notch below the corporate credit rating, from 'BBB', reflecting its disadvantaged position in the capital structure due to the company's new $325 million senior secured revolving bank credit facility. In addition, all ratings were removed from CreditWatch, where they were placed on April 15, 2003, with negative implications. AMERALIA INC: Extends Short-Term Financing Due Date to July 31 -------------------------------------------------------------- On February 20, 2003, AmerAlia, Inc., through its indirect, wholly-owned subsidiary, Natural Soda, Inc. (formerly named "Natural Soda AALA, Inc."), purchased the assets of White River Nahcolite Minerals Ltd. Liability Co., and certain related contracts held by IMC Chemicals Inc. with short-term financing provided by funds associated with The Sentient Group of Grand Cayman. Natural Soda, Inc., is owned by Natural Soda Holdings, Inc. (formerly "Natural Soda, Inc."). AmerAlia owns 100% of the outstanding stock of Natural Soda Holdings, Inc. White River Nahcolite Minerals is an indirect, wholly-owned subsidiary of IMC Global, Inc. IMC Chemicals is a subsidiary of IMC. The original terms of the short-term financing required repayment on March 24, 2003, however, the parties extended the repayment date to April 17, 2003, then to May 31, 2003, and then again until June 30, 2003. Certain of the conditions precedent have not been met and the parties have agreed to extend the due date of the short-term financing until July 31, 2003. AMERCO: Wants Blessing to Hire Ordinary Course Professionals ------------------------------------------------------------ AMERCO, pursuant to Sections 105(a), 327 and 331 of the Bankruptcy Code, seeks the Court's authority to retain professionals it utilized in the ordinary course of business and to compensate these professionals for postpetition services without the need for additional Court approval, subject to certain limitations. Bruce T. Beesley, Esq., at Beesley, Peck & Matteoni, Ltd., in Reno, Nevada, relates that AMERCO customarily retains the services of various attorneys, accountants and other professionals to represent it in matters arising in the ordinary course of business and not in this bankruptcy proceeding. Among them are: Amembal, Deane & Associates Legal Services Gasparri and Associates Legal Services Milbank Tweed Hadley & McCloy Legal Services Seward and Kissel Legal Services Mr. Beesley notes that AMERCO may retain additional Ordinary Course Professionals from time to time, as required in the ordinary course of business. AMERCO desires to continue to employ and retain the Ordinary Course Professionals to render services to the estate similar to those rendered prior to the Petition Date. Mr. Beesley contends that the request is warranted because: (a) it would be more costly and inefficient for AMERCO to submit individual applications to the Court for each Ordinary Course Professional; (b) while generally the Ordinary Course Professionals wish to represent AMERCO on an ongoing basis, many might be unwilling to do so if they may be paid only through a formal application process; (c) if the expertise and background knowledge of the Ordinary Course Professionals with respect to the particular areas and matters for which they were responsible before the Petition Date are lost, AMERCO's estate undoubtedly will incur additional and unnecessary expenses associated with the retention of other professionals that will lack the expertise and background knowledge. AMERCO proposes that it be permitted to pay, without formal Court application, 100% of the interim fees and disbursements to each Ordinary Course Professional upon submission to AMERCO of an appropriate invoice. However, the interim fees and disbursements per Ordinary Course Professional should not exceed a total of $50,000 per month throughout this Chapter 11 case. To the extend that the requested payments exceed $50,000 per month, AMERCO proposes that the request for payment will become subject to Court approval pursuant to Sections 330 and 331 of the Bankruptcy Code. Furthermore, AMERCO proposes that every 120 days, or at other Court-ordered interval, AMERCO will file a statement with the Court and serve this Statement to the U.S. Trustee, and any official committee that include these information: (a) the name of the Ordinary Course Professional; (b) the aggregate amount paid as compensation for services rendered and reimbursement of expenses incurred during the previous 120 days; and (c) a general description of the services rendered by the Ordinary Course Professional. Furthermore, AMERCO recognizes the importance of providing information regarding each Ordinary Course Professional that is an attorney to the Court and the U.S. Trustee. Accordingly, AMERCO proposes that each Ordinary Course Professional that is an attorney be required to file with the Court and served to AMERCO's counsel, any official committee's counsel, AMERCO's postpetition lenders and the U.S. Trustee, a verified statement under Rule 2014 of the Federal Rules of Bankruptcy Procedure within 60 days of the order granting this request. The U.S. Trustee, any creditors' committee appointed in this case and the postpetition lenders will have 20 days after receipt of the Verified Statement of each Ordinary Course Professional to object to the retention of the Professional. If any objection cannot be resolved within 20 days, the matter will be scheduled for hearing before the Court at the next regularly scheduled hearing date or at an agreeable time for the Parties and the Court. (AMERCO Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARVINMERITOR: Commences Cash Tender Offer for Dana Corp. Shares --------------------------------------------------------------- ArvinMeritor, Inc., (NYSE: ARM) is commencing a cash tender offer for all of the outstanding common shares of Dana Corporation (NYSE: DCN) common stock for $15.00 net per share. Following completion of the tender offer, ArvinMeritor intends to consummate a second step merger in which all remaining Dana shareholders will receive the same cash price paid in the tender offer. ArvinMeritor's offer represents a premium of 56% over Dana's closing stock price on June 3, 2003, the last trading day before ArvinMeritor submitted its first proposal to Dana in writing, a premium of 39% over Dana's average closing stock price for the last 30 trading days, and a premium of 25% over Dana's closing stock price on July 7, 2003, the last trading day before ArvinMeritor publicly announced its intention to commence a tender offer. The proposed transaction has a total equity value of approximately $2.2 billion assuming 148.6 million shares of Dana outstanding. In addition, Dana has net debt and minority interests of approximately $2.2 billion, accounting for Dana Credit Corporation on an equity basis, bringing the total enterprise value to approximately $4.4 billion. The transaction is anticipated to be significantly accretive to ArvinMeritor's earnings per share in the first year after the transaction closes. The tender offer and withdrawal rights are scheduled to expire at 5:00 p.m., on August 28, 2003, unless extended. ArvinMeritor currently owns 1,085,300 shares of Dana's common stock. The Company noted that the offer will be conditioned upon, among other things, acceptance by more than two-thirds of Dana's shares, the removal of Dana's poison pill, receipt of necessary regulatory approvals, obtaining necessary financing and other customary conditions. The complete terms and conditions will be set forth in the Offer to Purchase, which will be filed with the Securities and Exchange Commission and mailed to Dana's shareowners. UBS Investment Bank is acting as financial advisor and dealer manager, Gibson, Dunn & Crutcher LLP is acting as legal counsel and MacKenzie Partners, Inc. is acting as information agent for ArvinMeritor's offer. ArvinMeritor, Inc. is a premier $7-billion global supplier of a broad range of integrated systems, modules and components to the motor vehicle industry. The company serves light vehicle, commercial truck, trailer and specialty original equipment manufacturers and related aftermarkets. In addition, ArvinMeritor is a leader in coil coating applications. The company is headquartered in Troy, MI, and employs 32,000 people at more than 150 manufacturing facilities in 27 countries. ArvinMeritor's common stock is traded on the New York Stock Exchange under the ticker symbol ARM. For more information, visit the company's Web site at: http://www.ArvinMeritor.com As reported in Troubled Company Reporter's Thursday Edition, Standard & Poor's Ratings Service placed its 'BB+' corporate credit and senior unsecured debt ratings on ArvinMeritor Inc. on CreditWatch with negative implications. In addition, Standard & Poor's placed its 'BB' corporate credit and senior unsecured debt ratings on Dana Corp., on CreditWatch with negative implications. Fitch Ratings also downgraded the ratings of ArvinMeritor Inc.'s senior unsecured debt to 'BB+' from 'BBB-' and capital securities to 'BB-' from 'BB+' and placed the Ratings on Watch Negative. The downgrade reflects ARM's intent to acquire growth through debt financed acquisitions and a willingness to substantially raise the leverage in its capital structure. If the transaction is completed on the proposed terms, further rating action is expected. New financing for the transaction is likely to be on a secured basis, further impairing unsecured debt holders. The ratings have been placed on Rating Watch Negative. ASIA GLOBAL CROSSING: Robert Geltzer Appointed as Ch. 7 Trustee --------------------------------------------------------------- The United States Trustee for Region 2, Carolyn S. Schwartz, has appointed Robert Geltzer as the Interim Chapter 7 Trustee for the Asia Global Crossing Debtors pursuant to Section 701(a) of the Bankruptcy Code. If no trustee is elected, Mr. Geltzer will serve as the Trustee by operation of law. Mr. Geltzer is authorized to operate the business of the estates in accordance with the Bankruptcy Code. His address is Tendler Biggins & Geltzer, 1556 Third Avenue, Suite 505, New York, New York 10128, telephone (212) 410-0100 fax (212) 410-0400. (Global Crossing Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 609/392-0900) AVALON DIGITAL: Completes Sale of Certain Assets to Silverpop ------------------------------------------------------------- Avalon Digital Marketing Systems, Inc., (Nasdaq: AVLN) has completed the previously-announced sale of certain assets to Silverpop Systems, Inc., a privately-held email marketing firm headquartered in Atlanta, Georgia. The assets sold are primarily related to email marketing services provided to large enterprise clients from the company's California operations. Proceeds from the sale were used to pay secured creditors and release liens related to the assets. Silverpop also assumed certain liabilities related to the assets transferred. Post-closing, Avalon will focus its business on providing digital marketing software and services to small business customers from consolidated operations based in Utah. Historically, the small business channel has represented a majority of revenues for Avalon. However, market conditions and cash constraints have forced the company to sell certain assets to satisfy creditors and to consolidate operations. The company cautions that after the asset sale that it will still face a significant negative working capital position, and that it will require near-term financing and additional restructuring to satisfy other liabilities. Avalon Digital Marketing Systems Inc., with headquarters in Utah and offices in Hong Kong, provides digital messaging software and services that automate and enhance sales and marketing communications for small and medium enterprises. Avalon's technologies and services allow its customers to create, manage, deliver and track rich media email marketing campaigns as well as individual 1-to-1 communications. * * * "We Need Additional Financing" In its Form 10-Q filed for the period ended December 31, 2002, Avalon Digital reported: "Our liquidity is significantly impacted by credit and collections issues. Our Small Business channel has generated large balances of receivables and, depending on the quality of the credit and cash needs, we sell certain of the receivables, at a discount, to financing sources. Receivables that have not been sold are retained and billing and collecting administration have been outsourced. A large portion of the Small Business customers have historically had sub-prime credit. Accordingly, many of the receivables generated by these customers may have high credit risk. "At December 31, 2002, our cash position required that we actively seek additional capital. As of December 31, 2002, we had current assets of approximately $2.4 million and current liabilities of approximately $10.8 million. This represents a working capital deficit of approximately $8.4 million. The negative working capital balance includes as current liabilities approximately $1.3 of deferred revenues and is mitigated by approximately $0.8 million in net contracts receivables included in long-term assets. "The Company's line of credit facility with Zions Bank includes covenants for tangible net worth and debt coverage ratios. As of December 31, 2002, the balance on the line was $247,822, and the Company was in violation of these covenants, and has sought waivers. As of the date hereof, the bank has not waived the violations, and if it were to demand payment of the entire balance, the Company's liquidity would suffer. In January 2003, in exchange for an advance of $250,000 on the line, the Company designated a recurring revenue stream in the amount of approximately $40,000 per month for repayment of the outstanding balance on the line. "The $250,000 principal payment due to Radical Communication, Inc., on October 1, 2002 has not been made, and in February 2003, $50,000 of the past due amount was converted into common stock at $4 per share. We are seeking an extension or conversion into equity of some or all of the balance. "We have $820,000 of convertible notes payable that were due on November 21, 2002. The notes were convertible into common stock at the options of the holders, for the lower of $8.70 or the price of a private placement of our common stock, but not converted. In November 2002, the note holders agreed to amend the repayment terms of the notes to increase the interest rate to 14%, lower the conversion price to $3 per share, establish payment terms calling for six equal monthly principal payments beginning in January 2003 through June 2003. In January 2003, $130,667 of the notes were converted into 43,570 shares of common stock. As of February 10, 2003, the balance of the January payment that was not converted into common stock amounted to $50,107 and had not been paid. "In February 2003, a group of investors led by East-West Capital Associates, Inc., and its affiliate, East West Venture Group, LLC agreed to fund the $175,000 remainder of its $3 million obligation to purchase our common stock at $4 per share, by providing $25,000 in cash and $150,000 through the conversion of a portion of the note payable to Radical Communication, Inc. into common stock on the same terms. In addition, the February 2003 amendment to the stock purchase agreement terminated the remaining financing commitment of $800,000 in exchange for a cash investment of $200,000 in the Company by East-West Capital in the form of a convertible secured debenture, bearing interest at 10% per annum, and maturing on the earlier of 120 days from the funding date or the closing of a financing for at least an additional $500,000 or more of equity or debt. The debenture may be converted at the option of the holder at the lesser of (i) $1.375 per share or (ii) the same terms and conditions as a proposed new equity financing by the Company. The Company also agreed to reprice previous warrants issued to East-West Capital and its affiliates to $2.00 per share. East-West Capital agreed to eliminate the protective provisions of the related investor rights agreement and provide active assistance to the Company in its proposed new equity financing efforts. To date, East-West Capital has otherwise satisfied all of their original financing commitments to the Company. "Since the closing of the reverse acquisition of MindArrow, the Company has taken steps to reduce monthly cash operating expenses and identify new sources of revenue. We are currently seeking additional debt and equity financing and are currently evaluating proposals from investors under those terms. However, no binding agreements have been signed and there is no certainty that terms acceptable to the Company and investors can be reached. "The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the company as a going concern. "In our view, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon our continued operations, which in turn is dependent upon our ability to meet obligations on a continuing basis. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence." BANKUNITED: Preferreds Redeemed & Fitch Withdraws Rating -------------------------------------------------------- Fitch Ratings is withdrawing its rating on BankUnited Capital III's 9.0% Cumulative Trust Preferred Securities which have been redeemed, in full, by Bank United Financial Corporation. Rating Withdrawn: BankUnited Capital III -- Trust Preferred Stock 'BB'. BASIS100 INC: Robert J. Smith Resigns as Chief Financial Officer ---------------------------------------------------------------- Basis100 Inc. (TSX: BAS), a business service provider for the mortgage lending marketplace, announced the resignation of Robert J. Smith as the company's Chief Financial Officer. Smith has accepted a senior-level position with his former employer, Cendant Mortgage. Brian Thompson, Basis100's controller, will serve as the interim CFO until a new one can be appointed. "It is with great sadness that I have accepted Bob's resignation," said Joseph J. Murin, President and CEO of Basis100. "His guidance and leadership have played a pivotal role in the creation of Basis100's new strategic direction. On behalf of the entire Basis100 team, I'd like to thank Bob for his contributions to the company and wish him the best of luck in his new position." Smith joined Basis100 in April 2002 as President of U.S. Operations and was promoted to the role of CFO in January 2003. During his tenure, he facilitated the successful restructuring of the company's U.S. operations; consolidated the operations and support center to Jacksonville, Fla.; helped launch the company's new strategic initiative that focuses on the U.S. mortgage lending marketplace; and directed the sale of the company's Canadian Lending Solutions division. Smith will be actively involved in the recruitment of the company's new Chief Financial Officer and will remain on staff until the end of July to ensure the smooth transition of his current responsibilities to Brian Thompson. Thompson has held a variety of finance positions prior to joining Basis100. He served as Vice President, Finance and Accounting at National Auto Finance, and has held senior positions with Barnett Banks, Deloitte & Touche and Beneficial of Florida. Brian graduated from Florida State University in 1984 with a Bachelor of Science degree in Finance. He is also a certified public accountant. "Although I'm excited about the challenges that lie ahead for me, it's difficult to leave Basis100," added Smith. "I have thoroughly enjoyed working for such a dynamic company and wish my colleagues continued success in executing the company's U.S. strategy." Basis100 (TSX:BAS), whose March 31, 2003 balance sheet shows a working capital deficit of about CDN$5 million, is a business solutions provider that fuses mortgage processing knowledge and experience with proprietary technology to deliver exceptional services. The company's delivery platform defines industry-class best execution strategies that streamline processes and creates new value in the mortgage lending markets. For more information about Basis100, visit http://www.Basis100.com BAUSCH & LOMB: Will Host Investor Conference Call on July 24 ------------------------------------------------------------ Bausch & Lomb (NYSE: BOL) will host an investor conference call on Thursday, July 24, at 10:00 a.m. Eastern time to discuss the Company's 2003 second-quarter results. The conference call will be available by telephone and audio webcast. -- By telephone - dial 913-981-5507 between 9:50 a.m. and 10:00 a.m.; -- By webcast - log on to http://www.Vcall.comor to the Investor Relations page of the Company's Web site http://www.Bausch.com The investor conference call will be available by telephone rebroadcast beginning at 1:30 p.m. Eastern time on July 24, through midnight, Monday, July 28. The call-in number to listen to the replay is 719-457-0820; the confirmation code is 410034. A news release outlining the quarterly results will be issued by 8:00 a.m. Eastern time on July 24 on Business Wire and posted on the Company's Web site: http://www.Bausch.com Bausch & Lomb (Moody's, Ba1 Senior Notes Rating) is the eye health company, dedicated to perfecting vision and enhancing life for consumers around the world. Its core businesses include soft and rigid gas permeable contact lenses and lens care products, and ophthalmic surgical and pharmaceutical products. The Bausch & Lomb name is one of the best known and most respected healthcare brands in the world. Celebrating its 150th anniversary in 2003, the Company is headquartered in Rochester, New York. Bausch & Lomb's 2002 revenues were $1.8 billion; it employs approximately 11,500 people worldwide and its products are available in more than 100 countries. More information about the Company can be found on the Bausch & Lomb Web site at http://www.bausch.com BIOSPECIFICS TECH.: Cash Resources Insufficient to Fund Ops. ------------------------------------------------------------ Biospecifics Technologies Corporation has been engaged in the business of producing and licensing for sale a fermentation derived enzyme named Collagenase ABC, approved by the U.S. Food and Drug Administration for debriding chronic dermal ulcers and severely burned areas (the "topical ointment business"). The Company is also researching and developing additional products derived from this enzyme for potential use as pharmaceuticals. As of January 2003 the Company had limited cash resources available to fund its operations. Over the past few months, Biospecifics has been able to fund its operations only because (1) the Company borrowed $100,000 from an unaffiliated individual and an aggregate of $500,000 on seven separate occasions from an individual who is a principal of Bio Partners LP, a private investment group and unrelated third party, (2) the Company received from Abbott Laboratories, its major U.S. customer, in May 2003, early payment of royalties earned from distribution of Santyl(R) ointment from a supply that Biospecifics estimates will be depleted by July 30, 2003, (3) Biospecifics Chairman has deferred salary of approximately $100,000 since February 1, 2003 and in February and April repaid a total of $50,000 of the $1,025,309 principal amount he and his affiliate owed to the Company as of January 31, 2003, and (4) Biospecifics is deferring or making partial payments to creditors. On June 19, 2003, the Company entered into a financing transaction with Bio Partners LP, a private investor group, under which the Company sold to Bio Partners, in a private placement, I) a $1.575 million convertible note, issued at face value, and (II) 295,312 shares of Company common stock, issued at par value, or $.001 per share. The net proceeds to the Company were approximately $890,000, after the payment of expenses and repayment of $500,000 previously advanced to the Company by a principal of Bio Partners. Based on Biospecifics operating projections, the Company believes these funds will enable it to continue operations to December 31, 2003. The Company's projections assume that, among other things: - The Company obtain FDA approval of its production facilities by August 2003; - It is determined that the Company can sell its quarantine inventory (inventory produced at the renovated Curacao manufacturing facility, its primary manufacturing facility) in the United States; - Its Chairman repays to the Company $325,000 of the amount he and his affiliate owe the Company by the end of July 2003. Biospecifics Chairman has indicated that he intends to refinance the mortgage on Biospecifics administrative headquarters in Lynbrook, New York, which is owned by the affiliate of Biospecifics Chairman, and use the proceeds of the refinancing to repay this $325,000 to the Company; and - The Company receives a tax refund of $425,000 in August 2003. There is no assurance that any of these events will occur. If any of the assumptions on which the Company projections are based do not occur, the Company may not be able to fund its operations past the next several months. In addition, the Company cannot assure that it will be able to obtain any additional financing on acceptable terms, or at all. The Company is also in negotiations to license its injectable collagenase product under development for up-front license fees and milestone payments. The Company's projections do not assume this transaction. BREAKWATER RESOURCES: Reduces Term Credit Loan by $5 Million ------------------------------------------------------------ Breakwater Resources Ltd., has made a principal prepayment of US$5.0 million of its US$22.6 million Term Credit Facility. The payment brings the outstanding balances on Breakwater's Term Credit Facility and Supplemental Term Facility to US$17.6 million and US$6.5 million respectively. The payment was made from a portion of the proceeds from the sale of Breakwater's interests in the Tonawanda and Lapa properties, as previously announced. Breakwater Resources Ltd. is a mineral resource company engaged in the acquisition, exploration, development and mining of base metal and precious metal deposits in the Americas and North Africa. Breakwater has four producing zinc mines: the Bouchard-Hebert mine in Quebec, Canada; the Bougrine mine in Tunisia; the El Mochito mine in Honduras; and the El Toqui mine in Chile. * * * Liquidity Risk In the company's recent Sedar filing, it was reported that the price of zinc is currently at a 15-year low in absolute terms and in real terms at its lowest levels since the 1930's, and has declined steadily to this level since the latter months of 2000. The Company is unable to withstand continued low metal prices for an extended period without the ability to source cash required from sources other than operating cash flow. Recent debt financing combined with the rights offering have supported the operations during 2002. Going forward into 2003, a zinc price in excess of US$800 is required to support operations to the end of the year. In the event that the price of zinc does not exceed this level, the Company will be required to find an alternative source of financing. There is no certainty that an alternative source of financing will be available to the Company. World events, including the threat of war and bankruptcies of several major companies, have put serious stress on the ability of insurers to continue to provide support as they have in the past. The surety market is shrinking and, as a result, the availability of environmental bonding is being threatened. It is not unlikely that some or all of the Company's environmental bonds, which amount to approximately $13.0 million, may be withdrawn or that the Company may be required to provide security in the form of cash or letters of credit which would use a significant portion of available credit lines. Provision for such an event has not been included in the forecast for the year. In the event that the bonds are cancelled and the Company is unable to post adequate security, the Company could be in default under the Syndicated Credit Facility. The Lenders are secured with all of the assets of the Company and, in the event of default, could realize on their security. Management is pursuing alternative solutions to protect the assets in the event that the bonds are cancelled. At this time there is no assurance that such alternatives will be available. CABLEVISION SYSTEMS: S&P Places Low-B Ratings on Watch Negative --------------------------------------------------------------- Standard & Poor's Ratings Services placed the ratings on Bethpage, New York-based cable operator Cablevision Systems Corp. and related entities on CreditWatch with negative implications, including the 'BB' corporate credit rating on the company. At March 31, 2003, Cablevision's total debt outstanding was $6.4 billion, excluding collateralized indebtedness of $1.6 billion. The company's preferred stock totaled another $1.6 billion. The CreditWatch placement follows the company's Form 8K filing, in which it revealed that it has received a formal order of investigation from the Securities and Exchange Commission, as well as a subpoena in connection with the order. This investigation follows Cablevision's own recently reported internal investigation of improper expense accruals at American Movie Classics Co., which was disclosed by the company in June. "While the magnitude of the discrepancies reported by Cablevision does not appear to be material, Standard & Poor's cannot currently quantify the potential impact of the formal SEC investigation at this time," said credit analyst Catherine Cosentino. "Nor can Standard & Poor's predict whether the review will extend beyond the issues already raised by Cablevision or say what ramifications an expanded review would have for Cablevision's business prospects." Standard & Poor's will continue to monitor the progress of the investigation to try to gain additional clarity on what the review means for Cablevision's financial and business prospects. One of the events that will be monitored is the impact of the investigation on the company's ability to complete the spin-off of its satellite business later this year. However, there may not be sufficient clarification to resolve the CreditWatch for an extended period. C-BASS CBO: Low-B Ratings Assigned to Class E Notes & Preferreds ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to C-BASS CBO VII Ltd./C-BASS CBO VII Corp.'s $333 million floating- and fixed-rate notes, and preference shares. This presale report is based on information as of July 9, 2003. The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes and the preference shares and overcollateralization; -- The cash flow structure, which is subject to various stresses requested by Standard & Poor's; -- The experience of the collateral manager; -- The coverage of interest rate risks through hedge agreements; and -- The legal structure of the transaction, which includes the bankruptcy remoteness of the issuer. PRELIMINARY RATINGS ASSIGNED C-BASS CBO VII Ltd./C-BASS CBO VII Corp. Class Rating Amount (mil. $) A AAA 262.5 B AA 17.5 C A 17.5 D BBB 23.5 E BB 8.0 Pref shares BB- 4.0 CALL-NET ENTERPRISES: Will Publish Q2 2003 Results on July 30 ------------------------------------------------------------- Call-Net Enterprises Inc. (TSX: FON, FON.B) will be releasing its second quarter results before the markets open on Wednesday, July 30, 2003. The Company will host a conference call for investors and media at 1:00 p.m. (EDT) the same day. Bill Linton, president and chief executive officer and Roy Graydon, executive vice president and chief financial officer will participate in the call. To participate in the conference call, please dial 416-695-5259 or 1-877-461-2816. The confirmation number is T434297S. If you require assistance during the conference call, you can reach an operator by pressing "0". The call will also be audio webcast live at http://www.callnet.caor by entering http://www.newswire.ca/webcastin your web browser. Instant replay will be available until August 15, 2003 by dialing 416-252-1143 or 1-866-518-1010 and the audio webcast will be archived at http://www.callnet.ca Call-Net Enterprises Inc. (S&P, B Corporate Credit Rating, Stable) is a leading Canadian integrated communications solutions provider of local and long distance voice services as well as data, networking solutions and online services to households and businesses. It provides services primarily through its wholly owned subsidiary, Sprint Canada Inc. Call-Net Enterprises and Sprint Canada are headquartered in Toronto and own and operate an extensive national fibre network with over 134 co-locations in nine Canadian metropolitan markets. For more information visit http://www.callnet.caand http://www.sprint.ca CHART INDUSTRIES: Wants More Time to File Schedules & Statements ---------------------------------------------------------------- Chart Industries, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to extend the time period within which they must file their Schedules of Assets and Liabilities and Statements of Financial Affairs, as required by 11 U.S.C. Sec. 521 and Rule 1007 of the Federal Rules of Bankruptcy Procedure. The Debtors tell the Court that they need until September 6, 2003 to prepare and deliver these documents. In order to prepare the Schedules, the Debtors are required to gather information from books, records and documents stored in various locations throughout the country and in several international locations. Collection of necessary information is complicated by the fact that many prepetition invoices have not yet been received or entered into the Debtors' accounting systems. Additionally, the Debtors point out, they already have fully negotiated the Plan with the Senior Lenders, and votes on the Plan have been solicited from, and the Plan has been approved by, the Senior Lenders -- who fall within the only class of creditors entitled to vote on the Plan. Chart Industries, Inc., holds its headquarters in Cleveland, Ohio. The Debtors are suppliers of standard and custom-engineered products and systems serving a wide variety of low-temperature and cryogenic operations. The Company filed for chapter 11 protection on July 8, 2003 (Bankr. Del. Case No. 03-12114). Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $268,082,000 in total assets and $361,228,000 in total debts. CLAYTON HOMES: Brandywine Balks at Berkshire Hathaway's Offer ------------------------------------------------------------- Brandywine Asset Management LLC of Wilmington, Delaware, opposes the previously announced acquisition of Clayton Homes, Inc. (NYSE: CMH) by Berkshire Hathaway (NYSE: BRK.A) for $12.50 per share in cash. Brandywine, which holds approximately 2.3 million shares of Clayton Homes, intends to vote its shares against the transaction at the special meeting of stockholders to be held on July 16, 2003. Brandywine Asset Management was established in 1986 and, since 1998, is a wholly owned subsidiary of Legg Mason, Inc. Brandywine offers value-based equity, fixed income, balanced, U.S., non-U.S. and global strategies to serve the investment needs of a broad range of clients, including public funds, corporations, educational institutions, Taft-Hartley plans, eleemosynary funds, healthcare organizations, religious organizations and high net worth individuals. Clayton Homes, Inc. (Fitch, BB+ Senior Unsecured Rating, Positive) is a vertically integrated manufactured housing company with 20 manufacturing plants, 296 Company owned stores, 611 independent retailers, 86 manufactured housing communities, and financial services operations that provide mortgage services for 168,000 customers and insurance protection for 100,000 families. CNE GROUP: Reports Share Issuances Pursuant to SRC Merger Deal -------------------------------------------------------------- On April 23, 2003, CNE Group, Inc. acquired all of the outstanding stock of SRC Technologies, Inc. and Econo-Comm, Inc. by merging these companies into its wholly-owned subsidiaries. CNE issued to Michael and Carol Gutowski, the principal stockholders of SRC, an aggregate of 4,867,937 shares of its non- voting Series C Preferred Stock and a like number of ten year Class C Warrants, each to purchase one share of its common stock at $1.00 per share. The Class C Warrants are not exercisable and are not detachable from the C Preferred Stock prior to 66 months after their issuance. CNE issued to the other common stockholders of SRC, including Larry Reid, SRC's Chief Operating Officer, an aggregate of 899,976 shares of its common stock, 1,697,961 shares of its non-voting Series A Preferred Stock and a like number of ten year Class A Warrants, each to purchase one share of its common stock at $1.00 per share. The Class A Warrants are not exercisable and are not detachable from the A Preferred Stock prior to 66 months after their issuance. The Company issued an aggregate of 440,000 shares of its Series B Preferred Stock to the holders of the SRC Series B Preferred Stock. The A Preferred Stock has an aggregate liquidating preference over all other CNE equity of $1,697,961 and the B Preferred Stock has an aggregate liquidating preference over all other CNE equity except the A Preferred Stock of $440,000. The C Preferred Stock has no liquidating preference. CNE issued to Gary Eichsteadt and Thomas Sullivan, the stockholders of ECI, an aggregate of 4,867,938 shares of its Series C Preferred Stock and a like number of Class C Warrants. In addition, Messrs. Eichsteadt and Sullivan retained certain of ECI's trade receivables aggregating in the amount of approximately $100,000. The Company also acquired a patent related to the operation of ECI's business from Mr. Eichsteadt for four notes each in the principal amount of $500,000(aggregating $2,000,000), bearing interest at the annual rate of 8% payable quarterly and due on October 31, 2008. There were no relationships between CNE or any of its affiliates and any of the sellers of the assets acquired by the Company prior to the acquisition transactions. Messrs. Gutowski and Reid and Ms. Gutowski became directors and Mr. Gutowski became President and Mr. Reid became Executive Vice President of the Company immediately subsequent to the consummation of the acquisitions. Ms. Gutowski and Messrs. Eichsteadt and Sullivan became executive officers, respectively, of the Company's subsidiaries that merged with SRC and ECI. On April 23, 2003, CNE also effected a private financing pursuant to which it issued its notes in the aggregate principal amount of $750,000, of which $650,000 was contributed by officers of the Company, and 3,124,350 ten year Class B Warrants, each warrant to purchase one share of its common stock at $0.50 per share. The Notes bear interest at the annual rate of 10% payable quarterly and are due on April 30, 2004. The Warrants are non-dilutive until the Notes have been repaid. The due date of the Notes may be extended at the Company's option for an additional year in consideration for the issuance of 10 year cashless warrants to purchase 5% of the Company's then outstanding common stock at $0.50 per share. These Warrants will also be anti-dilutive until the Notes have been repaid. The Company is using the funds obtained from this financing to pay certain ECI notes payable and for working capital. The financing was effected pursuant to the exemption from the registration provisions of the Securities Act of 1933 provided by Section 4(2) thereof. On April 17, 2003, pursuant to the terms of Section 251(g) of the Delaware General Corporation Law, CareerEngine Network, Inc. became a wholly-owned subsidiary of CNE Group, Inc. Pursuant to this transaction the Company acquired all of the assets of CareerEngine, all former stockholders of CareerEngine became the stockholders of the Company, which is the entity that is now publicly traded on the American and Pacific Stock Exchanges under the symbol "CNE," and the officers and directors of CareerEngine became the officers and directors of the Company. As a successor entity to CareerEngine, the Company's shares are deemed to be registered under Section 12(g) of the Securities Exchange Act of 1934 and Rule 12g-3 promulgated thereunder. The shares have been issued without registration in reliance upon exemptions provided in Section 3(a)(9) of the Securities Act of 1933 and Rule 145 promulgated thereunder. CareerEngine has been subject to the reporting requirements of the Exchange Act since 1986. The last report filed by CareerEngine was its Annual Report on Form 10-KSB for the year ended December 31, 2002. CNE Group, Inc.'s March 31, 2003 balance sheet shows a working capital deficit of about $4 million, and a total shareholders' equity deficit of about $4 million. CNE Group (formerly CareerEngine Network) may just hook you up with that dream job. The company operates a network of six portal career Web sites -- ITClassifieds.com, FinancialPositions.com, EngineeringClassifieds.com -- that allow employers to post job openings and allow job seekers to post resumes. It also develops and manages career sites for clients. This is the latest in a series of incarnations for CNE Group, which operated in merchant banking and real estate as the Helmstar Group and in bond dealing as the Matthews & Wright Group. Chairman and president George Benoit owns about 29% of the company, which was forced to relocate from its World Trade Center headquarters following the 2001 terrorist attack. CONSOLIDATED FREIGHTWAYS: Auctioning-Off Woodinville Facility ------------------------------------------------------------- As part of the largest real estate sale in transportation history -- 220 total properties with an appraised value over $400 million -- Consolidated Freightways is placing its Woodinville distribution facility located at 18707 139th Avenue N.E. for sale to the highest bidder, through an open auction process scheduled for July 17, 2003. The Woodinville property is a 31-door cross-dock distribution facility situated on 3.69 acres and has been closed to operations since September 3, 2002, when the 74-year-old company filed for bankruptcy protection. Since then CF has been liquidating the assets of the corporation under orders of the bankruptcy court. 45 CF employees formerly worked at the Woodinville terminal. A contract price of $1,600,000 has been established for the CF property. Interested parties who would like to participate in the July 17 bankruptcy auction should submit the form Request to be Designated a Qualified Bidder at Auction. That form can be found at http://www.cfterminals.com/Overbidder.htmland must be submitted prior to the date of the auction. The indicated deposit must also be received, via wire or certified check, prior to the date of the auction. To date, 100 CF properties throughout the U.S. have been sold for $218 million. Potential bidders should direct any questions about the property and the bidding procedures that cannot be answered at the company's Web site http://www.cfterminals.comto Transportation Property Company at 800/440-5155. COVENTRY HEALTH: Acquiring Altius Health Plans for $41 Million -------------------------------------------------------------- Coventry Health Care, Inc. (NYSE:CVH) has signed a definitive agreement to acquire Altius Health Plans Inc. Altius is a privately-owned, Utah-based commercial-only health plan with total membership of approximately 160,000 consisting of 116,000 risk and 44,000 non-risk members and annual revenues of approximately $235 million. "I am pleased to announce another new market expansion," said Allen F. Wise, President and Chief Executive Officer of Coventry. "Earlier this year we completed the PersonalCare acquisition which opened up the central Illinois market for us. With the Altius acquisition, we are entering the Utah market with considerable mass through a well-run local health plan. Our proven business model will allow Coventry to continue to provide high quality health care to the current members of Altius, while enhancing service to employer and provider customers. We will continue to be opportunistic in growing our company through acquisition, both in existing and new markets, as well as growing through organic sales efforts which have been yielding excellent results thus far in 2003." Coventry will purchase the stock of Altius for up to $41.0 million in cash, subject to certain balance sheet true-up and other provisions. Included in the purchase price is approximately $6.5 million of current statutory net worth. The transaction is expected to close late in the third quarter of 2003, subject to closing conditions, regulatory and other customary approvals. The transaction is expected to be $0.01 accretive to earnings in 2003 and $0.06 in 2004. Coventry Health Care is a managed health care company based in Bethesda, Maryland operating health plans, insurance companies, and provider networks under the names Coventry Health Care, Coventry Health and Life, Carelink Health Plans, Group Health Plan, HealthAmerica, HealthAssurance, HealthCare USA, PersonalCare, SouthCare, Southern Health and WellPath. The Company provides a full range of managed care products and services including HMO, PPO, POS, Medicare+Choice, Medicaid, and Network Rental to 2.9 million members in a broad cross section of employer and government-funded groups in 13 markets throughout the Midwest, Mid-Atlantic and Southeast United States. More information is available on the Internet at http://www.cvty.com As reported in Troubled Company Reporter's July 9, 2003 edition, Fitch Ratings withdrew its 'Bq' quantitative insurer financial strength rating on Coventry Health Care of the Carolinas. CROWN CASTLE: S&P Assigns CCC Rating to Convertible Senior Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC' rating to the $230 million convertible senior notes issued by wireless tower operator Crown Castle International Corp. Proceeds from this public issuance, due 2010, were used to redeem the company's 10-5/8% senior discount notes due 2007. Simultaneously, Standard & Poor's affirmed its 'B-' corporate credit rating on the Houston, Texas-based Crown Castle. The outlook remains negative. The company had total debt of about $3.2 billion at March 31, 2003. "While Standard & Poor's views the tower business as having some favorable business characteristics, the rating is dominated by concerns about Crown Castle's longer term liquidity prospects," said credit analyst Michael Tsao. These concerns stem from the fact that two of the company's subsidiaries generating modest free cash flow--Crown Castle UK Ltd. and Crown Castle Atlantic Holding Co. LLC--cannot upstream cash to the parent and other subsidiaries (which together make up the restricted group). Crown Castle has used substantial debt in the past several years to acquire and build towers, anticipating steep growth in cash flows. However, this growth did not materialize because wireless carrier customers made cutbacks in capital expenditures after facing their own capital constraints and sooner-than-expected flattening of demand growth for services. The situation left Crown Castle aggressively leveraged at about 8.5x on a consolidated basis (and about 14.7x at the restricted group). At the end of March 2003, the restricted group had access to about $409 million of cash and $125 million in bank availability. The restricted group is not projected to generate free cash flows on a sustainable basis in the next two to three years. This is based on assumptions of its mid-single-digit revenue growth, limited expansion in EBITDA margin, and about $100 million in annual capital expenditures. Standard & Poor's also assumes that the restricted group will have about an additional $120 million in annual interest and dividend payments. These are attributable to two debt issues and exchangeable preferred stock becoming cash pay by August 2004. While Crown Castle's financial risk is high, its wireless tower leasing business enjoys several favorable characteristics. First, there is significant operating leverage. Because a tower has mostly fixed costs and few variable costs, each additional tenant on that tower adds to cash flow. Second, towers are not technology-dependent. Third, there is less likelihood for the tower industry to experience oversupply, as some other telecommunications sectors have, because towers are regulated by zoning laws and constraints relating to real estate and radio- frequency engineering. Crown Castle is among the largest wireless tower operators in the industry, with about 10,797 sites in the U.S. and 3,428 sites in the U.K. The company derives more than 80% of its revenues from the tower leasing business and the remainder from network services. CRUM & FORSTER: Fitch Assigns & Withdraws B Senior Debt Rating -------------------------------------------------------------- Fitch Ratings has assigned a 'B' rating to the senior debt of Crum & Forster Holding Corp.'s. The Rating Outlook is Negative. Additionally, Fitch has withdrawn the 'B' senior debt rating of Crum & Forster Funding Corp. CFHC recently assumed $300 million of senior notes from CFFC-a special purpose corporation established to issue and retain the above mentioned notes until Fairfax Financial Holdings Limited successfully renegotiated its bank facility allowing for the transfer of the notes to CFHC without creating an event of default under the facility. Proceeds from the note offering, barring issuance expenses and the placement in escrow of the first four interest payments on the notes, of more than $210 million will be distributed to Fairfax to extinguish outstanding debt and/or invest in cash, short term investments or marketable securities. Fairfax's renegotiated bank facility, in addition to allowing the transfer of the notes to CFHC, allows for borrowing by Northbridge Financial Corp. and Odyssey Re Holdings Corp. and unlike its predecessor, is secured--specifically by Fairfax's shares in Northbridge, Odyssey Re and CFHC. Crum & Forster Holdings Corp. -- Senior debt Assign 'B'/Negative. Crum & Forster Funding Corp. -- Senior debt Withdrawn 'B'/Negative. Fairfax Financial Holdings Limited -- Senior debt Affirm 'B+'/Negative. TIG Holdings, Inc. -- Senior debt Affirm 'B'/Negative; -- Trust preferred Affirm 'CCC+'/Negative. Members of The Crum & Forster Insurance Group -- Insurer financial strength Affirm 'BBB-'/Negative. Members of the Northbridge Insurance Group -- Insurer financial strength Affirm 'BBB-'/Negative. Odyssey Re Group -- Insurer financial strength Affirm 'BBB+'/Negative. Members of the TIG Insurance Group -- Insurer financial strength Affirm 'BB+'/Negative. Commonwealth Insurance Co. -- Affirm 'BBB-'/Negative. Commonwealth Insurance Co. of America -- Affirm 'BBB-'/Negative Ranger Insurance Co. -- Affirm 'BBB-'/Negative. The members of the Crum & Forster Insurance Group are: Crum & Forster Insurance Co. Crum & Forster Underwriters of Ohio Crum & Forster Indemnity Co. The North River Insurance Co. United States Fire Insurance Co. Members of the Northbridge Insurance Group are: Federated Insurance Co. of Canada Lombard General Insurance Co. of Canada Lombard Insurance Co. Zenith Insurance Co. (Canada) Markel Insurance Co. of Canada The members of the Odyssey Re Group are: Odyssey America Reinsurance Corp. Odyssey Reinsurance Corp. The members of the TIG Insurance Group are: Fairmont Insurance Company TIG American Specialty Ins. Company TIG Indemnity Company TIG Insurance Company TIG Insurance Company of Colorado TIG Insurance Company of New York TIG Insurance Company of Texas TIG Insurance Corporation of America TIG Lloyds Insurance Company TIG Premier Insurance Company TIG Specialty Insurance Company DENBURY RESOURCES: Completes Exchange of B-Rated 7-1/2% Notes ------------------------------------------------------------- Denbury Resources Inc. (NYSE:DNR) has completed the exchange of $225 million of its previously issued 7-1/2% Senior Subordinated Notes Due 2013 (S&P/B/Stable), which were privately placed in March 2003, for $225 million of 7-1/2% Senior Subordinated Notes Due 2013 that have been registered under the Securities Act of 1933. One-hundred percent of the privately placed notes were tendered for exchange. Denbury Resources Inc. -- http://www.denbury.com-- is a growing independent oil and gas company. The Company is the largest oil and natural gas operator in Mississippi, holds key operating acreage onshore Louisiana and has a growing presence in the offshore Gulf of Mexico areas. DETROIT MEDICAL: S&P Hatchets Revenue Bond Rating to B from BBB- ---------------------------------------------------------------- Standard and Poor's Ratings Services downgraded its ratings on $562 million of Detroit Medical Center's revenue bonds to 'B' from 'BBB-', reflecting a rapid decline in liquidity and substantial operating losses that are not likely to be eliminated without direct government support or radical restructuring. The outlook has been revised to negative from stable. "If direct government support becomes a reality, it should help, but not solve DMC's operating issues," said Standard & Poor's credit analyst Liz Sweeney. "If direct government support fails, DMC is likely to close two major hospitals with the goal of slashing public mission costs, but the financial outcome of such a radical restructuring is uncertain," she added. The negative outlook reflects the uncertainty surrounding DMC's ability to eliminate operating losses, with or without government support, and stem the drain on cash that the operating losses are causing. A bankruptcy filing is not expected to be necessary for liquidity reasons, as unrestricted cash and investments combined with an available line of credit and other cash inflows during the year, will be sufficient for operations during 2003. The rating is in the 'B' category because it is Standard & Poor's belief that whether DMC receives government support or not, the DMC's financial outlook is very uncertain. In addition, if DMC receives the government support it is seeking, it is likely to lose some measure of flexibility and independence and is not likely to be allowed to operate with the kind of cushion expected of a higher rated entity. DIRECTV: Removal Period Extension Hearing Slated for August 6 ------------------------------------------------------------- DirecTV Latin America, LLC may be party to actions pending in courts of various jurisdictions, Joel A. Waite, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, says. During the initial stage of this case, DirecTV has been focused on various matters including finalizing the DIP Financing and meeting with and providing information to the Committee. Thus, DirecTV did not have the opportunity to fully investigate and determine whether there are any pending matters that should be removed. Rule 9027 of the Federal Rules of Bankruptcy Procedure and Section 1452 of the Judiciary Procedures Code govern the removal of pending civil actions. Specifically, Section 1452(a) provides: "A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit's police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under Section 1334 of this title." Bankruptcy Rule 9027(a)(2) further provides, in pertinent part: "If the claim or cause of action in a civil action is pending when a case under the [Bankruptcy] Code is commenced, a notice of removal may be filed in the bankruptcy court only within the longest of (A) 90 days after the order for relief in the case under the Code, (B) 30 days after entry of an order terminating a stay, if the claim or cause of action in a civil action has been stayed, under Section 362 of the Code, or (C) 30 days after a trustee qualifies in a chapter 11 reorganization case but not later than 180 days after the order for relief." By this motion, DirecTV asks the Court to extend the time for it to file notices of removal of related proceedings under Bankruptcy Rule 9027(a) to and including the latest to occur of: (a) September 15, 2003; or (b) 30 days after the order terminating the automatic stay with respect to the particular actions sought to be removed. Mr. Waite asserts that the requested extension should be granted because: (a) it will afford DirecTV an additional opportunity to make fully informed decisions concerning removal of any pending actions and will assure that it does not forfeit valuable rights under Section 1542 of the Judiciary Procedures Code; and (b) the rights of the parties-in-interests will not be prejudiced by the extension for they may seek to remand a pending action to the state court. The Court will convene a hearing on August 6, 2003 to consider the Debtor's request. By application of Del.Bankr.LR 9006-2, the current removal period is automatically extended through the conclusion of that hearing. (DirecTV Latin America Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392- 0900) DUANE READE: Appoints Timothy R. LaBeau as SVP of Merchandising --------------------------------------------------------------- Duane Reade Inc. (NYSE: DRD) has appointed Timothy R. LaBeau to the position of Senior Vice President of Merchandising and to the Company's Executive Committee, effective Monday, July 21, 2003. Mr. LaBeau, whose responsibilities will include managing purchasing, merchandising and inventory control activities, will report directly to Anthony J. Cuti, Chairman of the Board and Chief Executive Officer. Mr. LaBeau, 48, has extensive merchandising experience and has held several important management positions throughout his 25-year career in the consumer retail industry. He most recently served as Operating Group President at Fleming, Inc., a multi-billion dollar full line grocery wholesaler. Previously, he was President and Chief Executive Officer of American Sales Company, a subsidiary of Ahold USA, from 1998 to 2002. From 1994 to 1998, he served as Executive Vice President of Merchandising and Procurement at Ahold USA. Prior to this position, he spent 17 years working at ALDI Inc., a multi-billion dollar retail grocery store chain operating in 12 states. At ALDI Inc., he served as President from 1986 to 1994, General Manager from 1983 to 1986, and Operations Manager from 1980 to 1983. Gary Charboneau, Senior Vice President of Sales and Marketing, will continue in his marketing role with an increased focus on the Company's advertising, loyalty marketing, photo marketing and in- store merchandising activities. Mr. Charboneau will partner with Mr. LaBeau on related merchandise purchase activities and continue to report to Mr. Cuti. Commenting on the appointment, Anthony J. Cuti, stated, "We are very pleased to have Tim join Duane Reade as a valuable addition to our already strong senior management team. In his new role, Tim will play an important part in our ongoing effort to further strengthen our sales performance, purchasing processes, and inventory management. His significant leadership experience and merchandising expertise will benefit the Company and we look forward to his contributions as we continue to grow the business." Founded in 1960, Duane Reade is the largest drug store chain in the metropolitan New York City area, offering a wide variety of prescription and over-the-counter drugs, health and beauty care items, cosmetics, hosiery, greeting cards, photo supplies and photofinishing. As of June 28, 2003, the Company operated 236 stores. Duane Reade maintains a Web site at http://www.duanereade.com As reported in Troubled Company Reporter's July 4, 2003 edition, Standard & Poor's Ratings Services revised its outlook on Duane Reade to negative from stable. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit and senior unsecured debt ratings and its 'B' subordinated notes rating. The outlook revision follows Duane Reade's announcement that sales and profits were weaker than expected in the second quarter of 2003 (ended June 28, 2003). The company continues to be affected by the soft New York economy. The unusually wet and cold spring in the New York-metropolitan area also contributed to the sales and profit shortfall. EASYLINK SERVICES: Sets Annual Shareholders' Meeting for Aug. 7 --------------------------------------------------------------- The Annual Meeting of Stockholders of EasyLink Services Corporation, a Delaware corporation, will be held at 3 p.m. local time on Thursday, August 7, 2003 at the Embassy Suites Hotel located at 121 Centennial Avenue, Piscataway, NJ 08854 for the following purposes: 1. To elect seven directors of EasyLink to serve until the 2004 Annual Meeting of Stockholders or until their respective successors are elected and qualified; 2. To approve the Company's 2003 Stock Option Plan; and 3. To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. The Board of Directors has fixed the close of business on June 12, 2003 as the record date for determining the stockholders entitled to notice of, and to vote at, the Annual Meeting, and any adjournment or postponement thereof. * * * As previously reported, EasyLink Services said it was seeking to restructure substantially all of approximately $86.2 million of outstanding indebtedness, including approximately $10.7 million of capitalized future interest obligations. The Company is currently in discussions with holders of its debt relating to the proposed restructuring. To date, the holders of approximately 70% of this debt have expressed interest in completing a restructuring on the terms discussed. Management seeks to restructure substantially all of the debt. If all of the debt were successfully eliminated on the currently proposed terms, the Company would pay approximately $2.0 million in cash and issue up to 35 million shares of its Class A common stock, including the shares issued to fund the cash payment. The number of shares to be exchanged for each class of debt was determined based on a deemed per share price of between $2.00 and $3.00. ENRON CORP: Judge Gonzalez Clears Austin Energy Settlement Pact --------------------------------------------------------------- Martin A. Sosland, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that Enron Sandhill Limited Partnership and Austin Energy are parties to a Participation Agreement, dated as of April 20, 2000, as amended, which provides, inter alia, for the construction, operation, maintenance and terms of ownership of an electric generation facility -- the Sandhill Project -- located on a site owned by Austin Energy in Travis County, Texas -- the Properties. Austin Energy is the electric utility department of the City of Austin, Texas. Enron North America Corporation, through its ownership of Enron Sandhill, owns 8.6% of the Sandhill Project while Austin Energy owns the remaining 91.4% of the Sandhill Project. Enron Sandhill is obligated by the terms of the Participation Agreement to sell its interest to Austin on November 3, 2003 for a nominal amount. Enron Sandhill is entitled under the Participation Agreement to an option to call up to 100MW from the Sandhill Project, which option expires on November 3, 2003. In addition, Enron Sandhill is obligated to pay Austin Energy, among other things: (i) a fixed monthly operation and maintenance fee, (ii) a usage fee, equal to fixed dollar amount for each MWh of energy scheduled and delivered to or on behalf of Enron Sandhill in a given month, and (iii) a variable operation and maintenance fee based on the amount of MWh scheduled and received by Enron over a specified amount in a calendar year. In connection with the Participation Agreement, Mr. Sosland informs the Court that ENA entered into a Guaranty in favor of Austin Energy dated as of April 20, 2000, pursuant to which ENA has guaranteed certain Enron Sandhill obligations under the Participation Agreement. In connection with the construction of the Sandhill Project, Enron Sandhill and ENA entered into the Separately Stated Engineering Materials and Equipment Procurement and Construction Agreement, dated April 20, 2000, as amended, pursuant to which ENA was the general contractor. ENA entered into an oral contract with EPC Estate Services, Inc., formerly known as National Energy Production Company, pursuant to which NEPCO performed work for the Sandhill Project as a contractor. NEPCO further entered into Purchase Order No. FR04560001, dated as of June 22, 2000, with Hamon Research-Cottrell, Inc., and Purchase Order No. FR04560006, dated as of August 28, 2000, with Turbine Air Systems, pursuant to which Hamon and TAS furnished equipment and performed service and work for the Sandhill Project as NEPCO's subcontractors. Under the Participation Agreement, Austin Energy remains indebted to Enron Sandhill for the construction of the Sandhill Project in an amount that is disputed among the Parties. Austin Energy asserted that under the terms of the Participation Agreement, Enron Sandhill and ENA, as guarantor, remain indebted to Austin Energy for fuel costs, station work, and other charges incurred or accrued before the Petition Date, and for station work charges that accrued after the Petition Date -- the Unpaid Energy Charges. Moreover, Mr. Sosland notes, Austin Energy asserted that it performed certain warranty work for the Sandhill Project on behalf of the Developer Entities -- the Unplanned Warranty Work - - and incurred costs and expenses in connection with its performance of the warranty work. In addition, Austin Energy asserted that it is owed liquidated damages for delays in substantial completion of the Sandhill Project and in performance relating to subsequent warranty work -- the Schedule LDs. On the other hand, Mr. Sosland continues, NEPCO asserted a claim against Austin Energy and the other Developer Entities for payment of $2,991,656 for work performed pursuant to its oral agreement with ENA and has filed a lien against the Properties in the official records of Travis County, Texas. Both Hamon and TAS also asserted claims for $384,000 and $227,779, for equipment supplied and work performed pursuant to NEPCO's purchase orders to them and have filed liens against the Properties for those amounts in the official records of Travis County, Texas. In connection with the Liens, Hamon filed a suit against Austin Energy and NEPCO styled "Hamon Research Cottrell, Inc. vs. City of Austin d/b/a Austin Energy and National Energy Production Co." in the District Court of Travis County Texas. TAS filed a suit against Austin Energy styled "Turbine Air Systems, Ltd. vs. City of Austin d/b/a Austin Energy" in the District Court of Travis County Texas. Thus, the Parties are in dispute with respect to the: (i) amounts owed by ENA to NEPCO for performance of additional construction work for the Sandhill Project under the Participation Agreement and the EPC Agreement; (ii) amounts owed to Austin for the Unplanned Warranty Work, the Unplanned Warranty Costs and Schedule LDs; and (iii) amounts owed to NEPCO, Hamon and TAS for the performance of construction work for the Sandhill Project. According to Mr. Sosland, the Liens asserted against the Properties jeopardize ENA's and Enron Sandhill's ability to obtain the highest value for the Call Option. Hence, the Parties wish to resolve all claims and issues relating to the Participation Agreement, the EPC Agreement, the Construction Contracts, the Guaranty, the Sandhill Project Construction Work, the Construction Costs, the Energy Charges, the Unpaid Energy Charges, the Liens, the Lawsuits, and the Disputes; and to release each other from all claims, obligations, liabilities, liens and lawsuits related thereto on the terms and conditions of a settlement agreement. The Settlement Agreement and Mutual Release provides, among other things, for the replacement of the Participation Agreement by a Power Allocation Agreement to be executed simultaneously with the Settlement Agreement, by and between Austin Energy and Enron Sandhill, governing, among other things, the Call Option and Enron Sandhill's right to electric energy generated by the project. Pursuant to the Settlement Agreement, Austin Energy will pay Hamon, TAS and NEPCO a settlement payment in full consideration of the Parties' Sandhill Project Construction Work and full satisfaction of the Parties' claims and liens. Specifically, Austin Energy will pay: -- $208,181 to Hamon, -- $171,131 to TAS, and -- $304,985 to NEPCO. Interest will accrue on any overdue portion of the Settlement Payments. NEPCO will also retain an intercompany claim for $1,845,677 against ENA for NEPCO's performance of additional construction work for the Sandhill Project under the Participation Agreement and the EPC Agreement. Payment of any taxes to be paid on the Settlement Payments will be paid in accordance with the terms of the Participation Agreement, EPC Agreement, or the relevant Construction Contract, as between the parties thereto, or in the event these agreements are silent on the issue, by the Party incurring the taxes; In addition, Enron Sandhill will transfer to Austin Energy its undivided interest in the Sandhill Project and Austin Energy. From and after the date of such transfer of Enron Sandhill's interest in the Sandhill Project, Austin Energy will automatically assume, perform, and be fully responsible for any and all claims, liabilities, penalties, fines, costs, expenses, and damages arising out of or relating to in any respect the construction, ownership, operation, or maintenance of the Sandhill Project, whether relating to periods of time prior to or after the date of transfer, other than claims, liabilities, penalties, fines, costs, expenses, and damages attributable to Enron Sandhill's acts and omissions; provided that this provision will not release either Enron Sandhill nor Austin Energy from their obligations under the Power Allocation Agreement. Moreover, Austin Energy will assume all responsibility for the management of the warranty and environmental obligations of Enron Sandhill, ENA, NEPCO and its Subcontractors relating to the Sandhill Project, provided, however, that NEPCO will not be released from liability on claims relating to that certain United States Protection Agency Administrative Order. Finally, the Settlement Agreement provides that each party waives and relinquish all claims it currently has or may have against each other party relating to the Sandhill Claims pursuant to the Settlement Agreement; and Austin Energy will release ENA from all obligations pursuant to the Guaranty, which Guaranty will be deemed null and void. Because Enron Power Marketing, Inc. made certain payments to Austin Energy on behalf of Enron Sandhill under the Participation Agreement, Austin Energy has requested a limited release from EPMI. Accordingly, the Settlement Agreement provides that EPMI agrees to join in the Settlement Agreement to provide a release to Austin Energy for any claims arising out of, related to, with respect to or in connection with any payments made by EPMI to Austin Energy on behalf of Enron Sandhill under the Participation Agreement. Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, ENA and NEPCO ask the Court to approve the Settlement Agreement and the contemplated transactions with Austin Energy. Mr. Sosland argues that the Settlement is warranted since: (a) the Parties propose to resolve all issues related to the Sandhill Claims without any litigation, which could result in additional, unnecessary expense for Debtors ENA and NEPCO; (b) it provides a mechanism for the prompt payment of all claims arising from the Sandhill Claims; (c) it allows NEPCO to realize value on amounts Austin Energy owed; (d) it results in the final satisfaction of all claims between the Parties relating to the Sandhill Claims; (e) it facilitates a future sale of the Call Option by freeing the option from all liens and allowing a potential buyer to enjoy the benefits of the Call Option without being liable for the administrative fees and other responsibilities currently associated with ENA's and Enron Sandhill's ownership of the Sandhill Project; and (f) it excuses NEPCO from the subcontracting responsibilities it is no longer able to service. * * * After due consideration, Judge Gonzalez grants the Debtors' request. (Enron Bankruptcy News, Issue No. 72; Bankruptcy Creditors' Service, Inc., 609/392-0900) EPICOR SOFTWARE: Completes Acquisition of ROI Systems for $20MM --------------------------------------------------------------- Epicor Software Corporation (Nasdaq: EPIC), a leading provider of integrated enterprise software solutions for the midmarket, has completed the acquisition of ROI Systems, a privately held ERP provider of manufacturing software solutions for approximately $20.7 million in an all cash transaction. The acquisition of ROI Systems brings to Epicor not only a highly experienced team, but also a strong customer base that extends Epicor's position as a leading provider of extended, end-to-end enterprise solutions for midmarket manufacturers. To date, Epicor has delivered its solutions to over 15,000 customers worldwide, and with the addition of the ROI customer base, Epicor's manufacturing customer community now includes over 6,500 customers, implemented in more than 35 countries. The company anticipates the acquisition to be accretive to earnings in the fourth quarter 2003 and for the year 2004. Concurrent with the closing, the company has completed a workforce reduction related to the acquisition that combines the best practices of the teams and leverages industry expertise to derive planned cost efficiencies of over 20 percent for the combined manufacturing group on a quarterly basis going forward. Costs associated with the acquisition will be reflected in third quarter 2003 operations. The company will provide revised guidance for the second half of 2003 and an outlook for 2004 revenue and earnings estimates when it reports its final second quarter results on July 23. "With this acquisition, we are executing on our previously announced balanced growth strategy to leverage our strength through both organic growth and acquisitions that meet our stringent M&A criteria," said George Klaus, chairman, CEO and president of Epicor. "The acquisition of ROI enables us to further leverage our domain expertise in manufacturing and our industry- endorsed road map to deliver next generation Web services to an expanding base of midmarket customers. The success of this business combination will be driven by continuing to deliver excellent customer satisfaction and powerful, cost-effective solutions, while accelerating the delivery of next generation technologies and enhancements across all of our products. "The combination of ROI Systems and Epicor will drive greater value for both groups of manufacturing customers and in turn, will contribute to our profitable growth and creation of shareholder value going forward," stated Klaus. ROI has enjoyed significant success with established industry expertise and strong customer satisfaction in a number of manufacturing verticals including consumer packaged goods, medical devices and equipment, and transportation products. For 2002, ROI reported profitability on over $20 million in annual revenues, and despite the difficult economy, reported the best sales quarter in its history for last quarter of 2002. "ROI has sustained profitable growth in midmarket manufacturing for nearly 20 years," said Paul Merlo, president of ROI Systems. "Epicor has a strong track record of supporting the customers and products that they have acquired, while continuing to invest in and deliver their next generation products. Together, the Epicor and ROI teams will be able to leverage significant manufacturing expertise and set new standards for customer satisfaction in the industry. "This relationship will also allow for accelerated delivery of advanced Web services technologies and collaborative applications to ROI customers," continued Merlo. "The significant synergies and opportunities created on both sides will be enormously positive for our customers, employees, and partners." Epicor and ROI provide a strongly aligned culture, customer focus, and technology vision that will benefit the combined companies' customer, employee and shareholder constituents. The company anticipates numerous synergies from this acquisition including technology skill sets, operating efficiencies, cross-selling opportunities, and facilities consolidation of the ROI and the Epicor manufacturing group offices, both currently located in Minneapolis, Minn. Epicor will leverage ROI's strong presence in its key vertical markets, as well as other specialized, non- overlapping verticals, to create new sales opportunities that complement Epicor's current market strengths in discrete, make-to- order manufacturing, distribution, hospitality and services- oriented industries. Epicor will continue to develop and support the ROI MANAGE 2000 product line. MANAGE 2000 release 7.1 is currently scheduled for limited release late in 2003. Epicor has successfully executed on its strategy to deliver its CRM, SRM, e-business and other extended enterprise applications across its installed base of customers and it expects to achieve similar success with the availability of these applications to ROI customers. In the first half of 2004, Epicor plans to release its .NET manufacturing solution, which will feature an n-tier architecture, that has been designed from the ground up to support Microsoft .NET and Web services. The solution will enable Epicor and ROI's manufacturing customers to leverage Web services technology for maximum ease of use, integration, and lower total cost of ownership (TCO). Epicor's product road map enables manufacturers to adopt Web services, on their own timeframe, while protecting their existing technology investment. Epicor is a leading provider of integrated enterprise software solutions for global midmarket companies. Founded in 1984, Epicor has over 15,000 customers and delivers end-to-end, industry- specific solutions that enable companies to immediately improve business operations and build competitive advantage in today's Internet economy. Epicor's comprehensive suite of integrated software solutions for Customer Relationship Management, Financials, Manufacturing, Supply Chain Management, Professional Services Automation and Collaborative Commerce provide the scalability and flexibility to support long-term growth. Epicor's solutions are complemented by a full range of services, providing single point of accountability to promote rapid return on investment and low total cost of ownership, now and in the future. Epicor is headquartered in Irvine, California and has offices and affiliates around the world. For more information, visit the company's Web site at http://www.epicor.com Epicor Software's December 31, 2002 balance sheet shows that total current liabilities exceeded total current assets by about $12 million, while net shareholders' equity has shrunk to about $4 million, from about $7 million as recorded in the year-ago period. EXIDE TECH.: Committee Wants to Investigate Insurance Assets ------------------------------------------------------------ The Official Committee of Unsecured Creditors of Exide Technologies and debtor-affiliates, seeks the Court's authority to obtain documents and information concerning certain insurance coverage of the Debtors, their estates, and their affiliates. The specific documents and information that the Committee seeks relate to Exide's liability insurance coverage between 1960 and 2001. The term "liability insurance" includes general liability coverage, environmental coverage, premises' coverage, production and products completed coverage, and liability coverage for officers, directors, shareholders, and managers of Exide and its predecessor companies. According to David B. Stratton, Esq., at Pepper Hamilton LLP, in Wilmington, Delaware, the Committee, through its professional advisors, has attempted to work with the Debtors and their advisors to conduct the necessary due diligence investigation related to Exide's insurance coverage. The Debtors have been slow in providing the Committee with critical information that is paramount to the Committee's review of insurance coverage that may be available to Exide. Although the Debtors recently have agreed to provide some documents, such information to date has not been provided. The Debtors have also not made certain persons who, on information and belief, have important information about these matters available to the Committee. Accordingly, the Committee finds itself with no choice but to request a Court order compelling the Debtors' cooperation, and the cooperation of certain current and former professionals of the Debtors. Mr. Stratton explains that the Committee seeks the prompt production of documents and information. Given the Debtors' recent statements that they are in the process of formulating their plans of reorganization and the Debtors' disclosure that they are in the process of negotiating with exit lenders, the Committee believes that it is critical to obtain this information and to hold these interviews as soon as possible. Indeed, the existence of any potential insurance coverage may have a dramatic impact on any plans of reorganization. The Committee submits that the list of documents and the amount and type of documents requested are consistent with what official creditors' committees typically request in Chapter 11 cases of like size and complexity. To investigate the existence and scope of coverage, the Committee needs access to insurance policies, internal memos, insurance claims and other relevant information in the Debtors' possession and control. The Committee also seeks access to, and an opportunity to interview, individuals who the Committee believes to be the most knowledgeable about these matters. Mr. Stratton explains that the purpose of the Committee's investigation is to determine whether there are proceeds payable to the Debtor with respect to liabilities it paid in the past or which may still be outstanding. This information is related to the Debtors' "acts, conduct, or property or to the liabilities and financial condition." Consequently, the information sought by the Committee is within the proper scope of Rule 2004 discovery. The Committee also seeks an opportunity to interview the Debtors' professionals who, on information and belief, are knowledgeable of these matters, and in fact, may be the only persons affiliated with the Debtors who have this knowledge. Given the broad scope of Rule 2004 investigation and the very language of the rule that "the court may order . . . any entity" to submit to this examination, the interviews sought by the Committee are likewise within the proper scope of Rule 2004 discovery. For the Committee to fulfill its statutory obligations to all of the Debtors' unsecured creditors and to be an effective counter- balance in these cases, Mr. Stratton contends that the Committee must have a full understanding of the Exide Entities' insurance coverage. The Committee will not have this understanding unless the Debtors provide the requested documents and information and the Committee has an opportunity to interview individuals who have important information about these matters. (Exide Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392- 0900) FACTORY 2-U: Reports Slight Decrease in Sales for June 2003 ----------------------------------------------------------- FACTORY 2-U STORES, INC. (Nasdaq: FTUS) announced that sales for the five-week period ended July 5, 2003 were $49.4 million, a decrease of 1.0% over sales of $49.9 million for the five-week period ended July 6, 2002. Comparable store sales for the five- week period ended July 5, 2003 increased 3.0% versus a decrease of 6.3% for the same period last year. The Company did not open or close any stores during the five-week period ended July 5, 2003. Sales for the twenty-two week period ended July 5, 2003 totaled $189.7 million compared to $203.5 million for the twenty-two week period ended July 6, 2002, a decrease of 6.8%. Comparable store sales for the twenty-two week period ended July 5, 2003 decreased 3.1% versus a decrease of 11.4% for the same period last year. For the twenty-two weeks ended July 5, 2003, the Company opened 1 new store and closed 3 stores: one of which was closed temporarily for landlord repairs. Bill Fields, Chairman and Chief Executive Officer, commented, "Our June comparable store sales performance marked our third consecutive month of positive comparable store sales results. With advertising and promotional activities similar to last year, we experienced a 15% increase in transaction counts on a comparable basis. Our Home business performed the best with comparable sales in the mid-teens, followed by our Children's category with positive low single-digit results. Footwear performed the poorest with negative high single-digit comparable sales. Geographically, our best performing areas were in Texas, Las Vegas, Nevada and the Pacific Northwest with comparable store sales in the range of positive 10% to 30%. Orange County and high desert regions of southern California and New Mexico performed the worst with negative comparable store sales in the high single-digits." Mr. Fields concluded, "We continue to make progress with our merchandise offerings, value statement and in-store execution. We also brought on-line our new distribution center in San Diego, California and we simultaneously closed our two smaller distribution centers in San Diego. As a result of start-up costs associated with our new distribution center, distribution costs will be higher for our second quarter. Our focus for the remainder of our second quarter is to increase transaction counts and continue building on our positive comparable store sales trend of the past three months. Though July was extremely promotional last year, we are targeting July comparable store sales to be in the range of negative 2% to positive 2%. Looking beyond our second quarter, we expect to be profitable in both our third and fourth quarters as a result of anticipated improvement in comparable store sales, lower promotional costs and lower distribution costs." We will provide a mid-month sales update for July on July 21, 2003 at 5:00 P.M. Eastern Daylight Time. Those interested can access this update message at 1-888-201-9603. This message will remain available until August 18, 2003. We will release our July sales results on August 6, 2003 after the market closes, or approximately 4:00 P.M. Eastern Daylight Time. We expect to release our second quarter operating results on August 13, 2003 after the market closes, or approximately 4:00 P.M. Eastern Daylight Time. We will host a real-time webcast presentation and live conference call to discuss our second quarter operating results and third quarter sales and operating results expectations, the same day at 5:00 P.M. Eastern Daylight Time. To participate in the call, dial 1-800-843-7949 five minutes before the call or access the Internet at www.factory2-u.com. All shareholders and other interested parties are encouraged to participate. A replay of the call will remain available for 48 hours by telephone or on the Internet through August 27, 2003. You may also obtain a transcript of the call by contacting Kehoe, White & Co., Inc. at 1-562-437-0655. FACTORY 2-U STORES, INC. operates 242 "Factory 2-U" off-price retail stores which sell branded casual apparel for the family, as well as selected domestics and household merchandise at prices which generally are significantly lower than the prices offered by its discount competitors. The Company operates 31 stores in Arizona, 2 stores in Arkansas, 64 stores in southern California, 63 stores in northern California, 1 store in Idaho, 8 stores in Nevada, 9 stores in New Mexico, 1 store in Oklahoma, 15 stores in Oregon, 34 stores in Texas, and 14 stores in Washington. At February 1, 2003, Factory 2-U Stores, Inc.'s balance sheet shows that its total current liabilities exceeded its total current assets by about $3 million, while its total shareholders' equity shrank to $44 million, from about $70 million recorded a year earlier. FLEMING: Herbert Baum et al. Want Advance Defense Costs Payment --------------------------------------------------------------- Certain current and former directors and officers ask the Court to lift automatic stay to allow Greenwich Insurance Company to advance initial defense expenses amounting to $7,500,000, under a Management Liability and Company Reimbursement Insurance Policy. The initial advance is half of Greenwich's first-layer policy and 7.5% of the total coverage. The request is made by current Fleming Companies, Inc. directors Herbert Baum, Kenneth Duberstein, Archie Dykes, Carol Hallet, Robert Hamada, Edward Joullian III and Alice Peterson; former Fleming director Guy Osborn; current Fleming general counsel Carlos Hernandez; and former Fleming officers Mark Hansen, Neal Rider, Mark Shapiro, Thomas Dahlen, Stephen Davis and William Marquard. The Greenwich Management Liability and Company Reimbursement Insurance Policy has a $15,000,000 aggregate liability limit. Subject to all of its terms and conditions, the Policy affords specified coverage for loss incurred by current and former Fleming D&Os. It also affords a special coverage to Fleming for the loss incurred in connection with its indemnification of the D&Os for the claims against them and in connection with the securities claims against Fleming itself. The Policy covers the period from February 5, 2002 to February 5, 2003. Beginning in September 2002, several lawsuits were filed against Fleming and certain of its directors and officers in both federal and state courts. The Securities and Exchange Commission has also instituted an investigation into certain activities on the part of Fleming and its management. Greenwich has received a request to advance defense expenses in connection with the pending investigations. Each of the D&Os is incurring legal fees and expenses in connection with the investigations. However, Greenwich has agreed to advance defense expenses only upon Court order. The Fleming D&Os believe that Greenwich would not violate the automatic stay by advancing the defense expenses. M. Blake Cleary, Esq., Young Conaway Stargatt & Taylor, in Wilmington, Delaware, assures the Court that the Debtors' estates will not be harmed by the advancement of the proceeds because it ultimately may be required to indemnify the D&O for these defense expenses if they are not advanced by insurance program contains a $100,000,000 total limit, including $85,000,000 in coverage excess of the $15,000,000 Greenwich Policy. Even after the advancement of the defense expenses, Mr. Cleary says, additional insurance remains available. (Fleming Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) FLEXIINTERNATIONAL: Brings-In Kingery Crouse as New Accountants --------------------------------------------------------------- On June 27, 2003, with the approval of the Audit Committee and the concurrence of the Board of Directors, FlexiInternational Software, Inc., engaged Kingery, Crouse & Hohl, P.A. as its independent auditors. Flexi dismissed its former independent auditors, Hill, Barth & King LLC, effective as of that date. HBK informed the Company that it would not register with the Public Company Accounting Oversight Board as required by the Sarbanes-Oxley Act and thus would no longer be able to provide audit services to public company registrants. Prior to the engagement of KCH, HBK had served as the independent auditors of Flexi since December 2001. FlexiInternational Software, Inc., whose March 31, 2003 balance sheet shows a total shareholders' equity deficit of about $2.3 million, is a leading designer, developer and marketer of Internet based financial and accounting software and services. FOCAL COMMS: Fitch Ups & Withdraws Junk Sr. Sec. Facility Rating ---------------------------------------------------------------- Fitch Ratings has upgraded the senior secured credit facility of Focal Communications to 'CCC-' from 'D' and withdrawn the rating. The senior unsecured noteholders have received preferred stock and warrants in the reorganization, therefore Fitch is withdrawing the 'D' rating on these securities. This rating action is the result of Focal's completion of its reorganization plan, which was approved by the bankruptcy court on June 19, 2003. As a result of this reorganization plan, Fitch estimates indebtedness at the company decreased from approximately $450 million as of March 31, 2003, to $95 million on a March 31, 2003 pro forma basis, represented by the $78 million secured credit facility and a $17 million equipment loan. As of March 31, 2003, Focal had approximately $27 million of cash and cash equivalents, and it reported positive EBITDA results of $7.3 million in the first quarter of 2003. The rating of Focal is based on public information. With the rating withdrawal, Fitch will no longer be providing financial analysis on this company. FURR'S RESTAURANT: COLP Selling Assets to CIC-Buffet for $30MM -------------------------------------------------------------- Furr's Restaurant Group, Inc., announced that on July 2, 2003 its principal operating subsidiary, Cafeteria Operators, L.P., signed an Asset Sale and Purchase Agreement with CIC-Buffet Partners, L.P., for the sale of substantially all of COLP's assets. The transaction is valued at approximately $30 million, consisting of $24.5 million in cash, $3 million in secured subordinated promissory notes and the assumption of certain liabilities. Closing of the transaction is targeted for completion in September 2003 in conjunction with confirmation of a joint plan of reorganization for the Company and its subsidiaries that will be proposed by the Company, the Company's senior secured lenders and the Company's Official Committee of Unsecured Creditors. The Company was advised by Murphy Noell Capital LLC, a Westlake Village, California based investment banking firm, in its negotiations with CIC. The Company also announced that on July 3, 2003 the Bankruptcy Court for the Northern District of Texas overseeing the Company's pending Chapter 11 cases approved bidding procedures that contemplate that qualified bidders will be allowed the opportunity to make higher and better offers to purchase COLP's assets at an auction planned for September 2003 in accordance with procedures approved by the Bankruptcy Court under Sections 363 and 365 of the U.S. Bankruptcy Code. Formal announcement of the auction and the process of obtaining any additional offers is scheduled to commence on or before August 1, 2003. The court's ruling gives CIC "stalking horse", or priority, status, which will allow CIC to collect a "breakup" fee should COLP agree to sell its assets to another party bidding in the auction and under certain other limited circumstances. The closing of the transactions described in the Purchase Agreement is subject to satisfaction of a number of conditions, including confirmation of the Company's plan of reorganization and final Bankruptcy Court approval. William Snyder, acting CEO of the Company, stated: "We are very pleased that we have been able to agree with our senior secured lenders and committee of unsecured creditors on the terms of a jointly proposed plan of reorganization, and on the terms of the Purchase Agreement with CIC. We expect to file the joint plan of reorganization and related disclosure statement within the next several weeks, and then to proceed onward with the necessary hearings to allow the plan of reorganization to be confirmed in September 2003 in conjunction with the planned auction. The Company's turnaround plan has been fully implemented and is continuing to show positive results, which we believe contributed to the significant value offered for the COLP's assets by CIC." If the proposed transactions do not close for any reason, the Company's plan of reorganization will also provide for the restructuring of the Company's debt, the cancellation of the Company's existing equity interests and the Company's emergence from bankruptcy as a viable, profitable restaurant company operating 54 restaurants that will be owned by its senior lenders. The Company's joint plan of reorganization will also provide for unsecured creditors (excluding claims of the Company's senior secured lenders) to share in a minimum cash payment of $1.5 million as well as recoveries from the estate's claims and causes of action. These funds will be distributed to unsecured creditors as beneficiaries of a creditors' trust to be created under the joint plan of reorganization. The Company, together with COLP, filed its voluntary petition in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas on January 6, 2003. The Company operates 54 cafeterias in six southwestern and western states. The Company also operates Dynamic Foods, its food preparation, processing and distribution division, in Lubbock, Texas. CIC is a newly organized company affiliated with the Private Equity Group of Cardinal Investment Company, Inc. Cardinal is an investment firm founded in 1974 by Edward W. Rose, III in Dallas, Texas. Its mission is to successfully invest the capital of the firm's partners and their associates. Cardinal manages more than $500 million in assets, investing in a wide range of public and private securities utilizing a team of professionals dedicated to each market. Its investments in the restaurant industry include Cafe Express and Retail and Restaurant Growth Capital. GENUITY INC: Plan Filing Exclusivity Extended to August 6, 2003 --------------------------------------------------------------- Having focused their efforts over the first three months of their Chapter 11 cases on consummating the Level 3 Sale, Erin T. Fontana, Esq., at Ropes & Gray LLP, in Boston, Massachusetts, reports that Genuity Inc. and debtor-affiliates are now involved in the task of working through the various complex inter-creditor issues and proposing a liquidation plan. The Debtors initiated meetings to discuss the inter-creditor and intercompany issues with the Creditors' Committee. In those meetings, the Debtors proposed certain possible structures for, and major terms of, a liquidating plan. The members of the Creditors' Committee are currently engaged in negotiations among themselves to formulate their views and a view of the Creditors' Committee regarding major plan features. At present, these discussions and negotiations are not complete, and thus the Debtors have not received definitive feedback from these major creditors. Accordingly, the Debtors sought and obtained a Court order extending their exclusive period to file a Chapter 11 plan to August 6, 2003, and their exclusive period to solicit acceptances of that plan to October 31, 2003. Ms. Fontana explains that the Creditors' Committee has agreed to these extensions, as part of their agreement with the Debtors that each will negotiate in good faith with the other over the terms of a plan that is acceptable to both parties. The Creditors' Committee has indicated that it intends to provide the Debtors with definitive feedback regarding their preferences for plan terms very soon. In return, the Debtors have agreed that during the Exclusive Filing Period, they will not file a plan that has not been approved by the Creditors' Committee until the Debtors believe that negotiations are not progressing in good faith toward filing a plan within the extended exclusivity period. In that event, the Debtors will give the Committee 10 days' prior notice of the filing of any plan. Ms. Fontana asserts that for the moment, continued negotiation, within these deadlines for the Debtors and the Creditors' Committee, is the preferable method to rapidly achieve a plan of liquidation that can be confirmed without objection from those major creditors who are members of the Committee. Ultimately, if some consensus or Creditors' Committee position cannot be reached, the more formal public proposal of a plan may become necessary to move the plan process forward. But this step is not necessary at this time. (Genuity Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Court Extends Plan Filing Exclusivity to Oct 28 ---------------------------------------------------------------- U.S. Bankruptcy Court Judge Gerber believes that terminating the Global Crossing Debtors' exclusive periods would have the potential for serious prejudice to creditors. There is at least a risk, if not certainty, that terminating exclusivity now -- particularly when it would not be for the purpose of permitting a creditor constituency to file a competing plan, but rather to facilitate a competing bid -- would send the wrong message, and could damage the regulatory approval process that is so important to all creditors, or, at least, all creditors other than those who are bidders. Accordingly, Judge Gerber extends the Exclusive Filing Period to the earlier of October 28, 2003, or in the event the Purchase Agreement is terminated in accordance with its terms, two weeks from the date of termination. The Exclusive Solicitation Period is also extended until 60 days after the Extended Exclusive Filing Period. (Global Crossing Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 609/392-0900) GOLDENTREE LOAN: S&P Assigns Three Prelim. BB Class Note Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to GoldenTree Loan Opportunities II Ltd.'s $403 million fixed-rate, floating-rate, discount, and revolving notes, and combination securities due 2015. This presale report is based on information as of July 9, 2003. The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The expected commensurate level of credit support in the form of subordination to be provided by the notes junior to the respective classes; -- The cash flow structure, which is subject to various stresses requested by Standard & Poor's; -- The experience of the collateral manager; -- The coverage of interest rate and foreign currency risks through hedge agreements; and -- The legal structure of the transaction, which includes the bankruptcy remoteness of the issuer. PRELIMINARY RATINGS ASSIGNED GoldenTree Loan Opportunities II Ltd. Class Rating Amount (mil. $) I-A AAA 185.0 I-B AAA 60.0 I-C* AAA 10.0 IIa AA- 12.0 IIb AA- 8.0 III A- 34.0 IV BBB 34.0 Va BB 10.0 Vb BB 2.0 Vc BB 2.0 A combination securities* AAA 13.0 B combination securities N.R. 10.0 C combination securities N.R. 10.5 Preferred shares N.R. 46.0 *The class I-C and A combination securities are rated to principal (accreted value) only. GREEN POWER ENERGY: Watts & Scobie Expresses Going Concern Doubt ---------------------------------------------------------------- According to the Auditors Report by Watts & Scobie, CPAs, dated June 20, 2003, concerning Green Power Energy Holdings Corporation: "[T]he Company has an immediate but unresolved need to obtain significant long-term financing that raises substantial doubt about its ability to continue as a going concern." Subsequent to year end, the Company began implementing a plan to convert the facility from a single fuel source, coal, to a combination of coal, waste wood, and shredded tires. The ultimate cost of the conversion is estimated by management to be approximately $400,000. The Company expended approximately $300,000 on this project during the first five months of 2003. On April 23, 2003, Green Power Energy Holding, LLC was converted into a regular corporation and merged with Dr. Owl Online, Inc. (OWL), a publicly-held corporation which had no significant assets or business operations. As a result of this merger, the owners of GPH hold 74% of the capital stock of Green Power Holdings Corp., the surviving parent company. This merger is expected to facilitate the Company's access to sufficient capital to provide operational funding and to liquidate the balance due under the asset purchase agreement. However, in June 2003, Cogentrix of North Carolina, Inc. agreed to a 30-day extension of the due date for the $6,239,812 payment. Management is negotiating with several financial institutions for long-term financing to replace this debt, and expects to obtain it in time to meet the extended due date but no firm commitment had been received. Failure to secure new long-term financing would cause the Company to default on its debt to Cogentrix and to create substantial doubt with respect to its ability to continue as a going concern. HEADWAY CORPORATE: Section 341(a) Meeting to Convene on Aug. 13 --------------------------------------------------------------- The United States Trustee will convene a meeting of Headway Corporate Resources, Inc.'s creditors on August 13, 2003, at 2:00 p.m., at 80 Broad Street, Second Floor, New York, New York 101004. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headway Corporate Resources, Inc., with its headquarters in New York, New York, provides human resource and staffing services. The Company filed for chapter 11 protection on July 1, 2003 (Bankr. S.D.N.Y. Case No. 03-14270). Jeffrey L. Tanenbaum, Esq., at Weil, Gotshal & Manges, LLP, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets of over $10 million and estimated debts of more than $50 Million. IMCLONE SYSTEMS: Regains Compliance with Nasdaq Requirements ------------------------------------------------------------ ImClone Systems Incorporated (NASDAQ: IMCLE) has received written notification from NASDAQ of its determination that the Company has evidenced compliance with the current requirement for continued listing on The Nasdaq National Market. As a result of the Company's compliance, its trading symbol will revert back to "IMCL" effective with the open of the market on July 10, 2003. ImClone Systems Incorporated, whose March 31, 2003 balance sheet shows a total shareholders' equity deficit of about $220 million, is committed to advancing oncology care by developing a portfolio of targeted biologic treatments, designed to address the medical needs of patients with a variety of cancers. The Company's three programs include growth factor blockers, angiogenesis inhibitors and cancer vaccines. ImClone Systems' strategy is to become a fully integrated biopharmaceutical company, taking its development programs from the research stage to the market. ImClone Systems' headquarters and research operations are located in New York City, with additional administration and manufacturing facilities in Somerville, New Jersey. ISTAR FIN'L: Fitch Rates 7-7/8% Series E Preferreds at BB --------------------------------------------------------- Fitch Ratings assigns a 'BB' rating to iStar Financial Inc.'s 7-7/8% series E cumulative redeemable preferred stock. The securities rank pari passu with iStar's existing series A, B, C and D cumulative redeemable preferred stock. iStar's senior unsecured debt rating and Rating Outlook is 'BBB-' and Stable, respectively. The 2.8 million series E shares have an aggregate liquidation preference of $140 million. The series E shares are being used to redeem iStar's 9.5% series A cumulative redeemable preferred stock with an aggregate liquidation preference of $140 million. Approximately $80 million of the series A remains outstanding and becomes callable in December 2003. The series E is non-callable for a period of five years. As this is an exchange of series E for series A securities, no meaningful change to iStar's capitalization is expected as a result of this transaction. However, the series E dividend is 163 basis points lower than the series A, and will save iStar approximately $2.2 million per year, or approximately 6% of the company's fiscal-year 2002 preferred dividend requirements. Headquartered in New York City, iStar provides structured financing and corporate leasing of high quality commercial real estate nationwide. iStar leverages its expertise in real estate, capital markets, and corporate finance to serve corporations with sophisticated financing requirements. As of March 31, 2003, loans and other lending investments totaled $3.2 billion and real estate subject to operating leases totaled $2.3 billion. JWS CBO: Fitch Affirms B+ Class D Senior Secured Note Rating ------------------------------------------------------------ Fitch Ratings affirms two classes of notes issued by JWS CBO 2000- 1, Ltd. These affirmations are the result of Fitch's annual review process. The following rating actions are effective immediately: -- $31,500,000 class C third priority senior secured notes 'BBB'; -- $23,250,000 class D fourth priority senior secured notes 'B+'. Fitch does not rate the class A or class B notes of JWS CBO. JWS CBO, a collateralized bond obligation managed by Stonegate Capital Management, L.L.C., was established in July 2000 and currently maintains most of its invested note proceeds in senior unsecured and subordinated bonds. Fitch has reviewed in detail the portfolio performance of JWS CBO. In conjunction with this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. The JWS CBO portfolio has experienced some deterioration since its inception, but has shown improvements over the last year of performance. As of the most recent trustee report dated June 5, 2003, the current portfolio has 3.8% in defaulted securities and 18.6% in securities rated 'CCC+' or lower (excluding defaults) calculated using the lower of the other agencies' ratings. However, only 3.9% of the total collateral that is rated 'CCC+' and below (excluding defaults) is trading below 70, which is higher than Fitch's expected recovery rates on defaulted senior unsecured bonds and subordinated bonds of 40% and 20%, respectively. Stonegate has been managing this portfolio well by trading premium securities and reinvesting the proceeds in par or below assets, thereby improving the structures overcollateralization levels. Although there have been three payment dates with a failing OC test, JWS CBO has had sufficient excess interest to cure the test and continue paying current interest on the class C and D notes. During this period, paydowns due to a failing OC test resulted in a class A principal reduction of approximately $10 million. As of the most recent trustee report, JWS CBO is passing all of its OC tests and its interest coverage tests. Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. As a result of this analysis, Fitch has determined that the current ratings assigned to the class C and D notes still reflect the current risk to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments. KAISER ALUMINUM: US Bank Has Until July 18, 2003 to File Claims --------------------------------------------------------------- In a Court-approved stipulation, Kaiser Aluminum Corporation and its debtor-affiliates, and U.S. Bank National Association, the indenture trustee for State Street Bank Trust Company, agree that the new indenture trustee's deadline to file proofs of claim against Alpart Jamaica Inc., KAE Trading, Inc., Kaiser Aluminum & Chemical Investment Limited, Kaiser Aluminum & Chemical of Canada Limited, Kaiser Bauxite Company, Kaiser Center Properties, Kaiser Export Company, Kaiser Jamaica Corporation and Texada Mines Ltd. - - the New Debtors -- on account of the Debtor-issued 12-3/4% senior subordinated notes is extended from June 16, 2003 to July 18, 2003. U.S. Bank resigned as trustee for the securities. The Debtors appointed Law Debenture Trust Company of New York as successor trustee for the securities. (Kaiser Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900) KMART CORP: Hires Fredrikson & Byron as Property Tax Counsel ------------------------------------------------------------ For the past three years, the Kmart Debtors have turned to Burr Wolff Co. for property tax advice and to manage the processing, audit, payment, and, if necessary, challenges to of all Kmart real and property taxes assessed by taxing authorities all over the United States. Among its responsibilities, Burr Wolff engages counsel to pursue challenges and appeals of disputable tax assessments. Burr Wolff engaged Fredrikson & Byron, PA to litigate a variety of property tax actions and appeals in Minnesota. Burr Wolff asked Fredrikson to pursue certain tax proceedings in the Minnesota Tax Court, including appeals from certain assessors' valuations as of January 2, 2002. The appeals were filed on April 30, 2003. However, the Minnesota Tax Court has questioned Fredrikson's authorization by the bankruptcy court to represent the Debtors in the appeals. For this reason, the Debtors ask the Court for authority to employ Fredrikson as special property tax counsel to pursue property tax protests, appeals, refunds and similar proceedings in Minnesota. Fredrikson will also render professional services on special projects that may be assigned to it in connection with the Minnesota tax proceedings. The Debtors believe that Fredrikson is well qualified and able to represent them. The Debtors propose to pay Fredrikson on a contingency basis. The firm will be paid 26% if either the amount by which a property tax is reduced or the amount a property tax refund is increased due to its efforts. The contingency fee will be reduced to 20% when the additional 6% has yielded $70,000 in compensation to the firm. The Debtors will shoulder certain expenses incurred in the prosecution of the tax proceedings. Consistent with past practices, the Debtors will pay Burr Wolff, who, in turn, will pay Fredrikson. Thomas R. Wilhelmy, Esq., at Frederickson assures the Court that his firm does not hold or present any adverse interest to the Debtors or their estates. Mr. Wilhelmy, however, discloses that on January 18, 2002, Fredrikson filed a notice of attorney's lien pursuant to Minn. Stat. Section 481.13 in the office of the Michigan Secretary of State. This was to perfect Fredrikson's lien interest in any property tax refunds. The firm anticipates that Burr Wolff will pay the amounts owed to it. As of the Petition Date, Mr. Wilhelmy further reports, Fredrikson had provided legal services valued at $558,179 for prepetition services related to all Minnesota tax petitions. (Kmart Bankruptcy News, Issue No. 59; Bankruptcy Creditors' Service, Inc., 609/392- 0900) L-3 COMMS: Will Publish Second Quarter Results on July 23, 2003 --------------------------------------------------------------- L-3 Communications (NYSE: LLL) intends to release its second quarter results for the period ended June 30, 2003 on Wednesday, July 23, 2003, before the open of the market. In conjunction with this release, L-3 Communications will host a conference call on the same day at 2:00 PM EDT that will be simultaneously broadcast live over the Internet. Frank C. Lanza, chairman and chief executive officer, Robert V. LaPenta, president and chief financial officer, and Cynthia Swain, vice president - corporate communications, will host the call. Wednesday, July 23, 2003 2:00 PM EDT 1:00 PM CDT 12:00 PM MDT 11:00 AM PDT Listeners may access the conference call live over the Internet at the following web address: http://www.firstcallevents.com/service/ajwz384888983gf12.html Allow fifteen minutes prior to the call to visit this site to download and install any necessary audio software. The archived version of the call may be accessed at this site or by dialing (800) 642-1687 (passcode: 1691728) beginning approximately two hours after the call ends through July 30, 2003 at 11:59 PM EDT. Headquartered in New York City, L-3 Communications is a leading merchant supplier of Intelligence, Surveillance and Reconnaissance systems and products, secure communications systems and products, avionics and ocean products, training devices and services, microwave components and telemetry, instrumentation, space and navigation products. Its customers include the Department of Defense, Department of Homeland Security, selected U.S. Government intelligence agencies, aerospace prime contractors and commercial telecommunications and wireless customers. To learn more about L-3 Communications, visit the company's Web site at http://www.L-3Com.com * * * As reported in Troubled Company Reporter's May 16, 2003 edition, Standard & Poor's Ratings Services assigned its 'BB-' rating to L-3 Communication Corp.'s new $300 million senior subordinated notes due 2013. At the same time, Standard & Poor's affirmed its 'BB+' corporate credit rating on L-3. The outlook is stable. "Ratings on New York, New York-based L-3 reflect a slightly below average business profile and an active acquisition program, but credit quality benefits from an increasingly diverse program base and efficient operations," said Standard & Poor's credit analyst Christopher DeNicolo. Acquisitions are an important part of the company's growth strategy, and the balance sheet has periodically become highly leveraged because of debt-financed transactions. However, management has a good record of restoring financial flexibility by issuing equity. LNR PROPERTY: Calls 9-3/8% Sr. Subordinated Notes for Redemption ---------------------------------------------------------------- LNR Property Corporation (NYSE: LNR), one of the nation's leading real estate investment, finance and management companies, has called for redemption its 9-3/8% Senior Subordinated Notes due 2008. The redemption date is August 8, 2003. The redemption price is 104.688% of the principal amount of the Notes. The redemption price will be paid, together with accrued interest from March 16, 2003 to the August 8, 2003 redemption date, when the Notes will be surrendered for redemption. Interest on the Notes will stop accruing on the redemption date. LNR will record a charge to its earnings for the quarter ending August 31, 2003 to reflect the redemption of the Notes at a premium. LNR Property Corporation is a real estate investment, finance and management company. As previously reported in Troubled Company Reporter, Fitch Ratings assigned a 'BB-' rating to LNR Property Corp's $350 million ten year 7.625% senior subordinated notes. The notes have a final maturity of July 15, 2013 and are pari passu with LNR's existing senior subordinated debt. The Rating Outlook is Stable. Partial proceeds from the transaction will be used to fully refinance LNR's $200 million of 9.375% senior subordinated notes due in 2008. LTV: Copperweld Signs-Up Standard & Poor's as Valuation Advisors ---------------------------------------------------------------- Copperweld Corporation asks Judge Bodoh's approval of its employment of Standard & Poor's Corporate Value Consulting as valuation advisors for its Chapter 11 case, nunc pro tunc to June 9, 2003, the day on which CVC actually began performing services for Copperweld. Shana F. Klein, Esq., at Jones Day in Cleveland, describes the services to be rendered by CVC as: (1) estimation of the reorganization value of Copperweld, reflecting an estimate of Copperweld's enterprise value based on the Debtor's prospective 7-year plan of reorganization, including all administrative and legal costs of the Chapter 11 case; and (2) estimation of the liquidation value of Copperweld under two scenarios: going concern and orderly liquidation. Mr. Myron Marcinkowski, Lead Managing Director for CVC, discloses that CVC has a tiered fee structure. For litigation matters or an individual asset liquidation analysis, the fees are: Hourly Professional Position Rate ------------ -------- ------ Myron Marcinkowski Lead Managing Director $385 S&P - Atlanta James Marshall Manager S&P - Atlanta $285 Senior Associate $215 Associate $150 However, the expected fees for the services anticipated by CVC and Copperweld are: Engagement Component Expected Fee -------------------- ------------ Service One - Reorganization value $20,000 to $25,000 Service Two - Liquidation Value for 3 operating groups $35,000 to $45,000 Service Three - Equity Allocation $10,000 to $15,000 Service Four - Disclosure Statement Included Service Five - Attendance at confirmation Hearing Included ------------------ Total expected fee $65,000 to $85,000 Mr. Marcinkowski discloses that CVC has done valuation work for many parties-in-interest in these cases, although not in connection with the matters on which CVC is to be employed. These parties in interest include: Interested Party Services ---------------- -------- Minnesota Power (potential purchaser) Valuation Wellspring Capital (potential purchaser) Price allocation Dewey Ballantine LLP Sell side advisory Kaye Scholer LLP Litigation Skadden Arps Valuation McDermott Will & Emery (represents potential Tax valuation; Purchasers) litigation BP America Valuation GATX Capital Valuation State of Minnesota Market strategy First Energy (creditors' committee) Valuation Citicorp Venture Capital (potential buyer) Valuation Accenture FAS 142 goodwill impairment Volkswagen (customer) Valuation General Motors (customer) Market strategy Citicorp Price allocation Notwithstanding these and other relationships, Mr. Marcinkowski avers that CVC is a disinterested party which neither holds nor represents any interest adverse to the Debtor in the matters for which CVC will be employed. (LTV Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 609/392-00900) LYONDELL CHEMICAL: Board Declares Regular Quarterly Dividend ------------------------------------------------------------ On July 9, 2003, the Board of Directors of Lyondell Chemical Company (NYSE: LYO) (S&P, BB- Senior Secured Debt Rating, Negative) declared a regular quarterly dividend of $0.225 per share of common stock to stockholders of record as of the close of business on August 25, 2003. Lyondell has two series of common stock outstanding: Common Stock and Series B Common Stock. The regular quarterly dividend on each share of outstanding Common Stock is payable in cash on September 15, 2003. Lyondell has elected to pay the regular quarterly dividend on each share of outstanding Series B Common Stock in kind in the form of additional shares of Series B Common Stock on September 29, 2003. Lyondell Chemical Company -- http://www.lyondell.com-- headquartered in Houston, Texas, is a leading producer of: propylene oxide; PO derivatives, including propylene glycol, butanediol and propylene glycol ether; toluene diisocyanate; and styrene monomer and MTBE as co-products of PO production. Through its 70.5% interest in Equistar Chemicals, LP, Lyondell also is one of the largest producers of ethylene, propylene and polyethylene in North America and a leading producer of ethylene oxide, ethylene glycol, high value-added specialty polymers and polymeric powder. Through its 58.75% interest in LYONDELL-CITGO Refining LP, Lyondell is one of the largest refiners in the United States processing extra heavy Venezuelan crude oil to produce gasoline, low sulfur diesel and jet fuel. MAGELLAN HEALTH: Wachovia Seeks Stay Relief to Prosecute Claims --------------------------------------------------------------- Wachovia Bank, National Association seeks relief from the automatic stay to allow another tribunal to render a decision in a pending civil action that will resolve the validity and amount of Wachovia's prepetition claim against Magellan Health Services, Inc. If the stay is modified, Wachovia seeks limited abstention by the Court from determining the validity and amount of the Claim, except to the extent necessary to estimate the Claim. Peter Janovsky, Esq., at Zeichner Ellman & Krause LLP, in New York, informs the Court that Magellan has scheduled Wachovia's Claim as a $30,000,000 contingent, unsecured, disputed claim. As of the Petition Date, Wachovia asserts a $40,000,000 claim, including pre-judgment interest. The Claim is the subject of a lawsuit that Wachovia filed against Magellan in the Court of Common Pleas for Richland County, South Carolina, in July 2000. Magellan removed the case to the United States District Court for the District of South Carolina, Columbia Division, where the case is now pending. The Claim is a prepetition claim arising from events that occurred in 1988, 1989, and 1990 when Magellan was known as Charter Medical Corporation and was headquartered in Macon, Georgia. Wachovia seeks to enforce two contractual indemnity agreements that Charter executed for the benefit of The South Carolina National Bank, which later merged into Wachovia. Mr. Janovsky tells the Court that the principal fact witnesses reside in South Carolina, North Carolina, or Georgia. Wachovia's two most important fact witnesses, neither of whom is employed by Wachovia, reside in Columbia, South Carolina, where the lawsuit is pending. Two other very important fact witnesses for Wachovia, neither of whom is employed by Wachovia, reside in or near Charlotte, North Carolina, which is 90 miles from Columbia, South Carolina. Wachovia is represented by counsels who reside in Columbia, South Carolina, and Magellan has been represented by counsel who also resides in Columbia, South Carolina, or in Atlanta, Georgia. The lawsuit is assigned to the Honorable Margaret B. Seymour, United States District Judge, who has two potentially dispositive motions filed by Magellan under advisement. The motions were argued on February 20, 2003, and Judge Seymour would probably have ruled on the motions in March if Magellan had not filed its bankruptcy petition. The facts of the case are somewhat complicated, and the parties have consistently and repeatedly reported to the District Court that a trial before a jury would require three weeks to complete. If the case is tried non-jury by Judge Seymour, the trial could probably be completed in two weeks. Mr. Janovsky assures the Court that Wachovia does not, however, seek to interfere with or limit the authority of the Bankruptcy Court to estimate the claim pursuant to Section 502(c) of the Bankruptcy Code. Wachovia also does not seek relief from the automatic stay with respect to enforcement of any judgment that might be entered in Wachovia's favor on the Claim. Any judgment will be subject to the terms of a plan of reorganization confirmed by the Court. In re Sonnax Industries, Inc., 907 F.2d 1280, 1286 (2d Cir.1990), adopted twelve factors enumerated by In re Curtis, 40 B.R. 795 (Bankr. D. Utah 1984), that a bankruptcy court should consider in deciding whether to permit litigation to continue in another forum. Those twelve Sonnax factors and the manner in which they apply, if at all, to this case are: 1. Whether relief would result in a partial or complete resolution of the issues: Granting the relief requested by Wachovia would clearly result in a complete resolution of all issues relating to the merits of Wachovia's Claim against Magellan and would leave no unresolved issues with which the Court would be required to deal; 2. Lack of any connection with or interference with the bankruptcy case: Wachovia's lawsuit against Magellan is connected to this bankruptcy case as it is a claim determination proceeding, but lifting the stay to allow determination of the claim in the District Court will not interfere with this bankruptcy case; 3. Whether the other proceeding involves Magellan as a fiduciary: Wachovia's lawsuit against Magellan does not involve Magellan as a fiduciary; 4. Whether a specialized tribunal with the necessary expertise has been established to hear the cause of action: No specialized tribunal has been established to hear Wachovia's lawsuit against Magellan, but the District Court before which the lawsuit is pending clearly has the expertise to deal with all issues in the case; 5. Whether Magellan's insurer has assumed full responsibility for defending it: Magellan has informed Wachovia that Magellan does not have any insurance to cover Wachovia's Claim; 6. Whether the action primarily involves third parties: No third parties are involved in Wachovia's lawsuit against Magellan; 7. Whether litigation in another forum would prejudice the interests of other creditors: Other creditors will not be prejudiced by allowing Wachovia's lawsuit to proceed in the court in which it is now pending; 8. Whether the judgment claim arising from the other action is subject to equitable subordination: The judgment claim that might arise from Wachovia's lawsuit against Magellan will not be subject to equitable subordination; 9. Whether movant's success in the other proceeding would result in a judicial lien avoidable by the debtor: Wachovia is not proceeding in a state court forum seeking a lien by way of a money judgment or to transcribe any federal court judgment to state court. Consequently, the resolution of the Claim would not result in a voidable judicial lien; 10. The interests of judicial economy and the expeditious and economical resolution of litigation: The interests of judicial economy will clearly be served by allowing Wachovia's lawsuit to proceed in the court in which it is now pending. Judge Seymour is already familiar with the complex facts of the case and the legal issues remaining to be resolved, all of which must be decided under the laws of South Carolina. Judge Seymour is in the best position to render an expeditious ruling on the pending motions filed by Magellan, and a trial before Judge Seymour in Columbia, South Carolina will be more economical for both Wachovia and Magellan; 11. Whether the parties are ready for trial in the other proceeding: The parties have completed discovery in Wachovia's lawsuit against Magellan and can be ready for trial on relatively short notice; and 12. Impact of the stay on the parties and the balance of harms: The stay has completely halted Wachovia's lawsuit against Magellan. But for the stay, the lawsuit would have been tried in June 2003. Magellan will not be harmed by allowing the lawsuit to proceed in the court in which it is pending because Magellan's fact witnesses reside in Georgia, and counsel who have been defending Magellan in the lawsuit reside in Atlanta, Georgia, and Columbia, South Carolina. By contrast, Wachovia's fact witnesses and counsel will be significantly inconvenienced by having to attend a trial before the Bankruptcy Court for the Southern District of New York. Debtors and the Committee Object In 1988, Wachovia's predecessor in interest, The South Carolina National Bank, and WAF Acquisition Corporation, previously known as Charter Medical Corporation and now known as Magellan, executed a letter agreement, dated June 15, 1988, pursuant to which SCN agreed to serve as the trustee of an employee stock option plan that Charter formed in 1988. Charter and SCN also executed an Employee Stock Ownership Trust Agreement dated September 1, 1988, which formalized the trust relationship between SCN and the ESOP. In May, 1991, two participants in the ESOP filed a class action against Charter, SCN and certain other parties. The Knop Lawsuit alleged that the defendants had breached certain of their fiduciary duties to the members of the ESOP. The Knop Lawsuit was settled pursuant to a Stipulation and Agreement of Compromise and Settlement, dated March 27, 1992. The Settlement was approved by, and incorporated in, an Order and Final Judgment by the Honorable Seybourn H. Lynne, United States District Judge for the Northern District of Alabama, dated April 30, 1992. The Knop Settlement Agreement contained, among other things, releases among the parties, including a release of Charter by SCN. In the later part of 1992, the Department of Labor filed a lawsuit against SCN and the then president and chairman of Charter, William A. Fickling, Jr., and members of his family, but not Charter, alleging that the defendants had breached certain of their fiduciary duties to the members of the ESOP. The defendants settled the DOL Lawsuit in June 2000. In accordance with the terms of the settlement, Wachovia, as successor by merger to SCN, paid $30,000,000, $25,000,000 of which was paid to the ESOP and the balance of which was paid to the United States Treasury as a penalty. In July 2000, Wachovia commenced the South Carolina Action against Magellan, seeking indemnification of the $30,000,000 that Wachovia paid to settle the DOL Lawsuit, plus attorneys' fees and expenses and interest. Specifically, Wachovia seeks in its Third Amended Complaint to reform a certain indemnification provision in the Trust Agreement and obtain contractual indemnification under the Engagement Letter and/or the Trust Agreement. The South Carolina Action was originally assigned to the Honorable Dennis J. Shedd, United States District Judge. In the fall of 2001, Judge Shedd was nominated to the United States Court of Appeals for the Fourth Circuit. On December 11, 2001, the South Carolina Action was transferred to the Honorable Terry L. Wooten. Judge Wooten ordered the parties to attend mediation and referred all of Magellan's pending motions, including a motion to dismiss the Third Amended Complaint in part and three motions for summary judgment, to the Honorable Bristow Marchant, Magistrate Judge for the District of South Carolina. In March, 2002, Wachovia filed its Fourth Motion for Leave to Amend Complaint and its proposed Fourth Amended Complaint. The proposed amended complaint adds a completely new cause of action -- a plea for reformation of the Knop Settlement Agreement. Magellan opposed the Fourth Motion for Leave to Amend on a number of legal grounds. The Fourth Motion for Leave to Amend Complaint remains pending, and, thus, the proposed Fourth Amended Complaint has not been deemed filed or served. The parties attended mediation in April 2002 and, subsequently, were able to reach a settlement conditioned on a number of approvals. As a result of the non-occurrence of such conditions, however, the settlement was never consummated. On December 12, 2002, the South Carolina Action was transferred to the Honorable Margaret B. Seymour. Shortly thereafter, Judge Seymour conducted a telephonic scheduling conference. At the time, Magellan informed the Court that it would be re-filing four dispositive motions that it had previously withdrawn without prejudice to facilitate a possible settlement. During the conference, Judge Seymour indicated to the parties that the case could be ready for trial in June if the pending motions did not dispose of the case. The case, however, was never scheduled for trial in June. On February 20, 2003, Judge Seymour held a hearing on all four of Magellan's pending motions, issuing a written order denying Magellan's motion to dismiss and an oral ruling denying one of Magellan's motions for summary judgment. Judge Seymour did not rule on Magellan's two remaining motions for summary judgment, nor did she rule on whether to allow Wachovia to file its Fourth Amended Complaint. The Judge did, however, direct Magellan not to respond to the Third Amended Complaint until she had issued a decision regarding the allowance of the Fourth Amended Complaint. Consequently, Magellan has not answered the Third Amended Complaint. On the Petition Date, approximately three months after Judge Seymour was assigned to the case and after only one hearing with Judge Seymour presiding, all proceedings in the South Carolina Action were stayed. On May 15, 2003, Wachovia filed an unsecured claim against Magellan in its Chapter 11 case with respect to the South Carolina Action for $39,904,453.25. Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, in New York, argues that Wachovia's request should be denied because: 1. There is no specialized tribunal to resolve Wachovia's Claims. The South Carolina Action is nothing more than a traditional, run-of-the mill prepetition litigation. No specialized tribunal is involved. Wachovia's conclusory assertion that the District Court of South Carolina "clearly has expertise to deal with all issues in the case," does not serve to create a specialized tribunal where none exists. Bankruptcy courts routinely adjudicate claims of this nature through the proof of claim process, and certainly can do so here and assure that these cases are not unduly delayed. 2. The South Carolina Action directly involves Magellan and not third parties. Unlike instances in which the stay is lifted to allow third parties to continue to assert their rights in litigation, Magellan is directly involved in the South Carolina Action. In fact, the only parties to the South Carolina Litigation are Magellan and Wachovia. Accordingly, a vacation of the stay necessarily will involve substantial management attention and substantial cost to the Debtors' estates. 3. Lifting the stay to permit the South Carolina Action to proceed will prejudice the interests of other creditors in the Debtors' Chapter 11 Cases. Wachovia's assertion that lifting the stay will not prejudice other creditors could not be further from reality. Vacating the stay unquestionably will not only significantly delay the administration of these cases, but could jeopardize the entire reorganization effort. Confirmation of the Debtors' plan effectively is conditioned on the amount of allowed unsecured claims not being in excess of a certain amount. Accordingly, it is essential that contingent and disputed claims be determined expeditiously. Permitting the South Carolina Action to proceed to liquidate the Wachovia Claim clearly will result in substantial delay, to the prejudice of all other creditors. Moreover, the equity commitment proposals to be implemented pursuant to the Debtors' plan are conditioned on certain benchmarks being achieved. If the Court were to cede claims resolution authority to the South Carolina court, these benchmarks likely will not be achieved and the entire reorganization process may be at risk. 4. The interests of judicial economy favor resolution of Wachovia's claims in the Bankruptcy Court. Wachovia has presented no evidence whatsoever showing that lifting the stay in this case would be in the interests of judicial economy and efficiency. Wachovia infers that Judge Seymour is "in the best position to render an expeditious ruling on the pending motions" because the case is already pending before her and she is already familiar with the facts of the case. Wachovia conveniently neglects to mention that Judge Seymour was only assigned to the South Carolina Action three months before the Petition Date, and apparently has no knowledge of the facts of this case that could not be gleaned from a thorough reading of the pleadings. 5. It is evident that the parties are not ready for trial. If Wachovia is permitted to proceed with its Fourth Amended Complaint, further discovery will be necessary and the issue regarding reformation of the Knop Settlement Agreement will have to be decided by the Northern District of Alabama, all of which will take significantly more than "just a few weeks." Further, based on the court's published jury selection calendar, it appears that Judge Seymour will not even be available to schedule a trial on the matter until September. The parties-in-interest in these cases simply cannot afford to have the parochial interest of one disputed claimant dictate the timing of the administration of these cases. 6. The balance of harms weighs in favor of maintaining the stay. Wachovia has presented no reason, much less a compelling reason, why the stay should be vacated. The Wachovia Claim is not unique nor is the South Carolina Action. It is the typical and customary type of claim that is routinely adjudicated by Bankruptcy Courts in the claims resolution process. Simply stated, there is no undue harm or prejudice that Wachovia will suffer by reason of the stay and by requiring it to proceed like all other holders of disputed claims in these cases. (Magellan Bankruptcy News, Issue No. 10: Bankruptcy Creditors' Service, Inc., 609/392-0900) MENNONITE GENERAL: Fitch Slashes Revenue Bond Rating to B+ ---------------------------------------------------------- Fitch Ratings has downgraded to 'B+' from 'BBB-' the rating on approximately $10.8 million Puerto Rico Industrial, Tourist, Educational, Medical, and Environmental Control Facilities Financing Authority hospital revenue bonds, series 1997 (Mennonite General Hospital Project), and $36.5 million Puerto Rico Industrial, Tourist, Educational, Medical, and Environmental Control Facilities Financing Authority hospital revenue bonds series 1996A (Mennonite General Hospital Project). Fitch maintains a Negative Rating Outlook. The downgrade stems from Mennonite's poor unaudited fiscal 2003 financial results, and extremely thin liquidity ratios. Mennonite had an operating loss of $5 million in 2003 versus a break even budget. These losses were primarily related to larger than expected contractual allowances, inadequate premium pricing on its health plan, and increasing supplies expense. Mennonite's unrestricted cash and investments was $2.8 million at fiscal 2003 equaling a dangerously low 15 days cash on hand. Mennonite's days in accounts receivable was also a very high 119 days at fiscal 2003. Bad debt expense continues to rise and was 5.2% of total operating revenues in fiscal 2003 compared to 4.2% in fiscal 2002. Both the increase in contractual allowances and rising bad debt expense are factors of a weak economic climate in Mennonite's primary service area with increasing unemployment. Mennonite has responded to the losses in fiscal 2003 by increasing premiums in its health plan, renegotiating its managed care contracts and implementing case management initiatives. Through the two months ended May 31, 2003, Mennonite had an operating loss of $435,000 and has budgeted to lose $356,000 from operations in fiscal 2004. Although management intended to sell its medical office suites to physicians, no action has been taken to date. Management estimated that it could raise approximately $4.3 million in cash through these sales which would equate to approximately 30 days cash on hand, however, Fitch received no assurances that this will occur over the short term. Mennonite will likely have a technical rate covenant violation related to debt service coverage which was 0.9 times in fiscal 2003. Mennonite is in the process of retaining a consultant to advise Mennonite on cost saving opportunities, which Fitch believes will satisfy the bond document requirements. The negative outlook reflects Fitch's belief that Mennonite will continue to be impacted by the weak economic climate and rising expenses. Despite this, Mennonite still maintains a strong market share, which continues to result in good utilization growth. Nonetheless, further deterioration in Mennonite's balance sheet or operations could warrant further negative rating action. Mennonite General Hospital is a two hospital system with a combined 266 licensed beds (266 operated), located in Cayey and Aibonito Puerto Rico. Mennonite had total operating revenues of $71.3 million in fiscal 2003. Mennonite's disclosure to both Fitch and bondholders has been excellent in terms of timeliness and accuracy. MESA AIR: Inks LOI with USAir for Up to 55 CRJ-700 Regional Jets ---------------------------------------------------------------- Mesa Air Group, Inc. (Nasdaq: MESA) has signed a Letter of Intent with US Airways for a minimum of 25 and a maximum of 55 CRJ-700 70 seat regional jets. Under the LOI, the aircraft would be provided by US Airways from its previously announced order from Bombardier. All aircraft are expected to be put in service no later then Dec. 31, 2004. The LOI is subject to reaching a definitive agreement on terms and conditions between Mesa and US Airways. The agreement with Mesa, if finalized, conforms to the 'Jets for Jobs' provisions of the US Airways collective bargaining agreement with the Air Line Pilots Association. Mesa currently has 52 50-seat regional jets under contract of which 49 are currently operating in the US Airways system under a long-term revenue guarantee agreement. The remaining three aircraft are scheduled to be delivered this year. "Regional jets are a critical piece of the US Airways restructuring strategy," said Jonathan Ornstein, Mesa's Chairman and CEO. "We are delighted to have the opportunity to significantly expand this important part our operation. We would like to thank our employees and employee leaders for their hard work and vision which has made this possible." Mesa currently operates 141 aircraft with 1,042 daily system departures to 162 cities, 43 states, Canada and Mexico and the Bahamas. It operates in the West and Midwest as America West Express; the Midwest and East as US Airways Express; in Denver as Frontier JetExpress and, commencing July 6, United Express; in Kansas City with Midwest Express and in New Mexico and Texas as Mesa Airlines. The Company, which was founded in New Mexico in 1982, has approximately 3,300 employees. Mesa is a member of the Regional Airline Association and Regional Aviation Partners. MINERS FUEL: William Schwab Appointed as Chapter 11 Trustee ----------------------------------------------------------- The U.S. Bankruptcy Court for the Middle District of Pennsylvania grants the request of the Acting United States Trustee for the District of Region 3 to appoint William G. Schwab, Esq., as the Chapter 11 Trustee to oversee Miners Fuel Company, Inc. The U.S. Trustee tells the Court she consulted with three parties before appointing Mr. Schwab: a) Michael Fiorillo, Esq., Counsel to the Debtor; b) Clayton W. Davidson, Esq., Counsel to LINC Credit, LLC; and c) Earl Gassaman, Service Tire Truck Center The U.S. Trustee assures the Court that none of the parties objected to the appointment of Mr. Schwab. The U.S. Trustee further stresses that Mr. Schwab has no connection with the Debtor, creditors, or other parties in interest. Miners Fuel Company Inc., with its headquarters in Tremont, Pennsylvania, filed for chapter 11 protection on June 27, 2003 (Bankr. M.D. Pa. Case No. 03-53104). The Miners Entities operate a long haul solid waste transporting business, a fuel oil supply business and a specialty waste company in Pennsylvania and New Jersey. Michael Fiorillo, Esq., at Fiorillo Law Office represents the Debtors in their restructuring efforts. MITEC TELECOM: Bolts from BEVE Buy-Out Talks with Partnertech AB ---------------------------------------------------------------- Mitec Telecom Inc. (TSX: MTM), a leading designer and manufacturer of wireless network products, has discontinued discussions with Partnertech AB of Sweden to sell to Partnertech all outstanding shares of BEVE Electronics AB. Mitec continues to explore disposing of its Swedish operations and is currently in discussions with other parties with respect to BEVE. This does not reflect a change in Mitec's corporate strategy. Mitec Telecom is a leading designer and provider of wireless network products for the telecommunications industry. The Company sells its products worldwide to network providers for incorporation into high-performing wireless networks used in voice and data/Internet communications. Additionally, the Company provides value-added services from design to final assembly and maintains test facilities covering a range from DC to 60 GHz. Headquartered in Montreal, Canada, the Company also operates facilities in the United States, Sweden, the United Kingdom, China and Thailand. Mitec Telecom Inc. is listed on the Toronto Stock Exchange under the symbol MTM. On-line information about Mitec is available at http://mitectelecom.com The Company's January 31, 2003 balance sheet shows a working capital deficit of about C$17 million, while total shareholders' equity is down to $26 million from about $48 million recorded at April 30, 2002. MORGAN STANLEY: S&P Cuts Ratings on Series 2000-XLF Note Classes ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on classes C, D, and E certificates of Morgan Stanley Dean Witter Capital I Inc.'s commercial mortgage securities pass-through certificates series 2000-XLF and removed them from CreditWatch negative, where they were placed June 2, 2003. In addition, the 'AA' rating on class B is affirmed and removed from CreditWatch negative, where it was also placed June 2, 2003. Additionally, the 'AAA' is affirmed on class A. The rating actions stem from the recent appraisal reduction taken in the amount of approximately $37.7 million based upon a value of $82 million for the Market Center loan. The Market Center loan is secured by a 744,401-square-foot office complex at 555 and 575 Market Street in San Francisco and represents 51% of the pool balance, or $110 million out of a current deal balance of $215 million. The only other loan in the pool, 909 Third Avenue, is expected to pay off in full at maturity this August. The appraisal reduction has resulted in classes C, D, and E not receiving timely interest payments. Based upon this most recent valuation, it is likely that classes A, B, and C could be repaid upon disposition of the property. The Market Center loan defaulted at maturity on Feb. 1, 2003, and the special servicer, Midland Loan Services Inc., expects to dispose of the property at a loss in the next few months. RATINGS LOWERED AND REMOVED FROM WATCH NEGATIVE Morgan Stanley Dean Witter Capital I Inc. Pass-through certs series 2000-XLF Rating Class To From C BB BBB/Watch Neg D CCC B/Watch Neg E D CCC/Watch Neg RATING AFFIRMED AND REMOVED FROM WATCH NEGATIVE Morgan Stanley Dean Witter Capital I Inc. Pass-through certs series 2000-XLF Rating Class To From B AA AA/Watch Neg RATING AFFIRMED Morgan Stanley Dean Witter Capital I Inc. Pass-through certs series 2000-XLF Class Rating A AAA NATIONAL EQUIPMENT: Has Until August 26, 2003 to File Schedules --------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois gave National Equipment Services, Inc., and its debtor-affiliates an extension to file their schedules of assets and liabilities, statements of financial affairs and lists of executory contracts and unexpired leases required under 11 U.S.C. Sec. 521(1). The Debtors have until August 26, 2003 to file these required documents. National Equipment Services, headquartered in Evanston, Illinois, rents specialty and general equipment to industrial and construction end users. The Company filed for chapter 11 protection on June 27, 2003 (Bankr. N.D. Ill. Case No. 03-27626). James A. Stempel, Esq., at Kirkland & Ellis represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed debts and assets of over $100 million each. NEW WORLD RESTAURANT: Completes Debt Refinancing Transactions ------------------------------------------------------------- New World Restaurant Group, Inc. (OTC: NWCI.PK) has closed on an offering of $160 million of 13% senior secured notes due 2008. The company used the net proceeds of the offering, together with cash on hand, to refinance its existing indebtedness, including its senior secured increasing rate notes that had matured on June 15, 2003. New World also entered into a new $15 million senior credit facility with AmSouth Capital. "This refinancing of the company's debt, following upon the recently announced equity restructuring agreement, will enable us to overcome the final hurdle in our efforts to stabilize New World's financial structure," said Anthony Wedo, chairman and chief executive officer of New World. "With a rational capital structure, we are now able to aggressively move forward with our plans to strengthen and grow the company. We will now focus our energies on continuing New World's role as a leading player and innovator in the quick-casual restaurant industry." The notes offering was made to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Jefferies & Company, Inc. acted as initial purchaser. The notes have not been registered under the Securities Act or applicable state securities laws, and may not be offered or sold absent registration under the Securities Act and applicable state securities laws or applicable exemptions from registration requirements. Within 90 days, New World has agreed to file an exchange offer registration statement with the Securities and Exchange Commission pursuant to which it will offer holders freely transferable notes. New World Restaurant Group is a leading company in the quick casual sandwich industry, the fastest-growing restaurant segment. The company operates locations primarily under the Einstein Bros. and Noah's New York Bagels brands and primarily franchises locations under the Manhattan Bagel and Chesapeake Bagel Bakery brands. The company's retail system currently consists of 455 company-owned locations and 288 franchised and licensed locations in 32 states. The company also operates a dough production facility and a coffee roasting plant. As reported in Troubled Company Reporter's June 18, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit and senior secured ratings on quick-casual restaurant operator New World Restaurant Group Inc. to 'D' from 'CCC-'. All ratings were removed from CreditWatch, where they had been placed May 20, 2003. NEW WORLD RESTAURANT: S&P Assigns B- Rating over Industry Risks --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to Golden, Colorado-based New World Restaurant Group Inc.'s $160 million senior secured notes due 2008. The proceeds were used to refinance its existing indebtedness including its $140 million senior secured notes that matured on June 15, 2003. Standard & Poor's also assigned its 'B-' corporate credit rating to the company. The outlook is negative. A material adverse outcome of the SEC and the Department of Justice investigations is not factored into the rating. "The ratings reflect the risks associated with New World's relatively small size in the highly competitive restaurant industry, its reliance on a single primary product and day part, weak cash flow protection measures, and highly leveraged capital structure," said credit analyst Robert Lichtenstein. The restaurant industry is highly competitive, with many larger and well-established restaurants that have substantially greater financial and other resources than New World. In addition, many competitors are less dependent on a single primary product (bagels) and day part (breakfast) than the company. Barriers to entry are low, because start-up costs associated with retail bagel and similar food service establishments are not significant. Moreover, local bagel shops provide effective competition. The company expanded rapidly over the past several years, acquiring Manhattan Bagel in 1998, Chesapeake Bagel in 1999, and Einstein/Noah in June 2001. Although the company operates five brands, management views the Einstein brand as its growth vehicle. The company successfully consolidated corporate and manufacturing facilities, and outsourced the remaining production, contributing to an improvement in operating margins to 15.5% in 2002 from 13.5% the year before. Same-store sales decreased 0.8% in the first quarter of 2003, after gaining 1.9% in 2002 and 2.5% in 2001. The company closed 10 underperforming stores in 2002, and more than 80 in previous years. Standard & Poor's expects operating cash flow and the company's revolving credit facility will be New World's primary sources to service its debt and fund its capital expenditures. NRG ENERGY: Files Second Amended Plan and Disclosure Statement -------------------------------------------------------------- Scott J. Davido, Senior Vice President of NRG Energy, Inc. relates that the NRG Energy Debtors' Second Amended Plan and Disclosure Statement, which was delivered to the Court on June 26, 2003, classifies these entities as "Non-continuing Debtor Subsidiaries": -- NRG FinCo, -- NRGenerating, and -- NRG Capital. Furthermore, Mr. Davido reports that at any time prior to the Confirmation Hearing, the Debtors may determine to remove NRG Power Marketing Inc. from the Plan and pursue a liquidation of PMI under a separate Chapter 11 plan. This determination will not affect the distributions under the Plan with respect to the other entities treated under the Plan. To facilitate the potential PMI liquidation, and an orderly transition to a new power marketer to provide fuel supply, power marketing and other services to NRG's generating facilities, on June 16, 2003, NRG formed a new wholly owned subsidiary called NRG Marketing Services LLC. NRG Marketing is in the process of qualifying itself to do business in several states and obtaining tax identification numbers. In addition, on June 17, 2003, NRG Marketing filed an application with Federal Energy Regulation Commission under Section 205 of the Federal Power Act for authority to sell power at market-based rates. After NRG Marketing receives all necessary qualifications to engage in power marketing activities and establishes the necessary business arrangements with counterparties, including the posting of any necessary collateral, NRG Marketing will be in a position to commence supplying fuel, marketing power and providing other services to NRG's generating facilities. Mr. Davido informs Judge Beatty that the Plan does not address the reorganization of: (i) NRG Northeast Generating LLC, Arthur Kill Power LLC, Astoria Gas Turbine Power LLC, Connecticut Jet Power LLC, Devon Power LLC, Dunkirk Power LLC, Huntley Power LLC, Middletown Power LLC, Montville Power LLC, Norwalk Power LLC, Oswego Harbor Power LLC, and Somerset Power LLC -- the Northeast Debtors, or (ii) NRG South Central Generating LLC, Louisiana Generating LLC, NRG New Roads Holdings LLC and Big Cajun II Unit 4 LLC -- the South Central Debtors. A significant factor in NRG's decision to exclude the Non-Plan Debtors from the Plan is the Xcel settlement. Xcel conditioned its settlement that if NRG does not emerge from bankruptcy by December 15, 2003, Xcel will be under no obligation to make the Xcel Contribution. December 15, 2003 is not an arbitrary date because a significant portion of the cash that Xcel will use to fund the Xcel Contribution would be derived from a worthless stock deduction that Xcel expects to recognize as a result of the loss of its NRG investment. That loss is anticipated to arise at the time Xcel's existing NRG common stock is cancelled as part of the Plan. If the plan becomes effective and NRG emerges from bankruptcy in 2003, Xcel would expect to receive a cash refund during the first part of 2004 of taxes paid in 2001 and 2002. By contrast, if NRG emerges from bankruptcy in 2004, no refund would be received until 2005 and the refund, when received, would be significantly smaller. Furthermore, if Xcel claims the loss in a year prior to the year that NRG emerges from bankruptcy, NRG could lose its ability to use a significant portion of its net operating loss carryforwards that would otherwise be available to offset NRG's and its subsidiaries' income in subsequent year. The year's delay and the smaller cash refund to Xcel would materially limit Xcel's ability to fund the Xcel Contribution. Given the magnitude of the potential payment from Xcel, Mr. Davido concedes, it is imperative that NRG secure Plan effectiveness by December 15, 2003. Accordingly, NRG decided to file a separate reorganization plan to move ahead as promptly as possible. With the varied issues involving the restructuring of the Northeast Debtors and South Central Debtors, it is questionable whether NRG would be able to address the Northeast Debtors and South Central Debtors in the Plan and still emerge from bankruptcy by December 15, 2003. Rather than risk missing the Effective Date deadline and risk forfeiting the Xcel Contribution, NRG decided that the interests of the Debtors' creditors are best served by omitting the Northeast Debtors and South Central Debtors from the Plan. Nevertheless, NRG has continued to make substantial progress towards reorganization of the Northeast Debtors and South Central Debtors since the Petition Date. Since the Petition Date, there has been substantial contact by NRG and the South Central Debtors with the South Central Noteholders' Committee, and its representatives regarding various restructuring alternatives, including a sale of some or all of the South Central assets. In addition, the South Central Debtors have regularly discussed all non-ordinary course transactions involving the South Central assets with the South Central Noteholders' Committee, and have reached an interim arrangement with the South Central Noteholders regarding the use of cash pledged under the South Central Notes. While there is no final plan of reorganization for any of the Non-Plan Debtors at this early stage of the Chapter 11 cases, NRG does intend to file either separate plans or one or more joint plans of reorganization for the Non-Plan Debtors as soon as practicable. It is NRG's current intention to maintain the status of NRG Northeast and NRG South Central as its subsidiaries. In the course of the Chapter 11 Case, Mr. Davido explains, the Debtors and the Non-Plan Debtors have endeavored to clearly specify on the face of any order entered by the Court the Debtors or Non-Plan Debtors to which the relief granted in the order applies. In the likely event that the Debtors emerge from Chapter 11 before the Non-Plan Debtors: (a) to the extent an order specifies that the relief applies only to one or more Non-Plan Debtors, as of the Effective Date, the order will remain in full force and effect as to the Non-Plan Debtors, unless and until otherwise ordered by the Bankruptcy Court; (b) to the extent an order specifies that the relief applies only to one or more Debtors, as of the Effective Date, the Debtors will no longer be subject to the terms of the order on a prospective basis; and (c) to the extent an order specifies that the relief applies to both one or more Debtors and one or more Non-Plan Debtors, as of the Effective Date, the order will remain in full force and effect only as to the Non-Plan Debtors, and the Debtors will no longer be subject to the terms of the order on a prospective basis. A full-text copy of NRG Energy's Second Amended Disclosure Statement is available for free at: http://bankrupt.com/misc/NRGEnergy::s_2nd_amended_disclosure_stat.pdf (NRG Energy Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) OWENS & MINOR: Names Mark A. Van Sumeren as SVP, OMSolutions(SM) ---------------------------------------------------------------- Owens & Minor, (NYSE: OMI) (S&P/BB+/Stable) a FORTUNE 500 company and the nation's leading distributor of national name-brand medical and surgical supplies, has named Mark A. Van Sumeren as senior vice president, OMSolutions(SM). Van Sumeren, most recently a vice president at Cap Gemini Ernst & Young and a twenty-four year veteran in healthcare, will assume leadership of the OMSolutions(SM) group at Owens & Minor effective August 4, 2003. Created in November 2002, OMSolutions(SM) is a supply chain management consulting and implementation service, offering healthcare customers programs such as outsourced materials management, integrated operating room management, clinical inventory management, and implementation of WISDOM(2)(SM), Owens & Minor's innovative data mining tool. Current OMSolutions(SM) engagements include consulting and outsourcing projects with individual hospitals and hospital systems. "We are extremely pleased that Mark Van Sumeren has agreed to lead our OMSolutions(SM) group, which has gotten off to a fast start this year," said Craig R. Smith, president and chief operating officer of Owens & Minor. "His deep experience in healthcare consulting, knowledge of the supply chain process, and general knowledge of hospital customers will accelerate our already strong momentum. Mark adds significant value to the team we have in place and salutes our commitment to OMSolutions(SM) as a key initiative." Van Sumeren has been a national leader in CGEY's Health Provider Supply Chain practice, which he created while at Ernst & Young. In that position he was responsible for assisting healthcare clients in making changes in organizational processes through redesign, restructuring and reengineering. After joining Ernst & Young in 1983, Van Sumeren worked his way up the ranks to earn a partnership position, and when Ernst & Young was acquired by Cap Gemini in 2000, he was named a vice president. "I'm truly excited about joining Owens & Minor," said Van Sumeren. "I've always been impressed by the company, its people and especially by their commitment to their customers. Further, the OMSolutions(SM) team has already done an outstanding job establishing and building the business. It is a tremendous honor to be afforded the opportunity to join such a great team." At CGEY, Van Sumeren served as engagement vice president for many of the firm's largest healthcare clients, including Duke University Health System, Northwestern Memorial Hospital, Lenox Hill Hospital, Health Midwest, Medical University Health System, Wm. Beaumont Health System, Rush System for Health and Stanford University Medical Center. Other clients included academic medical centers, teaching hospitals, integrated delivery systems and community hospitals. Prior to joining Ernst & Young, Van Sumeren was an internal consultant at the Detroit Medical Center. He received his undergraduate degree in industrial and operations engineering and an MBA from the University of Michigan. Owens & Minor, Inc., a Fortune 500 company headquartered in Richmond, Virginia, is the nation's leading distributor of national name brand medical/surgical supplies. The company's distribution centers throughout the United States serve hospitals, integrated healthcare systems and group purchasing organizations. In addition to its diverse product offering, Owens & Minor helps customers control healthcare costs and improve inventory management through innovative services in supply chain management and logistics. The company has also established itself as a leader in the development and use of technology. For more information, visit the company's Web site at http://www.owens-minor.com PACIFIC MAGTRON: Sells LiveMarket Unit's Assets to LiveCSP Inc. --------------------------------------------------------------- Pacific Magtron International Corp. (OTCBB: PMIC) has sold the assets of its Lea Publishing Inc./LiveMarket subsidiary to LiveCSP Inc., a newly formed corporation owned by the former employees of LiveMarket. As part of its previously announced plan to refocus on its core business, Pacific Magtron has sold the intangible assets and associated hardware of its subsidiary, Lea Publishing Inc./dba LiveMarket to the LiveCSP Inc. for $5,000 in cash and for 24 months of continuing software service and support from LiveCSP for the company's LiveWarehouse.com subsidiary. Ted Li, president and CEO of Pacific Magtron International Corp., said, "While it is difficult to part with products we strongly believed in, it is in the best interest of the company to continue to re-focus on its core competencies. We believe that the team at LiveCSP is the best one to continue the development and support of the LiveMarket products because this group was involved in the original development of LiveMarket's flagship products (LiveSell and LiveExchange)." "We are excited about the acquisition of LiveMarket and feel its customers will benefit from our knowledge and dedication to the LiveSell and LiveExchange product offerings," stated Marc Huynen, president of LiveCSP. "We expect that our purchase of LiveMarket will enable LiveMarket to grow and prosper." Pacific Magtron International Corp. is an enterprise dedicated to providing total hardware solutions in the computer peripheral marketplace. For more information, visit Web site at http://www.pacificmagtron.com * * * Liquidity and Capital Resources In its most recent SEC Form 10-Q, the Company reported: "It is our business plan that we finance our operations primarily through cash generated by operations and borrowings under our floor plan inventory loans and line of credit. The continued decline in sales, the continuation of operating losses or the loss of credit facilities could have a material adverse effect on the operating cash flows of the Company. "As of June 30, 2002, the Companies did not meet the revised minimum tangible net worth and profitability covenants, giving Transamerica, among other things, the right to call the loan and immediately terminate the credit facility. On October 23, 2002, Transamerica issued a waiver of the default occurring on June 30, 2002 and revised the terms and covenants under the credit agreement. Under the revised terms, the credit facility includes FNC as an additional borrower and PMIC continues as a guarantor. Effective October 2002, the new credit limit is $3 million in aggregate for inventory loans and the letter of credit facility. The letter of credit facility is limited to $1 million. The credit limits for PMI and FNC are $1,750,000 and $250,000, respectively. As of September 30, 2002, the Companies did not meet the revised covenants relating to profitability and tangible net worth. This gives Transamerica, among other things, the right to call the loan and immediately terminate the credit facility. "On May 31, 2002 the Company entered into a Preferred Stock Purchase Agreement with an investor. Under the agreement, the Company agreed to issue 1,000 shares of its preferred stock at $1,000 per share. The Company issued 600 shares of its preferred stock and warrants for purchasing 400,000 shares of the Company's common stock for a net proceeds of $477,500 on May 31, 2002. We expect to issue the additional 400 shares for an estimated gross proceeds of $370,000 in the fourth quarter 2002. Even though we have completed the required registration of the underlying common stock in October 2002, there is no assurance these remaining 400 shares will be sold. "At September 30, 2002, the Company had consolidated cash and cash equivalents totaling $2,667,400 (excluding $250,000 in restricted cash) and working capital of $3,960,400, a decrease of $1,774,500 compared to the working capital at December 31, 2001. At December 31, 2001, we had consolidated cash and cash equivalents totaling $3,110,000 (excluding $250,000) in restricted cash) and working capital of $5,734,900. The decrease in working capital is primarily due to an increase in accounts payable. "Net cash used in operating activities during the nine months ended September 30, 2002 was $233,600, which principally reflected the net loss incurred during the period, and an increase in inventories, which was partially offset by an increase in accounts payable and a decrease in accounts receivable. On June 12, 2002, the Company received a Federal income tax refund of $1,034,700. "Net cash used by investing activities during the nine months ended September 30, 2002 was $102,300, resulting from the purchases of property and equipment of $128,000 and an increase of $22,700 in deposits and other assets. These uses were partially offset by the proceeds from the sale of property and equipment. "Net cash used in financing activities was $106,700 for the nine months ended September 30, 2002, primarily due to net decreases in the floor plan inventory loans and principal payments on the mortgages on our office facility. This was partially offset by the net proceeds of $477,500 from the issuance of preferred stock. "On July 13, 2001, PMI and PMIGA obtained a new $4 million (subject to credit and borrowing base limitations) accounts receivable and inventory financing facility from Transamerica Commercial Finance Corporation. This credit facility has a term of two years, subject to automatic renewal from year to year thereafter. The credit facility can be terminated by either party upon 60 days' prior written notice and immediately if the Companies lose the right to sell or deal in any product line of inventory. The Companies are subject to an early termination fee equal to 1% of the then established credit limit. The facility includes a $2.4 million inventory line (subject to a borrowing base of up to 85% of eligible accounts receivable plus up to $1,500,000 of eligible inventories), a $600,000 working capital line and a $1 million letter of credit facility used as security for inventory purchased on terms from vendors in Taiwan. Borrowing under the inventory loans are subject to 30 to 60 days repayment, at which time interest begins to accrue at the prime rate, which was 4.75% at September 30, 2002. Draws on the working capital line also accrue interest at the prime rate. "Under the agreement, PMI and PMIGA granted Transamerica a security interest in all of their accounts, chattel paper, cash, documents, equipment, fixtures, general intangibles, instruments, inventories, leases, supplier benefits and proceeds of the foregoing. The Companies are also required to maintain certain financial covenants. As of December 31, 2001, the Companies were in violation of the minimum tangible net worth covenant. On March 6, 2002, Transamerica issued a waiver of the default and revised the covenants under the credit agreement retroactively to September 30, 2001. The revised covenants require the Companies to maintain certain financial ratios and to achieve certain levels of profitability. As of December 31, 2001 and March 31, 2002, the Companies were in compliance with these revised covenants. As of June 30, 2002, the Companies did not meet the revised minimum tangible net worth and profitability covenants, giving Transamerica, among other things, the right to call the loan and immediately terminate the credit facility. "On October 23, 2002, Transamerica issued a waiver of the default occurring on June 30, 2002 and revised the terms and covenants under the credit agreement. Under the revised terms, the credit facility includes FNC as an additional borrower and PMIC continues as a guarantor. Effective October 2002, the new credit limit was reduced to $3 million in aggregate for inventory loans and the letter of credit facility. The letter of credit facility is limited to $1 million. The credit limits for PMI and FNC are $1,750,000 and $250,000, respectively. As of September 30, 2002, there were outstanding draws of $990,800 on the credit facility. As of September 30, 2002, the Companies did not meet the covenants as revised on October 23, 2002 relating to profitability and tangible net worth, constituting a technical default. This gives Transamerica, among other things, the right to call the loan and immediately terminate the credit facility. We are currently in discussions with Transamerica to obtain a waiver of the covenant default. There is no assurance that a waiver will be obtained from Transamerica nor that the covenants will be revised with terms favorable to us. "In March 2001, FNC obtained a $2 million discretionary credit facility from Deutsche Financial Services Corporation to purchase inventory. To secure payment, Deutsche obtained a security interest in all of FNC's inventory, equipment, fixtures, accounts, reserves, documents, general intangible assets and all judgments, claims, insurance policies, and payments owed or made to FNC. Under the loan agreement, all draws matured in 30 days. Thereafter, interest accrued at the lesser of 16% per annum or at the maximum lawful contract rate of interest permitted under applicable law. "FNC was required to maintain certain financial covenants to qualify for the Deutsche bank credit line, and was not in compliance with certain of these covenants as of June 30, 2002 and December 31, 2001, which constituted a technical default under the credit line. This gave Deutsche the right to call the loan and terminate the credit line. The credit facility was guaranteed by PMIC and could be terminated by Deutsche immediately given the default. On April 30, 2002, Deutsche elected to terminate the credit facility effective July 1, 2002. Upon termination, the outstanding balance must be repaid in accordance with normal terms and provisions of the financing agreement. As of September 30, 2002, there were outstanding draws of $11,600 on the credit line. The entire outstanding balance was repaid on October 9, 2002. "Pursuant to one of our bank mortgage loans with a $2,393,700 balance at September 30, 2002, we are required to maintain certain financial covenants. During 2001, we were in violation of a consecutive quarterly loss covenant and an EBITDA coverage ratio covenant, which is an event of default under the loan agreement that gives the bank the right to call the loan. A waiver of these loan covenant violations was obtained from the bank in March 2002, retroactive to September 30, 2001, and through December 31, 2002. As a condition for this waiver, we transferred $250,000 to a restricted account as a reserve for debt servicing. This amount has been reflected as restricted cash in the consolidated financial statements. "We presently have insufficient working capital to pursue our long-term growth plans with respect to expansion of our service and product offerings. We believe, however, that our existing cash, trade credits from suppliers, anticipated income tax refunds, and proceeds from issuance of additional preferred stock will satisfy our anticipated requirements for working capital to support our present operations through the next 12 months, provided we are able to maintain our existing credit lines or obtain comparable replacement credit facilities. "On May 31, 2002 we received net proceeds of $477,500 from the issuance of 600 shares of 4% Series A Preferred Stock. We expect an additional 400 shares will be issued in the fourth quarter 2002. Even though we have completed the required registration of the underlying common stock in October 2002, there is no assurance these remaining 400 shares will be sold or that we will be able to obtain additional capital beyond the issuance of these 1,000 shares of Preferred stock. Upon the occurrence of a Triggering Event, such as the Company were a party in a "Change of Control Transaction," among others, as defined, the holder of the preferred stock has the rights to require us to redeem its preferred stock in cash at a minimum of 1.5 times the Stated Value. As of September 30, 2002, the redemption value of the Series A Preferred Stock, if the holder had required us to redeem the Series A Preferred Stock as of that date, was $912,200. Even though we do not expect those Triggering Events will occur, there is no assurance that those events will not occur. In the event we are required to redeem our Series A Preferred Stock in cash, we might experience a reduction in our ability to operate the business at the current level. "We are actively seeking additional capital to augment our working capital and to finance our new business. However, there is no assurance that we can obtain such capital, or if we can obtain capital that it will be on terms that are acceptable to us." PG&E NATIONAL: Asks Court to Restrict Trading to Preserve NOLs -------------------------------------------------------------- PG&E National Energy Group Inc., and its debtor-affiliates ask Judge Mannes to "enforc[e] the automatic stay and establish[] notice and hearing procedures that must be satisfied before certain transfers of claims against PG&E National Energy Group, Inc., and its Subsidiaries, or any beneficial interest therein, are deemed effective." In other words, NEG wants to restrict trading in its debt securities. $1 Billion of Tax Benefits at Risk Vice President and Assistant Treasurer John C. Barpoulis explains that NEG fears unrestricted trading in its debt securities may jeopardize the value of more than $1 billion of tax losses, including built-in losses (i.e., asset tax basis in excess of asset fair market value) and net operating loss carryforwards the Company's accumulated to date. NEG currently estimates that the aggregate tax basis of its assets exceeds the aggregate fair market value of such assets by substantially more than $1 billion. Thus, NEG has a "net unrealized built-in loss" of approximately that amount. NEG may have NOLs during or upon the consummation of its reorganization plan under chapter 11, such as by reason of the disposition of its built-in loss assets, referred to above, but the existence and amount of such losses depends on future events and therefore cannot be known presently. The Tax Losses are a valuable asset of NEG's estate, and may be used by NEG to offset income and gain during the pendency of its chapter 11 proceeding and after emergence from chapter 11, thereby significantly reducing its future federal income tax liability under applicable rules set forth in the Internal Revenue Code of 1986, as amended. The Debtors are concerned about the viability of NEG's Tax Losses, however, because certain transfers of claims against NEG could occur prior to confirmation of NEG's chapter 11 plan. Those transfers could severely limit NEG's ability to use the Tax Losses and could have significant negative consequences for NEG, its estate and its reorganization process. If an ownership change occurs pursuant to the consummation of a confirmed chapter 11 plan and Section 382(1)(5) of the I.R.C. does not apply, NEG's ability to use the Tax Losses will be limited under Section 382. Section 382(1)(5), also known as the "Bankruptcy Exception," applies to any ownership change that occurs pursuant to the consummation of a confirmed bankruptcy plan in which at least 50% of the stock (by value) of the debtor is received by existing shareholders or "qualified creditors." A debtor's ability to utilize its tax losses without restriction is generally preserved if Section 382(l)(5) applies to an ownership change. Very generally, "qualified creditors" are creditors who have held their claims against the debtors for 18 months or more before the petition date or who acquired such claims in the ordinary course of the debtor's business and have held such claims since they arose. See I.R.C. Sec. 382(1)(5)(E); Treas. Reg. Sec. 1.382-9(d). Based on NEG's current information, the Bankruptcy Exception may apply to the ownership change that will occur pursuant to the consummation of a confirmed bankruptcy plan. However, additional trading in the claims against NEG may cause the Bankruptcy Exception not to be available, because buyers of those claims may not be "qualified creditors." $183,000,000 Transfer Limit In order to preserve to the fullest extent possible the flexibility to craft a chapter 11 plan that maximizes the use of NEG's Tax Losses, the Debtors want to closely monitor certain transfers of claims, so as to be in a position to act expeditiously to prevent such transfers if necessary. Specifically, the Debtors want notice and hearing procedures put in place that will govern the trading of more than $183,000,000 of NEG-related debt obligations. The Debtors estimate that the total claims (including maximum liability under contingent claims) against NEG are approximately $3.86 billion, so transfers of less than $183 million aren't likely to trigger any loss of tax benefits. While the Debtors may face an uphill battle to prevent the transfer, they want to talk about it and slow it down. Courts have previously recognized that built-in losses, like NOLs, are property of the estate and must be protected. See, e.g., In re WorldCom, Inc., et al., Case No. 02-13533 (AJG) (Bankr. S.D.N.Y. March 4, 2003) (approving notification procedures and transfer restrictions in order to protect tax basis and NOLs). Various courts have commonly granted the relief requested herein, i.e., the restriction or enjoining of transfers of claims in order to protect debtors against the possible loss of their NOLs and built-in losses. See, e.g., In re WorldCom, Inc., et al., Case No. 02-13533 (AJG) (Bankr. S.D.N.Y. March 4, 2003) (approving notification procedures and restrictions on certain transfer of claims against and interests in the debtors); In re Williams Comm. Group, Inc., Case No. 02-11957 (BRL) (Bankr. S.D.N.Y. July 24, 2002) (debtors provided 30 days' notice to object to proposed transfers of claims against the debtors that would increase the transferee's holdings to or above levels that could reasonably be expected to lead to a distribution of 5% of the stock in the reorganized debtors); In re Ames Dept. Stores, Inc., Ch. 11 Case No. 01-42217 (REG) (Bankr. S.D.N.Y. August 20, 2001) (enjoining and establishing procedures respecting transfer of common stock and claims). See also similar protection of NOLs granted respecting transfer of equity interest in debtor: In re Maxxim Medical Group, Inc., et al., Case No. 03-10438 (PJW) (Bankr. D. Del. February 13, 2003) (approving notification and hearing procedures for trading in, and claiming worthless stock deduction in respect of, equity securities of the debtor); In re Conseco, et al., Case No. 02-49672 (CAD) (Bankr. N.D. Ill. December 17, 2002) (limiting certain transfers of, and trading in, equity interests of the debtors and approving related notification procedures); In re Worldtex, Inc., Case No. 01-785 (MFW) (Bankr. D. Del. Apr. 2, 2001) (debtors provided 30 days' notice to object to proposed transfers that would result in the transferee holding 5% or more of the debtors' common stock or decrease the ownership interest of an existing 5% or greater shareholder); In re First Merchants Acceptance Corp, 1998 Bankr. LEXIS 1816 (Bankr. D. Del. 1998) (debtors provided 30 days' notice to object to proposed transfers of stock in the debtors that would increase the transferee's holding to or above certain level); In re Metrocall, et al., Case No. 02-11579 (RB) (Bankr. D. Del. June 6, 2002) (debtors provided 5 business days' notice to object to proposed transfers of stock that would result in transferee holding 5% or more of the debtors' stock or a reduction in the ownership interest of an existing 5% or greater shareholder); In re US Airways Group, Inc., et al., Case No. 02-83984 (SSM) (Bankr. E.D. Va. Oct. 2, 2002) (debtors provided 10 days' notice to object to proposed transfers of equities to and from 5% holders); In re Casual Male Corp, Case No. 01-41404 (REG) (Bankr. S.D.N.Y. May 18, 2001) (enjoining transfers of common stock and convertible notes that would result in the transferee's holdings increasing to or beyond 4.99% and providing debtors 30 days' notice to object to certain transfers); In re Southeast Banking Corp., 1994 WL 1893513 (Bankr. S.D. Fla. July 21, 1994) (enjoining 5% trades of common stock); and In re Phar-mor, Inc., 152 B.R. 924 (Bankr. N.D. Ohio 1993) (enjoining shareholders from selling stock in the debtors unless they obtained relief from the automatic stay). (PG&E National Bankruptcy News, Issue No. 1; Bankruptcy Creditors' Service, Inc., 609/392-0900) POLAROID CORP: Challenges California Tax Claim's Validity --------------------------------------------------------- Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in Wilmington, Delaware, tells the Court that in 1976, Polaroid Corporation sued Eastman Kodak Company to enjoin Kodak's infringement of Polaroid's U.S. patents and to recover damages from the infringement. In 1985, the trial court ruled for Polaroid, enjoined Kodak, and reserved the damages issue for later determination. The lawsuit's damages phase extended to January 1991 when the trial court awarded Polaroid $233,055,432 lost profits and $204,467,854 hypothetical royalties as damages. The court also awarded $435,635,685 judgment interest. Subsequently, by the Parties' agreement, on July 25, 1991, Polaroid received $437,523,286 in damages and $487,003,268 judgment to settle the lawsuit. For the tax year 1991, Polaroid reported $437,523,286 in damages and $485,614,925 in interest as non-business income on its California tax return, netting a $2,635,630 non-business income. In so doing, the income was solely allocable to Massachusetts -- Polaroid's primary place of commercial domicile. Hence, Polaroid did not pay taxes with respect to the Kodak judgment in California. Mr. Galardi continues that on May 10, 1995, the California Franchise Tax Board issued an audit report with respect to its examination of Polaroid's California tax returns for the tax years 1990 and 1991. In the Audit Report, the Board asserted its position that the damages and interest paid to Polaroid resulting from the Kodak litigation were taxable in part by California. After the issuance of the Audit Report, Polaroid received two Notices of Proposed Assessment for tax years 1990 and 1991. On August 29, 1995, Polaroid filed a protest in connection with its receipt of the NPAs. More than three years after Polaroid's protest, the Board granted a hearing on December 8, 1998. Polaroid received the ruling, in the form of Notices of Action, affirming the assessments set in the NPAs. The issuance of a Notice of Action effectively ended Polaroid's proceedings before the Board. Although, Mr. Galardi relates that Polaroid continued to file an appeal of the Notices of Action to the California State Board of Equalization. However, SBE's decision on the appeal upheld the determinations of the Board. Mr. Galardi tells the Court that although the Board has not yet computed Polaroid's final liability, it is estimated that Polaroid will owe approximately $3,100,000 in taxes and not less than $4,800,000 in interest. On December 26, 2001, the Board filed a proof of claim asserting a $7,922,421 priority claim pursuant to Section 507(a)(8)(A)(iii) of the Bankruptcy Code. Mr. Galardi argues that the Claim is not entitled to priority under Section 507 because it was assessed prior to the Petition Date. By this motion, the Debtors and the Official Committee of Unsecured Creditors ask the Court, pursuant to Sections 505 and 507 of the Bankruptcy Code: (a) to determine that the Board's Claim is a general, unsecured claim rather than a priority claim as asserted in the Proof of Claim, or (b) in the event that the Claim is determined to be entitled to priority, to set a discovery and briefing schedule with respect to an action to determine the Claim amount and validity. Mr. Galardi points out that the taxes were assessed more than 240 days prior to the Petition Date. Thus, by virtue of Section 507(a)(8)(A), the Claim is a general, unsecured claim rather than a priority claim for taxes that arise from business activities conducted prior to 1991 -- 10 full years prior to the Petition Date. Furthermore, the Bankruptcy Code does not define the terms "assessed" or "assessable" nor does it provide any guidance for determining when assessment occurs. Mr. Galardi explains that what constitutes assessment of state taxes under Section 507(a)(8) is therefore open to Court interpretation. In essence, the legislative history requires a court to balance the interests of the debtors and the debtor's creditors against the interests of the taxing authority. Since the Debtors have ceased operations and are contemplating the solicitation of a liquidating plan, the Court must balance the interest of the Debtors' unsecured creditors against the interests of the Board. Mr. Galardi notes that the Debtors' assets primarily consists of 35% of the stock of the entity that purchased the Debtors' assets July 2002 and a relatively small amount of cash. If the Claim that relates to business conducted in the 1970s and 1980s was determined to be a priority claim, a substantial portion of the distribution, that would otherwise be distributed to the Debtors' unsecured creditors, would be paid instead solely to the Board. The result would then be inequitable. The Board, in contrast, has had over eight years to collect on its Claim. In making its initial assessment, the Board was extremely aggressive in its audit and invited protest from Polaroid. The Board's Claim is the sole remaining claim of any state taxing authority related to the Kodak judgment. Since Polaroid's receipt of the Kodak judgment, it has negotiated numerous tax assessments related to the Kodak judgment. "It would be then incongruous to allow the Board alone to receive a substantial portion of the value that is slated to be distributed to unsecured creditors and to reward the Board's aggressive, yet dilatory tactics with respect to its Claim," Mr. Galardi emphasizes. Furthermore, a decision finding that the Claim is entitled to priority effectively instructs potential debtors that they must abandon any litigation, no matter how meritorious, at an early stage, lest the obligations be awarded priority over all other claims merely because of a hyper-technical interpretation of when the tax obligation was "assessed." Mr. Galardi says that the interpretation is manifestly unfair and twists Congress' carefully crafted priority scheme. Mr. Galardi clarifies that in the event that the Court finds that the Claim is entitled to priority status because the underlying tax was "not assessed before, but assessable under applicable law or by agreement, after, the commencement of the case", the Debtors, under Section 505, would want to determine the validity and legality of the Claim. The Debtors would contest the Claim on two fronts: (1) the amount and legality of the underlying tax as an initial matter; and (2) the Board's claim for interest prior to the "assessment." The underlying tax was assessed prior to the Petition Date. Mr. Galardi argues that in the event the tax will be determined to be entitled to priority, the determination must be based on a finding that the tax is "assessed" for purposed of section 507(a)(8)(A)(iii). Under California state law, the decision of the SBE is subject to de novo review in California state court. However, prior to bringing the state court action, the taxpayer must pay the tax. In state court, the taxpayer's appeal is styled as a complaint for refund. In addition, if the tax is found to be "assessed" postpetition on SBE's decision, the Debtors want to exercise their right to have the Court determine the appropriate amount and priority of interest, if any, payable pursuant to the Claim. It is illogical to presume that the Board would collect interest on its Claim for the time period preceding the "assessment" of the underlying tax. Taking the Board's best argument, it would appear that the portion of the Claim relating to interest prior to the postpetition "assessment" would be a general, unsecured claim, not entitled to priority. The Debtors expect that their request to determine the amount and validity of the underlying tax will be a time-consuming and expensive process. The endeavor would not be cost-effective in the event that the Court agrees with the Debtors' initial position that the Claim is a general, unsecured claim. Thus, the Debtors do not want to pursue the motion until the time it is determined that the Claim is entitled to priority status. Accordingly, the Debtors expressly reserve their rights to contest the amount and validity of the underlying tax represented in the Claim under Section 505. (Polaroid Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392-0900) POLYONE CORP: Reduces Earnings Outlook for Second-Quarter 2003 -------------------------------------------------------------- PolyOne Corporation (NYSE:POL), a leading global polymer services company, expects to report an after-tax loss before special items between $3.5 million and $5.5 million, or $0.04 to $0.06 per dilutive share, for second-quarter 2003. Special items will consist primarily of restructuring costs. PolyOne projects that the special items will increase the net loss by approximately $0.03 to $0.04 per dilutive share. "The slow demand we observed in our North American sales for April continued into May and June, when we normally experience seasonal pickup," said Thomas A. Waltermire, PolyOne chairman and chief executive officer. "The decline in demand has been broad based and appears consistent with other views of the U.S chemical industry and U.S. industrial production overall. In fact, the U.S. Industrial Production Index (less the high-tech component) is below the trough level we experienced in the fourth quarter of 2002." In its first-quarter 2003 earnings release, PolyOne projected that second-quarter revenues would improve seasonally compared with first-quarter 2003, but would not equal the 12 percent sequential increase over the comparable 2002 period. It now appears that sales in the second quarter of 2003 will be approximately 1 percent above first-quarter 2003 sales of $646 million and below the second-quarter 2002 level of $671 million. PolyOne projects that Performance Plastics segment sales will be up modestly in the second quarter versus the first quarter of 2003, led by North American Vinyl Compounds and International Plastic Compounds and Colors. The Elastomers & Performance Additives and Distribution segments are projected to show sequential revenue decrease. The Company expects reduced margins in its North American Performance Plastics operations. Raw material costs rose sharply in second-quarter 2003, more than offsetting selling price increases implemented in most business operations. In the first-quarter 2003 outlook commentary, PolyOne estimated that its Resin & Intermediates segment, which comprises principally the Oxy Vinyls, LP and SunBelt Chlor-Alkali equity joint ventures, would realize an operating income improvement of $10 million to $13 million in second-quarter 2003 compared with second-quarter 2002. The Company now estimates that the improvement will be between $6 million and $7 million. This revised estimate is due primarily to lower-than-anticipated polyvinyl chloride resin shipments coupled with unrealized anticipated market selling prices and higher-than-anticipated costs for natural gas and ethylene. The Company anticipates that second-quarter 2003 operating income before special charges will increase $0.5 million to $3.5 million over the preceding quarter, but will be well below the second- quarter 2002 level. As a result of the $300 million debt issuance in early May 2003 and the restructuring of PolyOne's short-term borrowing facilities, interest expense will be higher by approximately $5 million, or $0.03 per share. Company Results Mirror U.S. Industrial Production PolyOne's North American sales trends historically have shown a general correlation with the U.S. Industrial Production Index, less the high-tech component. After a modest increase in the first half of 2002, the index started declining in third-quarter 2002 and, despite an increase in January 2003, trended downward through May 2003. (See index chart by using the following hyperlink to PolyOne's Web site: http://www.polyone.com/corp/invest/USIndustrialProduction.pdf) PolyOne Second-Quarter 2003 Earnings Release and Conference Call PolyOne will release its second-quarter 2003 results after the close of business on July 29, 2003, and host a conference call at 9 a.m. Eastern time on July 30, 2003. The conference dial-in number is 888-489-0038 (domestic) or 706-643-1611 (international), conference topic: PolyOne Earnings Call. Replay number is 800-642- 1687 (domestic) or 706-645-9291 (international). The conference ID for the replay is 6571857. The call will be broadcast live and then via replay for two weeks on the Company's Web site: http://www.polyone.com PolyOne Corporation, with revenues approximating $2.5 billion, is an international polymer services company with operations in thermoplastic compounds, specialty resins, specialty polymer formulations, engineered films, color and additive systems, elastomer compounding and thermoplastic resin distribution. Headquartered in Cleveland, Ohio, PolyOne has employees at manufacturing sites in North America, Europe, Asia and Australia, and joint ventures in North America, South America, Europe, Asia and Australia. Information on the Company's products and services can be found at http://www.polyone.com As reported in Troubled Company Reporter's May 27, 2003 edition, Fitch Ratings affirmed PolyOne Corporation's senior unsecured debt rating at 'B' and assigned a 'B' rating to the new 10.625% senior unsecured notes. The senior secured rating related to the credit facility was upgraded to 'BB-' from 'B'. The Negative Rating Watch was removed. The Rating Outlook is Negative. The ratings reflect PolyOne's continued weak financial performance. PROVANT INC: Selling Certain Assets to Shed Debt Burden ------------------------------------------------------- Provant, Inc. (POVT:PK) is mailing the following letter to its stockholders of record: Dear Stockholders: Financial statements for the three and nine months ended March 31, 2003 are in the process of being reviewed by our auditors and will be posted shortly on our Web site. As you will see, the financial statements cover only the parent company and Star Mountain, our last remaining subsidiary. The results of the divisions we sold in December 2002 to Drake, Beam, Morin-Japan and of our Senn Delaney Leadership Consulting Group, which we sold in April 2003, are being treated as discontinued operations. During the quarter ended March 31, 2003 we replaced the senior management of Star Mountain, promoting Joe Swerdzewski, the head of Star Mountain's FPMI division, to CEO. Joe has done an excellent job streamlining Star Mountain's operations. Provant's problem today, as it has been for a long time, is the burden of too much bank debt at the parent company level. Each time the banks have granted us an extension (the latest of which runs to July 31, 2003), the costs have been very high. The simple fact is that Provant owes much more than it could borrow today on a commercial basis. While we have explored numerous alternatives, the only ones that have borne fruit so far are the asset sales described above. Last summer in connection with an extension of our bank loan, Provant committed to the banks that it would pursue a sale of Star Mountain. We retained for that purpose Quarterdeck Investment Partners, an investment-banking firm specializing in the sale and financing of government businesses. Following an intensive marketing process, I am pleased to report that we have executed a letter of intent, the terms of which contemplate an upfront cash payment sufficient to pay Provant's existing indebtedness, ongoing cash payments to help cover parent company expenses, and retention by Provant of an equity stake in Star Mountain. How much that equity stake will prove to be worth depends on how well Star Mountain performs over the next few years. The letter of intent is non-binding and subject to various conditions, including satisfactory completion of further due diligence by the buyer and negotiation of a definitive agreement. Of course, there are no guarantees that a transaction will be completed. The transaction will require shareholder approval, and the proxy statement for the shareholders meeting will contain a more complete description. Your Board of Directors has been working hard in a difficult situation to preserve value for the stockholders while meeting the Company's obligations. Although many companies in similar circumstances have simply given up and turned their assets over to the banks, we continue to persevere. Questions have been raised regarding trading in Provant stock. We are advised that the stock is trading on the pink sheets under the ticker POVT.PK. Information regarding the pink sheets is available at http://www.pinksheets.com We look forward to providing you more information regarding the Star Mountain transaction in the upcoming weeks. Sincerely, John E. Tyson, Chairman Stockholder information is also available on the World Wide Web at http://www.provant.com RELIANT RESOURCES: Selling Desert Basin Plant for $288 Million -------------------------------------------------------------- Reliant Resources, Inc. (NYSE: RRI), has entered into a definitive agreement for the sale of its 588-megawatt Desert Basin plant, located in Casa Grande, AZ, to Salt River Project Agricultural Improvement and Power District, of Phoenix, for $288.5 million. The transaction is subject to regulatory approvals, including the Federal Energy Regulatory Commission, and certain third-party consents and approvals. The transaction is expected to close by the end of 2003. "The sale of our Desert Basin plant is consistent with our strategy of tightening our strategic focus and strengthening our balance sheet," said Joel Staff, chairman and chief executive officer. Reliant will use the proceeds to prepay indebtedness under its existing credit facility or for the possible acquisition of CenterPoint Energy, Inc.'s 81 percent interest in Texas Genco Holdings, Inc. The sale is expected to be neutral to earnings per share in 2004. Desert Basin, a combined-cycle facility, started commercial operation in 2001 and is currently providing all of its power to SRP under a 10-year power-purchase agreement. Reliant Resources, Inc., based in Houston, Texas, provides electricity and energy services to retail and wholesale customers in the U.S. and Europe, marketing those services under the Reliant Energy brand name. The company provides a complete suite of energy products and services to approximately 1.7 million electricity customers in Texas ranging from residences and small businesses to large commercial, industrial and institutional customers. Its wholesale business includes approximately 22,000 megawatts of power generation capacity in operation, under construction or under contract in the U.S. The company also has nearly 3,500 megawatts of power generation in operation in Western Europe. For more information, visit http://www.reliantresources.com As reported in Troubled Company Reporter's July 1, 2003 edition, Reliant Resources, Inc.'s $550 million 9.25% senior secured notes due 2010 and $550 million 9.50% senior secured notes due 2013 were rated 'B+' by Fitch Ratings. ROBOTEL ELECTRONIQUE: Liquidating Assets Due to Insolvency ---------------------------------------------------------- Electrohome Limited has been informed that all of the assets of its 90%- owned insolvent subsidiary Robotel Electronique Inc., of Laval, Quebec, are in the process of being liquidated, with all of the proceeds directed to Robotel's bank as a secured creditor. Robotel ceased operations on May 30, 2003 and all of its officers and directors, including those nominated by Electrohome, have resigned. It appears that Robotel will not repay any of its secured or unsecured obligations to Electrohome. As a result and as previously announced, Electrohome will write off the entire $6.0 million it has invested in Robotel, including equity shares, loans and advances. On a consolidated basis before tax, the loss is expected to be $2.8 million and will be recorded in the third quarter. Of this amount, only $0.3 million represents a cash outlay. Electrohome continues to hold a 26% interest in the newly merged Fakespace Systems Inc., which is the largest international company exclusively in the advanced visualization marketplace, and a small minority interest in Immersion Studios Inc., which produces specialty digital interactive cinema. Electrohome also owns its 300,000 sq. ft. facility in Kitchener, Ontario, most of which is leased to external tenants. Electrohome's shares are traded on the TSX under the symbols ELL.X. STELCO INC: Pursuing Cost-Reduction Talks with U.S.W.A. Leaders --------------------------------------------------------------- Stelco Inc. senior management representatives from the Corporation and its business units met on July 8 with United Steelworkers of America national, district and local union executives to discuss Stelco's current position. The purpose of the meeting was to enable Stelco officials to outline current business conditions, the Corporation's financial position and its plans for improving performance. The Corporation requested that the union and the hourly employees they represent support the Corporation's need for cost reduction with significant labor cost reductions and productivity improvements. Jim Alfano, Stelco's President and Chief Executive Officer, stated that, "This was an important meeting. It is imperative that we address all areas of cost reduction to improve our financial performance and competitive position, and labor costs are a critical component. All of our people have a very significant stake in the Corporation, and it is in their best interest to fully support our improvement plans. I believe, with their support for our initiatives, we will be successful in addressing the current challenges and improving our competitive position." No further comments will be made at this time given the confidential nature of the discussions between the Corporation and the U.S.W.A. Stelco Inc. is Canada's largest and most diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. Stelco has a presence in six Canadian provinces and two states of the United States. Consolidated net sales in 2002 were $2.8 billion. * * * As previously reported, Standard & Poor's Ratings Services lowered its long-term corporate credit rating on integrated steel producer Stelco Inc. to 'B' from 'BB-', senior unsecured debt rating to 'B- ' from 'BB-', and subordinated debt to 'CCC+' from 'B'. At the same time, the ratings were removed from CreditWatch, where they were placed April 29, 2003. The outlook is negative. STELCO: Steelworkers Driven to Develop Own Cost-Cutting Plans ------------------------------------------------------------- United Steelworkers' directors and local union leaders from Stelco Inc.'s operations across Canada agreed Wednesday that information received Tuesday from Stelco Inc. senior management should not be taken at face value, and that the union will develop its own plan to make improvements that will ensure Stelco's future sustainability. The statement makes it clear that the union has always been prepared to work with the company to make improvements to Stelco's competitiveness. The leaders from six local unions and the Steelworkers' four elected directors met for three days, including a historic meeting for two hours on Tuesday with Stelco CEO Jim Alfano and other senior management. "Right from the beginning of our union we have always been prepared to work with Stelco to reduce costs and improve its competitiveness," the statement said. "But we've never been prepared just to accept what Stelco says without question. "We will address these issues on our own terms, not theirs. "We are prepared to work with the company to reduce costs, on a local-by-local basis. "We are not prepared to open our collective agreements." The six local union presidents are: Rolf Gerstenberger, Local 1005, Hilton Works, Hamilton; Bill Ferguson, Local 8782, Lake Erie Works; Scott Duvall, Local 5328, Stelwire, Hamilton; Serge Gailloux, Local 6951, McMaster Works, Contracoeur, QC; Guy Gaudette, Stelfil, Lachine, QC; Paul Perreault, Alta Steel, Edmonton. * * * As previously reported, Standard & Poor's Ratings Services lowered its long-term corporate credit rating on integrated steel producer Stelco Inc. to 'B' from 'BB-', senior unsecured debt rating to 'B-' from 'BB-', and subordinated debt to 'CCC+' from 'B'. At the same time, the ratings were removed from CreditWatch, where they were placed April 29, 2003. The outlook is negative. TELENETICS CORP: Peter E. Salas Discloses 9.999% Equity Stake ------------------------------------------------------------- Peter E. Salas, as General Partner of Dolphin Offshore Partners, L.P., is the beneficial owner of 11,826,907 Telenetics Corporation's common shares and 3,599,878 warrants (which are subject to contractual limitations that prohibit exercise of the warrants if such conversion or exercise would result in the beneficial owner owning in excess of 9.999% of Telenetics Corporation's shares of common stock). 11,935,807 shares are approximately 25.10% of the 47,549,965 shares of the Company's common stock outstanding as of May 14, 2003. 7,585,858 common shares were received as part of an exchange for the $2,115,000 face value of convertible debentures due January 2003. Mr. Salas has the exclusive right to vote and/or dispose of the shares of common stock at any regular or special meetings of the shareholders of the Company and/or any actions in lieu of meetings or shareholder proceedings. Based in Lake Forest, Telenetics designs, manufactures and distributes wired and wireless data communications products for customers worldwide. Telenetics offers a wide range of industrial grade modems and wireless products, systems and services for connecting its customers to end-point devices such as meters, remote terminal units, traffic and industrial controllers and remote sensors. Telenetics also provides high-speed communications products for complex data networks used by financial institutions, air traffic control systems and public and private wireless network operators. Additional information is available at http://www.telenetics.com As reported in Troubled Company Reporter's April 23, 2003 edition, the Company's auditors Haskell & White LLP stated in its report for the period December 31, 2002: "The [Company's] consolidated financial statements have been prepared assuming that the Company will continue as a going concern. . . . [T]he Company has suffered recurring losses from operations, has used cash in operations on a recurring basis, has an accumulated deficit, and is involved in a dispute with a significant contract manufacturer that, among other things, raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty." TRANSTEXAS GAS: Files First Amended Plan & Disclosure Statement --------------------------------------------------------------- TransTexas Gas Corporation, (OTCBB:TTXGQ), announced that on June 27, 2003, the Company, together with its wholly owned subsidiaries, Galveston Bay Processing Corporation and Galveston Bay Pipeline Company, filed its First Amended Joint Plan of Reorganization for Debtors under Chapter 11 of the Bankruptcy Code dated as of July 8, 2003, and First Amended Joint Disclosure Statement for Debtors' Joint Chapter 11 Plan of Reorganization under Chapter 11 of the Bankruptcy Code, dated as of July 8, 2003, in Case No. 02-21926 (Jointly Administered) in the United States Bankruptcy Court for the Southern District of Texas, Corpus Christi Division. On that same date, Thornwood Associates, LP filed a competing Disclosure Statement for Creditor's Joint Plan of Reorganization and Creditor's Joint Plan of Reorganization regarding TransTexas and its subsidiaries. The Debtors' Amended Disclosure Statement, Debtors' Amended Plan, Thornwood Disclosure Statement and Thornwood Plan are available on the Company's Web site at http://www.transtexasgas.com A Confirmation Hearing is scheduled at 9:00 a.m. (Central Time) on Aug. 5, 2003, in the Bankruptcy Court. The time fixed for filing objections in the Bankruptcy Court to the confirmation of Debtors' Amended Plan and/or the Thornwood Plan is July 25, 2003. The time fixed for receipt of ballots accepting or rejecting the Debtors' Amended Plan and/or the Thornwood Plan is July 31, 2003. TransTexas is engaged in the exploration, production and transmission of natural gas and oil, primarily in South Texas, including the Eagle Bay field in Galveston Bay and the Southwest Bonus field in Wharton County. Information on the Company, including the Company's filings with the Securities and Exchange Commission may be found on the Internet at http://www.transtexasgas.com/ TRANSWITCH: Nasdaq Approves Listing Transfer to National Market --------------------------------------------------------------- TranSwitch Corporation (NASDAQ: TXCC) a leading developer and global supplier of innovative high-speed VLSI solutions for communications applications, announced that its request to transfer the listing of its common stock from The Nasdaq SmallCap Market to The Nasdaq National Market has been approved by Nasdaq. TranSwitch will begin trading on The Nasdaq National Market effective at the opening of business on July 10, 2003. TranSwitch's common stock will continue to trade under its current symbol TXCC. "We are pleased that TranSwitch is able to return to The Nasdaq National Market," stated Dr. Santanu Das, President and Chief Executive Officer of TranSwitch Corporation. "This is an important milestone for the company and one we believe reflects the progress TranSwitch has been making during this past year." TranSwitch Corporation, headquartered in Shelton, Connecticut, is a leading developer and global supplier of innovative high-speed VLSI semiconductor solutions - Connectivity Engines(TM) - to original equipment manufacturers who serve three end-markets: the Worldwide Public Network Infrastructure, the Internet Infrastructure, and corporate Wide Area Networks. Combining its in-depth understanding of applicable global communication standards and its world-class expertise in semiconductor design, TranSwitch Corporation implements communications standards in VLSI solutions which deliver high levels of performance. Committed to providing high-quality products and service, TranSwitch is ISO 9001 registered. Detailed information on TranSwitch products, news announcements, seminars, service and support is available on TranSwitch's home page at the World Wide Web site at http://www.transwitch.com As previously reported, Standard & Poor's affirmed its 'B-' corporate credit and senior unsecured debt ratings on Traswitch Corp. At the same time, Standard & Poor's revised the company's outlook to negative from stable. The outlook revision reflects diminished liquidity and ongoing cash usage, stemming from a severe decline in the company's markets. Transwitch's quarterly revenue run rate has been below $5 million and negative free cash flow has been about $20 million per quarter since June of 2001. The company may face difficulties increasing revenues from a very low base, given substantial competition and a rapidly evolving technology environment in the communications equipment market. TY COBB HEALTHCARE: Fitch Cuts $17.8-Million Bonds Rating to BB+ ---------------------------------------------------------------- Fitch Ratings downgraded Ty Cobb's outstanding $17,812,000 Hospital Authority of the City of Royston, GA revenue anticipation certificates (Ty Cobb Healthcare System, Inc. Project) series 1999 to 'BB+' from 'BBB-'. The bonds have been removed from Rating Watch Evolving. The Rating Outlook is Negative. Over the past seventeen months Fitch has reviewed and analyzed Ty Cobb's internal financial statements on a monthly basis, through May 30, 2003. Despite overall financial improvement in 2002, Ty Cobb fell short of its year-end projections of 70 days cash on hand, days in accounts receivables below 75 days, and breakeven bottom line performance. While Fitch views Ty Cobb's improvements favorably, the downgrade to 'BB+' is based on the organizations weak balance sheet, operating performance, and debt service coverage. Furthermore, Fitch believes numerous underlying issues and industry pressures (revenue cycle management, nursing shortage, rising supplies and insurance expenses, volatile utilization statistics, physician recruitment, and continued losses at Barrow Community Hospital) will continue to challenge management over the near-term. At Dec. 31, 2002, Ty Cobb reported an operating margin equal to a negative 2.6%, excess margin of negative 1.4%, and maximum annual debt service coverage of 1.6x, all of which improved over 2001, but are substantially below Fitch's 'BBB' medians. Additionally, a slight decline in days in accounts receivables (81 days in 2002 compared to 84 days in 2001) led to an improvement in day's cash on hand from 38 days to 48 days (Fitch's 'BBB' median is 98 days). Revenue cycle management is one of Fitch's major concerns. Fitch notes that the consulting team hired to improve Ty Cobb's collections and revenue cycle is no longer providing its services to the organization, which recently resulted in the complete outsourcing of Ty Cobb's billing office operations. The overall outcome of the prior consulting team was very positive during their employment with the organization, resulting in dramatic improvements in liquidity (through the seven months ended July 31, 2002 days cash on hand was 75 days), but once the consultants left the organization, a noticeable decline in overall financial performance could be seen. Fitch believes the outsourcing of Ty Cobb's collections is positive, but could take some time to realize significant improvements given its relatively poor payor mix. Additional concerns include the overall staffing shortages across the system (both nursing and physicians), and the continued operating losses at Barrow. In 2002, Ty Cobb showed substantial improvements in its salary expenses, but, similar to its other projections, fell short of its stated goals. The need for additional physicians continues to increase given the recent and projected increases in population and the departure of some physicians over the past year. The lack of adequate staff resulted in lower inpatient admissions in 2002 and through the first five months of 2003. Management has implemented some major incentive plans for the recruitment and retention of nurses and physicians, which is viewed positively and has resulted in additional staff over the past few months. Despite positive six month interim period results from Barrow, 2002 audited results showed a substantial deterioration of all financial ratios because of rising nursing expenses and a significant increase in bad debt expenses and contractual allowances due to a change in accounting methodology. Barrow's operating performance at year-end was negative $3.8 million, which represented more than a $5 million decline over the first half of 2002 (Barrow reported positive $1.3 million from operations through June 30, 2002). External obstacles have prevented the expected financial turnaround at Barrow, which has been a financial drain since its acquisition in 2000 and will continue to hinder the system's operating performance over the near-term. On a positive note, Ty Cobb's other remaining facilities have showed solid improvements in operating and bottom line performance. Ty Cobb, Franklin and Madison County Facilities improved operations by more than $1.4 million and bottom line performance by nearly $1.8 million in 2002. Additionally Hart County Hospital improved its operations by more than $2 million and its bottom line by more than $1.5 million. The improvements at these facilities are viewed very favorably, but do not completely mitigate the external pressures on the organization or the continued losses at Barrow. The Negative Outlook is based on the various concerns facing management over the next 2-3 years. Overall expenses are expected to increase going forward and unless Ty Cobb is able to properly address its accounts receivables, staffing situation, and improve its volume and reimbursement, operational improvements made over the past year may not be sustainable. Fitch believes management has the capacity to improve this organization over the medium-term and their ability to do so will play a vital role in Ty Cobb's ultimate success or failure. If Ty Cobb is unable to maintain its current liquidity, profitability, and coverage levels there could be additional negative rating pressure. Ty Cobb Healthcare System consists of 3 hospitals (210 operated beds) and 3 nursing facilities (350 operated beds). The system had $70.7 million in total operating revenue in FY 2002. Ty Cobb's annual and quarterly disclosure to Fitch has been adequate in terms of content, accuracy, and timeliness of financial statements. UNITED AIRLINES: US Bank Seeks Stay Relief to Control LA Deposit ---------------------------------------------------------------- U.S. Bank serves as Trustee for the California Statewide Communities Development Authority. On April 1, 2001, the CSCDA issued the California Statewide Communities Development Authority Special Facilities Revenue Bonds Series 2001, for $34,590,000. The Bonds were to finance the acquisition, construction, improvement, installation and equipping of the LAX Project. The CSCDA deposited the proceeds in an interest account, construction fund and a capitalized interest fund. The CSCDA loaned a portion of the proceeds to United Airlines by allowing it to make draws from the Construction Fund. United is obligated to pay the principal and interest on the Bonds. As of May 13, 2003, the Construction Fund contained $2,968,808. U.S. Bank received draw requests on the Construction Fund from United on December 5, 2002 and December 13, 2002, for $1,191,547 and $233,824. U.S. Bank has possession of the money in the Construction Fund, which does not constitute property of United's estate. Consequently, U.S. Bank believes that the automatic stay does not apply to its actions on these funds. Out of an abundance of caution, U.S. Bank asks Judge Wedoff to confirm that the exercise of its rights to the Construction Fund is not a violation of the automatic stay. Katherine A. Constantine, Esq., at Dorsey & Whitney, in Minneapolis, informs the Court that U.S. Bank's request is substantially identical to those filed by HSBC Bank USA and SunTrust. On the hearing day for those requests, U.S. Bank and United agreed on similar orders for the benefit of Bondholders that U.S. Bank served as Indenture Trustee. However, United changed its mind and refused to submit the agreed orders unless U.S. Bank agreed to release construction funds connected to the indenture of trust and bonds that are completely separate and totally unrelated to the indenture of trust. (United Airlines Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) UNITED AIRLINES: Terminating Employee Stock Ownership Plan ---------------------------------------------------------- UAL Corporation has announced that it is terminating its employee stock ownership plan and, with the participation and approval of the International Association of Machinists and the Air Line Pilots Association, distributing to participants in the ESOP the assets in their respective ESOP accounts. The ESOP termination follows the issuance of a regulation by the Internal evenue Service that permits the ESOP to distribute the ESOP shares to plan participants without jeopardizing UAL's net operating loss tax benefits, which the Company believes are important to its successful emergence from Chapter 11. To preserve the NOL, the bankruptcy court earlier this year enjoined the sale of UAL shares by major holders of the stock, such as the ESOP. As a result of the IRS regulation, which effectively exempted distributions of ESOP shares from the terms of the injunction, the Company and its Creditors' Committee were able to approve the distribution to ESOP participants. UPC POLSKA: S&P Drops Corp. Credit Rating to D Over Bankruptcy -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Polish cable operator UPC Polska Inc. to 'D' from 'CC' and lowered the senior unsecured debt rating on the company to 'D' from 'C'. The downgrade follows the company's announcement that it filed a petition for relief under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York on July 7, 2003. The company has also filed a pre-negotiated plan of reorganization. UPC Polska has already entered into a debt restructuring agreement with United Pan Europe Communications N.V. subsidiaries UPC Telecom and Belmarken Holding B.V. and a committee of third-party bondholders that collectively hold the majority of UPC Polska bonds. The ratings will subsequently be withdrawn. UPC POLSKA: Wants Approval to Hire Baker & McKenzie as Counsel -------------------------------------------------------------- UPC Polska, Inc., asks for permission from the U.S. Bankruptcy Court for the Southern District of New York to employ and retain Baker & McKenzie as its General Counsel. "Baker & McKenzie is well suited for the type of representation," UPC Polska tells the Court. Baker & McKenzie is a leading multinational law firm, and has considerable experience in virtually all aspects of law that may arise in this Chapter 11 Case. Furthermore, Baker & McKenzie is familiar with the Debtor's businesses and financial affairs. The Debtor relates that Baker & McKenzie has represented the Company in various corporate and securities matters since its inception in 1997. Moreover, during the months preceding the Petition Date, Baker & McKenzie assisted the Debtor in its negotiations with various debt holders regarding a restructuring of the Debtor's capital structure, and, ultimately in connection with its preparations to commence this case, including the drafting of the Debtor's proposed Chapter 11 plan of reorganization and accompanying disclosure statement. Specifically, Baker & McKenzie will: (a) advise the Debtor of its rights, powers and duties as debtor and debtor in possession under Chapter 11 of the Bankruptcy Code; (b) prepare on behalf of the Debtor all necessary and appropriate applications, motions, draft orders, other pleadings, notices, schedules and other documents, and review all financial and other reports to be filed in this Chapter 11 Case; (c) perform certain tasks required of professionals under the Bankruptcy Code and Bankruptcy Rules, the Local Rules of this Court and United States Trustee Guidelines, including the finalization of this retention application and related documents, and the preparation of fee applications and related documents; (d) advise the Debtor concerning, and prepare responses to, applications, motions, and other pleadings and notices that may be filed and served in this Chapter 11 Case; (e) advise the Debtor with respect to, and assist in the negotiation and documentation of, any appropriate financing agreements and related transactions; (f) review the nature and validity of any liens asserted against the Debtor's property and advise the Debtor concerning the enforceability of such liens; (g) advise the Debtor regarding its ability to initiate actions to collect and recover property for the benefit of its estate; (h) counsel the Debtor in connection with the confirmation and consummation of a plan of reorganization and related documents; (i) advise and assist the Debtor in connection with any potential property dispositions; (j) advise the Debtor concerning executory contract and/or any unexpired lease assumptions, assignments and rejections; (k) assist the Debtor in reviewing, estimating and resolving claims asserted against the Debtor's estate; (l) commence and conduct litigation necessary or appropriate to assert rights held by the Debtor, protect assets of the Debtor's estate or otherwise further the goal of completing the Debtor's successful reorganization; and (m) perform all other necessary or appropriate legal services in connection with this Chapter 11 Case for or on behalf of the Debtor. Ali M.M. Mojdehi, Esq., a Baker & McKenzie partner, reports that the hourly rates currently charges by the firm range from: partners $410 to $600 counsel and associates $100 to $425 legal assistants and support staff $125 to $220 UPC Polska, Inc., headquartered in Denver, Colorado, is an affiliate of United Pan-Europe Communications N.V. The Debtors is a holding company, which owns various direct and indirect subsidiaries operating the largest cable television systems in Poland. The Company filed for chapter 11 protection in July 7, 2003 (Bankr. S.D.N.Y. Case No. 03-14358). Ali M.M. Mojdehi, Esq., and Ira A. Reid, Esq., at Baker & McKenzie represent the Debtor in its restructuring efforts. As of March 31, 2003, the Debtor listed $704,000,000 in total assets and $940,000,000 in total debts. VICWEST CORP: Creditors Will Vote on CCAA Plan on August 1 ---------------------------------------------------------- As previously announced, Vicwest Corporation and certain of its Canadian subsidiaries obtained an order on May 12, 2003, to begin Vicwest's restructuring under the Companies' Creditors Arrangement Act. Vicwest announced that it has filed a material change report with the Canadian securities regulators on their Web site http://www.sedar.comattached to which are copies of the following materials that have been mailed to Vicwest's affected creditors: (1) a notice to affected creditors of Vicwest regarding a meeting of affected creditors of Vicwest scheduled to be held on August 1, 2003; (2) the Vicwest plan of compromise and reorganization dated July 2, 2003 pursuant to the CCAA and the Business Corporations Act (Ontario); (3) an information circular dated July 2, 2003 with respect to the Plan; (4) an order of Ontario Superior Court of Justice the obtained on July 2, 2003 approving the claims procedure for affected creditors of Vicwest and the holding of, and the manner of notice for and conduct at, the Meeting; (5) the fifth report dated July 2, 2003 of Deloitte & Touche Inc., in its capacity as monitor of Vicwest; and (6) certain other materials related to the Meeting, voting at the Meeting and the claims procedure. Copies of the materials that were mailed to Vicwest's affected creditors are also available at http://www.deloitte.com/ca/vicwest on the Monitor's Web site. The Plan has been filed with the Court. As previously announced, the preparation and filing of Vicwest's consolidated financial statements for the year ended December 31, 2002 and the quarter ended March 31, 2003 have been delayed as a result of Vicwest's restructuring activities under the CCAA. Vicwest anticipates that it will be able to comply with its financial statement filing requirements after completion of its restructuring process. At this time it is anticipated that Vicwest will emerge from its restructuring process in August, 2003. Vicwest, with corporate offices in Oakville, Ontario, is Canada's leading manufacturer of metal roofing, siding and other metal building products. WACKENHUT CORRECTIONS: Completes 8-1/4% Sr. Unsec. Note Offering ---------------------------------------------------------------- Wackenhut Corrections Corporation (NYSE: WHC) has completed the sale of $150 million in aggregate principal amount of ten-year, 8-1/4% senior unsecured notes in a private offering to qualified institutional buyers under Rule 144A of the Securities Act and to persons outside the United States pursuant to Regulation S and the amendment of its senior secured credit facility, consisting of a $100 million 6-year term loan and a $50 million 5-year revolver. The interest rate for the Term Loan B and the Revolver is LIBOR plus 3%. The notes have not been registered under the securities laws of the United States and may not be offered or sold in the United States except to qualified institutional buyers. WCC has used the net proceeds from the offering, together with approximately $100 million of borrowings under its amended senior secured credit facility and approximately $16 million in cash-on-hand, to repurchase 12 million shares of its common stock from Group 4 Falck A/S, its former 57% shareholder, and to refinance amounts outstanding under its previous senior secured credit facility. As reported in Troubled Company Reporter's May 5, 2003 edition, Standard & Poor's Ratings Services placed its 'BB-' corporate credit and 'BB' senior secured debt ratings on Wackenhut Corrections Corp., on CreditWatch with negative implications. Negative implications mean that the ratings could be lowered or affirmed, following Standard & Poor's review. Boca Raton, Florida-based WCC, a provider of a comprehensive range of prison and correctional services, had about $125 million of debt outstanding at Dec. 29, 2002. WACKENHUT CORRECTIONS: Buys-Back Group 4 Falck Controlling Stake ---------------------------------------------------------------- Wackenhut Corrections Corporation (NYSE: WHC) has completed the repurchase of all 12 million shares of WCC common stock held by its former majority shareholder, Group 4 Falck of Denmark. The two Group 4 Falck members of the WCC Board of Directors have tendered their resignations, reducing the WCC Board from nine to seven members. George C. Zoley, Chairman of the Board and Chief Executive Officer of WCC, stated: "This historic transaction transforms WCC from a corporate subsidiary into a truly independent company with full access to the capital markets and the ability to grow at its own pace. We have recently moved our corporate offices to Boca Raton, Florida and will be establishing a new name for the company within the next year pursuant to the Group 4 Falck share repurchase agreement. We are confident that the elimination of the uncertainty created by Group 4 Falck's 12 million share overhang will represent a long term benefit for WCC shareholders." WCC had previously given investor guidance for 2003 earnings per share within the range of $1.04 to $1.06, which did not assume either the repurchase of 12 million shares from Group 4 Falck or the sale of WCC's 50% interest in the UK joint venture, Premier Custodial Group Limited. With the repurchase of the 12 million shares, which reduces the number of outstanding shares to 9.4 million (or 15.3 million weighted average shares for 2003), and with the sale of WCC's 50% interest in PCG, WCC estimates 2003 earnings per share to be within the range of $3.00 to $3.20, inclusive of an after-tax book gain of approximately $32 million from the sale of PCG. Investor guidance previously given by WCC for 2004 did not reflect the sale of WCC's interest in PCG. Since WCC has not yet allocated the proceeds from that sale for any specific purpose, WCC is not providing any updated investor guidance for 2004 at this time. Mr. Zoley further stated: "With the approximately $80 million in pre-tax proceeds, or $52 million in after-tax proceeds, that the company received from the sale of its 50% interest in the UK joint venture and the company's enhanced ability to access the capital markets, WCC plans to pursue one or more acquisitions during the next nine months, rather than pay down borrowings under its senior credit facility. The company will be considering opportunities in the US and international markets within its existing business lines of correctional and mental health care services." WCC also announced that its Board of Directors has adopted a shareholder rights plan. The rights plan is intended to assist the company in pursuing its long-term business strategies and to enhance stockholder value. WCC is a world leader in the delivery of correctional and detention management, health and mental health services to federal, state and local government agencies around the globe. WCC offers a turnkey approach that includes design, construction, financing and operations. The Company represents 31 government clients servicing 48 facilities in the United States, Australia, South Africa, New Zealand, and Canada with a total design capacity of approximately 36,000 beds. As reported in Troubled Company Reporter's May 5, 2003 edition, Standard & Poor's Ratings Services placed its 'BB-' corporate credit and 'BB' senior secured debt ratings on Wackenhut Corrections Corp., on CreditWatch with negative implications. Negative implications mean that the ratings could be lowered or affirmed, following Standard & Poor's review. Boca Raton, Florida-based WCC, a provider of a comprehensive range of prison and correctional services, had about $125 million of debt outstanding at Dec. 29, 2002. WEIRTON STEEL: Secures Court Nod to Hire Procurement Specialty -------------------------------------------------------------- Weirton Steel Corporation obtained permission from the Court to employ Procurement Specialty Group, Inc. as procurement consultants, effective as of the Petition Date. With the Court's approval, PSG will be: (a) reviewing and analyzing the Debtor's procurement contracts, including but not limited to contracts to purchase maintenance, repair, and operating supplies, raw materials, services, transportation, construction, and capital equipment, and advising the Debtor which contracts can be renegotiated to reduce the costs to the Debtor; (b) assisting the Debtor in negotiating procurement contracts, including but not limited to contracts to purchase maintenance, repair, and operating supplies, raw materials, services, transportation, construction, and capital equipment; (c) reviewing and analyzing the Debtor's purchasing processes to identify deficiencies and recommend improvements; (d) reviewing and analyzing the Debtor's purchasing personnel organizational charts to recommend improvements; (e) working with Debtor's purchasing personnel to improve vendor communications and relations; (f) assisting the Debtor in the development and approval of multiple vendor sources for critical materials; and (g) performing other procurement-related duties as PSG and the Debtor will deem appropriate and feasible. PSG has and will likely provide general consulting services to the Debtor's suppliers in the future. PSG assists these suppliers in negotiating lower prices for the commodities that the suppliers purchase from other entities. The Debtor will compensate PSG with: (a) Initial Fee The Debtor will pay PSG a $70,000 initial cash retainer, to be held pending completion of the engagement. (b) Project Fee The Debtor will compensate PSG for its services pursuant to the firm's ordinary billing rates. Currently, PSG employees are compensated at $175 per hour for professionals and $25 per hour for clerical staff. These hourly rates will be applied in full to travel time spent in the performance of the services described. (c) Percent of Savings The Debtor will pay PSG an amount equal to 17.5% of savings that are realized as a result of PSG services during the first 18 months after each savings program becomes effective. (d) Expenses The Debtor will reimburse PSG for the costs of all of its travel expenses, including transportation, lodging and meals, incurred in the performance of services to the Debtor. The Debtor will pay PSG a flat fee equal to $250 per month to cover all administrative expenses, including but not limited to postage, phone and facsimile charges, and office supplies. (Weirton Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) WESTPOINT STEVENS: Court Approves BSI as Ballot & Notice Agent -------------------------------------------------------------- WestPoint Stevens Inc., and its debtor-affiliates sought and obtained authority to employ Bankruptcy Services LLC as the Court's noticing agent and their claims and balloting agent pursuant to the terms and conditions of a Standard Bankruptcy Services Agreement. Section 156(c) of the Judiciary Procedures Code, which governs the staffing and expenses of the Bankruptcy Court, authorizes the Court to use facilities other than those of the Clerk's Office for the administration of bankruptcy cases. WestPoint Stevens Chief Financial Officer Lester D. Sears tells the Court that given the size and complexity of this Chapter 11 case, the Debtors believe that the most effective and efficient manner in which to accomplish the process of notifying creditors and receiving, docketing, maintaining, photocopying, and transmitting proofs of claim is to engage an independent third party to act as the noticing and claims agent. BSI is a nationally recognized specialist in Chapter 11 administration. Since its formation, BSI has been involved in a number of cases in the Southern District of New York, as well as other districts throughout the region and has vast experience in noticing and claims administration in large Chapter 11 cases. Under the BSI Agreement, BSI, at the Debtors' or the Clerk's Office's request, will provide the Clerk's Office with these services as Claims Agent: a) relieve the Clerk's Office of all noticing under any applicable bankruptcy rule and processing of claims; b) at any time, after request, satisfy the court that the outside claims agent has the capability to efficiently and effectively notice, docket and maintain the proofs of claim; c) notify all creditors of the filing of the bankruptcy petition and of the setting of the first meeting of creditors, pursuant to Section 341(a) of the Bankruptcy Code, under the proper provision of the Bankruptcy Code; d) furnish a last date for the filing of a proof of claim and a form for filing a proof of claim to each creditor notified of the filing; e) maintain an up-to-date copy of the Debtors' schedules which lists all creditors and amounts owed; f) provide the creditor with the scheduled amount and classification and Debtor with which it holds a claim; g) file with the clerk a certificate of service within 10 days, which includes a copy of the notice, a list of persons to whom it was mailed, and the date mailed; h) provide Mylar labels to the clerk's office with these information: (i) FILED S.D.N.Y.B.C., (ii) case name and number, and (iii) claim number beginning with 00001 and continuing; i) microfilm, or by some similar electronic means, reproduce the first page of any proof of claim; j) after reproducing, cause to be removed all proofs of claims from the office of the clerk to the outside claims agent; k) maintain all proofs of claim filed; l) maintain an official claims register by docketing all proofs of claim on a claims register; m) maintain all original proofs of claim in correct claim number order, in an environmentally secure area and protect the integrity of these original documents from theft and alteration; n) transmit to the clerk an official copy of the claims register on a weekly basis, unless authorized by the clerk on a more/less regular basis; o) maintain an up-to-date official mailing list for all entities which will be available after request of a party- in-interest or the clerk; p) be open to the public for examination of the original proofs of claim, without charge, during regular business hours; q) maintain a telephone staff to handle inquiries as related to procedures in filing proofs of claim; r) make any necessary changes to the claims register pursuant to court order; s) make all original documents available to the clerk on an expedited and immediate basis; t) provide notices to any entities, not limited to creditors, that the Debtors or the court deem necessary for an orderly administration of the bankruptcy case; and u) at the close of the case, box and ship all original documents in proper format, as provided by the clerk's office, to the Federal Archives and Record Administration located at Central Plains Region, 200 Space Center Drive in Lee's Summit, Missouri 64064. The Debtors want to compensate and reimburse BSI in accordance with the terms of the BSI Agreement for all services rendered and expenses incurred in connection with the Debtors' Chapter 11 cases. The Debtors believe that these compensation rates are reasonable and appropriate for services of this nature and comparable to those charged by other providers of similar services. Any additional professional services will be charged at BSI's hourly rates: Kathy Gerber $210 Senior Consultants 185 Programmer 130-160 Associate 135 Data Entry/Clerical 40-60 Schedule Preparation 225 BSI President Ron Jacobs assures the Court that neither BSI nor any of its members or employees hold or represent any interest adverse to the Debtors' estates or creditors with respect to the services described and in the BSI Agreement. BSI also represents that: a) it is not employed by the Government and will not seek any compensation from the Government; b) by accepting employment in this case, it waives any rights to receive compensation from the Government; c) it is not an agent of the United States and is not acting on behalf of the United States; d) it will not misrepresent any fact to the public; and e) it will not employ any past or present employee of the Debtors for work on this particular case involving the Debtors. (WestPoint Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM INC: Selling Douglas Lake Ranch for $68.5 Million ---------------------------------------------------------- Marcia Goldstein, Esq., at Weil Gotshal & Manges LLP, in New York, relates that Bernard Ebbers, WorldCom's former chief executive officer, is the legal and beneficial owner of all of the issued and outstanding shares of the capital stock of Douglas Lake Properties, Inc. and all of the issued and outstanding partnership interests in Douglas Lake Land & Timber Company, LLP. In turn, Douglas Lake Properties is the legal and beneficial owner of all of the issued and outstanding shares of the capital stock of Douglas Lake Cattle Company. Douglas Lake Cattle owns and operates a ranch located in the Nicola Valley in the southern interior of British Columbia, known as "Douglas Lake Ranch". Pursuant to a prepetition pledge and security agreement, dated April 18, 2002, Ms. Goldstein informs the Court that Mr. Ebbers pledged to WorldCom his shares in Douglas Lake Properties and his 99% partnership interest in Douglas Lake Land & Timber as partial security for certain prepetition loans made to him by WorldCom. By letter agreements dated April 17, 2002, Mr. Ebbers granted WorldCom certain rights with respect to his ownership interests in Douglas Lake Properties and Douglas Lake Land. The Control Agreements provide that WorldCom may exercise sole and exclusive control of those ownership interests after providing Douglas Lake Properties and Douglas Lake Land with written notice. By letters each dated October 24, 2002, Ms. Goldstein recounts that WorldCom informed Douglas Lake Properties and Douglas Lake Land that WorldCom was exercising its rights under the Control Agreements. On January 10, 2003, WorldCom directed Douglas Lake Properties and Douglas Lake Land to replace their officers and directors with individuals specified by WorldCom. Following the replacement of the officers, directors and managers, Douglas Lake Properties and Douglas Lake Land undertook a marketing process for the sale of the Ranch. Specifically, Douglas Lake Properties and Douglas Lake Land, with the assistance of WorldCom, Hilco Real Estate, LLC and Colliers International, sent information regarding the Ranch to various publications and to certain contacts. In addition, the Sellers contacted six parties that had expressed an interest in the Ranch prior to WorldCom's involvement. As a result of the marketing process for the Ranch, Ms. Goldstein reports that the Sellers received expressions of interest from more than 100 parties, a subset of which entered into non- disclosure agreements and received due diligence materials on the Ranch. Subsequently, the Sellers received three qualified and conforming bids. The three qualifying bidders delivered letters of intent that were not contingent on financing, and submitted a deposit of 5% of the purchase price. Of the three qualified and conforming bids, the Sellers determined that the offer from E. Stanley Kroenke for $68,500,000 was the highest and best offer, and thereafter, entered into negotiations with Stanley Kroenke with respect to the terms of the contemplated sale and to document the contemplated transaction. In May 2003, the Sellers and Douglas Lake Cattle entered into a Purchase and Sale Agreement, dated May 29, 2003, which provides for the sale to Stanley Kroenke of (i) the shares and shareholder loans of Douglas Lake Cattle, and (ii) certain timber rights and beneficial interests in real property owned by Douglas Lake Land, for $68,500,000, subject to adjustment. By transfer of the shares of Douglas Lake Cattle, Ms. Goldstein states that Stanley Kroenke will also become the owner of the Ranch. The Debtors expect that, after satisfaction of, or reserve for, Sellers' obligations to their creditors and deductions for fees, taxes and for certain stay agreements, dividends and distributions representing net proceeds of the sale, estimated to be $55,000,000, will be recovered by WorldCom. Under the contemplated sale transaction, because WorldCom has the right to exercise sole and exclusive control of the voting rights with respect to the Sellers, Ms. Goldstein submits that WorldCom must approve and authorize the sale transaction, which involves substantially all of the Sellers' assets. Although the Debtors believe that the giving of this approval and authorization does not, as a general matter, require Court approval, out of an abundance of caution and to apprise the Court and parties-in- interest of the status of a transaction which effectively represents a recovery by the estates on an asset, the Debtors seek Judge Gonzalez's permission to give approval and to take all actions necessary or appropriate to consummate the sale transaction. The general terms of the contemplated transaction are: A. Sellers: Douglas Lake Properties Inc. and Douglas Lake Land & Timber LLC. B. Purchaser: E. Stanley Kroenke. C. Purchase Price: $68,500,000. D. Purchased Assets: All of the shares and shareholder loans of the Sellers' Assets. E. Adjustment for Liabilities: The Purchase Price will be decreased by: -- the outstanding amount of certain bank debt of Douglas Lake Cattle; -- net amounts outstanding to Douglas Lake Land and other related parties, which will be repaid on closing; -- the Sellers' contribution to certain stay programs; and -- a net working capital adjustment to be determined at closing. F. Holdbacks: The Sellers are liable for standard representations and warranties. There will be a 5% holdback of the sale price, which will be the Purchaser's sole recourse for any claims arising out of the Sellers' breach of representations and warranties. The representations and warranties survive until June 30, 2005. In addition, there is a $500,000 holdback for certain potential Canadian tax liabilities of the Sellers arising prior to the closing. If not drawn down by June 30, 2005, the holdback will be remitted to the Sellers. G. Releases: WorldCom waives and releases all claims and rights it has or may have against Douglas Lake Cattle or the Assets or Stanley Kroenke. H. Termination Fee: In the event that an alternative transaction for the Assets is consummated with a party other than Stanley Kroenke, Stanley Kroenke is entitled to $2,000,000, plus the reimbursement of expenses up to $500,000. The Debtors believe that the consent to the sale of the Assets is an exercise of their sound business judgment. Ms. Goldstein points out that the sale of the Assets will enable the Debtors to recover an estimated $55,000,000 on a net basis for Assets that are not needed in the Debtors' ongoing business operations. Therefore, the Sellers and the Debtors will directly benefit economically as a result of the transaction. (Worldcom Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392- 0900) YAHOO! INC: Reports Improved Second Quarter Financial Results ------------------------------------------------------------- Yahoo! Inc. (Nasdaq: YHOO) reported results for the second quarter ended June 30, 2003. Net revenues for the second quarter totaled $321.4 million, a 42 percent increase over the $225.8 million reported for the same period in 2002. Operating income for the second quarter of 2003 was $62.8 million, compared to $7.5 million for the same period of 2002. Operating income before depreciation and amortization for the second quarter of 2003 was $97.3 million, compared to $35.0 million for same period of 2002. Cash flow from operating activities for the second quarter of 2003 was $92.1 million, compared to $103.4 million for same period of 2002. Free cash flow for the second quarter of 2003 was $67.7 million, compared to $64.0 million for same period of 2002. Net revenues for the six months ended June 30, 2003 totaled $604.4 million, a 44 percent increase over the $418.5 million reported for the same period in 2002. Operating income for the six months ended June 30, 2003 was $117.7 million, compared to $3.3 million for same period of 2002. Operating income before depreciation and amortization for the six months ended June 30, 2003 was $181.3 million, compared to $53.8 million for same period of 2002. Cash flow from operating activities for the six months ended June 30, 2003 was $190.8 million, compared to $150.8 million for same period of 2002. Free cash flow for the six months ended June 30, 2003 was $142.8 million, compared to $102.3 million for same period of 2002. "We're very excited about the results we have seen in the second quarter, the largest revenue producing quarter in our history. Each piece of our engine is working smoothly with the others, and the numbers show that over the last eighteen months, our performance has been stronger and better," said Terry Semel, chairman and chief executive officer, Yahoo!. "Some of the key drivers of success this quarter include more balanced growth in marketing services, from both traditional advertising and sponsored search, as well as ongoing success in converting consumers and small businesses to fee-based services. We are optimistic about the future and we remain steadfastly focused on execution against our priorities." Business Outlook "This quarter's results demonstrate continued balanced growth across all of our revenue contributors and strong trends in our key financial metric of overall free cash flow generation. As we exit our fifth consecutive quarter of GAAP profitability, we continue to execute upon the key business and financial objectives we have laid out as a company, resulting from a steadily increased base of hundreds of blue-chip traditional marketers, thousands of small- and medium-sized businesses, and millions of worldwide consumers. We are also upwardly revising our business outlook for revenues and operating income before depreciation and amortization for the full year 2003, and we are pleased that our own visibility in our financial prospects has increased," said Susan Decker, chief financial officer, Yahoo!. Please refer to the "Notes to Unaudited Condensed Consolidated Statements of Operations" attached to this press release for our business outlook. Second Quarter 2003 Financial Highlights Revenues: In the second quarter of 2003, Yahoo! reported net revenues of $321.4 million, a 42 percent increase from the same period in 2002. For the six months ended June 30, 2003, net revenues were $604.4 million, a 44 percent increase from the $418.5 million reported in the same period in 2002. Marketing services revenues for the second quarter of 2003 totaled $219.2 million, a 44 percent increase from the same period in 2002. Marketing services revenues for the six months ended June 30, 2003 totaled $409.2 million, a 41 percent increase from the same period in 2002. These increases resulted from a combination of a strong increase in revenues from Yahoo!'s sponsored search services, as well as growth in the balance of Yahoo!'s global marketing services revenues. Fees revenues for the second quarter of 2003 totaled $69.9 million, a 43 percent increase compared to the same period in 2002. Fees revenues for the six months ended June 30, 2003 totaled $133.7 million, a 51 percent increase compared to the same period in 2002. These increases were primarily driven by the growth in paying relationships for Yahoo!'s premium services, including the SBC Yahoo! DSL and Dial products, Yahoo! Personals, and our small business and communications suites of premium services, partially offset by a decrease in our event webcasting business. Listings revenues for the second quarter of 2003 totaled $32.3 million, a 29 percent increase compared to the same period in 2002. Listings revenues for the six months ended June 30, 2003 totaled $61.5 million, a 52 percent increase compared to the same period in 2002. These increases were driven primarily by the incremental contribution of revenue from HotJobs, which was acquired in February 2002, as well as increases in our search and marketplace services revenues. Operating income and Operating income before depreciation and amortization: Operating income for the second quarter of 2003 totaled $62.8 million, compared to $7.5 million in the same period of 2002. Operating income before depreciation and amortization for the second quarter of 2003 totaled $97.3 million, a 178 percent increase compared to the $35.0 million reported in the same period of 2002. Operating income margin was 20 percent of net revenues in the second quarter of 2003 compared to 3 percent of net revenues for the same period of 2002. Operating income before depreciation and amortization margin doubled to 30 percent of net revenues in the second quarter of 2003 compared to 15 percent of net revenues in the same period of 2002. The substantial increase in Operating income and operating income before depreciation and amortization reflects strong growth in net revenues and only an 18 percent increase in costs on a year over year basis as a result of our ongoing cost discipline. Operating income for the six months ended June 30, 2003 totaled $117.7 million, compared to $3.3 million in the same period of 2002. Operating income before depreciation and amortization for the six months ended June 30, 2003 totaled $181.3 million, a 237 percent increase compared to the $53.8 million reported in the same period of 2002. Operating income margin was 19 percent of net revenues for the six months ended June 30, 2003 compared to 1 percent of net revenues for the same period of 2002. Operating income before depreciation and amortization margin increased to 30 percent of net revenues for the six months ended June 30, 2003 compared to 13 percent of net revenues in the same period of 2002. Cash flow from operating activities and Free cash flow: Cash flow from operating activities for the second quarter of 2003 totaled $92.1 million, compared to $103.4 million for the same period of 2002. Free cash flow for the second quarter of 2003 totaled $67.7 million, a 6 percent increase compared to the $64.0 million reported for the same period of 2002. Cash flow from operating activities for the six months ended June 30, 2003 totaled $190.8 million, compared to $150.8 million for the same period of 2002. Free cash flow for the six months ended June 30, 2003 totaled $142.8 million, a 40 percent increase compared to the $102.3 million reported for the same period of 2002. Net Income (Loss): Net income for the second quarter of 2003 was $50.8 million or $0.08 per diluted share, compared with $21.4 million or $0.03 per diluted share for the same period of 2002. Net income for the six months ended June 30, 2003 was $97.5 million or $0.16 per diluted share, compared with income before the cumulative effect of accounting change of $31.9 million or $0.05 per diluted share for the same period of 2002. Net loss was $32.3 million or $0.05 per diluted share for the six months ended June 30, 2002, including the charge of $64.1 million for the cumulative effect of the accounting change for the implementation of Statement of Financial Accounting Standard No. 142 ("SFAS 142"). SFAS 142, which the Company adopted January 1, 2002, requires companies to assess the goodwill recorded from previous acquisitions, and as necessary, record an impairment charge that does not affect cash or the Company's operations. Yahoo! Inc. is a leading provider of comprehensive online products and services to consumers and businesses worldwide. Yahoo! is the No. 1 Internet brand globally and the most trafficked Internet destination worldwide. Headquartered in Sunnyvale, Calif., Yahoo!'s global network includes 25 World properties and is available in 13 languages. As reported in Troubled Company Reporter's July 7, 2003 edition, Standard & Poor's Ratings Services assigned its 'BB+' corporate credit rating to Yahoo! Inc. At the same time, Standard & Poor's assigned its 'BB+' rating to Yahoo's $750 million senior convertible notes due 2008. Net proceeds will be used for general corporate purposes, including acquisitions. Sunnyvale, California- based Yahoo had no debt outstanding at March 31, 2003. The outlook is stable. "The rating reflects the company's well-established Internet brand, high profit margins, good discretionary cash flow, and ample cash cushion, along with concerns regarding the company's revenue and earnings concentration from advertising and sponsorship, competition in the Internet search business, and the challenge of retaining its market position in an evolving Internet medium as Internet usage migrates to broadband," said credit analyst Andy Liu. * Ernst & Young Strikes Merger with Blair Crosson in B.C. Canada ---------------------------------------------------------------- Two of British Columbia's leading accounting firms have merged, creating the premier business valuation and litigation support practice in the province. Ernst & Young, a global leader in professional services, and the Vancouver based valuations, litigation support and tax firm Blair Crosson Voyer (BCV) officially announced the merger. The full team at Blair Crosson Voyer will now operate within the Transaction Advisory Services and Tax groups of Ernst & Young. "This transaction fits with Ernst & Young's goal of expanding our presence in British Columbia," says Fred Withers, managing partner with Ernst & Young in Vancouver. "The merger decision was ultimately based on our strong belief in the B.C. economy, and thus a market need for expanded transaction advisory services. With today's announcement - our acquiring the leading firm in business valuation and litigation support, as well as BCV's seasoned tax group - Ernst & Young adds some of the profession's key expertise and top- ranked valuators to its growing transaction advisory team. That puts us in a dominant position in business valuation and litigation support, and leaves us prepared to serve clients fully as the economy strengthens," Mr. Withers says. Blair Crosson Voyer is a Vancouver success story, becoming the pre- eminent business valuation and litigation support practice in British Columbia by building a strong presence in the community and the market with work for an impressive list of clients. Richard Crosson who joins Ernst & Young as partner and will lead the valuations practice as senior vice president with Ernst & Young Transaction Advisory Services, says the merger makes a lot of sense for clients of both BCV and Ernst & Young. "Ernst & Young is stronger in valuations and litigation support through this deal -- something the market will be better for -- and the BCV team can now offer our clients the impressive scope of services and resources that the global reach of Ernst & Young provides," he says. Along with Mr. Crosson, Vern Blair becomes a senior vice president with Ernst & Young Transaction Advisory Services. Ron Voyer becomes a partner in taxation with Ernst & Young LLP. In all, six Blair Crosson Voyer people will join Ernst & Young Transaction Advisory Services; four people join the tax group at Ernst & Young, as well as one administrative person. The Ernst & Young and BCV merger is the second recent transaction for Ernst & Young. In late June, Ernst & Young Corporate Finance Inc. and Synergy Partners merged, forming the largest mid-market M&A firm in Alberta. Ernst & Young, a global leader in professional services, is committed to restoring the public's trust in professional services firms and in the quality of financial reporting. Its 106,000 people in more than 140 countries around the globe pursue the highest levels of integrity, quality, and professionalism to provide clients with solutions based on financial, transactional, and risk- management knowledge in Ernst & Young's core services of audit, tax, and corporate finance. Further information about Ernst & Young and its approach to a variety of business issues can be found at http://www.ey.com/perspectives Ernst & Young refers to all the members of the global Ernst & Young organization. Ernst & Young Corporate Finance Inc. is Canada's largest financial advisory business focused on the mid-market. We have more than 25 years of experience providing transaction advisory services and more than 280 professionals in nine cities, specializing in specific industry sub-sectors. Our clients benefit from our multidisciplinary team approach, which seamlessly integrates Ernst & Young's M & A, Financing, Business Valuation, Litigation Support, Restructuring, M&A Tax and Transaction Support practices to ensure that every aspect of a transaction is effectively managed. Blair Crosson Voyer specializes in taxation, valuation and litigation support services. Founded in 1989 and with six chartered business valuators, Blair Crosson Voyer is the largest independent valuations and litigation support practice in British Columbia. Blair Crosson Voyer provides valuations services for a wide variety of business needs and has acted as experts in many of the largest commercial damages claims in British Columbia. Blair Crosson Voyer tax consultants specialize in corporate reorganizations, serving a variety of industries and principally the real estate and technology sectors. * Kristin Going Joins Gardner Carton's Restructuring Practice ------------------------------------------------------------- Gardner Carton and Douglas, a leading law firm with offices in Chicago and Washington D.C., is pleased to announce the addition of Kristin K. Going as a senior associate in its Washington D.C. office. Ms. Going, who has an LLM in Bankruptcy and is a member of the Maryland and Ohio Bars, concentrates her practice in the representation of debtors, creditors committees, indenture and securitization trustees, assignees for the benefit of creditors, and individual creditors in insolvency proceedings in state and federal courts. We are further expanding our already highly recognized national insolvency practice, which is only further enhanced with the addition of Kristin Going in the D.C. office, says Harold L. Kaplan, Chair of the Firm s Corporate Restructuring Practice resident in Chicago, and Stephanie Wickouski who leads the Practice out of the D.C. office. The Corporate Restructuring Practice of Gardner Carton & Douglas has a national reputation particularly in representing indenture trustee and bondholder interests in major cases throughout the United States (representing in excess of $6 billion in bond defaults in the last year), as well as creditor committees and other interests. The practice Chair, Mr. Kaplan, was named one of thirteen Outstanding Bankruptcy Attorneys in the United States in 2001 by Turnaround and Workouts Magazine. Ms. Wickouski is the author of the definitive treatise entitled Bankruptcy Crimes. Gardner, Carton & Douglas -- http://www.gcd.com/-- was established in Chicago in 1910. The firm's 230 attorneys practice in Chicago and Washington D.C. Diverse and geographically widespread, the firm s extensive client base includes major domestic and foreign manufacturing and technology companies; hospitals and other nonprofit organizations; commercial and investment banks; insurance companies and other financial service institutions; Native American tribes, universities and municipalities; broadcasters, common carriers and private communication users; advanced technology businesses; and individuals. * Tracy Treger Joins Gardner Carton's Restructuring Practice ------------------------------------------------------------ Gardner Carton and Douglas, a leading law firm with offices in Chicago and Washington D.C., is pleased to announce the addition of Tracy L. Treger, a nationally recognized corporate bankruptcy lawyer, as a principal in its Chicago Corporate Restructuring Practice. Ms. Treger has ten years of experience in complex reorganization cases before federal bankruptcy courts throughout the country. Previously, Ms. Treger was with Altheimer & Gray. Ms. Treger is the author of numerous bankruptcy, lending and creditors rights articles. She also has a national reputation representing landlords and equipment lessors in insolvency situations, as well as experience with SIPA liquidations of brokerage firms, trustee representations, and fraud and fraudulent conveyance matters. Her articles have appeared in The Commercial Lending Review, Wiley Bankruptcy Update, Illinois Banker, Chicago- Kent and Whittier Law Reviews, and various local publications. With Tracy Treger, we are further expanding our already highly recognized national insolvency practice, says Harold L. Kaplan, Chair of the Firm's Corporate Restructuring Practice resident in Chicago, and Stephanie Wickouski who leads the Practice out of the D.C. office. The Corporate Restructuring Practice of Gardner Carton & Douglas has a national reputation particularly in representing indenture trustee and bondholder interests in major cases throughout the United States (representing in excess of $6 billion in bond defaults in the last year), as well as creditor committees and other interests. The practice Chair, Mr. Kaplan, was named one of thirteen Outstanding Bankruptcy Attorneys in the United States in 2001 by Turnaround and Workouts Magazine. Ms. Wickouski is the author of the definitive treatise entitled Bankruptcy Crimes. Gardner, Carton & Douglas -- htpp://www.gcd.com/ -- was established in Chicago in 1910. The firm's 230 attorneys practice in Chicago and Washington D.C. Diverse and geographically widespread, the firm s extensive client base includes major domestic and foreign manufacturing and technology companies; hospitals and other nonprofit organizations; commercial and investment banks; insurance companies and other financial service institutions; Native American tribes, universities and municipalities; broadcasters, common carriers and private communication users; advanced technology businesses; and individuals. * Morgan Lewis Elects 17 Lawyers as New Partners ------------------------------------------------ Morgan Lewis, one of the 10 largest U.S. law firms, announced that 17 lawyers have been elected to the partnership. "We are enormously proud to welcome these exceptional attorneys to the partnership," says Francis M. Milone, Chairman of Morgan Lewis. "Our commitment to excellence in client service is consistently strengthened by the attraction and promotion of dynamic and talented attorneys," he adds. The diversity of practice groups and offices from which this year's rising partners have been selected reflects the depth and breadth of Morgan Lewis. A chart of the new partners, their practice groups, and their home offices follows. Morgan Lewis, with a team of nearly 1,200 lawyers in 16 offices, is a fully-integrated, multipractice law firm that serves global clients. For more than a century, Morgan Lewis has represented Fortune 500 companies, multinational financial services and investment banking organizations, as well as leaders in the life sciences, technology, energy, securities, real estate and media sectors. For more information about Morgan Lewis, visit http://www.morganlewis.com *BOOK REVIEW: Lost Prophets -- An Insider's History of the Modern Economists ---------------------------------------------------------- Author: Alfred L. Malabre, Jr. Publisher: Beard Books Softcover: 256 pages List Price: $34.95 Review by Henry Berry Order your personal copy today at http://www.amazon.com/exec/obidos/ASIN/1587981807/internetbankrupt Alfred Malabre's personal perspective on the U.S. economy over the past four decades is firmly grounded in his experience and knowledge. Economics Editor of The Wall Street Journal from 1969 to 1993 and author of its weekly "Outlook" column, Malabre was in a singular position to follow the U.S. economy in recent decades, have access to the major academic and political figures responsible for economic affairs, and get behind the crucial economic stories of the day. He brings to this critical overview of the economy both a lively, often provocative, commentary on the picture of the turns of the economy. To this he adds sharp analysis and cogent explanation. In general, Malabre does not put much stock in economists. "In sum, the profession's record in the half century since Keynes and White sat down at Bretton Woods [after World War II] provokes dismay." Following this sour note, he refers to the belief of a noted fellow economist that the Nobel Prize in this field should be discontinued. In doing so, he also points out that the Nobel for economics was not one originally endowed by Alfred Nobel, but was one added at a later date funded by the central bank of Sweden apparently in an effort to give the profession of economists the prestige and notice of medicine, science, literature and other Nobel categories. Malabre's view of economists is widespread, although rarely expressed in economic circles. It derives from the plain fact that modern economists, even hugely influential ones such as John Meynard Keynes, are wrong as many times as they are right. Their economic theories have proved incomplete or shortsighted, if not basically wrong-headed. For example, Malabre thinks of the leading economist Milton Friedman and his "monetarist colleagues" as "super salespeople, successfully merchandising.an economic medicine that promised far more than it could deliver" from about the 1960s through the Reagan years of the 1980s. But the author not only cites how the economy has again and again disproved the theories and exposed the irrelevance of wrong-headedness of the policy recommendations of the most influential economists of the day. Malabre also lays out abundant economic data and describes contemporary marketplace and social activities to show how the economy performs almost independently of the best analyses and ideas of economists. Malabre does not engage in his critiques of noted economists and prevailing economic ideas of recent decades as an end in itself. What emerges in all of his consistent, clear-eyed, unideological analysis and commentary is his own broad, seasoned view of economics-namely, the predominance of the business cycle. He compares this with human nature, which is after all the substance of economics often overlooked by professional and academic economists with their focus on monetary policy, exchange rates, inflation, and such. "The business cycle, like human nature, is here to stay" is the lesson Malabre aims to impart to readers interested in understanding the fundamental, abiding nature of economics. In Lost Prophets, in language that is accessible and jargon-free, this author, who has observed, written about, and explained economics from all angles for several decades, persuasively makes this point. In addition to holding a top position at The Wall Street Journal, Malabre is also the author of the books, Understanding the New Economy and Beyond Our Means, which received the George S. Eccles Prize from the Columbia Business School as the best economics book of 1987. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***