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/raid1/www/Hosts/bankrupt/TCR_Public/030724.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, July 24, 2003, Vol. 7, No. 145 Headlines ACCLAIM ENTERTAINMENT: Names Paul Eibeler Pres. and COO for NA ADELPHIA BUSINESS: Wants to Extend $15MM DIP Financing Maturity ADELPHIA COMMS: Selling Sunshine Network Interests for $3.6 Mil. ADF GROUP: Reaches Short-Term Debt and Bridge Loan Workout Pact ADVANSTAR COMM: S&P Assigns B- Rating to $400 Million Sr. Notes AIR CANADA: Comments on Canada's Competition Tribunal Decision AIR CANADA: Reports 100% Increase in Online Bookings AIR CANADA: CIBC Presses for Prompt Execution of Assignment Form AK STEEL: S&P Cuts Ratings to B+ Over Weak Financial Performance AMERCO: Court Grants Final Approval of BDO Seidman's Engagement AMERICA WEST HLDGS: S&P Affirms & Removes B- Rating from Watch AMES DEPARTMENT: Sues 69 Vendors to Recover Preference Payments ANTARES PHARMA: Completes Second $2MM Private Equity Placement ARMSTRONG: Maertin Plaintiffs' Suit Settlement Drawing Fire ARVINMERITOR INC: Dana's Board Rejects Unsolicited Tender Offer ARVINMERITOR: Voices Commitment to Offer to Acquire Dana Shares BAYOU STEEL: Hires Valuation Research as Valuation Consultants BAY VIEW CAPITAL: Reports $410 Million Net Assets in Liquidation BENCHMARK ELEC.: Stable Profitability Spurs S&P to Up Ratings BUDGET GROUP: Plan Filing Exclusivity Extended Until August 1 BURLINGTON IND.: Court Approves Hilco's Engagement as Appraisers COLUMBUS MCKINNON: Completes $115MM Senior Secured Note Offering COM21 INC: Inks Definitive Pact to Sell Certain Assets to ARRIS COMM 2001-J1: Fitch Cuts Class G, H & J Note Ratings to BB/B/B- CONSOL ENERGY: Liquidity Concerns Prompt S&P's BB+/B Ratings COVANTA ENERGY: Court Fixes Aug. 14 Bar Date for 30 New Debtors DEAN FOODS: S&P Affirms BB+ Corporate Credit Rating DEVINE ENTERTAINMENT: Red Ink Continues to Flow in March Quarter DOUBLECLICK INC: Reports Improved 2nd Quarter Financial Results EAGLE-PICHER INC: S&P Assigns B+ Senior Secured Bank Loan Rating EL PASO CORP: Re-Election of Board's Nominees Confirmed ENERGY PARTNERS: S&P Assigns B+ Corporate Credit Rating ENRON CORP: Settlement Shows Cost of Neglecting Risk Management ENRON CORP: Classification and Treatment of Claims Under Plan EXIDE TECHNOLOGIES: Court Fixes Aug. 15 as Contaminant Bar Date FHC HEALTH SYSTEMS: S&P Rates Counterparty Credit Rating at B GAUNTLET ENERGY: Canadian Court Extends CCAA Stay Until Aug. 29 GENERAL BINDING: Q2 Earnings Results Enter Negative Territory GRISTEDE'S FOODS: S&P Rates Planned $150M Sr. Secured Notes at B HARBISON-WALKER: Court Extends Halliburton Stay to Sept. 30 HARTZ MOUNTAIN: S&P Cuts Corporate Credit Rating Down 2 Notches HILCORP ENERGY: S&P Rates Proposed $350 Million Sr. Notes at 'B' IMPERIAL PLASTECH: Misses Deadline to File Financials INTEGRATED HEALTH: Resolves Claims Dispute with BT Off. Products INTERNET INFINITY: Hires Kabani & Co. to Replace Caldwell Becker JP MORGAN COMM'L: Fitch Affirms Low-B Ratings on 3 Note Classes KERR GROUP: S&P Assigns BB- Speculative Grade Credit Rating KINDERCARE LEARNING: $125 Million Credit Facility Rated 'B+' LEAP WIRELESS: Court OKs Irell & Manella as Committee's Counsel LEASE INVESTMENT: Fitch Cuts Four Class Note Ratings to BB/B LENNOX INT'L: Second Quarter 2003 Results Reflect Improvement LTV CORP: Wants to Fund Trust to Indemnify Officers & Directors LTWC CORPORATION: Case Summary & Largest Unsecured Creditors LUCILLE FARMS: Fails to Comply with Nasdaq Listing Requirements MANDALAY RESORT: Fitch Rates $250M 6. Senior Unsec. Notes at BB+ MILLENNIUM CHEM: S&P Further Cuts Ratings on Weak Fin'l Profile MIRANT CORP.: Committee Formation Meeting is Tomorrow in Dallas MIRANT CORP: Court Restricts Securities Trading to Preserve NOLs MIRANT CORP: Asks Court to Deem Utilities Adequately Assured NATIONAL EQUIPMENT: Kurzman Carson Appointed as Claims Agent NATIONAL STEEL: Retirees' Committee Hires Seyfarth as Counsel NEXTEL COMMS: S&P Ratchets Corporate Credit Rating Up a Notch NIFF-CORR LLC: Case Summary & 20 Largest Unsecured Creditors NTELOS: Proposes New Board of Directors for Reorganized Debtor OM GROUP: Ratings Off Watch Due to Unit's Nearing Divestiture OWENS: Claims Status Modification Hearing Continues on July 28 OWENS-ILLINOIS: Reports Decline in Second Quarter Fin'l Results PACIFIC GAS: Gets Nod to Pay $281 Million Mortgage Bond Maturity PACIFIC GAS: Modifies BNY Stipulation re Cash Collateral Use PEABODY ENERGY: Board Raises Cash Quarterly Dividend by 25% PG&E NATIONAL: Look for Schedules and Statements by August 22 QUANTUM CORP: Fiscal First Quarter Net Loss Stands at $9 Million REGAL ENTERTAINMENT: Reports Slight Improvement in Q2 Results RENT-WAY INC: SEC and U.S. Attorney Complete Investigation RURAL CELLULAR: S&P Junks $325 Million Senior Notes at CCC SAFETY-KLEEN: Settles Claims Dispute with Dai-Ichi Kangyo Bank SALEM COMMS: S&P Keeping Watch on B+ Corporate Credit Rating SIEBEL SYSTEMS: Initiates Restructuring Plan to Reduce Expenses SK GLOBAL AMERICA: Case Summary & 18 Largest Unsecured Creditors SPIEGEL GROUP: Wants Blessing to Hire Watson Wyatt as Consultant SR TELECOM: Closes $4.5 Million Private Placement Transaction TOWER AUTOMOTIVE: Working Capital Deficit Narrows to $82 Million UNITED AIRLINES: Turning Over Assets to Northern Trust Company UPC POLSKA: Gets Court Nod to Hire Ordinary Course Professionals U.S. CAN CORP: Completes $125 Million 10-7/8% Debt Offering VANTAGEMED CORP: Appoints Ernie Chastain Vice President of Sales VICWEST CORP: Creditors' Meeting Scheduled to Convene on Aug. 1 VIRYANET: March 31, 2003 Balance Sheet Upside-Down by $883,000 WABASH NATIONAL: Preparing to Offer $100 Million Conv. Notes WABASH NATIONAL: June 30 Working Capital Deficit Tops $190 Mill. WEIRTON STEEL: Obtains Nod to Implement Temporary Layoff Program WESTPOINT STEVENS: Wants Utility Cos. Deemed Adequately Assured WINSTAR: Winstar Holdings Asks Court to Hold Network in Contempt WORLDCOM: NLPC Lauds Hatch Hearing Probing Bankruptcy Proceeding WORLDCOM INC: CAGW Applauds Hearing to Question MCI's Bankruptcy WORLDCOM INC: Intends to Assume Two Amended Fionda Agreements * Dewey Ballantine Adds Partner Lawrence M. Hill to NY Office * Fried Frank Elects Three New Partners at New York Headquarters * DebtTraders' Real-Time Bond Pricing ********* ACCLAIM ENTERTAINMENT: Names Paul Eibeler Pres. and COO for NA -------------------------------------------------------------- As part of its new global operating plan designed to fuel the Company's future growth, Acclaim Entertainment, Inc. (Nasdaq: AKLM) has appointed Paul Eibeler as President and Chief Operating Officer of Acclaim North America. Reporting directly to Rod Cousens, Chief Executive Officer for Acclaim, Eibeler will be responsible for overseeing the performance and strategic growth of the company's North American operations, including product development, marketing, sales and manufacturing. Eibeler, a seasoned interactive entertainment industry executive, most recently served as President and Director of Take-Two Interactive Software, Inc. (Nasdaq: TTWO), a position he held since January 2000. During his tenure at Take-Two, the organization grew to become the number two publisher in the interactive entertainment industry. "We have gone to great lengths to implement new systems to improve the way we design our products, manage our operating expenses and stabilize the organization so that it can attain a stronger position in the marketplace," said Rod Cousens, Chief Executive Officer for Acclaim. "An important part of this process includes strengthening our senior management team, and we are very pleased to have Paul join us and lend his leadership skills and industry- wide credibility to help expedite our improved performance and success." "I am excited to become part of the new management team," said Paul Eibeler. "I believe that Acclaim has a tremendous opportunity based on its rich history to take advantage of the growth of the interactive software business." Prior to joining Take-Two, Eibeler was a consultant to Microsoft's Xbox launch team. From 1998 through 1999, he served as Executive Vice President and General Manager of Acclaim North America. Earlier in his career, Eibeler held various executive positions with Impact, Inc., a leading supplier of licensed toys and school supplies. Eibeler received a B.A. degree from Loyola College in 1978. Based in Glen Cove, N.Y., Acclaim Entertainment, Inc. -- whose March 31, 2003 balance sheet shows a total shareholders' equity deficit of about $46 million -- is a worldwide developer, publisher and mass marketer of software for use with interactive entertainment game consoles including those manufactured by Nintendo, Sony Computer Entertainment and Microsoft Corporation as well as personal computer hardware systems. Acclaim owns and operates five studios located in the United States and the United Kingdom, and publishes and distributes its software through its subsidiaries in North America, the United Kingdom, Australia, Germany, France and Spain. The Company uses regional distributors worldwide. Acclaim also distributes entertainment software for other publishers worldwide, publishes software gaming strategy guides and issues "special edition" comic magazines periodically. Acclaim's corporate headquarters are in Glen Cove, New York and Acclaim's common stock is publicly traded on NASDAQ.SC under the symbol AKLM. For more information visit its Web site at http://www.acclaim.com ADELPHIA BUSINESS: Wants to Extend $15MM DIP Financing Maturity --------------------------------------------------------------- Pursuant to the Adelphia Business Solutions, Inc.'s Senior DIP Credit Agreement and the Final DIP Order, the $15,000,000 DIP Loan from Beal Bank, S.S.B. matures on the earlier of: -- July 31, 2003, -- the Effective date of a Chapter 11 Plan or Reorganization, or -- the Termination Date. Judy G.Z. Liu, Esq., at Weil, Gotshal & Manges LLP, in New York, notes that since the ABIZ Debtors have yet to file a plan of reorganization, it would be best for ABIZ to seek an extension of the Maturity Date from Beal Bank. Although not yet in the final form, the Debtors and Beal Bank already agreed to the amendment of the terms and provisions of the Senior DIP Credit Agreement. The salient terms of the Amendment will be: A. Scheduled Maturity: Extend scheduled Maturity to April 30, 2004; B. Administration Fee: Increase the monthly administration fee from $15,000 to $25,000; C. Extension Fee: $100,000; D. Eligible Receivable Covenant: Modify covenant to permit the Debtors to include available cash for purposes of covenant compliant. Minimum aggregate requirement to be $20,000,000 in eligible receivables and available cash. Certain cash is included, including cash used to satisfy the new cash collateral covenant; E. Cash Collateral Covenant: Add a requirement to maintain at least $5,000,000 in a restricted cash collateral account at Beal Bank; F. Free Cash Flow Covenant: Adjust the minimum cumulative free cash flow covenant for July 2003 and add cumulative monthly minimum through extended maturity; and G. Fee for Future Amendments/Waivers: A $50,000 amendment and waiver fee will be charged for each future amendment or waiver. Not charged in connection with this pending amendment; the extension fee applies instead. The Debtors expect to finalize the Amendment no later than July 24, 2003 and promise to file the finalized Amendment with the Court immediately. In the summer of 2001, the property located at 200 Technology Drive in Pittsburgh, Pennsylvania, was transferred from Adelphia Business Solutions of Pennsylvania, Inc. to Adelphia Business Solutions Investment, LLC. Since that time, the Property has been reflected as an asset on ABS Investment's books and records rather than on ABIZ-PA's. Also, the Debtors receive all of the requisite regulatory approvals necessary to consummate the Transfer. However, a deed evidencing the Transfer was never executed and recorded to reflect the Transfer on the land records. Under the Final DIP Order, Beal Bank has a first priority lien on the Debtors' real property. To grant the mortgage on the Property that Beal Bank requires, the Debtors need authorization to correct the real estate records by: (i) executing the recording a deed reflecting title to the Property in ABS Investment as of the date of Transfer; and (ii) granting a mortgage on the Property in Beal Bank's favor. Accordingly, the ABIZ Debtors ask the Court to: (a) approve the Amendment and authorize the extension of the Senior DIP Credit Agreement pursuant to the terms and conditions presented; (b) modify the Final DIP Order to reflect the terms of the Amendment; and (c) approve the recording of a deed reflecting a previous transfer. Ms. Liu contends that the Amendment is warranted pursuant to Section 364(c) of the Bankruptcy Code because: (a) it will allow the Debtors to maintain a liquidity cushion necessary to continue their operations until they confirm a plan of reorganization and emerge from Chapter 11 with replacement financing; (b) the Debtors are unable to obtain alternative financing on an unsecured basis; and (c) the terms and provisions of the Amendment and modification of the Final DIP Order were negotiated at arm's length and in good faith between the Parties. (Adelphia Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADELPHIA COMMS: Selling Sunshine Network Interests for $3.6 Mil. ---------------------------------------------------------------- Pursuant to Sections 105 and 363 of the Bankruptcy Code, the Adelphia Communications Debtors seek the Court's authority to transfer its interest in Sunshine Network of Florida, Ltd. -- the Partnership, and shares in Sunshine Network, Inc. -- the Corporation -- to FSN Sunshine Holdings, Inc. Shelly C. Chapman, Esq., at Willkie Farr & Gallagher, in New York, relates that ACOM and FSN are limited partners of the Partnership, which is governed by the Amended and Restated Limited Partnership Agreement dated April 15, 1989. ACOM and FSN are also shareholders of the Corporation, which is the sole general partner of the Partnership, and are parties to the Amended and Restated Shareholders' Agreement dated April 15, 1989. Currently, ACOM holds an approximate 7.028% limited partnership interest in the Partnership and 15,437 shares of common stock in the Corporation. The Corporation holds a 1% general partnership interest in the Partnership, thereby giving ACOM a 7.099% effective ownership interest in the Partnership. ACOM purchased the Interest from SFC and Adelphia Cable Partners, L.P. for $100,000 in March 1994. As ownership of the Sunshine Network has been largely consolidated into FSN's hands, Ms. Chapman points out that ACOM's modest minority interest in the Sunshine Network has no meaningful value to the estates. Moreover, the Debtors currently receive no dividends or distributions on account of the Interest nor do they expect to receive any in the future. Ms. Chapman informs Judge Gerber that the sale is memorialized in an Assumption and Assignment Agreement -- the Documentation -- that contains these salient terms: (a) FSN will purchase the Interest for $3,620,461; (b) ACOM will convey the Interest to FSN free and clear of all liens, claims, security interests, restrictions on transfer, or other rights of third parties, except as otherwise set forth in the Partnership Agreement or the Shareholders' Agreement; (c) ACOM must obtain Bankruptcy Court approval of the Transaction on or before August 31, 2003; and (d) FSN agrees to indemnify ACOM and its affiliates, officers, employees, partners, agents and representatives against and hold them harmless from all obligations and liabilities of ACOM of any nature arising out of, relating to or otherwise in respect of the Interest. Ms. Chapman contends that the Sale Transaction is fair and reasonable because: (a) the Documentation is the result of intensive arm's-length negotiations between the parties; and (b) the sale allows the Debtors to gain profit from an investment that has no meaningful value to the estate. (Adelphia Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADF GROUP: Reaches Short-Term Debt and Bridge Loan Workout Pact --------------------------------------------------------------- ADF Group Inc., has concluded an agreement with its lending syndicate on the restructuring of its short-tem debt (approximately CDN$41.8M) as well as with the bank concerning the bridge loan (approximately US$15M) granted to ADF for the acquisition of Owen Steel Company Inc. These agreements were concluded with the collaboration and support of ADF's bonding companies. Pursuant to the agreement with the lending syndicate, the latter lending syndicate is assigning a $26 million portion of its loan to an entity to be designated by the bonding companies in consideration of a payment of $20.2 million, payable by instalments between July 22 and December 15, 2003. A portion of the Assignment Price ($10 million) is being guaranteed by the bonding companies. As of the execution of the agreements, an amount of approximately $8.5 million has already been paid by ADF to the lending syndicate on the Assignment Price. The balance of the lending syndicate's loan is repayable only from a percentage of the collection of certain claims of ADF. With respect to the agreement reached with the bank, ADF Group, the bank and the bonding companies have agreed to put Owen Steel Company Inc. up for sale. The bank will, under certain conditions, stay proceedings under the bridge loan until December 15, 2003 and will limit its recourses in relation to said loan to the assets of Owen Steel Company Inc. Jean Paschini, Chairman of the Board and Chief Executive Officer of ADF stated that he is satisfied that ADF completed an important phase of its restructuring plan, which will enable the company to finalize the operational aspect of the plan and to pursue its discussions with the other stakeholders. ADF Group Inc. is a North American leader in the design, engineering, fabrication and erection of complex steel superstructures, as well as in architectural metal work. ADF is one of the few players in the industry capable of handling highly technically complex megaprojects on fast-track schedules in the commercial, institutional, industrial and public sectors. ADF operates three fabrication plants: two in Canada and one in the United States. At April 30, 2003, the Company's balance sheet shows that its total current liabilities outweighed its total current assets by about $40 million. ADVANSTAR COMM: S&P Assigns B- Rating to $400 Million Sr. Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to Advanstar Communication Inc.'s proposed $400 million second priority senior secured notes maturing in 2008 and 2010. At the same time, the 'B' rating on the company's revolving bank credit facility was placed on CreditWatch with positive implications based on the improved collateral coverage that would result from the pending reduction in the size of the facility. In addition, Standard & Poor's affirmed its other ratings, including its 'B' corporate credit rating. The outlook remains negative. The Boston, Massachusetts-based business-to-business media company is analyzed on a consolidated basis with its parent, Advanstar Inc. Total consolidated debt, pro forma for the proposed refinancing, is approximately $670 million. Proceeds will be used to repay about $350 million in bank term debt and $40 million in revolving credit borrowings. At that time, the company's bank loan will be reduced to a $60 million revolving credit facility, and Standard & Poor's will raise its rating on the facility to 'B+'. "The repayment of bank debt with higher rate notes will modestly increase interest expense, although this will be more than offset by the elimination of all material debt maturities until at least 2007 when the revolving credit facility matures," according to Standard & Poor's credit analyst Steve Wilkinson. "Proposed amendments to bank financial covenants will also alleviate pressure from the scheduled tightening of leverage tests in early 2005," he continued. The ratings on Advanstar reflect its high financial risk and the still difficult, but stabilizing, industry operating environment. These risks are tempered by the good competitive positions of Advanstar's niche trade show and publishing businesses and the company's good sector diversity outside of its fashion industry concentration. The ratings could come under pressure if Advanstar is unable to gradually increase its revenue and profitability to improve its weak key credit measures and to meet the onset of cash interest payments on its discount notes in April 2006. Ratings could also be lowered if Advanstar's margin of covenant compliance narrows. AIR CANADA: Comments on Canada's Competition Tribunal Decision -------------------------------------------------------------- Air Canada provided the following comment on the Competition Tribunal's reasons and findings released Tuesday with respect to the preliminary issue of the avoidable cost test relating to an application commenced by the Commissioner of Competition against Air Canada in March 2001. Air Canada and the Commissioner of Competition had jointly requested a hearing before the Competition Tribunal for clarification regarding the avoidable cost test for evaluating pricing behavior in the Canadian airline industry under the Competition Act. It was Air Canada's expectation that the Tribunal's decision about the avoidable cost test would provide guidance to Air Canada and other airline industry participants about acceptable pricing behavior. The hearing, considered to be Phase One of the application, was a technical exercise involving a review of all of Air Canada's costs over time periods from April 2000 to March 2001 and a determination of which of those cost items would be considered avoidable costs. The Tribunal ruled that all of Air Canada's overhead costs over the relevant time periods were considered avoidable costs and concluded that Air Canada had operated below its avoidable cost on the two sample routes during the two designated time periods. "The Canadian airline industry is highly competitive and all industry participants will need greater clarity as to what pricing behaviour is acceptable and what constitutes permissible competitive response," said John M. Baker, Senior Vice President and General Counsel for Air Canada. "We will review the decision more carefully before deciding on our next steps. "The Tribunal made it repeatedly clear in its reasons and findings that this decision is in no way a determination that Air Canada breached the Competition Act and that there are many elements remaining to be addressed in any future phase of the case," said Mr. Baker. Air Canada filed for protection under the Companies' Creditors Arrangement Act (CCAA) on April 1, 2003. The Tribunal has stayed its decision in view of the CCAA restructuring process providing for an extension of the timeframe to appeal the decision and ensuring that no further phases of the application will be dealt with until after the Company emerges from court protection or the Court rules otherwise. AIR CANADA: Reports 100% Increase in Online Bookings ---------------------------------------------------- Air Canada customers are booking in record numbers at aircanada.com since the airline introduced simple, low, permanent online fares in mid-May. The airline announced that online bookings have doubled in just two months. Over 30 per cent of Air Canada's domestic bookings are now made online, half of which are being generated through the airline's dedicated travel agency Web site at http://www.aircanada.com/agents In addition, Air Canada announced a new feature which offers even easier online travel planning at http://www.aircanada.comwith the ability for customers to make their own itinerary changes online. The airline also announced a new hotel booking tool which offers accommodation at highly competitive rates and considerable savings. "Simple, low domestic fares at aircanada.com have clearly struck a cord with our customers, who now have more control than ever over their travel planning," said Montie Brewer, Executive Vice President, Commercial. "With the addition today of new self- service tools, our customers have access to more information and better options than ever for booking travel on Air Canada. We will continue to add online tools and services that ensure aircanada.com is where customers come to book their travel as simply and as easily as possible," he said. The new online domestic booking structure proving popular with customers greatly simplifies travel booking with five new fare categories: Fun, Latitude, Freedom, Econo and Flash fare products that permanently offer new low, competitive, best-value one way and return travel. Fun one way web fares offer deep discounts off full one way fares, while Latitude one way web fares offer full flexibility and value at an attractive price. Self serve online changes now available Effective immediately, Air Canada customers can not only book Air Canada's value-based domestic web fares online but can also make complete or partial changes to their reservations on eligible domestic routes. aircanada.com customers can now change flights and pay online as the new booking tool automatically re-prices trip itineraries. Enhanced online hotel booking now available Effective immediately, aircanada.com , 4321zip.com and flytango.com offer the ability to book hotels online at a significant saving. The hotel booking feature includes a wide selection of value-priced accommodation at 50,000 hotels that may be searched by property type, location, price and hotel quality or by the top ten Canadian cities. The enhanced hotel booking function provides customers with prepayment facilities at Air Canada's most popular destinations worldwide. Customers will know the total accommodation cost at the time of booking on this new service that is supported 24 hours a day, seven days a week. Further enhancements to aircanada.com in the coming months In the coming weeks and months, customers booking at aircanada.com will enjoy more new or expanded services designed to enhance their web booking experience. Effective July 30 Aeroplan Bonus Miles earned by booking online at aircanada.com will be available for redemption to customers in their account within 24 hours. One Aeroplan Bonus Mile is awarded for every $3 spent on airfare for travel within Canada and is credited to the account of the customer who makes the online booking. By October customers who travel on multi-leg itineraries, including those journeys that may involve arriving into one city and leaving from another, will be able to book these types of itineraries at aircanada.com . The aircanada.com website will also soon feature group travel booking capabilities and faster downloading of information. Enhanced user identification and password administration functions will soon be available to make travel booking as simple and easy as possible. The site enhancements are an element of Air Canada's comprehensive business strategy focused on providing value and simplicity for customers. The enhancements are designed to increase customer usage of the online channel, simplify and automate the customer's travel experience and further the airline's more efficient, lower cost business strategy. AIR CANADA: CIBC Presses for Prompt Execution of Assignment Form ---------------------------------------------------------------- Canadian Imperial Bank of Commerce asks the Court to direct Air Canada to immediately execute and deliver a form of assignment with respect to a portion of CIBC's position in a bank syndicate loan. Otherwise, CIBC asks Mr. Justice Farley to declare that the assignment of a portion of its position in the syndicated loan pursuant to a credit derivative is effective and binding on the bank syndicate and its agent, Air Canada and the assignee whether or not Air Canada executes a form of assignment. Brian McDonough, Senior Vice President, Special Loans, explains that CIBC is one of the lenders to Air Canada under a syndicated loan with The Bank of Nova Scotia as agent. Before the Petition Date, CIBC purchased a hedge or "credit derivative" in the form of a right to deliver a portion of its syndicated loan to Deutsche Bank AG on certain conditions. Air Canada's CCAA filing triggered an event of default and caused Deutsche Bank to demand CIBC's portion of the syndicated loan. In order to get the benefit of the Credit Derivative, Mr. McDonough continues, CIBC must "settle" the transaction by delivering a valid assignment. CIBC agreed with Deutsche Bank to make the assignment directly to National Bank of Canada. "[T]he consent of Air Canada is not required for the assignment by CIBC to National Bank of Canada as an event of default is outstanding under the Syndicated Loan," Mr. McDonough says. The Assignment Form, however, contemplates Air Canada's signature. Under the Loan Agreement, Air Canada is required to act reasonably in executing the Assignment Form. CIBC delivered to Air Canada and to Nova Scotia an Assignment Form on May 16, 2003. On May 23, 2003, Air Canada executed the Assignment Form as required and returned the executed Form to CIBC. For a technical reason, Nova Scotia refused to accept the Assignment Form. So CIBC prepared a new version of the Assignment Form and sent it to Air Canada for execution. But Air Canada did not respond to CIBC's request that it execute the second version of the Assignment Form. David Shapiro, Air Canada's Assistant General Counsel, later advised CIBC that the new version would not be executed because National Bank of Canada may acquire set-off rights as a consequence of the assignment. But Mr. McDonough notes that such consequence is specifically contemplated by the loan documentation. Air Canada also purported to retract its signature of the earlier version of the Assignment Form. Mr. McDonough maintains that because of Air Canada's unreasonable refusal to execute and deliver the Assignment Form and the delay in its responses, CIBC is at risk of being severely prejudiced. CIBC may lose the benefit of the Credit Derivative unless Air Canada is immediately directed to execute and deliver the Assignment Form. * * * Mr. Justice Farley declares that the assignment of a portion of CIBC's position in the Syndicated Loan is effective and binding on CIBC, National Bank of Canada, Air Canada and The Bank of Nova Scotia, although that Air Canada has not executed the assignment. But Mr. Justice Farley clarifies that the assignment does not create additional set-off rights with respect to the assigned debts. (Air Canada Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) AK STEEL: S&P Cuts Ratings to B+ Over Weak Financial Performance ---------------------------------------------------------------- Standard & Poor's Ratings Services has lowered its corporate credit ratings on integrated steel producer AK Steel Corp. and its parent, AK Steel Holding Corp. to 'B+' from 'BB-' based on the company's weaker than expected financial performance. The current outlook is negative. Middleton, Ohio-based AK Steel has about $1.3 billion in total debt. "The downgrade reflects AK's weaker than expected financial performance resulting from difficult conditions in its key market segments and the expectation that these conditions will continue to subdue the company's financial performance for the intermediate term', said Standard & Poor's credit analyst Paul Vastola. "AK's competitive position has also been weakened by integrated steel companies that have emerged from bankruptcy and drastically improved their balance sheets by reducing debt and shedding their postretirement obligations". Standard & Poor's said that its ratings on AK Steel reflect its challenged business position as a mid-size, value-added, integrated steelmaker, with high exposure to the automotive market, and burdensome legacy costs, which more than offset its fair liquidity. AK Steel competes in cyclical, capital-intensive markets with a focus on the manufacture of flat-rolled carbon, stainless, and electrical steel. AMERCO: Court Grants Final Approval of BDO Seidman's Engagement --------------------------------------------------------------- After conducting the final hearing, U.S. Bankruptcy Court Judge Zive allows Amerco to employ BDO Seidman as its accountants pursuant to the Amended May 8, 2003 Engagement Letter that states: (a) Immediately under the heading "Dispute Resolution Procedure" on page five of the Engagement Letter, this language will be added: "Any dispute, controversy or claim that arises in connection with the performance or breach of this agreement shall be resolved by the United States Bankruptcy Court for the District of Nevada in accordance with the laws of the State of Nevada, provided, however, at the request of either party, and with the consent of the Bankruptcy Court, such dispute, controversy or claim may be resolved pursuant to the procedures described below." (b) This language in the first paragraph below the heading "Dispute Resolution Procedure" on page five of the Engagement Letter is removed: "If any dispute, controversy or claim arises in connection with the performance or breach of this agreement", an will be replaced with: "Either party may. . . ." * * * BDO Seidman will render these services: (a) Complete the audit of AMERCO's financial statements for the fiscal year ended March 31, 2003; and (b) Complete the re-audit of AMERCO's financial statements for fiscal years ended March 31, 2002 and 2001. In exchange for the services to be rendered, BDO Seidman will charge AMERCO on these hourly rates: Partners $450 - 825 Associates 110 - 350 Administrative staff 65 BDO Seidman will also seek the reimbursement of out-of-pocket expenses, including, among other things, long distance telephone calls, facsimiles, photocopying, postage and package delivery charges, messengers, court fees, transcript fees, travel expenses, working meals and computer-assisted research. (AMERCO Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392- 0900) AMERICA WEST HLDGS: S&P Affirms & Removes B- Rating from Watch -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on America West Holdings Corp. and subsidiary America West Airlines Inc., including the 'B-' corporate credit ratings, and removed them from CreditWatch, where they were placed on March 18, 2003. The outlook is negative. "The ratings on America West reflect risks relating to the adverse airline industry environment, a weak balance sheet, and limited financial flexibility," said Standard & Poor's credit analyst Betsy Snyder. "After significant losses incurred since 2001, which almost resulted in its filing for Chapter 11 bankruptcy protection, the company finally reported a profit in the second quarter of 2003, even before the inclusion of an $81 million refund from the federal government," the credit analyst continued. America West Holdings' major subsidiary is America West Airlines Inc., the eighth-largest airline in the U.S, with hubs located at Phoenix and Las Vegas. America West benefits from a low cost structure, among the lowest in the industry. However, it competes at Phoenix and Las Vegas against Southwest Airlines Co., the other major low-cost, low-fare operator in the industry and financially the strongest. As a result of the competition from Southwest, as well as America West's reliance on lower-fare leisure travelers, its revenues per available seat mile also tend to be among the lowest in the industry. In addition, America West Holdings owns the Leisure Co., one of the nation's largest tour packagers. In January 2002, the company received proceeds from a $429 million loan, 90% of which was guaranteed by the federal government under the Air Transportation Stabilization Act, which enabled it to avert filing for Chapter 11 bankruptcy protection. As part of this process, the company completed arrangements for over $600 million in concessions, financing, and other assistance. These actions have allowed it to maintain its relatively low cost structure relative to the industry. Although the company has remained unprofitable since then, it did report a small profit in the second quarter of 2003, even before the inclusion of an $81 million refund from the federal government, one of only a few U.S. airlines to have achieved such a feat. However, the company's financial flexibility is expected to remain weak. Although it had $465 million of cash and short-term investments at June 30, 2003 (of which $80 million is restricted), it has no bank facilities and a substantial portion of its assets are encumbered. The ratings on America West could be lowered if the airline industry enters a renewed downturn due to further terrorism or a "double-dip" recession, causing further pressure on America West's credit profile. AMES DEPARTMENT: Sues 69 Vendors to Recover Preference Payments --------------------------------------------------------------- Ames Department Stores, Inc., and its debtor-affiliates seek to avoid preferential transfers made to 69 creditors. Barry S. Gold, Esq., at Weil, Gotshal & Manges LLP, in New York, tells the Court that Sections 547(b) and 550(a) of the Bankruptcy Code empower a debtor-in-possession, for its estate's benefit, to avoid and recover any transfer of an interest in property: * to or for the benefit of a creditor; * for or on account of an antecedent debt owed by the debtor- in-possession before the transfer was made; * made while the debtor-in-possession was insolvent; * made on or within 90 days, or in certain circumstances, within one year, before the filing of the petition; and * that enables the creditor to receive more in satisfaction of its claims than it would receive in a case under chapter 7 of the Bankruptcy Code if the transfer had not been made. The Avoidable Transfers were on account of antecedent debts owed by Ames to these vendors and were made while the Debtors were insolvent. The Avoidable Transfers enabled the vendors to recover more than they would have received if: -- the Avoidable Transfers had not been made, -- the case were under Chapter 7, and -- they received payment of their debt to the extent provided by Chapter 11. Given these justifications, Mr. Gold contends that the Avoidable Transfers should be avoided and set aside as preferential and the money transferred should be returned to the Debtors. The Debtors are entitled to recover from each of the vendors an amount that is not less than the total amount of transfers. Mr. Gold emphasizes that the recoverable amount should also include interest and costs. Thus, the Debtors ask that the Court enter judgment against the Vendors and direct them to pay to the estate the total amount of the Avoidable Transfers to be determined at trial. In May 2003, the Debtors filed individual complaints against 69 defendant-vendors. During the 90-day period before the Petition Date, the Debtors made avoidable transfers to these creditors in these amounts: Vendor Name Total Check Amount ----------- ------------------ Audiovox Corp. $88,658 Broilking Corp. 138,285 Bush Industries, Inc. 147,421 Castlewood Apparel Corp. 264,682 Cayset Fashions Ltd. 107,938 CHF Industries, Inc. 290,801 Chrisha Creations, Ltd. 142,752 Citgo Petroleum Corp. 130,940 Cliff Weil Inc. 142,931 Commonwealth Wholesale Corp. 477,867 Conley National, Inc. 123,355 Cosmi Corp. 410,012 Dart Distributing LLC 404,528 E. Mishan & Sons, Inc. 145,268 ESS-Hanes Her Way 218,155 Etna Products Co., Inc. 100,367 Fleximat Corp. 326,322 Franco Manufacturing Company, Inc. 460,947 General Mills, Inc. 105,750 Hedstrom Corp. 101,920 Huffy Bicycle Company 609,975 IC Isaacs & Company L.P. 97,009 Jeri Jo, Inc. 105,224 Kantor Bros. Neckwear Co., Inc. 91,483 Kazi Sportswear, Inc. 313,332 Kent (Bicycles) Int'l, Inc. 247,212 Kent Sporting Goods, Inc. 207,585 Klear-Vu Corp. 108,644 Kraco Enterprises, Inc. 147,963 Leen & Associates, Inc. 146,517 L'eggs Products, Inc. 102,714 Lifetime Products, Inc. 102,249 Lynk, Inc. 117,018 Magnivision, Inc. 96,387 Matisse Jewelry, Inc. 90,869 Maurice Sporting Goods, Inc. 689,486 McCormick & Company, Inc. 121,351 Merisant Co. 158,787 Metal Fusion, Inc. 505,323 Notions Marketing 577,494 Opus, Inc. 133,054 Peaches Uniforms, Inc. 129,299 Pepsi-Cola Buffalo Bottling Corp. 98,685 Pepsi-Cola Company Winston Salem 797,165 Presto Products Company 442,191 Pro-Mart Industries, Inc. 110,746 Purity Foods, Inc. 205,945 Quaker Oats Company 126,947 Quick Response Marketing, Inc. 486,338 Radio Flyer, Inc. 141,362 Sandalwood Apparel Corp. 870,351 Singer Sewing Company 334,629 Smart Inventions, Inc. 127,771 Spectra Merchandising Int'l, Inc. 231,225 TDK Electronics Corp. 318,375 Terrisol Corp. 115,062 Teters Floral Products, Inc. 336,219 T-Fal Corp. 637,241 The Greene Company 397,204 The Hilasal Company 427,730 The Holson Company 609,341 The Hoover Company 559,485 Thomson Consumer Electronics, Inc. 434,267 Todd Harvey Associates, Inc. 148,335 TracFone Wireless, Inc. 110,996 Trend Zone, Inc. 130,111 Unical Enterprises, Inc. 938,550 Whittier Wood Products 463,998 Wynit, Inc. 114,018 (AMES Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392-0900) ANTARES PHARMA: Completes Second $2MM Private Equity Placement -------------------------------------------------------------- Antares Pharma, Inc. (OTC Bulletin Board: ANTR) has completed the second tranche of a planned $4.0 million private placement of common equity. The second tranche of $2.0 million was under the same terms as the equity placement announced on July 9, 2003, and was also priced at the $1.00 value of Antares Pharma's shares as of the close of business on July 3, 2003. The participants in this tranche of the financing include SCO Capital Partners LLC, North Sound Legacy Funds, and Vertical Ventures Investments LLC. SCO Securities LLC acted as the placement agent. Lawrence Christian, Chief Financial Officer of Antares Pharma, said, "This equity placement provides further working capital needed to support our ongoing operations and to secure additional technology license agreements. After the completion of this sale of equity, we estimate our cash position, when combined with our plans to further reduce our monthly cash burn, will provide operating capital well into 2004." Antares Pharma develops pharmaceutical delivery systems, including needle-free and mini-needle injector systems and transdermal gel technologies. These delivery systems are designed to improve both the efficiency of drug therapies and the patient's quality of life. The Company currently distributes its needle-free injector systems in more than 20 countries. In addition, Antares Pharma conducts research and development with transdermal gel products and currently has several products in clinical evaluation with partners in the US and Europe. The Company is also conducting ongoing research to create new products that combine various elements of the Company's technology portfolio. Antares Pharma has corporate headquarters in Exton, Pennsylvania, with manufacturing and research facilities in Minneapolis, Minnesota, and research facilities in Basel, Switzerland. Antares Pharma's March 31, 2003 balance sheet shows a working capital deficit of about $4 million and a total shareholders' equity deficit of about $3 million. ARMSTRONG: Maertin Plaintiffs' Suit Settlement Drawing Fire ----------------------------------------------------------- Marc S. Casarino, Esq., at White & Williams in Wilmington, representing International Insurance Company, U.S. Fire Insurance Company and Cravens Dargan Co., Pacific Coast, as managing general agent for Central National Insurance Co. of Omaha, objects to the Motion to Approve Settlement filed by the Maertin Plaintiffs, and requests adequate protection of the ACE Insurers' rights and interests. Prior to the Petition Date, the ACE Insurers issued certain insurance policies to Armstrong World Industries, Inc., including various excess liability policies. The ACE Insurers hold claims against the Debtors, are parties-in-interest in the bankruptcy case, and are defendants in the direct action filed by the Maertin Plaintiffs. The Objections The ACE Insurers object to the Settlement Motion to the extent that the provisions of the proposed settlement attempt to bind the ACE Insurers or in any way alter, impair or otherwise affect their rights, claims and defenses under the ACE Excess Policies. Subject to the granting of certain adequate protection of the ACE Insurers' rights, the ACE Insurers do not object to the Debtors' entry into the settlement. Rather, the ACE Insurers request protection of their rights and interests as provided in a proposed order approving the settlement without prejudice to the ACE Insurers. Furthermore, the subject-matter of the proposed settlement -- the Maertin Plaintiffs' bad faith claims against AWI and its primary insurer, Liberty Mutual, and direct action claims against AWI's primary and excess insurers (including the ACE Insurers) seeking insurance coverage for AWI's pre-petition agreement to pay a $7 million settlement -- is presently being litigated before the Honorable Jerome B. Simandle in the United States District Court for the District of New Jersey, Camden Vicinage, in an action captioned Maertin et al. v. Armstrong World Industries, Inc., Liberty Mutual Group et al. The Bankruptcy Court lacks jurisdiction to determine, alter, impair or otherwise affect the rights, claims and defenses of the ACE Insurers under the ACE Excess Policies or in the NJ Direct Action in connection with the requested approval of the proposed settlement. Accordingly, approval of the proposed settlement, if any, must be without prejudice to the rights of the ACE Insurers. The Maertin Plaintiffs' Settlement Motion seeks approval of a Settlement Agreement and Release dated March 6, 2003, among the Maertin Plaintiffs, Liberty Mutual and AWI. This Second Settlement Agreement is not only contingent upon Bankruptcy Court approval, but also approval by District Judge Simandle in the NJ Direct Action. United States Magistrate Judge Rosen scheduled a hearing in the NJ Direct Action to consider approval of the Second Settlement Agreement, and directed the parties to confer in person beforehand to address any matters relating to that settlement. As the Maertin Plaintiffs acknowledge, the Second Settlement Agreement is only a "partial" settlement. It does not resolve all of the claims and issues among the parties to the Second Settlement Agreement, including especially the allocation and trigger issues pending before District Judge Simandle in the NJ Direct Action. Mr. Casarino describes the Maertin Plaintiffs' summary of the Second Settlement Agreement in their Settlement Motion as "bare bones" and "misleading." He believes that the Second Settlement Agreement "targets and could prejudice the rights of Armstrong's excess insurers" in the NJ Direct Action, including the ACE Insurers' rights and defenses under the ACE Excess Policies. Under the Second Settlement Agreement, in exchange for Liberty Mutual's $3 million payment to the Maertin Plaintiffs, $2 million of which is to be allocated to a particular Liberty Mutual primary policy, the Maertin Plaintiffs agree to forebear from prosecuting their claims for the $4 million balance of the settlement against either the Debtors or Liberty Mutual. Instead, the Maertin Plaintiffs agree to first proceed against the excess insurers in the NJ Direct Action. In the event that the excess insurers are not found liable for the balance of the settlement in the NJ Direct Action, however, the Maertin Plaintiffs may pursue their claims for the remaining settlement amount against AWI (albeit in the bankruptcy case) and Liberty Mutual. The Second Settlement Agreement seeks to saddle the excess insurers with the burden of paying the remaining $4 million of the settlement, despite Liberty Mutual's apparent agreement to originally fund the entire settlement amount and despite the fact that Liberty Mutual's primary policies, if properly exhausted, would provide coverage for the entire $7 million amount. The Second Settlement Agreement preserves the rights of the Debtors and Liberty Mutual to contest the manner in which the remaining $1 million dollar payment by Liberty Mutual is to be allocated. Nothing in the Second Settlement Agreement provides that the provisions of the proposed settlement are not binding upon, and are without prejudice to, the excess insurers' rights in the NJ Direct Action. The Second Settlement Agreement further provides that the Bankruptcy Court "shall have jurisdiction over the settlement for purposes of enforcing this Settlement Agreement and adjudicating disputes that may arise over payment made in connection with this Settlement Agreement," except that the Bankruptcy Court shall not have jurisdiction to adjudicate certain disputes relating primarily to the allocation of Liberty Mutual's $3 million settlement payment (as the parties presumably agree that these issues shall be determined by Judge Simandle in the NJ Direct Action). The ACE Insurers object to the Second Settlement Agreement to the extent that the same may be deemed binding upon non-parties such as the ACE Insurers or to the extent that any order approving the Settlement Motion would constitute a finding, ruling or judgment by the Bankruptcy Court that the provisions in the Second Settlement Agreement are binding upon the excess carriers or in any way alter, impair or otherwise affect their rights, claims and defenses. No Jurisdiction Mr. Casarino insists that the Bankruptcy Court has no jurisdiction to approve the Second Settlement Agreement as binding upon the ACE Insurers. First, the ACE Insurers are not parties to the Second Settlement Agreement. Second, the rights, claims and defenses among the Maertin Plaintiffs, Liberty Mutual and the excess insurers, all non-debtor parties, are presently the subject of the litigation pending before Judge Simandle in the NJ Direct Action. As such, the NJ Direct Action is the appropriate forum to determine the extent to which there is sufficient insurance coverage under Armstrong's primary policies issued by Liberty Mutual to cover the entire settlement amount. The fact that the Maertin Plaintiffs, Armstrong and Liberty Mutual have conditionally agreed to settle for an amount less than the full limits of Armstrong's primary policies cannot bind or impair the rights of the excess insurers in the NJ Direct Action or otherwise alter or expand the contractual rights and obligations under their excess policies. For similar reasons, the proposed settlement cannot bind, impair or otherwise affect the ACE Insurers' rights in the NJ Direct Action or in the ACE Insurers' Appeal to argue that the Maertin Plaintiffs' failure to proceed directly against AWI to collect the settlement, as authorized by Judge Farnan's Order, precludes their claims against the excess insurers under the NJ Anti-Direct Action Statute. Finally, the jurisdictional provisions in the proposed settlement cannot bind the ACE Insurers or expand or pre-decide the Bankruptcy Court's jurisdiction beyond that authorized by law. Any approval of the Second Settlement Agreement should not confer upon the Bankruptcy Court jurisdiction to determine any rights, claims and/or defenses of the ACE Insurers or in the NJ Direct Action, under the guise of enforcing the Second Settlement Agreement. Request For Adequate Protection The Second Settlement Agreement may be approved by the Bankruptcy Court only if it is without prejudice to the rights, claims and defenses of the ACE Insurers in the NJ Direct Action and any other action or proceeding now or hereinafter instituted relating to the claims of the Maertin Plaintiffs. The ACE Insurers request adequate protection of such rights, claims and defenses pursuant to the terms and conditions set forth in their proposed form of order. Any approval of the Second Settlement Agreement should be made expressly subject to such terms and conditions in order to protect the due process rights of the ACE Insurers. The ACE Insurers reserve their rights to amend, modify or supplement (by further objections affidavit or otherwise) these Objections. Moreover, by filing these Objections, the ACE Insurers do not waive, and expressly reserve, all of their rights, defenses, claims and/or exclusions under the ACE Excess Policies, applicable law or otherwise. The ACE Insurers further reserve the right to assert any and all such rights, defenses, claims and/or exclusions in any appropriate manner or forum whatsoever. * * * OneBeacon Insurance Company, formerly CGU Group, successor by merger to Potomac Insurance Company, which allegedly issued certain excess catastrophe liability policies to Armstrong World Industries, Inc., represented by Kevin J. Connors, Esq., at Marshall, Dennehey, Warner, Coleman & Goggin in Wilmington, joins in the Objections of the ACE Insurers to the Maertin Plaintiffs' Motion to Approve Settlement and the related Request for Adequate Protection. In joining International's Objections and Request, Mr. Connors says that OneBeacon relies upon and adopts the arguments set forth by International. (Armstrong Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARVINMERITOR INC: Dana's Board Rejects Unsolicited Tender Offer --------------------------------------------------------------- Dana Corporation's (NYSE: DCN) Board of Directors has rejected an unsolicited tender offer from ArvinMeritor, Inc. (NYSE: ARM) after a thorough review and consultation with its legal and financial advisors. On July 9, 2003, ArvinMeritor launched a tender offer for all outstanding shares of Dana common stock at a price of $15.00 per share. Dana filed a Schedule 14D-9 with the Securities and Exchange Commission recommending that its shareholders not tender their stock in response to this offer. The Board stated as reasons for its recommendation that ArvinMeritor's offer is a financially inadequate, high-risk proposal that is not in the best interests of Dana or its shareholders. In addition, the Board cited the significant financing risks and serious antitrust concerns raised by the offer that could prevent its completion. The Board said in its response that: - ArvinMeritor's offer was inadequate, from a financial point of view, to holders of Dana common stock, as indicated in the opinions, dated July 21, 2003, that the Board of Directors received from its financial advisors, Credit Suisse First Boston LLC and Deutsche Bank Securities Inc. - Dana's restructuring and transformation efforts are producing results. Management has reported these results to the Board, and both have reaffirmed their belief that the Company's ongoing strategy is a better way to enhance value for shareholders. Management and the Board also believe that Dana's strategy is meeting its targets to deliver improved financial performance for the remainder of 2003, 2004 and beyond - performance that they believe is not yet reflected in the current stock price. - Dana has already achieved success in executing its restructuring plan as evidenced by improved earnings, the generation of $540 million in proceeds from asset sales, and the reduction of net debt by approximately $590 million over the past 18 months (excluding approximately $710 million in asset sales and $580 million in debt reduction attributable to Dana Credit Corporation's disposition activities over the same period of time). - ArvinMeritor's proposed transaction raises serious antitrust issues and is very likely to attract intensive scrutiny from government antitrust authorities, which may result in litigation to block the offer. For example, Dana and ArvinMeritor are the only substantial North American producers of axles, driveshafts, and foundation brakes for medium- and heavy-duty trucks, with combined market shares ranging from 80 percent to 100 percent. ArvinMeritor has not yet even begun the process of seeking antitrust clearance by making the required filing under the Hart-Scott-Rodino Act. - Although ArvinMeritor would need to arrange substantial borrowings to consummate its offer, when confronted by securities regulators from the State of Ohio, ArvinMeritor stated that it has not entered into any commitments or agreements to obtain any such financing. Based on ArvinMeritor's public disclosures, the size of the required financing would result in ArvinMeritor having an approximately 88% pro forma debt-to-capital ratio, which would be among the highest in the automotive supply industry. - ArvinMeritor's offer is highly conditional, which creates significant uncertainty that the offer could ever be completed. Dana Corporation Chairman and CEO Joe Magliochetti said, "There is virtually no rationale for accepting this offer, which represents inadequate value and a high level of risk for shareholders. "We are confident that with the substantial completion of our restructuring, the critical momentum we are beginning to achieve in our transformation process, our market leadership and the expected cyclical upward turn in our heavy-duty markets, we are positioned to outperform our peers as the industry recovers. We are confident that as we go forward, the benefits of our restructuring will enhance shareholder value." Dana Corporation also has retained Goldman, Sachs & Co. as a financial adviser in connection with this matter. Dana is a global leader in the design, engineering, and manufacture of value-added products and systems for automotive, commercial, and off-highway vehicle manufacturers and their related aftermarkets. The company employs approximately 60,000 people worldwide. Founded in 1904 and based in Toledo, Ohio, Dana operates hundreds of technology, manufacturing, and customer service facilities in 30 countries. The company reported 2002 sales of $9.5 billion. 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, Mich., and employs 32,000 people at more than 150 manufacturing facilities in 27 countries. ArvinMeritor 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 previously reported in Troubled Company Reporter, 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. ARVINMERITOR: Voices Commitment to Offer to Acquire Dana Shares --------------------------------------------------------------- ArvinMeritor, Inc. (NYSE: ARM) issued the following statement in response to Dana Corporation's (NYSE: DCN) announcement that its Board of Directors has recommended that its shareowners reject ArvinMeritor's cash tender offer to acquire all of Dana's outstanding common stock for $15.00 net per share. ArvinMeritor stated: "Despite the fact that the Dana Board has rejected our all-cash tender offer and refuses to negotiate with us, we are committed to this transaction. Our offer permits Dana's shareowners to realize an attractive cash value for their shares today without bearing the risks of Dana's long-term restructuring efforts. "We believe Dana's Board and management team has failed to seize this unique opportunity to maximize value for its shareowners. As we have indicated previously, if Dana's Board is willing to work with us to consummate a transaction quickly, we may be prepared to analyze further whether a higher value is warranted. In addition, because it remains our strong preference to work together with the Dana Board, we are flexible in considering a mix of cash and stock consideration if it will facilitate a transaction. "We believe that Dana's response recites a litany of manufactured reasons to oppose this combination. We are confident that there is not one issue listed in today's press release by Dana that cannot be resolved." As previously announced, on July 9, 2003, ArvinMeritor commenced a cash tender offer for all of the outstanding common shares of Dana common stock for $15.00 net per share. The tender offer and withdrawal rights are scheduled to expire at 5:00 p.m., on August 28, 2003, unless extended. 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 30 trading days before ArvinMeritor publicly announced its intention to commence a tender offer, 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. 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, Mich., and employs 32,000 people at more than 150 manufacturing facilities in 27 countries. ArvinMeritor 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 previously reported in Troubled Company Reporter, 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. BAYOU STEEL: Hires Valuation Research as Valuation Consultants -------------------------------------------------------------- Bayou Steel Corporation and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the Northern District of Texas to employ Valuation Research, an appraisal firm, to perform an evaluation of the company's business operations. The Debtors believe that Valuation Research is well qualified to provide the necessary services and that it would be most efficient and in the best interest of their estates that Valuation Research be employed. The services that the Debtors expect Valuation Research to render include: (a) appraisal inspection, investigation and analysis of fixed assets and records related to such assets; (b) appraisal related data, information gathering, market research and other related activities; (c) appraisal report preparation; and (d) confer, advise and discuss our specific appraisal of BSC assets, appraisal methodology and witness preparation, depositions and defense of any litigation related to these matters. The hourly billing rates for professionals at Valuation Research range from $150 per hour to $280 per hour. The professionals most likely to perform the majority of the work on the Debtors' case and their current hourly rates are: Joseph Mickle Director $280 per hour James Farlow Sr. Vice President $250 per hour Michael Ardizzone Staff Appraiser $150 per hour Neil Thompson Sr. Vice President $250 per hour Dave Unger Staff Appraiser $150 per hour Neil C. Kelly Chairman $300 per hour Bayou Steel Corp., a producer of light structural shapes and merchant bar steel products, filed for chapter 11 protection on January 22, 2003 (Bankr. N.D. Tex. 03-30816). Patrick J. Neligan, Jr., Esq., at Neligan, Tarpley, Andrews & Foley, LLP, represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $176,113,143 in total assets and $163,402,260 in total debts. BAY VIEW CAPITAL: Reports $410 Million Net Assets in Liquidation ---------------------------------------------------------------- Bay View Capital Corporation (NYSE: BVC) reported net assets in liquidation of $409.9 million, or $6.37 in net assets in liquidation per outstanding share at June 30, 2003 as compared to $411.0 million, or $6.41 in net assets in liquidation per outstanding share at March 31, 2003. During the third quarter of 2002, the Company adopted liquidation basis accounting as a result of its stockholders' approval of a plan of dissolution and stockholder liquidity and subsequent completion of the sale of its retail banking assets to U.S. Bank, N.A. In accordance with accounting principles generally accepted in the United States of America, under the liquidation basis of accounting, the Company is now reporting the value of, and the changes in, net assets available for distribution to stockholders instead of results from continuing operations. The second quarter decrease in net assets in liquidation was primarily the result of dividends paid on the Capital Securities which was in excess of income from operations. The proceeds from stock options and warrants exercised during the quarter totaled $0.6 million as compared to $2.6 million during the first quarter. Net income from operations was $0.6 million for both the second quarter and the first quarter of 2003. The net income from operations for the second quarter consisted of $0.7 million of pre-tax income from operations, $0.9 million of net charges for liquidation valuation adjustments which were largely attributable to writedowns on the auto lease and liquidating loan portfolios, and a tax benefit of $0.8 million. "Despite the $0.9 million of charges for the liquidation valuation adjustments and a challenging business and economic environment, our second quarter results were better than plan," commented John Okubo, CFO of Bay View Capital Corporation. "This was largely attributable to better yield on our liquidating loan portfolio which resulted in favorable interest income." A comparison of pro-forma net assets in liquidation, adjusted for estimated after-tax earnings from the Company's remaining operations and an estimated after-tax gain on Bay View Acceptance Corporation, the Company's auto finance company, is set forth below. This pro-forma measure contains projections of future earnings and the after-tax gain in BVAC, and is a non-GAAP measure. The Company believes this is a more comprehensive measure of the economic value of the Company's net assets in liquidation. At June 30, 2003, total assets were $593 million as compared to $595 million at March 31, 2003 and $876 million at December 31, 2002. The Company continues to have significant liquidity. At June 30, 2003, cash and cash equivalents totaled $82.6 million. During the quarter, the Company received $19.2 million of loan repayments in its liquidating loan portfolio. These loan repayments were comprised of $9.6 million of asset-based loans, $5.8 million of syndicated loans and $3.8 million of other loans. At June 30, 2003, the Company's remaining investment in loans to be liquidated was reduced to $49.2 million from $73.8 million at March 31, 2003. Total nonperforming assets, net of mark-to-market valuation adjustments declined to $19.8 million at June 30, 2003 from $22.0 million at March 31, 2003. Franchise related nonperforming assets declined to $15.9 million at June 30, 2003 from $17.5 million at March 31, 2003. Total loans and leases delinquent 60 days or more at June 30, 2003 also declined -- to $2.8 million from $8.3 million at March 31, 2003. Delinquent franchise related loans were $1.9 million at June 30, 2003 as compared to $6.8 million at March 31, 2003. During the quarter, we transferred $5.9 million of nonperforming franchise loans to real estate owned and recognized a loss of $0.5 million. BVAC purchased $73.6 million of auto installment contracts on new and used vehicles for the quarter, compared to $71.6 million for the first quarter of 2003. Second quarter purchases were slightly below expectations. During the quarter, auto manufacturers continued to offer sales incentives, including below-market auto financing programs, at a record pace. Second quarter purchases consisted of 2,621 contracts with weighted average contract rates of 8.50% and weighted average FICO scores of 730. At June 30, 2003, BVAC was servicing 33,700 contracts representing $590 million as compared to 35,200 contracts representing $602 million at March 31, 2003. During the quarter, BVAC completed a study of its loan production and servicing operations, and identified a number of opportunities to increase efficiencies without compromising existing underwriting and servicing standards. To this end, the Chicago and Houston loan production offices are being consolidated into the Covina, California office. In addition, BVAC is reducing the size of its loan servicing and collections staff while expanding its lending operations from five to seven days per week. Headcount, which was 141 full-time equivalent employees at June 30, 2003, is expected to be reduced to approximately 110 by September 30, 2003. As a result of this restructuring, BVAC anticipates reducing operating expenses by $1.5 million on an annualized pre-tax basis. Second quarter results include a pre-tax charge of $675 thousand for the costs of the restructuring. As previously announced, BVAC closed a $250 million revolving receivables warehouse credit facility during the quarter. The facility, provided by Sheffield Receivables Corporation, an asset- backed commercial paper vehicle sponsored by Barclays Bank, PLC, will be used to fund BVAC's purchases and warehousing of installment contracts. Borrowings will be repaid with the proceeds from securitizations or sales of installment contracts. During the third quarter, BVAC anticipates closing its first securitization of 2003 with an offering of approximately $200 million. On June 30, 2003, Bay View Bank, N.A., a wholly-owned subsidiary of the Company, commenced a Plan of Dissolution and Liquidation under which the Bank will sell all of its assets, satisfy or discharge all of its known and currently due and payable liabilities and distribute the remaining proceeds to the Company, the Bank's sole shareholder. Under this plan, persons that may have claims that are not currently due and payable or are otherwise contingent will have such claims satisfied or discharged by the Bank or such claims will be assigned to and assumed by the Company. The dissolution and liquidation of the Bank is contemplated by the Plan of Dissolution and Stockholder Liquidity which was approved by the Company's stockholders on October 3, 2002. The Company currently anticipates completing the dissolution of the Bank during the fourth quarter of 2003. As discussed above, the Company adopted liquidation basis accounting effective September 30, 2002. Accordingly, the Company's consolidated financial statements for periods subsequent to September 30, 2002 have been prepared under the liquidation basis of accounting including the replacement of the Consolidated Statement of Operations and Comprehensive Income with the Consolidated Statement of Changes in Net Assets in Liquidation. The Company's consolidated financial statements presented for periods prior to September 30, 2002, (i.e., for the quarter ended June 30, 2002) are presented on a going concern basis of accounting. The Company is providing, herein, (1) Consolidated Statements of Net Assets (Liquidation Basis) as of June 30, 2003 and December 31, 2002, (2) Consolidated Statements of Changes in Net Assets in Liquidation (Liquidation Basis) for the three months ended June 30, 2003 and March 31, 2003 and the six months ended June 30, 2003 and (3) Consolidated Statements of Operations and Comprehensive Income (Loss) for the three- and six-month periods ended June 30, 2002 (Going Concern Basis). Bay View Capital Corporation is a financial services company headquartered in San Mateo, California and is listed on the NYSE: BVC. For more information, visit http://www.bayviewcapital.com As previously reported in Troubled Company Reporter, Standard & Poor's Ratings Services withdrew all its ratings on Bay View Capital Corp., and its subsidiaries (including Bay View Bank N.A.) except the 'B-' preferred stock rating on its subsidiary, Bay View Capital Trust I. These ratings were withdrawn as the company liquidates itself. BENCHMARK ELEC.: Stable Profitability Spurs S&P to Up Ratings ------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit and senior secured debt ratings on Benchmark Electronics Inc. to 'BB-' from 'B+' and its subordinated debt rating to 'B' from 'B-'. "The upgrade reflects Benchmark's stable profitability and improved credit measures, despite weak end markets in the highly competitive electronic manufacturing services sector," said credit analyst Edward O'Brien. The outlook is stable. Angleton, Texas-based Benchmark provides EMS primarily in the high-end computing and communications equipment markets. As of March 2003, total debt was about $158 million (operating lease adjusted). Ratings reflect the company's mid-tier industry position, significant customer concentration, and challenges posed by weak electronics end markets. These concerns are offset in part by consistent operating performance, strong contractual relationships with leading original equipment manufacturers, and a moderately leveraged financial profile. Despite challenging industry conditions, operating margins have remained between 6% and 7% since fiscal 1999. Credit measures improved, largely aided by a $110 million equity issue in April 2002, as well as good cash flow generation, which led to modest debt reduction and increased financial flexibility. Sales for the 12 months ended March 2003 increased to about $1,750 million from about $1,174 million for the previous 12-month period. The company has ample liquidity--cash balances of about $322 million as of March 2003 were more than double the total debt. Benchmark generated $201 million in free operating cash flow in the 12 months ended March 2003 and is expected to continue to generate free operating cash flow over the near term based on continued profitability and moderate capital expenditure levels. Additional financial flexibility is provided by full availability of its $175 million revolving credit facility. Term loan debt maturities of about $22 million in 2003 are manageable. BUDGET GROUP: Plan Filing Exclusivity Extended Until August 1 ------------------------------------------------------------- Since the Petition Date, the Budget Group Debtors: 1. negotiated and received approval for three highly complex postpetition financing facilities providing for $2,000,000,000 financing; 2. negotiated and consummated the North American Sale, including the assumption and assignment of more than 7,000 contracts; 3. negotiated and received approval for a complicated and critical settlement with their surety bond provider; 4. negotiated and consummated the EMEA Sale, which included the assumption of certain of the obligations outstanding under the EMEA DIP Facility and the analysis and resolution of numerous issues arising under various foreign non- bankruptcy laws; 5. managed critical vendor relationships with airports and other critical vendors; 6. performed all the tasks required by the Chapter 11 process including noticing and reporting; 7. coordinated and managed the various post-closing issues related to the North American Sale and EMEA Sale; 8. established a Claims Bar Date; 9. initiated a process for the reconciliation and resolution of the various claims made against the Debtors' estates; and 10. engaged in discussions with various parties-in-interest regarding the development and execution of a Chapter 11 plan. More recently, the Debtors, with the assistance of their professionals, have: 1. developed and begun implementing a cooperative plan with the Committee for the reconciliation and resolution of the $5,000,000,000 in claims made against their estates; 2. developed and discussed with the Committee and the U.K. Administrator a plan for resolving the allocation and other intercompany issues existing among the non-BRACII Debtors and BRACII; 3. facilitated discussions between the Committee and the U.K. Administrator regarding the allocation and other intercompany issues; 4. discussed and negotiated with the Committee and U.K. Administrator the framework for a Chapter 11 plan for the Debtors, including BRACII; and 5. continued attending to the various post-closing issues involved with the North American Sale and the EMEA Sale, including proceeding with the litigation against Cherokee Acquisition Corporation and Cendant Corporation and continuing to administer their estates. Claims Management and Reconciliation Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, informs the Court that since April 30, 2003 Bar Date, the Debtors, with the Committee's assistance, have begun the complex process of analyzing, reconciling and resolving the $5,000,000,000 scheduled and filed claims against their estates and the treatment of those various claims. Among other things, the Debtors and their professionals have begun the process of comparing over 4,900 claims asserted against the Debtors' estates with the claims assumed in connection with the North American Sale and have prepared and circulated to the Committee a draft objection to certain duplicative claims and claims that properly reflect equity interests. The Debtors have provided the Committee with an analysis of contract rejection claims related to contracts that were rejected pursuant to the North American Asset and Stock Purchase Agreement as well as a partial analysis of the over 1,300 litigation claims filed against their estates. Additionally, the Debtors and their tax advisors are working through the 1,300 tax-related claims and continue to interact with the various taxing authorities regarding audit requests and tax assessments. Allocation and Other Intercompany Issues Both of the Sales were structured as going concern sales of assets held by numerous Debtor entities in different parts of the world and, with respect to the EMEA Sale, in various judicial insolvency proceedings, resulting in gross proceeds realized for assets belonging to the U.S. Debtors and BRACII. No allocation of the Sale Proceeds was made among the estates prior to or at the closing of the Sales. To make distributions on account of valid claims against the various Debtor entities, it is necessary to allocate the Sale Proceeds between the U.S. Debtors and BRACII. The Debtors have worked to facilitate a process by which the allocation of the Sale Proceeds could be accomplished consensually among the parties. To this end, the Committee submitted to the U.K. Administrator a proposal for settling the allocation of the Sale Proceeds. The U.K. Administrator is currently formulating its response to that proposal. In addition to the allocation of the Sale Proceeds, potential intercompany claims exist between BRACC and BRACII arising from a certain license agreement and their business relationships both prior and subsequent to the Petition Date. The determination of the validity, magnitude and priority of these claims could significantly impact distributions to creditors of the U.S Debtors and BRACII. The outstanding allocation and other intercompany issues are complex and involve many competing interests and a foreign insolvency process. The Debtors, the Committee and the U.K. Administrator have invested and continue to invest significant time attempting to resolve these issues consensually. Because these issues necessarily impact plan formulation, the parties have begun discussions regarding the best means to expeditiously resolve these issues if the parties are unable to reach an agreement. To that end, the Debtors intend to seek approval of a judicial process for the resolution of the allocation and other intercompany issues and the Debtors are currently consulting with the Committee and the U.K. Administrator concerning the parameters of that request. Plan and Disclosure Statement Notwithstanding these open issues, the Debtors have expended substantial effort in developing a Chapter 11 plan and have engaged the Committee and the U.K. Administrator in dialogue over the plan structure and its components. However, because of the complexity of these outstanding issues, the plan structure has continued to evolve as the Debtors, in consultation with the Committee and U.K. Administrator, continue to refine their approach to the plan. In the hopes of shortly proposing a consensual plan, the Debtors, in consultation with the U.K. Administrator and BRACII, prepared a plan term sheet that was submitted to the Committee in April, and to which the Committee responded both at a meeting with the Debtors in June and more recently in discussions with the Debtors regarding an alternative plan structure. The Debtors also have prepared a draft of a disclosure statement that was provided to the Committee in May. The Debtors anticipate receiving comments from the Committee shortly. The Debtors further anticipate that over the next month they will continue to finalize the drafting of the plan documents, taking into account the resolution mechanism for the allocation and intercompany claim issues, the needs of the U.K. Administrator regarding the parallel U.K. Administration proceeding and continuing input from the Committee. Post-Closing Issues Associated with the North American and EMEA Sale Since the Sales closed, the Debtors have continued to address the various post-closing issues arising in connection with the transfer of substantially all of the Debtors' assets. These post-closing issues include: 1. addressing matters not originally contemplated by the North American ASPA and the EMEA Asset Purchase Agreement, including assumption of certain liabilities and payment of certain obligations asserted against the Debtors' estates and the U.K. Administration; 2. working to resolve the remaining objections asserted by parties to those contracts the Debtors assumed and assigned pursuant to the North American ASPA and the EMEA APA; 3. continuing to pursue a litigation strategy to resolve the outstanding post-closing issues relating to the North American ASPA and the EMEA; and 4. developing and executing a strategy for the successful wind down of the Debtors' remaining operations. On May 6, 2003, the Debtors, with the approval and input of the Committee, sought payment through the Court from Cendant and Cherokee and complained about the assumption of certain employment-related litigation under the North American ASPA. In response to the Debtors' Complaint, on June 23, 2003, Cendant and Cherokee filed an answer and counterclaims. The Court ordered mediation and the Debtors and the Committee are in the process of formulating a response to the counterclaims. In light of all these issues and concerns, the Debtors ask Judge Walrath to extend their exclusive period to file a plan through and including August 1, 2003 and their exclusive period to solicit acceptances of that plan through and including October 30, 2003. Mr. Brady relates that the Debtors have continued to make considerable progress in these cases. Most importantly, the Debtors believe that they are poised to bring these cases to successful completion -- and at the same time to conclude the U.K. Administration -- upon obtaining clarity as to the amount of bona fide claims against the estates, reaching a resolution of the outstanding allocation and other intercompany issues and solidifying the plan structure and its components. Each of these tasks is underway and significant progress has been made working with the Committee and the U.K. Administrator, but the complexities and competing interests involved necessitate additional time for resolution. The Debtors believe that continued exclusivity in these cases will foster the process of formulating and confirming a consensual Chapter 11 plan. Mr. Brady assures Judge Walrath that the requested extension will not prejudice the legitimate interests of any creditor. The Debtors, the Committee and the U.K. Administrator continue to work cooperatively through the myriad issues associated with the U.K. Administration, the allocation and other intercompany issues and the plan. Additionally, the Debtors continue to make timely payment of all of their postpetition obligations. Committee Objects Christopher S. Sontchi, Esq., at Ashby & Geddes, in Wilmington, Delaware, points out that the Debtors' assets have been substantially liquidated, and the Debtors have ceased all normal business operations and only have to distribute those sale proceeds and other assets through these Chapter 11 proceedings. While the Committee and the Debtors have, in fact, been working cooperatively on formulating and filing an appropriate liquidating plan for these estates, as well as on a process for determining appropriate allocations of assets to the different estates, and while the Debtors recognize that the Committee represent the economic stakeholders in these cases, the continued accrual of time and expense in administering these cases requires the Committee to operate under a much greater sense of urgency in respect to the plan process. Mr. Sontchi contends that extending exclusivity until August 1 is simply inadequate to assure that the plan process commences this month. Accordingly, the Committee asks the Court to require the Debtors to file a plan for these cases within this month. According to Mr. Sontchi, terminating exclusivity, if necessary, will not prejudice the Debtors' efforts to move these cases forward, but will open the plan process, if necessary, to the Committee to foster an expeditious distribution to creditors. In the event that the Debtors fail to file a plan within this month, exclusivity should be terminated in the Committee's favor. Debtors Respond The Debtors share the Committee's and the U.K. Administrator's desire to effect a distribution to creditors through a liquidating plan as quickly as possible. According to Edmon L. Morton, Esq., at Young, Conaway, Stargatt & Taylor, LLP, in Wilmington, Delaware, while the Debtors are reluctant publicly to quarrel with the Committee in the midst of plan negotiations, the Committee's suggestion that the Debtors are not proceeding with alacrity is both inaccurate and unfair. The principal causes of delay in the Debtors' efforts to file and confirm a plan have been the inability of the Committee and the U.K. Administrator to reach an agreement over sale proceeds allocation issues and intercompany claims issues, and the Committee's recent decision to withdraw its support for the plan structure that had initially been pursued by the Debtors. The Debtors do not criticize the Committee or the U.K. Administrator for their failure to achieve settlement -- the allocation and intercompany issues are undeniably difficult and complex. But the Debtors cannot fairly be held responsible for the absence of a settlement, particularly when the Debtors have employed every reasonable effort to "broker" a solution. Since completion of the EMEA Sale to Avis Europe PLC in March 2003, the Debtors have worked cooperatively with the Committee and the U.K. Administrator to: 1. fashion a consensual resolution between the U.S. Debtors and BRACII concerning the allocation of sale proceeds and the resolution of intercompany claims between the estates; and 2. craft a liquidating plan and a parallel scheme of arrangement or a company voluntary arrangement that would permit prompt distributions to all unsecured creditors. The plan and arrangement structures initially proposed by the Debtors assumed -- as did the Committee and the U.K. Administrator -- that allocation and intercompany issues would be resolved consensually by the Committee and the U.K. Administrator prior to confirmation, and that distributions could begin on the plan and arrangement effective dates based on the agreed resolutions. By late May, however, it became increasingly apparent to the parties that the allocation and intercompany issues might not be resolved consensually. Accordingly, the Debtors proposed to both the Committee and the U.K. Administrator that: 1. The Debtors would file a motion to establish streamlined procedures for judicial resolution of the dispute; and 2. The Debtors would, on a parallel track, file a consensual liquidating plan that was premised upon a resolution of the allocation and intercompany disputes. The Debtors further proposed to schedule a disclosure statement hearing to occur shortly after trial of the allocation and intercompany issues, so that the results of the trial could be incorporated into the disclosure statement before votes were solicited. The Committee and the U.K. Administrator concurred with this approach, and the Debtors have prepared and circulated a draft Procedures Motion. In mid-June, the Committee informed the Debtors that while the Committee continued to support the filing of a Procedures Motion, the Committee no longer wished to proceed with a plan that was premised on a resolution of the allocation and intercompany disputes. Rather, the Committee insisted that the Debtors immediately file a "stand alone" plan for the U.S. Debtors that could be confirmed over the objection of the U.K. Administrator and which would permit a distribution to U.S. creditors prior to the resolution of the disputes between the U.S. Debtors and BRACII. The Debtors informed the Committee that while the Debtors were unwilling to prosecute confirmation of a plan over the objections of the U.K. Administrator, the Debtors would, if the Committee was prepared to support the establishment of reserves in BRACII's favor, endeavor to negotiate the terms of a plan that would both be acceptable to the U.K. Administrator and permit distributions to U.S. creditors prior to resolution of the allocation and intercompany disputes. The Debtors have made significant progress in these negotiations, and a draft Reserve Plan -- which will permit the simultaneous confirmation of plans for the U.S. Debtors and BRACII -- has been circulated to both the Committee and the U.K. Administrator. Mr. Morton contends that the Debtors remain committed to effecting distributions to creditors as soon as it is reasonably practicable. The Debtors will continue to employ every reasonable effort to facilitate a consensual resolution of the allocation and intercompany issues. The Debtors will also utilize their best judgment to ensure that neither the dispute resolution procedures nor the plan mechanics unfairly prejudice either the Committee or the U.K. Administrator. The Debtors will file a plan as soon as they are reasonably satisfied that the interests of all creditors are protected. The Debtors firmly believe that continued exclusivity is most effective and efficient environment to accomplish this. * * * Judge Walrath extends the Debtors' exclusive periods to file a plan to August 1, 2003 and to solicit votes for that plan to October 30, 2002 without prejudice to the Debtors' right to file for another extension. (Budget Group Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) BURLINGTON IND.: Court Approves Hilco's Engagement as Appraisers ---------------------------------------------------------------- Burlington Industries, Inc., and its debtor-affiliates obtained permission from the Court to employ Hilco, nunc pro tunc to June 13, 2003, to provide appraisal and valuation services relating to their inventory, machinery and equipment and real estate in connection with the auction process. The parties entered into two engagement letters, dated June 13, 2003 and June 16, 2003. The Agreements describe the various appraisal services and valuation methods that Hilco anticipates performing for the Debtors and the terms and conditions of Hilco's proposed engagement by the Debtors. Pursuant to the Agreements, Hilco's provision of services to the Debtors is contingent upon the Court's approval of the Agreements' terms and conditions. Hilco will provide these valuations: (a) For the Inventory, Hilco will provide to prospective lenders a projection of net and gross liquidation value and forced liquidation value scenario; (b) For the Equipment, Hilco will provide prospective lenders with a detailed net orderly liquidation value and net forced liquidation value appraisal for the assets in question; (c) For the Real Estate, Hilco will estimate the market value of the fee simple interest in eight of the Debtors' properties, as of the date of the inspection; and (d) For all the Sale Assets, Hilco will prepare reports outlining these valuations for the Debtors. In exchange for the services, Andy Dahlman, Vice President of Hilco Appraisal Services, LLC, Hilco intends to charge an all-in- fee for its professional services rendered to the Debtors on these terms: (a) Inventory and Equipment Hilco's fee for the Inventory and Equipment evaluation and appraisal will be $275,000 plus direct out-of-pocket costs consisting of travel and expenses. Of this amount, $137,000 is due on the Court's approval of Hilco' employment and the balance is due upon completion but prior to the delivery of the final report. (b) Real Estate Hilco's fee for the Real Estate evaluation and appraisal will be $72,000 plus direct out-of-pocket costs consisting of travel and expenses, which will be payable upon the report's completion and the Debtors' acceptance. (Burlington Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 609/392-0900) COLUMBUS MCKINNON: Completes $115MM Senior Secured Note Offering ---------------------------------------------------------------- Columbus McKinnon Corporation (Nasdaq: CMCO) completed its previously announced sale of $115 million of Senior Secured 10% Notes due 2010. The Notes were privately placed. The Company used the net proceeds from this offering to repay all outstanding borrowings under its second secured term loan -- $66.8 million plus interest and expenses -- to repurchase senior subordinated notes in the amount of $30.1 million plus interest, and to repay a portion of its senior credit facility debt -- $3.9 million on the term loan and $10.0 million on the revolver. The senior subordinated notes repurchased by Columbus McKinnon had a face value of $35.7 million, which resulted in a $5.6 million reduction in debt. In conjunction with the repayment of its second secured term loan, the Company will reverse, in the current quarter, previously accrued interest charges of $0.8 million for payment- in-kind interest forgiven based on repayment of that debt within one year. In connection with this offering, the Company's senior lenders consented to a concurrent amendment of the senior credit agreement to permit the note offering; the amendment also provided for, among other things, an increase in senior leverage ratios for the fiscal 2004 first quarter and subsequent quarters. As previously reported, Standard & Poor's Ratings Services assigned its 'B-' rating to Columbus McKinnon Corp.'s $100 million senior secured note offering due 2010. At the same time Standard & Poor's affirmed its 'B' corporate credit and 'CCC+' subordinated debt ratings on the company. The outlook remains negative. At the March 31, 2003 fiscal year-end, Amherst, N.Y.-based Columbus McKinnon had approximately $323 million of debt outstanding. The company holds leading (No. 1 or No. 2) niche market positions within the material handling, lifting, and positioning products industry. COM21 INC: Inks Definitive Pact to Sell Certain Assets to ARRIS --------------------------------------------------------------- ARRIS (Nasdaq: ARRS), a global telecommunications technology leader, has entered into a definitive agreement for the acquisition of certain cable modem termination systems and related assets of COM 21, including the stock of its Irish subsidiary, for a purchase price of approximately $2,800,000, subject to the approval of the US Bankruptcy courts and certain other closing conditions. The transaction will transfer ownership of a DOCSIS 2.0 based Layer 3 capable CMTS specifically suited for smaller markets to the ARRIS portfolio of next generation high speed data products. The new C3 product along with ARRIS's market leading Cadant C4 CMTS provides ARRIS customers with complete market coverage from very large concentrated urban markets to small and mediums size markets. "This is the culmination of our previously announced OEM agreement with COM 21," said Bob Stanzione, ARRIS Chairman, President & CEO. "The transaction enables us to own and integrate the intellectual property and talent behind our new C3 CMTS. The C3 is a feature rich rack mounted CMTS which will allow us to reach smaller scale systems domestically and internationally. We expect the transaction to be slightly dilutive to earnings per share in the second half of this year and accretive in 2004. The transaction is an exciting one for us and we are pleased to welcome approximately 45 new employees to the ARRIS family. I am confident they will help keep us on the leading edge of internet protocol technology," concluded Stanzione. ARRIS provides broadband local access networks with innovative next generation high-speed data and telephony systems for the delivery of voice, video and data to the home and business. ARRIS complete solutions enhance the reliability and value of converged services from the network to the subscriber. Headquartered in Duluth, Georgia, USA, ARRIS has design, engineering, distribution, service and sales office locations throughout the world. Information about ARRIS' products and services is found at http://www.arrisi.com COMM 2001-J1: Fitch Cuts Class G, H & J Note Ratings to BB/B/B- --------------------------------------------------------------- COMM 2001-J1's commercial mortgage pass-through certificates, $23.3 million class F has been downgraded to 'BBB-' from 'BBB' by Fitch Ratings. Fitch has also downgraded the following classes: -- $13.6 million class G to 'BB' from 'BBB-'; -- $13.6 million class H to 'B' from 'BB'; -- $11.7 million class J to 'B-' from 'BB'. In addition, Fitch has affirmed the following classes: -- $27.8 million class A1 'AAA'; -- $108.3 million class A1F 'AAA'; -- $236.7 million class A2 'AAA'; -- $46.6 million class B 'AA'; -- $46.6 million class C 'A+'; -- $15.5 million class D 'A'; -- $31.1 million class E 'A-'; -- $7.6 million class M 'AA'; -- $5 million class P 'BBB-'. The downgrades are due to the deteriorating performance of the Thayer Hotel Portfolio and 165 Market Halsey loans. Although these underlying properties have deteriorating performance, no loan is or has been delinquent. The transaction is highly concentrated, with 69.3% office properties. Vacancy rates in six of the seven office loans (59.4% of loan balance) have increased. However, most of the office properties in the transaction are located in relatively strong markets such as New York (23.3% of loan balance) and Washington, D.C. (14.7%). As of the July 2003 distribution, the certificate balance has been reduced by approximately 3.9%, to $764.4 million from $795.3 million at issuance. The certificates are collateralized by eleven fixed-rate loans secured by eighteen commercial loans. Nine of the eleven loans, or approximately 80%, have investment grade credit assessments. As part of its review, Fitch analyzed the performance of each loan and the underlying collateral. Fitch compared each loan's debt service coverage ratio at the year ended December 2002 to the DSCR at last review (trailing twelve months ended June 2002) and the DSCR at issuance. DSCRs are based on Fitch adjusted net cash flow and a stressed debt service based on the current loan balance and a Fitch hypothetical mortgage constant. The Thayer Hotel Portfolio loan (14.8%) is secured by six full- service hotels located in New Jersey, Louisiana, Florida and Texas. The Fitch stressed DSCR for the pool of loans decreased to 1.12 times as of Dec. 31, 2002 from 1.70x at issuance. RevPar for the portfolio has decreased to $75 as of YE 2002, from $85 at issuance. The current volatile state of the hotel industry and overbuilt markets has contributed to the decline of this hotel portfolio. The Market Halsey loan (7.2%) is secured by a 16-story telecom carrier hotel located in downtown Newark, NJ. The property is configured specifically for telecommunications and technology based tenants. The occupancy decreased to 83% as of YE 2002, from 90% at issuance. The Fitch stressed DSCR declined to 1.33x as of YE December 2002 from 1.44x at issuance. The deterioration in performance is due to the decline in occupancy. In addition, Fitch is concerned with the tenancy of the building given that MCI/Worldcom (9.6% of net rentable area), and Qwest Communications (23.6%) are currently in bankruptcy. Performance has improved in several loans (36.5%). The largest loan in the pool, the Graybar Building (16.3%), is secured by a 1.3 million square foot building located adjacent to the Grand Central Terminal in New York City. Although occupancy has declined to 91% as of March 31, 2003 from 96% at issuance, NCF has increased 5.5% due to increased rental rates paid by new tenants. DSCR for YE 2002 has increased to 1.47x, from 1.37x at issuance. The Plaza at La Jolla (10.4%) is secured by a five Class A office buildings containing 633,000 square feet, and located in the San Diego MSA. DSCR has increased to 1.56x as of YE 2002, from 1.41x at issuance. Occupancy has increased to 100% as of March 31, 2003, from 98.4% at issuance, and as of YE 2002 NCF has increased 16.1% from issuance. NCF has also increased in the Golden Triangle Portfolio (9.9%). The loan is secured by four office buildings in the central business district of Washington, D.C. Occupancy has decreased to 89.9% as of YE 2002, from 97.9% at issuance. As of YE 2002, NCF has increased 8.3% since issuance, and the DSCR has increased to 1.59x from 1.55x at issuance. Performance is stable in the remaining loans (28.8%). YE 2002 NCF at Boise Towne Square (10.2%), a 1.17 million square foot regional mall in Boise, has increased 2.5% since issuance. YE 2002 NCF has increased 3.2% since issuance at 28 and 40 West 23rd Street (7.5%), two connected office buildings in New York City. As of YE 2002. the DSCR for Pennsylvania Plaza (4.4%) has decreased to 1.38x from 1.40x at issuance. The DSCR for U.S. Bancorp (14.25%) has decreased to 1.45x at YE 2002 from 1.46x issuance. The loan is secured by an office tower and plaza containing 1.1 million square feet located in Portland, OR. Occupancy has decreased to 91.0%, from 94.6% at issuance. Decreased occupancy and increased expenses have resulted in NCF decreasing 1.1% since issuance. Fitch will continue to monitor the transaction, as surveillance is ongoing. CONSOL ENERGY: Liquidity Concerns Prompt S&P's BB+/B Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit ratings on Consol Energy Inc., out of investment grade to 'BB+'/'B' from 'BBB-'/'A-3' based on Standard & Poor's assessment that the possible cancellation of surety bonds combined with Consol's potential production growth could result in substantially reduced liquidity. The current outlook is stable. Standard & Poor's said that at the same time it has placed its 'BB+' rating on the company's senior unsecured debt, which was also lowered from 'BBB-', on CreditWatch with negative implications based on increased risk lenders could face if the banks asked for collateral on the credit facility. Total debt at Pittsburgh, Pa.-based Consol is $652 million. "The downgrade reflects Standard & Poor's assessment that the potential cancellation of surety bonds combined with Consol's potential capital expenditures for production growth could result in substantially reduced liquidity", said Standard & Poor's credit analyst Dominick D'Ascoli. Standard & Poor's believes the rate of cancellations on surety bonds by insurance companies will increase due to the number of re-insurers exiting this business by year's end. As insurance companies exit the surety bond business, Consol will need to provide assurances on its underlying obligations. These assurances will most likely take the form of letters of credit or cash collateral, which would reduce liquidity. The most imminent issue facing the company is the $422 million of workers' compensation surety bonds outstanding as of March 31, 2003. Also, potential production growth, in both coal and gas operations, could lead to increased capital expenditures for the next few years. Consequently, free cash flow in 2004 and 2005 may not be at levels sufficient to prevent a further reduction in liquidity. Standard & Poor's said that it placed Consol's senior unsecured debt rating on CreditWatch because operating asset collateral may need to be provided for the company's bank credit facility, which would place the senior unsecured lenders at a disadvantage. Standard & Poor's ratings on Consol reflect its strength as an efficient producer of underground coal, significant reserve position, and energy diversification strategy. The ratings also reflect the current challenging industry conditions, and the high degree of financial leverage, which includes debt and postretirement obligations. Consol is the fifth-largest coal producer in the U.S. and the largest in the eastern U.S. COVANTA ENERGY: Court Fixes Aug. 14 Bar Date for 30 New Debtors --------------------------------------------------------------- The Court orders that: (a) the form and manner of the New Covanta Energy Debtors' Bar Date Notice, the Instructions and the Publication Notice are approved; (b) all Entities holding or asserting any prepetition claims against any of the New Debtors must file proofs of claim so that the proof of claim is received by the Court on or before 5:00 p.m., Eastern Time, on August 14, 2003; (c) any governmental unit must file its claim on or before December 5, 2003 at 5:00 p.m.; and (d) an entity holding a claim in connection with the rejection by one or more of the New Debtors of any executory contract or unexpired lease arising after June 26, 2003 but prior to the entry of an order confirming a reorganization plan or liquidation in these cases must file a proof of claim, if any, on or before the later of: (1) August 14, 2003; and (2) the New Debtors' Rejection Bar Date, which is 30 days after the Debtors send via first class U.S. mail a notice or copy of the order authorizing the rejection of a particular executory contract or unexpired lease to the affected counterparty or lessor, as the case may be, which service will be made on or before the 11th day after the entry of the order granting the rejection. (Covanta Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) DEAN FOODS: S&P Affirms BB+ Corporate Credit Rating --------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB+' corporate credit ratings on Dean Foods Co. and its wholly owned subsidiary, Dean Holding Co. The ratings are removed from CreditWatch, where they were placed on June 2, 2003. The outlook is positive. Dallas, Texas-based Dean Foods has about $3.4 billion in rated debt. "The outlook revision reflects the completion of the common equity conversion of the last tranche of preferred securities and Standard & Poor's expectation that Dean Foods' credit protection measures will, in the near term, improve to a level that would be commensurate with an investment grade rating. Key to an upgrade will be Dean Foods' ability to sustain stronger credit protection measures and at the same time continue its acquisition strategy," said credit analyst Jayne M. Ross. The ratings reflect Dean Foods' position as the largest national dairy company in the U.S., with about a 35% share of the U.S. dairy industry. This is offset by a moderately aggressive financial profile and the company's acquisitiveness. The ratings further reflect the company's strong portfolio of national, regional, local, and private-label brands, solid regional market positions, geographic diversity, stable cash flow, moderate capital expenditures, cost-saving opportunities, and an experienced management team. DEVINE ENTERTAINMENT: Red Ink Continues to Flow in March Quarter ---------------------------------------------------------------- Devine Entertainment Corporation (TSE:DVN) reported results for the year ended December 31, 2002 and the three months ended March 31, 2003. Management acknowledged that 2002 and the first quarter of 2003 were challenging times for Devine Entertainment. The Company's main asset, its film library, continued to perform well generating revenues of over $900,000, but difficult market conditions in general and the insolvency of two of the Company's distributors, Steeplechase Entertainment and Media Content, created significant cash flow losses. The delay of new production into 2003 and the lack of income related to production activity limited the Company's revenues, creating additional financial difficulties. As a result, the Company's auditors have reviewed the Company's finances and approved the 2002 financial statements on a going concern basis. The Company's continuing library sales, cuts to its operating costs and the deferral of remuneration by management have allowed the Company to satisfy its primary obligations, but the Company remains in default on much of its long term debt and new financing or new production income will be required before the end of 2003 in order for the Company to continue to meet its obligations. Management is committed to new production activity in 2003 that is expected to play an important part in turning around the Company's financial situation, and returning the Company to profitability. Overall, revenues from sales of the Company's film library in 2002 were $917,398 (all amounts in Canadian dollars), a decrease of 6% from $973,626 in 2001. Broadcast sales were up almost 70% at $190,500 in 2002, as compared to $112,230 in fiscal 2001. Despite a negative climate for the entertainment industry overall, and the difficulties with some of the Company's third party distributors, the Company's North American video sales in 2002 remained strong accounting for 79% of total revenues. In 2002, revenues from North American video sales were $726,898 as compared to $861,000 in 2001. Net operating losses totaled $862,503 or approximately $0.06 per share in 2002, an improvement of over 20% from a loss of $1,095,169 or $0.08 per share for 2001. In light of the lack of new production activity in 2002 and in accordance with U.S. GAAP, the Company took a write-down of $757,749 on its investment in the development of new projects over the last three years. After the write down of the Company's development slate of $757,794, the basic and fully diluted loss for 2002 was $1,620,297 or $0.12 per share as compared to a loss of $7,442,443 or $0.58 per share in 2001. The Company also reported a net loss for the three months ended March 31, 2003 of $99,762, or $0.01 a share, as compared to a loss of $97,569, or $0.01 per share, for the same quarter in 2002. The Company's revenues decreased 48% to $165,538 as compared to $318,138 for the same period in 2002, primarily due to the timing of the recognition of $180,000 of revenues from a CBC broadcast license in March of 2002. Revenues from video sales of the Company's library increased 20% from $138,138 for the first quarter of 2002 to $165,538 for the first quarter of 2003. Operating expenses for the first quarter of 2003 were $126,009 as compared to $174,035 for the same period in 2002, a decrease of 23%. The Company's cash position at March 31, 2003 was $18,275 as compared to $34,969 at the beginning of the quarter. Management noted that the Company has recently established a new co-production relationship with U.K. based Spice Factory, the leading feature film producer in the U.K. in 2001, and secured distribution and financing commitments from ArcLight Films, Telefilm Canada, Odeon (a division of Alliance Atlantis), Superchannel, Corus Entertainment and Astral Media's The Movie Network which promise the resumption of renewed production activity with the Company's first feature film for the world-wide family audience, entitled "Bailey". The Company is optimistic that the $10 million production will commence in the third quarter of 2003. To assist in the Company's financing of "Bailey" and generate new working capital, the Company's board of directors approved the terms of a proposed bridge loan from an investor group including management at its most recent board meeting on July 17, 2003. Subject to regulatory approval and compliance with applicable securities law, the board approved payment terms for the bridge financing that include the issuance of common shares, deferred fees and an interest in the profits of the film and also approved the payment for certain outstanding obligations through the issuance of common shares to management, certain consultants and third party lenders. In addition, the board authorized management to request the lifting of an Ontario Securities Commission management cease trade order and to make preparations for the Company's annual shareholder meeting within the next 90 days. Devine Entertainment Corporation is a five-time Emmy Award-winning global producer and distributor of children's and family entertainment. The Composers', Inventors', and Artists' Specials are currently broadcast in over 50 countries. Headquartered in Toronto, the Company's common shares trade on the Toronto Stock Exchange, trading symbol DVN, and OTC in the U.S. under symbol DVNNF. The Company's corporate Web site is http://www.devine-ent.com As reported in Troubled Company Reporter's June 3, 2003 edition, Devine is actively negotiating a series of corporate and production related financings that, if completed successfully in the near future, will put the Company on a stronger fiscal footing and enable it to complete its filings and schedule a shareholders meeting within the next 45-75 days. The Company has been pursuing new financing for some time and acknowledges that, if a financing is not completed in the near future, it may not be able to meet all of its ongoing obligations which could necessitate a reorganization of the Company and a change in the status of its TSX listing. Devine's management continues to pursue new corporate financing, new production and the maximizing of revenues and the value of its proprietary film library. Management remains committed to its shareholders and creditors in a very difficult time for Toronto-based film production companies and the Canadian entertainment sector in general. DOUBLECLICK INC: Reports Improved 2nd Quarter Financial Results --------------------------------------------------------------- DoubleClick Inc. (Nasdaq: DCLK), the leading provider of data and technology tools for direct marketers, web publishers and advertisers, announced financial results for the second quarter ending June 30, 2003, and updated its business outlook for full year 2003. DoubleClick reported revenues for the second quarter of $63.6 million versus $75.7 million in the year ago period. Revenues increased sequentially by 5.8%, though they declined 16.0% year- over-year largely due to the divestitures of businesses in 2002. Total GAAP operating expenses were $32.1 million, a decline of 45% versus $58.4 million in the second quarter of 2002. GAAP net income for the most recent quarter was $5.8 million, with a GAAP EPS of $0.04, compared with $4.1 million and a GAAP EPS of $0.03 in the second quarter of 2002. Total company headcount at the end of the second quarter was 1,082, down 15% from 1,270 at the end of the second quarter of 2002. The Company's expenses declined in the second quarter of 2003 versus the year ago period due to the divestitures of its Media, DoubleClick Japan, and Research businesses, and because of ongoing cost-cutting initiatives. Second quarter 2003 GAAP earnings and expenses also benefited from a net restructuring credit of $6.9 million, which resulted from a $14.3 million reversal of DoubleClick's real estate reserve for its New York facility offset by $7.4 million in additional restructuring charges in connection with certain of the Company's other facilities. In addition, 2Q03 GAAP earnings were reduced by a $4.4 million loss in connection with the redemption of the Company's 4.75% convertible subordinated notes and $1.0 million in equity losses associated with the Company's minority investments. Last year's second- quarter results included a $7.3 million restructuring charge related to the Company's real estate and a $11.9 million gain related to the sale of the Company's @plan research product line. The Company used $0.6 million in cash flow from operations during the second quarter of 2003. This figure included a payment of $14.4 million in connection with the termination of a portion of the lease on the Company's New York headquarters. The Company ended the quarter with $873.2 million in cash and marketable securities, and had a net cash position of $580.2 million, or $4.23 per share On June 23, 2003, the Company issued $135 million of zero coupon convertible subordinated notes due 2023, the proceeds of which, together with existing cash, will be used to redeem the Company's $154.8 million of 4.75% convertible subordinated notes due 2006 on July 24, 2003. "DoubleClick's business continues to thrive despite the continued softness in marketing and technology spending," said Kevin Ryan, Chief Executive Officer, DoubleClick. "During the quarter, we were able to successfully complete a convertible bond offering, continue to build our suite of marketing technology tools through the acquisition of a data management company, as well as sign on large customers. In addition, we eliminated some excess real estate exposure in New York, which will help cash flow in future quarters." TechSolutions The global TechSolutions division reported second quarter revenues of $43.5 million. Total TechSolutions gross margins were 61.9%, a decline from 65.1% in the second quarter of 2002. DoubleClick's global DART and DARTmail platforms delivered 151.1 billion impressions in the second quarter of 2003. The Company's Ad Management products had revenues of $32.6 million in 2Q03, versus $38.1 million in the year ago period. In the second quarter of 2003, DoubleClick's DART for Advertisers product saw a strong volume increase, which is attributable to existing customers running more online campaigns throughout the system, as well as from the enrollment of new agencies. During the quarter, eBay signed a multi-year deal to use DoubleClick's ad management solution. In addition, the Company launched a new version of its ad management software, DART Enterprise, and began the beta phase of its new rich media product, DART Motif, which derived from a partnership with Macromedia. On the planning side of DoubleClick's business, the Company completed the integration of the IMS reach and frequency tool, Web RF, with DoubleClick's MediaVisor tool. Customers of both Web RF and MediaVisor now have the ability to plan their online advertising campaigns using reach and frequency data, the standard metrics used to plan television campaigns as well as other offline media. DoubleClick's email management and delivery platform, DARTmail, reported revenues of $9.2 million for 2Q03, versus $9.9 million in the year ago period. In the second quarter DoubleClick unveiled several initiatives designed to help marketers and the email marketing industry better understand and leverage policy, research, education, and technology, in the fight against spam, and to further differentiate legitimate marketing communications from unwanted and unsolicited email. As part of these initiatives, DoubleClick plans to issue quarterly reports on government and ISP developments; hold an industry event in the fall which will be exclusively focused on the spam crisis; increase its investment in technology solutions that enhance email delivery; and continue to field both consumer and marketer research on this issue. In addition, DoubleClick recently completed a large study with AOL in order to better understand consumers' attitudes and reactions to unwanted and unsolicited email. Primary results will be available in the third quarter and the full findings will be presented at the Advertising Research Foundation conference in September. DoubleClick's TechSolutions segment also includes its Campaign Management product, Ensemble, and its web analytics tool, SiteAdvance. The Company completed two large customer installations of the Ensemble product during the second quarter, and remains on schedule with its plan to release the latest version, 6.5, in December. This version will include integration with DoubleClick's DARTmail product. Web publishers continue to use SiteAdvance in order to understand how their customers are interacting with the publishers' websites. During the second quarter, SiteAdvance launched in international markets, starting with customers such as Dixons Group PLC and Loyalty Management. The product also added a new feature that allows e-commerce sites to use DARTmail to remarket to consumers who abandoned items within online shopping carts. "Our portfolio of technology and data marketing solutions continues to grow in terms of both product offerings and client base," said David Rosenblatt, President, DoubleClick. "We continue the momentum within each of our divisions as clients and prospects recognize the value of our integrated solutions and overall R&D investment, coupled with the advantages of working with a company that has the expertise and the financial resources to help them grow their businesses." Data DoubleClick Data revenue increased 12.3% to $20.1 million in 2Q03 versus $17.9 million in 2Q02. Excluding $0.8 million in revenue associated with DoubleClick's former research products, DoubleClick Data revenue increased 17.5%. Gross margins were 70.7%, a slight dip from the year ago period. Abacus's business- to-consumer alliance revenues grew 13.6% year-over-year. The U.S. Business-to-Business segment of Abacus continued its strong growth in the second quarter, increasing its revenue 78.4%. "We are particularly happy with the second quarter results from the Data segment," continued Rosenblatt. "The Abacus teams in the U.S. and U.K. have done an exceptional job in outperforming the catalog industry." In the second quarter of 2003, DoubleClick launched Abacus Japan as part of its international operations. Japan is the second largest catalog market in the world, and interest from the country's catalog companies has been very encouraging. In the long term, DoubleClick believes that this market has the potential to be the second largest in the world, after the U.S. Going forward, the Data business will also include DoubleClick's new Data Management division. This division was formed as a result of the Company's recent acquisition of CSC Advanced Database Solutions, a privately held data management solutions company that specializes in building, maintaining and providing access to customer marketing databases. Almost all of DoubleClick's Abacus, email, and campaign management customers use a data management solution, which represents great synergy with DoubleClick's business as well as an opportunity to incrementally grow revenues. DoubleClick plans to continue to offer CSC's products as stand- alone products in addition to integrating many of DoubleClick's products into the data management solution in the future. Third Quarter 2003 Outlook DoubleClick is expecting third quarter revenues to be between $73 million and $77 million. GAAP earnings for the third quarter are projected to be between $0.00 and $0.04 per share. Segment projections for the third quarter of 2003 are as follows: * Data revenues are estimated to be between $31 million and $33 million, with gross margins in the low 70's percentage range, including $2.5 million from Data Management. * TechSolutions revenues are estimated to be between $42 million and $45 million, with gross margins in the low 60's percentage range. * Within TechSolutions, Email technology is expected to generate revenues between $9.5 million and $10 million and new initiatives should account for about $2.5 million of revenues. Total company gross margins are expected to be in the mid 60's percentage range. Total company GAAP operating expenses are expected to be between $48 million and $50 million. Gross margin and operating cost estimates include the impact of charges of $0.8 million and $7.5 million, respectively, for leasehold improvements associated with the planned exit of certain real estate facilities by year-end. Items in interest and other are expected to add roughly $1.5 million in after-tax income. Full Year 2003 Update Based on strong results to date, DoubleClick is narrowing its full year 2003 earnings guidance towards the high end. The Company now expects GAAP earnings per share in the range of $0.07 to $0.12 for the full year 2003, versus the previous range of $0.03 to $0.12. Full year revenue guidance is also being tightened, to $260 to $275 million from $250 to $300 million previously. "Even as we invest in new products and clean up excess real estate exposure, profitability continues to improve, indicating that the fundamentals of the business are very healthy," said Bruce Dalziel, Chief Financial Officer, DoubleClick. "We will continue to focus on growing revenues as well as expanding our product lines to meet the needs of our customers." DoubleClick -- http://www.doubleclick.net-- is the leading provider of data and technology for advertisers, direct marketers and web publishers to plan, execute and analyze their marketing programs. DoubleClick's online advertising, email marketing and database marketing solutions help clients yield the highest return on their marketing dollar. In addition, the Company's marketing analytics tools help clients measure performance within and across channels. DoubleClick Inc. has global headquarters in New York City and maintains 21 offices around the world. As reported in Troubled Company Reporter' June 24, 2003 Edition, Standard & Poor's Ratings Services assigned its 'B-' rating to DoubleClick Inc.'s $135 million convertible subordinated notes due 2023. "The convertible subordinated notes were rated one notch below the corporate credit rating given its ample cash balances, moderate levels of obligations that rank ahead of the subordinated debt, and Standard & Poor's expectation that the company is unlikely to increase its priority obligations in the intermediate term," said credit analyst Andy Liu. Net proceeds will be used to repay existing debt. New York, New York-based DoubleClick had $154.8 million of debt outstanding on March 31, 2003. At the same time, Standard & Poor's revised its outlook on the ratings to stable from negative. The outlook revision reflects the company's improvement in profitability and discretionary cash flow. All existing ratings are affirmed. EAGLE-PICHER INC: S&P Assigns B+ Senior Secured Bank Loan Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' senior secured bank loan rating to the $275 million senior secured credit facilities of Eagle-Picher Inc., formerly Eagle-Picher Industries Inc. Standard & Poor's also assigned its 'B-' senior unsecured debt ratings to the company's $220 million senior unsecured notes due 2013. Proceeds will be used to repay existing debt, refinance the company's existing $220 million subordinated notes due 2008, and for working capital and general corporate purposes. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating on the company and its 'CCC+' preferred stock ratings on Eagle-Picher Holdings Inc. The outlook remains stable. Phoenix, Ariz.-based Eagle-Picher is a provider of niche products to the automotive, aerospace, defense, telecommunications, and pharmaceutical end-markets. It will have pro forma total debt of about $407 million. The senior secured bank facilities consist of a $125 million revolving credit facility due 2008 and a $150 million term loan B due 2009 and are secured by a first-priority perfected security interest in all the tangible and intangible assets owned by Eagle- Picher and the capital stock of the company and its guarantor subsidiaries (limited to 65% of the voting stock of its foreign subsidiaries). The bank facilities are rated the same as the company's corporate credit rating, reflecting the likelihood of a meaningful recovery of principal in the event of a default or bankruptcy, despite significant loss exposure. "Intense pricing pressures have played a large role in the automotive industry. However, the company's strong technical capabilities have helped it to compete against stronger and better-positioned competitors in the industry (including original equipment manufacturers)," said Standard & Poor's credit analyst Linli Chee. "We expect Eagle-Picher to continue to realize benefits from ongoing restructuring and productivity enhancements," Ms. Chee said. "The demonstrated ability of new management to improve operating performance should offset the impact of flat-to-low revenue growth in the company's automotive segment in the near term to ensure credit protection measures remain in line with the rating." EL PASO CORP: Re-Election of Board's Nominees Confirmed ------------------------------------------------------- El Paso Corporation (NYSE: EP) announced that the independent inspectors of election have delivered their certified Final Report of the results of voting at El Paso's 2003 Annual Meeting of Shareholders. The Final Report confirms that the Board of Directors' nominees were reelected at the June 17 Annual Meeting. The breakdown of the certified voting results for each Director nominee, together with a summary of the certified voting results for each of the other proposals voted upon at the meeting, is attached to this release. El Paso Corporation (S&P, B+ L-T Corporate Credit Rating, Negative) is the leading provider of natural gas services and the largest pipeline company in North America. The company has core businesses in pipelines, production, and midstream services. Rich in assets, El Paso is committed to developing and delivering new energy supplies and to meeting the growing demand for new energy infrastructure. For more information, visit http://www.elpaso.com El Paso Corporation Annual Meeting - June 17, 2003 Certified Voting Report of IVS Associates Inc. - July 22, 2003 Certified results of voting with respect to the election of Directors: Nominees For -------- --- John M. Bissell 230,211,392 Juan Carlos Braniff 224,777,447 James L. Dunlap 230,368,109 Robert W. Goldman 230,398,308 Anthony W. Hall, Jr. 230,382,094 Ronald L. Kuehn, Jr. 230,003,212 J. Carleton MacNeil, Jr. 230,421,643 Thomas R. McDade 224,779,864 J. Michael Talbert 229,930,687 Malcolm Wallop 220,130,651 John L. Whitmire 231,890,432 Joe B. Wyatt 225,416,482 R. Gerald Bennett 197,431,145 C. Robert Black 196,410,411 Charles H. Bowman 197,436,059 Ronald J. Burns 197,427,286 Stephen D. Chesebro 197,325,344 Ted Earl Davis 197,491,257 John J. Murphy 202,930,257 John V. Singleton 197,469,153 Selim K. Zilkha 115,849,899 Certified voting results with respect to each of the other proposals presented at the Annual Meeting are indicated below: -- The company proposal to ratify the appointment of PricewaterhouseCoopers LLP as independent certified public accountants for fiscal year ending December 31, 2003 was approved; -- The company proposal to amend our Certificate of Incorporation to eliminate Article 12 containing a "fair price" provision was approved; -- The company proposal to amend our Certificate of Incorporation to eliminate our Series A Junior Participating Preferred Stock was approved; -- The dissident proposal to amend the company's By-laws to fix the number of directors at nine was defeated; -- The dissident proposal to amend the company's By-laws to delete advance notice provisions applicable to director nominations was defeated; -- The dissident proposal to amend the company's By-laws to repeal changes made after November 7, 2002 was defeated; -- The dissident proposal purporting to establish the sequence for presentation of proposals at the annual meeting was approved; -- The shareholder proposal requesting the preparation of a pay disparity report was defeated; -- The shareholder proposal requesting that the company index options for senior executives was defeated; and -- The shareholder proposal requesting that the company redeem any poison pill and seek shareholder approval prior to the adoption of any new poison pill was approved. ENERGY PARTNERS: S&P Assigns B+ Corporate Credit Rating ------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to independent exploration and production company Energy Partners Ltd. At the same time, Standard & Poor's assigned its 'B+' issue rating to Energy Partners' proposed $150 million senior unsecured notes due 2010. The outlook is stable. New Orleans, La.-based Energy Partners has about $150 million of debt outstanding, pro forma the transaction. "The proceeds from the transaction will be used to refinance current indebtedness and provide capital for future growth initiatives such as property acquisitions," noted Standard & Poor's credit analyst Daniel Volpi. Pro forma for the transaction, total debt to capital is roughly 38% (47% if preferred stock is considered debt). EBITDA interest coverage is expected to be above 7x at midcycle hydrocarbon prices although coverage measures in 2003 are likely to be stronger because of current commodity prices and the company's commodity price hedge position; roughly 50% of 2003 production hedged at favorable prices. However, only 10% of 2004 natural gas production is hedged, which materially exposes the company's cash flow to swings in commodity prices. Pro forma for the transaction, Energy Partners will have about $67 million of cash on hand and full access to a $60 million senior secured revolving credit facility (expires March 2005). While the company is not expected to maintain such high cash balances, the ratings presume that management will maintain adequate liquidity. In addition, Energy Partners plans to limit capital expenditures to operating cash flow. The company's bank credit facility contains financial covenants including a minimum tangible net worth test and EBITDA plus exploration expense to interest ratio. Presently, Energy Partners is comfortably in its covenants. Energy Partners' liquidity profile benefits from an absence of near-term debt maturities, with its credit facility maturing in 2005 and the proposed notes in 2010. The stable outlook reflects expectations that Energy Partners will maintain disciplined financial policies. Acquisitions are expected to either have been partially prefinanced with the proposed notes offering or, if significantly larger, to incorporate an equity component. ENRON CORP: Settlement Shows Cost of Neglecting Risk Management --------------------------------------------------------------- The proposed settlement of Enron Corp.'s Chapter 11 bankruptcy is positive proof of the consequences of neglecting the practice of proper risk management techniques, a renowned energy commentator says. Shirley S. Savage, co-author of the best-selling book "Power Market Risk: How to Survive (& Prosper) in Crazy Times," responded to the July 11 news of the proposed settlement of the energy conglomerate's record $67 billion debt to creditors: "They were swindled. Enron's deal, offering between 14 and 18 cents on the dollar to hundreds of struggling companies, is the ruinous consequence of ignoring risk management. The landscape of the American power industry is littered with the casualties of Enron's proven dishonesty and manipulative practices. The consequences will endure for years." Ms. Savage goes on to add: "Enron (and other speculative players) made a mockery of fair markets during the California power crisis. But the companies who were duped by them have only themselves to blame. Proper credit analysis, prudent risk portfolio management, use of competitive intelligence methodology, and critical analysis of price formation - plus a careful reading of Enron's own minimal disclosure of its financial practices - would have warned creditors that they were in grave peril, and enabled them to extricate themselves long before the collapse occurred." The lessons have dawned on the many readers of Ms. Savage's book, which has been snapped up by power companies, marketers, regulators and consultants in the US, and worldwide, and widely praised for its simple exposition of how to effectively practice risk management. Its publisher, The Thinking Companies, Inc., is extending the opportunity for those who have not yet seen the light to buy the book at a 'Summer Sale' price of $159 through August 31, 2003. As the respected journal Public Utilities Fortnight observed: "The few dollars invested in this ...engaging book ... could pay great dividends for energy companies trying to get a better grasp on how to manage risk." You can find it online (and read other rave reviews) at http://www.thinkingenergy.comor call 207-829-3223 to place an order. For further information or commentary: Shirley S. Savage, The Thinking Companies, Inc., 207-829-2020. E-Mail: ronin@thinkingenergy.com ENRON CORP: Classification and Treatment of Claims Under Plan ------------------------------------------------------------- Stephen F. Cooper, Acting President, Acting Chief Executive Officer and Chief Restructuring Officer of Enron Corp., reports that the Debtors made these classifications, treatment of, and estimated recoveries on, Allowed Claims and Equity Interests under the Plan: Class Type of Claim Estimate Claim Treatment ----- ------------- -------- --------------- N/A Administrative 100% Payment in full, in cash Expense Claims Unimpaired; not entitled to vote. N/A Priority Tax 100% At the Debtors' option, either: Claims (a) pay in full in cash, (b) paid over a six-year period from the date of assessment with interest at a rate to be determined by the Court, or (c) as mutually agreed by the Claim holder and the Debtors. Unimpaired; not entitled to vote. 1 Priority 100% Payment in full, in cash Non-Tax Claims Unimpaired; not entitled to vote. 2 Secured Claims 100% At the Debtors' option, either: (a) the payment in full, in Cash; (b) the sale or disposition proceeds of the property securing any Allowed Secured Claim to the extent of the value of their interests in the property; (c) the surrender to the Claim holder of the property securing the Claim; or (d) other distributions as will be necessary to satisfy the requirements of Bankruptcy Code. Unimpaired; not entitled to vote. General Distribution of: Unsecured Claims Against: (a) Pro Rata Share of the Distributive Assets 3 -- EMCC 58.9% attributable to that 4 -- ENE 14.4% particular Debtor; and 5 -- ENA 18.3% 6 -- EPMI 21.3% (b) Pro Rata Share of 3,000,000 7 -- PBOG 75.0% Litigation Trust Interest 8 -- SSLC 19.5% and 3,000,000 Special 9 -- EBS 12.7% Litigation Trust Interests. 10 -- EESO 10.8% 11 -- EEMC 28.9% Impaired; entitled to vote. 12 -- EESI 28.0% 13 -- EES 61.8% 14 -- ETS 75.0% 15 -- BAM 6.3% 16 -- ENA Asset 75.0% Holdings 17 -- EGLI 19.2% 18 -- EGM 5.0% 19 -- ENW 5.1% 20 -- EIM 5.0% 21 -- OEC 13.0% 22 -- EECC 12.5% 23 -- EEOSC 5.0% 24 -- Garden State 5.0% 25 -- Palm Beach 5.0% 26 -- TSI 8.0% 27 -- EEIS 57.3% 28 -- EESOMI 39.3% 29 -- EFSI 5.0% 30 -- EFM 24.5% 31 -- EBS LP 5.0% 32 -- EESNA 5.9% 33 -- LNG Mktg. 75.0% 34 -- Calypso 5.0% 35 -- Global LNG 75.0% 36 -- EIFM 75.0% 37 -- ENGMC 19.7% 38 -- ENA Upstream 15.6% 39 -- ELFI 29.3% 40 -- LNG Shipping 75.0% 41 -- EPSC 9.4% 42 -- ECTRIC 18.7% 43 -- Communications 7.5% Leasing 44 -- Wind 32.2% 45 -- Wind Systems 46.0% 46 -- EWESC 44.1% 47 -- Wind 5.7% Maintenance 48 -- Wind 43.5% Constructors 49 -- EREC I 46.0% 50 -- EREC II 43.5% 51 -- EREC III 44.1% 52 -- EREC IV 5.7% 53 -- EREC V 32.2% 54 -- Intratex 5.0% 55 -- EPPI 5.0% 56 -- Methanol 13.8% 57 -- Ventures 9.4% 58 -- Enron 5.0% Mauritius 59 -- India Holdings 5.0% 60 -- OPP 75.0% 61 -- NETCO 75.0% 62 -- EESSH 79.6% 63 -- Wind Dev't. 65.8% 64 -- ZWHC 75.0% 65 -- Zond Pacific 5.0% 66 -- ERAC 75.0% 67 -- NEPCO 8.3% 68 -- EPICC 7.5% 69 -- NEPCO Power 8.3% Procurement 70 -- NEPCO Services 8.6% 71 -- San Juan Gas 21.6% 72 -- EBF LLC 75.0% 73 -- Zond 37.1% Minnesota 74 -- EFII 29.6% 75 -- E Power 36.7% Holdings 76 -- EFS-CMS 6.6% 77 -- EMI 12.2% 78 -- Expat Services 16.5% 79 -- Artemis 15.6% 80 -- CEMS 38.0% 81 -- LINGTEC 10.1% 82 -- EGSNVC 6.1% 83 -- LGMC 7.2% 84 -- LRC 13.6% 85 -- LGMI 14.0% 86 -- LRCI 16.0% 87 -- ECG 7.2% 88 -- EnRock Mngt. 5.0% 89 -- ECI Texas 75.0% 90 -- EnRock 75.0% 91 -- ECI Nevada 36.3% 92 -- Alligator 5.0% Alley 93 -- Enron Wind 16.7% Storm Lake I 94 -- ECTMI 21.0% 95 -- EnronOnline 12.0% LLC 96 -- St. Charles 5.0% Development 97 -- Calcasieu 5.0% 98 -- Calvert City 5.0% Power 99 -- Enron ACS 5.0% 100 -- LOA 75.0% 101 -- ENIL 5.8% 102 -- EI 5.0% 103 -- EINT 9.2% 104 -- EMDE 6.7% 105 -- WarpSpeed 5.0% 106 -- Modulus 75.0% 107 -- ETI 10.1% 108 -- DSG 6.5% 109 -- RMTC 75.0% 110 -- Omicron 5.0% 111 -- EFS I 75.0% 112 -- EFS II 5.0% 113 -- EFS III 75.0% 114 -- EFS V 5.0% 115 -- EFS VI 5.0% 116 -- EFS VII 75.0% 117 -- EFS IX 75.0% 118 -- EFS X 9.5% 119 -- EFS XI 7.2% 120 -- EFS XII 15.5% 121 -- EFS XV 5.0% 122 -- EFS XVII 75.0% 123 -- Jovinole 5.0% 124 -- EFS Holdings 75.0% 125 -- EOS 11.3% 126 -- Green Power 75.0% 127 -- TLS 14.5% 128 -- ECT Securities 75.0% Limited Partnership 129 -- ECT Securities 17.2% LP 130 -- ECT Securities 5.0% GP 131 -- KUCC Cleburne 5.0% 132 -- EIAM 75.0% 133 -- EBPHXI 5.0% 134 -- EHC 75.0% 135 -- EDM 6.0% 136 -- EIKH 75.0% 137 -- ECHVI 75.0% 138 -- EIAC 7.2% 139 -- EBPIXI 5.0% 140 -- Paulista 5.0% 141 -- EPCSC 10.7% 142 -- Pipeline 14.6% Services 143 -- ETPC 75.0% 144 -- ELSC 75.0% 145 -- EMMS 7.9% 146 -- ECFL 75.0% 147 -- EPGI 5.0% 148 -- Transwestern 5.0% Gathering 149 -- Enron 5.0% Gathering 150 -- EGP 5.0% 151 -- EAMR 37.2% 152 -- EBP I 20.3% 153 -- EBHL 23.8% 154 -- Enron Wind 5.0% Storm Lake II 155 -- EREC 9.8% 156 -- EA III 20.2% 157 -- EWLB 35.1% 158 -- SCC 11.0% 159 -- EFS IV 49.7% 160 -- EFS VIII 75.0% 161 -- EFS XIII 68.5% 162 -- ECI 9.1% 163 -- EPC 26.9% 164 -- Richmond 5.0% Power 165 -- ECTSVC 14.5% 166 -- EDF 21.0% 167 -- ACFI 8.0% 168 -- TPC 75.0% 169 -- APACHI 19.9% 170 -- EDC 11.8% 171 -- ETP 5.0% 172 -- NSH 75.0% 173 -- Enron South 18.7% America 174 -- EGPP 51.9% 175 -- PGS 30.9% 176 -- PTC 5.0% 177 Enron 0% Distributions of: Subordinated Debenture (a) Pro Rata Share of the Claims Distributive Assets attributable to ENE; and (b) Pro Rata Share of 3,000,000 Litigation Trust Interest and 3,000,000 Special Litigation Trust Interests; Subject to subordination Rights of senior debts. Impaired; entitled to vote. 178 Enron Guaranty 12% Distributions of Pro Rata Share Claims of the Enron Guaranty Distributive Assets. Impaired; entitled to vote. 179 Wind Guaranty 29.7% Distributions of Pro Rata Share Claims of the Wind Guaranty Distributive Assets. Impaired; entitled to vote. 180 Intercompany TBA Distributions of Pro Rata Share Claims of the Intercompany Guaranty Distributive Assets. Impaired; not entitled to vote. Convenience Payment in cash of the amount Claims against: of the Convenience Claim 181 -- EMC 53.0% Distribution Percentage against 182 -- ENE 13.0% the particular Debtor. 183 -- ENA 16.4% 184 -- EPMI 19.2% Impaired; entitled to vote. 185 -- PBOG 67.5% 186 -- SSLC 17.6% 187 -- EBS 11.6% 188 -- EESO 9.7% 189 -- EEMC 26.0% 190 -- EESI 25.2% 191 -- EES 55.7% 192 -- ETS 67.5% 193 -- BAM 5.6% 194 -- ENA Asset 67.5% Holdings 195 -- EGLI 17.3% 196 -- EGM 4.5% 197 -- ENW 4.6% 198 -- EIM 4.5% 199 -- OEC 11.7% 200 -- EECC 11.3% 201 -- EEOSC 4.5% 202 -- Garden State 4.5% 203 -- Palm Beach 4.5% 204 -- TSI 7.2% 205 -- EESI 51.6% 206 -- EESOMI 35.4% 207 -- EFSI 4.5% 208 -- EFM 22.0% 209 -- EBS LP 4.5% 210 -- EESNA 5.3% 211 -- LNG Marketing 67.5% 212 -- Calypso 4.5% 213 -- Global LNG 67.5% 214 -- EIFM 67.5% 215 -- ENGMC 17.7% 216 -- ENA Upstream 14.0% 217 -- ELFI 26.4% 218 -- LNG Shipping 67.5% 219 -- EPSC 8.5% 220 -- ECTRIC 16.8% 221 -- Communications 6.7% Leasing 222 -- Wind 29.0% 223 -- Wind Systems 41.4% 224 -- EWESC 39.7% 225 -- Wind 5.2% Maintenance 226 -- Wind 39.1% Constructors 227 -- EREC I 41.4% 228 -- EREC II 39.1% 229 -- EREC III 39.7% 230 -- EREC IV 5.2% 231 -- EREC V 29.0% 232 -- Intratex 4.5% 233 -- EPPI 4.5% 234 -- Methanol 12.5% 235 -- Ventures 8.5% 236 -- Enron 4.5% Mauritius 237 -- India 4.5% Holdings 238 -- OPP 67.5% 239 -- NETCO 67.5% 240 -- EESSH 17.7% 241 -- Wind Dev't. 59.2% 242 -- ZWHC 67.5% 243 -- Zond Pacific 4.5% 244 -- ERAC 67.5% 245 -- NEPCO 7.5% 246 -- EPICC 6.7% 247 -- NEPCO Power 7.5% Procurement 248 -- NEPCO Serv. 7.7% International 249 -- San Juan Gas 19.4% 250 -- EBF LLC 67.5% 251 -- Zond 33.4% Minnesota 252 -- EFII 26.6% 253 -- E Power 33.0% Holdings 254 -- EFS-CMS 5.9% 255 -- EMI 11.0% 256 -- Expat Serv. 14.8% 257 -- Artemis 14.0% 258 -- CEMS 34.2% 259 -- LINGTEC 9.0% 260 -- EGSNVC 5.5% 261 -- LGMC 6.5% 262 -- LRC 12.3% 263 -- LGMI 12.6% 264 -- LRCI 14.4% 265 -- ECG 6.5% 266 -- EnRock Mngt. 4.5% 267 -- ECI Texas 67.5% 268 -- EnRock 67.5% 269 -- ECI Nevada 32.6% 270 -- Alligator 4.5% Alley 271 -- Enron Wind 15.0% Storm Lake I 272 -- ECTMI 18.9% 273 -- EnronOnline 10.8% LLC 274 -- St. Charles 4.5% Development 275 -- Calcasieu 4.5% 276 -- Calvert City 4.5% Power 277 -- Enron ACS 4.5% 278 -- LOA 37.5% 279 -- ENIL 5.2% 280 -- EI 4.5% 281 -- EINT 8.3% 282 -- EMDE 6.0% 283 -- WarpSpeed 4.5% 284 -- Modulus 67.5% 285 -- ETI 9.0% 286 -- DSG 5.9% 287 -- RMTC 67.5% 288 -- Omicron 4.5% 289 -- EFS I 67.5% 290 -- EFS II 4.5% 291 -- EFS III 67.5% 292 -- EFS V 4.5% 293 -- EFS VI 4.5% 294 -- EFS VII 67.5% 295 -- EFS IX 67.5% 296 -- EFS X 8.5% 297 -- EFS XI 6.5% 298 -- EFS XII 13.9% 299 -- EFS XV 4.5% 300 -- EFS XVII 67.5% 301 -- Jovinole 4.5% 302 -- EFS Holdings 67.5% 303 -- EOS 10.2% 304 -- Green Power 67.5% 305 -- TLS 13.0% 306 -- ECT Securities 67.5% Limited Partnership 307 -- ECT Securities 15.5% LP 308 -- ECT Securities 4.5% GP 309 -- KUCC Cleburne 4.5% 310 -- EIAM 67.5% 311 -- EBPHXI 4.5% 312 -- EHC 67.5% 313 -- EDM 5.4% 314 -- EIKH 67.5% 315 -- ECHVI 67.5% 316 -- EIAC 6.5% 317 -- EBPIXI 4.5% 318 -- Paulista 4.5% 319 -- EPCSC 9.6% 320 -- Pipeline 13.2% Services 321 -- ETPC 67.5% 322 -- ELSC 67.5% 323 -- MMS 7.1% 324 -- ECFL 67.5% 325 -- EPGI 4.5% 326 -- Transwestern 4.5% Gathering 327 -- Enron 4.5% Gathering 328 -- EGP 4.5% 329 -- EAMR 33.5% 330 -- EBP-I 18.2% 331 -- EBHL 21.4% 332 -- Enron Wind 4.5% Storm Lake II 333 -- EREC 8.8% 334 -- EA III 18.2% 335 -- EWLB 31.6% 336 -- SCC 9.9% 337 -- EFS IV 44.8% 338 -- EFS VIII 67.5% 339 -- EFS XIII 61.6% 340 -- ECI 8.2% 341 -- EPC 24.2% 342 -- Richmond 4.5% Power 343 -- ECTSVC 13.0% 344 -- EDF 18.9% 345 -- ACFI 7.2% 346 -- TPC 67.5% 347 -- APACHI 17.9% 348 -- EDC 10.6% 349 -- ETP 4.5% 350 -- NHS 67.5% 351 -- Enron South 16.9% America 352 -- EGPP 46.7% 353 -- PGS 27.8% 354 -- PTC 4.5% 355 Enron Guaranty 10.8% Payment in cash of the amount Convenience of the Convenience Claim Claims Distribution Percentage against Enron Guaranty Distributive Assets. Impaired; entitled to vote. 356 Wind Guaranty 26.7% Cash Payment of the amount of Convenience the Convenience Claim Claims Distribution Percentage against Wind Guaranty Distributive Assets. Impaired; entitled to vote. 357 Subordinated 0% No distribution to Claims Impaired; not entitled to vote. 362 363 Allowed Enron 0% No distribution Preferred Equity Impaired; not entitled to vote. Interests 364 Enron Common 0% No distribution Equity Interests Impaired; not entitled to vote. 365 Other Equity 0% No distribution Interests Impaired; not entitled to vote. Mr. Cooper explains that the Enron Preferred Equity Interests and the Enron Common Equity Interests will be deemed cancelled and of no force and effect and the Exchanged Stock will be issued in lieu thereof. On the latter to occur of the entry of a Final Order resolving all Claims in the Chapter 11 cases and the final distribution made to holders of Allowed Claims and Allowed Equity Interests, the Exchanged Enron Preferred Stocks and the Exchanged Enron Common Equity Stock will be deemed extinguished and the certificates and all other documents representing the Equity Interests will be deemed cancelled and of no force and effect. According to Mr. Cooper, the estimates are very preliminary and are based on information available to the Debtors as of June 1, 2003. As the preliminary value of assets and amount of claims used to calculate the estimated recoveries may be significantly different than those ultimately realized, the actual distribution under the Plan may be substantially higher or lower than the estimated recoveries. Mr. Cooper informs Judge Gonzalez that the Debtors used the Blackstone Model in calculating the estimated recoveries. The Blackstone Model tracks the assets and liabilities of each Debtor and most of other Enron Companies. Taking into consideration, among other things, the complex web of Intercompany claims and equity interests between the Enron Companies, the model calculates the asset value of each Debtor and the allocation of that value to satisfy secured, administrative, prior and unsecured Claims against each Debtor. Furthermore, the Blackstone Model was designed to permit the incorporation of numerous variables reflecting different values and legal assumptions. Other than cash on hand, the asset valuation information contained in the Blackstone Model reflects either: (i) if the asset has been sold, the sale price, or (ii) if the asset has not been sold, an estimate developed by Blackstone and management. This way, Mr. Cooper explains, a Debtor's assets may include Cash, assets held for sale, assets identified for transfer into InternationalCo, claims and causes of action, and investments in subsidiaries. Due to the inherent uncertainty of litigation, for estimating asset value purposes, no value is ascribed to any claims or causes of actions the Debtors may have. The claims estimates included in the Blackstone Model were estimated using these procedures: (i) Administrative, Secured and Priority Claims, including administrative claims against other Debtors, have been estimated by the Debtors based on historical expense levels, filed Claims and the Debtors' books and records; (ii) Intercompany Claims are based on the intercompany accounts and notes reflected in the Debtors' books and records, as may be adjusted from time to time; and (iii) all other Claims are based on filed Claims, the Debtors' books and records and analysis performed by the Debtors and their professionals. (Enron Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 609/392-0900) EXIDE TECHNOLOGIES: Court Fixes Aug. 15 as Contaminant Bar Date --------------------------------------------------------------- Gould Electronics Inc. has contaminant-related claims against the Debtors as a result of Exide Technologies' purchase of GNB Batteries stock from Pacific Dunlop in 2000. In 1983, Gould transferred the assets and liabilities of its battery manufacturing business to GNB, which in turn sold its stock to Pacific Dunlop. As a result, GNB has become, and is, Exide Technologies. Subsequent to the sale of the Battery Business, disputes arose between Gould and GNB regarding environmental liability resulting from the Battery Business. In 1994, Gould obtained a declaration by a federal district court that GNB was liable under the CERCLA and under a January 1, 1983 Restated Assumption Agreement for all of the environmental liabilities of the Battery Business, including those that arose before the sale. The Assumption Agreement was executed as part of the sale. The District Court decision was affirmed by the 7th Circuit. Notwithstanding its obligation to pay all environmental and other claims associated with the Battery Business, Exide has indicated that it does not intend to pay all those claims. Exide also has ceased funding certain environmental cleanup obligations at sites related to the Battery Business. It is likely that the United States Environmental Protection Agency and certain other parties will look to Gould to fund obligations that Exide refuses to pay. In this event, Gould will have significant claims against Exide. The April 23, 2003 General Bar Date Order specifically excluded Contaminant-Related Claims and provided that any claims of Gould were to be treated the same as Contaminant-Related Claims. Accordingly, Gould was not required to file, and has not yet filed, a proof of claim asserting any claims against the Debtors. The exception provided for Gould's claims was premised, in large part, on the amount of information gathering and document review required before Gould could assert its claim against the Debtors. Gould simply was not, and could not have been, in a position to assert its claims against the Debtors by the April 23, 2003 deadline. The additional time provided to Gould was based on an expectation that it would be provided information and access to documents and individuals sufficient to allow it to determine the nature and amount of its claims. That expectation has not been met. Despite reasonably diligent efforts on the Debtors' part, Gould has not had sufficient access to information, documents, and individuals to allow it to determine its claims. Accordingly, Gould is not presently in a position to file a meaningful proof of claim. It also appears unlikely that Gould will be in a position to do so by the proposed August 15, 2003 Contaminant-Related Claims Bar Date. Consequently, Gould objects to the proposed Contaminant-Related Claims Bar Date. Gould points out that the Debtors possess or control the information and documents required to assert its claims. But Gould has been stymied in its efforts to obtain those documents -- stymied by a lack of enthusiasm by the Debtors' personnel and by the assertion of various confidentiality restrictions. "Gould is not alleging that the Debtors have intentionally thwarted Gould's information-gathering efforts. That lack of intent, however, does not change the fact that Gould has been unable to compile and review all of the information and documents it requires," Duane D. Werb, Esq., at Werb & Sullivan, Wilmington, Delaware, tells the Court. Based on the current level of cooperation by the Debtors and the estimates of Gould's consultants, Gould believes that it should be able to file a proof of claim by October 1, 2003 -- 45 days after the date the Debtors proposed. * * * Judge Carey orders that all contaminant-related personal injury claims or contaminant-related property damage claims against the Debtors' estates must be filed by August 15, 2003. Judge Carey however exempts St. Paul from providing certain information on the Proof of Claim Form with respect to surety-related claims. The Debtors have resolved Gould's Objection through a separate letter agreement. (Exide Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) FHC HEALTH SYSTEMS: S&P Rates Counterparty Credit Rating at B ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' counterparty credit rating to FHC Health Systems Inc. At the same time, Standard & Poor's assigned its 'B' debt rating to both FHC's $30 million senior secured revolving credit facility and its $250 million senior unsecured redeemable debentures, which are due in 2011. The outlook is stable. FHC intends to use the net proceeds of this offering to refinance existing debt and preferred stock obligations. "The rating actions reflect FHC's extremely weak capitalization, weak financial flexibility somewhat offset by marginal earnings, and an average business position," said Standard & Poor's credit analyst Steven Ader. "The secured debt and debentures are rated the same, reflecting Standard & Poor's criteria regarding relative support of the underlying collateral for the respective issues." Pretax earnings, after debt servicing, are projected to be about $35 million and $18 million in 2003 and 2004, respectively. The decline in 2004 earnings are the result of Standard & Poor's expectation that the renewal terms on the large public sector contract constituting 29% of consolidated revenue in 2002, will result in reduced profitability. Fixed-charge coverage is expected to be between 1.2 and 1.4x. Debt to capital is expected to remain near current levels. FHC Health Systems Inc., a Norfolk, Va.-based organization incorporated in 1983, is a behavioral healthcare company that offers behavioral health insurance and behavioral health provider services through two primary subsidiaries, ValueOptions and Alternative Behavioral Services. ValueOptions provides mental health, substance abuse, integrated mental health/substance abuse, and employee assistance programs to about 23 million people as of April 2003. Alternative Behavioral Services provides services through psychiatric hospitals, residential treatment centers, therapeutic group homes, foster care family settings, alternative schools, outpatient offices, and home visits. GAUNTLET ENERGY: Canadian Court Extends CCAA Stay Until Aug. 29 --------------------------------------------------------------- Gauntlet Energy Corporation said that the stay of proceedings preventing creditors' actions against it has been extended by the Court of Queen's Bench of Alberta to August 29, 2003. Gauntlet's banker, which is its primary secured creditor and the Court appointed Monitor supported the application to the Court for the extension. Gauntlet's progress in developing a financial restructuring plan will be reviewed by the Court on August 29, 2003, at which time it is expected Gauntlet will be requesting a further extension of the creditor protection Order. GENERAL BINDING: Q2 Earnings Results Enter Negative Territory ------------------------------------------------------------- General Binding Corporation (Nasdaq: GBND) announced results for the second quarter of 2003. Total segment operating income for the quarter was comparable to the level posted last year, despite a sales decline of 1.8% reflecting the continuing weak economy. In addition, the Company reported a net loss for the quarter of $0.32 per share, including a pre-tax charge of $8.4 million for certain cost improvement initiatives, compared to net income last year of $0.13 per share, which included $1.7 million of charges. In response to the soft sales environment and to improve its profitability, GBC announced several initiatives during the quarter. These initiatives are anticipated to generate over $2 million of profitability improvement in 2003, and more than $10 million of annualized improvement after the expected completion of the initiatives in mid-year 2004. The Company reported $8.4 million of charges related to these initiatives in the second quarter. GBC also announced the refinancing of its senior credit facility during the quarter, which, together with two other recent financings, are expected to generate over $4 million of annualized interest payment savings. "The weak economy continues to affect sales in certain areas of our business," said Dennis Martin, GBC's Chairman, President and CEO. "However, the Operational Excellence initiatives we undertook throughout the organization last year to generate cost savings and increases in productivity levels have helped considerably to stabilize our results this year. The new programs we recently announced should contribute significant improvements in GBC's efficiencies and profitability." 2nd Quarter 2003 Results Financial results for the quarter included the following highlights: -- Sales in the quarter totaled $171.2 million, down $3.2 million, or 1.8%, from the second quarter of 2002. International sales within the Groups were positively affected by exchange rate movements. Sales in the Commercial and Consumer Group declined by $4.9 million, or 4.2%, in the quarter over the prior year, due primarily to continuing lower demand in visual communication products, partially offset by growth in the 3- ring binder business. The Industrial and Print Finishing Group's sales were down $0.9 million, or 2.7%, as lower domestic commercial films sales were not completely offset by higher international sales. Sales in the Europe Group were up $2.6 million, or 11.7%, primarily due to favorable exchange rates. -- The Company's gross profit for the quarter decreased by $1.6 million, or 0.2 points over the prior year to 39.8%, primarily related to the adverse effect of lower sales volumes and certain mix changes in the Commercial and Consumer Group, partially offset by the favorable impact of Operational Excellence initiatives. -- Selling, service and administrative expenses were down $1.9 million, or 3.3%, in the quarter compared to prior year, primarily due to lower levels of discretionary spending and variable expenses, partially offset by the adverse effect of exchange rate movements on international expenses. -- Total segment operating income for the quarter was roughly flat compared to last year at $11.6 million. Operating income in the Commercial and Consumer and the Industrial and Print Finishing Groups were down $2.7 million and $0.7 million, respectively, as a result of lower sales and lower gross profit margins. The Europe Group's operating income was up $1.9 million due primarily to the favorable effect of exchange rates and lower costs. -- Restructuring expense in the quarter totaled $8.4 million. This expense was related to the manufacturing rationalization and workforce reduction programs detailed below. In the second quarter of 2002, restructuring and other charges totaled $1.7 million. -- Interest expense in the quarter totaled $10.2 million, roughly flat to the $10.0 million from the prior year. Included in interest expense for the quarter was $1.1 million related to the loss on the extinguishment of the Company's prior credit facility which was refinanced in June 2003. -- A net loss was reported for the quarter of $0.32 per share, including a pre-tax charge of $8.4 million for the aforementioned cost improvement initiatives, compared to net income last year of $0.13 per share, which included $1.7 million of charges. -- Total net debt at the end of the quarter, adjusted for cash and equivalents, was $334 million, up roughly $11 million from the amount outstanding at the beginning of the year. Six-Month Results For the first six months of 2003, sales were $340.6 million, down 1.7% from the same period last year. The net loss for the period was $0.32 per share, including pre-tax charges totaling $9.8 million. For the same period last year, the Company reported a net loss of $5.23 per share, including charges of $6.6 million and the cumulative effect of accounting changes totaling $79 million. Company Comments "In response to the continuing weak economy, we have continued to look hard at our organization to improve our profitability," continued Mr. Martin, "and we recently announced several major initiatives that should reduce expenses and realign a portion of our manufacturing operations for improved profitability and efficiencies." "We also significantly improved our capital structure by completing the refinancing of our senior credit facility during the quarter," continued Mr. Martin. "This was an important financial milestone for GBC. We enhanced our financial flexibility by significantly reducing our interest payments and achieving a maturity date of January 2008." "Overall," Mr. Martin concluded, "the successful implementation of GBC's Operational Excellence initiatives has helped us weather the lack of top line growth. We are confident that the new initiatives we undertook this quarter and our continuing focus on long-term sales and marketing initiatives position us well to drive growth in shareholder value as the economy improves." Recent Actions To Improve Profitability On July 17, the Company announced several measures to improve its cost structure and reduce its expenses. These initiatives are anticipated to generate over $2 million of profitability improvement in 2003 and more than $10 million of annualized improvement after the expected completion of the initiatives in mid-year 2004, and they include: -- Booneville, MS Manufacturing Rationalization -- As part of its ongoing Operational Excellence Program, GBC has begun relocating certain labor-intensive office products manufacturing operations from its Booneville facility to its Nuevo Laredo, Mexico facility and outsourcing several other product lines. As a result, the Booneville workforce will be reduced by about 250 employees from a total of 660 over the next 12 months. -- Workforce Reduction Program - In addition to the workforce reduction actions in Booneville, the Company has recently completed a reduction in staffing of about 115 employees at other GBC locations, bringing the total number of employees affected company-wide to approximately 365, or about 9% of GBC's total employees. The Company expects to take charges totaling approximately $9.5 million related to these cost reduction programs, of which $8.4 million was recognized in the second quarter of 2003. The cash portion of the charges is estimated at about $4 million, principally related to severance expenses. The remaining charges will be non-cash and are mainly related to asset impairments at the Booneville facility. Senior Credit Facility Refinancing On June 30, GBC announced the refinancing of its primary senior credit facility. The new $197.5 million facility includes a $72.5 million multicurrency revolving credit line and a $125 million term loan. The maturity date on the new facility is January 15, 2008, and it provides for significantly lower interest rates compared to the previous facility. The facility, led by Harris Bank, LaSalle Bank and General Electric Capital Corporation, should provide the financial flexibility and liquidity to support all of GBC's currently anticipated operating and capital requirements. GBC was successful in reducing the size of the new facility by more than $90 million from the previous facility primarily as a result of debt reduction achieved through the successful execution of its Operational Excellence Program and approximately $30 million of aggregate proceeds from two other recent financings. The annualized interest payment savings from these financings is expected to be more than $4 million. Financial Reporting Changes Beginning with its second quarter results, the Company's financial reporting has been modified to reflect the strategic organizational restructuring announced in late-2002. This change more closely aligns GBC's marketing, sales and support functions around its key customers and end-consumers and eliminates operational overlap. The realignment primarily consisted of combining three of the Company's four business units into the following two new Groups: -- Commercial and Consumer Group (combination of the Document Finishing Group, Office Products Group, the Education division and the Asia/Pacific region). This combined group will focus on branding and marketing strategies for "consumer-ready" products that leverage GBC's leadership among customers of its binding, laminating and information-display products in the work, school and home environments. -- Industrial and Print Finishing Group (combination of the Films Group and the Automated Finishing division). This combined group will target print-for-pay and other finishing customers who use GBC's professional-grade finishing equipment and supplies as part of their mass production or sophisticated, professional applications. GBC is a world leader in products that bind, laminate, and display information enabling people to accomplish more at work, school and home. GBC's products are marketed in over 100 countries under the GBC, Quartet, and Ibico brands, and they help people enhance printed materials and organize and communicate ideas. As reported in Troubled Company Reporter's July 2, 2003 edition, Standard & Poor's Ratings Services assigned its senior secured 'B+' rating to office supplies manufacturer General Binding Corp.'s $197.5 million bank facility. At the same time, Standard & Poor's affirmed its 'B+' corporate credit and 'B-' subordinated debt ratings on the company. Total debt outstanding at March 31, 2003, was $336.1 million. The outlook on the Northbrook, Illinois-based General Binding is stable. GRISTEDE'S FOODS: S&P Rates Planned $150M Sr. Secured Notes at B ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'B' rating to Gristede's Foods Inc.'s planned $150 million senior secured note offering due in 2010. A 'B' corporate credit rating was also assigned to the company. The outlook is negative. The notes will be secured by a second lien on substantially all of the company's assets and capital stock of subsidiaries and would be subordinated to any security pledged to a new revolving credit facility. The notes will be issued under Rule 144A with registration rights. New York, New York-based Gristede's plans to use the majority of the proceeds from the note offering to purchase Kings Super Markets Inc. from Marks & Spencer PLC for $120 million in cash. "The acquisition would expand the company's markets to northern New Jersey from New York City, and provide opportunities for Gristede's to leverage Kings' expertise in perishable and prepared food offerings," said credit analyst Patrick Jeffrey. As part of the transaction, Di Giorgio Corp. will contribute $10 million in exchange for a 10-year supply agreement with Gristede's. The ratings on Gristede's reflect its participation in the highly competitive supermarket industry, its small sales and earnings base compared to other operators, the integration risk related to the Kings acquisition, and the company's high leverage. These risks are mitigated, somewhat, by Gristede's leading market position in the New York City market. Liquidity is marginal and is based on the company securing a $20 million revolving credit facility within 30 to 60 days of the senior secured notes closing. An interim $5 million facility would be utilized by the company if the revolving credit facility were not in place at the time the senior notes are funded. Gristede's had pro forma cash balances of $3.6 million as of March 29, 2003. However, debt maturities are minimal over the next few years. Standard & Poor's believes there are inherent risks in Gristede's integrating a large acquisition such as Kings. Because the combined entity will have a relatively small sales and earnings base, the ratings could be lowered if credit protection measures and liquidity are negatively affected by integration or competitive factors. The ratings could also be lowered if the company is not able to obtain a $20 million revolving credit facility within 30 to 60 days of the senior secured notes closing. HARBISON-WALKER: Court Extends Halliburton Stay to Sept. 30 ----------------------------------------------------------- Halliburton (NYSE: HAL) announced that the Harbison-Walker bankruptcy court approved an agreement among DII Industries, Harbison-Walker Refractories Company and the Official Committee of Asbestos Creditors that extends the court's temporary restraining order through September 30, 2003. The temporary restraining order will expire if a pre-packaged Chapter 11 filing by Halliburton's subsidiaries DII Industries, Kellogg Brown & Root and certain of their subsidiaries is not made on or prior to September 30, 2003. The parties to the agreement, however, retain the right to request the bankruptcy court to extend the stay beyond September 30, 2003. Should the stay expire on September 30, 2003, the court established that discovery on the stayed claims cannot begin until November 1, 2003, and trial dates cannot be set before January 1, 2004. The court's temporary restraining order, which was originally entered on February 14, 2002, stays more than 200,000 pending asbestos claims against DII Industries. In December 2002, Halliburton announced that it had reached an agreement in principle that, if and when consummated, would result in a settlement of asbestos and silica personal injury claims against DII Industries, Kellogg Brown & Root and their current and former subsidiaries with U.S. operations. Halliburton, founded in 1919, is one of the world's largest providers of products and services to the petroleum and energy industries. The company serves its customers with a broad range of products and services through its Energy Services Group and Engineering and Construction Group business segments. The company's World Wide Web site can be accessed at http://www.halliburton.com HARTZ MOUNTAIN: S&P Cuts Corporate Credit Rating Down 2 Notches --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior secured debt ratings on The Hartz Mountain Corp. to 'B' from 'BB-". At the same time, the ratings were placed on CreditWatch with negative implications. Secaucus, N.J.-based Hartz Mountain is a manufacturer and marketer of a wide variety of pet supplies. Total debt outstanding at March 31, 2003, was about $190 million. "The rating actions reflect Hartz Mountain's continued weaker-than-expected operating performance, which has resulted in credit measures that are significantly below the current rating level," said Standard & Poor's credit analyst Jean C. Stout. The company's performance has been impacted by a weak economy and the consolidation in the retail industry, which has resulted in an increasingly consolidated retail base and the on-going shift to mass merchandisers, which has pressured pricing. In addition, during the second quarter of 2003, adverse weather conditions negatively affected sales of higher-margin flea and tick treatments. At the same time, as a result of the weak financial results, Hartz Mountain is in discussions with its bank group to amend financial covenants, as it does not expect to be in compliance for the quarter ended June 2003 or for the remainder of the year. The negative CreditWatch listing incorporates the possibility that the ratings could be lowered further if Hartz Mountain's banks fail to provide the company with adequate financial flexibility. Standard & Poor's will monitor the company's success in discussions with its banks prior to taking further rating action. HILCORP ENERGY: S&P Rates Proposed $350 Million Sr. Notes at 'B' ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to petroleum company Hilcorp Energy I L.P. Standard & Poor's also assigned its 'B' rating to Hilcorp's proposed $350 million senior unsecured notes maturing in 2010. The outlook on Hilcorp is stable. Texas-based Hilcorp will have about $510 million of total debt pro forma for the notes offering. "The ratings on Hilcorp reflect a below-average business profile and aggressive financial leverage," noted Standard & Poor's credit analyst Scott A. Beicke. "The cyclical and capital-intensive nature of the petroleum industry contributes to Hilcorp's below- average business profile," he continued. Hilcorp's business profile is supported by a proven history of low finding costs, a strong operational record, and control of nearly 90% of its net production. The relatively low decline rates associated with Hilcorp's properties provide a degree of stability to the small reserve base. In addition, the company's aggressive hedging program serves to mitigate commodity price risk. Material price hedging at favorable prices should stabilize near-to-medium- term cash flows and lessen the risks that accompany Hilcorp's acquisition strategy. Hilcorp's liquidity will be adequate, with access to a secured credit facility maturing in July 2006 and no other debt maturities due until 2010. The company will have the ability to borrow roughly $64 million under its bank credit agreement as of the close of the notes issuance. Hilcorp should safely meet the facilities' requirements, which include covenants dealing with debt to EBITDA, interest coverage, and the current ratio. The stable outlook reflects expectations that Hilcorp will prudently manage its financial profile. The company has stated that it intends to use near-term cash flow to reduce debt outstanding under its credit facility. Failure to improve financial metrics, given the currently favorable commodity price environment, would pressure the company's rating. If Hilcorp experiences significant operational disappointments or fails to reduce its debt level over the near term, the company's ratings or outlook could change. IMPERIAL PLASTECH: Misses Deadline to File Financials ----------------------------------------------------- Imperial PlasTech Inc. (TSX: IPQ) announced that as a result of its restructuring under the Companies' Creditors Arrangement Act it will be late in filing its interim financial statements for the six months ended May 31, 2003. Imperial PlasTech is required to file these interim financial statements by July 30, 2003. On June 12, 2003, the PlasTech Group, comprised of Imperial PlasTech and its subsidiaries, Imperial Pipe Corporation, Imperial Building Products Corporation, Ameriplast Inc. and Imperial Building Products (U.S.) Inc., was placed into receivership by its secured operating lender following a demand for repayment. Shortly after being placed into receivership, the Board of Directors and all Senior Officers of the PlasTech Group resigned. In order to prevent liquidation and to restructure the PlasTech Group, A.G. Petzetakis SA, a significant shareholder of Imperial PlasTech, acquired all of the indebtedness of the PlasTech Group owed to that lender. A.G. Petzetakis then took the initiative in assisting the PlasTech Group to emerge from receivership and to obtain protection from creditors under the CCAA on July 3, 2003, in order to facilitate the restructuring and continued operations of the PlasTech Group as a going concern. On July 11, 2003, a Second Order was obtained under the CCAA to approve an outsourcing arrangement with A.G. Petzetakis in order to assist it in fulfilling certain obligations, the terms of the engagement of the Chief Restructuring Officer of the PlasTech Group, and the retainer of Canadian counsel and U.S. counsel to the PlasTech Group. In accordance with the terms of the Initial Order dated July 3, 2003 and the Second Order dated July 11, 2003 issued under the CCAA, the PlasTech Group sent notice of the CCAA proceedings, including a copy of the Initial Order and the Second Order, to the known creditors of the PlasTech Group, other than employees and creditors to which the PlasTech Group owe less than $5,000, on or before July 17, 2003. The PlasTech Group intends to file a proposal for a plan or plans of compromise or arrangement between the PlasTech Group and one or more classes of their secured and/or unsecured creditors as they deem appropriate prior to the expiration of the stay period imposed under the CCAA. Since the Board of Directors and all Senior Officers of the PlasTech Group had resigned, the court appointed Messrs. Peter J. Perley, Mark Weigel, and William Thomson under the CCAA as directors of Imperial PlasTech. The court also appointed Mr. Perley under the CCAA as Chief Restructuring Officer of the PlasTech Group, to restructure the PlasTech Group, and appointed Richter & Partners Inc. under the CCAA as Monitor, to monitor the property and the conduct of the business of the PlasTech Group. As a result of the restructuring of the PlasTech Group and the resignation of the former Board of Directors and Senior Officers of the PlasTech Group, the court appointed Board is not sufficiently familiar with, and has not had a sufficient opportunity to review and analyze, the financial condition of the PlasTech Group in order to complete the interim financial statements of Imperial PlasTech for the six months ended May 31, 2003. Imperial PlasTech is working with its auditors, Deloitte Touche, to complete the interim financial statements as soon as possible. Imperial PlasTech anticipates that the financial statements will be filed on or prior to September 30, 2003. The Ontario Securities Commission may impose a cease trade order if the interim financial statements have not been filed by September 30, 2003. Imperial PlasTech intends to satisfy the provisions of the Alternate Information Guidelines of the Ontario Securities Commission so long as Imperial PlasTech is in default of filing its interim financial statements, including issuing a news release every two weeks in order to keep the market informed of any developments during this time. Imperial PlasTech intends to file with the Ontario Securities Commission, during the period that Imperial PlasTech is in default of filing its interim financial statements, the same information it provides to its creditors at the times the information is provided to its creditors and in the same manner as it would file a material change report under the Securities Act. The PlasTech Group is a diversified plastics manufacturer supplying a number of markets and customers in the residential, construction, industrial, oil and gas and telecommunications and cable TV markets. Currently operating out of facilities in Edmonton Alberta and Atlanta Georgia, the PlasTech Group intends to focus on the growth of its core businesses while assessing any non-core businesses. For more information, access the group's Web site at http://www.implas.com INTEGRATED HEALTH: Resolves Claims Dispute with BT Off. Products ---------------------------------------------------------------- Integrated Health Services, Inc., and its debtor-affiliates ask the Court to approve their stipulation with BT Office Products International now known as Corporate Express Office Products, Inc., settling their adversary proceeding. On January 31, 2002, Integrated Health Services, Inc. filed a complaint against BT Office Products to recover preferential and fraudulent conveyances made to BT Office products amounting to at least $421,811. In response, BT Office Products asserted the subsequent advance of new value and ordinary course of business affirmative defenses. After an exchange of information and documentation regarding the Transfers and BT Office Products' defenses to the avoidability of the Transfers, the parties agreed to resolve the adversary proceeding consensually to avoid the costs and uncertainties of litigation. Pursuant to the Stipulation and in settlement of the Adversary Proceeding, BT Office Products will pay the Debtors $14,577. The parties will exchange mutual releases. BT Office Products has also agreed to withdraw its claim for $1,071,135.70. In addition, the Adversary Proceeding will be dismissed. Alfred Villoch, III, Esq., at Young, Conaway, Stargatt & Taylor, LLP, in Wilmington, Delaware, tells the Court that the Stipulation enables the Debtors to receive substantially all of the relief, which they could have reasonably expected to receive from prosecuting the Adversary Proceeding. (Integrated Health Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTERNET INFINITY: Hires Kabani & Co. to Replace Caldwell Becker ---------------------------------------------------------------- On July 2, 2003 Caldwell, Becker, Dervin, Petrick & Co., L.L.P., the principal independent accountants of Internet Infinity, Inc., resigned. The reports of Caldwell, Becker, Dervin, Petrick & Co., L.L.P. on the financial statements of Internet Infinity for each of the past two years ended March 31, 2003 and 2002 contained explanatory paragraphs describing an uncertainty about Internet Infinity's ability to continue as a going concern. On July 9, 2003, Internet Infinity engaged Kabani & Company, Inc., as its new principal accountant to audit its consolidated financial statements. JP MORGAN COMM'L: Fitch Affirms Low-B Ratings on 3 Note Classes --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on four classes of J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass-through certificates series 1999-C7. At the same time, ratings are affirmed on four classes from the same series. The rating actions reflect a loan pool that has performed well, with an improved weighted average debt service coverage for year- end 2002 (92% of loans reporting) of 1.59x compared to 1.42x at issuance. As of June 2003, the loan pool had paid down 12% since issuance, with a current balance of $715.12 million and 142 fixed- rate loans (average mortgage rate is 7.214%); the loan pool balance at issuance was $808.77 million with 145 loans. In addition, there were no delinquent loans in June 2003, nor any realized losses. As of June 2003, the master servicer, Midland Loan Services Inc. (Midland) placed 32 loans on its watchlist ($171.73 million, 24.0%). Thirteen of the loans ($69.68 million, 9.7%) reported DSC ratios below 1.0x (includes fifth and seventh largest loan); 17 loans ($90.22 million, 12.6%) reflect a decline in occupancy at the properties; and two loans ($11.83 million, 1.7%) secured by retail properties due to the bankruptcy filing of Kmart and store closings of Food Lion; however, these stores remain open. The following three loans (from the top 10) are of concern to Standard & Poor's: -- The largest loan ($51.8 million, 7.3%) is secured by six anchored retail centers, which are cross-collateralized and cross-defaulted, located in New Jersey, Florida, Illinois, South Carolina, and Maryland. Since issuance, anchors at three of the retail centers have vacated due to bankruptcy or store closings. Consequently, the year-end 2002 weighted average DSC declined to 1.14x from 1.52x at issuance, and the April 2003 weighted average occupancy decreased to 76.7% from 96.0%. Mills Corp., a publicly traded real estate investment trust, controls the borrower. -- The fifth largest loan ($17.6 million, 2.5%), secured by a 287,336-square-feet (sq. ft.) office building in Baltimore, Md., reported a February 2003 decline in occupancy to 67% from 95% occupancy at issuance, mainly due to the borrower being unsuccessful in re-leasing approximately 161,000 sq. ft. since losing a major tenant in March 2001. The year-end 2002 DSC declined to 0.54x from 1.47x at issuance. However, in July 2003, the borrower reported that a lease has been signed for 49,000 sq. ft., which increases the occupancy to 85%. -- The seventh-largest loan ($14.7 million, 2.1%), secured by three multifamily properties with 532 units in Greenville, S.C., and Charlotte, N.C. Both markets are losing tenants due to the low mortgage interest rates; however, the borrower continues to offer concessions to attract tenants. The weighted average year-end 2002 DSC declined to 0.66x from 1.35x at issuance, and the average March 2003 occupancy was 70% compared to 88% at issuance. Standard & Poor's stressed the weaker performing watchlist loans in its analysis, and the stressed credit enhancement levels adequately support the assigned ratings. The loan pool remains diverse with multiple property types that include multifamily (32%), retail (23%), office (19%), and hotel (10%). The pool also remains geographically diverse with properties located in 30 states; only two states, California and Florida, have concentrations in excess of 10%, at 17.5% and 11.5%, respectively. RATINGS RAISED J.P. Morgan Commercial Mortgage Finance Corp. Mortgage pass-thru certs series 1999-C7 Rating Class To From Credit Support (%) B AA+ AA 27.45 C A+ A 21.85 D BBB+ BBB 14.57 E BBB BBB- 12.89 RATINGS AFFIRMED J.P. Morgan Commercial Mortgage Finance Corp. Mortgage pass-thru certs series 1999-C7 Class Rating Credit Support (%) A-1 AAA 33.06 A-2 AAA 33.06 G B 3.92 H B- 3.36 F BB 7.56 X AAA N/A KERR GROUP: S&P Assigns BB- Speculative Grade Credit Rating ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to plastic closure and container producer Kerr Group Inc. The outlook is stable. At the same time, Standard & Poor's assigned its 'BB-' rating to the company's proposed $205 million senior secured bank facility, based on preliminary terms and conditions. With pro forma annual revenues of about $343 million, Lancaster, Pennsylvania-based Kerr is a domestic producer of closures for the healthcare and food and beverage segments, and pharmaceutical bottles and prescription vials. Pro forma debt outstanding will be about $215 million. "The company's below-average business position benefits from its decent market shares in relatively recession-resistant healthcare, food, and beverage niches, well-established customer relationships, and attractive operating profitability," said Standard & Poor's credit analyst Liley Mehta. "Offsetting factors include the company's limited scale of operations, a highly fragmented industry structure, significant competition from large, globally diversified packaging suppliers and integration risks related to its acquisitions." KINDERCARE LEARNING: $125 Million Credit Facility Rated 'B+' ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' bank loan rating to KinderCare Learning Centers Inc.'s senior secured $125 million revolving credit facility due in July 2008. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating and 'B-' subordinated debt rating. "The speculative grade ratings continue to reflect KinderCare's leading business position in the highly fragmented child-care industry," said credit analyst Michael J. Kaplan. The company's position is overshadowed by recent, significant weak demand trends for child-care services, industry threats, and the consolidated company's heavy debt burden. The outlook is negative. Following the transaction, KinderCare, on a consolidated basis, will have approximately $550 million of debt outstanding. The new credit facility replaces a $390 million term loan and revolving credit facility that was due to expire in February 2004. The term loan and revolving credit facility and a $100 million synthetic lease facility were refinanced by a $300 million mortgage loan due July 2008 (with a one-year renewal option), from Morgan Stanley Mortgage Capital Inc. The borrower of this loan is a newly formed, single-purpose bankruptcy remote entity known as KC PropCo. The mortgage loan is secured by 475 KinderCare early education and childcare centers. KinderCare also may use the balance of the proceeds from the mortgage loan to purchase up to $37 million of its $300 million 9-1/2% subordinated notes due 2009. The new $125 million revolving credit facility is secured by a first mortgage lien or first trust deed on land and improvements at childcare centers, which on March 7, 2003 had an estimated market value of $130 million and book value of $65.8 million, and perfected first-priority security interests in all accounts receivable and intellectual property of the borrower, other than those owned by KC PropCo. The bank loan rating in the same as the corporate credit rating indicating that there is a strong likelihood of substantial, but not full, recovery of principal in the event of default, given the value of collateral. Portland, Ore.-based KinderCare is the largest provider of proprietary center-based preschool education and child-care services in the U.S., with 1,266 facilities in 39 states and two centers in the U.K. LEAP WIRELESS: Court OKs Irell & Manella as Committee's Counsel --------------------------------------------------------------- The Official Committee of Unsecured Creditors of Leap Wireless International Inc., and its debtor-affiliates, wants to retain Irell & Manella LLP as co-counsel to the Committee nunc pro tunc to the Petition Date. Committee Chairman Neil Subin relates that Irell & Manella is comprised of attorneys whose practice includes, among other things, the areas of bankruptcy, creditors' rights, real estate, labor, litigation, and tax. The Firm is well qualified to render specialized services to the Committee in these cases. Irell's attorneys who will render services to the Committee are duly licensed to practice law in the courts of the State of California and are admitted to practice before the United States District Court for the Central District of California. Irell has agreed to accept as compensation for its services amounts as may be allowed by the Court, based on the time spent and services rendered and other appropriate factors. Irell has further agreed to render services to the Committee at the Firm's regular hourly rates, which may be subject to adjustment from time to time. The hourly rates to be charged to the Committee are: William N. Lobel Partner $620 Jeffrey M. Reisner Partner 500 Mike D. Neue Associate 395 Anna Mitescu Associate 225 Patricia Naegely Legal Assistant 160 In connection with its employment by the Committee, Irell will: A. advise the Committee regarding its powers, rights and responsibilities under the Bankruptcy Code; B. represent the Committee in proceedings or hearings in the United States Bankruptcy Court for the Central District of California or any other forum as requested by the Committee in which an action or proceeding may affect the Debtors, its assets, claims of creditors or the Committee; C. advise and assist the Committee in connection with the administration of these cases, disposition of assets, and the confirmation and consummation of any proposed plan of reorganization or liquidation; D. advise the Committee concerning the requirements of the Bankruptcy Code and the federal and local rules relating to the administration of these cases; E. prepare pleadings, applications, schedules, orders and other papers as may be necessary or appropriate in connection with these Chapter 11 cases; and F. perform any other and further services as typically may be rendered by counsel for a committee of unsecured creditors in Chapter 11 cases or which may be necessary or advisable in connection with these cases, including the prosecution of avoidance and asset recovery actions. Unless otherwise agreed between the parties, Irell will not be responsible for: (i) the provision of substantive legal advice outside the insolvency area, including corporate law, partnership law, non-bankruptcy taxation, securities law, torts, environmental law, non-bankruptcy labor issues, criminal law, or real estate law; or (ii) substantive litigation involving prepetition claims. Mr. Subin informs the Court that Irell received a $25,000 retainer on account of its prepetition representation of the Unofficial Noteholders' Committee. About $16,000 of the retainer remains available to Irell for the payment of allowed postpetition fees and expenses attributable to the representation of the Committee. There has been no other agreement or arrangement with Irell and any other party regarding the payment of its fees and expenses in these bankruptcy cases. Irell Partner Jeffrey M. Reisner assures the Court that the Firm and all of the attorneys are disinterested persons who do not hold or represent any entity in the Debtors' cases having an adverse interest in connection with the Debtors' cases, and do not have any material connection either with the Debtors, their creditors, the Committee, or any other party-in-interest in these cases or with their attorneys or accountants, other than these disclosures: A. Because of the specialized nature of bankruptcy practice, from time to time Irell may concurrently represent one client in a particular case and the adversary of that client in an unrelated case. In addition, while representing the Committee, Irell may represent a debtor of the Debtors as a debtor in a bankruptcy case or in connection with out-of-court negotiations with the entity's creditors; provided, however, that in no event will Irell participate in these representations to the extent that they involve matters related to the Debtors. Finally, while representing the Committee, Irell may represent creditors of the Debtors in matters unrelated to these Chapter 11 cases. With respect to the Committee members, the Committee recognizes Irell's right to represent these interests in matters unrelated to the Debtors' bankruptcy cases. The Committee members also understand and have agreed that Irell does not, by virtue of its representation of the Committee in these cases, represent any of the members in these cases. B. Irell's members may have professional, working, or social relationships with firms or professionals that may be adverse to the Debtors or other interests in these cases. In addition, Irell's attorneys have spouses, significant others, parents, children, siblings, fianc,s or fianc,es who are attorneys at other law firms or companies that are or may be involved in the Debtors' cases. Irell's policy strictly forbids disclosure of confidential information to anyone outside of the Firm. C. Prior to Irell's engagement by the Committee in these cases, the Firm performed services for these persons who are, or may be, parties-in-interest in these cases in matters that are wholly unrelated to the Committee and its members -- Alliance Capital Management; Alliance Partners, Inc.; Bear Sterns & Co., Inc.; Cargill; Merrill Lynch; Pierce Fenner & Smith, Inc.; Societe General; Andrews & Kurth LLP; Goldman, Sachs & Co.; Morgan Stanley; Northern Trust; Mellon Financial Services Corp.; Imperial Credit Asset Management; and Deutsche Bank Securities. Irell has not performed work for the majority of these former clients for several years. Moreover, in most instances, since completing these representations, Irell has accepted employment adverse to these parties. Irell will not perform services for any of these parties in any matter related to or arising out of these cases. In the event that action is required in these bankruptcy cases by counsel against these parties, which is not anticipated, Irell will either obtain a waiver or other counsel will be asked to handle the matter. Irell's personnel also are currently engaged as mediators in matters involving Allstate Funds and Bank One, N.A. D. From time to time, Irell has performed services for persons who are or may be parties-in-interest in these cases in matters wholly unrelated to the Committee. Irell may continue to represent these parties in matters unrelated to the Debtors' bankruptcy cases, and may accept representations adverse to these parties -- U.S. Bancorp; Credit Suisse First Boston; JPMorgan Chase; and ABN Amro. In the event that a waiver is necessary and cannot be obtained, Irell will not represent the Committee with respect to the claims of these parties. E. Also, from time to time, Irell has referred work to, or has been referred work or retained by, various professionals who may be parties-in-interest or may be retained by parties-in-interest in these cases. These professionals include -- Latham & Watkins; UBS Warburg; Kramer Levin Naftalis & Frankel LLP; Chanin & Co.; and Andrews & Kurth. Irell has not represented, and will not represent, any of these entities in connection with any matter related to these cases. "Application approved," Judge Adler rules. (Leap Wireless Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEASE INVESTMENT: Fitch Cuts Four Class Note Ratings to BB/B ------------------------------------------------------------ Fitch Ratings has taken the following rating actions for Lease Investment Flight Trust: --Class A-1 notes are downgraded to 'A' from 'AA'; --Class A-2 notes are downgraded to 'A' from 'AA'; --Class A-3 notes are downgraded to 'A' from 'AA'; --Class B-1 notes are downgraded to 'BBB' from 'A'; --Class B-2 notes are downgraded to 'BBB' from 'A'; --Class C-1 notes are downgraded to 'BB' from 'BBB'; --Class C-2 notes are downgraded to 'BB' from 'BBB'; --Class D-1 notes are downgraded to 'B' from 'BB'; --Class D-2 notes are downgraded to 'B' from 'BB'; --All classes are removed from Rating Watch Negative. The downgrades reflect the increasing gap between expected and actual lease rental payments during 2003 as well as Fitch's expectation that the current gap may narrow but will likely remain in excess of those levels experienced previous to 2003. The reduced cash flow lease rental trend is primarily attributable to increased nonperforming aircraft and aircraft that have been released at rates well below historical levels. The nonperforming aircraft include 2 B767-300ER aircraft leased by Air Canada, who is in bankruptcy and has not been making payments to most of its aircraft lessors. While Fitch expects the resumption of the Air Canada lease payments shortly, the new lease rates will likely be below the original rates as the market for widebody aircraft has deteriorated during the past two years. LIFT's lease expirations during 2004 are not overwhelming and include only 3 aircraft, 2 B737-300s and 1 B737-400. The continued depressed demand for many aircraft types will likely continue to impair lease rates. Additional market events such as terrorist attacks, airline bankruptcies and or airline liquidations are possible and would exacerbate weak lease rates. LIFT is a Delaware business trust formed to conduct limited activities, including the issuance of debt, and the buying, owning, leasing and selling of commercial jet aircraft. LIFT originally issued $1,429 million of notes in June 2001, while as of July 2003 had $1,337 million of notes outstanding. Primary servicing is being performed by GE Capital Aviation Services, Limited (a wholly owned subsidiary of General Electric Capital Corp.), while the administrative agent role is being performed by Phoenix American Financial Services, Inc., a subsidiary of Phoenix American Incorporated. LENNOX INT'L: Second Quarter 2003 Results Reflect Improvement ------------------------------------------------------------- Lennox International Inc. (NYSE: LII) (S&P/BB- Corporate Credit Rating) announced second quarter 2003 diluted earnings per share of $0.51 versus $0.43 for the same quarter in 2002. Sales decreased 1% to $819 million from $828 million in last year's second quarter. In constant currencies and adjusting for the loss of $49 million in heat transfer revenues -- most of which are now part of the company's joint venture with Outokumpu and no longer reported by LII -- total sales were up 2%. Sales outside the U.S. and Canada generated 13% of total LII revenues. Quarterly operating income was $56 million, up 10% from last year's $51 million. The second quarter 2002 included $1 million in pre-tax restructuring charges related to programs announced in 2001, while a pre-tax charge of $0.1 million for gains, losses and other expenses was recorded in the second quarter 2003. Adjusting for these items, operating income increased 7% year-over-year, the company's sixth straight quarter of year- over-year improvement in operating profitability. Net income was $30 million, up 19% from $26 million in the same period last year. Diluted earnings per share were $0.51 compared with $0.43 in second quarter 2002. When adjusted for gains, losses and other expenses, and restructuring charges, net income grew 12%. On the same basis EPS increased to $0.50 in second quarter 2003, versus $0.45 the prior year. As of June 30, 2003, LII's total debt was $390 million, down $121 million from a year ago. Total debt to capitalization was 42.2%, comparing very favorably with 53.2% a year ago. Free cash flow in the second quarter was a usage of $21 million, bringing the year- to-date figure to a usage of $73 million. Due to the seasonal nature of many of the company's businesses, it is typical for LII to use free cash flow in the first half of the year and generate free cash flow in the second half. Operational working capital ratio improved significantly to 19.2% from 21.1% last year. At the end of second quarter, inventories were down 10%, or $29 million, from 2002. "I'm very pleased to report our sixth straight quarter of year- over-year improvement in operating performance, despite difficult market conditions," said Bob Schjerven, chief executive officer. "And our progress was not limited to the profitability reported on our income statement and the strengthening of our balance sheet. We continue to execute the initiatives necessary to position Lennox International for profitable growth." Business segment highlights: Heating & Cooling: LII's Heating & Cooling business revenues rose 10% to $509 million, despite reduced industry shipments and unfavorable weather in many key markets. Adjusting for fluctuations in exchange rates, sales were up 7%. Segment operating income increased 32% to $55 million from $42 million last year and operating margins expanded 180 basis points to 10.8% from 9.0% last year. Residential heating & cooling revenues grew 8% in the second quarter to $377 million, with sales up 7% adjusting for foreign exchange. Sales increases were achieved by all of the company's home comfort equipment brands, including hearth products. Segment operating income increased 27% for the quarter to $46 million from $36 million last year. Operating margins expanded 180 basis points to 12.2% through higher volumes; a favorable mix of recently introduced, higher margin premium product; and improved hearth products performance. This improvement continued to be partially offset by margin pressure in LII's residential new construction business. Commercial heating & cooling revenues rose 15% to $132 million, up 8% when adjusted for currency fluctuations. Segment operating profit jumped 59% to $9 million, with operating margins increasing to 6.9% from 5.0% last year. Higher volumes, increased factory productivity, and the benefits of paring back underperforming international operations more than offset expenses associated with closing a plant in Europe. Production at that plant ceased at the end of the second quarter, with volume relocated to other LII facilities. Service Experts: Revenues declined 3% to $243 million, or 5% adjusting for currency exchange. As with the first quarter 2003, the sales decline was attributable entirely to the company's commercial new construction business. Year-over-year sales in the service and replacement businesses and in the residential new construction business grew modestly for the second straight quarter. Lower margins in the new construction businesses, higher insurance expenses, and increased investment in advertising reduced segment operating profit to $8 million from $16 million last year. Operating margins for the quarter were 3.1%, compared with 6.3% last year. "While the market environment for Service Experts is extremely challenging -- especially given soft end market demand for replacement sales and stiff price competition in the new construction sector -- we continue to implement key initiatives to improve profitability," Schjerven said. "We continue to see the profit and growth potential of this business, and we're confident the actions we have underway, including the new management announced two weeks ago, are beginning to pay off in improved performance." Refrigeration: Demand for commercial refrigeration products from retail customers, notably supermarkets, was depressed in both domestic and international markets. In this difficult environment, segment revenues were up 5% at $97 million, down 3% when adjusted for currency exchange. Segment operating income was flat at $9 million, with operating margins declining 50 basis points to 9.2%. Improved factory performance and diligent cost control partially offset the impact of lower foreign exchange-adjusted revenues. Business outlook With no clear evidence of a sustained commercial market recovery in the back half of the year, and assuming normalized weather patterns, the company continues to expect revenues to be relatively flat for full-year 2003. "We're very pleased with the operating improvements we realized in the first half of this year in our heating & cooling and refrigeration businesses, and we're confident this trend will continue," said Bob Schjerven. "Combining that success with our anticipation of a modest improvement in Service Experts profitability in the last half of the year, we are very confident in reaffirming our guidance for full-year 2003 EPS in the range of $1.10 to $1.20." The company continues to expect free cash flow will be approximately equal to net income for the full year. A Fortune 500 company operating in over 100 countries, Lennox International Inc. is a global leader in the heating, ventilation, air conditioning, and refrigeration markets. Lennox International stock is traded on the New York Stock Exchange under the symbol "LII". Additional information is available at: http://www.lennoxinternational.com LTV CORP: Wants to Fund Trust to Indemnify Officers & Directors --------------------------------------------------------------- The LTV Corporation, LTV Steel Corporation, and each of their wholly owned debtor subsidiaries -- but excluding LTV Steel's non- debtor railroad subsidiaries and Copperweld, Welded Tube Holdings, Inc., and their business-affiliated entities -- ask Judge Bodoh to authorize the creation and funding of a trust to ensure the continued indemnification of their current and future directors and officers during the winddown of their estates. Nicholas M. Miller, Esq., at Jones Day, in Cleveland, Ohio, reminds Judge Bodoh that, by orders entered on December 7, 2001 and August 30, 2002, the Court authorized the Debtors to implement an asset protection plan through and including December 13, 2002 to effect the orderly cessation of operations for, and the sale of assets of, the Debtors' Integrated Steel Business. By an order dated February 28, 2002, the Court approved the sale of substantially all of the assets of the Integrated Steel Business to WLR Acquisition Co., now known as International Steel Group, Inc. The closing of the Integrated Steel Sale transactions occurred on April 12, 2002 for the hard assets, and May 13, 2002 for the inventory. On November 7, 2002, the Court entered an order approving the sale of the assets of the LTV Tubular division of LTV Steel. The closing of the sale of the LTV Tubular Business occurred on December 31, 2002. The Indemnification Obligations and the Proposed Trust The articles of incorporation and/or by-laws of the LTV Debtors provide for indemnification of the applicable corporation's directors and officers to the full extent permitted under the laws of their states of incorporation by reason of the fact that such person is or was an officer or director or is or was serving at the company's request as an officer or director in any other corporation, partnership, joint venture, trust or other enterprise, including any of the Debtors. However, LTV Steel, and possibly other of the LTV Debtors, are administratively insolvent. Further, all of the LTV Debtors' assets eventually will be distributed to creditors, potentially leaving insufficient or no funds available to satisfy the Indemnity Obligations. As of June 28, 2003, the prior director, officer and fiduciary liability insurance policies maintained by the LTV Debtors expired, and the LTV Debtors obtained new policies with substantially reduced limits and a $1,000,000 self-insured retention. The creation of the Trust is intended to ensure the fulfillment of the LTV Debtors' Indemnity Obligations to their current -- i.e., those who served at any time on or after June 28, 2003 -- and future directors and officers. The Trust The Trust will be an irrevocable, non-ERISA, grantor trust established with an independent bank or trust company having a capital and surplus of at least $500,000,000 in the aggregate. The principal and interest earned on that sum will be held in trust separately from other funds of LTV Steel and used exclusively for the purposes of indemnification. The Trust's assets will be invested in interest-bearing deposit accounts or short-term United States obligations or mutual funds that invest primarily in such obligations. No Indemnitee will have any beneficial ownership in the Trust's assets prior to the time they are paid to an Indemnitee as provided under the terms of the Trust and the articles or bylaws. The Trustee will make disbursements from the trust assets to pay unpaid Indemnity Obligations on a current basis as an Indemnitee incurs them on the completion of these procedures: * An Indemnitee will give 10 business days' written notice, which Notice will include: (a) a reasonably detailed description of the unpaid Indemnity Obligation, including reasonable time and narrative detail for any legal fees included in such unpaid Indemnity Obligation, and (b) a statement that: (i) the Indemnitee has sought reimbursement for the Indemnity Obligation under any applicable D&O insurance policies and from LTV Steel, and (ii) the insurers and LTV Steel have failed or refused to reimburse the Indemnitee on a current basis. The Notice will be transmitted to the Trustee of the Trust, LTV Steel, LTV Steel's legal counsel, the Administrative Claimants' Committee's legal counsel and any Indemnitee who files a request with the Bankruptcy Court to receive such notice. (c) Any of the Notice Parties may dispute the validity of the Indemnity Obligation for which reimbursement is sought in a Notice by: (i) filing an Objection with the Bankruptcy Court prior to the end of the Notice Period, and (ii) serving the Objection on the Notice Parties and the Indemnitee that submitted the Notice prior to the end of the Notice Period. An Objection must state with particularity the nature of the party's objection to the validity of the Indemnity Obligation sought in a Notice. At the end of the Notice Period, unless an Objection has been appropriately filed and served, the Trust will disburse to the Indemnitee, or to the person or entity to whom the Indemnitee owes funds that give rise to an Indemnity Obligation, in the discretion of the Trustee, from the Trust assets an amount equal to the amount of the Indemnity Obligation described in the Notice. If an Objection is properly filed and served, however, the Trustee will make disbursement from the Trust assets for Indemnity Obligations only in accordance with the terms of a final, non-appealable order of the Bankruptcy Court. The principal terms of the Trust are: (a) Trust Amount: LTV Steel will fund the Trust with an initial $1,000,000 contribution. If Trust Assets are distributed pursuant to the terms of the Trust, then LTV Steel will contribute additional funds to the Trust so that the Trust Assets will remain at $1,000,000 until the expiration of the Trust. (b) The current and future directors and officers of these subsidiaries are not Indemnitees: Copperweld Bimetallic Products Company Copperweld Canada Inc. Copperweld Corporation Copperweld Equipment Company Copperweld Marketing & Sales Company Copperweld Tubing Products Company LTV Copperweld Bimetallics UK (Holdings) Limited LTV Copperweld Bimetallics UK Limited LTV International, Inc. Metallon Materials Acquisition Corporation Miami Acquisition Corporation Southern Cross Investment Company TAC Acquisition Corporation Welded Tube Co. of America Welded Tube Holdings, Inc. Aliquippa and Southern Railroad Company Chicago Short Line Railway Company The Cuyahoga Valley Railway Company Monongahela Connecting Railroad Company, and The River Terminal Railway Company. (c) Past directors and officers who are not serving in such capacity as of June 28, 2003 are not Indemnitees. (d) Trust Purpose: The Trust Assets will be used to indemnify the Indemnitees regardless of when a claimed loss is or was incurred or asserted, to the extent that such claim or loss is not fully covered or paid by the applicable director, officer and/or fiduciary liability insurance policy and not otherwise fully paid by the applicable LTV Debtor. (e) Beneficiaries: The rights of each Indemnitee against the LTV Debtors or under any applicable insurance policies and applicable law will in no way be affected or diminished by the establishment or any provision of the Trust. (f) Trust Termination: On the date of the expiration of the last run-off endorsement under any applicable D&O Policy, all Trust Assets, including accrued interest, remaining in the Trust will be released to LTV Steel unless one or more claims to which an Indemnity Obligation may apply are then pending against an Indemnitee, in which event the release of Trust Assets will occur upon the final disposition of such claim(s). Creation & Funding of the Trust is Warranted Section 363(b) of the Bankruptcy Code provides that a debtor-in- possession "after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." In general, a debtor may use, sell, or lease property of the estate outside the ordinary course of its business where such use represents an exercise of the debtor's sound business judgment. The "use" of a debtor's funds to pay for expenses related to the operation of its business is considered a use that is governed by Section 363 of the Bankruptcy Code. The LTV Debtors believe that creation of the Trust is warranted because their efforts to wind down and otherwise resolve their estates require the continued cooperation and expertise of the Indemnitees. Without assurance that the LTV Debtors will be in a position to honor their Indemnification Obligations, the Indemnitees may terminate their relationships with the LTV Debtors to avoid the resulting risk of personal exposure for otherwise indemnifiable losses. The Administrative Claimants' Committee has indicated its support for the creation of the Trust. (LTV Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 609/392-00900) LTWC CORPORATION: Case Summary & Largest Unsecured Creditors ------------------------------------------------------------ Lead Debtor: LTWC Corporation 111 High Ridge Road Stamford, Connecticut 06905 dba Learn2 Corporation dba Learn2.com dba E-Stamp Corporation Bankruptcy Case No.: 03-12272 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- LTWC CA Corporation 03-12273 LTWC DE Corporation 03-12274 LTWC Services, Inc. 03-12275 Viagrafix Corporation 03-12276 Type of Business: The Debtor provides permission email marketing and tracking services. Chapter 11 Petition Date: July 23, 2003 Court: District of Delaware Judge: Peter J. Walsh Debtors' Counsel: John C. Phillips, Jr, Esq. Phillips, Goldman & Spence 1200 N. Broom Street Wilmington, DE 19806 Tel: 302-655-4200 Fax : 302-655-4210 Total Assets: $5,016,000 (as of March 31, 2003) Total Debts: $2,576,000 (as of March 31, 2003) A. LTWC Corporation's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Credit First Suisse Boston Investment Banking Fees $465,857 650 California Street San Francisco, CA 94108 Ethan M. Topper Tel: 415-249-2100 Bowne Financial Printers Financial Printing Fees $336,254 633 West 5th Street, Suite 1400 Los Angeles, CA 90071 Tel: 213-627-2200 Richardson ISD Property Taxes $69,856 AT&T Teleconference Teleconference Services $56,448 Services Kewill Electronic Commerce Construction Services $39,336 Merrill Comms, LLC Edgar Filings $38,832 AT&T Telephone $38,278 Wilson Sonsini Goodrich Legal Services $33,037 & Fosati Pacific Bell Telephone $28,478 Perkins Cole, LLP Legal Services $25,898 County of Santa Clara Tax Property Taxes $23,698 Collectors Office Bridgeport Financial, Inc. Marketing Expenses $23,500 Jackson Lewis Schnitz & Legal Services $20,965 Krup NASDAQ Stock Market, Inc. Listing Fees $20,667 Jefferson County Colorado Property Taxes $11,296 Merrill Lynch Administrative Fees $9,300 Blevins & Sordahl, Inc. Legal $8,615 World View Technologies Consulting $7,970 Time Warner Telecom ISP Fees $7,803 The Washington Mgt. Group $7,294 B. LTWC Services, Inc.'s 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Perkins Cole, LLP Legal $195,900 A.I. credit Corp. E&O Insurance $35,900 Internap Network Services Bandwith $32,736 New Edge Networks Bandwith $31,200 XO Communications Bandwith $30,519 Stansbury Jobs Temp Help $14,605 Regan Braun Law Office Legal $13,621 Accountants, Inc. Temp Help $6,289 Qwest Bandwith $4,684 Insight Equipment $4,392 AT&T Corp. Bandwith $4,052 G Finance Holding Corp. Lease $3,564 Citicorp Vendor Finance Lease $3,055 Robert Half Temp Help $2,790 Telstra, Inc. Telephone $2,449 Gross & Belsky, LLP Legal $2,344 Nicole Rynee Barnes Legal $2,062 Pacific Gas & Electric Utility $2,876 Stormwatch Services, Inc. Equipment $2,150 Fusionstorm Equipment $1,618 C. Viagrafix Corporation's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Lightyear Communications Telephone $27,354 United Parcel Service Freight Expense $21,696 Southwestern Bell Bandwith $18,475 Southwestern Bell Bandwith $17,484 Creative Computers Computers $13,002 Southwestern Bell Telephone $12,876 Programmer's Paradise, Inc. Advertising $12,212 Echodata Services, Inc. Inventory $11,458 Advanced Digital Inventory $11,295 Information CMP Media, Inc. Advertising $8,550 Southwestern Bell Telephone $8,531 Allied Vaughn Inventory $8,491 Hamilton Exhibits Trade Show $6,975 Prodata Internet Service, Consulting $6,826 Inc. Southwestern Bell Telephone $6,286 Consumer Products Council Advertising $6,000 Crain Displays & Exhibits, Advertising $5,526 Inc. Blevins & Sordal, Inc. Legal $4,722 America Online, Inc. Advertising $4,660 RJM Sales Marketing $4,560 LUCILLE FARMS: Fails to Comply with Nasdaq Listing Requirements --------------------------------------------------------------- Lucille Farms, Inc. (NASDAQ: LUCY) received a Nasdaq Staff Determination, dated July 17, 2003 which indicated that the Company had failed to file its Annual Report on Form 10-K as required by Marketplace Rule 4310(C)(14), and that its securities were, therefore, subject to delisting from the Nasdaq SmallCap Market. The Company has requested a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. There can be no assurance that the Panel will grant the Company's request for continued listing. On July 16, 2003, the Company issued a press release containing its results for the quarter and fiscal year ended March 31, 2003 and reported that there will be a delay in the filing of its Annual Report on Form 10-K due to the failure to obtain on a timely basis a waiver of a default in the debt service ratio covenant contained in its USDA guaranteed 20-year term loan with First International Bank (UPS Capital Business Credit). In such release Jay Rosengarten, the Company's CEO stated: "The failure to obtain the waiver prior to filing the Annual Report on Form 10-K would require the Company to report the loan as a current liability as at its fiscal year ended March 31, 2003. This in turn would result in a default in other covenants contained in the loan agreement with the Bank, as well as a default in covenants contained in loan agreements with other banks. Monthly payments of the obligation to the Bank have been made on a timely basis. The Company has been advised by the Bank that the delay in obtaining the waiver stems from the need to obtain approval for the waiver from the USDA and the paperwork involved in the process. We have no reason to believe that the waiver will not be forthcoming." Lucille Farms, Inc. is engaged in the manufacture, processing, shredding and marketing of low moisture mozzarella cheese and the shredding of other cheese and cheese blends. Also, utilizing proprietary formulas and processes, the Company has developed a line of mozzarella type cheese products, which include reduced fat, non-fat and low moisture products. The company also sells whey, which is a by-product of its cheese making operation. The Company's low moisture mozzarella and mozzarella type cheese products are manufactured in the Company's USDA approved production facility in Swanton, Vermont and are made of natural ingredients. MANDALAY RESORT: Fitch Rates $250M 6. Senior Unsec. Notes at BB+ ---------------------------------------------------------------- Fitch Ratings has assigned a rating of 'BB+' to the $250 million senior notes due 2009 being issued by Mandalay Resort Group. Proceeds are to be used to pay down outstandings under the revolving credit facility. Ratings reflect Mandalay's leading Las Vegas assets, strong historical operating performance, significant discretionary free cash flow, and growth potential for 'Mandalay Mile' Strip properties (principally Mandalay Bay) driven by the new $235 million convention center which opened in January 2003 and the $225 million hotel tower at Mandalay Bay which should open in November 2003. Beyond 2004, MBG has no major capital projects in the pipeline and should have the capacity to delever. These factors are partially offset by the company's aggressive financial policy (which entails a demonstrated proclivity for share repurchases and more recently, dividends), heavy capital expenditure plans in FY 2004, gaming tax increases in Illinois and Nevada, the competitive threat of Native American Gaming in California to MBG's secondary Strip and other Nevada properties, and declining EBITDA contributions from major secondary markets, Detroit and Illinois. In FY 2004, EBITDA Fitch believes leverage will continue to deteriorate to levels weak for the category as debt levels rise and company-wide EBITDA retracts. The Rating Outlook is Stable. As of April 30, 2003, MBG had $2.87 billion in debt, comprised of senior unsecured bank debt (25%), senior unsecured notes (25%), and subordinated notes (50%). Over the course of FY 2004, MBG will refinance $575 million in debt, including: (1) $150 million in 6.75% senior subordinated notes which matured in July 2003; (2) $275 million in senior notes due December 2005 which were called and redeemed on July 15, 2003; and (3) $150 million in 6.7% debentures due 2096, which will likely be put to MBG in November 2003. Issuance of the new notes plus $400 million floating-rate convertible senior debentures issued back in March 2003 and bank borrowings will largely address these requirements. In addition, MBG is currently negotiating a new $150 million capital lease facility that will substantially replace the outstanding operating lease agreements totaling $158 million, including a $113 million operating lease agreement which terminates June 30, 2003. With retirement of the operating leases, rent expense will no longer flow through the EBITDA, and MBG can use 'EBITDA' versus 'EBITDAR' for reporting purposes. Refinancing actions in fiscal 2004 will increase the overhang of senior debt, as subordinated debt composition will decline to roughly 40% of total debt versus roughly 50% at FYE 2003. However, these actions also allow MBG to take advantage of historically low interest rates, and should improve operating leverage. For FY 2004, Fitch expects MBG's operating performance to look much like that of the first quarter, in which EBITDA outperformance by MBG's flagship property, Mandalay Bay (23% of FY 2003 EBITDAR), was offset by declines at the rest of the properties, resulting in a 8.0% decline in property EBITDAR. As in the first quarter, Mandalay Bay should continue to benefit from the addition of its new $235 million convention center (opened January 6, 2003) which drove a sharp increase in RevPAR and fueled a 16% increase in EBITDAR at the property. With the largest room base on the Las Vegas Strip, MBG is particularly leveraged to room rates. Through RevPAR gains, Fitch believes the convention center will continue to generate significant EBITDA gains at Mandalay Bay through FY 2004. In addition, the convention center should be a major source of room demand for the new all-suite room tower at Mandalay Bay, which is scheduled to open in fall 2003. Tax increases recently announced in Illinois and Nevada are negatives for MBG; however, the credit impact should not be material. Fitch estimates that the two plans will result in a $24 million hit to EBITDA in FY 2004 versus the prior year, or approximately a 0.2x turn in leverage. Free cash flow should be in the $250 million - $275 million range in FY 2004, short of project capital spending requirements of $350 million. Project capital spending requirements primarily relate to the new all-suites tower and new retail center at Mandalay Bay, which are scheduled to open in November 2003. Thereafter, roughly $27.5 million in dividend payments, termination of the $100 million equity forward contract, and replacement of the $158 million operating lease facility with an on-balance sheet capital lease facility, should cause debt levels to increase by approximately $300 million to the $3.0 billion range by year-end. Based on this forecast, Fitch expects MBG's leverage to continue to increase to above the 5.0 times range by year-end. This follows a 0.5x increase to 4.9x in FY 2003, when weaker operating results, heavy capital spending and aggressive share repurchases also precluded material debt reduction. Financial flexibility is hampered in FY 2004 as cash from operations is spoken for and the company operates close to its covenant restrictions. However, issuance of the new notes reduces MBG's reliance on the revolver which otherwise would have been largely tapped in FY 2004. While the company secured amendments in Feb. 2003 to loosen the leverage covenant to 5.25x through FYE 2004, Fitch believes weakness in the latter half would necessitate further amendments or waivers from lenders. Fitch believes there is little risk that bank lenders will not grant the necessary waivers or amendments if required. In FY 2005, committed investments should drop significantly. With no major capital projects officially in the pipeline, MBG should have the capacity to reduce debt and leverage to the more acceptable levels for the rating category. Nonetheless, the company could announce capital spending plans at any time that could usurp free cash flow and decelerate or eliminate potential deleveraging. Notably, the funding for the permanent casino in Detroit is expected to be off-balance sheet, and should therefore not impact MBG's leverage. MILLENNIUM CHEM: S&P Further Cuts Ratings on Weak Fin'l Profile --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Millennium Chemicals Inc. to 'BB' from 'BB+' citing the company's subpar financial profile and the announcement that Millennium expects to report a steeper than expected loss for the second quarter due to weak sales volumes and competitive price pressures in the titanium dioxide (TiO2) business. The current outlook is negative. Red Bank, New Jersey-based Millennium, with about $1.6 billion of annual sales and approximately $1.2 billion of outstanding debt (excluding adjustments to capitalize operating leases), is primarily engaged in the production of commodity chemicals. "The announced operating shortfall, which comes during the important coatings season for TiO2, as well as lingering economic uncertainties and the potential for additional raw material pressures in the petrochemical industry, are likely to further delay Millennium's efforts to restore the financial profile," said Standard & Poor's credit analyst Kyle Loughlin. "Standard & Poor's also recognizes that adverse business conditions in the petrochemical industry, including recent escalation in natural gas costs and weak demand for plastics, are likely to limit cash distributions from 29.5%-owned Equistar Chemicals L.P. this year." Standard & Poor's said that its ratings on Millennium reflect its average business risk profile and aggressive debt burden, mitigated somewhat by financial policies that strongly emphasize debt reduction as business conditions improve. Still, a disappointing coatings season for TiO2--a white pigment used in coatings, plastics, and paper production--and heightened uncertainty with respect to natural gas prices on the company's acetyls segment are likely to result in a more gradual trend of improvement than previously planned. Still, meaningful sources of untapped liquidity, in the form of bank facilities, cash balances, and the ownership stake in Equistar Chemicals, remain positive factors, although cash distributions are likely to be of limited benefit in the near term. MIRANT CORP.: Committee Formation Meeting is Tomorrow in Dallas --------------------------------------------------------------- George F. McElreath, the Assistant United States Trustee for Region 6, will meet with Mirant's largest creditors in Dallas tomorrow for the purpose of forming one or more official committees. The meeting will be held at 10:00 a.m. in the Lakewood Room at Cityplace Conference Center, located at 2711 N. Haskell in Dallas, Texas. Yesterday's story about an official committee in Mirant's chapter 11 proceeding hiring a law firm was erroneous. That story related to Leap Wireless rather than Mirant. We apologize for the confusion. MIRANT CORP: Court Restricts Securities Trading to Preserve NOLs ---------------------------------------------------------------- Mirant announced that the U.S. Bankruptcy Court has entered an emergency relief order preventing the sale or trading of certain shares of, and claims of creditors in, the company's Chapter 11 case. Creditors holding claims against Mirant or its debtor subsidiaries in excess of $250 million, and shareholders owning or seeking to acquire 4.75 percent of Mirant's stock, are prohibited from selling or trading such shares or claims. This order is in effect until the Court can consider Mirant's request to establish a notice procedure regarding the trading of shares and claims. The emergency relief is necessary to prevent potential trades of claims or stock that could negatively impact the Debtors' net operating loss tax attributes. The emergency relief preserves these tax attributes until parties in interest can appear and be heard regarding the notice procedure requested by Mirant. Mirant's tax loss attributes are approximately $1 billion and could reach $2.5 billion by the end of 2003. These attributes may result in potential future tax savings of as much as $200 to $400 million. The court order, the motion filed by the Debtors, and the supporting notices and papers are available at http://www.bsillc.com In addition, copies may be obtained by contacting Craig H. Averch at (310) 620-7704 or caverch@whitecase.com. Mirant is a competitive energy company that produces and sells electricity in North America, the Caribbean, and the Philippines. Mirant owns or controls more than 22,000 megawatts of electric generating capacity globally. We operate an integrated asset management and energy marketing organization from our headquarters in Atlanta. For more information, visit http://www.mirant.com MIRANT CORP: Asks Court to Deem Utilities Adequately Assured ------------------------------------------------------------ Pursuant to Sections 105(a) and 366 of the Bankruptcy Code, Mirant Corp., and its debtor-affiliates seek a Court order: -- prohibiting the Utility Companies from altering, refusing or discontinuing services, including the making of demands for security deposits or accelerated payment terms; -- determining that the Utility Companies have been provided with "adequate assurance of payment" within the meaning of Section 366; and -- establishing procedures for determining requests for additional assurance of payment, providing that each Utility Company may petition this Court for relief consistent with Section 366. The Debtors obtain a wide range of utility services from different utility companies, including electricity, telephone, gas, oil, coal, pipeline, rail and transmission services. Judith Elkin, Esq., at Haynes and Boone LLP, in Dallas, Texas, confirms that the Debtors have paid all amounts owed to the Utility Companies in full and on time. Furthermore, the Debtors are current with respect to their undisputed utility invoices, other than payment interruptions that may be caused by the commencement of these Chapter 11 cases. Indeed, prior to the Petition Date, the average monthly cost of Utility Services was approximately $10,600,000 in the aggregate. Ms. Elkin assures the Court that the Debtors currently have over $733,000,000 in available cash and anticipate receiving approval of a $500,000,000 DIP financing facility. The Debtors have determined that these service providers should be considered utilities: A. Certain of the Fuel Suppliers are "Utilities" The nature of the Debtors' generating business is such that certain of its commercial suppliers and contractors have attained "utility" status insofar as Section 366 is concerned. Among the Debtors' Utility Companies is Massey Coal Sales Company, Inc., a commercial provider of coal necessary to fuel the production of electricity at the Debtors' Lovett, New York generation facility. The Debtors use coal in the same way that they use gas -- as fuel for the production of electricity. The continued supply of this fuel is vital to the Lovett generation facility's operations. Because Massey provides essential coal to the Lovett generation facility and this service cannot easily be replaced, this supplier is a "utility" governed by Section 366 and should be enjoined from attempting to "alter, refuse or discontinue" service to the Debtors. B. The Pipeline, Rail and Transmission Grid Operators are Utilities Section 366 not only covers suppliers of utility services, but also entities that function as conduits for those services. CSX Transportation, Inc. and Norfolk Southern Railway Co., the rail companies that transport coal to the Lovett generation facility cannot be bypassed. Despite extensive efforts, the Debtors have been unable to arrange for alternate providers for this service. If these rail operators are allowed to terminate service to the Debtors, the Lovett generation facility will be unable to obtain coal. "It is essential that the Utility Services continue uninterrupted," Ms. Elkin says. If the Utility Companies are permitted to terminate Utility Services, the Debtors' operations, including its generating plants, will be impaired and may be forced to shut down. The latter event would have devastating consequences for the Debtors' operations, jeopardizing the Debtors' ability to reorganize and exposing their employees to the risk of being laid-off. Moreover, due to the particular nature of the Debtors' business -- supplying energy services nationwide -- a disruption in service could present health and safety hazards to the Debtors' customers and the public at large. Quite simply, a cessation in Utility Services could leave millions of homeowners and business without power. Ms. Elkin relates that that the Utility Companies are adequately assured of payment given that: (a) the Debtors have historically paid amounts owing to the Utility Companies in respect of the contracts and tariffs at issue in full and on time; (b) for gas, oil and coal contracts, the Debtors intend to prepay for these commodities; (c) the Debtors possess in excess of $733,000,000 cash and anticipate receiving approval of a $250,000,000 DIP financing facility; (d) the Debtors project generating sufficient cash postpetition to meet all working capital needs or otherwise obtaining sufficient DIP financing; (e) postpetition utility charges will have administrative expense priority pursuant to Sections 503(b)(1)(A) and 507(a)(1) of the Bankruptcy Code; and (f) in the event of a postpetition default or other changes in circumstances, any utility may petition the Court for relief consistent with Section 366. The adequate assurance determination must be made on a case-by- case basis examining the facts and circumstances of each case. In Mirant's case, the Debtors have an excellent history of promptly paying all of their utility obligations. Prepayment for the delivery of gas, oil and coal will completely eliminate the risks to the counterparties to these transactions. Moreover, a debtor's financial resources are an important factor in determining adequate assurance. Because the Debtors have more than sufficient liquidity to meet all postpetition utility obligations, the risk of non-payment is diminished. Furthermore, the granting of administrative expense priority to a utility provider, where a debtor has a good payment history and a high degree of liquidity, satisfies the requirements of adequate assurance, obviating the need for the debtor to post a security deposit. Accordingly, the Debtors ask the Court to approve their proposed adequate assurance to each Utility Company and the procedure concerning requests for additional assurance. Ms. Elkin states that this request is without prejudice to the Utility Companies' rights to ask additional assurances in the form of deposits or other security; provided, however, that any request must be made in writing and actually received by the Debtors and counsel for the Debtors within 45 days of the Order date entered in accordance with this request -- the Deposit Request Deadline. Any request the Debtors will receive for additional assurances after the Deposit Request Deadline will constitute an untimely and invalid adequate assurance request. If a Utility Company disputes the finding of adequate assurance, the Utility Company will be required to file a motion for determination of adequate assurance of payment unless otherwise agreed to by the parties or ordered by the Court. (Mirant Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONAL EQUIPMENT: Kurzman Carson Appointed as Claims Agent ------------------------------------------------------------ National Equipment Services, Inc., and its debtor-affiliates asks for permission from the U.S. Bankruptcy Court for the Northern District of Illinois to appoint Kurtzman Carson Consulting LLC as Notice, Claims and Balloting Agent. KCC and the Debtors agreed that in this retention, KCC will provide: a) assistance to the Debtors with preparation the Schedules of Assets and Liabilities, Statement of Financial Affairs and other documents required for filing with the Court; b) claims administration; c) assistance with solicitation of acceptances or rejections to any plan of reorganization filed by the Debtors; and d) performance of other miscellaneous administrative services. KCC will also provide the Debtors with claims management consulting and computer services. The Debtors also may use KCC to provide the Debtors with training and consulting support necessary to enable the Debtors to effectively manage and reconcile claims. Jonathan A. Carson, the President of KCC tells the Court that the current fees charged by the professionals in his firm are: Clerical $40 to $65 per hour Bankruptcy Consultant $125 to $195 per hour Senior Bankruptcy Consultant $220 to $275 per hour Technology/Programming Consultant $125 to $195 per hour 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. NATIONAL STEEL: Retirees' Committee Hires Seyfarth as Counsel ------------------------------------------------------------- The Official Committee of Retired Employees of National Steel Corporation seeks the Court's authority to retain Seyfarth Shaw as its counsel retroactive to June 2, 2003. The Retiree Committee needs bankruptcy attorneys to prosecute its interests over and with respect to National Steel retiree benefit plans. The Retiree Committee wants Seyfarth to assist in: (a) its consultations with interested parties concerning the administration of the cases; (b) any investigation of the Debtors' assets, liabilities and financial condition and other relevant matters; (c) its participation in the formulation of a plan in these cases; (d) advising those it represents of its determinations concerning any plan formulated in these cases; (e) carrying out the purposes of Sections 1114 and 1129(a)(13) of the Bankruptcy Code, including the benefit plan analysis and alternatives, legal research, benefit claim analysis, and communications, proposals and negotiations; (f) structuring and implementing alternatives to cancellation of benefits and utilization of COBRA rights, including structuring and implementing alternative group insurance and the creation of a retiree association necessary to settle a trust implementing group insurance; and (g) its performance of other services as are in the interest of those it represents. The Retiree Committee believes that Seyfarth is well qualified, and has the necessary background, resources, expertise and dedication to meet its legal needs in these cases. Seyfarth is a law firm comprised of 500 attorneys located in nine offices in the United States and one in Europe. It has extensive experience in representing debtors and debtors-in-possession, secured and unsecured creditors, creditors' committees, equity holders, and trustees in Chapter 11 proceedings and adversary proceedings. It has skilled employee benefits department familiar with insolvency issues. Seyfarth will be compensated for its services in accordance with the firm's customary standard hourly rates. The positions, practice areas and current hourly billing rates of the Seyfarth professionals expected to be primarily responsible for providing services to Retiree Committee are: Professional Position Area Rate ------------ -------- ---- ---- William J. Hanlon Partner (Boston) Bankruptcy $350 Peter C. Miller Partner (Chicago) Employee Benefits 350 William J. Factor Partner (Chicago) Bankruptcy 320 Charles S. Riecke Associate (Chicago) Bankruptcy 235 Justin M. Crawford Associate (Chicago) Employee Benefits 200 Jennifer M. McManus Paralegal (Chicago) Bankruptcy 140 Seyfarth will also be entitled to reimbursement of actual necessary expenses. Seyfarth has performed limited, necessary services in relation to these cases since June 2, 2003. Seyfarth partner William J. Hanlon attests that no member of the firm has any connection with the Debtors, their creditors, or any other parties-in-interest. Mr. Hanlon assures the Court that as required by Section 1103(b), Seyfarth does not represent any other entity having adverse interest in connection with the cases. Mr. Hanlon, however, discloses that, in 2002, Seyfarth represented two entities that have asserted claims in these cases -- Rudd Equipment Company and Amalgamet Inc. Seyfarth assisted Rudd Equipment with the filing of a proof of claim against the Debtors and in contacting the Debtors' counsel shortly after the Petition Date to inquire about the payment under an equipment lease. Seyfarth aided Amalgamet with the filing of a proof of claim against the Debtors and in the period discussions with the Debtors' counsel to ascertain the status of Amalgamet's reclamation demand aggregating $90,000. Seyfarth also renders services to Amalgamet on unrelated matters. But Mr. Hanlon maintains that Seyfarth has recently advised both creditors that it would not be able to represent them on any future matters in the cases. It will, however, continue to provide services on unrelated matters. (National Steel Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) NEXTEL COMMS: S&P Ratchets Corporate Credit Rating Up a Notch ------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on Reston, Va.-based wireless carrier Nextel Communications Inc., to 'BB-' from 'B+'. In addition, Standard & Poor's assigned its 'B+' rating to the company's proposed $1 billion senior serial redeemable notes due 2015 to be publicly offered. The proposed new notes are rated one notch below the corporate credit rating because of the amount of material obligations that rank ahead of them. Among these are about $4.5 billion of secured bank debt and about $2.5 billion of current liabilities at various subsidiaries. Proceeds from the proposed notes will be used to retire the 10.65% senior redeemable discount notes due 2007 and redeem the 11.125% series E exchangeable preferred stock. The outlook is stable. At the end of second quarter 2003, Nextel had about $11.8 billion of debt. "The upgrade reflects Standard & Poor's more favorable assessment of the company's intermediate term competitiveness and, secondarily, an improvement in financial leverage," said credit analyst Michael Tsao. Based on an assessment of Nextel's network and established niche in the business sector, Standard & Poor's does not expect Nextel to be materially challenged by competitors through mid-2005. Nextel has a proven overbuild frame relay network that is optimized for push-to-talk (PTT) calls. Because competitors have networks that were not designed with PTT in mind, competing PTT offerings are unlikely to initially match Nextel's service quality in the areas of latency, reliability, and multi-party calling capability. Nextel's sizable subscriber base in several industries (i.e., construction, services, and wholesale) also mitigates the impact of competition. Subscribers in these industries have for years used DirectConnect as a convenient and cost-efficient way to keep in touch with each other. Because switching to a competing service would entail loss of access to this network, a Nextel subscriber may find it difficult to justify switching to a competitor. With no effective competition expected, any potentially negative impact from wireless number portability also likely will be limited. Given that some of Nextel's competitors are substantially better capitalized and are working on PTT technology with the cooperation of several major equipment vendors, Nextel could face meaningful competition starting in late-2005 to early-2006. Nextel also has strengthened its balance sheet in the past year. The combination of solid EBITDA growth and privately negotiated debt-for-equity exchanges helped the company to lower debt-to-annualized EBITDA to about 2.9x in second quarter 2003 from about 4.1x in the same quarter a year ago. Given that Nextel is projected to perform solidly in the next two years and that management remains committed to further deleverage the balance sheet, Nextel's financial risk profile could moderately improve. Nextel had about $3.7 billion (about $2.4 billion of cash and $1.3 billion of bank credit facility availability) of liquidity at the end of second quarter 2003. This level of liquidity, when combined with such factors as moderate free cash flow prospect, no significant debt maturities until 2007, and adequate headroom under bank covenants, should provide the company with adequate financial flexibility through 2006. NIFF-CORR LLC: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: NIFF-CORR LLC 1260 20th Road Tippecanoe, Indiana 46570 Bankruptcy Case No.: 03-34002 Type of Business: Sheet metal roofing manufacturer Chapter 11 Petition Date: July 14, 2003 Court: Northern District of Indiana (South Bend Division) Judge: Harry C. Dees, Jr. Debtor's Counsel: Mark E. Wagner, Esq. Kizer & Neu, LLP 1406 West Plymouth Street P.O. Box 158 Bremen, IN 46506 Tel: 574-546-2626 Fax: 574-546-2608 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Coasted Steel Corp. Purchase on account $286,589 Dept. #159001 P.O. Box 67000 Detroit, MI 48267-1590 Hubbell Steel Corp. Purchase on account $243,489 Interstate Steel Company Purchase on account $54,916 Premier Resource Group Purchase on account $43,686 Promet Steel, Inc. Purchase on account $93,982 Samuel & Son Chicago Ltd. Purchase on account $71,070 Taylor Steel, Inc. Purchase on account $36,141 The Bradbury Company, Inc. Purchase on account $31,858 Wheeling-Trucking, Inc. Purchase on account $33,749 Alliance Trucking, Inc. Purchase on account $23,825 Ameristar Purchase on account $44,882 Anchor Steel, LLC Purchase on account $46,653 Atlas Bolt & Screw Purchase on account $41,604 ECA Steel Corp Purchase on account $23,440 Harrington & King Purchase on account $27,485 Perforating Co., Inc. Kenwood Metals, Inc. Purchase on account $22,000 Mako Metals, Inc. Purchase on account $75,020 Manuben-Itochu Steel USA Purchase on account $32,153 Medinah Metals LLC Purchase on account $22,064 NTELOS: Proposes New Board of Directors for Reorganized Debtor -------------------------------------------------------------- NTELOS Inc., has completed a search for new members of its board of directors. Following approval and confirmation of the Company's Joint Plan of Reorganization, the Company will reconstitute its board of directors, as called for in the Plan. The Company's new board of directors will include Mr. Thomas E. Doster, Mr. Rudy F. Graf and Ms. Susan A. McLaughlin, in addition to current directors Messrs. A. William Hamill, John B. Mitchell, James S. Quarforth and John B. Williamson, III. Biographies of each are provided below. James Quarforth, Chief Executive Officer of NTELOS, said, "We are pleased with the experience and diverse backgrounds of the persons who have agreed to serve on our new board of directors. Our new board will provide the depth and breadth required to support our primary business objectives and position the Company for long term success. We also thank all of our existing and prior board members for their years of dedication and service." Biographical information for each of the persons who have agreed to serve on the Company's new board of directors is as follows: -- Thomas E. Doster currently serves as a Director with Morgan Stanley & Co., Incorporated. Mr. Doster is also a director of IMPSAT Fiber Networks, Inc., Logix Communications and Viatel Holdings Bermuda. -- Rudy J. Graf currently serves as a member of the board of directors of Citizens Communications Company. Mr. Graf served as Vice Chairman, President and Chief Operating Officer for Citizens Communications Company from 1999 through 2002. Prior to 1999, Mr. Graf served as President and Chief Operating Officer of Centennial Communications. -- A. William Hamill has been a director of NTELOS since 2001. Mr. Hamill is President of H3 Companies LLC, an investments and advisory firm. Mr. Hamill was formerly Executive Vice President and Chief Financial Officer of United Dominion Realty Trust, Inc. -- Susan A. McLaughlin previously served as Executive Vice President and Chief Operating Officer of AGL Resources, President and Chief Executive Officer of Atlanta Gas Light Company, Chief Executive Officer of Virginia Natural Gas and President of Consumer Services of BellSouth Corporation. Ms. McLaughlin also served as a director of Target Corporation and Delphi Corporation. -- John B. Mitchell, Sr. has been a director of NTELOS since 1989. Mr. Mitchell is President and Chairman of the Board of Hammond- Mitchell, Inc., a construction contractor in Covington, Virginia. -- James S. Quarforth has been a director of NTELOS since 1987. Mr. Quarforth has been Chief Executive Officer of NTELOS since May 1, 1999. -- John B. Williamson, III has been a director of NTELOS since 2001. Mr. Williamson is President, Chief Executive Officer and a director of RGC Resources, Inc., Roanoke, Virginia. The Company also filed a supplement of exhibits to its proposed Joint Plan of Reorganization, containing draft forms of the Purchase Agreement for the sale of $75 million aggregate principal amount of new 9% convertible notes, the Indenture governing the notes and certain other corporate documents, with the United States Bankruptcy Court for the Eastern District of Virginia. NTELOS and certain of its subsidiaries voluntarily filed for reorganization under Chapter 11 of the United States Bankruptcy Code on March 4, 2003 in order to complete development and implementation of a comprehensive financial restructuring plan that would significantly reduce the Company's debt. The full text of the Disclosure Statement and the Joint Plan of Reorganization, each dated July 1, 2003, together with the supplement of exhibits to the Joint Plan of Reorganization, are available on the Company's Web site at http://www.ntelos.com NTELOS Inc. (OTC Bulletin Board: NTLOQ) is an integrated communications provider with headquarters in Waynesboro, Virginia. NTELOS provides products and services to customers in Virginia, West Virginia, Kentucky, Tennessee and North Carolina, including wireless digital PCS, dial-up Internet access, high- speed DSL (high-speed Internet access), and local and long distance telephone services. OM GROUP: Ratings Off Watch Due to Unit's Nearing Divestiture ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B+' corporate credit rating on specialty chemical and refined metal products producer OM Group Inc. based on the expected completion of its agreement to sell its precious metals business. Standard & Poor's said that at the same time it has removed its ratings on Cleveland, Ohio-based OM from CreditWatch where they were placed Oct. 31, 2002. The current outlook is stable. OM Group is expected to complete its definitive agreement to sell its precious metals business to Umicore S.A. for about $752 million in cash. "The pending sale, which is expected to close in the third quarter of 2003, was incorporated into the ratings and is a positive for credit quality, given that net proceeds of about $700 million have been earmarked for debt reduction," said Standard & Poor's credit analyst Wesley E. Chinn. "Still, the financial profile will remain highly leveraged, the business profile will be less robust, and the outlook for higher cobalt and nickel prices remains uncertain. If the sale of the precious metals business, which is still subject to regulatory review, does not occur, it would clearly have negative implications for OM's credit prospects," he said. Standard & Poor's said that its ratings on OM reflect the company's position as an established provider of metal-based specialty chemical and refined metal products and expected satisfactory liquidity, overshadowed by the vulnerability of its operating margins and profitability to the volatility of cobalt and nickel prices, political and civil instability risks in the Democratic Republic of Congo, its principal cobalt supplier, long- term nickel supply uncertainties, and a heavy debt load. OWENS: Claims Status Modification Hearing Continues on July 28 -------------------------------------------------------------- Owens Corning and its debtor-affiliates want the Court to modify the status of 261 claims from priority to general unsecured non- priority. Since the Bar Date, the Debtors and their advisers have been reviewing the Proofs of Claim filed in these cases. Based on the review, Mark W. Mayer, the Debtors' Vice President for Global Accounting, declares that these Disputed Claims were filed with the incorrect priority status. That is, each of the Disputed Claims asserts a "priority" status under Section 507(a) to which they are not entitled. These claims include: Claimant Claim No. Claim Amount -------- --------- ------------ 2 Scale 12085 $359,725.63 Braddock, Richard S. 6299 200,000.00 Creative Advantage, Inc. 7652 145,343.34 Davison Petroleum Products LLC 6914 412,246.12 Export Development Canada 3943 211,527.04 Granzow, Dennis 5979 113,000.00 Hayes, Jack 5362 250,000.00 Marsh USA, Inc. 6910 211,486.00 Mead Corp. 5390 268,892.00 Warren Co. Metro School District 4874 119,247.00 Wausau Insurance Companies 12070 245,033.00 Wiltsie, Allan 8887 545,000.00 Wise Metals Group LLC 2326 175,753.60 YWCA Battered Womens Shelter 7960 200,000.00 Zaske, Linda 7000 246,000.00 Maria Aprile Sawczuk, Esq., at Saul Ewing LLP, in Wilmington, Delaware, assures the Court that any claimant holding a Disputed Claim will suffer no prejudice by having the priority status of its Disputed Claim modified because the claimant's underlying claim amounts are not subject to this objection. However, the Debtors reserve their right to later file objections to the amount and allowability of the Disputed Claims on any grounds that the law permits. The objections, if any, will be properly filed and noticed at a later date. * * * Judge Fitzgerald sustains the Debtors' objection except for Leonard Berger Ph.D.'s and Armstrong and Bragg Home Service's claims, which will be heard further on July 28, 2003. (Owens Corning Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 609/392-0900) OWENS-ILLINOIS: Reports Decline in Second Quarter Fin'l Results --------------------------------------------------------------- Owens-Illinois, Inc., (NYSE: OI) reported second quarter 2003 net earnings of $17.0 million, compared with net earnings for the second quarter of 2002 of $96.9 million. Results for the second quarter of 2003 included a loss of $37.4 million ($37.4 million after tax) from the sale of long-term notes receivable and additional interest charges of $16.8 million ($10.7 million after tax) for early retirement of debt, principally note repurchase premiums. Exclusive of these items, earnings in the second quarter of 2003 were $65.1 million. Operating results in the second quarter of 2003 continued to be unfavorably impacted by higher energy costs, reduced pension income, lower glass unit shipments in North America, South America, and the Asia Pacific region, and competitive pricing pressures in most of the Company's plastics businesses. Joseph H. Lemieux, Owens-Illinois Chairman and Chief Executive Officer said, "Despite continued global economic uncertainty, our manufacturing operations are in good shape. We are also pleased at the completion of several refinancing activities dating back to January of last year, including our $1.9 billion bank credit agreement, which illustrates strong support in the future of our operations from the investment community." Business Review Summary Second quarter 2003 net sales were $1.580 billion compared with $1.497 billion in the second quarter of 2002. On a segment reporting basis, EBIT for the second quarter of 2003 was $219.0 million compared with $249.6 million for the second quarter of 2002. Glass Containers Segment The Glass Containers segment reported second quarter 2003 net sales of $1.075 billion, up 4.8% from $1.026 billion in the second quarter of 2002. Segment EBIT was $184.3 million for the second quarter of 2003 compared with $192.9 million for the second quarter of 2002. EBIT margins in the second quarter of 2003 were 17.2% compared with 18.8% in the second quarter of 2002. Pension income was approximately $9.7 million lower, contributing to the reduction in Segment EBIT and EBIT margins. Within the segment, North American glass container operations reported lower sales and EBIT for the second quarter of 2003 compared with the second quarter of 2002. Higher energy costs and lower unit shipments, principally containers for beer, were partially offset by improved pricing, lower operating expenses, and a more favorable product sales mix. Most of the reduction in pension income for the Glass Containers Segment was in North America. European glass container operations reported improved sales and EBIT for the second quarter of 2003 compared with the second quarter of 2002. The favorable effects of higher unit shipments, increased selling prices, favorable currency translation rates, and improved manufacturing performance were partially offset by higher energy costs. Asia Pacific glass container operations reported lower EBIT for the second quarter of 2003 compared with the second quarter of 2002, while sales approximated the prior year period. Unit shipments in Australia were lower, principally for wine and beer containers. And in China, unit sales volumes in both Shanghai and Guangdong were impacted by the SARS epidemic. Lower pricing in Australia, principally for wine containers, also contributed to lower sales and EBIT. In New Zealand, a furnace rebuild further contributed to the year-over-year EBIT decline. Favorable currency translation rates offset the effect of lower volumes and pricing on net sales. The volume and price effects on EBIT were partially offset by favorable currency translation rates and improved manufacturing performance in most of the Asia Pacific region. In the South American glass container operations, second quarter 2003 sales declined approximately 12% from a year ago. The primary factors contributing to the reduced sales were lower unit shipments and unfavorable currency translation. Despite these negative factors, EBIT for South American glass container operations was essentially equal to a year ago reflecting the positive effect of higher selling prices and improved manufacturing efficiencies and labor productivity. Plastics Packaging Segment For the second quarter of 2003, the Plastics Packaging segment reported net sales of $505.0 million compared with net sales of $471.0 million for the second quarter of 2002. Resin cost pass- through pricing to customers increased sales $38 million in the quarter. Segment EBIT for the second quarter of 2003 was $53.7 million compared with EBIT of $78.2 million for the second quarter of 2002. The principal factors contributing to the EBIT decline were lower selling prices in most of the segment's businesses, reduced sales and EBIT within the Company's advanced technology systems business, and an approximate $2.2 million reduction in pension income. EBIT for the second quarter of 2003 was favorably impacted by an approximate 8% increase in unit shipments over the prior year period. Other Retained Items Other retained costs were $2.5 million lower in the second quarter of 2003 compared with the second quarter of 2002. A $1.1 million reduction in pension income was more than offset by reduced administrative costs. Interest Expense Interest expense, excluding charges for early debt retirement, increased to $121.6 million in the second quarter of 2003 from $106.2 million in the second quarter of 2002. The higher interest in 2003 was mainly due to the issuance of $625 million of fixed rate notes during the fourth quarter of 2002 and $900 million of fixed rate notes in May 2003. The proceeds from the notes were used to repay lower-cost variable rate debt borrowed under the Company's bank credit agreement. Lower interest rates on the Company's remaining variable rate debt partially offset the increase. Interest expense for the second quarter of 2003 included charges of $13.2 million for premiums and the write-off of unamortized finance fees related to the repurchase of $263.5 million principal amount of 7.85% Senior Notes due 2004, and $3.6 million for the write-off of unamortized finance fees related to the reduction of commitments under the bank credit agreement. Sale of Notes Receivable On July 11, 2003, the Company received payments totaling 100 million British pounds sterling (US$163.0 million) in connection with the sale to Ardagh Glass Limited of certain long-term notes receivable. The notes were received from Ardagh in 1999 by the Company's wholly-owned subsidiary, United Glass Limited, in connection with its sale of Rockware, a United Kingdom glass container manufacturer obtained in the 1998 acquisition of the worldwide glass and plastics packaging businesses of BTR plc. The notes were due in 2006 and interest had previously been paid in kind through periodic increases in outstanding principal balances. The proceeds from the sale of the notes were used to reduce outstanding borrowings under the Company's bank credit agreement. The notes were sold at a discount of approximately 22.6 million British pounds sterling. The resulting loss of US$37.4 million (US$37.4 million after tax) was included in the results of operations of the second quarter of 2003. Six-month Results For the first six months of 2003, the Company reported net earnings of $51.4 million, compared with a net loss of $608.4 million for the first six months of 2002. Results for the first half of 2003 included a loss of $37.4 million ($37.4 million after tax) from the sale of long-term notes receivable and additional interest charges of $16.8 million ($10.7 million after tax) for early retirement of debt, principally note repurchase premiums. Exclusive of these items, earnings in the first half of 2003 were $99.5 million. Results for the first half of 2002 included: 1) a charge for future asbestos related costs of $475 million ($308.8 million after tax), 2) additional charges of $10.9 million ($6.7 million after tax) for early retirement of debt, and 3) a charge for the change in method of accounting for goodwill of $460 million ($460 million after tax). Exclusive of these items, earnings in the first half of 2002 were $167.1 million. Effective Tax Rate Excluding the effects of the loss on the sale of long-term notes receivable in 2003, the effects of the first quarter 2002 asbestos-related charge, and the additional interest charges for early retirement of debt in all periods, the Company's estimated effective tax rate for the first six months of 2003 was 31.6% compared with an estimated rate of 31.6% for the first six months of 2002 and an actual rate of 30.1% for the full year 2002. The increase from the actual rate for the full year 2002 to the estimated rate for 2003 is due to a shift in estimated international earnings toward countries with higher effective tax rates. Refinancing Activities During the second quarter of 2003, the Company completed its refinancing activities that began in January 2002. During that 17-month period, various operating subsidiaries of the Company placed $1 billion principal amount 8-7/8% Senior Secured Notes due February 15, 2009; $625 million principal amount 8-3/4% Senior Secured Notes due November 15, 2012; $450 million principal amount 7-3/4% Senior Secured Notes due May 15, 2011 and $450 million principal amount 8-1/4% Senior Notes due May 15, 2013. The net proceeds from issuing these notes were used to repay outstanding borrowings and reduce commitments under the bank credit agreement, repurchase in a tender offer $263.5 million of the 7.85% Senior Notes due 2004, and pay related note repurchase premiums and transaction costs. On June 13, 2003, the Company and certain of its subsidiaries entered into an amended and restated bank credit agreement totaling $1.9 billion consisting of a $600 million revolving credit facility and a $460 million A term loan, each of which has a final maturity date of April 1, 2007, and an $840 million B term loan, which has a final maturity date of April 1, 2008. Proceeds from borrowings under the amended and restated agreement were used to repay all amounts outstanding under the Company's $1.9 billion credit agreement which had been scheduled to mature on March 31, 2004. As a result of these refinancing activities, the Company's next significant debt maturity will be $350 million in May 2005. The impact of refinancing lower-cost, shorter-term variable rate debt with higher-cost, longer-term fixed rate debt is expected to increase interest expense in the second half of 2003 by approximately $22 million over the second half of 2002 based on current short-term rates. Higher expected average debt outstanding is also expected to increase interest expense in the second half of 2003 over the second half of 2002 by approximately $6 million, making the total expected increase in interest expense approximately $28 million over the second half of 2002. Asbestos Asbestos-related cash payments for the second quarter of 2003 were $44.8 million, a reduction of $5.6 million, or 11.1%, from the second quarter of 2002. For the six months of 2003, cash payments were $99.9 million, a reduction of $11.8 million, or 10.6%, from the first six months of 2002. As of June 30, 2003, the number of asbestos-related claims pending against the Company was approximately 30,000, up from approximately 24,000 pending claims at December 31, 2002. In April, the Company received approximately 5,000 new filings in advance of the effective date of the recently enacted Mississippi tort reform law. Approximately 60% of those filings are cases with exposure dates after the Company's 1958 exit from the business for which the Company takes the position that it has no liability. The Company anticipates that cash flows from operations and other sources will be sufficient to meet all asbestos-related obligations on a short- term and long-term basis. Owens-Illinois is the largest manufacturer of glass containers in North America, South America, Australia and New Zealand, and one of the largest in Europe. O-I also is a worldwide manufacturer of plastics packaging with operations in North America, South America, Europe, Australia and New Zealand. Plastics packaging products manufactured by O-I include consumer products (blow molded containers, injection molded closures and dispensing systems) and prescription containers. More information on the Company can be obtained at http://www.o-i.com As reported in Troubled Company Reporter's April 25, 2003 edition, Fitch Ratings assigned a 'BB' rating to Owens-Illinois' (NYSE: OI) $450 million senior secured notes and a 'B+' rating to its $350 million senior notes offered in a private placement. The senior secured notes are due 2011 and the senior notes are due 2013. The Rating Outlook remains Negative. PACIFIC GAS: Gets Nod to Pay $281 Million Mortgage Bond Maturity ---------------------------------------------------------------- PG&E Corporation's (NYSE: PCG) utility unit, Pacific Gas and Electric Company, has received approval from the U.S. Bankruptcy Court to pay $281 million of 6-1/4 percent Series 93C First and Refunding Mortgage Bonds maturing August 1, 2003. Pacific Gas and Electric Company will pay the bondholders from its current available cash. Bondholders who hold the bonds in a brokerage account will have principal and interest paid to their account. Certificate holders will need to deliver their certificates to the trustee, The Bank of New York, to receive payment for the principal. Interest checks to certificate holders will be mailed separately. PACIFIC GAS: Modifies BNY Stipulation re Cash Collateral Use ------------------------------------------------------------ Pacific Gas and Electric Company asks the Court to approve another modification to a stipulation with BNY Western Trust Company regarding the use of cash collateral to provide for PG&E's timely payment of the principal amount of mortgage bonds scheduled to mature on August 1, 2003 aggregating $281,000,000. BNY Western Trust is the successor trustee pursuant to a December 1, 1920 indenture with respect to the 1993 Series C mortgage bonds issued by PG&E. The current principal amount outstanding of the 1993 Series C Bonds is $290,500,000. However, $9,500,000 of these Bonds are held in treasury by PG&E. Rather than seeking to pay the $9,500,000 in principal amount of the Bonds held in treasury -- which would entail the prompt "roundtripping" of the $9,500,000 by first paying it to BNY Western Trust, who would then pay it to PG&E in satisfaction of the Bonds held in treasury -- PG&E proposes to cancel the $9,500,000 held in treasury on or before the August 1, 2003 maturity date, and pay on maturity the $281,000,000 principal amount of the 1993 Series C Bonds held by the pubic. PG&E represents that the payment will benefit the estate financially because the Bonds accrue interest at a rate significantly in excess of the rates it currently earns on its cash balances. The 1993 Series C Bonds accrue interest at 6.25% per annum. If PG&E is authorized to make the August 2003 principal payment on the Bonds, it expects to do so using cash currently held by the estate. As reported on its most recent Operating Report, PG&E had a $3,600,000 cash balance as of April 30, 2003. By contrast, if PG&E fails to timely make the August 2003 principal payment, it risks being in default under the Indenture and the negative consequences that may flow from the default like the potential acceleration of all series of the Bonds. PG&E's obligations under the Indenture are substantially oversecured. The total unpaid indebtedness under the Bonds is $3,300,000,0000. Such indebtedness is secured by a first- priority lien on substantially all of PG&E's assets. PG&E reported $26,600,000,000 in total assets as of April 30, 2003 on its most recently filed Operating Report. In addition, PG&E is solvent and expects to pay all allowed claims against the Debtor's estate in full. Thus, there is little doubt that the Bonds will eventually be satisfied in full. In May 2001, the Court approved PG&E and BNY Western Trust's stipulation (i) authorizing and restricting use of cash collateral pursuant to Section 363 of the Bankruptcy Code and Rule 4001 of the Federal Rules of Bankruptcy Procedure and (ii) granting adequate protection pursuant to Bankruptcy Code Sections 361 and 363. The Original Stipulation provides for PG&E's continued use of cash collateral in which BNY Western Trust has an interest -- on behalf of the Bondholders -- pursuant to certain conditions and restrictions. Among other things, the Original Stipulation provides for the timely payment of interest and sinking fund payments as provided under the Indenture. The annual amount of interest and sinking fund payments currently accruing on the Bonds is $260,000,000. The parties modified the Original Stipulation in February 2002 to permit PG&E's timely payment of the $333,000,000 in principal amount of mortgage bonds that matured on March 1, 2002. PG&E and BNY Western Trust Trustee have continued to perform their obligations under the Stipulation. The Stipulation currently provides that: "As additional adequate protection hereunder, the Indenture Trustee and the Bondholders shall be entitled to the payment of accrued and unpaid interest and sinking fund payments due and payable under the Indenture (the "Pre-Petition Indebtedness") on or prior to the Petition Date at the prevailing rate (with respect to interest payments) in effect under the Indenture. Additionally, interest on the Pre-Petition Indebtedness shall continue to accrue subsequent to the Petition Date at the prevailing rate under the Indenture and shall be payable on the terms set forth therein. Furthermore, any and all sinking fund payments that become due subsequent to the Petition Date shall be payable on the terms set forth in the Indenture. In addition the principal amount of the Bonds scheduled to mature on March 1, 2002 in the approximate amount of $333 million shall be payable on the terms set forth in the Indenture." The parties have agreed to modify the Stipulation to add this provision: "In addition the principal amount of the Bonds scheduled to mature on August 1, 2003 in the approximate amount of $281 million shall be payable on the terms set forth in the Indenture." PG&E represents that the modification to the Stipulation is consistent with the Court's Guidelines for Cash Collateral and Financing Stipulations. (Pacific Gas Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 609/392-0900) PEABODY ENERGY: Board Raises Cash Quarterly Dividend by 25% ----------------------------------------------------------- Peabody Energy's board of directors has approved a 25 percent increase in the regular quarterly dividend on common stock, to $0.125 per share. The increased dividend is payable on August 26, 2003, to shareholders of record on August 5, 2003. Directors also authorized management to implement a dividend reinvestment plan to allow shareholders to reinvest dividends in BTU shares without paying transaction fees. The company will subsequently communicate full details of the plan to shareholders. Peabody Energy (NYSE: BTU) is the world's largest private-sector coal company, with 2002 sales of 198 million tons of coal and $2.7 billion in revenues. Its coal products fuel more than 9 percent of all U.S. electricity generation and more than 2 percent of worldwide electricity generation. * * * As previously reported in Troubled Company Reporter, Fitch Ratings assigned a 'BB+' to Peabody Energy's proposed $600 million revolving credit facility and a new $600 million bank term loan and a 'BB' to its issuance of $500 million of senior unsecured notes due 2013. The Rating Outlook remains Positive. PG&E NATIONAL: Look for Schedules and Statements by August 22 ------------------------------------------------------------- Section 521(1) of the Bankruptcy Code requires every debtor to file Schedules of Assets and Liabilities and a Statement of Financial Affairs. Rule 1007(c) of the Federal Rules of Bankruptcy Procedure allows the debtor to file its Schedules and Statements within 15 days after the Petition Date. However, the conduct and operation of the PG&E National Energy Group Debtors' business requires them to maintain voluminous books and records and a complex accounting system. Due to the number of Debtors, the number of creditors, the complexity of the Debtors' businesses, and the diversity of their operations and assets, it is impossible to produce and deliver coherent and complete Schedules and Statements within the mandated 15 days. At present, the NEG Debtors are still in the process of assembling the information necessary to complete the Schedules and Statements. At the NEG Debtors' behest, Judge Mannes extends their deadline to file Schedules and Statements to August 22, 2003. The benefit the extension will produce is increased accuracy in the Debtors' Schedules and Statements. The extension will provide the Debtors sufficient time to prepare and file the Schedules and Statements. As of March 31, 2003, PG&E National Energy Group and its 190 subsidiaries had $7,600,000,000 in total assets and $8,980,000,000 in total liabilities (book value). For the quarter ending March 31, 2003, NEG sustained a $400,000,000 net loss. The Office of the United States Trustee has advised the NEG Debtors that it will not oppose this request on the condition that the Debtors don't seek any further extensions. The Debtors agree that they will not seek further extensions and will file their Schedules and Statements no later than August 22, 2003. In addition, the NEG Debtors will work with the U.S. Trustee and any subsequently appointed creditors' committee to make available sufficient financial date and creditor information to permit at least an initial meeting of creditors pursuant to 11 U.S.C. Sec. 341(a) to be timely held. (PG&E National Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) QUANTUM CORP: Fiscal First Quarter Net Loss Stands at $9 Million ---------------------------------------------------------------- Quantum Corp. (NYSE: DSS), a leading provider of data protection systems, announced that revenue for its fiscal first quarter, ended June 29, 2003, was $202 million. The company reported a GAAP net loss of $9 million for the June quarter and a non-GAAP loss of $5 million, both of which included the negative impact of $3 million in tax costs related to foreign withholding taxes. As Quantum announced when it revised its FQ1 expectations earlier in the month, the company's results were driven primarily by lower-than-expected media revenue and, to a lesser extent, lower tape drive revenue after two quarters of significant growth. Despite the lower revenue, gross margin rates were up slightly from the March quarter, and operating expenses were down sequentially to $66 million on a GAAP basis and $64 million on a non-GAAP basis. "Over the last year, we have been working to execute an aggressive plan to return Quantum to a position of sustained growth and profitability," said Rick Belluzzo, chairman and chief executive officer of Quantum. "As a result, we have improved many of the fundamentals underlying our business, as evidenced by the two quarters of solid momentum that preceded FQ1. We continued to see progress in several areas in the June quarter, but this was unfortunately overshadowed by the lower-than-expected media revenue. As I've said before, there is still more work to do, and we will continue to focus intensely on improving our performance." In the last year, Quantum has expanded its product lines, secured several key OEM wins, increased operational efficiency and reduced costs. As a result, the company saw several positive year-over- year comparisons for FQ1. For example, overall Storage Solutions Group revenue was up significantly, tape drive revenue also increased, and operating expenses were down, with a significant decline in general and administrative expenses. Fiscal 2004 first quarter revenue in the DLTtape(TM) Group was $146 million, comprised of $55 million in total tape media revenue and $91 million in tape drive revenue. The shortfall in expected media revenue reflected the impact of continued economic weakness, particularly in Europe. This resulted in lower-than-expected media prices that, in turn, led to a reduction in sales of Quantum- branded media, Quantum royalties (which are based on licensee revenues) and inventory levels held by media resellers. Although FQ1 tape drive revenue was lower-than-expected, it was still up nearly a third compared to the June quarter last year, and tape drive gross margins increased for the third consecutive quarter. Super DLTtape(TM) shipments remained roughly flat sequentially, as expected. Quantum continues to execute on its industry-leading tape drive roadmap, with the SDLT 600 super drive on track for qualifications this summer and general availability in the fall. Fiscal 2004 first quarter revenue in Quantum's Storage Solutions Group, which includes tape automation, services and enhanced backup solutions, was $66 million. This represented an increase of 7% sequentially and more than 30% over the comparable quarter last year. The company's leadership in the high-volume autoloader space was again evident in FQ1, as sales of its ValueLoader(TM) and SuperLoader(TM) again grew sequentially. Shipments of Quantum's DX30 enhanced backup system also increased over the prior quarter. The positive results in SSG reflected the work Quantum has done to broaden its product lines and strengthen its go-to-market model over the past year, and the company is continuing to refine its SSG sales model further to offer a more solutions-oriented approach to enterprise customers. This will be particularly important as Quantum prepares to launch the DX100, its second- generation enhanced backup solution, in the fall. In addition to reporting its FQ1 results, Quantum also provided its outlook for the second quarter of fiscal year 2004. The company said it expects total revenues to be flat to slightly up from FQ1, and GAAP and non- GAAP gross margins to be roughly flat. GAAP operating expenses are expected to be in the range of $67 million to $70 million, with non-GAAP operating expenses anticipated to be in the $63 million to $66 million range. As a result, Quantum expects the GAAP loss per share to be in the range of 5 to 7 cents and the non-GAAP loss per share to be in the 1 to 3 cent range. Both the GAAP and non-GAAP outlook include an expected $2.5 million negative impact related to media royalty withholding taxes, and the difference between the GAAP and non- GAAP figures reflects amortization of acquisition-related intangibles, as well as $1 million to $2 million in expected restructuring charges. "As I look toward the remainder of the current quarter and beyond, our priorities are clear -- drive revenue growth through new products and enterprise sales efforts; work to reverse the media trend we saw in FQ1 through new products and expansion of our target market; and continue to improve gross margins and reduce expenses," said Belluzzo. "The economic environment remains challenging, but we are confident that these priorities -- along with the actions we've taken over the past year -- are the right ones to position Quantum for success. We are a more focused, more efficient company than we were a year ago, and we are excited about the future and the leading role we will continue to play in data protection." Quantum Corp., founded in 1980, is a global leader in data protection, meeting the needs of business customers with enterprise-wide storage solutions and services. Quantum is the world's largest supplier of half-inch cartridge tape drives, and its DLTtape technology is the standard for tape backup and archiving of business-critical data for the mid-range enterprise. Quantum is also a leader in the design, sale and service of autoloaders and automated tape libraries used to manage, store and transfer data. Over the past year, Quantum has been one of the pioneers in the emerging market of disk-based backup, offering a solution that emulates a tape library and is optimized for data protection. Quantum sales for the fiscal year ended March 31, 2003, were $871 million. Quantum Corp., 1650 Technology Drive, San Jose, CA 95110, 408-944-4000, http://www.quantum.com As previously reported, Standard & Poor's Ratings Services lowered its corporate credit rating on Quantum Corp., to double-'B'-minus from double-'B' and its subordinated debt rating to single-'B' from single-'B'-plus. REGAL ENTERTAINMENT: Reports Slight Improvement in Q2 Results ------------------------------------------------------------- Regal Entertainment Group (NYSE:RGC) (S&P/ BB- Corporate Credit Rating), a leading motion picture exhibitor owning and operating the largest theatre circuit in the United States under the Regal Cinemas, United Artists Theatres, Edwards Theatres and Hoyts Cinemas brands and its media company, Regal CineMedia, announced second quarter 2003 results. Total revenue for the quarter ended June 26, 2003 was $648.1 million, a 6.7% increase compared to total pro forma revenue of $607.3 million for the second quarter of 2002. Net income increased 1.3% to $47.1 million in the second quarter of 2003 compared to pro forma net income of $46.5 million in the comparable quarter of 2002. Earnings per diluted share, excluding merger and restructuring expenses (net of related tax effect), decreased 5.6% to $0.34 for the second quarter of 2003 compared to the pro forma amount in the second quarter of 2002. Adjusted EBITDA of $136.1 million for the quarter ended June 26, 2003 increased 0.5% from the pro forma amount in the comparable period in 2002 and represented an Adjusted EBITDA margin of 21.0%. The results of operations for the Company include the results of operations for the acquired Hoyts theatres for all periods subsequent to March 27, 2003. Reconciliations of non-GAAP measures are provided in the financial schedules accompanying the press release. Regal's Board of Directors also declared a cash dividend of $0.15 per Class A and Class B common share, payable on September 12, 2003, to stockholders of record on August 25, 2003. The Company intends to pay a regular quarterly dividend for the foreseeable future at the discretion of the Board of Directors depending on available cash, anticipated cash needs, overall financial condition, loan agreement restrictions, future prospects for earnings and cash flows as well as other relevant factors. "This was a significant quarter for Regal Entertainment Group in that we produced another quarter of solid financial results in a challenging box office environment. In addition, we returned value to shareholders in the form of an extraordinary dividend of $5.05 per share, completed the integration of the acquired Hoyts theatres and strengthened our base of long-term shareholders," stated Mike Campbell, CEO of Regal Entertainment Group's theatre operations and Co-CEO of Regal Entertainment Group. "We are also pleased that our strong cash position and free cash flow generation allowed the Company to declare a regular quarterly dividend of $0.15 per share, which maintains our quarterly dividend at historical levels," Campbell continued. Kurt Hall, Chief Executive Officer of Regal CineMedia and Co-CEO of Regal Entertainment Group stated, "The deployment of the Digital Content Network continues to track ahead of plan and under budget with over 3,000 screens now deployed, on our way to approximately 5,000 screens by Q1 2004. The growing geographic reach of our digital network, combined with the higher quality of our digital pre show "The 2WENTY", has been well received by theatre patrons and advertisers. By providing a more cost effective and efficient cinema advertising and marketing solution, we are beginning to expand the universe of clients who are using cinema as part of their marketing plans." Regal Entertainment Group (NYSE:RGC) is the largest motion picture exhibitor in the world. The Company's theatre circuit, comprising Regal Cinemas, United Artists Theatres, Edwards Theatres, and Hoyts Cinemas operates 6,119 screens in 562 locations in 39 states. Regal operates approximately 17% of all screens in the United States including theatres in 46 of the top 50 U.S. Designated Market Areas and growing suburban markets. We believe that the size, reach and quality of the Company's theatre circuit not only provide its patrons with a convenient and enjoyable movie-going experience, but is also an exceptional platform to realize economies of scale in theatre operations and, through Regal CineMedia, develop new sources of revenue and cash flow by utilizing Regal's existing asset base. Regal CineMedia is a wholly owned subsidiary of Regal Entertainment Group focusing on the expansion and development of advertising and new uses for Regal's theatre assets, while at the same time enhancing the movie-going experience. Regal CineMedia operates other divisions that focus on meetings and special productions in a theatre environment, including the presentation of live sports and entertainment events, as well as the sale of group tickets and gift certificates. Additional information is available on the Company's Web site at http://www.REGmovies.comor http://www.regalcinemedia.com RENT-WAY INC: SEC and U.S. Attorney Complete Investigation ---------------------------------------------------------- Rent-Way, Inc. (NYSE: RWY) reported that the Securities and Exchange Commission and the U.S. Attorney for the Western District of Pennsylvania have concluded their investigation of the company. In connection with the civil action taken by the SEC, the company has consented to the entry of an order requiring compliance with the record keeping and reporting provisions of the Exchange Act. The SEC did not seek any financial penalty against the company, its current officers or directors, nor will the U.S. Attorney bring any charges against the company or current officers and directors. In response to the actions announced today, William E. Morgenstern, Chairman and CEO of Rent-Way, stated, "We are pleased that the investigation has been completed and believe the final results are consistent with our internal investigation." Tuesday's SEC release stated, "The Commission considered that Rent-Way undertook remedial actions and cooperated with commissions staff." In a release issued Tuesday, United States Attorney Mary Beth Buchanan recognized "the significant cooperation provided by company officials at Rent-Way" and stressed that the Company had been "fully and openly cooperating with the government." Also, according to a statement made Tuesday, the U.S. Attorney and the Securities and Exchange Commission have announced that action will be taken against three former employees. Mr. Morgenstern concluded, "This marks a new beginning for Rent- Way. The distractions managing our business in the wake of the accounting irregularities announced over 32 months ago are behind us. Looking ahead, we plan to focus on growing our business and increasing profitability in our stores. We have taken steps to reposition our company for growth, both financially and operationally. In particular, our recently completed refinancing has provided us with the financial resources we need to execute our business plan and take advantage of opportunities in the vibrant rent-to-own market." Rent-Way is one of the nation's largest operators of rental- purchase stores. Rent-Way rents quality name brand merchandise such as home entertainment equipment, computers, furniture and appliances from 753 stores in 33 states. As reported in Troubled Company Reporter's June 5, 2003 edition, Standard & Poor's Ratings Services raised its corporate credit rating on Rent-Way Inc., to 'B+' from 'CCC'. The rating was removed from CreditWatch where it had been placed May 13, 2003. The outlook is stable. In addition, Standard & Poor's assigned its 'BB-' rating to the company's $60 million senior secured bank loan, and its 'B-' rating to $205 million senior secured notes. The bank loan rating continues to be preliminary and is subject to review upon final documentation. The Erie, Pennsylvania-based company had $213 million of debt outstanding as of March 31, 2003. RURAL CELLULAR: S&P Junks $325 Million Senior Notes at CCC ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC' rating to Rural Cellular Corp.'s $325 million senior notes due 2010, issued under Rule 144A with registration rights. Simultaneously, Standard & Poor's lowered its ratings on Rural Cellular's corporate credit and bank loan to 'B-' from 'B', the subordinated debt rating to 'CCC' from 'CCC+', and the preferred stock rating on the company's junior exchangeable preferred stock to 'CCC-' from 'CCC'. At the same time, Standard & Poor's lowered the rating on the company's 11-3/8% senior exchangeable preferred stock to 'D' from 'CCC-'. This follows the company's announcement that its board of directors has determined not to declare the quarterly cash dividend on this instrument (the carrying value of which was $248 million as of March 31, 2003), which was due to pay cash dividends beginning August 1, 2003. "The ratings are removed from CreditWatch where they were placed on April 14, 2003 because of weakened industry fundamentals," said credit analyst Rosemarie Kalinowski. The proposed senior unsecured notes are rated two notches below the corporate credit rating because the ratio of priority obligations to total assets exceeds 30%. The outlook is stable. Proceeds of the new note issue together with $41 million of cash will be used to repay $356 million of bank debt. Alexandria, Minn.-based Rural Cellular provides wireless voice services to more than 722,000 subscribers in rural markets covering the Midwest, Northeast, South, and Northwest regions of the U.S. Pro forma for the new notes, as of March 31, 2003, total debt outstanding was about $1.3 billion. The downgrade reflects the higher degree of risk facing the regional rural wireless carriers because of a number of factors, including the adoption of the industry of wireless number portability in November 2003, continued declines in roaming rates received from the national carriers, and more aggressive competition from the national players. The rating on the company reflects high debt leverage and moderate growth in overall revenue, offset somewhat by below industry average churn of 1.8% and above average EBITDA margin in the mid- 40% area. In addition, recent roaming agreements to cover GSM traffic mitigates near-term competitive threats of an extensive network overbuild by these carriers in Rural Cellular's service area. SAFETY-KLEEN: Settles Claims Dispute with Dai-Ichi Kangyo Bank -------------------------------------------------------------- After much time and litigation expense, the Safety-Kleen Debtors and Mizuho Corporate Bank, Ltd., as successor-in-interest to Dai- Ichi Kangyo Bank, present Judge Walsh with a simple stipulation settling the dispute regarding an irrevocable letter of credit amounting to $6,000,000, which DKB issued in favor of Laidlaw Transportation, Inc., at Safety-Kleen's request. The terms of the settlement are: (1) DKB and the Safety-Kleen Debtors exchange mutual releases; (2) The Motion and Renewed Motion filed by DKB are withdrawn with prejudice and without costs; and (3) Upon the Court's approval of this settlement, DKB will be deemed to have an allowed, liquidated, unsecured proof of claim against the bankruptcy estate for $3,405,304, and all other proofs of claim by DKB are deemed superseded by the allowed claim in this settlement. Judge Walsh quickly adds his signature to this settlement. (Safety-Kleen Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 609/392-0900) SALEM COMMS: S&P Keeping Watch on B+ Corporate Credit Rating ------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on Salem Communications Corp., including its 'B+' corporate credit rating, on CreditWatch with negative implications due to a thinning covenant cushion and modest liquidity. Camarillo, Calif.-based radio operator Salem had approximately $316.1 million of debt outstanding on March 31, 2003. "The rating action recognizes that Salem's covenant cushion is narrowing due to debt-financed acquisition activity, which restrains cash flow in the short term, and financial covenants that become more restrictive beginning Sept. 30, 2003," said Standard & Poor's credit analyst Alyse Michaelson. Limited liquidity, derived from borrowing capacity under existing credit facilities, is expected to be used to fund already committed acquisitions. Discretionary cash flow deficits, resulting from high capital spending to re-format acquired stations and startup losses at acquired stations, preclude debt repayment. Still, Salem benefits from the relative cash flow stability afforded by its block programming time sales, which helps shield its revenues from lingering war-related softness in television advertising. Standard & Poor's will assess Salem's prospects for boosting its covenant cushion and liquidity, plans for expansion, and near-term operating outlook in resolving the CreditWatch listing. If the company is unable to accomplish these goals, the rating could potentially be lowered one or more notches. SIEBEL SYSTEMS: Initiates Restructuring Plan to Reduce Expenses --------------------------------------------------------------- Siebel Systems, Inc. (Nasdaq:SEBL) (S&P, BB Corporate Credit and B+ Subordinated Ratings), a leading provider of eBusiness applications software, announced revenues and earnings for the quarter ended June 30, 2003. Revenues for the second quarter of 2003 were $333.3 million. Net income was $9.8 million. Revenues from license fees for the second quarter of 2003 were $109.9 million. Revenues from maintenance, consulting, and other services were $223.4 million. The company's cash, cash equivalents, and short-term investments were $2.3 billion at June 30, 2003, an increase of $80.9 million from March 31, 2003. Days sales outstanding in accounts receivable decreased to 58 days in the second quarter of 2003 versus 63 days in the first quarter of 2003. Quarterly Highlights The following highlights were announced or occurred since Siebel Systems' last earnings statement: Siebel Systems Secures New Customers: The company concluded new software licensing agreements with more than 140 new customers in the second quarter, including 3M UK PLC; American Dental Association; Amersham Plc; Banco de Chile; Berlex Laboratories, Inc.; Binney & Smith, Inc.; Brinks Nederland B.V.; Britvic Soft Drinks Ltd.; Chartered Benefit Services, Inc.; City & Guilds of London Institute; debitel Danmark AS; Fuji Xerox (Hong Kong) Limited; Hewlett-Packard Colombia Ltda.; Inveresk Clinical Research Ltd.; Martindale-Hubbell; Motorola (China) Electronics Limited; Novartis Pharma Canada, Inc.; Organon NV; Sandisk Corporation; Shire Pharmaceutical Group PLC; Siemens Westinghouse Power Corporation; Thomson Legal & Regulatory Applications, Inc.; and T-Systems CSM GmbH. Siebel Systems Secures Repeat Orders: In the second quarter, the company concluded additional software licensing agreements with more than 175 existing customers, including Airbus S.A.S.; Bayerische Motoren Werke AG; Baxter Healthcare Corporation; Best Software SB, Inc.; BMW Financial Services, NA LLC; Cesky Telecom A.S.; ClientLogic B.V.; Credit Lyonnais Asset Management; General Services Administration; Greenpoint Mortgage Funding, Inc.; Guidant Corporation; Health Net, Inc.; Itron, Inc.; JPMorgan Chase Bank; KPN Telecom GSE ZW; Monster Worldwide, Inc.; National Australia Bank Limited; Network Appliance, Inc.; Novo Nordisk Pharmaceuticals, Inc.; Otis; Pfizer, Inc; Philip Morris International Management SA; Putnam Investments, Inc.; RAC Motoring Services, Ltd.; Royal Caribbean Cruises, Ltd.; RWE Systems AG; SimCorp A/S; SITA; SKF Data Service AB; Stream S.p.A.; Telecom Italia Mobile S.p.A.; Telecom Italia S.p.A; The Manufacturers Life Insurance Company; T-Mobile USA, Inc.; Trend Micro, Inc.; Warner Brothers Entertainment, Inc.; Xerox Corporation.; and XM Satellite Radio, Inc. Customer Engagements The company concluded new engagements with more than 140 new customers and expanded engagements at more than 175 existing customers, including the following: Autodesk, a global leader in design software, selected Siebel eBusiness Applications as its worldwide CRM software standard. Autodesk will implement multiple Siebel applications as part of a broad, company-wide initiative to enhance and expand customer and partner relationship management. The first phase of this 4,000- user deployment, using Siebel Partner Relationship Management, will focus on applications for Autodesk employees managing orders for complex digital design and content creation products and services, followed by self-service and channel management applications used by customers and partners to directly interact with Autodesk. Subsequent phases will extend Siebel eBusiness Applications to sales, marketing, and call center users, with Siebel Analytics providing insight into customer behavior and preferences to top executives and managers across the enterprise. Two key factors in Autodesk's selection of Siebel CRM were its intuitive user interface and the breadth of business functionality. BISYS(R), a premier provider of business process outsourcing solutions for investment firms, insurance companies, and banks, has purchased an additional 1,000 user licenses of Siebel Finance, MidMarket Edition. BISYS, which had originally acquired close to 6,000 licenses as the basis for its Relationship Manager Suite, is experiencing rapid client adoption -- more than 65 bank sales -- of this fully integrated front-office service, sales, and marketing solution. Relationship Manager Suite, powered by Siebel eBusiness Applications, enables BISYS' community and regional bank clients to deliver a consistent customer experience while supporting a broad portfolio of financial services across multiple delivery channels. BISYS has also deployed Siebel Call Center internally to optimize service and build lasting, profitable relationships with its client banks. BT expanded its global use of Siebel eBusiness Applications in the second quarter, contributing to anticipated cost savings of more than $200 million by 2004. In an implementation involving more than 22,500 users, the retail division of one of the world's leading communications companies is transforming itself into an agile, customer-focused business. To serve its 21 million consumer and business customers, BT is rationalizing up to 104 disparate call centers and investing $179.4 million to create a network of 33 multifunctional, next-generation contact centers (31 in the UK and 2 in India), powered by Siebel CRM applications. The integrated customer understanding will enable BT Retail to provide a consistent, fast, and accurate response to all 850 million inbound customer inquiries received each year -- whether it is through the Internet, the telephone, mobile devices, field sales, or channel partners. The Civil Aviation Safety Authority, the independent authority responsible for the safety regulation of civil air operations in Australia and the operation of Australian aircraft overseas, will standardize on Siebel eGovernment applications across more than 500 users nationwide. CASA will deploy Siebel Service, Siebel PRM, and Siebel Employee Relationship Management applications to manage its extensive registries, which contain more than 100,000 aviation registration records of aviation industry participants and aircraft. With centralized and consistent information, consolidated safety information, and automated workflow, CASA will become more "participant-centric," supporting reporting obligations to government authorities while more effectively managing resources. GE Medical Systems, a unit of General Electric Company and a $9 billion global leader in medical imaging, healthcare services, and technology, is standardizing its global service operations on Siebel Medical call center, contracts, and billing capabilities. The new global service delivery platform will replace multiple service applications and unify service information across multiple departments and systems, giving GE Medical Systems the flexibility to scale its service operations as the company expands its business through future growth. The Siebel implementation will provide a comprehensive repository used by GE Medical Systems' service professionals worldwide to improve service productivity and effectiveness, increase service revenues, and maximize customer satisfaction. Siebel Systems Product and Technology Leadership Siebel Systems Delivers Products and Services for Accelerated ROI; Showcases Customer Success at European User Week: Joined by more than 1,500 customers and partners, Siebel Systems showcased new products and services for easier integration, rapid deployment, and reduced total cost of ownership at its annual European User Week in Cannes, France. The company unveiled Siebel 7.5.3, which sets a new standard for accelerated time-to-value by delivering an additional 17 percent cost savings in deploying and maintaining Siebel eBusiness Applications. Siebel Systems also announced packaged, fix-priced Rapid Deployment Offerings to help customers gain maximum value and competitive advantage from their technology investment. In addition, new Business Process Solution Sets help map the most valuable business processes supported by Siebel applications to customer needs as they implement Siebel applications for accelerated ROI. Siebel Systems and IBM Introduce Next-Generation CRM Bank Teller Solution: Demonstrated at Siebel European User Week for the first time, Siebel Branch Teller is designed to speed banking transactions by giving tellers an expanded set of information and tools in a highly intuitive interface, while incorporating detailed customer insight and management functions and providing full-featured transaction-processing capabilities. Developed in close collaboration with IBM and based on IBM's WebSphere, the solution reflects the evolving role of the retail bank teller as a more informed and empowered customer service agent. Siebel Branch Teller enables banks to gain critical capabilities that enable tellers to improve customer loyalty and increase both branch and customer profitability. Siebel Systems Receives Industry Accolades Siebel Systems was broadly recognized as one of the world's leading software companies in the second quarter of 2003: -- Leading Analyst Research Confirms Siebel Systems' Commanding Lead in CRM Market Share and Production Implementations: According to the leading research and advisory firm Gartner, Inc., Siebel Systems is the unrivaled leader in global CRM software deployments. Gartner Dataquest estimates of new CRM software license sales show Siebel Systems in the number one position. Further, Gartner Dataquest estimates of buyers' intentions to implement within 12 months of purchase show that Siebel Systems is the leader with 28.1 percent market share, compared to the closest competitor who has 5 percent. Additionally, a separate Gartner, Inc. study indicates Siebel Systems' annual number of users deployed is five to eight times larger than that of any competitor. IDC, the premier global market intelligence and advisory firm in the information technology and telecommunications industries, also reports that Siebel Systems maintained its dominant market position, with 17.1 percent of the worldwide CRM applications software market in 2002, compared to the closest competitor who has approximately 6 percent. In upcoming IDC research on vendor market standings within marketing, sales, and customer service software segments, IDC will indicate that Siebel Systems outpaced competitors with the leading market share worldwide in each segment. -- Siebel Systems Named Worldwide Leader in Customer Analytic Applications: In a May 2003 report, IDC recognized Siebel Systems as the market share leader in the rapidly growing customer analytic applications market. Siebel Systems captured 15.4 percent ($122.6 million) of the worldwide market for these applications in 2002, up from 5.5 percent share in 2001. IDC expects customer analytics to be the fastest growing analytic applications market over the next five years, increasing at a 12.9 percent compound annual growth rate to more than $1.4 billion by 2007. IDC also reports that Siebel Systems was the fastest growing major analytic applications provider in the industry, with revenue growth of 230 percent in 2002. -- Siebel Systems Earns Leadership Status in META Group Evaluation of Channel Relationship Management: Siebel PRM received the highest overall score for channel relationship management in META Group's first annual METAspectrum(SM) vendor analysis for ChRM application suites. Siebel Systems was the only vendor listed in the Leader position and the only vendor to receive top ratings from META Group for both channel and customer relationship management. -- Harvard Business School Alumni Association Honors Siebel Systems with 2003 Entrepreneurial Company of the Year Award: HBSA of Northern California awarded Siebel Systems as the 25th annual Entrepreneurial Company of the Year to honor the company's entrepreneurial roots, lasting presence, and exceptional management through periods of rapid growth. -- Northern California Ernst & Young Recognizes Thomas M. Siebel as "Master Entrepreneur of the Year - 2003": Northern California Ernst & Young honored Mr. Siebel as the recipient of its most prestigious award of Master Entrepreneur for founding and managing one of the most successful software companies in history. Ernst & Young selects only one executive from among 35 Entrepreneur of the Year award finalists from a wide variety of industries throughout Northern California for this special recognition. Siebel Systems Restructures for Increased Profitability Siebel Systems has initiated a restructuring plan that it expects will enable the company to achieve a 15 percent operating margin at roughly current revenue levels. Measures include a workforce reduction of approximately 490 employees; consolidation or elimination of certain facilities; reduction of depreciation expenses through retirement of some assets; and migration of some business operations offshore. The company expects to end the third quarter with approximately 5,000 employees. The plan is expected to achieve quarterly savings of nearly $30 million by the fourth quarter of 2003 and nearly $40 million by the second half of 2004, when the full effect of the reduced depreciation costs is realized. The company expects to take a restructuring charge in the third and fourth quarters of 2003. Siebel Systems, Inc. is a leading provider of eBusiness applications software, enabling corporations to sell to, market to, and serve customers across multiple channels and lines of business. With more than 3,500 customer deployments worldwide, Siebel Systems provides organizations with a proven set of industry-specific best practices, CRM applications, and business processes, empowering them to consistently deliver superior customer experiences and establish more profitable customer relationships. Siebel Systems' sales and service facilities are located in more than 28 countries. SK GLOBAL AMERICA: Case Summary & 18 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: SK Global America, Inc. One Parker Plaza 400 Kelbey Street Fort Lee, New Jersey 07024 Bankruptcy Case No.: 03-14625 Type of Business: SK Global America is a subsidiary of SK Global Co., Ltd., one of the world's leading trading companies. Chapter 11 Petition Date: July 21, 2003 Court: Southern District of New York (Manhattan) Judge: Cornelius Blackshear Debtor's Counsel: Albert Togut, Esq. Scott E. Ratner, Esq. Togut, Segal & Segal LLP One Penn Plaza Suite 3335 New York, NY 10119 Tel: (212) 594-5000 Fax: (212) 967-4258 Total Assets: $3,268,611,000 Total Debts: $3,167,800,000 Debtor's 18 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Koram Bank (all branches) Short term loan $65,000,000 Koram Bank Short term loan $50,000,000 39, Da-dong Chung-gu Seoul, Korea 100-180 Mr. Park Whan-Min Tel: 82-2-3455-2136 Fax: 82-2-3455-2935 Koram Bank, London Branch Short term loan $15,000,000 Second Floor, 30-40 Eastcheap London, EC3M 1HD United Kingdom Dong Hwun Song Tel: 44-20-7283-1833 Fax: 44-20-7626-8828 Shinhan Bank, New York Short term loan $52,000,000 Branch 32nd Floor 800 3rd Avenue New York, NY 10022 Suk-Jin Koh Tel: 212-371-8000 Fax: 212-371-8875 Woori Bank (all branches) Short term loan $41,000,000 Woori Bank, New York Short term loan $29,000,000 Agency 245 Park Avenue, 41st Fl/ New York, NY 10167 Jeong Han Kim Tel: 212-949-1900 Fax: 212-490-7146 Woori Bank, HongKong Short term loan $7,000,000 Branch Suite 1401, Two Pacific Place 88 Queensway, Hong Kong Hong-Koo Kim Tel: 85-2-2521-8016 Fax:82-2-2526-7458 Woori Bank, L.A. Agency Short term loan $5,000,000 3360 West Olympic Blvd. Suite 300 Los Angeles, CA 90019 Kwi Hwa Jung Tel: 213-620-0747 Fax: 213-627-5438 The Bank of New York Short term loan $40,000,000 One Wall Street New York, NY 10286 John T. Murray Tel: 212-635-7683 Fax: 213-635-8599 Kookmin Bank/New York Short term loan $35,000,000 Branch 565 Fifth Avenue, 24th Fl. New York, NY 10017 Sei-Jun Park Tel: 212-679-6100 Fax: 212-897-1456 Union Bank of California Short term loan $26,500,000 400 California Street 6th Floor San Francisco, CA 94104 Young Ho Won Tel: 415-765-2887 Fax: 415-765-2653 Korea Exchange Bank (all Short term loan $25,991,000 Branches) Korea Exchange Bank, Short term loan $15,991,000 L.A. Agency 777 S. Figueroa St., Suite 3000 Los Angeles, CA 90017 Yong Koo Kim Tel: 213-683-0830 Fax: 213-622-5378 Korea Exchange Bank, Short term loan $10,000,000 Chicago Branch 181 West Madison Street, Suite 2100 Chicago, IL 60062 Tack Hyun Yun Tel: 312-372-7890 Fax: 312-372-7839 The Korea Development Bank Short term loan $23,000,000 (all branches) The Korea Dev't Bank/ Short term loan $15,000,000 New York Branch 320 Park Avenue 32nd Floor New York, NY 10022 Sung Ho Park Tel: 212-688-7686 Fax: 212-421-5028 KDB Asia Limited Short term loan $5,000,000 Suite 2101-2103, 21st Floor Two Exchange Square 8 Connaught Place Central Hong Kong Mr. Yong-II Kwon Tel: 85-2-2525-1128 Fax: 85-2-2537-3989 Korea Dev't Bank, Ireland Short term loan $3,000,000 Russel House, Ground Floor Stokes Ploace St. Stephens Green Dublin 2, Ireland N.J. Seong Tel: 353-1-4753-644 Fax: 353-1-4753-658 Societe Generale-New York, Short term loan $22,000,000 As Agent 1221 Avenue of the Americas New York, NY 10020 Eric Wormser Tel: 212-278-6078 Fax: 212-278-7723 Citibank N.A., Hong Kong Short term loan $20,000,000 Branch 48/F Citibank Tower, Citibank Plaza 3 Garden Road, Central Hong Kong Adrienne Lam Tel: 852-2868-8929 Fax: 852-2845-3415 Mizuho Corp. Bank, Ltd. Short term loan $20,000,000 1251 Avenue of the Americas New York, NY 10020 Takashi Yano Tel: 212-282-4947 Fax: 212-282-4383 The Export-Import Bank Short term loan $15,000,000 of Korea 16-3, Youido-dong Yongdeungpo-ku, Seoul 150-996 Korea Chang Ho Ha Tel: 822-3779-6431 Fax: 822-3779-6749 Industrial and Commercial Short term loan $13,000,000 Bank of China (all Branches) Industrial and Commercial Short term loan $8,000,000 Bank of China-Seoul Branch Taepyungro 2-Ka Chung-Ku, Seoul 100-102 Korea Industrial and Commercial Short term loan $5,000,000 Bank of China-Tokyo Branch 2-1 Maranouchi 1-Chome Chiyoda-Ku, Tokyo 100-0005 Japan Kong Xiannguo Tel: 81-3-5223-2008 Fax: 81-2-5219-8502 Hana Bank, NY Agency Short term loan $11,000,000 West Bldg. (24th Floor) 280 Park Avenue New York, NY 10017 Byouing-Ho Kim Tel: 212-687-6160 Fax: 212-818-1721 Nat Exix Banques Short term loan $10,000,000 Popularies - Hong Kong Branch 12th Floor, Citic Tower 1 Tim Mei Avenue Central, Hong Kong Johnson Chan Tel: 852-2828-0916 Fax: 852-2583-9801 Credit Lyonnais-Seoul Short term loan $8,000,000 Branch 8-10th Floor Youone Bldg. 75-95 Seosomundong, Chung-Ku, Seoul Byung Pil Kim Tel: 82-2-772-8201 Fax: 82-2-772-8427 Oriental Fire & Marine Short term loan $5,000,000 Insurance Co, Ltd. 25-1, Youido-dong Yeongdeungpo-gu, Seoul Korea 150-878 Mr. Shin, Yong Nam Tel: 82-2-3786-1412 Fax: 82-2-3786-1430/782 Cho Hung Bank, London Short term loan $3,000,000 Branch 1 Minster Court Mincing Lane London EC3R 7AA UK Kang Hee Lee Tel: 44-20-7623-7791 Fax: 44-20-7648-1421 SPIEGEL GROUP: Wants Blessing to Hire Watson Wyatt as Consultant ---------------------------------------------------------------- In the context of their postpetition operations, The Spiegel Debtors need a consultant for employee benefit matters. In this regard, the Debtors chose Watson Wyatt to provide employee benefits consulting services. According to James L. Garrity, Jr., Esq., at Shearman & Sterling LLP, in New York, Watson Wyatt is particularly suited to provide benefits consulting services since it has already provided expert witnesses and compensation program development services to debtors in numerous cases. Mr. Garrity relates that the Debtors have been working with Watson Wyatt to prepare an incentive plan and performance incentive program aimed at rewarding critical employees for achieving results necessary to their emergence from Chapter 11 protection. This incentive program will ultimately provide value to the various interests of the Debtors' creditor constituencies. By this application, the Debtors ask the Court for permission to employ Watson Wyatt, nunc pro tunc to May 1, 2003. Specifically, Watson Wyatt will: (a) make recommendations of retention, emergence and post- emergence compensation programs consistent with Spiegel's strategy and structure; (b) make a detailed report containing description and costing of the recommended plans; (c) hold meetings and maintain ongoing communications with Spiegel management, legal counsel and bankruptcy professionals on pay and related issues; (d) review prepetition contracts; and (e) assist with the determination of all administrative claims including contracts, deferred compensation, severance and change in control agreements. As compensation for its services, Watson Wyatt will: (a) charge the Debtors a $65,000 fee, inclusive of administrative and technological services, for the preparation of reports; (b) charge the Debtors for its professional services on an hourly basis in accordance with its ordinary and customary rates effective on the date the services are rendered; and (c) seek reimbursement of actual and necessary out-of-pocket expenses. The Watson Wyatt professionals who will primarily work for the Debtors and their customary hourly rates are: Paul Platten Senior Consultant $645 Alex Cedro Consultant 235 Carol Parsons Administrative Assistant 215 Claire Wilson Administrative Assistant 140 Pursuant to the terms and conditions of the firm's retention, if any of the services do not conform to the requirements of their engagement, the Debtors will notify Watson Wyatt and services will be performed again at no additional charge or a portion of the fees paid will be refunded. If the re-performance of services and refund of the applicable fees would not provide an adequate remedy for damages arising from the breach of the general terms of the engagement, Watson Wyatt's maximum total liability will be limited direct damages in an amount not exceeding $250,000 or, if greater, the fees payable with respect to the particular engagement pursuant to which the liability arises. However, the Liability Cap does not apply to the extent that any liability arises from Watson Wyatt's gross negligence or willful misconduct or damage to any personal property. Watson Wyatt Senior Consultant Paul Platten assures the Court that the firm has no connection with the Debtors, their creditors, the U.S. Trustee or any other interested party in the Chapter 11 cases. Watson Wyatt also does not represent any interest adverse to the Debtors and their estates in matters for which it will be employed. (Spiegel Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) SR TELECOM: Closes $4.5 Million Private Placement Transaction ------------------------------------------------------------- SR Telecom(TM) Inc. (TSX: SRX) has closed its previously announced private placement financing. The Corporation received gross proceeds of $4,488,000, issuing 5,280,000 units at $0.85 per unit. Each unit consists of one common share in the capital of SR Telecom and one-half of one share purchase warrant (each whole share purchase warrant upon exercise thereof will entitle the holder thereof to acquire one common share in the capital of SR Telecom at a price of $1.00 per share until July 18, 2008). The securities will be subject to a four-month hold period under applicable securities laws. The distribution was marketed on a best efforts basis by way of a brokered private placement with TD Securities Inc. and CIBC World Markets Inc. acting as agents. Net proceeds will be used for working capital. At closing, SR Telecom has 60,946,415 common shares issued and outstanding. * * * As reported, Standard & Poor's Ratings Services affirmed its 'B+' long-term corporate credit and senior unsecured debt ratings on SR Telecom Inc. At the same time, the outlook was revised to negative from stable due to weak first-quarter results. The ratings on SR Telecom reflect the company's strong position in this market and the extent of its customer and geographic diversity. This is offset by the company's limited near-term financial flexibility, its reliance on the successful rollout of its new products to restore profitability growth, and ongoing exposure to emerging markets and prolonged economic weakness in South America, which continues to negatively affect SR Telecom's Chilean subsidiary. TOWER AUTOMOTIVE: Working Capital Deficit Narrows to $82 Million ---------------------------------------------------------------- Tower Automotive, Inc. (NYSE:TWR) announced second quarter revenues of $743 million, compared with $751 million in the second quarter of 2002. The company reported a net loss of $2 million for the quarter versus net income for the second quarter of 2002 of $23 million. For the six months ended June 30, 2003, revenues were $1.5 billion, compared with $1.4 billion in the 2002 period. Reported net income for the six months ended June 30, 2003 was $9 million, or $0.16 per diluted share. The company reported a net loss of $124 million for the six months ended June 30, 2002. "For the quarter, we converted well on higher than expected sales," stated Dug Campbell, president and chief executive officer of Tower Automotive. "We also generated $112 million of cash from operations, which exceeded our capital spending of $58 million for the quarter. Our recent debt restructuring has improved the financial flexibility of our enterprise and our launch activity is on track." During the second quarter of 2003, the company completed a $258 million senior note offering and also amended its senior credit facility, reducing the borrowing capacity but providing for less stringent financial covenants in order to enhance overall liquidity. The combination of the senior notes offering and amended senior credit facility will also provide flexibility for the company to redeem its $200 million convertible subordinated notes. At June 30, 2003, the company's balance sheet shows that its total current liabilities outweighed its total current assets by about $82 million. The company previously announced that it is relocating the production of high-volume frame assemblies for the Ford Ranger currently performed at its Milwaukee facility to its Bellevue, Ohio, business unit. The relocation of the Ranger production line will be completed by June of 2004. Tower Automotive expects to realize annual cash savings, primarily from reduced labor costs, of approximately $10 million following full completion of the move. During the second quarter of 2003 the company recorded a $23.1 million pre-tax restructuring and asset impairment charge ($0.27 per share effect) comprised of cash charges of $2.8 million, pension and other post-retirement benefit plan curtailment costs of $7.7 million and non-cash asset impairment charges of $12.6 million related to restructuring activities. Tower Automotive, Inc., is a global designer and producer of structural components and assemblies used by every major automotive original equipment manufacturer, including Ford, DaimlerChrysler, GM, Honda, Toyota, Nissan, Fiat, Hyundai/Kia, BMW, and Volkswagen Group. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The company is based in Grand Rapids, Mich. Additional company information is available at http://www.towerautomotive.com As reported in Troubled Company Reporter's June 6, 2003 edition, Standard & Poor's Ratings Services assigned its 'B' rating to new $250 million senior notes due 2013 of R.J. Tower Corp., issued under rule 144A with registration rights. At the same time Standard & Poor's assigned its 'BB-' rating to the company's $240 million senior secured term loan. The debt issues will be guaranteed by R.J. Tower's parent, Tower Automotive Inc. The 'BB-' corporate credit rating on Tower was affirmed. The outlook is stable. UNITED AIRLINES: Turning Over Assets to Northern Trust Company -------------------------------------------------------------- On October 4, 1989, UAL Corporation and National Bank of Detroit entered into a Trust Agreement. The Agreement created a trust that held certain assets to fund the Debtors' retirement benefits liabilities for certain former directors. On June 15, 1997, Northern Trust Company was appointed successor trustee to NBD. According to James H.M. Sprayregen, Esq., at Kirkland & Ellis, Section 3(a) of the Trust Agreement provides that in a UAL bankruptcy, Northern Trust will dispose of any assets in the Trust only as a "court of competent jurisdiction" may direct to satisfy the claims of the Debtors' creditors. The Debtors and Northern Trust have agreed that all assets in the Trust will be remitted to the Debtors, minus application fees and any outstanding expenses payable to Northern Trust. The current estimated value of assets in the Trust is $1,512,000. In the agreed Stipulation, Northern Trust will liquidate the Trust's assets and deliver the proceeds to the Debtors, less $1,266 in fees and expenses. The parties have agreed to the terms, but Court approval is required for Northern Trust to liquidate the assets and remit the funds to the Debtors. (United Airlines Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) UPC POLSKA: Gets Court Nod to Hire Ordinary Course Professionals ---------------------------------------------------------------- UPC Polska, Inc., sought and obtained approval from the U.S. Bankruptcy Court for the Southern District of New York to continue employing the professionals it utilized in the ordinary course of its business, without the submission of separate employment applications and affidavits. The Debtor will pay to each Ordinary Course Professional without an application to the Court by such professional, 100% of fees and disbursements incurred. Such payments would be made following the submission to and approval by the Debtor of appropriate invoices setting forth in reasonable detail the nature of the services rendered and disbursements actually incurred but not to exceed a total of $30,000 per month or $250,000 in the aggregate in the Debtor's Chapter 11 Case, The Debtor desires to continue to employ the Ordinary Course Professionals to render many of the services to its estate similar to those services rendered prior to the Petition Date. Prior to the Petition Date, the amount of aggregate annual compensation paid by the Debtor to the Ordinary Course Professionals on an annual basis was approximately $700,000. These Ordinary Course Professionals render key services for the Debtor that impact the Debtor's continuing business operations. It is essential that the employment of the Ordinary Course Professionals, many of whom are already familiar with the Debtor's operations and business affairs, continue on an ongoing and uninterrupted basis to avoid disruption of the Debtor's business operations, as well as to ensure Debtor's compliance with state and federal legal and regulatory requirements. 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. U.S. CAN CORP: Completes $125 Million 10-7/8% Debt Offering ----------------------------------------------------------- U.S. Can Corporation's wholly owned Subsidiary, United States Can Company, has completed the offering of $125 million of its 10-7/8% senior secured notes due 2010. The notes are secured, on a second priority basis, by substantially all of the collateral that currently secures the Company's senior secured credit facility. The second priority senior secured notes were offered in the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and outside the United States pursuant to Regulation S under the Securities Act. The second priority senior secured notes have not been registered under the Securities Act or any state securities laws and therefore may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and any applicable state securities laws. The Company has also amended its senior secured credit facility, as previously announced, to permit the offering of the second priority senior secured notes and adjust certain financial covenants, among other things. These amendments also permit, from time to time and subject to certain conditions, the Company to make borrowings under its revolving credit facility for repurchases of a portion of its outstanding 12-3/8% senior subordinated notes in open market or privately negotiated purchases. U.S. Can Corporation is a leading manufacturer of steel containers for personal care, household, automotive, paint and industrial products in the United States and Europe, as well as plastic containers in the United States and food cans in Europe. As reported in Troubled Company Reporter's July 15, 2003 edition, Standard & Poor's Ratings Services assigned its CCC+ rating to United States Can Co.'s new $125 million senior secured second-priority notes due 2010. At the same time, Standard & Poor's revised its outlook on U.S. Can Corp. to stable from negative, reflecting the expected improvement in the company's liquidity, financial covenant compliance, and debt amortization schedule once the proposed note issue is successfully completed. Standard & Poor's also affirmed its B corporate credit rating on Lombard, Illinois based U.S. Can Corp. Total debt outstanding was $546 million at March 31, 2003. VANTAGEMED CORP: Appoints Ernie Chastain Vice President of Sales ---------------------------------------------------------------- VantageMed Corporation (OTC Bulletin Board: VMDC.OB), a leading provider of healthcare information solutions, announced the appointment of Ernie Chastain as the company's vice president of sales. Mr. Chastain joins VantageMed after most recently serving as the Vice President of Sales of the Enterprise Division of VitalWorks Inc. Ernie Chastain has over 20 years of senior sales management experience with high-profile healthcare information technology companies such as Infocure/VitalWorks, Inc., Quality Systems, Inc., Elcomp Systems Inc., and Versyss Corporation among others. His experience includes building successful sales organizations, and introducing new products to increase market share and profitability. He received a BA in Marketing from the University of Georgia. "Ernie Chastain brings to VantageMed a wealth of senior sales management expertise that will accelerate VantageMed's next phase of growth," says Richard M. Brooks, Chairman and Chief Executive Officer, VantageMed. " Ernie has an impressive history of success in this marketplace, especially increasing revenue and expanding market share. His energy, intellect, and vision yield the perfect combination to grow and lead our talented sales team." VantageMed is a provider of healthcare information systems and services distributed to more than 12,000 customer sites through a national network of regional offices. Our suite of software products and services automates administrative, financial, clinical, and management functions for physicians, dentists, and other healthcare providers and provider organizations. VantageMed Corporation's December 31, 2002 balance sheet shows that its total current liabilities exceeded its total current assets by about $1.1 million. The Company also reported that its total net capital is further depleted to about $3 million from about $10 million recorded a year ago. VICWEST CORP: Creditors' Meeting Scheduled to Convene on Aug. 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's protection under the CCAA has been extended until August 12, 2003. A meeting of affected creditors of Vicwest has been scheduled for Friday, August 1, 2003 at 10:00 a.m. (Toronto time) in Room 205B, Metro Toronto Convention Centre, 255 Front Street West (North Building), Toronto, Ontario. The Meeting is being held to consider and, if deemed advisable, to approve a plan of compromise and reorganization proposed by Vicwest pursuant to the CCAA. Copies of the Meeting materials that were mailed to affected creditors of Vicwest are available on the Canadian securities regulators' Web site -- http://www.sedar.com-- and on the Web site of Deloitte & Touche Inc., monitor to Vicwest -- http://www.deloitte.com/ca/vicwest The monitor has recommended that all affected creditors vote in favor of the Plan. 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 or September, 2003. Vicwest, with corporate offices in Oakville, Ontario, is Canada's leading manufacturer of metal roofing, siding and other metal building products. VIRYANET: March 31, 2003 Balance Sheet Upside-Down by $883,000 -------------------------------------------------------------- ViryaNet (NasdaqSC: VRYA), a leading provider of integrated mobile and Web-based software applications for workforce management and the automation of field service delivery, announced financial results of its first fiscal quarter of 2003. Total revenues were $2.0M for the first quarter, ended March 31, 2003, a 56% increase from $1.3M recorded for the fourth quarter of 2002, and a 52% decrease from $4.2M recorded in the first quarter of 2002. For the first quarter of 2003, the Company reported a net loss of $1.4M, compared to a net loss of $4.3M for the fourth quarter of 2002, and compared to a net loss of $0.3M for the first quarter of 2002. The Company reported gross margins of 42% for the first quarter of 2003, compared to 6% for the fourth quarter of 2002, and 67% for the first quarter of 2002. The increase in gross margins from the previous quarter was due to an increase in the volume of services business, the absence of the one-time restructuring charges of the previous quarter in the services business, and the contribution of higher-margin license revenues. Operating expenses for the first quarter of 2003 were $2.1M, compared to $4.2M for the fourth quarter of 2002, and compared to $3.1M for the first quarter of 2002. Excluding charges related to: provisions for doubtful accounts; restructuring; in-process R&D write-offs; or stock-based compensation, operating expenses for the first quarter of 2003 were $2.1M compared to $2.7M for the fourth quarter of 2002, and $2.6M for the first quarter of 2002. During July 2003, the Company reached an agreement with its primary lender, Bank Hapoalim of Israel, to restructure a portion of its short-term loan arrangement for $3.45M. Under such agreement, the bank has agreed to convert $2.4M of the short-term loan into a long-term loan. The Company's balance sheet statements as of December 31, 2002 and March 31, 2003 have been adjusted to reflect such change in the loan structure. The Company's cash position on March 31, 2003 was $2.6M, compared to $3.2M at the end of the previous quarter. The operating cash flow during the quarter improved to a cash burn of $0.8M compared to a cash burn of $1.7M in the previous quarter. Excluding cash outflows during the quarter related to Q4 2002 restructuring activities, the Company's cash burn was $0.5M. Days of Sales Outstanding for the quarter ended on March 31, 2003 was 58 days. The Company's March 31, 2003 balance sheet shows a working capital deficit of about $1.1 million, and a total shareholders' equity deficit of about $883,000. "We are beginning to realize the benefits of the restructuring we accomplished in 2002 in operations, sales, distribution, and new vertical markets," stated Win Burke, president and CEO, ViryaNet. "Our revenues are beginning to grow as our new sales, distribution, and marketing programs begin to produce results. As a result of the cost reductions taken in 2002 as well as improved revenues on improved business terms, our operational cash burn in this quarter was reduced to approximately $0.5M. We anticipate steady improvements going forward, and, for the second quarter of 2003, we expect to report revenues in the range of $2.6M to $2.8M, and cash flow from operations to be slightly positive." Q1 Activities During the first quarter of 2003, the Company forged a strategic partnership with GE Network Solutions, a business unit of GE Power Systems, and an affiliate of GE Capital Equity Holdings, which is the second largest shareholder of ViryaNet. The terms of the agreement call for GE Network Solutions to act as a value added reseller (VAR) of the ViryaNet products -- marketing, selling, implementing, and supporting the ViryaNet Service Hub in the utilities, oil & gas, and telecommunications markets worldwide. The terms of the agreement included an initial purchase by GE Network Solutions of ViryaNet software licenses. In other reseller channel activities, Aspective, ViryaNet's European partner, gained a new telecommunications customer, Orange Telecommunications, using ViryaNet's software and sold additional ViryaNet software user licenses to T-Mobile, another of its telecommunications customers. ViryaNet also entered into an agreement with Bitek, a product and systems integration company, located in Korea, whereby Bitek markets, sells, and supports ViryaNet Service Hub in multiple market sectors in southeast Asia. The first quarter of 2003 also saw the rapid implementation of ViryaNet Service Hub at Leslie's PoolMart, as well as the completion of a major release upgrade at Symbol Technologies. ViryaNet is a provider of software applications that improve the quality and efficiency of an organization's service operations. ViryaNet's flagship product -- the award-winning ViryaNet Service Hub -- combines the power of the Internet, the freedom of wireless technologies, and the resources of ViryaNet's deep service expertise to help companies improve workforce scheduling, dispatching, and activity reporting; customer contract and entitlement automation; and asset, logistics, and depot repair management. Customers in the utility, telecommunications, grocery and retail, high-technology manufacturing, HVAC, and other industries use ViryaNet Service Hub to transition complex service business processes into a manageable, scalable Internet operation, with the goal of increasing service revenues, decreasing service costs, and maximizing customer satisfaction. WABASH NATIONAL: Preparing to Offer $100 Million Conv. Notes ------------------------------------------------------------ Wabash National Corporation (NYSE: WNC) intends to raise approximately $100 million through an offering of five-year senior unsecured notes that will be convertible into shares of Wabash's common stock, subject to market and other conditions. The interest rate, conversion price and offering price are to be determined by negotiations between Wabash and the initial purchasers of the notes. The Company may raise up to an additional $25 million upon exercise of an option granted to the initial purchasers in connection with the offering. The Company expects to use the net proceeds of the offering to repay outstanding indebtedness. Wabash National Corporation designs, manufactures, and markets standard and customized truck trailers under the Wabash(TM) brand name. The Company is one of the world's largest manufacturers of truck trailers and a leading manufacturer of composite trailers. The Company's wholly owned subsidiary, Wabash National Trailer Centers, is one of the leading retail distributors of new and used trailers and aftermarket parts throughout the U.S. and Canada. Wabash National Corp.'s March 31, 2003 balance sheet shows that its total current liabilities exceeded its total current assets by about $205 million. As reported in Troubled Company Reporter's April 16, 2003 edition, Wabash National completed the amendment of its credit facilities, which includes its revolving line of credit, its senior notes, its receivables facility and its lease facility. The amendment revises certain of the Company's financial covenants and adjusts downward the required monthly principal payments during 2003. In another previous report, the Company said it was not prepared to predict that first quarter results, or any other future periods, would achieve net income, and did not expect to announce further results before the first quarter would be completed, given the softness in demand and other factors. The Company remains in a highly liquidity-constrained environment, and even though its bank lenders have waived current covenant defaults, there is no certainty that the Company will be able to successfully negotiate modified financial covenants to enable it to achieve compliance going forward, or that, even if it does, its liquidity position will be materially more secure. WABASH NATIONAL: June 30 Working Capital Deficit Tops $190 Mill. ---------------------------------------------------------------- Wabash National Corporation (NYSE: WNC) announced results for the three and six month periods ended June 30, 2003. Net sales for the second quarter were $230 million compared to $210 million for the same period last year. Net loss for the second quarter was $27 million, including a $29 million non-cash charge related to planned asset divestitures, compared to a net loss of $22 million for the same period last year. Diluted loss per share was $1.05 for the quarter, including a $1.09 per share charge related to planned asset divestitures, compared to a loss of $0.96 per share for the 2002 quarter. For the six months ended June 30, 2003, net sales were $453 million and a net loss of $26 million, including the $29 million charge, compared to net sales of $372 million and a net loss of $36 million for the same period last year. Diluted loss per share for the six months ended June 30, 2003 and 2002 was $1.02, including the $1.09 per share charge, and $1.61, respectively. At June 30, 2003, Wabash National's June 30, 2003 balance sheet shows that its total current liabilities eclipsed its total current assets by about $190 million, while its net capital had further dwindled to about $49 million. Commenting on the quarter, William P. Greubel, President and Chief Executive Officer, stated, "The fundamental changes currently taking place within the Company could prove to be a watershed period as we move to structurally improve the Company, both operationally and financially. The following are just some of the significant highlights from the quarter: * Sales increased 3% from the 2003 first quarter on the continuing improvement in demand for new trailers while operating income, before the $29 million charge, improved 48% over first quarter 2003 levels. We are indeed becoming earnings focused as opposed to share focused. We successfully started up two new production lines during the quarter, one line for our new Wabash FreightPro sheet and post trailer and one line for DuraPlate(R) containers. We believe trailer industry demand will continue to improve over the next several quarters. Our demand continues to be affected by our large customers managing their equipment capacity very closely; * We are in the final planning stages of reorganizing our channels of sales and distribution which will allow us to improve our opportunities to exploit our product and service offerings in the mid to large sized fleet segments of the trailer industry while maintaining our strategic relationships with the premier trucking companies in the U.S.; * As announced, we have signed a definitive agreement to sell substantially all of the assets of our leasing and rental business and our aftermarket parts business. Total consideration from the sale of these assets and the retained assets is approximately $65-$70 million of which $55 million will be paid in cash upon closing. We expect the transaction to close in the third quarter and is subject to lender approval and buyer financing. As noted above, we recorded an impairment charge of $29 million in the quarter to recognize the planned disposal of these assets at less than book value. This non-cash charge will not affect the Company's compliance under its existing bank covenants. Upon closing this transaction, all proceeds from this divestiture will go toward debt retirement which, including this amount, will total approximately $90 million year-to-date; * We also announced the selection of Fleet Capital to lead and fully underwrite a new $250 million syndicated bank financing for the Company. The new financing, which is subject to Fleet Bank credit approval and Wabash board approval, will be a three year asset based revolver and term loan that will be used to replace existing indebtedness and will substantially lower our cost of debt. Closing on the transaction is expected to occur during the third quarter of this year. Successfully refinancing our existing debt will result in charges of approximately $24 million, including prepayment penalties of approximately $20 million and a non-cash charge of approximately $4 million for the write-off of previously deferred debt costs, which will be recognized when the financing is completed. These charges will not affect the Company's compliance under its existing bank covenants; and * We are in the process of evaluating what we believe will be the final piece to our new capital structure, which will mark the culmination of two years of work to turn the Company around and to secure its future. We continue to meet or exceed our objectives. We have active and sound management leading our turnaround. Associate involvement has been excellent. Our capital structure will soon be very solid. We intend to focus our free cash flow in the future on continuing to pay down debt. We shall augment our profitability by focusing our products and services on the entire van market going forward. As the trailer industry improves, we have positioned ourselves to take full advantage of the recovery." Wabash National Corporation designs, manufactures, and markets standard and customized truck trailers under the Wabash(TM) brand name. The Company is one of the world's largest manufacturers of truck trailers and a leading manufacturer of composite trailers. The Company's wholly owned subsidiary, Wabash National Trailer Centers, is one of the leading retail distributors of new and used trailers and aftermarket parts throughout the U.S. and Canada. WEIRTON STEEL: Obtains Nod to Implement Temporary Layoff Program ---------------------------------------------------------------- As of June 1, 2003, Weirton Steel Corporation employed approximately 516 salaried employees, who were not represented by any collective bargaining unit. The Debtor has determined that it is imperative to implement a temporary layoff in excess of 50 individuals or approximately 10% of its Salaried Employees. Some or all of the Salaried Employees affected by the Temporary Layoff Program may be subject to future employment cost reduction programs, or they may ultimately be called back to work. According to Mark E. Freedlander, Esq., at McGuireWoods LLP, in Pittsburgh, Pennsylvania, the proposed Temporary Layoff Program consists of four phases: Phase 1: Identifying job functions that can be temporarily curtailed, reduced or replicated by other job functions. Phase 2: Grouping non-represented employees who perform the job functions identified in Phase 1 or who perform similar job functions requiring similar skills and knowledge. Phase 3: Soliciting employees within affected groups to volunteer to be temporarily laid off. Phase 4: Achieving the necessary number of layoffs not met by volunteers by involuntary temporary layoffs within affected groups by pension service time(seniority). Mr. Freedlander assures the Court that the Temporary Layoff Program was designed without unlawful consideration of race, sex, age, religion, national origin, veteran status, and qualified disability status as factors in determining impacted jobs. Those Salaried Employees subject to the Temporary Layoff Program, either voluntarily or involuntarily, will be requested to execute a Waiver and Release, Mr. Freedlander says. After executing the Waiver and Release, the affected Salaried Employees will receive the Enhanced Layoff Benefits, namely: (a) Sixty percent of weekly base salary less $351 per week, less applicable federal and state payroll taxes and withholding for the first to occur of a period of 22 full calendar weeks or until the layoff ends; (b) Healthcare coverage at Weirton's cost, including the same coverages as are provided under COBRA continuation coverage for the employee, spouse and eligible dependents for exempt Salaried Employees, not subject to change with respect to employee premium contributions only, for the first to occur of a period of five full calendar months or the period of layoff ends; and (c) Life insurance coverage consisting of the basic group term life insurance for the employee and dependents and the supplemental group term life insurance coverage, as provided by Weirton for exempt Salaried Employees, with basic group term life to be paid by Weirton and supplemental group term life to be shared by Weirton and the Salaried Employee for the first to occur of a period of five full calendar months or the period of the layoff ends. On the other hand, for those impacted Salaried Employees who refuse to execute a Waiver and Release, the Debtor will provide the Basic Lay-off Benefits, namely: (a) Lay-off Payments for a period of four calendar weeks or until the layoff period ends, whichever comes first; (b) Health coverage of three full calendar months or until the period of layoff ends, whichever comes first; and (c) Life Insurance of three full calendar months or until the layoff period ends, whichever comes first. In addition to Layoff Benefits, in accordance with the West Virginia Wage Payment Collection Act, impacted Salaried Employees will be paid for unused vacation time on the next regular pay after the lay-off. Mr. Freedlander asserts that the proposed Layoff Benefits is fair, reasonable and non-discriminatory layoff program. Still, the Debtor expects that some impacted Salaried Employees may refuse to execute the Waiver and Release, and may, in fact, seek legal redress against the Debtor's senior management. Thus, the Debtor seeks the Court's authority to establish an Indemnity Reserve against availability under its postpetition revolving credit facility in an amount not to exceed $3,000,000, until a reorganization plan is confirmed, for the benefit of the Debtor's senior management and employees in formulating and implementing the Temporary Layoff Program. Mr. Freedlander informs Judge Friend that Debtor's aggregate liability for the proposed salary continuation payments and benefits to the impacted Salaried Employees will be no less than $350,000 and is not expected to exceed $750,000 assuming that all impacted Salaried Employees will execute the Waiver and Release and receive the Enhanced Layoff Benefits. Layoff Benefits will be entitled to administrative priority claim status in accordance with Section 503(b)(1)(A) of the Bankruptcy Code. Mr. Freedlander maintains that the amounts to be paid under the Temporary Layoff Program are amply supported by the Debtor's sound judgment. Moreover, the Temporary Layoff Program will allow the Debtor to continue to operate its business with minimal disruption and proceed with the important task of stabilizing its operations. Accordingly, the Debtor asks the Court to: (a) approve the Temporary Layoff Program; (b) authorize the payment of the Layoff Benefits and afford the Layoff Benefits administrative priority claim status in accordance with Section 503(b); (c) authorize it to pay all reasonable costs of defense and otherwise hold harmless and indemnify management from all claims of impacted Salaried Employees that arise from or relate to the Temporary Layoff Program and establish the Indemnity Reserve; and (d) exercise jurisdiction over any claims that arise from or relate to the Temporary Lay-off Program. Independent Steelworkers Union Responds Richard A. Pollard, Esq., at Pietragallo, Bosick & Gordon, in Pittsburgh, Pennsylvania, points out that the Debtors' request would have substantial impact on the Debtor's finances and on the availability, for business operations, of funds from the DIP financing. Mr. Pollard argues that: (a) The Temporary Layoff Program cannot have been conceived at the last minute or in response to an unanticipated emergency, so as to justify requiring parties-in-interest to review and respond to the motion over the limited time span. To the contrary, the request itself recites that the program was based on the Debtor's "extensive review of its Salaried Employees" and also refers to the "care undertaken by senior management to formulate and implement a fair, reasonable and non-discriminatory layoff program;" (b) The request fails to explain or justify the need for relief on an emergency basis. Indeed, the request avers that "[t]he Temporary Layoff Program provides impacted Salaried Employees a 45-day period in which to determine whether to execute the waiver and Release", so it does not appear that the anticipated implementation of the program or the realization of cost savings from the program would occur immediately; (c) The Debtor did not justify its failure to discuss the substance of the request with all interested constituencies prior to its filing on an emergency basis. The Union cannot speak to the existence of advance discussions with other constituencies, but the request avers none, and except for a comment that a motion about the proposed layoffs might be filed, no advance discussions with the Union have occurred; and (e) The Debtor seeks to determine the procedural and substantive rights of the affected employees without identifying them and affording to them an opportunity to object if they should believe an objection appropriate. To the extent that the Debtor's request seeks to assure authority for payment of the proposed benefits as administrative expenses, Mr. Pollard informs Judge Friend that the Union has no objection per se. However, to the extent that administrative expense status would be extended any further or to any other claims, the Union believes that the determination of the nature of, and extent of, and prospect of, is extraordinary and should not be resolved on an emergency basis. The Union further objects to specific aspects of the Debtors' request for reasons that include, without limitation: (a) Those Salaried Employees who do not execute a Waiver and Release would receive substantially lesser benefits than those Salaried Employees who do. If, and to the extent that the layoffs occur in the ordinary course of the Debtor's business and represent ordinary decisions in these circumstances, it is in no way clear why the Debtor seeks to pay heavily for the Waiver and Release or penalize those who do not sign it; (b) Although the request expresses concern for potential litigation by affected Salaried Employees, it provides no basis for any conclusion that any substantial or viable claims are likely to arise from the implementation of the Temporary Layoff Program. To the contrary, Mr. Pollard notes, the request specifically avers that "the Debtor did not have a formal severance or layoff program or policies with respect to the Salaried Employees," indicating that the Temporary Layoff Program would not violate the terms of any prepetition contractual rights with any affected salaried employees; (c) The increased payments to those employees executing waivers and the proposed establishment of an Indemnity Reserve under the Debtor's postpetition facility, Mr. Pollard points out, appears calculated solely to benefit non-debtor entities, to the potential detriment of the Debtor's access to needed working capital under its postpetition financing; (d) It is extraordinary that, in undertaking this carefully considered Temporary Layoff Program, $3,000,000 of the precious postpetition revolving credit facility would be consumed as an "indemnity reserve" and on an emergency basis. Mr. Pollard reminds Judge Friend that the postpetition revolving credit facility was approved by the Court to provide the Debtor with badly needed working capital, rather than as an insurance policy for or carve-out "for the benefit of senior management and employees of Weirton"; (e) To the best of the Union's knowledge, the Debtor maintains directors and officers liability insurance, and that insurance should adequately protect senior management and employees in these circumstances. It is not clear why extraordinary protection for senior management employees is required, on an emergency basis or otherwise; (f) The request fails to take into account the availability of potentially less costly means of obtaining protection from potential litigation by affected salaried employees, like giving them notice and an opportunity to object before the Court to the terms of the proposed Temporary Layoff Program, so as to subject the employees to the defense of res judicata or collateral estoppel with respect to any objections they may later seek to assert; and (g) The proposed savings level resulting from the Temporary Layoff Program is not clear from the request and may well not exceed the consumed working capital involved based upon reduced availability under the postpetition revolving credit facility. Therefore, the Independent Steelworkers Union asks the Court to deny the Debtors' emergency request. * * * Judge Friend concurs with the Debtors that the Temporary Lay-off Program: -- has been designed in a good faith non-discriminatory manner, -- is a sound exercise of the Debtor's business judgment, -- constitutes a legitimate business purpose, and -- was job-related and consistent with business necessity. Accordingly, Judge Friend approves the Temporary Layoff Program and authorizes and empowers, but does not direct, the Debtor to pay the Lay-off Benefits. The Court further permits the Debtor to pay all reasonable costs of defense of and otherwise hold harmless all members of the Debtors' management or employees in respect of any claims of any impacted Salaried Employees arising from or relating to the development and implementation of the Temporary Layoff Program. Subject to further Court order, the Debtor is authorized to establish an indemnity reserve in an amount to be determined at a subsequent hearing before the Court. (Weirton Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) WESTPOINT STEVENS: Wants Utility Cos. Deemed Adequately Assured --------------------------------------------------------------- John J. Rapisardi, Esq., at Weil Gotshal & Manges LLP, in New York, tells the Court that in connection with the operation of their business and management of their properties, WestPoint Stevens Inc., and its debtor-affiliates obtain electricity, natural gas, telephone, water, trash collection, communications and other similar services from various utility companies. Generally, the Debtors have an excellent payment history with respect to their utility services and there are few, if any, defaults or arrearages with respect to their undisputed utility service invoices, other than the payment interruptions that might have been caused by the commencement of these Chapter 11 cases. The Debtors' businesses require that the utility services continue uninterrupted. Any interruption in essential services will cause irreparable harm to the Debtors' ability to conduct their business in an orderly and efficient manner. By this motion, the Debtors ask the Court to determine that the Utility Companies are adequately assured of future payment pursuant to these payment assurance measures: A. Any undisputed charge for Utility Services furnished by a Utility Company to the Debtors after the Petition Date will constitute an administrative expense of the Debtors' Chapter 11 cases in accordance with Sections 503(b) and 507(a)(1) of the Bankruptcy Code. B. The Debtors will file monthly operating statements with the Court on the ECF System and deliver a copy of same to the United States Trustee for the Southern District of New York and each of the Requesting Utilities. C. In the event of a material adverse change to the Debtors' liquidity position, as indicated on the monthly operating statements, any Requesting Utility may ask the Court to find that it no longer has adequate assurance of payment for future services. D. With respect to the Requesting Utilities, notwithstanding any longer time authorized under the applicable tariffs, the Debtors' time to pay their monthly bills in respect of Utility Services will be fixed at the greater of: 1. the number of days allowed under each such Requesting Utility's ordinary course billing cycle in effect prior to the Petition Date, with any disputes as to the cycle to be resolved by this Court, or 2. the last business day in the 14 calendar days following receipt of the postpetition invoice by the Debtors. E. In the event of a postpetition payment default by the Debtors, the Requesting Utility may fax a notice to the Debtors demanding payment, and if the Debtors fail to make payment within five business days of receipt of notice, the Requesting Utility may move the Court, on an expedited basis, for leave to terminate Utility Services. Mr. Rapisardi points out that the Debtors have an excellent payment history with the Requesting Utilities and there had been few or no defaults or arrearages with respect to the payment of undisputed Utility Service invoices. It is well established, at least in the Second Circuit, that absent significant prepetition payment defaults, a debtor's agreement to pay postpetition services of its utilities as administrative expenses constitutes "adequate assurance" of its future performance within the meaning of Section 366. Mr. Rapisardi adds that adequate assurance also exists in these cases by reason of the Debtors' excellent prepetition payment history as well as their present and projected future liquidity position. As of June 25, 2003, the Debtors had $209,100,000 in unused borrowing capacity under their $300,000,000 debtor-in- possession financing facility. Based on this borrowing capacity and cash balances, the Debtors' current liquidity is at least $209,300,000. Also, the Debtors' financial projections indicate that they will maintain adequate liquidity to pursue strategic restructuring and reorganization alternatives throughout 2003. Based on the restructuring proposal with their major creditor constituents, including the bondholders, the Debtors anticipate they will be able to successfully emerge from Chapter 11 by the end of 2003 or early 2004. The Debtors submit that they have more than sufficient available funds with which to pay all undisputed postpetition utility charges and other administrative expenses. Moreover, Mr. Rapisardi contends that the proposed Payment Safeguards provide substantial adequate assurance of payment to the Requesting Utilities. Specifically, the Debtors' monthly operating statements to be filed with the Court will enable the Requesting Utilities to closely monitor the Debtors' liquidity position. If there is any material adverse change in liquidity, the Requesting Utilities may petition the Court to require the Debtors to provide additional assurance in the form of a deposit or other security. Also, in the event the Debtors default in payment of a postpetition utility bill, the Payment Safeguards provide an expedited procedure to obtain a hearing before the Court for leave to terminate Utility Services. (WestPoint Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) WINSTAR: Winstar Holdings Asks Court to Hold Network in Contempt ---------------------------------------------------------------- Winstar Holdings, LLC asks the Court to find Network Communications of Indiana, Inc. in civil contempt for violating the December 19, 2001 order approving the sale of substantially all assets of Winstar Communications, Inc. and its related debtor entities by commencing an action seeking damages from Winstar Holdings, IDT Corporation and Winstar Communications, LLC under a complaint currently pending in the United States District Court for the Southern District of Indiana, concerning property of the estate which was purchased by Winstar Holdings pursuant to the Sale Order. William K. Harrington, Esq., at Duane Morris LLP, in Wilmington, Delaware, recounts that on April 15, 2003, an action was commenced against Winstar Holdings, IDT and Winstar Communications in the Superior Court of Marion County, State of Indiana. That state court action alleged claims for trade secret misappropriation, conversion, unfair competition and "tortious interference" with contractual relations based on the alleged misappropriation of a "customer list". On May 2, 2003, the Defendants removed the state court action related to the Complaint to the Removal Court on the grounds of diversity jurisdiction. Network Communications' complaint alleges an interest in assets, which were purchased pursuant to the Sale Order. Specifically, the Asset Purchase Agreement provided for the Debtors to sell, assign, convey, transfer and deliver to the purchasers, free and clear of all encumbrances, all of the rights, title and interest in the Purchased Assets. The Purchased Assets were defined to include all rights, title and interest of the Debtors in, to and under "all historical information relating to accounts of the customers of the Business which, at the Closing Date, are users of any of the services provided by the Sellers in the operation of the Business . . ." Paragraph 9 of the Sale Order further states that a claimant is "forever barred, estopped, and permanently enjoined from asserting against the Holdings, the Buyer, any interest arising under or out of, in connection with, or in any way relating to . . . the Debtors' businesses prior to the Closing Date of the Sale of the Purchased Assets." Mr. Harrington contends that despite full knowledge of the Sale Order and its provisions, Network Communications has refused to dismiss the Complaint that is specifically barred by the Sale Order. In addition, Network Communications has willfully ignored the exclusive jurisdiction of the Bankruptcy Court with regard to the interpretation of the Asset Purchase Agreement. Specifically, the Sale Order states, "this Court retains and shall have exclusive jurisdiction to endorse and implement the terms and provisions of the Asset Purchase Agreement . . . in all respects, including, but not limited to, retaining jurisdiction to . . . interpret, implement, and enforce the provisions of the Asset Purchase Agreement and this Sale Order." Thus, to the extent Network Communications could even allege claims of ownership of the "customer list", the Complaint should have been properly filed with the Bankruptcy Court and not in the Indiana state court. The Bankruptcy Court, as a court of equity with jurisdiction over the terms and provisions of the Sale Order, can protect its jurisdiction by issuing an injunction barring Network Communications from further violations of the Sale Order. Section 105(a) of the Bankruptcy Code empowers this Court to exercise its equitable powers where "necessary" or "appropriate" to facilitate the implementation of other Bankruptcy Code provisions. Mr. Harrington affirms that Network Communications' action against the Defendants has caused and will continue to cause additional costs to Winstar Holdings if allowed to proceed. It is clear that the Sale Order has been validly in effect since its entry on December 19, 2001. Network Communications has arguably had knowledge of the Sale Order since its entry, and has had actual knowledge since at least June 4, 2003 when a further notice, which included a copy of the Sale Order, was forwarded to its counsel. Despite this knowledge, Network Communications continues to pursue its action in Removal Court in violation of the Sale Order. Accordingly, Winstar Holdings seeks a remedial order holding Network Communications in civil contempt for its willful and deliberate violation of the Sale Order, and for its attempted abuse of the bankruptcy process. The Court should impose a coercive monetary fine on Network Communications, which will continue from day to day and be compounded until the time as Network Communications has fully remedied the damage caused. The order should also provide that Network Communications may only purge itself of this finding of civil contempt by immediately withdrawing or the Complaint so that it no longer violates the terms and provisions of the Sale Order. The effect of this order will be to re-impose the status quo as to the effect of the Sale Order, Winstar Holdings' rights and the Debtors' automatic stay. (Winstar Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM: NLPC Lauds Hatch Hearing Probing Bankruptcy Proceeding ---------------------------------------------------------------- The National Legal and Policy Center (NLPC) thanked Senator Orrin Hatch (R-UT), Chairman of the Senate Judiciary Committee, for holding a hearing to investigate the implications of MCI/WorldCom's bankruptcy proceeding. Even though MCI/WorldCom stands to have approximately $35 billion of debt wiped away from its books, it is still pursuing tax benefits from its net operating losses that could potentially allow the company to avoid paying income tax for the foreseeable future. This loophole was exposed in a May 12, 2003 commentary in BusinessWeek. Senators Rick Santorum (R-PA) and Kent Conrad (D-ND) in the Senate and House Members Jim McCrery (R-LA), Robert Matsui (D-CA) and Scott McGinnis (R-CO) have introduced legislation to close this loophole. They join numerous other Members of Congress including Senator Susan Collins (R-ME) and Congressman John Sweeney (R-NY) who have criticized several aspects of the MCI/WorldCom situation including the fact that the federal government continues to award contracts to the company. NLPC Chairman Ken Boehm stated, "While there are very real concerns about what effect the emergence of MCI/WorldCom from bankruptcy means for the telecommunications industry at large, what is particularly upsetting is that the benefits the company is receiving from this process don't seem to be to be enough for it. At some point MCI/WorldCom's overreaching for continued benefits from the federal government has got to be addressed. Our hope is that the remedies being explored will ultimately result in not just more talk, but in real action." Based in Falls Church, Virginia, the NLPC promotes ethics, openness and accountability in government through research, education and legal action. NLPC distributes the Code of Ethics for Government. WORLDCOM INC: CAGW Applauds Hearing to Question MCI's Bankruptcy ---------------------------------------------------------------- Citizens Against Government Waste (CAGW) praised Senate Judiciary Committee Chairman Orrin Hatch (R-Utah) for his leadership in investigating MCI's bankruptcy proceedings and its effect on competition within the telecommunications industry. At a hearing Tuesday afternoon, Chairman Hatch heard testimony on the issue from industry experts, including Bankruptcy Examiner and former U.S. Attorney General Richard Thornburgh, who earlier this year authored a report on MCI's bankruptcy. "We commend Chairman Hatch for taking a closer look at whether MCI could emerge from bankruptcy with an unfair advantage that would threaten the financial stability of the entire telecommunications industry," CAGW President Tom Schatz said. "If MCI was allowed to compete unbridled of its debt, it could force prices across the industry to nosedive. As telecommunications is one of the largest sectors of the American economy, such an occurrence could lead to a huge government bailout, costing taxpayers tens of billions of dollars." Chairman Hatch is the latest member of Congress to become involved in MCI's bankruptcy. Senate Governmental Affairs Committee Chairman Susan Collins (R- Maine) has launched an investigation into why the federal government continues to grant contracts to the company despite its fraudulent history. Sen. Rick Santorum (R-Pa.) has offered legislation that would close a loophole in federal tax law that has allowed bankrupt companies to continue to receive tax benefits from their net operating losses despite having their corporate debt dramatically reduced during the bankruptcy process. In the House, Rep. John Sweeney (R-N.Y.) is supporting an amendment to be offered to the fiscal 2004 Transportation Appropriations Act that would suspend MCI from federal contracts for the year. "Despite the valiant efforts of several members of Congress, the federal government continues to do business with a fraudulent company, MCI, jeopardizing tax dollars," Schatz continued. "This past week, the House of Representatives itself extended a contract with MCI worth $17 million. This adds to the more than $1.2 billion the company has received in government contracts since declaring bankruptcy, which is approximately 60 percent greater than the $750 million fine MCI will pay in its settlement with the Securities and Exchange Commission." CAGW has been calling for MCI's debarment from government contracts since November, 2002, on the basis that such agreements unnecessarily put taxpayer dollars at risk, and amount to a hidden government bailout of the company. Continuing its ad campaign, "Crime Doesn't Pay," from last month, CAGW has been running ads over the course of the last week in Congress Daily, The Hill, Roll Call, The Washington Times, and The Weekly Standard. "When Enron and Arthur Andersen committed similar fraud, they were debarred. The question remains, why is the government allowing this double standard to continue?" Schatz concluded. "More than a year has passed since MCI has declared bankruptcy. It is time to protect taxpayers from being the latest victims of MCI's fraud." Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government. WORLDCOM INC: Intends to Assume Two Amended Fionda Agreements ------------------------------------------------------------- Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, in New York, recounts that on November 21, 1996, Fionda, LLC and Debtor TTI National, Inc. entered into a representation agreement. In addition, on May 24, 1999, Fionda and MCI WorldCom Communications, Inc., the successor-in-interest to WorldCom Technologies, Inc., entered into an association program agreement, which was subsequently amended by 13 individual amendments. Pursuant to the Agreements, Fionda, acting as an authorized sales representative, sells certain services offered by the Debtors to end-users and receives commissions from the Debtors based on a percentage of the amount billed to end-users. Fionda sells different types of services offered by the Debtors under each of the Agreements. On May 19, 2003, Ms. Goldstein reports that Fionda and MCI entered into a similar third agreement, pursuant to which Fionda is authorized to sell MCI telecommunications products and services to end-users, including "The Neighborhood" products. Similar to the Agreements, Fionda receives commissions from MCI based on a percentage of the amount billed to end-users procured under the Postpetition Agreement. In addition, the Postpetition Agreement establishes a minimum sales requirement for Fionda, so that Fionda is required to procure a minimum number of orders that result in provisioning of new products and services. If Fionda does not meet this minimum sales requirement, MCI will deduct a one-time charge from Fionda's commission. As the Postpetition Agreement was executed in the ordinary course of business after the Petition Date, MCI is not seeking to assume this agreement. Pursuant to the 14th Amendment, however, if the Agreements are not assumed by MCI, Fionda has the option to terminate the Postpetition Agreement. On May 19, 2003, Ms. Goldstein informs the Court that Fionda and MCI entered into the 14th amendment to the Association Agreement. Pursuant to the 14th Amendment, MCI agreed to file a motion seeking approval of the assumption of the Association Agreement as amended by the 14th Amendment and the Representation Agreement. The 14th Amendment to the Association Agreement provides, inter alia: A. Term: The term of the Association Agreement, as amended by the 14th Amendment, will expire on September 30, 2003 and will not automatically renew for any period beyond the Termination Date. B. Cure Amount: The Debtors will pay to Fionda $2,722,966.13 as cure in full and complete satisfaction of any and all amounts owing under the Association Agreement and the Representation Agreement. C. Cure of Defaults: After payment of the Cure Amount, the Association Agreement, as amended by the 14th Amendment, and the Representation Agreement will be deemed cured in all respects. If, however, the Court does not grant this Motion, or if the Debtors fail to pay the Cure Amount by August 15, 2003, then the 14th Amendment or the Postpetition Agreement, or both, will at the option of Fionda, be null and void. By this Motion, the Debtors seek entry of an order approving the assumption of the Association Agreement, as amended by the 14th Amendment and the Representation Agreement. Ms. Goldstein insists that the Agreements are beneficial to the Debtors' estates in a number of ways. Fionda is one of the Debtors' largest and most specialized sales representatives, providing the Debtors with over 225,000 active long distance customer lines and significant monthly revenues. Fionda's clients include some of the largest entities in the affinity, membership, retail, and direct sales industries. Fionda's experience and its ability to reach the large Customer Base provides a significant benefit to the Debtors for selling their products and will allow for substantial expansion of sales of "The Neighborhood's" combined local and long distance products. Ms. Goldstein tells the Court that it is WorldCom's and Fionda's intention that the document governing the parties' relationship will be transitioned from the Agreements to the Postpetition Agreement. Following this transition, Fionda will continue to market the Debtors' products and services, including, most significantly, "The Neighborhood" products. The assumption of the Agreements will ensure that Fionda will maintain the Customer Base as the parties' transition to the Postpetition Agreement and provide an even broader customer base to which Fionda will market "The Neighborhood" products. Pursuant to the Agreements and the Postpetition Agreement, Fionda may not market the products of any other telecommunications company to the Customer Base. The assumption of the Agreements and the minimum sales requirements in the Postpetition Agreement will ensure that one of the Debtors' largest sales representatives will continue to market only their products and services. The Debtors believe that the amount outstanding under the Agreements is $2,722,966.13. Fionda asserted in its timely proof of claim that the amount outstanding under the Agreements exceeds $2,860,000. In the context of this settlement, however, the Debtors and Fionda have agreed to a $2,722,966.13 cure payment, resulting $137,000 in savings for the Debtors, in full and complete satisfaction of all amounts owing under the Agreements. Ms. Goldstein asserts that the Association Agreement, as amended, and the Representation Agreement are critical assets of the estate, which benefit the Debtors by generating significant revenues, ensuring the extensive marketing of "The Neighborhood" products, and maintaining the exclusivity of over 225,000 customer lines. (Worldcom Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) * Dewey Ballantine Adds Partner Lawrence M. Hill to NY Office ------------------------------------------------------------- Dewey Ballantine LLP, a leading international law firm, announced that Lawrence M. Hill has joined the Firm as a partner in the Tax Group in its New York office. Mr. Hill, formerly a partner of White & Case LLP, is one of the nation's leading tax litigators. He has represented many of the international accounting firms in litigation and risk management matters and is at the forefront of defending the IRS's tax shelter promoter penalty investigations against professional service firms and financial institutions. His practice also includes representation of banks, investment banks and major corporations in a number of tax cases involving complex financial products. In addition, he has litigated federal and state tax cases involving issues such as transfer pricing, corporate structurings, estate and gift taxation, partnerships, tax accounting, civil and criminal tax fraud, penalties, individual taxation and constitutional law. Accounting Today Magazine named Mr. Hill one of the "Top 100 Most Influential People in the Accounting Profession" in 1998, 1999 and 2000. Mr. Hill recently won a high-profile case for a former Big Five accounting firm. In the landmark case, he convinced a district court in a summons enforcement action to uphold the right of the accounting firm's clients to preserve their anonymity under the accountant-client privilege under section 7525. "Larry Hill's proficiency in complex litigation as well as in strategic and risk management consultation adds depth and expertise to our Firm-wide Tax Group," said Everett L. Jassy, chairman of Dewey Ballantine's Management Committee. "The IRS continues to increase its scrutiny of complex tax issues and Larry will be an excellent resource for both current and future clients in dealing with these matters." "I am delighted to join Dewey Ballantine, a Firm with rich tradition and depth in the tax practice area," said Lawrence Hill. "I look forward to continuing my career with the Firm's top- caliber attorneys and working with its exceptional client base." Graduating Phi Beta Kappa from State University of New York at Binghamton, Mr. Hill holds a J.D. and LL.M. in taxation from George Washington University National Law Center. Mr. Hill is vice chair of the Court Procedure and Practice Committee of the Tax Section of the American Bar Association and chair of the Subcommittee on Tax Shelters of its Administrative Practice Committee. Dewey Ballantine's tax department is among the largest of any general practice law firm, with 21 tax partners, one counsel and more than 30 tax associates practicing the full spectrum of corporate tax work in offices in New York, Washington, D.C., Los Angeles, London and Warsaw. The principal areas of practice include transactional tax, international tax, lease financing, financial products, tax controversy, legislative and employee benefits. A major part of Dewey Ballantine's tax practice involves large-case tax controversy work. The Firm represents U.S. and foreign corporate taxpayers at the audit and appeals stages before the IRS, and in tax litigation in the Federal courts -- from the United States Tax Court to the Supreme Court of the United States. Dewey Ballantine LLP, founded in 1909, is an international law firm with more than 550 attorneys located in New York, Washington, D.C., Los Angeles, Palo Alto, Houston, Austin, London, Warsaw, Budapest, Prague and Frankfurt. Through its network of offices, the firm handles some of the largest, most complex corporate transactions and litigation in areas such as M&A, bankruptcy, capital markets, private equity, antitrust, intellectual property, structured finance, project finance, international trade and international tax. Industry specializations include energy and utilities, healthcare, insurance, media, consumer and industrial goods, technology, telecommunications and transportation. * Fried Frank Elects Three New Partners at New York Headquarters ---------------------------------------------------------------- Fried, Frank, Harris, Shriver & Jacobson announced that Eric Feuerstein, David Hennes and Vivek Melwani have been elected to the partnership, effective September 1st. All three lawyers practice in the Firm's New York headquarters. Commenting on the announcement, Co-Managing Partner Valerie Ford Jacob said, "We are all very excited and proud to have these colleagues, who have dedicated themselves to Fried Frank over the years, as partners of the Firm." Co-Managing Partner Paul Reinstein added, "We expect Eric, David and Vivek to take strong leadership positions in our Firm as we grow in the years ahead. "Eric M. Feuerstein, 34, joined the Firm in 1996. He earned his Juris Doctor at the Benjamin N. Cardozo School of Law in 1995 and his Bachelor of Arts cum laude at Cornell University in 1991. Mr. Feuerstein specializes in real estate law. He has worked in the areas of acquisitions, leases, ground leases, joint ventures and financings with such clients as Brookfield Financial Properties, Jack Resnick & Sons, Inc., Macklowe Properties, Inc., Reckson Associates Realty Corp., RFR Properties LLC and Tishman Speyer Properties. David B. Hennes, 32, joined Fried Frank in 1996. He earned his Juris Doctor at the University of Pennsylvania Law School in 1995 and his Bachelor of Arts with high distinction at the University of Michigan in 1991. Mr. Hennes was a law clerk to the Hon. Jerome B. Simandie, U.S. District Judge in New Jersey, from 1995 to 1996. Mr. Hennes practices in the areas of civil litigation and white- collar and enforcement litigation. Among his many representations was his defense of the former CEO of McKesson Corp. in connection with a civil securities litigation arising from an earnings restatement that followed McKesson's acquisition of HBO & Co. Vivek Melwani, 31, joined the Firm in 1995. He earned his Juris Doctor with distinction at the Hofstra University School of Law and his Bachelor of Business Administration in 1992 also at Hofstra University. Mr. Melwani practices in the area of bankruptcy and restructuring. His representations have included the unofficial committee of bondholders and the official committee of unsecured creditors in Conseco, Inc., the third-largest Chapter 11 case in history, and the unofficial committee of bondholders in the restructuring of NTL, Inc. with respect to more than $11 billion of debt. Fried, Frank, Harris, Shriver & Jacobson is an international law firm with approximately 500 attorneys in offices in New York, Washington, DC, Los Angeles, London and Paris. It handles major matters involving, among other things, corporate transactions, including mergers and acquisitions and financings; litigation; real estate; antitrust counseling and litigation; bankruptcy and restructuring; benefits and compensation; environmental law; insurance; intellectual property and technology; securities regulation, compliance and enforcement; tax; and trusts and estate. * DebtTraders' Real-Time Bond Pricing ------------------------------------- Issuer Coupon Maturity Bid - Ask Weekly change ------ ------ -------- --------- ------------- Federal-Mogul 7.5% due 2004 14.5 - 16.5 0.0 Finova Group 7.5% due 2009 43.5 - 44.5 +0.5 Freeport-McMoran 7.5% due 2006 102.5 - 103.5 0.0 Global Crossing Hldgs 9.5% due 2009 4.5 - 5.0 +0.25 Globalstar 11.375% due 2004 3.0 - 3.5 -0.5 Lucent Technologies 6.45% due 2029 68.25 - 69.25 -0.75 Polaroid Corporation 6.75% due 2002 11.0 - 12.0 0.0 Westpoint Stevens 7.875% due 2005 20.0 - 22.0 0.0 Xerox Corporation 8.0% due 2027 84.0 - 86.0 -1.5 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 ********* 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 ***