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/raid1/www/Hosts/bankrupt/TCR_Public/030801.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, August 1, 2003, Vol. 7, No. 151 Headlines ALDERWOODS: S&P Assigns B+ Credit and BB- Facility Ratings AMAZON.COM INC: June Quarter Net Loss Cut by Half to $43 Million AMERCO: Court Approves Beesley Peck as Co-Counsel on Final Basis AMERICAN PAD & PAPER: Court Confirms Plan of Reorganization AMERICAN WAGERING: US Trustee Sets Creditors Meeting for Sept. 5 ANALYTICAL SURVEYS: Annual Shareholders' Meeting Set for Aug. 21 ANC RENTAL: Asks Court to Approve Adoption of New Severance Plan ARMSTRONG WORLD: Chan Galbato Will Step Down as Unit's Pres./CEO ASIA GLOBAL CROSSING: Chapter 7 Trustee Hires Davis Graber ATA HOLDINGS: S&P Keeps Junk Ratings on CreditWatch Negative ATLANTIC COAST: Second Quarter Results Reflect Strong Growth BEAR STEARNS: Fitch Affirms Low-B Ratings on Six Note Classes BOYD GAMING: Board Declares Quarterly Dividend Payable on Sept 3 CALL-NET ENTERPRISES: Second Quarter Results Enter Positive Zone COMMUNITY CHOICE: S&P Knocks Financial Strength Rating Down to R CONE MILLS: June 29 Working Capital Deficit Narrows to $10 Mill. CONSECO INC: Wants Blessing to Sever General Indemnity Agreement CONSTELLATION BRANDS: Completes Convertible Preferred Offering CONTINENTAL AIRLINES: Selling Portion of Interest in ExpressJet COX COMMS: June 30 Working Capital Deficit Narrows to $500 Mill. CWMBS INC: Fitch Takes Rating Actions on Series 1998-21 Notes DELCO REMY: June 30 Net Capital Deficit Balloons to $422 Million DELTA AIR LINES: S&P Assigns B Rating to Proposed 10% Sr. Notes DOANE PET CARE: Reports $3 Million in Net Loss for 2nd Quarter ENERGY WEST: Credit Agreement Further Extended Until August 29 EPOCH: Fitch Downgrades Note Ratings from Three Transactions ETHYL CORP: Completes Exchange Offer for 8-7/8% Senior Notes FEDERAL-MOGUL: Has Until October 1 to Move Actions to Del. Court FLEMING: Will Present C&S Agreement to Court at August 4 Hearing FLEMING COMPANIES: Hires Food Partners for Financial Advice FLEXTRONICS: Commences Convertible Subordinated Debt Offering GLIMCHER REALTY: Second Quarter Net Loss Stands at $4 Million GLOBAL CROSSING: Gets Clearance for Centennial Settlement Pact GMAC COMMERCIAL: Fitch's BB+ Rating Assigned to Class F Notes GRAPHIC PACKAGING: Amends & Extends Tender Offer for Sr. Notes HOME PRODUCTS: S&P Cuts Corp. Credit Rating Down a Notch to B KAISER ALUMINUM: Wants to Appoint Prof. McGovern as Mediator KISTLER AEROSPACE: Section 341(a) Meeting to Convene on Aug. 26 KMART CORP: Court Enters Final Decree Closing 16 Units' Cases LEGACY HOTELS: S&P Slashes Senior Unsecured Debt Rating to B+ LIBERTY MEDIA: Look for Q2 Supplemental Fin'l Info. on August 14 LORAL SPACE: Taps Appleby Spurling as Bermuda Insolvency Counsel MAGELLAN HEALTH: Asks Court to Clear $150M Onex Equity Agreement MANITOWOC: Weaker-than-Expected Performance Spurs S&P Downgrades MASSEY ENERGY: Reports Improved Second Quarter Financial Results MERRILL LYNCH: Fitch Rates Classes B-4 & B-5 Notes at BB+/B+ METALS USA: Preparing to Resell 5.5 Mill. Shares of Common Stock METRIS MASTER: Fitch Cuts Ratings on $3.6-Bil. Worth of Notes MICROBEST INC: Ahearn Jasco Steps Down as Independent Auditors MICROBEST INC: Fails to Comply with SEC Reporting Requirements MIRANT CORP: Wins Interim Nod to Hire Haynes & Boone as Counsel NATIONAL WINE: S&P Affirms Credit & Debt Ratings After Review NEXMED INC: Secures $1.8MM Line of Credit from GE Life Science NICHOLAS-APPLEGATE: S&P Keeps Watch on Low-B Class D Note Rating NRG ENERGY: Court Approves PricewaterhouseCoopers as Accountants OMNOVA SOLUTIONS: Will Cease Heat Transfer Printing Product Line ON SEMICONDUCTOR: July 4 Net Capital Deficit Widens to $750 Mil. PAC-WEST TELECOMM: 2nd Quarter Results Show Marked Improvement PCNET INT'L: Defaults on Obligations Under Plan of Arrangement PEABODY ENERGY: Shareholders Complete Secondary Public Offering PETROLEUM GEO-SERVICES: S&P Drops Corporate Credit Rating D PETROLEUM GEO: Wants to Hire Ordinary Course Professionals PG&E NATIONAL: Signs-Up Whiteford Taylor as Local Counsel PILLOWTEX CORP: UNITE Airs Disappointment with Bankruptcy Filing POLAROID: Cardinale & Maiorelli Ask Court to Set Aside Sale Order RIVERWOOD INT'L: Majority of Noteholders Consents to Amendments RMH TELESERVICES: June 30 Working Capital Deficit Widens to $9MM SI TECHNOLOGIES: Pulls Plug on Grant Thornton's Engagement Pact SK GLOBAL: Asks Court to Approve BSI Appointment as Claims Agent SMITHFIELD FOODS: Provides Earnings Expectations for Fiscal Q1 SPIEGEL: Court Approves Watson Wyatt Engagement as Consultant TERAYON COMMS: Second Quarter Net Loss Burgeons to $13 Million TEXAS PETROCHEMICALS: Wants to Pay Critical Vendors' Claims TRITON CDO IV: S&P Lowers & Removes B Class B Rating from Watch UNIVERSAL ACCESS: Board Approves 1-For-20 Reverse Stock Split U.S. RESTAURANT: Retires $47.5 Million in Senior Unsecured Notes USDATA CORP: Inks Pact to Sell All Assets & Debts to Tecnomatix USEC INC: 2nd Quarter Results Show Improved Business Operations VINTAGE PETROLEUM: Will Host Q2 2003 Conference Call on August 7 VISHAY: Proposed $450-Mill Sub. Convertible Notes Gets B+ Rating WABASH NATIONAL: 3.25% Note Offering Increased by $25 Million WACKENHUT CORRECTIONS: Will Publish 2nd Quarter Results on Aug 7 WELLS FARGO: Fitch Takes Rating Actions to Series 2003-9 Notes WORLDWIDE WIRELESS: Intends to File for Liquidation of Company WYNN RESORTS LTD: S&P Junks Subordinated Debentures at CCC+ * J. Edward Houston Joins Hillsboro Group as Chairman and CEO * BOOK REVIEW: Risk, Uncertainty and Profit ********* ALDERWOODS: S&P Assigns B+ Credit and BB- Facility Ratings ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Alderwoods Group Inc. At the same time, Standard & Poor's assigned its 'BB-' rating to Alderwoods' proposed $325 million senior secured bank facility. The facility comprises a $275 million senior secured term loan due 2008, and a $50 million revolving credit facility due 2008. The proceeds from the proposed term loan are expected to refinance existing company debt, including debt of its owned subsidiary, Rose Hills. When the transaction is completed, the rating on Rose Hills (CCC+/Developing/--) will be withdrawn. The proposed revolving credit facility is expected to replace the existing facility, which matures in April 2004. The outlook on Alderwoods is stable. Total debt outstanding as of June 14, 2003 was $691 million. The rating on the secured bank loan is rated one notch above the corporate credit rating. The facility is secured by all present and future domestic assets of Alderwoods and its direct and indirect subsidiaries, including mortgages on certain U.S. funeral homes and cemetery properties, and by the capital stock of each of the domestic subsidiaries and 66% of the capital stock of each first-tier foreign subsidiaries. Standard & Poor's review of the collateral package in a distressed default scenario suggests estimated asset values that offer a strong likelihood of full recovery of bank debt in the event of a default. The factor most likely to cause a decline in net worth would be the devaluation of the funeral home and cemetery properties included in the collateral package. "The low, speculative-grade ratings on Cincinnati, Ohio-based Alderwoods Group Inc., the second-largest cemetery and funeral home operator in North America, reflect its highly leveraged profile, the uncertain success of the company's implementation of a new business plan, and its vulnerability to periods of business weakness," said Standard & Poor's credit analyst David Peknay. "These factors are mitigated by the relatively favorable long-term predictability of the funeral home and cemetery business." The company's focus on improving operating performance since its re-emergence from bankruptcy on Jan. 2, 2002, has led it to identify for disposal a number of underperforming or non-strategic assets. Its commitment to strengthen its balance sheet is demonstrated by the company's $77 million reduction in debt in 2003, and $158 million reduction since January 2002, using proceeds from asset sales and free cash flow. Standard & Poor's expects Alderwoods to remain committed to a financial policy that includes the use of asset sales proceeds and free cash flow for further debt reduction. Still, Standard & Poor's does not expect a significant decline in its current high leverage, and lease- adjusted debt to EBITDA should remain near 5x for the next couple of years. Alderwoods' attempts to improve its operating performance during a period of recently weak death rates may not provide meaningful gains in the near term. Small gains in average revenues per funeral have been more than offset by larger declines in the total number of funeral services performed. Nevertheless, favorable long-term demographics are anticipated to result in improving demand, which should help the company's operating performance. AMAZON.COM INC: June Quarter Net Loss Cut by Half to $43 Million ---------------------------------------------------------------- Net sales of Amazon.com, Inc. were $1.10 billion and $806 million for the three months ended June 30, 2003 and 2002, and $2.18 billion and $1.65 billion for the six months ended June 30, 2003 and 2002, representing increases of 37% and 32%. Net sales for its North America segment were $703 million and $586 million for the three months ended June 30, 2003 and 2002, and $1.41 billion and $1.21 billion for the six months ended June 30, 2003 and 2002, representing increases of 20% and 17%. Net sales for its International segment were $397 million and $219 million for the three months ended June 30, 2003 and 2002, and $776 million and $445 million for the six months ended June 30, 2003 and 2002, representing increases of 81% and 74%. Net sales for the three and six months ended June 30, 2003 benefited by worldwide sales of over 1.4 million units of the book Harry Potter and the Order of the Phoenix. Growth in unit sales is greater than growth in net sales due to lower prices, including as a result of the Company's free shipping promotions, and to an increasing percentage of units being sold by third parties for which Amazon.com earns a net commission. Net sales benefited $55 million in comparison to the second quarter of 2002, and $106 million in comparison to the six months ended June 30, 2002, due to changes in foreign exchange rates as the U.S. Dollar weakened. The future growth of its International segment may fluctuate significantly with changes in foreign exchange rates. Shipping revenue, which consists of outbound shipping charges to its customers and excludes amounts earned from third-party sellers, was $80 million and $81 million for the three months ended June 30, 2003 and 2002, and $158 million and $171 million for the six months ended June 30, 2003 and 2002. The decline in shipping revenue in comparison to the prior year periods is primarily due to the increased acceptance by its customers of the free shipping offers. The Company provides to its customers free shipping alternatives worldwide, which reduce shipping revenue as a percentage of sales and causes its gross margins on retail sales to decline. The Company views these shipping offers as an effective marketing tool and intends to continue offering these alternatives indefinitely. Gross profit was $274 million and $218 million for the three months ended June 30, 2003 and 2002, and $545 million and $441 million for the six months ended June 30, 2003 and 2002. Gross margin was 24.9% and 27.1% for the three months ended June 30, 2003 and 2002, and 24.9% and 26.7% for the six months ended June 30, 2003 and 2002. Gross profit for the North America segment was $190 million and $170 million for the three months ended June 30, 2003 and 2002, and $377 million and $344 million for the six months ended June 30, 2003 and 2002. Gross margin was 27.1% and 29.0% for the North America segment during the three months ended June 30, 2003 and 2002, and 26.8% and 28.5% for the six months ended June 30, 2003 and 2002. Gross profit for the International segment was $84 million and $48 million for the three months ended June 30, 2003 and 2002, and $168 million and $98 million for the six months ended June 30, 2003 and 2002. Gross margin was 21.1% and 21.9% for the International segment during the three months ended June 30, 2003 and 2002, and 21.6% and 21.9% for the six months ended June 30, 2003 and 2002. The increases in gross profit in comparison with the prior periods correspond with increases in unit sales, including those by third- party sellers, offset by Amazon's year-around free shipping offers and lower prices for customers. The decline in gross margin in comparison to the prior year is primarily the result of its year- round free shipping offers and lower prices for customers, partially offset by increases in higher-margin sales by third parties and improvements in vendor pricing. Amazon's overall gross margins fluctuate based on several factors, including the mix of sales during the period, sales volumes by third-party sellers, competitive pricing decisions, changes in vendor pricing, and general efforts to reduce prices for customers over time, as well as the extent to which its customers accept the free shipping offers. Gross profit benefited $12 million in comparison to the second quarter of 2002, and $23 million in comparison to the six months ended June 30, 2002, due to changes in foreign exchange rates as the U.S. Dollar weakened. During the second quarter of 2003, the Company sold approximately 1.4 million copies of Harry Potter and the Order of the Phoenix at a discount of approximately 40% off list price. Including the effect of related shipping, these sales were fulfilled at roughly the Company's overall cost, which had a negative effect on its gross margin. Sales of products by third-party sellers continue to increase. Since revenues from these sales are recorded as a net amount, they result in lower revenues but higher gross margins per unit. To the extent product sales by third-party sellers continue to increase, Amazon anticipated improvement in gross margin, offset to the extent it offers additional or broader price reductions, free shipping offers, and other promotions. Shipping activity resulted in a loss of $26 million and a profit of $2 million for the three months ended June 30, 2003 and 2002. Shipping activity resulted in a loss of $53 million and a profit of $1 million for the six months ended June 30, 2003 and 2002. The loss from shipping primarily reflects the increased acceptance by its customers of the free shipping offers, offset in part by cost reductions from efficiencies in its outbound shipping. The Company continues to measure its shipping results relative to their effect on the overall financial results, with the viewpoint that free shipping offers are an effective marketing tool. Amazon intendx to continue offering these alternatives, which will reduce shipping revenue as a percentage of sales and negatively affect gross margins. Fulfillment costs represent those costs incurred in operating and staffing its fulfillment and customer service centers, including costs attributable to receiving, inspecting, and warehousing inventories; picking, packaging, and preparing customer orders for shipment; credit card fees and bad debt costs; and responding to inquiries from customers. Fulfillment costs also include amounts paid to third-parties that assist the Company in fulfillment and customer service operations. Certain of its fulfillment-related costs that are incurred on behalf of other businesses, such as Toysrus.com, Inc. and Target Corporation, are classified as cost of sales rather than fulfillment. Fulfillment costs were $107 million and $86 million for the three months ended June 30, 2003 and 2002, representing 10% and 11% of net sales and $211 million and $176 million for the six months ended June 30, 2003 and 2002, representing 10% and 11% of net sales. The increase in fulfillment costs in comparison with the prior year primarily corresponds with sales volume. The improvement in fulfillment costs as a percentage of net sales results from improvements in productivity and accuracy, the increase in units fulfilled which leverages the fixed-cost portion of the Company's fulfillment network, efficiencies gained through utilization of fulfillment services provided by third parties, a decline in customer service contacts per order resulting from improvements in its operations, and enhancements to its customer self-service features available on its Websites. These improvements were offset, in part, by credit card fees associated with third-party seller transactions, which represent a significant percentage relative to commission amounts earned, and as a result, negatively affect fulfillment as a percentage of net sales. Marketing expenses consist of advertising, on-line marketing, promotional and public relations expenditures, and payroll and related expenses for personnel engaged in marketing and selling activities. Marketing expenses, net of co-operative marketing reimbursements, were $25 million and $29 million for the three months ended June 30, 2003 and 2002, representing 2% and 4% of net sales, and $54 million and $61 million for the six months ended June 30, 2003 and 2002, representing 2% and 4% of net sales. To the extent co-operative marketing reimbursements decline in future periods, Amazon may incur additional expenses to continue certain promotions or elect to reduce or discontinue them. Declines in expense for marketing-related activities reflect Company efforts to cut ineffective marketing programs, as well as reduced rates charged to it for some online marketing activities. These decreases are partially offset by increased investment in marketing channels considered most effective in driving incremental net sales, such as its Associates program. Amazon's Associates program enables participating Websites to make Amazon's products available to their audiences with fulfillment performed by Amazon. The Company provides to its customers free shipping alternatives, and although the effect of these shipping offers are reflected in gross profit and does not directly affect marketing expenses, Amazon views these offers as an effective marketing tool and as stated, intends to continue offering these free shipping alternatives indefinitely. Technology and content expenses consist principally of payroll and related expenses for development, editorial, systems, and telecommunications operations personnel; systems and telecommunications infrastructure; and costs of acquired content, including freelance reviews. Technology and content expenses were $52 million and $58 million for the three months ended June 30, 2003 and 2002, representing 5% and 7% of net sales, and $102 million and $114 million for the six months ended June 30, 2003 and 2002, representing 5% and 7% of net sales. The decline in absolute dollars spent in comparison with the prior year period primarily reflects efficiency improvements in the Company's systems infrastructure, as well as improved expense management and general price reductions in some expense categories. The Company expects to continue investing in technology and improvements to its Websites, which may include, but are not limited to, hiring additional employees, offering additional Website features and product categories to its customers, and implementing additional commercial relationships, as well as potentially continuing its international expansion. General and administrative expenses consist of payroll and related expenses for executive, finance, and administrative personnel, human resources, professional fees, and other general corporate expenses. General and administrative expenses were $22 million and $19 million for the three months ended June 30, 2003 and 2002, representing 2% of net sales in each period, and $43 million and $40 million for the six months ended June 30, 2003 and 2002, representing 2% of net sales in each period. The Company's North America segment operating income was $55 million and $36 million for the three months ended June 30, 2003 and 2002, representing an increase of 53%, and $106 million and $71 million for the six months ended June 30, 2003 and 2002, representing an increase of 49%. This improvement primarily results from increasing revenues, including amounts earned from sales by third parties, and leveraging its direct cost structure relative to sales growth, partially offset by a 1% decline in segment gross margin. The Company's International segment operating income was $13 million in comparison to a loss of $10 million for the three months ended June 30, 2003 and 2002, and $28 million in comparison to a loss of $20 million for the six months ended June 30, 2003 and 2002. These improvements primarily resulted from revenue growth of 81% and 74% for the three and six months ended June 30, 2003. Also contributing to the improvement in its International segment operating income was leverage in its direct cost structure relative to sales growth. International segment operating income benefited $3 million in comparison to the second quarter of 2002 due to changes in foreign exchange rates as the U.S. Dollar weakened. Amazon's income from operations was $42 million and $1 million for the three months ended June 30, 2003 and 2002, and $81 million and $3 million for the six months ended June 30, 2003 and 2002. The improvement in operating results in comparison with the prior year was attributable to increasing revenues and leveraging its direct cost structure relative to sales growth. Income from operations benefited $3 million and $7 million in comparison to the three and six months ended June 30, 2002 due to changes in foreign exchange rates as the U.S. Dollar weakened. Net interest expense was $29 million and $30 million for the three months ended June 30, 2003 and 2002, and $59 million and $60 million for the six months ended June 30, 2003 and 2002. Interest income was $6 million for each of the three months ended June 30, 2003 and 2002, and $12 million and $11 million for the six months ended June 30, 2003 and 2002. Interest expense was $34 million and $36 million for the three months ended June 30, 2003 and 2002, and $71 million for each of the six months ended June 30, 2003 and 2002. Interest income fluctuates with prevailing interest rates and the average balance of invested funds. Interest expense is primarily related to Amazon's 6.875% PEACS, 4.75% Convertible Subordinated Notes, and its 10% Senior Discount Notes that it redeemed on May 28, 2003. Interest expense decreased $2 million in comparison to the three months ended June 30, 2002 primarily due to the Company's recent redemption of its 10% Senior Discount Notes, offset by the negative effect on interest expense associated with its 6.875% PEACS as the U.S. Dollar weakened in comparison to the Euro. In addition, the recent termination of its Euro Currency Swap will make future interest expense more volatile. At June 30, 2003, the Company had net operating loss carryforwards of approximately $2.7 billion related to U.S. federal, state, and foreign jurisdictions. Utilization of net operating loss carryforwards, which begin to expire at various times starting in 2010, may be subject to certain limitations under Sections 382 and 1502 of the Internal Revenue Code of 1986 and other limitations under state and foreign tax laws. Additionally, approximately $218 million of capital loss carryforwards begins to expire in 2005. Approximately $1.3 billion of its net operating loss carryforwards relates to tax deductible stock-based compensation in excess of amounts recognized for financial reporting purposes. To the extent that net operating loss carryforwards, if realized, relate to stock-based compensation, the resulting tax benefits will be recorded to stockholders' equity, rather than to results of operations. Amazon experienced a net loss of $43 million and $94 million for the three months ended June 30, 2003 and 2002, and $53 million and $117 million for the six months ended June 30, 2003 and 2002. Year over year improvements during the second quarter of 2003 primarily resulted from improvements in operating income. Although Amazon.com reported improvement in its net loss relative to the prior year comparable period, this improvement is not necessarily predictive of future results for a variety of reasons. For example, the Company is unable to forecast the effect on its future reported results of certain items, including the stock- based compensation associated with variable accounting treatment and the gain or loss associated with the remeasurement of its 6.875% PEACS that results from fluctuations between the U.S. Dollar and the Euro. These items represented significant charges during the first and second quarters of 2003 and may result in significant charges or gains in future periods. * * * Amazon's liabilities exceed its assets by more than $1.2 billion at June 20, 2003. Amazon's June 30 balance sheet shows ample liquidity with a near-2:1 current ratio. Moody's rates the insolvent online retailer's 4-3/4% Convertible Subordinated Notes due 2009 at Caa2 and Standard & Poor's rates them at CCC+. Amazon's 400 million shares of common stock trade around $40 per share this week, placing a $16 billion market cap on company. Steven L. Gidumal at Trilogy Capital, LLC, in New York, has looked at Amazon from every financial and operational angle imaginable time and again since 1999. He concluded long ago that Amazon's days as a stand-alone entity are numbered. "Amazon has been underpricing their product for years. They're now faced with having to move up the price elasticity curve in order to generate profits, which few (if any) companies in American history have done," Mr. Gidumal says. AMERCO: Court Approves Beesley Peck as Co-Counsel on Final Basis ---------------------------------------------------------------- AMERCO obtained permission from the Court to employ and retain Beesley, Peck & Matteoni, Ltd. as its co-counsel for restructuring and bankruptcy issues and as conflicts counsel to the extent Squire Sanders can't represent AMERCO in a particular matter. Beesley, Peck & Matteoni, Ltd. has one of the largest bankruptcy practice groups in Nevada with offices in Reno. BP&M has expertise in various practice areas, which will be significant to AMERCO's case, including bankruptcy and restructuring, corporate finance and commercial litigation. Moreover, BP&M possesses expertise in bankruptcy matters recognized on a regional basis, having been actively involved in major Chapter 11 cases, including Washington Group International, Agribio Tech and Stratosphere. To assist Squire Sanders, BP&M will: (a) Advise AMERCO with respect to its powers and duties as debtor-in-possession in the continued management and operation of its business and property; (b) Attend meetings and negotiating with representatives of creditors and other parties-in-interest and advising and consulting on the conduct of this Chapter 11 case, including all of the legal and administrative requirements of operating in Chapter 11; (c) Assist AMERCO with the preparation of its Schedules of Assets and Liabilities and Statements of Financial Affairs; (d) Advise AMERCO in connection with any contemplated sales of assets or business combinations, including the negotiation of asset, stock, purchase, merger or joint venture agreements, formulation and implement appropriate procedures with respect to the closing of any transactions and counseling the Debtor in connection with the transactions; (e) Advise AMERCO in connection with any postpetition financing and cash collateral arrangements and negotiating and drafting documents relating thereto, providing advice and counsel with respect to related prepetition financing arrangements, and negotiating and drafting documents; (f) Advise AMERCO on matters relating to the evaluation of the assumption, rejection or assignment of unexpired leases and executory contracts; (g) Advise AMERCO with respect to legal issues arising in or relating to its ordinary course of business including attendance at senior management meetings, meetings with AMERCO's financial and turnaround advisors and meetings of the Board of Directors; (h) Take all necessary action to protect and preserve AMERCO's estate, including the prosecution of actions on its behalf, the defense of any actions commenced against it, negotiations concerning all litigation in which AMERCO is involved and objecting to claims filed against AMERCO's estate; (i) Prepare, on AMERCO's behalf, all motions, applications, answers, orders, reports and papers necessary to the administration of the estate; (j) Negotiate and prepare, on AMERCO's behalf, a plan of reorganization, disclosure statement and all related agreements or documents and taking any necessary action on AMERCO's behalf to obtain plan confirmation; (k) Attend meetings with third parties and participating in negotiations with respect to bankruptcy case matters; (l) Appear before the Court, any appellate courts and the U.S. Trustee and protecting the interests of the AMERCO's estate before the Court and the U.S. Trustee; (m) Perform all other necessary legal services and providing all other necessary legal advice to AMERCO in connection with this Chapter 11 case; and (n) Act as AMERCO's counsel to the extent that Squire Sanders cannot act by reason of a conflict. BP&M will charge AMERCO for legal services at its standard hourly rates: Legal Assistants $75 - 125 Law Clerks 110 Associates 115 - 250 Partners 300 - 400 (AMERCO Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMERICAN PAD & PAPER: Court Confirms Plan of Reorganization ----------------------------------------------------------- American Pad & Paper LLC said that the bankruptcy court has confirmed its Plan of Reorganization. The Effective Date on which Ampad will officially exit Chapter 11 is expected to occur during August. An affiliate company of Crescent Capital Investments, Inc., was selected as the Successful Bidder during Ampad's Chapter 11 auction process. The affiliate of Crescent Capital will become the new equity sponsor and will assume ownership of Ampad as it emerges from bankruptcy. Based on Crescent Capital's bid, the estimated enterprise value of Ampad is between $80 million and $85 million. Mark Lipscomb, Ampad's President and CEO, stated, "Reaching the point where we can successfully emerge from the Chapter 11 process has involved a number of important factors, not the least of which has been the ongoing support of our customers and vendors, and the continued dedication of our employees. Once we emerge from bankruptcy, the financial strength of Crescent Capital will support Ampad's objective of expanding its leadership position in the marketplace." David Crosland, Executive Director at Crescent Capital stated, "Ampad exemplifies the characteristics we seek when making an investment: strong management and employee team, demonstrated market acceptance of its products, sustainable value proposition, and opportunities to enhance growth through expanding distribution channels and/or selective acquisitions. The strength of Ampad's market position and business execution have been clearly demonstrated by the fact that the Ampad brand has maintained its strong market share position, even while operating under the adverse circumstances of Chapter 11. This acquisition fits perfectly into our philosophy for investing in market leaders and positioning these companies to expand market share." Crescent Capital Investments, Inc. is an Atlanta-based private equity firm founded in 1997. It has over $500 million in capital resources with over $100 million in equity available for each transaction. Crescent has completed ten transactions since 1998 with an aggregate enterprise value of nearly $1 billion. Further information on Crescent can be found at http://www.crescentcapital.com American Pad & Paper LLC is a leading manufacturer and distributor of writing pads, filing supplies, retail envelopes and specialty papers and serves many of the largest and fastest growing office products retailers and distributors in North America. Additional information on Ampad can be found at http://www.ampad.com AMERICAN WAGERING: US Trustee Sets Creditors Meeting for Sept. 5 ---------------------------------------------------------------- The United States Trustee will convene a meeting of American Wagering, Inc.'s creditors at 1:00 p.m. on September 5, 2003, at the Office of the U.S. Trustee, Young Building, Room 2110, 300 Booth Street, Reno, Nevada 89509. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. American Wagering, Inc., headquartered in Reno, Nevada, filed for chapter 11 protection on July 25, 2003 (Bankr. Nev. Case No. 03- 52529). Thomas H. Fell, Esq., at Gordon & Silver, Ltd., represents the Debtor in their restructuring efforts. When the Company filed for protection from its creditors, it listed $13,694,623 in total assets and $13,688,935 in total debts. ANALYTICAL SURVEYS: Annual Shareholders' Meeting Set for Aug. 21 ---------------------------------------------------------------- The annual meeting of shareholders of Analytical Surveys Inc. will be held on Thursday, August 21, 2003, at the Doubletree Hotel, 37 N.E. Loop 410, San Antonio, Texas at 10:00 A.M., CDT, for the following purposes: 1. To elect five directors to the Board of Directors. 2. To approve the 2003 Stock Option Plan. 3. To ratify the appointment of KPMG LLP as independent public accountants for the fiscal year ending September 30, 2003. 4. To transact such other business as may properly come before the Annual Meeting, or any adjournment or adjournments thereof. Shareholders of record at the close of business on July 18, 2003 will be entitled to notice of, and to vote, at the Annual Meeting, or any adjournment or adjournments thereof. Analytical Surveys Inc., provides technology-enabled solutions and expert services for geospatial data management, including data capture and conversion, planning, implementation, distribution strategies and maintenance services. Through its affiliates, ASI has played a leading role in the geospatial industry for more than 40 years. The Company is dedicated to providing utilities and governmental agencies with responsive, proactive solutions that maximize the value of information and technology assets. As of January 1, 2003, ASI is headquartered in San Antonio, Texas and maintains facilities in Indianapolis, Indiana and Waukesha, Wisconsin. For more information, visit http://www.anlt.com Liquidity and Going Concern Uncertainty In its most recent Form 10-Q filing, the Company reported: "The accompanying [sic] financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the fiscal years of 2000 through 2002, we experienced significant operating losses with corresponding reductions in working capital and net worth, excluding the impact of debt forgiveness, and we do not currently have a line of credit in place to support operating cash flow requirements. Our revenues and backlog have also decreased substantially during the same period. Our senior secured convertible note also has certain immediate call provisions that are outside of our control, which if triggered and exercised, would make it difficult for us to meet accelerated debt payments. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. "To address the going concern issue, management has implemented financial and operational restructuring plans designed to improve operating efficiencies, reduce and eliminate cash losses and position ASI for profitable operations. In 2002, we improved our working capital position by reducing our bank debt through the issuance of preferred stock and convertible debt and with the collection of a $1.2 million federal income tax refund. The consolidation of our production operations to two solution centers has resulted in lower general and administrative costs and improved operating efficiencies. Additionally, the relocation of our corporate headquarters has resulted in additional savings realized with a smaller corporate staff and efficiencies in occupancy and travel related expenses. Our sales and marketing team is pursuing market opportunities in both our traditional digital mapping and newly launched data management initiatives. We continue to focus on cost control as we develop the data management initiative. "The financial statements do not include any adjustments relating to the recoverability of assets and the classifications of liabilities that might be necessary should we be unable to continue as a going concern. However, management believes that its continued turnaround efforts, if successful, will improve operations and generate sufficient cash to meet its obligations in a timely manner." ANC RENTAL: Asks Court to Approve Adoption of New Severance Plan ---------------------------------------------------------------- The Asset Purchase Agreement that ANC Rental Corporation and its debtor-affiliates executed with CAR Acquisition Corp. LLC and Cerberus Capital Management LP on June 12, 2003 requires the rejection of all prior formal or informal severance arrangements, except for certain severance programs, and the adoption of a new severance plan, subject to certain conditions. CAR Acquisition has committed to offer employment to at least 90% of the Debtors' employees at least five business days prior to the anticipated closing of the sale. The New Severance Plan is intended to apply to employees who are terminated by the Debtors prior to the closing of the sale, including employees who are not offered employment by CAR Acquisition. The New Severance Plan is being adopted in conjunction with the Bonus Pool to be offered by CAR Acquisition following the closing to all of the Debtors' employees. Pursuant to the Agreement, employees at grade level 14 and above will have the opportunity to participate in the Bonus Pool based on the Company's EBITDAR between May 1, 2003 and the closing date. Employees below grade 14 will receive one week's pay at closing. Thus, as contemplated in the Agreement, the Debtors seek the Court's permission to enter into the New Severance Plan. William J. Burnett, Esq., at Blank Rome LLP, in Wilmington, Delaware, informs the Court that the New Severance Plan is being adopted in connection with the Agreement. Therefore, if the Agreement is not consummated, the New Severance Plan will be eliminated. Additionally, the payment of benefits under the New Severance Plan, and each payment under the Severance Plan, is contingent upon Lehman Commercial Paper Inc.'s consenting to the use of cash collateral to make severance payments. Although the New Severance Plan sets forth the highest possible amounts to which employees could become entitled pursuant to the New Severance Plan, the making of any payments thereunder is subject to Lehman's prior express written consent to the use of cash collateral to make the severance payment, which consent may be granted or withheld in its sole discretion. To the extent that Lehman consents to a lesser amount of severance payments than what is set forth, or does not consent to any severance payments, or the Debtors have insufficient funds to pay all the benefits due under the New Severance Plan, the employee will not be entitled to any greater benefit and will have no claim, administrative or otherwise, against the estates for the difference between the maximum amounts set forth in the New Severance Plan and any lesser severance payments, if any. Lehman has not granted its consent to use of its cash collateral to fund any payments under the New Severance Plan and is under no obligation to do so. Lehman's discretion, however, will not involve defining an individual employee's entitlement to a payment but simply defining whether, and how much, its cash collateral is made available to fund payments under the New Severance Plan. The New Severance Plan would completely supersede and replace any severance provisions offered to non-union employees and non-union former employees of the Debtors under any benefit plan or under any other severance plan, program or agreement, whether written or oral, including, but not limited to, individual agreements between employees of Alamo Rent-A-Car, LLC hired prior to January 1, 1998 and Alamo, known as "FamPact," and any informal guidelines that might be construed as a severance plan; provided that, the New Severance Plan will not supersede or replace: 1. the severance arrangements already communicated to certain employees at the Debtors' Minneapolis, Minnesota location who are subject to separate retention agreements; and 2. the severance benefits of non-union former employees who became entitled to severance under the Debtors' Prior Severance Programs who signed severance agreements and releases prior to June 12, 2003. In connection with the adoption of the New Severance Plan, the Debtors also seek Judge Walrath's authority to reject the Prior Severance Programs. FamPact alone would cost the Debtors $25,000,000 and in light of the Debtors' current situation, this severance plan is no longer appropriate. Therefore, the Debtors seek to reject the Prior Severance Programs and replace them with the more cost effective New Severance Plan. (ANC Rental Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARMSTRONG WORLD: Chan Galbato Will Step Down as Unit's Pres./CEO ---------------------------------------------------------------- Armstrong World Industries, Inc. (OTC Bulletin Board: ACKHQ) announced that Chan W. Galbato, President and CEO, Armstrong Floor Products, will leave the company to pursue other opportunities. Michael D. Lockhart, Chairman and CEO will assume all responsibilities for Floor Products operations. This change is driven by a desire to eliminate the holding company philosophy, to reduce overall resources and apply all available resources to increasing the success of the core businesses: floors, ceiling, and cabinets. "As we approach emergence," said Lockhart, "the Chapter 11 process is placing fewer demands on my time. This allows me to focus more directly on Armstrong's businesses. Chan and I agree that this situation creates a redundancy between our roles. "In his two years at Armstrong, Chan made significant contributions to the company. He oversaw the integration of Armstrong Wood Products with Armstrong Floor Products, creating one flooring business. He renewed our focus on commercial flooring, where we are currently enjoying good success. Under Chan's leadership, we have also been able to bring about significant cost reductions in our European Flooring operations." Armstrong World Industries, Inc., a subsidiary of Armstrong Holdings, Inc., is a global leader in the design and manufacture of floors, ceilings and cabinets. In 2002, Armstrong's net sales totaled more than $3 billion. Founded in 1860 and based in Lancaster, PA, Armstrong has 59 plants in 14 countries and approximately 16,500 employees worldwide. More information about Armstrong is available on the Internet at http://www.armstrong.com ASIA GLOBAL CROSSING: Chapter 7 Trustee Hires Davis Graber ---------------------------------------------------------- Asia Global Crossing's Chapter 7 Trustee, Robert L. Geltzer, relates that he needs a firm that has considerable experience in accounting matters, with accountants that have extensive familiarity with the accounting practices in insolvency matters in the Bankruptcy Courts in many districts of the United States. Accordingly, Mr. Geltzer sought and obtained the Court's authority to employ Davis, Graber & Nasberg, LLP as his accountants, nunc pro tunc to June 20, 2003. Specifically, Davis will: (a) analyze the financial operations of the corporation prior to the Chapter 11 Petition Date, as necessary; (b) analyze the financial operations of the corporations subsequent to the Chapter 11 petition and up to the date of conversion to Chapter 7; (c) analyze the transactions with insiders, related or affiliated entities for a period the Trustee will dictate and identify potential preferential transfers and fraudulent conveyances; (d) identify and prepare an analysis of all assets and liabilities as the Chapter 7 Trustee considers necessary; (e) attend meetings and confer with representatives of the Chapter 7 Trustee and his counsel; (f) provide supporting documentation or reports to substantiate alleged insider and preferential transfers or fraudulent conveyances and present the findings in Court, under oath, if necessary; (g) prepare all federal, state and local tax returns as required; and (h) provide other services that may be necessary. Andrew W. Plotzker, a member at Davis, Graber & Nasberg, LLP, informs Judge Bernstein that the firm's hourly rates for services rendered are: Partners $275 - 375 Managers and Senior Managers 175 - 265 Staff 115 - 165 Paraprofessionals 75 - 110 Davis will also seek reimbursement for the out-of-pocket expenses incurred in providing the services. According to Mr. Plotzker, to the best of his knowledge, Davis does not hold or represent any interest adverse to the Trustee, the Debtors or their creditors with respect to the matters it is to be engaged. In addition, Davis is not a creditor of the Debtors and has no relevant connection with any parties-in- interest or their attorneys. Thus, Mr. Plotzker concludes, Davis is a "disinterested person" pursuant to Section 101(14) of the Bankruptcy Code. (Global Crossing Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) ATA HOLDINGS: S&P Keeps Junk Ratings on CreditWatch Negative ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on ATA Holdings Corp. and subsidiary ATA Airlines Inc., including lowering the corporate credit rating on both to 'CCC' from 'B-'. Ratings remain on CreditWatch with negative implications, where they were placed March 18, 2003. "The downgrade is based on the company's July 28, 2003, announcement that it does not expect to have enough cash to make its 2004 debt and lease payments, and it cannot obtain additional long-term financing," said Standard & Poor's credit analyst Betsy Snyder. "The downgrades of ATA's enhanced equipment trust certificates also reflect the continuing substantial deterioration in market values of the Boeing 757-200 aircraft which form their collateral," the credit analyst continued. The ratings on ATA Holdings Corp. reflect uncertainty regarding payment of its 2004 debt maturities and lease payments, which the company has indicated it will have to refinance or restructure. ATA Holdings is the parent of ATA Airlines Inc., the 10th-largest scheduled air carrier in the U.S. ATA offers low fares to value- oriented passengers out of hubs located at Chicago's Midway Airport and at Indianapolis, Ind. ATA is also the largest charter airline in North America, providing charter airline services primarily to U.S. and European tour operators, as well as to U.S. military and government agencies. Lower fare, leisure carriers have been less affected than the large network carriers have by the industry downturn that began in late 2000, as passengers have sought low fares. ATA has been replacing its relatively old aircraft with new Boeing planes, which has resulted in one of the youngest airline fleets in the industry, and aided its operating costs. However, the company's revenues have suffered from continuing price competition, which is not expected to abate over the near term. ATA has a heavy operating lease burden due to delivery of the new aircraft. In November 2002, ATA closed on a $168 million loan that was 90% backed by the federal government, one of only a few airlines that have been granted a loan guarantee thus far. Although the company reported a profit of $40.8 million in the second quarter of 2003, it included a $37.2 million refund from the federal government. ATLANTIC COAST: Second Quarter Results Reflect Strong Growth ------------------------------------------------------------ Atlantic Coast Airlines Holdings, Inc. (Nasdaq: ACAI), parent of Atlantic Coast Airlines, reported-based on accounting principles generally accepted in the United States (GAAP)-net income of $45.7 million for the second quarter 2003 compared to net income of $17.4 million for the second quarter 2002. The company's results for second quarter 2003 and 2002 include several special items as noted below and in the pro forma financial results attached. Excluding these charges and credits, the company would have reported net income of $17.2 million for 2003 compared to $14.1 million for 2002. The company's second quarter 2003 results were affected by the items noted below: -- The company recorded a $34.6 million ($20.4 million after tax) credit to income to reverse a portion of the retirement charge it recorded for Jetstream-41 aircraft in 2001 and 2002. The credit, which does not affect cash in the current period, was due to delays in the company's retirement schedule for its J-41 turboprop fleet as a result of uncertainty over the company's contractual relationship with United. The company believes that it will not complete the retirement of the turboprop aircraft originally planned to be retired by year- end. The company anticipates that the remaining J-41s will be retired during 2004 and that it will record a charge as these turboprops are retired. -- The company recently reached an agreement with United on fee- per-departure rates for 2003. The company's second quarter revenue includes $12.3 million ($7.3 million after tax) of additional revenue associated with this agreement as a result of changes to estimates used in the first quarter of 2003. -- In the second quarter of 2003, the company recorded $1.5 million ($0.9 million after tax) in government compensation under the Emergency Wartime Supplemental Appropriations Act. During the second quarter 2003, ACA generated approximately 1.1 billion available seat miles, an increase of 6.6 percent over the same period last year. The company carried 2,181,332 passengers, an increase of 22.2 percent over the same period last year. Load factor improved 7.7 points to 75.3% for the second quarter compared to 67.6% in the second quarter 2002. On July 28, 2003, the company announced it anticipates that its longstanding relationship with United Airlines will end, and that it will establish a new, independent low-fare airline to be based at Washington Dulles International Airport. ACA has a fleet of 148 aircraft -- including 118 jets -- and offers approximately 840 daily departures, serving 84 destinations in the U.S. and Canada. Atlantic Coast Airlines (S&P/B-/Negative) employs over 4,800 aviation professionals. The common stock of parent company Atlantic Coast Airlines Holdings, Inc. is traded on the Nasdaq National Market under the symbol ACAI. For more information about ACA, visit http://www.atlanticcoast.com BEAR STEARNS: Fitch Affirms Low-B Ratings on Six Note Classes ------------------------------------------------------------- Bear Stearns Commercial Mortgage Pass-Through Certificates, series 2002-PBW1 are affirmed by Fitch Ratings as follows: -- $364.8 million class A-1 'AAA'; -- $385.9 million class A-2 'AAA'; -- Interest-only classes X-1 and X-2 'AAA'; -- $26.5 million class B 'AA'; -- $31.1 million class C 'A' -- $8.1 million class D 'A-' -- $9.2 million class E 'BBB+' -- $13.8 million class F 'BBB' -- $13.8 million class G 'BBB-' -- $16.1 million class H 'BB+' -- $10.4 million class J 'BB' -- $3.5 million class K 'BB-' -- $5.8 million class L 'B+' -- $9.2 million class M 'B' -- $2.3 million class N 'B-'. Fitch does not rate the $13.8 million class P. The rating affirmations follow Fitch's annual review of the transaction, which closed in October 2002. The rating affirmations reflect the consistent loan performance and minimal reduction of the pool collateral balance since closing. Wells Fargo Bank, N.A., the master servicer, collected year-end (YE) 2002 financials for 87.7% of the pool balance. Based on the information provided, the resulting YE 2002 weighted average debt service coverage ratio is 1.48 times, compared to 1.36x at issuance for the same loans. Currently, there are no loans in special servicing. Fitch reviewed credit assessments of three loans in pool, the Belz Outlet Center (6.9%), the RREEF Master Trust Portfolio (4.5%), and the CNL Retail Portfolio (2.3%). The DSCR for each loan is calculated using borrower provided net operating income less required reserves divided by debt service payments based on the current balance using a Fitch stressed refinance constant. Based on their stable to improved performance, all three loans maintain investment grade credit assessments. The Belz Outlet Center loan is secured by a 637,772 square foot retail center located in Orlando, Florida. The stressed DSCR for year end 2002 was 1.42x, compared to 1.45 at issuance. The major tenants Rockport (3.5%), Nike (3.5%), and the Gap (2.4%). The RREEF Textron Portfolio loan is secured by seven properties: a 175-unit apartment complex located in Miami, Florida; a 292-unit apartment complex located in Pompano Beach, FLorida; a 336-unit apartment located in Pasadena, Maryland; a 175,040-sf shopping center located in Redmond, Virginia; a 561,920-sf industrial building located in Richardson, Texas; a 576,644-sf industrial park in Boston, Massachusetts; and a 94,893-sf office building located in Washington D.C. The stressed DSCR for the year end 2002 was 3.06x, compared to 2.93x at issuance. The CNL Retail Portfolio loan is secured by retail building housing five single-tenant retail stores totaling 210,885-sf located in Florida and Virginia. The stressed DSCR for the YE 2002 was the same as at issuance at 1.39x. The five tenants in the CNL Retail Portfolio are Barnes & Nobles, Kash n' Karry, Bed Bath & Beyond, Best Buy, and Borders Books. Fitch will continue to monitor this transaction as surveillance is ongoing. BOYD GAMING: Board Declares Quarterly Dividend Payable on Sept 3 ---------------------------------------------------------------- Boyd Gaming Corporation (NYSE: BYD) reported its financial results for the second quarter 2003. In addition, the Company reported that its Board of Directors has instituted a policy of quarterly cash dividends on its common stock. The Board has declared a quarterly dividend of $.075 per share, payable September 3, 2003 to shareholders of record on August 12, 2003. The Company also reported strong initial performance at Borgata, which opened July 3 in Atlantic City. The Company reported adjusted earnings of $.21 per share in the second quarter versus $.29 per share in the second quarter last year. In both periods adjusted earnings are before preopening expenses, and, in the second quarter this year, adjusted earnings also exclude a charge of $3.5 million, or $.03 per share, for a one-time retroactive gaming tax imposed by the State of Indiana. Per share amounts are reported on a diluted basis. Revenues for the second quarter were $313 million, essentially the same as reported in the second quarter last year. Blue Chip was the only property with a significant change in revenue this quarter versus the prior year, up 11.7% due to the commencement of dockside operations in August 2002. The Company reported preopening expenses of $11.9 million, or $.11 per share, in the second quarter this year and $3.2 million, or $.03 per share, in the second quarter last year, both principally related to the development of Borgata, the Company's joint venture with MGM MIRAGE in Atlantic City. Net income in the second quarter was $4.4 million, or $.07 per share, versus $17.0 million, or $.26 per share, reported in the second quarter last year. Second Quarter Results of Operations The Company's nine operating units generated property EBITDA in the quarter of $70.2 million (before the one-time Indiana charge) as compared to $78.2 million reported in the second quarter last year, a decline of 10.2%. After corporate expense, second quarter EBITDA (before the one-time Indiana charge) was $63.1 million versus $71.6 million reported in the prior year. William S. Boyd, Chairman and Chief Executive Officer of Boyd Gaming, said, "Operating conditions remained difficult in the second quarter as the war in Iraq depressed results early in the quarter, the economy remained sluggish, and higher gaming taxes took their toll. Despite these conditions, Sam's Town Las Vegas and Delta Downs turned in excellent quarters, and revenue gains at Blue Chip were enough to essentially offset higher gaming taxes, exclusive of the one-time Indiana charge." Six-month Results of Operations The Company reported revenue of $634 million for the first six months of 2003, up from $615 million in the same period of 2002. The gain was principally the result of dockside operations at Blue Chip and a full period of slot operations at Delta Downs, where slot operations commenced in February 2002. EBITDA (before the one-time Indiana charge) was $135 million for the first six months in 2003 versus $143 million in the comparable period last year. Adjusted earnings for the first six months of 2003 were $.50 per share as compared to $.60 per share for the same period last year. Net income for the first six months of 2003 was $20.9 million, or $.32 per share, versus $24.9 million, or $.38 per share, reported for the first six months last year. Prior year net income includes a charge for the cumulative effect of a change in the accounting for goodwill, which amounted to $.13 per share. Second Quarter Property Highlights Sam's Town Las Vegas continued to produce strong results. In the second quarter this year, the property's EBITDA was $8.5 million, an 8.2% increase over last year on a 2.0% increase in revenue. The property's EBITDA margin improved year-over-year to 25.9% from 24.4% in the second quarter last year. Delta Downs reported EBITDA of $7.3 million in the quarter versus $6.7 million reported last year. However, in the second quarter last year, Delta Downs results were boosted by a one-time credit of $1.5 million for the refund of horse racing purse money; excluding that credit, Delta Downs reported second quarter EBITDA this year that was 39% above the comparable period last year. The Downtown Las Vegas properties reported EBITDA of $10.0 million, $2.1 million below the comparable quarter in the prior year. The decline was related to lower revenue and EBITDA at the Fremont and from higher costs in the Company's Hawaii-to-Las Vegas air charter operations. Par-A- Dice reported EBITDA in the quarter of $12.0 million, down $2.7 million from the second quarter last year. The decline resulted primarily from higher gaming taxes, increased marketing costs, and disruption related to the installation of a new player tracking system in April. At Blue Chip, the revenue increase of 11.7% essentially offset the increase in gaming taxes that went into effect in August 2002, exclusive of the one-time Indiana charge. Blue Chip EBITDA before the $3.5 million charge was $21.9 million versus $22.1 million reported last year. Initiation of Quarterly Dividend The Company's Board of Directors declared its first quarterly cash dividend to shareholders of $.075 per share, which translates into an annualized dividend of $.30 per share. The dividend will be paid September 3, 2003, to shareholders of record on August 12, 2003. Bill Boyd commented, "We are very pleased to be distributing a portion of our earnings to our shareholders. We remain confident in our ability to sustain reliable and meaningful earnings and cash flows over time that will enable us to reward our shareholders with cash payments from earnings. With our debt at a comfortable level in relation to our cash flow, we feel we will be able to continue to grow our business as investment opportunities arise." The Company also announced that its two million share repurchase program, approved in late 2002 and about half completed, will remain in effect. Borgata The Company reported that Borgata, its $1.1 billion joint venture with MGM MIRAGE in Atlantic City, opened successfully on July 3. Bill Boyd remarked, "The initial reactions from customers to our beautiful property have been overwhelmingly positive. Customer intent to return, as measured during intercept surveys, is strong and has exceeded our expectations. Our customer database is growing at an excellent pace and ahead of plan. Our daily revenues per gaming table and slot machine, we believe, are already among the highest in the market. Average daily casino revenue through almost four weeks of operation is in the upper quartile of Atlantic City properties as measured by last July rankings, even though our marketing programs are only in their initial stages. Importantly," Boyd continued, "Borgata turned out to be the kind of place we wanted it to be: upscale yet very comfortable; fun and energetic. I am very proud of the friendliness and enthusiasm exhibited by our great group of employees." Development Plans The Company reported that it is proceeding with two projects to expand its Central Region operations. First, the Company will soon begin a $50 million expansion project at Delta Downs. The first phase involves expanding the size of the casino building to provide customers with a more open and comfortable environment, including wider aisles on the slot floor. The second phase, planned to begin in early 2004, involves the addition of food and beverage amenities and the development of a hotel at the property, the first phase of which is expected to contain approximately 200 guest rooms. Planning is underway for an expansion of gaming operations at the successful Blue Chip Casino in Indiana. The Company expects to build a new boat, which will allow for more gaming positions and for the casino to be located on one floor versus the three story boat now in operation. The project, which is also expected to include a new parking structure, is subject to regulatory and other approvals. Bill Boyd stated, "Expanding our highly successful properties in order to grow revenues and EBITDA is part of our core strategy. Delta Downs and Blue Chip, which together account for about 40% of our wholly-owned property EBITDA, both have strong positions in their respective markets and should benefit nicely from these planned property enhancements." Third Quarter Outlook Bill Boyd commented on the outlook for the third quarter. "After eight straight quarters of property EBITDA from our wholly-owned properties meeting or exceeding the comparable quarter in the prior year, the second quarter saw a decline in that measurement. Looking ahead, we expect that the third quarter will show results in which property EBITDA once again meets or exceeds the prior year, exclusive of the effects of the large gaming tax increase in Illinois. The tax, which took effect July 1, 2003, could depress EBITDA by about $4 million in the quarter. For Borgata, we expect strong gaming and non-gaming revenue results throughout the third quarter. However, as we projected, high start-up costs and expenses will result in lower than normal margins in the quarter. Therefore, we don't expect Borgata to be a meaningful contributor to our Company's bottom line in the third quarter, but remain confident that it will make a significant contribution to income in 2004. Borgata, in its start-up period, is performing according the plan, and this expectation for its contribution to our Company is fully in line with our projections. Considering all of this, we expect adjusted earnings per share in this year's third quarter to be generally in line with the just completed second quarter." Financial Statistics The Company provided the following additional financial information for the second quarter ended June 30, 2003: * June 30 debt balance: $1.089 billion * Debt reduction in quarter: $14.5 million * June 30 cash: $76.8 million * Shares repurchased in second quarter: 128,900 shares at an average price of $12.67 per share. * Capital spending in second quarter: $17.1 million, almost all related to normal maintenance items. * Capitalized interest during the quarter: $4.5 million, substantially all related to the Company's investment in Borgata. * Cash contributed in the second quarter to the joint venture that owns Borgata: $4.9 million Headquartered in Las Vegas, Boyd Gaming Corporation (NYSE: BYD) is a leading diversified owner and operator of 13 gaming entertainment properties located in Nevada, New Jersey, Mississippi, Illinois, Indiana and Louisiana. Boyd Gaming recently opened Borgata Hotel Casino and Spa at Renaissance Pointe (AOL keyword: borgata or http://www.theborgata.com), a $1.1 billion entertainment destination hotel in Atlantic City, through a joint venture with MGM MIRAGE. Additional news and information on Boyd Gaming can be found at http://www.boydgaming.com * * * As previously reported in Troubled Company Reporter, Standard & Poor's assigned its 'B+' rating to Boyd Gaming Corp.'s $300 million senior subordinated notes. Standard & Poor's also affirmed it 'BB' corporate credit rating on Boyd. The outlook is stable. CALL-NET ENTERPRISES: Second Quarter Results Enter Positive Zone ---------------------------------------------------------------- Call-Net Enterprises Inc. (TSX: FON, FON.B), a national provider of competitive telecommunications and data services to residences and businesses across Canada, reported financial results for the second quarter ending June 30, 2003. Consolidated revenue for the second quarter was $194.1 million compared to $197.9 million in the second quarter of 2002. EBITDA (earnings before interest, taxes, depreciation and amortization) before unusual items were $24.1 million representing a $33.8 million improvement from the same period last year. Net income was $2.5 million compared to a net loss of $62.4 million in the second quarter of 2002. For the third consecutive quarter, the Company was cash self sufficient, generating an increase in cash of $6.4 million and ending the quarter with $132.7 million of cash and short term investments. Bill Linton, president and chief executive officer, commented, "Despite the continuing challenges in the Canadian telecommunications market, Call-Net's overall financial performance for the second quarter was within the range of management's expectation. We continued to execute against our 2003 on-net strategy, growing our local service on both the consumer and enterprise sides of the business. We entered into a new partnership with Microcell Solutions to develop an innovative wireline, wireless bundle that we intend to launch in the third quarter. We continue to gain momentum in the enterprise market driven by our cross-border capabilities with Sprint and our leadership in customer responsiveness." Business Revenue from business customers for the second quarter was $143.7 million, compared to $149.1 million for the same period in 2002. Revenue from business customers represents 74 per cent of Call-Net's total consolidated revenue. A decline in long distance and data revenue was offset by an increase in local service revenue. Local access lines increased by 40,600, representing a $4.8 million increase in revenue for the second quarter compared to the same period in the previous year. Long distance revenue declined by $6.0 million, compared to the same quarter last year, as the average revenue per minute continued to decrease offset by a 9.5 per cent increase in long distance volume. Data revenue declined by $4.2 million as price pressures, carrier customer migration to their own networks were only partially offset by new enterprise business growth. Call-Net continued to reap the benefits of its relationship with Sprint, adding a number of marquee customers to its growing list of national, North American and global enterprises and service providers with operations in Canada, including Bata Limited, The Columbia House Company (Canada), Intuit Canada Limited and Top Producers Systems Inc. Residential The residential business unit delivered a solid performance for the quarter with revenues of $50.4 million, a $1.6 million improvement compared to the same quarter last year. For the first time in the Company's history, revenue from bundled products exceeded revenue from stand-alone products. Residential local service access lines increased by 39,700 from last year, bringing the total to 146,900 at June 30, 2003. This growth contributed to the $5.6 million increase in residential local revenue for the quarter compared to the same period in the previous year. Gains in residential local service revenue were offset by the continued loss of long distance customers, a decrease of 60,600 customers compared to the same quarter of the previous year. The corresponding decrease in revenue was offset by modestly higher residential average revenue per minute and an increase in the service access fee. Residential data revenue fell by $1.5 million from June 30, 2002 as the number of dial-up customers switching to high-speed access offerings continued. "The CRTC's favourable decision to unbundle the ILEC's local and high speed Internet products and our own drive to continue to introduce innovative bundled products, and invest in our on-net strategy, will improve our customer retention and acquisition," added Linton. Operating expenditures and carrier charges Operating costs for the second quarter were $71.6 million, $17.6 million lower than the second quarter of 2002, as a result of a reduction in human resource costs, a decrease in bad debt expense and lower occupancy costs, marketing expenses and capital taxes. Carrier charges for the second quarter were $98.4 million or $20 million less than the same quarter of the previous year as a result of various favourable CRTC decisions, network optimization and lower costs for competitive services. "Our operational performance continued to be strong and our capital expenditure levels are on plan, allowing us to continue to generate free cash flow. We remain on track to deliver against our forecast," said Roy Graydon, executive vice president and chief financial officer. "Gross profit increased $16.2 million or 20.4 per cent during the second quarter compared to the same quarter last year. More importantly, our profit as a percentage of revenue continued to improve, as a result of continued gains on the regulatory front, network optimization, aggressive supplier contract renegotiations and the implementation of an increase to the system access fee." Outlook Throughout the remainder of the year, Call-Net will continue to conservatively invest in its 'on-net' strategy, focusing on sustaining cash flow self-sufficiency and limiting near-term capital investment while maximizing gross margin. The Company plans capital expenditures of $40 to $50 million for 2003. On July 23, 2003, Sprint Canada entered into an agreement to securitize certain of its accounts receivable and optimize working capital. This provides further liquidity to invest in the Company's core business, which will provide cash proceeds of up to $55.0 million. On the residential front, Call-Net will continue to focus on expanding its share of the local residential service market, buoyed by the launch of a unique wireline, wireless bundle and the favourable July 21, 2003 decision to unbundled local residential and high-speed access service. Through its July 7, 2003 acquisition of the assets of Mosaic Performance Solutions Canada, which will operate under the name of E-Force, the Company expects to generate annual revenue of $25.0 million with similar profitability to Call-Net's current core business. Call-Net will continue to leverage its relationship with Sprint to win multi-national cross-border customers and cost-effectively deploy specific new products and to focus on call centre applications in partnership with TimeiCR and other partners. During the third quarter, the Company intends to launch its next generation of networking virtual private network suite of solutions for business customers, leveraging proven Sprint technology and marketing expertise. On the regulatory front, Call-Net will continue to focus on deriving the full benefits of 2002 CRTC Price Cap decisions and will pursue a decision with respect to its May 2003 application to jump-start competition in the local residential service market. Call-Net Enterprises Inc. (S&P, B Corporate Credit Rating, Stable) is a leading Canadian integrated communications solutions provider of local and long distance voice services as well as data, networking solutions and online services to businesses and households primarily through its wholly-owned subsidiary Sprint Canada Inc. Call-Net, headquartered in Toronto, owns and operates an extensive national fiber network and has over 134 co-locations in nine Canadian metropolitan markets. For more information, visit the Company's Web sites at http://www.callnet.caand http://www.sprint.ca COMMUNITY CHOICE: S&P Knocks Financial Strength Rating Down to R ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'R' financial strength rating to Community Choice Michigan. "This rating action follows the announcement made by the State of Michigan Circuit Court for the 30th Judicial Circuit Ingham County approving an order for rehabilitation for the company on May 12, 2003," explained Standard & Poor's credit analyst Raymona Kimbrough. This action came after supervision of the company by the Office of Financial and Insurance Services. CCM began operation in 1996. It has about 71,000 members in 36 counties in out-state Michigan. The company provides health care coverage to those who have Medicaid or MIChild coverage. An insurer rated 'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pa some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions such as market conduct violations. CONE MILLS: June 29 Working Capital Deficit Narrows to $10 Mill. ---------------------------------------------------------------- Cone Mills Corporation (NYSE: COE) announced results for the second quarter ended June 29, 2003. For the quarter, Cone reported a net loss of $3.6 million or $.18 per share after preferred dividends. Excluding special charges of $3.1 million net of tax related to the extension of credit facilities and additional reserves for losses on assets available for sale, Cone reported a net loss of $0.5 million or $.06 per share after preferred dividends. By comparison, Cone reported net income of $3.1 million or $.08 per share after preferred dividends for the second quarter of 2002. Cone recognized a $4.1 million pre-tax charge as part of Other Expense for the exercise and payment of contingent rights that were granted as part of the November 2001 extension of senior lending agreements. The Equity Appreciation Rights were settled during the second quarter in conjunction with the further extension of these senior lending agreements to March 2004. The settlement was funded by the payment of $2.1 million in cash and the issuance of $1.8 million in senior notes and approximately 169,000 shares of Cone common stock. In addition, during the second quarter, Cone recognized a $0.8 million pre-tax asset impairment charge to write down further certain assets available for sale that it had reached an agreement to sell in the third quarter. The $0.8 million asset impairment charge is a non-cash charge. Net sales for the second quarter of 2003 were down by 23.4% to $96.3 million from $125.8 million in the second quarter of 2002. The decrease was a result of lower sales volume across all three of Cone's business segments. Denim sales for the second quarter were down primarily as a result of volume and, to a lesser extent, pricing, which were marginally offset by a more value-added product mix. Outside sales for the commission finishing segment were down 22.8% to $11.2 million. Second quarter sales for the decorative fabrics segment were $6.2 million, down 34.2% from the second quarter of 2002. All of Cone's businesses encountered difficult market conditions in the second quarter of 2003. Gross profit for the second quarter of 2003 was $10.4 million or 10.8% of sales, as compared with the second quarter of 2002 results of $17.3 million or 13.7% of sales. Operating income for the denim segment was $5.5 million in the second quarter of 2003, as compared to $8.7 million in the second quarter of 2002. Despite a very weak demand environment and reduced volume as compared to the second quarter of 2002, the commission finishing segment managed to limit its operating loss to $0.2 million in the second quarter of 2003, as compared with operating income of $1.1 million in the second quarter of 2002. The decorative fabrics segment had an operating loss of $1.1 million for the second quarter of 2003, as compared with an operating loss of $0.1 million for the second quarter of 2002. Operating income before depreciation, amortization and non-cash asset impairment charges was $7.5 million for the second quarter of 2003 or $9.3 million including Cone's pro rata share of Parras Cone's results. For the second quarter of 2002, operating income before depreciation, amortization and non-cash asset impairment charges was $12.9 million and $15.2 million, respectively. On a year-to-date basis, operating income before depreciation, amortization and non-cash asset impairment charges was $17.4 million or $21.8 million including Cone's pro rata share of Parras Cone's results. This compares to 2002 year-to-date operating income before depreciation, amortization and non-cash asset impairment charges of $24.6 million or $28.2 million including Cone's pro rata share of Parras Cone's results. At June 29, 2003, the Company's balance sheet shows that its total current liabilities outweighed its total current assets by about $10 million. In regards to second quarter results, John L. Bakane, Chairman and CEO, commented, "We are disappointed to report our first negative earnings performance since 2001. Our lower second quarter income was the result of a trying retail environment that has given rise to unprecedented conservatism in retailers' orders for the fall and holiday seasons and subsequent pressures to reduce inventories throughout the pipeline. This was exacerbated not only by the growth of garment imports but also the inability of retailers to modify outstanding orders for imported goods, which have long lead times. As a consequence, U.S. producers have faced a greater burden of pipeline inventory adjustments, causing reduced sales and curtailed operating schedules that have a negative impact on our profitability. "On the positive side, our associates have done an outstanding job in the areas of product development, customer service, quality improvement, efficiency and cost control. We believe we have continued to gain denim market share in our region. Additionally we are encouraged by our manufacturing expansion strategy in Mexico, as Parras Cone's results have continued to be outstanding in the face of difficult market conditions, and we expect Parras Cone to be debt free by early 2004." In regards to the outlook for the remainder of the year, Mr. Bakane added, "The paradox of depressed near-term conditions versus signs of economic recovery have combined to make present visibility the poorest I have seen in my career. However, we believe that recent massive government fiscal and monetary stimuli and the inevitable end of inventory liquidations will result in future recovery in our markets." Gary L. Smith, CFO, commented, "On May 27, Cone amended its credit agreements with its lenders extending its existing credit agreement and senior note maturity through March 15, 2004. The $.06 per share loss excluding the special items was below our expectation for the quarter as a result of the overall weakness in the textile and apparel sectors. Cone continued to manage its working capital very tightly which allowed the company to average in excess of $24.0 million of availability under its revolving credit facility in the second quarter of 2003." Founded in 1891, Cone Mills Corporation, headquartered in Greensboro, NC, is the world's largest producer of denim fabrics and one of the largest commission printer of home furnishings fabrics in North America. Manufacturing facilities are located in North Carolina and South Carolina, with a joint venture plant in Coahuila Mexico. As previously reported, Standard & Poor's Ratings Services affirmed its 'CCC+' long-term corporate credit and senior secured debt ratings on Cone Mills Corp. The ratings were removed from CreditWatch, where they were placed on Jan. 24, 2003. The outlook is negative. Greensboro, N.C.-based Cone Mills had about $149 million in debt outstanding at March 30, 2003. CONSECO INC: Wants Blessing to Sever General Indemnity Agreement ---------------------------------------------------------------- Conseco, Conseco Finance Corp., Conseco Finance Services Corp., Zurich American Insurance Company and Fidelity and Deposit Company of Maryland seek to resolve the treatment of contracts and claims. By this motion, Conseco seeks the Court's authority to sever a General Indemnity Agreement and assume a Severed Executory Contract and an Insurance Policy. Conseco and Fidelity are parties to a General Indemnity Agreement dated October 11, 2000, pursuant to which bonds have been issued periodically. Zurich, Fidelity and their affiliates filed Proof of Claim 49672-006868 against Conseco for alleged obligations related to the Indemnity Agreement for $44,834,771. The Debtors objected to the Zurich Claim and Zurich responded. Zurich asked the Court for allowance and payment of an administrative expense claim stating that the Insurance Policy is an executory contract. Under a stipulation, CNC and CFC agree to sever the Indemnity Agreement. CNC assumes its obligations under the CNC Indemnity Agreement and CNC assumes it obligations related to the Insurance Policy. Conseco has met its obligations under the Indemnity Agreement and the proposed cure amount is, therefore, zero. The Zurich Claim is withdrawn. (Conseco Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSTELLATION BRANDS: Completes Convertible Preferred Offering -------------------------------------------------------------- Constellation Brands, Inc. (NYSE: STZ), a leading international producer and marketer of beverage alcohol brands, has completed its public offerings of Class A common stock and mandatory convertible preferred stock. Net proceeds of these offerings, including over-allotment options exercised by the underwriters, are approximately $427.4 million. The net proceeds will be used to repay all amounts outstanding under the bridge loans plus accrued interest and a portion of term loans under the Company's senior credit facility, all of which were incurred to partially finance the acquisition of BRL Hardy. In these offerings, Constellation issued 9,800,000 shares of Class A common stock at a public offering price of $28.00 per share and 6,820,000 depositary shares at a public offering price of $25.00 per depositary share. These shares include 300,000 shares of Class A common stock and 820,000 depositary shares issued pursuant to the underwriters' over-allotment options. The depositary shares are convertible into shares of Class A common stock at a conversion rate between 0.7319 and 0.8929 shares, depending on the then market value of our Class A common stock at the time of conversion. Each depositary share represents 1/40th of a share of Constellation's Series A mandatory convertible preferred stock which is convertible into shares of Constellation's Class A common stock. The mandatory convertible preferred stock was priced to yield 5.75% with a conversion premium of 22.0% over the Class A common stock offering price. Update of Earnings Guidance The following statements are management's updated diluted earnings per share expectations both on a comparable basis and a reported (GAAP) basis for fiscal year ending February 29, 2004 based on the final share count as a result of the completion of the public offerings. -- Diluted earnings per share on a comparable basis for Fiscal 2004 is expected to be within a range of $2.44 to $2.51 versus $2.07 for Fiscal 2003. -- Diluted earnings per share on a reported basis for Fiscal 2004 is expected to be within a range of $1.89 to $1.96 versus $2.19 for Fiscal 2003. Constellation Brands, Inc. is a leading international producer and marketer of beverage alcohol brands with a broad portfolio across the wine, spirits and imported beer categories. The Company is the largest multi-category supplier of beverage alcohol in the United States; a leading producer and exporter of wine from Australia and New Zealand; and both a major producer and independent drinks wholesaler in the United Kingdom. Well-known brands in Constellation's portfolio include: Corona Extra, Pacifico, St. Pauli Girl, Black Velvet, Fleischmann's, Mr. Boston, Estancia, Simi, Ravenswood, Blackstone, Banrock Station, Hardys, Nobilo, Alice White, Vendange, Almaden, Arbor Mist, Stowells and Blackthorn. As previously reported, Standard & Poor's Ratings Services assigned its 'BB' rating to beverage alcohol producer Constellation Brands Inc.'s $1.6 billion senior secured credit facilities and its $450 million senior unsecured bridge loan. At the same time, Standard & Poor's affirmed its 'BB' corporate credit and senior unsecured debt ratings on Constellation Brands, as well as the 'B+' subordinated debt rating on the company. CONTINENTAL AIRLINES: Selling Portion of Interest in ExpressJet --------------------------------------------------------------- Continental Airlines, Inc. (NYSE: CAL) has agreed to sell a portion of its shares of common stock of ExpressJet Holdings, Inc. (NYSE: XJT) to ExpressJet, thereby reducing its ownership of ExpressJet by approximately 8 percent. Continental also announced that, due to current market conditions, it has terminated its recently announced offer to sell 5 million shares of ExpressJet's common stock as selling stockholder in a registered public offering. ExpressJet separately announced that it has priced its 144A private offering of $125 million aggregate principal amount of convertible notes (plus up to an additional $18.75 million of convertible notes if the initial purchasers of ExpressJet's convertible notes exercise in full their option to purchase additional notes). ExpressJet will use the net proceeds of this offering to repurchase approximately $122 million of ExpressJet common stock from Continental Airlines at a discount to the market price. With the repurchase of shares by ExpressJet, Continental's ownership of ExpressJet is expected to fall to approximately 45% (or 44% if the initial purchasers of ExpressJet's convertible notes exercise in full their option to purchase additional notes). Commenting on Continental's termination of its 5 million share public offering of ExpressJet stock, Jeff Misner, Continental Airlines' chief financial officer, said, "With our cash balance at an all-time high, we will wait for a more appropriate opportunity to reduce our stake beyond the shares that we are selling to ExpressJet. As we've said before, we do not intend to remain a stockholder of ExpressJet over the long term." Continental continues to review Financial Accounting Standards Board's Interpretation 46, Consolidation of Variable Interest Entities, to determine whether the decrease in its ownership interest of ExpressJet, as a result of its sale of stock to ExpressJet, will result in Continental's ceasing to consolidate ExpressJet for accounting purposes. A discussion of this Interpretation and its application is contained in Note 4 to the financial statements in Continental's quarterly report on Form 10- Q for the quarter ended June 30, 2003. The primary effects of deconsolidation on Continental's financial statements would be a decrease in current assets, primarily due to the elimination of ExpressJet's cash ($118 million at June 30, 2003), an increase in assets resulting from the inclusion of Continental's note receivable from ExpressJet as an asset of Continental, and a decrease in operating income as a result of the exclusion of ExpressJet's operating income from Continental's statement of operations. This decrease in operating income would be offset in part by increases in nonoperating income from Continental's equity in ExpressJet's earnings. Also, upon deconsolidation, Continental would no longer record minority interest on either its balance sheet or income statement. Under the companies' capacity purchase agreement, Continental purchases all of ExpressJet's capacity and is responsible for selling all the seat inventory. As a result, after deconsolidation, Continental will continue to record the related passenger revenue and related expenses, with payments under the capacity purchase agreement reflected as a separate operating expense. Continental Airlines is the world's seventh-largest airline with 2,300 daily departures to 134 domestic and 92 international destinations. Continental has the broadest global route network of any U.S. airline, including extensive service throughout the Americas, Europe and Asia. Continental has hubs serving New York, Houston, Cleveland and Guam, and carries approximately 41 million passengers per year on the newest jet fleet among major U.S. airlines. As recently reported, Standard & Poor's Ratings Services assigned its 'CCC+' rating to Continental Airlines Inc.'s (B/Negative/--) $150 million 5.0% senior unsecured convertible debt due 2023. Ratings on Continental were affirmed on June 2, 2003, and removed from CreditWatch, where they were placed on March 18, 2003. "Ratings on Continental are based on its heavy debt and lease burden and relatively limited financial flexibility, which outweigh better-than-average operating performance and a modern aircraft fleet," said Standard & Poor's credit analyst Philip Baggaley. The outlook on Continental's long-term corporate credit rating is negative. Losses are expected to narrow and operating cash flow should turn modestly positive in the second and third quarters of 2003, but Continental remains vulnerable to any renewed deterioration in the airline industry revenue environment. COX COMMS: June 30 Working Capital Deficit Narrows to $500 Mill. ---------------------------------------------------------------- Cox Communications, Inc. (NYSE: COX) reported financial results for the three months ended June 30, 2003. "Cox Communications is pleased to share results from another outstanding quarter, marked by operating cash flow growth of 20%, operating income growth of 68% and revenue growth of 14%," said Jim Robbins, President and CEO of Cox Communications. "Due to our consistent OCF growth year to date, which has been positively impacted by the success we have had with our innovative productivity initiatives, we have increased historical OCF guidance to 17% to 18% growth for the full year 2003." Robbins continued: "Despite the traditionally seasonal nature of the second quarter, we delivered 237,722 advanced service revenue generating units and are on track to achieve our guidance of 1.0 to 1.1 million new service net additions for the year. A driving factor in our success continues to be our bundling strategy. Today nearly one third of our customers buy multiple services from Cox, further demonstrating the value of our superior bundle of digital services, which was confirmed last week when Cox received the highest honor in J.D. Power and Associates' 2003 Residential Local Telephone Customer Satisfaction Study," Robbins added. "Cox's local telephone service ranked the highest in overall customer satisfaction in the Western Region - strong evidence of our success in bringing choice in local and long distance telephone service at a great value to Cox communities." SECOND QUARTER HIGHLIGHTS During the second quarter of 2003, Cox: -- Ended the quarter with just under 6.3 million basic video customers, up 0.5% from June 30, 2002. -- Ended the quarter with 10.7 million total RGUs, up 2% for the quarter, driven by 6% growth in advanced-service RGUs for the quarter. Total RGUs and advanced-service RGUs were up 12% and 34%, respectively, compared to June 30, 2002. -- Added 112,452 high-speed Internet customers, ending the quarter with 1.7 million high-speed Internet customers, representing year-over-year growth of 50%. -- Added 56,170 Cox Digital Telephone customers, ending the quarter with 0.8 million telephone customers, representing year-over-year growth of 45%. -- Achieved Cox Digital Cable net additions of 69,100 customers, ending the quarter with 1.9 million digital cable customers. Cox Digital Cable is now available to 98% of the homes in Cox's service areas with penetration of our basic video customer base exceeding 30%. -- Generated $463.0 million in cash flows from operating activities and $125.8 million in free cash flow (cash flows from operating activities less capital expenditures). -- Reduced capital expenditures to $337.2 million for the quarter, down 32% from the second quarter of 2002. 2003 OUTLOOK For the full year 2003, Cox expects year-over-year growth in basic video subscribers of just under 1%. The company expects to add 1.0 million to 1.1 million advanced-service RGUs in 2003 driven by bundled offerings, excellent customer service and increased product availability. Cox expects to achieve revenue growth of 14% to 15%. Cox is increasing its guidance on operating cash flow (operating income before depreciation and amortization and gains or losses on the sale of cable systems) growth to 17% to 18% (16% to 17% excluding the impact of the $9.8 million one-time charge taken in 2002 related to the continuation of Excite@Home high- speed Internet service). Capital expenditures for the full year are now anticipated to be $1.5 billion, which is below the previously announced expectation of $1.6 billion. In addition, Cox expects to be free cash flow positive for the full year 2003. OPERATING RESULTS Three months ended June 30, 2003 compared with three months ended June 30, 2002 Total revenues for the second quarter of 2003 were $1.4 billion, an increase of 14% over the second quarter of 2002. This was primarily due to increased customers for advanced services (including digital cable, high-speed Internet access and telephony), higher basic cable rates and a $5 price increase on monthly high-speed Internet access adopted in certain markets in the fourth quarter of 2002 and in most of Cox's remaining markets in the first quarter of 2003. Also contributing to the increase was an increase in commercial broadband customers. Cost of services, which includes programming costs, other direct costs and field service costs, was $594.9 million for the second quarter of 2003, an increase of 14% over the same period in 2002. Programming costs increased 10% to $291.5 million, reflecting rate increases and customer growth. Other cost of services increased 17% to $303.4 million, reflecting 1.2 million in net additions of basic and advanced-service RGUs over the last twelve months, as well as increased labor costs due to the transition from upgrade construction and new product launches to maintenance and related customer costs directly associated with the growth of new customers. Selling, general and administrative expenses were $296.9 million for the second quarter of 2003, an increase of 6% over the comparable period in 2002. This was due to an 8% increase in general and administrative expenses primarily related to increased salaries and benefits and increased headcount and a 1% net increase in marketing expense primarily due to an increase related to the promotion of new services and bundling alternatives, partially offset by a decrease in costs associated with Cox Media, Cox's advertising business. Operating income increased 68% to $168.3 million for the second quarter of 2003, and operating cash flow increased 20% to $532.1 million. Operating income margin (operating income as a percentage of revenues) for the second quarter of 2003 was 12%, and operating cash flow margin (operating cash flow as a percentage of revenues) for the second quarter of 2003 was 37%. Depreciation and amortization increased to $364.3 million from $337.7 million in the second quarter of 2002. This was due to an increase in depreciation from Cox's continuing investment in its broadband network in order to deliver additional programming and services. For the second quarter of 2003, Cox recorded a $24.2 million pre- tax loss on derivative instruments primarily resulting from the change in the fair value of certain derivative instruments embedded in Cox's zero-coupon debt that is indexed to shares of Sprint PCS common stock that Cox owns. Net gain on investments of $124.1 million for the second quarter of 2003 was primarily due to a $97.2 million pre-tax gain on the sale of 32.9 million shares of Sprint PCS common stock and a $27.1 million pre-tax gain as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading. The net loss on investments for the comparable period in 2002 was primarily due to a $113.5 million pre-tax loss as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading and a $677.4 million decline in the fair value of certain investments, primarily Sprint PCS, considered to be other than temporary. Net income for the current quarter was $117.7 million compared to a net loss of $516.2 million for the second quarter of 2002. Six months ended June 30, 2003 compared with six months ended June 30, 2002 Total revenues for the six months ended June 30, 2003 were $2.8 billion, an increase of 15% over the six months ended June 30, 2002. This was primarily due to increased customers for advanced services (including digital cable, high-speed Internet access and telephony), higher basic cable rates and a $5 price increase on monthly high-speed Internet access adopted in certain markets in the fourth quarter of 2002 and in most of Cox's remaining markets in the first quarter of 2003. Also contributing to the increase was an increase in commercial broadband customers. Cost of services was $1.2 billion for the six months ended June 30, 2003, an increase of 14% over the same period in 2002. Programming costs increased 12% to $586.1 million, reflecting rate increases and customer growth. Other cost of services increased 17% to $592.5 million, reflecting 1.2 million in net additions of basic and advanced-service RGUs over the last twelve months, as well as increased labor costs due to the transition from upgrade construction and new product launches to maintenance and related customer costs directly associated with the growth of new customers. Selling, general and administrative expenses were $600.1 million for the six months ended June 30, 2003, an increase of 8% over the comparable period in 2002. This was due to an 11% increase in general and administrative expenses primarily related to increased salaries and benefits and increased headcount, partially offset by a 2% decrease in marketing expense primarily due to a decrease in costs associated with Cox Media, Cox's advertising business. Operating income increased 58% to $263.4 million for the six months ended June 30, 2003, and operating cash flow increased 21% to $1.0 billion, reflecting the one-time non-recurring charge of $9.8 million in the first quarter of 2002 related to the continuation of Excite@Home high-speed Internet service. Excluding this charge, operating cash flow increased 20% compared to the six months ended June 30, 2002. Operating income margin (operating income as a percentage of revenues) for the six months ended June 30, 2003 was 9%, and operating cash flow margin (operating cash flow as a percentage of revenues) for the six months ended June 30, 2003 was 36%. Depreciation and amortization increased to $748.6 million from $663.5 million in the six months ended June 30, 2002. This was due to an increase in amortization resulting from a non-cash impairment charge of $25.0 million recognized in the first quarter, upon completion of Cox's annual impairment test of franchise value in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, and an increase in depreciation from Cox's continuing investment in its broadband network in order to deliver additional programming and services. For the six months ended June 30, 2003, Cox recorded a $26.7 million pre-tax loss on derivative instruments primarily due to a $4.4 million pre-tax loss resulting from the change in the fair value of Cox's net settleable warrants and a $22.9 million pre-tax loss resulting from the change in the fair value of certain derivative instruments embedded in Cox's zero-coupon debt that is indexed to shares of Sprint PCS common stock that Cox owns. Net gain on investments of $122.4 million for the six months ended June 30, 2003 was primarily due to a $97.2 million pre-tax gain on the sale of 32.9 million shares of Sprint PCS common stock and a $27.1 million pre-tax gain as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading. The net loss on investments for the comparable period in 2002 was primarily due to a $170.4 million pre-tax loss related to the sale of 23.9 million shares of AT&T Wireless common stock, a $388.8 million pre-tax loss as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading and a $677.4 million decline in the fair value of certain investments, primarily Sprint PCS, considered to be other than temporary. Net income for the six months ended June 30, 2003 was $88.5 million compared to a net loss of $380.6 million for the six months ended June 30, 2002. LIQUIDITY AND CAPITAL RESOURCES Cox has included Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2002 as a means of providing more detail regarding the liquidity and capital resources discussion below. In addition, Cox has included a calculation of free cash flow in the Summary of Operating Statistics to provide additional detail regarding a measure of liquidity that Cox believes will be useful to investors in evaluating Cox's financial performance. For further details, please refer to the Summary of Operating Statistics and discussion under the heading of Use of Operating Cash Flow and Free Cash Flow. Significant sources of cash for the six months ended June 30, 2003 consisted of the following: -- the sale of 32.9 million shares of Sprint PCS common stock for net proceeds of approximately $161.7 million; -- the net issuance of approximately $110.0 million of commercial paper; -- the issuance of 4.625% senior notes, which mature in June 2013, for net proceeds of approximately $596.2 million; and -- the generation of net cash provided by operating activities of approximately $818.9 million. Significant uses of cash for the six months ended June 30, 2003 consisted of the following: -- the repurchase of $422.7 million aggregate principal amount at maturity of Cox's convertible senior notes due 2021 that had been properly tendered and not withdrawn, for aggregate cash consideration of $304.2 million, which represented the accreted value of the repurchased notes; -- the repurchase of $1.3 billion aggregate principal amount of Cox's exchangeable subordinated debentures due 2029 (the PRIZES) and $274.9 million aggregate principal amount of Cox's exchangeable subordinated debentures due 2030 (the Premium PHONES) that had been properly tendered and not withdrawn pursuant to Cox's offer to purchase any and all PRIZES and Premium PHONES, for aggregate cash consideration of $751.9 million; and -- capital expenditures of $662.9 million. Please refer to the Summary of Operating Statistics for a break out of capital expenditures in accordance with industry guidelines. At June 30 2003, Cox had approximately $7.0 billion of outstanding indebtedness (including cumulative derivative adjustments made in accordance with SFAS No. 133 which reduced reported indebtedness by approximately $611.2 million). In June 2003, Cox renewed its 364-day revolving bank credit facility for a reduced capacity of $900.0 million. At June 30, 2003, Cox's balance sheet shows that its total current liabilities exceeded its total current assets by about $500 million. Cox Communications (NYSE: COX), a Fortune 500 company, is a multi- service broadband communications company with approximately 6.5 million total customers, including 6.3 basic cable subscribers. Cox is the nation's fourth-largest cable television provider, and offers both traditional analog video programming under the Cox Cable brand as well as advanced digital video programming under the Cox Digital Cable brand. Cox provides an array of other communications and entertainment services, including local and long distance telephone under the Cox Digital Telephone brand; high-speed Internet access under the brands Cox High Speed Internet and Cox Express; and commercial voice and data services via Cox Business Services. Cox is an investor in programming networks including Discovery Channel. More information about Cox Communications can be accessed on the Internet at http://www.cox.com CWMBS INC: Fitch Takes Rating Actions on Series 1998-21 Notes ------------------------------------------------------------- Fitch Ratings has taken rating actions on the following CWMBS, Inc. (Countrywide Home Loans) residential mortgage-backed certificates: CWMBS (Countrywide Home Loans, Inc.), mortgage pass-through certificates, series 1998-21 -- Class A affirmed at 'AAA'; -- Class M upgraded to 'AAA' from 'AA'; -- Class B1 upgraded to 'AAA' from 'A'; -- Class B2 upgraded to 'AA+' from 'BBB'; -- Class B3 upgraded to 'BBB+' from 'BB'; -- Class B4 upgraded to 'BB-' from 'B'. These rating actions are being taken as a result of delinquencies and losses, as well as credit support levels. DELCO REMY: June 30 Net Capital Deficit Balloons to $422 Million ---------------------------------------------------------------- Delco Remy International, Inc., a leading worldwide manufacturer and remanufacturer of automotive electrical and drivetrain/powertrain products, announced its financial performance for the second quarter and six months ended June 30, 2003. In the second quarter of 2003, the Company reported Net Sales of $272.1 million and Operating Income of $26.6 million. Compared to the second quarter of 2002, this represents a sales increase of $2.2 million, or 0.8 percent, and Operating Income improvement of $5.1 million, or 23.7 percent. For the six months ended June 30, 2003, Net Sales of $528.7 million increased $10.0 million, or 1.9 percent, over the comparable period of 2002. For the first half of 2003, an Operating Loss of $1.5 million includes a $44.6 million restructuring charge, compared with Operating Income of $46.0 million in 2002, which included a $4.4 million post-employment benefit curtailment gain. At June 30, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $422 million. Commenting on these results, Thomas J. Snyder, President and CEO, stated: "Our second quarter results reflect the solid progress made by the Company as we begin to reap the benefits of earlier cost reduction and restructuring actions. Additionally, our sales growth reflects our competitive wins in the marketplace which have more than offset the general market softness." The Company continues to be recognized for its excellence in customer satisfaction. It has been awarded the 2002 aftermarket supplier of the year award from Volvo, and was also recognized as a Platinum level supplier for Freightliner. Performance Highlights: Sales in the second quarter of 2003 increased, as compared to the prior year, primarily due to new business awards in the OE and Electrical Aftermarket Business, which more than offset lower industry volume. For the six months ended June 30, 2003, sales increased, as compared to the prior year, due to volume growth in the light and heavy duty sectors and higher sales in Europe reflecting incremental business awards and the favorable impact of foreign currency exchange. Gross Profit increased 17.5 percent, or $7.6 million, from the prior quarter and 10.8 percent, or $5.0 million, over the prior year due to the benefits of tight cost control and the impact of the global capacity program to consolidate production facilities. These benefits more than offset the adverse effects of new program launches and an unfavorable product mix, particularly in the Aftermarket Business. Cash used in operating activities was $28.2 million in the first six months of 2003. This was driven primarily by the build-up of inventory to facilitate the global capacity program and the seasonal increase in working capital attributable to higher receivables and increased aftermarket inventory. Other Items: Commenting on the outlook for the third quarter, Snyder said, "Based on the current OE production schedule and aftermarket order patterns, we expect that the third quarter 2003 sales and operating performance will be similar to the second quarter of 2003 and will reflect significant continued year over year improvement. We also expect our inventory to decrease in the third quarter due to the reduction of the transitional inventory build that was required for the global capacity program." Delco Remy International, Inc., headquartered in Anderson, Indiana, is a leading designer, manufacturer, remanufacturer and distributor of electrical, drivetrain/powertrain and related products and core exchange service for automobiles and light trucks, medium- and heavy-duty trucks and other heavy- duty off- road and industrial applications. It was formed in 1994 as a partial divestiture by General Motors Corporation of the former Delco Remy division, which traces its roots to Remy Electric, founded in 1896. DELTA AIR LINES: S&P Assigns B Rating to Proposed 10% Sr. Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' rating to Delta Air Lines Inc.'s (BB-/Negative/--) proposed $683.5 million 10% senior notes due 2008, being offered in exchange for two outstanding senior note issues. "The rating on the new notes, which are senior unsecured obligations, is two notches lower than Delta's corporate credit rating because the large amount of secured debt and leases in the company's capital structure places senior unsecured creditors in an effectively subordinated position," said Standard & Poor's credit analyst Philip Baggaley. "The notes, issued under Rule 144a, with registration rights, are being offered in exchange for the $300 million 6.65% medium-term notes, series C, due 2004 (along with cash) and for the $500 million 7.7% senior notes due 2005; Delta is undertaking the exchange to extend its debt maturities, and the consideration being offered would fully repay principal of the outstanding notes," the credit analyst continued. The ratings on Delta Air Lines Inc., the third-largest airline in the U.S., reflect financial damage from substantial losses over the past two years, a heavy debt and lease burden, and ongoing risks associated with the company's participation in the cyclical and price-competitive airline industry. Positive factors are the company's solid market position in the U.S. domestic and trans- Atlantic markets and the work rule flexibility and productivity made possible by a mostly nonunion work force (only the pilots, among major employee groups, are organized). Delta, like other large airlines, has announced capacity cuts and expense reductions in response to the adverse revenue outlook, most recently a program intended to lower cost per available seat mile 15% by the end of 2005. It is in the early stages of discussions with its pilots, who have agreed to consider contract changes, regarding concessions to reduce labor costs. These talks, which are expected to be difficult and lengthy, will be important in Delta's plans to reduce its relatively high operating costs. Other employees are not unionized, so the company has greater flexibility to change compensation and has revised the pension plans of noncontract employees to narrow a substantial pension-funding gap. Ratings could be lowered if the nascent revenue recovery in the U.S. airline industry falters, causing renewed substantial losses, or if Delta's ambitious cost-cutting initiatives do not progress. DOANE PET CARE: Reports $3 Million in Net Loss for 2nd Quarter -------------------------------------------------------------- Doane Pet Care Company reported results for its second quarter and six months ended June 28, 2003 and updated its outlook for the balance of fiscal 2003. Quarterly Results For the three months ended June 28, 2003, the Company's net sales increased 14.8% (9.2% excluding the positive impact of the foreign currency exchange rate) to $234.5 million from $204.3 million recorded in the quarter ended June 29, 2002. The 2003 second quarter sales increase was primarily due to sales volume from new business awarded in 2002 and the favorable currency exchange rate between the dollar and the Euro. The Company reported a net loss of $3.4 million for its 2003 second quarter compared to net income of $5.2 million for the 2002 second quarter. The positive impact on performance from higher sales volume was offset by higher commodity and natural gas costs. Second quarter 2003 net income (loss) was also impacted by SFAS 133 fair value accounting for the Company's commodity derivative instruments, which resulted in a $4.0 million period- over-period unfavorable impact on operating results. Net cash provided by operating activities was $14.6 million for the 2003 second quarter compared to $20.2 million for the 2002 second quarter. This decrease was primarily due to the decline in net income (loss) as a result of higher commodity and natural gas costs, partially offset by a favorable change in working capital. The Company believes cash flows from operating activities is the most directly comparable GAAP financial measure to the non-GAAP Adjusted EBITDA liquidity measure typically reported in its earnings releases. The calculation of Adjusted EBITDA is explained below in the section titled "Adjusted EBITDA Supplemental Information." Adjusted EBITDA was $19.0 million in the 2003 second quarter compared to $24.4 million recorded in the 2002 second quarter primarily due to higher commodity and natural gas costs, as discussed above. Doug Cahill, the Company's President and CEO, said, "Our global team exceeded our expectations in meeting our operational, service and cost containment objectives in the 2003 second quarter and we continued to post solid top line growth. Unfortunately, bottom line performance was impacted by higher commodity costs." Year to Date Results For the six months ended June 28, 2003, the Company's net sales increased 16.5% (11.3% excluding the positive impact of the foreign currency exchange rate) to $494.4 million from $424.4 million recorded in the six months ended June 29, 2002. The year to date 2003 sales increase was primarily due to sales volume from new business awarded in 2002 and the favorable currency exchange rate between the dollar and the Euro. The Company reported a net loss of $11.3 million for the first six months of 2003 compared to net income of $13.7 million for the 2002 six month period. The positive benefit on performance from higher sales volume in the 2003 six month period was offset by higher commodity and natural gas costs. The 2003 six month period also included an $11.1 million non-cash charge associated with the Company's debt refinancing completed during the first quarter of 2003. In addition, year to date 2003 net income (loss) was impacted by SFAS 133 fair value accounting for the Company's commodity derivative instruments, which resulted in a $10.3 million period-over-period unfavorable impact on operating results. Net cash provided by operating activities was $14.7 million for the 2003 six month period compared to $58.7 million for the 2002 six month period. This decrease was primarily due to an unfavorable change in working capital and the impact of higher commodity and natural gas costs on net income (loss). The unfavorable change in working capital was primarily due to higher sales activity in the 2003 period, an $8.3 million interest payment in the 2003 period on the sponsor facility that was repaid in full with proceeds from the senior note offering in the first quarter of 2003 and an unusually favorable change in working capital in the 2002 period. Adjusted EBITDA was $44.8 million in the first six months of 2003 compared to $50.9 million recorded in the first six months of 2002. Higher sales volume in the 2003 period was offset by higher commodity and natural gas costs, as discussed above. 2003 Outlook and Guidance Cahill continued, "Our ability to convert top line growth to the same level of earnings growth has been hampered by the higher commodity environment resulting from last year's drought. We anticipate this higher cost trend will continue through the third quarter of this year. Looking forward, we are cautiously optimistic that commodity prices will decline because the growing conditions in the U.S. for corn, soybeans and wheat are ideal thus far this season." The Company said that it anticipates net sales growth in the range of 11% to 12% for the full year 2003. The Company also said that it expects the full year 2003 Adjusted EBITDA to be at the lower end of its previously forecasted range of $95 million to $105 million based upon the outlook for commodity prices. The Company said it expects the comparable GAAP financial measure, cash flows from operating activities, to range between $14.7 million and $56.2 million for fiscal 2003. Cash flows from operating activities is difficult to project with more precision because of the potential volatility in commodity prices and the resulting impact on cash margin requirements for financial derivatives used to hedge certain commodities. This fact, combined with the possible temporary variability in the timing of cash receipts and disbursements, can have a significant impact on net working capital levels on any particular day and thus, cash flows from operating activities for the relevant period. For the full year 2003, the Company believes that net changes in working capital, which are reflected as changes in current assets and liabilities in the Adjusted EBITDA reconciliation table below, could vary from a positive $15 million on the high end to a negative $15 million on the low end due to the uncertainties described above. In connection with the Company's outlook for full year 2003 Adjusted EBITDA, the Company assumed higher commodity and natural gas costs in fiscal 2003 over 2002 and an increase in employee related costs and distribution expenses, partially offset by the impact of increased sales volume, improved operating efficiencies at the Company's manufacturing plants and continued Project Focus initiatives. In addition to the possible temporary variability in working capital as described above in the Company's outlook for cash flows from operating activities, the Company also assumed cash income taxes of approximately $2 million, and a variability in cash interest expense due to a portion of the Company's debt being subject to variable interest rates and a portion of the Company's debt being Euro-denominated debt and impacted by fluctuations in foreign currency exchange rates. See the Adjusted EBITDA reconciliation table below for a reconciliation of the Company's outlook for full year 2003 Adjusted EBITDA to the outlook for full year 2003 cash flows from operating activities. Doane Pet Care Company, based in Brentwood, Tennessee, is the largest manufacturer of private label pet food and the second largest manufacturer of dry pet food overall in the United States. The Company sells to over 600 customers around the world and serves many of the top pet food retailers in the United States, Europe and Japan. The Company offers its customers a full range of pet food products for both dogs and cats, including dry, semi- moist, wet, treats and dog biscuits. For more information about the Company, including its SEC filings and past press releases, please visit http://www.doanepetcare.com As reported in Troubled Company Reporter's April 2, 2003 edition, Standard & Poor's Ratings Services affirmed its 'B+' corporate credit and senior secured debt ratings on pet food manufacturer Doane Pet Care Co. The 'B-' subordinated debt rating on the company was also affirmed. These ratings have been removed from CreditWatch, where they were placed on April 3, 2002. At the same time, Standard & Poor's affirmed Doane's 'B-' senior unsecured debt rating, which was not on CreditWatch. The outlook is negative. ENERGY WEST: Credit Agreement Further Extended Until August 29 -------------------------------------------------------------- Energy West, Incorporated (Nasdaq: EWST), a natural gas, propane and energy marketing company serving the Rocky Mountain states, has agreed with Wells Fargo Bank Montana, N.A., on an additional extension of its credit facility through August 29, 2003. The Wells Fargo credit facility was originally scheduled to expire on May 1, 2003 and previously was extended through July 31, 2003. Under the terms of the new extension, Energy West will have approximately $6.1 million in borrowing capacity through the end of the extension period, substantially all of which has been utilized. The new extension also provides that Energy West will be allowed to defer repayment of any amounts drawn on outstanding letters of credit until the end of the extension period. Energy West currently has approximately $4.4 million in letters of credit outstanding under the credit facility, but under the terms of the extension no new letters of credit will be issued. The current extension of the Wells Fargo credit facility gives Energy West additional time to seek replacement credit facilities from new lenders. There is no assurance that Energy West will be able to obtain a commitment from a replacement lender or negotiate any further extension with Wells Fargo. Energy West believes that its ability to defer repayment of amounts drawn on the outstanding letters of credit, combined with its cash on hand, cash generated from operations and cost-saving measures previously implemented, will be sufficient to provide funding for Energy West's operations through the extension period ending August 29. As previously reported in Troubled Company Reporter, Energy West retained D.A. Davidson & Co. and DAMG Capital as financial advisers to advise the Company in connection with the Company's financing needs and capital structure. Among other things, D.A. Davidson and DAMG Capital are assisting the Company in negotiations with its bank lender, Wells Fargo Bank Montana, N.A., concerning a restructuring and extension of the Company's credit facility for a longer period. The Company's advisers are also assisting the Company in its efforts to secure a replacement credit facility and establish a capital structure to meet the Company's long-term needs. Energy West also announced the settlement of the lawsuit between its subsidiary, Energy West Resources, Inc. and PPL Montana, LLC, for a total of $3.2 million. After allowing for reserves previously charged to income, and reversal and forfeiture of accrued but previously deferred management bonuses, for financial reporting purposes the impact of the settlement will be a reduction of the Company's consolidated pre-tax income of approximately $170,000 for Fiscal Year 2003. Energy West's March 31, 2003 balance sheet shows that its total current liabilities exceeded its total current assets by about $2.4 million. EPOCH: Fitch Downgrades Note Ratings from Three Transactions ------------------------------------------------------------ Fitch Ratings has downgraded fifteen classes from EPOCH 2000-1 Ltd., EPOCH 2001-1 Ltd., and EPOCH 2001-2, Ltd. Each transaction is a credit default swap referencing a portfolio of predominantly senior unsecured bonds. The following classes of notes have been downgraded: EPOCH 2000-1, Ltd. -- Class I secured floating-rate notes to 'BBB' from 'A-'; -- Class II secured floating-rate notes to 'BB' from 'BBB+'; -- Class III secured floating-rate notes to 'B' from 'BBB-'; -- Class IV secured floating-rate notes to 'CC' from 'CCC-'; -- Class V secured floating-rate notes to 'C' from 'CC'. EPOCH 2001-1, Ltd. -- Class I secured floating-rate notes to 'AA' from 'AAA'; -- Class II secured floating-rate notes to 'A' from 'AA-'; -- Class III secured floating-rate notes to 'BB' from 'BBB-'; -- Class IV secured floating-rate notes to 'CC' from 'CCC+'. EPOCH 2001-2, Ltd. -- Class I secured floating-rate notes to 'AA' from 'AAA'; -- Class II secured floating-rate notes to 'A' from 'AA'; -- Class III secured floating-rate notes to 'BBB' from 'A'; -- Class IV-A secured floating-rate notes to 'B-' from 'B'; -- Class IV-B secured floating-rate notes to 'B-' from 'B'; -- Class V secured floating-rate notes to 'CCC-' from 'CCC+'. In conjunction with these actions, the class I, II, III, IV and V notes from EPOCH 2000-1, as well as the class II, III and IV notes from EPOCH 2001-1 have been removed from Rating Watch Negative. EPOCH 2000-1, Limited, was created to enter into a partially funded credit default swap referencing an equally weighted, $2.5 billion portfolio of 250 predominantly senior unsecured bonds. These actions are being taken as a result of further credit deterioration in the portfolio and the notes' exposure to British Energy and Southern Energy, Inc. (now Mirant Corp.). This will result in higher than expected credit protection payments and a diminished level of credit enhancement for senior tranches of the notes. EPOCH 2001-1, Limited, was created to enter into a partially funded credit default swap referencing an equally weighted, $1 billion portfolio of 100 predominantly senior unsecured bonds. These actions are being taken as a result of further credit deterioration in the portfolio and the notes' exposure to Mirant Corp. This will result in higher than expected credit protection payments and a diminished level of credit enhancement for senior tranches of the notes. EPOCH 2001-2, Limited, was created to enter into a partially funded credit default swap referencing an equally weighted, $1.6 billion portfolio of 100 predominantly senior unsecured bonds. These actions are being taken as a result of further credit deterioration in the portfolio and the notes' exposure to Mirant Corp. This will result in higher than expected credit protection payments and a diminished level of credit enhancement for senior tranches of the notes. Fitch will continue to monitor these transactions. ETHYL CORP: Completes Exchange Offer for 8-7/8% Senior Notes ------------------------------------------------------------ Ethyl Corporation (NYSE:EY) has completed its offer to exchange $1,000 principal amount of its 8-7/8% Senior Notes due 2010, which have been registered under the Securities Act of 1933, as amended, for each $1,000 principal amount of its outstanding 8-7/8% Senior Notes due 2010. The exchange offer expired as scheduled at 5:00 p.m., New York City time, on Monday, July 28, 2003. The company has accepted tender of unregistered notes from holders of $150,000,000, or 100%, of the $150,000,000 outstanding principal amount. Ethyl Corporation (S&P, B+ Corporate Credit Rating, Stable) develops, manufactures, blends, and delivers chemical additives that enhance the performance of petroleum products. From custom- formulated chemical blends to market-general additive components, Ethyl provides the world with the technology to make fuels burn cleaner, engines run smoother and machines last longer. FEDERAL-MOGUL: Has Until October 1 to Move Actions to Del. Court ---------------------------------------------------------------- Federal-Mogul Corporation and its debtor-affiliates obtained second extension of their Removal Period. U.S. Bankruptcy Court Judge Newsome gave the Debtors until October 1, 2003, to determine which civil actions pending as of the Petition Date they will remove and transfer, if any, to the District Court in accordance with Section 1452 of 28 U.S.C. and Rules 9006 and 9027 of the Federal Rules of Bankruptcy Procedure. (Federal-Mogul Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392- 0900) FLEMING: Will Present C&S Agreement to Court at August 4 Hearing ---------------------------------------------------------------- Fleming Companies, Inc. has received no qualifying bids to compete with the offer submitted by C&S Wholesale Grocery to acquire Fleming's wholesale grocery business. As a result, no auction will be held. The company will seek approval of the C&S asset purchase agreement by the U.S. Bankruptcy Court in Delaware during the hearing scheduled for August 4, 2003. Fleming (OTC Pink Sheets: FLMIQ) is a supplier of consumer package goods to independent supermarkets, convenience-oriented retailers and other retail formats around the country. To learn more about Fleming, visit the company's Web site at http://www.fleming.com Fleming and its operating subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on April 1, 2003. The filings were made in the U.S. Bankruptcy Court in Wilmington, Delaware. Fleming's court filings are available via the court's Web site at http://www.deb.uscourts.gov FLEMING COMPANIES: Hires Food Partners for Financial Advice ----------------------------------------------------------- The Food Partners LLC is an investment banking firm with expertise in the food industry. Food Partners services parties in various segments of the food chain, merger, acquisition and divestiture services, private placement of debt and equity capital, financial restructuring, strategic advisory and loan portfolio services. According to Scotta E. McFarland, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C., Food Partners has rendered services to the Fleming Debtors since September 2002 in connection with the Debtors' divestiture efforts. Accordingly, Food Partners became familiar with the Debtors' operations. In the context of their restructuring, the Debtors sought and obtained Court's permission to engage Food Partners to provide retail grocery financial and strategic advisory services. The Debtors need Food Partners to advise them in connection with possible sales of their price-impact retail grocery stores. Specifically, the Debtors want Food Partners to: (a) advise and assist them in developing strategy for accomplishing possible sale transactions; (b) advise them in the development of a list of prospective buyers after considering the qualitative characteristics of these parties and evaluating each party against the Debtors' strategic and financial objectives. Food Partners will assess the Debtors' strategies for approaching each prospective Buyer. No party will be contacted by Food Partners without the Debtors' prior approval and without Food Partners causing the third-party to execute a Confidentiality Agreement; (c) prepare, with their approval, confidential descriptive memoranda for distribution to prospective Buyers selected by the Debtors, describing select information pertaining to the Store Assets; (d) facilitate and respond to questions raised by prospective Buyers; (e) coordinate among their various entities and divisions, distribution centers and other personnel; (f) assist them in negotiating and executing all agreements with prospective Buyers; (g) advise them and act as their representative in the course of negotiating sale transactions with prospective Buyers; and (h) assist them in closing the transactions. Ms. McFarland relates that Food Partners' engagement will run from May 9, 2003 until December 31, 2003. However, Food Partners' engagement may be terminated by either party any time, with or without cause, upon written notice. The financial and strategic advisory services that Food Partners will provide to the Debtors are necessary to enable them to maximize the value of their estates and to reorganize successfully, Ms. McFarland says. As compensation for its services, the Debtors will pay Food Partners a success fee equal to 1% of the total amount of consideration paid to the Debtors by a Buyer for the divested Store Assets. The Success Fee will be paid to Food Partners in readily available funds on the day the Transaction closes. The Debtors will also reimburse the firm on a monthly basis for all reasonable documented expenses incurred in connection with a Transaction. Food Partners principal Matthew S. Morris discloses that postpetition, Food Partners received no compensation for its services. But during the one-year period before the Petition Date, Food Partners received compensation for assisting the Debtors with the sale of 28 retail grocery stores in California, Wisconsin, Texas and Utah. Through these transactions, Mr. Morris says, the Debtors received cash consideration and removed liabilities from their balance sheets aggregating $130,500,000. The Debtors also executed five-year supply agreements with retailer-customers, which contained an estimated $280,000,000 in annual purchase requirements. For these services, Food Partners received $1,800,000 in total compensation. Mr. Morris assures Judge Walrath that Food Partners holds no interest adverse to the Debtors and their estates, creditors or equity security holders. The firm has no connection with the Debtors, their creditors or their related parties. Food Partners is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code, Mr. Morris attests. (Fleming Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392- 0900) FLEXTRONICS: Commences Convertible Subordinated Debt Offering ------------------------------------------------------------- Flextronics International Ltd. (Nasdaq: FLEX) intends to raise, subject to market and other conditions, a total of $500 million through a private offering of Convertible Subordinated Notes due 2010. Flextronics expects to grant the initial purchasers an option to purchase up to an additional $30 million principal amount of the notes. The notes will be convertible into Flextronics ordinary shares. Upon conversion, Flextronics will have the right to deliver cash (or a combination of cash and ordinary shares) in lieu of ordinary shares. The offering will be made only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933. The company intends to use the net proceeds of the offering to repurchase outstanding senior subordinated notes and for general corporate purposes. The notes to be offered and the ordinary share issuable upon conversion of the notes have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Headquartered in Singapore, Flextronics is the leading Electronics Manufacturing Services provider focused on delivering operational services to technology companies. With fiscal year 2003 revenues of $13.4 billion, Flextronics is a major global operating company with design, engineering, manufacturing, and logistics operations in 29 countries and five continents. This global presence allows for manufacturing excellence through a network of facilities situated in key markets and geographies that provide its customers with the resources, technology, and capacity to optimize their operations. Flextronics' ability to provide end-to-end operational services that include innovative product design, test solutions, manufacturing, IT expertise, network services, and logistics has established the Company as the leading EMS provider. For more information, visit http://www.flextronics.com As reported in Troubled Company Reporter's May 6, 2003 edition, Standard & Poor's Ratings Services assigned its 'BB-' rating to Flextronics International Ltd.'s new $400 million senior subordinated notes issue due 2013. At the same time, Standard & Poor's affirmed its 'BB+' corporate credit rating and its other ratings on Flextronics. The outlook remains stable. GLIMCHER REALTY: Second Quarter Net Loss Stands at $4 Million ------------------------------------------------------------- Glimcher Realty Trust, (NYSE: GRT), one of the country's premier retail REITs, reported results for its second quarter and six months ended June 30, 2003 consistent with the revised guidance issued by the Company on July 10, 2003. Funds From Operations was $9.8 million for the second quarter and $31.0 million for the first six months of 2003. FFO was $20.1 million and $40.0 million for the comparable quarter and six months of 2002. FFO is an industry standard for evaluating operating performance defined as net income, plus real restate depreciation, less gains or losses from sales of depreciable property, discontinued operations, extraordinary items and the cumulative effect of accounting changes. Revenues in the quarter increased 16% to $70.8 million from $61.0 million in the second quarter of 2002 due to the inclusion of revenues for five malls reported as joint ventures in the second quarter of 2002. This revenue gain was partially offset by decreased community center revenues due to asset sales and anchor tenant bankruptcies, and reduced revenue from tenant reimbursements. Additional bad debt reserves of $7.9 million or $0.21 per diluted common share were recorded in the second quarter for prior years' estimated recoveries of common area maintenance, taxes and insurance and for other past due receivables owed by bankrupt companies or other troubled tenants. "Although the quarter was a difficult one for us, we have addressed the causes and are enhancing processes and making changes in personnel and procedures to help prevent a reoccurrence of these issues" said Michael P. Glimcher, President. "With the resolution of these issues, we can now refocus our efforts on generating growth in FFO." Second Quarter Additional Reserves In the second quarter the Company recorded additional reserves for bad debts of $7.9 million. Included in the additional reserves is $4.6 million attributable to 2002 and 2001 estimated recoveries for CAM, taxes, and insurance at the Company's regional malls and community shopping centers. The determination of the recoveries of these expenses for prior years, and any required reserves, was completed in the second quarter as part of the annual calculation of final recovery billings for each tenant and had no impact on the Company's cash flow. The remaining $3.3 million relates to past due receivables owed by bankrupt companies or other troubled tenants. The Company's policy is to record a regular provision for credit losses each quarter and assess the adequacy of the total reserve based on our historical collection and write-off experience and the current state of the retail sector. During the second quarter of 2003 Kmart announced the proposed settlement of unsecured claims in connection with their emergence from bankruptcy in April. The Company adjusted its allowance for bad debts attributable to Kmart receivables as well as its reserve for several other bankrupt companies and troubled tenants. Second Quarter and Year to Date Results For the second quarter ended June 30, 2003, the Company reported FFO of $9.8 million, compared with $20.1 million for the second quarter of 2002. Net income available to common shareholders was a loss of $3.9 million for the quarter as compared to net income available to common shareholders of $3.1 million for the comparable quarter in 2002. Revenues in the quarter increased 16% to $70.8 million from the comparable period in 2002 primarily due to the inclusion of $13.0 million of revenues for five malls reported as joint ventures in the second quarter of 2002, offset by declining community center revenues of $569,000 due to asset sales and anchor tenant bankruptcies. The decline in quarterly FFO per diluted common share and earnings per diluted common share on a year over year basis is attributable to the additional bad debt reserves, a $0.05 per diluted common share reduction in revenue from tenant reimbursements to adjust 2003 estimated recoveries of property operating expenses to 2002 actual recovery percentages, a $0.01 per diluted common share charge for the early extinguishment of a mortgage on Lloyd Center and dilution resulting from stock option exercises in the second quarter. At June 30, 2003 the Company's debt to market capitalization was 53.5% as compared to 57.9% at December 31, 2002. Comparable mall store occupancy at June 30, 2003 increased to 89.9% from 86.8% at June 30, 2002, and comparable mall store average rents decreased to $23.13 per square foot from $23.25 per square foot, respectively. The Company realized declines during the quarter in same store revenue and net operating income of 1.1% and 1.8%, respectively, in the regional mall portfolio due primarily to the anchor vacancies. For the six months ended June 30, 2003 and 2002, FFO was $31.0 million and $40.0 million, respectively. The Company reported a loss of $1.3 million for the six months ended June 30, 2003 as compared to net income of $8.7 million for the comparable period in 2002. The declines in FFO and net income on a year over year basis are attributable to the incremental reserves recorded in the 2003 second quarter. Outlook The Company expects FFO for 2003 to be in the range of $ 2.10 to $2.15 per diluted common share. This guidance incorporates actual results for the first six months and assumes no acquisitions or additional asset sales in 2003. Dividend Performance For the second quarter of 2003, the Company declared a cash dividend of $0.4808 per common share, which was paid on July 15, 2003, to common shareholders of record as of June 30, 2003. The cash dividend is equivalent to $1.9232 on an annualized basis. The Company also paid a cash dividend of $0.578125 on its 9.25% Series B Preferred Shares on July 15, 2003, to shareholders of record on June 30, 2003. On an annualized basis, this is the equivalent of $2.3125 per preferred share. Glimcher Realty Trust -- a real estate investment trust whose corporate credit and preferred stock ratings are rated by Standard & Poor's at BB and B, respectively -- is a recognized leader in the ownership, management, acquisition and development of enclosed regional and super-regional malls, and community shopping centers. Glimcher Realty Trust's common shares are listed on the New York Stock Exchange under the symbol "GRT." Glimcher Realty Trust is a component of both the Russell 2000(R) Index, representing small cap stocks, and the Russell 3000(R) Index, representing the broader market. Visit Glimcher at: http://www.glimcher.com GLOBAL CROSSING: Gets Clearance for Centennial Settlement Pact -------------------------------------------------------------- The Global Crossing Debtors obtained the Court's approval of their Settlement Agreement with Centennial Florida Switch Corp., and Centennial Puerto Rico Operations Corp., under which they agreed to restructure their various contractual relationships by amending and assuming certain agreements and terminating others. The Settlement Agreement provides for the restructuring of the various contractual relationships between the Debtors and Centennial. The salient terms of the Settlement Agreement are: A. The Debtors agree to use reasonable efforts to cure any technical issues associated with the remaining Purchased Capacity and the Dark Fiber; B. The Debtors waive any and all rights they may have had to the GX Credit; C. Subject to availability, Centennial has the option to exchange any or all of the Purchased Capacity for alternate capacity anywhere on the Network. On the activation date of the Exchanged Capacity, Centennial will pay the Debtors a $5,000 option fee per STM-1 of Exchanged Capacity; D. Centennial will have the right to terminate the IRU granted by the Debtors in any STM-1 unit of Purchased Capacity, subject to payment in full by Centennial of any outstanding maintenance costs. If notice of termination is given later than November 30, 2005, termination will be subject to an additional payment from Centennial equal to one year's maintenance costs for the relevant Purchased Capacity; E. The Centennial Credit will be reduced to $1,000,000. Centennial must utilize the $1,000,000 credit by December 31, 2004 or it is forfeited; F. The CSA will be modified to provide that its term is extended to December 31, 2004 and Centennial will purchase at least $500,000 in services per six-month period, up to $1,500,000 prior to December 31, 2004. In the event that Centennial does not purchase $500,000 of services at the end of any given Period, Centennial will pay the Debtors the difference between $500,000 and the amount of services actually purchased in this Period; G. The Debtors and Centennial will use good faith commercially reasonable efforts to finalize the terms of, and execute definitive agreements relating to, the Fiber Agreement and the Co-location Agreement without further delay; H. The Debtors will assume the Amended CPA, the CSA, the March Agreement, the Fiber Agreement, and the Co-location Agreement, all as amended by the Settlement Agreement. The Debtors will not be required to make any cure payments in connection with the assumption; I. To the extent any of its provisions are still in effect, the MOU will be terminated and cease to have any force and effect; and J. As of the Effective Date, both the Debtors and Centennial will exchange mutual releases. As previously reported, the GX Debtors and Centennial Florida are parties to a Carrier Services Agreement, dated as of September 25, 2000. Pursuant to the CSA, the GX Debtors are obligated to provide Centennial with a variety of telecommunications services, including the sale of voice traffic. The GX Debtors and Centennial Puerto Rico are parties to a purchase agreement, dated as of June 29, 2001. Pursuant to the Purchase Agreement, the GX Debtors agreed to purchase various telecommunications services from Centennial Puerto Rico, including voice termination services. (Global Crossing Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392- 0900) GMAC COMMERCIAL: Fitch's BB+ Rating Assigned to Class F Notes ------------------------------------------------------------- GMAC Commercial Mortgage Asset Corp.'s mortgage pass-through certificates, series 2000-FL-B, $8.6 million class E certificates are upgraded to 'AAA' from 'AA' by Fitch Ratings. In addition, Fitch affirms the following classes: -- $8.5 million class C 'AAA'; -- $3.5 million class D 'AAA'; -- $9.3 million class F 'BB+'. Fitch does not rate the $9.3 million class G. Classes A and B have paid off. The rating actions follow Fitch's annual review of the transaction, which closed in July 2000. The upgrades are attributed to increased subordination levels as a result of additional loan payoffs since last year's review. As of the July 2003 distribution date, the pool's aggregate collateral balance has been reduced 72%, to $39.2 million from $138 million at issuance. The remaining pool is composed of six loans, collateralized by eleven health care properties. The pool is concentrated geographically, with 46.3% of the pool located in VA (16.4%) and Michigan (29.9%). The servicer collected year-end 2002 financials for 100% of the remaining pool. Six loans, representing 66.8% of the pool, have increased net cash flows since issuance. Of the four loans where NCF has declined, only one loan had a YE 2002 debt service coverage ratio below 1.0 times. Currently, there are five cross collateralized and cross-defaulted loans in special servicing as a result of the Centennial Healthcare bankruptcy filing in January 2003. One loan, IHCP/Vanguard Health Care (11%) is on the master servicer watchlist, due to its upcoming maturity date (December 2003) and low DSCR resulting from decreased revenues and increased liability insurance and nursing expenses. One loan, representing 10.5% of the pool, exercised a one-year extension option at its maturity and is now scheduled to mature in 2005. The remaining loans in the pool mature by December 2004. Fitch will continue to closely monitor this transaction as surveillance is ongoing. GRAPHIC PACKAGING: Amends & Extends Tender Offer for Sr. Notes -------------------------------------------------------------- Graphic Packaging Corporation (NYSE: GPK) announced the amendment of Graphic Packaging's pending cash tender offer to purchase any and all of its outstanding 8-5/8% Senior Subordinated Notes due 2012 (CUSIP No. 388684AB8) and the extension of the consent expiration date and the tender offer expiration date. The tender offer is being amended to provide (1) that the tender offer consideration to be paid will be equal to $1,020.00 per $1,000 principal amount of the validly tendered Notes plus accrued and unpaid interest to but not including the date of payment for the Notes accepted for purchase and (2) that the total consideration to be paid to each holder of Notes who validly consents to the proposed amendments on or prior to the consent expiration date will be $1,022.50 per $1,000 principal amount of Notes to which such consents are validly delivered and not withdrawn, if such Notes are accepted for purchase. The consent payment will remain $2.50 per $1,000 principal amount of Notes with respect to which consents are validly delivered and not withdrawn, if such Notes are accepted for purchase. Graphic Packaging also announced that the tender offer expiration date is being extended to 12:01 a.m., New York City time, on Wednesday, August 13, 2002, unless further extended. The tender offer had originally been scheduled to expire at 12:01 a.m., New York City time, on Thursday, August 7, 2003. The tender offer is also being amended to provide that, upon the terms and subject to the conditions of the offer (including, if the offer or consent solicitation is further extended or amended, the terms and conditions of any such extension or amendment), including without limitation receipt of the requisite consents and execution of a supplemental indenture, Graphic Packaging will accept for purchase and pay, or cause payment to be made for, all Notes validly tendered and not withdrawn pursuant to the offer on or prior to 12:00 Noon, New York City time, on Thursday, August 7, 2003 (such date and time, the Early Payment Deadline), promptly following August 7, 2003. Holders that validly tender Notes on or prior to the Early Payment Deadline will be paid the tender offer consideration or the total consideration, as applicable, plus accrued and unpaid interest up to, but not including, the date of payment for such Notes, if such Notes are accepted for purchase. Upon the terms and subject to the conditions of the offer (including, if the offer or consent solicitation is further extended or amended, the terms and conditions of any such extension or amendment), Graphic Packaging will accept for purchase and pay, or cause payment to be made for, all Notes validly tendered pursuant to the offer after the Early Payment Deadline but on or prior to the amended tender offer expiration date, promptly following the amended tender offer expiration date. Any conditions to the offer that are waived by Graphic Packaging with respect to any Notes validly tendered on or prior to the Early Payment Deadline that are accepted for purchase by Graphic Packaging will be waived with respect to any Notes validly tendered and accepted for purchase after the Early Payment Deadline. Holders that validly tender Notes after the Early Payment Deadline but on or prior to the amended tender offer expiration date will be paid the tender offer consideration, plus accrued and unpaid interest up to, but not including, the date of payment for such Notes, if such Notes are accepted for purchase. As of the close of business on July 29, 2003, approximately $12.947 million of the $300 million outstanding principal amount of the 8-5/8% Senior Subordinated Notes due 2012 had been tendered. Consummation of the offer is subject to certain conditions, including (1) the consummation of the merger of Graphic Packaging International Corporation, a parent company of Graphic Packaging, with a subsidiary of Riverwood Holding, Inc. upon terms satisfactory to Graphic Packaging, (2) the consummation of certain financing transactions related to such merger upon terms satisfactory to Graphic Packaging, and (3) the receipt of the requisite consents with respect to the proposed amendments and the execution of the supplemental indenture to the indenture governing the Notes. Subject to applicable law, Graphic Packaging may, in its sole discretion, waive or amend any condition to the offer or solicitation, or extend, terminate or otherwise amend the offer or solicitation. The offer is being made in anticipation of a change of control offer required to be made by Graphic Packaging pursuant to the indenture governing the Notes following the consummation of the merger. Notes that are not tendered for purchase pursuant to this offer or the change of control offer will remain outstanding. Graphic Packaging does not currently plan to redeem any non- tendered Notes. Goldman, Sachs & Co. is the dealer manager for the offer and solicitation agent for the solicitation. MacKenzie Partners, Inc. is the information agent and Wells Fargo Bank Minnesota, National Association is the depositary in connection with the offer and solicitation. The offer is being made pursuant to an Offer to Purchase and Consent Solicitation Statement, dated July 10, 2003, and the related Consent and Letter of Transmittal (as each may be amended from time to time), which together set forth the complete terms of the offers and solicitations. Copies of the Offer to Purchase and Consent Solicitation Statement and related documents may be obtained from MacKenzie Partners, Inc. at (800) 322-2885. Additional information concerning the terms of the offers and the solicitations may be obtained by contacting Goldman, Sachs & Co. at (800) 828-3182. Graphic Packaging, headquartered in Golden, Colorado, is a leading provider of paperboard packaging solutions to multinational consumer products companies. As reported in Troubled Company Reporter's March 28, 2003 edition, Standard & Poor's Ratings Services placed its 'BB' corporate credit rating on folding carton producer Graphic Packaging Corp. on CreditWatch with negative implications. Standard & Poor's at the same time placed its 'B' corporate credit rating on paperboard manufacturer Riverwood International Corp. on CreditWatch with positive implications. The rating actions followed announcement by the companies that they had signed a definitive, stock-for-stock merger agreement. Standard & Poor's said that the negative implications on the Graphic Packaging CreditWatch reflect expectations that the transaction will create a company that is more highly leveraged than is Graphic Packaging currently. Conversely, the positive CreditWatch implications on Riverwood indicate that the transaction could create a company with the ability to generate greater levels of free cash flow than Riverwood, which would allow for more rapid debt reduction. Graphic Packaging had debt outstanding at Dec. 31, 2002, of about $480 million. Riverwood's debt at Sept. 30, 2002, was about $1.6 billion. Total debt for the combined company is initially expected to be about $2.2 billion. HOME PRODUCTS: S&P Cuts Corp. Credit Rating Down a Notch to B ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on household goods manufacturer Home Products International Inc. to 'B' from 'B+'. At the same time, Standard & Poor's lowered the senior secured rating on the company to 'B+' from 'BB-' and the subordinated debt rating to 'CCC+' from 'B-'. The outlook is negative. Total debt outstanding at Home Products International as of June 28, 2003, was $129.7 million. "The downgrade reflects increased competitive pressures that have eroded profitability, including more intense price competition at the retail level from imported products and sharply higher raw material costs," said credit analyst Martin S. Kounitz. The ratings are based on Home Products' sensitivity to fluctuations in the price of plastic resin (the company's primary raw material), vulnerability of its products to competition based on price, its concentrated customer list, and its high debt leverage. Increased raw material prices in the first half of 2003 ended June 28, and to a lesser extent retail price erosion, were the major factors in the compression of the company's gross margin, to 15.8% from 25.6% for the same period the previous year. The price of polypropylene resin--the company's primary raw material and a large component of its cost of goods sold--has risen by more than 30% year-to-date. Standard & Poor's expects plastic resin prices to remain high for the intermediate term as consumer uses for plastics expand and the supply remains constrained. Revenues are concentrated. About 70% of Home Products' sales are to its three major customers, Kmart Corp., Wal-Mart Stores Inc., and Target Corp. As Kmart has closed stores, Home Products' sales have been hurt. Chicago, Illinois-based Home Products manufactures ironing boards and plastic houseware items, including hangers and storage boxes, sold under the HOMZ trademark. KAISER ALUMINUM: Wants to Appoint Prof. McGovern as Mediator ------------------------------------------------------------ Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, reports that Kaiser Aluminum Corporation and debtor-affiliates have been named as one of many defendants in a significant number of lawsuits, including asbestos-related claims caused by: (a) exposure to products containing asbestos produced or sold by the Debtors; or (b) exposure to asbestos during, and as a result of, work performed at facilities owned or controlled by the Debtors. The lawsuits generally relate to products that the Debtors have not manufactured for more than 20 years. As of the Petition Date, there have been more than 100,000 asbestos-related personal-injury claims against the Debtors. In addition, in the future, there may be asserted asbestos-related personal-injury claims from individuals who may have been exposed to asbestos or asbestos-containing products but either: (a) have been unable to file a claim because of the automatic stay; or (b) have not yet manifested symptoms of asbestos-related diseases resulting from exposure, but may in the future. The Debtors determined that the services of a mediator would help facilitate a consensus among their primary creditor constituencies regarding the treatment of asbestos liabilities. Accordingly, the Debtors ask the Court to appoint Francis McGovern as mediator with respect to plan-related negotiations between asbestos claimants and other creditor constituencies, nunc pro tunc to June 1, 2003. Francis McGovern, a professor at Duke University School of Law, has written and spoken extensively on the use of alternative dispute resolution techniques to avoid or to improve the litigation process. Mr. DeFranceschi informs the Court that institutions like the federal judiciary, many state courts, and the United Nations have sought Mr. McGovern's services in addressing the practical and conceptual issues involved in dispute resolution. As a court-appointed special master or neutral expert, Mr. McGovern developed or assisted in developing solutions in some of the most significant mass-claim litigation in the United States, including: -- the DDT toxic exposure litigation in Alabama; -- the Dalkon-Shield controversy; and -- the silicone gel breast implant litigation. Mr. McGovern also acted as a special master or mediator in several state court asbestos cases and currently serves as a mediator in connection with asbestos issues in other Chapter 11 proceedings. Mr. DeFranceschi relates that Mr. McGovern will be appointed to mediate any disputes among the Existing Claimants, the Future Claimants and the Debtors' other stakeholders with respect to the treatment of asbestos liabilities in any proposed reorganization plan. He will exercise independent professional judgment as a Mediator and have no financial interest in the outcome of the case. Mr. McGovern affirms that he is a disinterested person as defined in Section 101(14) of the Bankruptcy Code. The Debtors will compensate Mr. McGovern at $10,000 per day, inclusive of all expenses, for any day during which Mr. McGovern attends a meeting directly relating to the negotiation of reorganization plans. Mr. DeFranceschi asserts that Mr. McGovern's many years of alternative dispute resolution experience and involvement as an impartial third-party in a substantial number of large and complex, mass-tort cases makes him well qualified to comprehend the issues relevant these Chapter 11 cases competently and effectively mediate issues relating to the asbestos liabilities. (Kaiser Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) KISTLER AEROSPACE: Section 341(a) Meeting to Convene on Aug. 26 --------------------------------------------------------------- The United States Trustee will convene a meeting of Kistler Aerospace Corporation and its debtor-affiliates' creditors on August 26, 2003, 1:30 p.m., at 1200 Sixth Avenue, Room 614, Seattle, Washington 98101. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Kistler Aerospace Corporation, headquartered in Kirkland, Washington is developing a fleet of fully reusable launch vehicles to provide lower cost access to space for Earth orbiting satellites. The Company filed for chapter 11 protection on July 15, 2003 (Bankr. W.D. Wash. Case No. 03-19155). Jennifer L. Dumas, Esq., and Youssef Sneifer, Esq., at Davis Wright Tremaine LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $6,256,344 in total assets and $587,929,132 in total debts. KMART CORP: Court Enters Final Decree Closing 16 Units' Cases ------------------------------------------------------------- Kmart Corporation and its debtor-affiliates sought and obtained the Court's approval issuing a final decree pursuant to Section 350(a) of the Bankruptcy Code and Rule 3022 of the Federal Rules of Bankruptcy Procedure closing 16 cases for debtors that ceased to have a separate corporate existence pursuant to the restructuring transactions under Kmart's confirmed reorganization plan: 1. Big Beaver of Caguas Development Corporation, 2. Big Beaver of Caguas Development Corporation II, 3. Big Beaver of Carolina Development Corporation, 4. Builders Square Inc., 5. ILJ Inc., 6. JAF Inc., 7. Kmart CMBS Financing Inc., 8. Kmart Financing I, 9. Kmart Holdings Inc., 10. Kmart Michigan Property Services LLC, 11. Kmart of Amsterdam NY Distribution Center Inc., 12. Kmart Pharmacies of Minnesota Inc., 13. Kmart Pharmacies Inc., 14. PMB Inc., 15. Sourcing and Technical Services Inc., and 16. Troy CMBS Property LLC (Kmart Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEGACY HOTELS: S&P Slashes Senior Unsecured Debt Rating to B+ ------------------------------------------------------------- Standard & Poor's Ratings Services downgraded its ratings on Legacy Hotels Real Estate Investment Trust (Legacy REIT or the trust) to 'BB-'. At the same time, the senior unsecured debt rating was lowered to 'B+' from 'BB+'. The outlook is negative. "The rating action is based on a confluence of events including Legacy REIT's recent C$139.0 million acquisition of a hotel property in Seattle, Washington, with debt financing, the deteriorating operating performance of the trust, weakening credit ratios, and poor financial liquidity," said Standard & Poor's credit analyst Ron Charbon. The negative outlook reflects the uncertainty facing Legacy REIT in the next 12 to 18 months and the current suspension of distributions to unitholders. About 25% of Legacy's tangible assets are encumbered by mortgages and, therefore, Standard & Poor's has lowered the unsecured rating by one notch to distinguish between the long-term corporate credit rating and the senior unsecured debt rating. The 'BB-' long-term corporate credit rating on Legacy REIT reflects the deterioration of its business risk profile and financial risk profile. Legacy REIT's credit strengths include a portfolio of good quality real estate assets and its prominent market position. Legacy REIT's credit weaknesses include the aggressive business and financial policies of management, weak and deteriorating credit measures, liquidity concerns, and uncertainty in the lodging sector in general. Standard & Poor's is concerned with Legacy REIT's business and financial strategies given a challenging lodging environment when it is experiencing weakening credit measures. Toronto-based Legacy REIT recently announced its agreement to purchase the Olympic hotel in Seattle for approximately C$139.0 million. This acquisition is Legacy REIT's second purchase in the U.S. Similar to its purchase of the Monarch hotel in Washington D.C., this acquisition included some form of assistance from its major shareholder, hotel operator Fairmont Hotels & Resorts Inc. Standard & Poor's expects that following the Olympic acquisition, the debt to total book value of capital will approach 56%, total debt to EBITDA will be just under 7x, and EBITDA interest coverage at about 2x; these levels are weak for the current ratings category. In these calculations, Standard & Poor's classifies Legacy REIT's C$150.0 million of convertible subordinated debentures as debt and adds the subordinated convertible debenture interest to total interest expense. The liquidity of the trust as of June 30, 2003, includes C$14.0 million in cash and C$90.0 million in unused lines of credit. With the acquisition of the Seattle hotel, the pro forma available line of credit is expected to be drawn down to less than C$40.0 million. Given the scheduled C$70.0 million of capital expenditures for 2003 and lower operating revenues, the liquidity of the trust will be constrained, notwithstanding the suspension of distributions. The outlook for the lodging sector is for a slow and gradual recovery in 2004. The lodging sector has endured a number of negative events in the past few years and it continues to be susceptible to a sluggish economy, unrest in the airline business, and global geo-political events. Standard & Poor's will continue to look for Legacy REIT to strengthen its credit measures and its rating could be lowered in the future if the trust's financial ratios are negatively affected by future acquisitions, weakening operating performance, or liquidity concerns given the upcoming refinancings. LIBERTY MEDIA: Look for Q2 Supplemental Fin'l Info. on August 14 ---------------------------------------------------------------- Liberty Media Corporation (NYSE: L, LMC.B) will release Second Quarter 2003 Supplemental Financial Information on Thursday, August 14, 2003. You are invited to participate in Liberty Media's conference call, which will begin at 5:00 p.m. (ET). Robert Bennett, Liberty Media's President and CEO, will host the call. Please call Premiere Conferencing at (913) 981-4900 at least 10 minutes prior to the call so that we can start promptly at 5:00 p.m. (ET). You will need to be on a touch-tone telephone to ask questions. The conference administrator will give you instructions on how to use the polling feature. Questions will be registered automatically and queued in the proper sequence. Replays of the conference call can be accessed from 8:00 p.m. (ET) on August 14, 2003 through 5:00 p.m. (ET) August 21, 2003, by dialing (719) 457-0820 plus the pass code 556459#. In addition, the Second Quarter Supplemental Financial Information conference call will be broadcast live via the Internet. All interested persons should visit the Liberty Media Web site at http://www.libertymedia.com/investor_relations/default.htmto register for the web cast. Links to the press release and replays of the call will also be available on the Liberty Media Web site. The conference call and related materials will be archived on the web site for one year. Liberty Media Corp.'s 4.000% bonds due 2029 are currently trading at about 60 cents-on-the-dollar. LORAL SPACE: Taps Appleby Spurling as Bermuda Insolvency Counsel ---------------------------------------------------------------- Loral Space & Communications Ltd., and its debtor-affiliates ask for approval from the U.S. Bankruptcy Court for the Southern District of New York to employ Appleby Spurling & Kempe as Special Bermuda Insolvency Counsel. Loral Space, is a Bermuda Corporation. The commencement of a chapter 11 case in the United States will require the commencement of winding up proceedings in Bermuda pursuant to the Bermuda Companies Act 1981. Therefore, an ongoing review and analysis of various laws of Bermuda will be necessary. The Debtors will need counsel well versed in the local laws of Bermuda. The Debtors seek to retain Appleby to advise and represent them on all aspects of Bermuda Corporate, Insolvency, Restructuring and Liquidation law. The Debtors expect Appleby Spurling to: i) represent the Debtors in the provisional liquidations proceedings in Bermuda, including filing various applications and motions and instructing United Kingdom Counsel, including where appropriate Queen's Counsel with respect to Court appearances; ii) identify issues under Bermuda law that will arise in the provisional liquidation and during the course of these Chapter 11 proceedings, and counseling the Debtors with regard to such issues; iii) coordinate as necessary with the Debtors United States counsel with respect to the Debtors Chapter 11 cases; and iv) provide such other services relating to issues under Bermuda law as the Debtor shall reasonably request from time to time with respect to the reorganization of its business. The hourly rates charged by Appleby Spurling are: partners $425 - $525 per hour associates and paralegals $175 - $475 per hour legal assistants $150 - $200 per hour The professionals currently expected to work on these matters are: Peter Bubenzer $510 per hour John Riihiluoma $500 per hour Judy Collis $500 per hour Jennifer Fraser $475 per hour Ian Stone $490 per hour Alison Dyer-Fagundo $310 per hour Susan Davis-Crockwell $300 per hour Ruby Rawlins $210 per hour Bernette Cox $150 per hour Valerie Smith $210 per hour Loral Space & Communications Ltd., headquartered in New York, New York, and together with its affiliates, is one of the world's leading satellite communications companies with substantial activities in satellite-based communications services and satellite manufacturing. The Company filed for chapter 11 protection on July 15, 2003 (Bankr. S.D.N.Y. Case No. 03-41710). Stephen Karotkin, Esq., and Lori R. Fife, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $2,654,000,000 in total assets and $3,061,000,000 in total debts. MAGELLAN HEALTH: Asks Court to Clear $150M Onex Equity Agreement ---------------------------------------------------------------- A condition to the consummation of the March 26, 2003 Plan is that Magellan Health Services, Inc., and its debtor-affiliates realize not less than $50,000,000 in gross proceeds and $47,500,000 in net proceeds from a common stock offering to be consummated in conjunction with the Plan becoming effective. The Debtors intend to make an offering of their common stock to the general unsecured claim holders pursuant to the Plan. As a condition to confirmation, the Plan provides that the Debtors must enter into a commitment letter with one or more parties to purchase any common stock or New Senior Notes not purchased by the general unsecured creditors pursuant to the Plan, which yields Magellan not less than $50,000,000 in gross proceeds and not less than $47,500,000 in net proceeds. The PCM/AG Equity Commitment Letter To fulfill the condition to confirmation and consummation as specified in the Plan, prior to the Petition Date, the Debtors sought a commitment from their primary creditor constituencies, as well as a third party investor, Onex Corporation, for an equity or debt infusion to be made in conjunction with the effectiveness of the Plan. Because Onex required more time to complete its due diligence, it was unable to provide the Debtors with a commitment letter at that time. The Debtors did, however, receive two definitive proposals to provide financing in connection with the consummation of the restructuring, the most favorable of which was made by Amalgamated Gadget, L.P. and Pequot Capital Management, Inc., both on behalf of certain managed funds and accounts. After extensive negotiation with these Initial Investors, they have reached an agreement with the Debtors on the terms and provisions of an investment that was set forth in a March 10, 2003 commitment letter. Pursuant to this PCM/AG Equity Commitment Letter, the Initial Investors agreed to, among other things, commit, on a standby basis, to make an investment of up to $50,000,000 to purchase a portion of the new common stock of reorganized Magellan to be issued pursuant to the Plan. In exchange for the investment, the Initial Investors were to receive 26.5% of the outstanding New Common Stock of reorganized Magellan under the Plan. The holders of general unsecured claims in Class 7 under the Plan were to be given the right to purchase New Common Stock at the same price as the PCM/AG Investment on a pro rata basis under the Plan and the Initial Investors agreed to purchase the balance of the New Common Stock that is not subscribed to and purchased by the claimants. In addition, the PCM/AG Equity Commitment Letter also provides for indemnification obligations, expense reimbursement and the payment of various fees, including a $1,000,000 break-up fee and a $1,500,000 commitment fee, of which $750,000 was previously paid on March 11, 2003. Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, in New York, recounts that on April 4, 2003, the Court approved the PCM/AG Equity Commitment Letter and, specifically, the break- up fee, indemnification, expense reimbursement obligation and commitment fee. The Original Onex Equity Commitment Letter Although the Debtors believed that the Initial Investors' proposal met the minimum requirements to achieve a successful reorganization and to emerge from Chapter 11, the Debtors nevertheless continued to have discussions with Onex and other potential third-party investors regarding a proposal that would be even more favorable to the Debtors and their creditors. After completing its due diligence and engaging in extensive negotiations with the Debtors, on May 21, 2003, Onex presented the Debtors with a Funding Commitment, pursuant to which Onex agreed to provide the Debtors with, among other things, a commitment to purchase up to $200,000,000 of common stock of reorganized Magellan in conjunction with the consummation of a plan of reorganization substantially similar to the Plan. Specifically, Onex agreed to, among other things, invest up to $150,000,000 to purchase a separate class of common stock of reorganized Magellan in exchange for 44.78%2 of the economic equity interests in reorganized Magellan. Of the $150,000,000 investment, $50,000,000 was to be offered to holders of general unsecured claims in Class 7 as a rights offering which Onex would backstop, and $100,000,000 was to be purchased by Onex directly. In addition, holders of allowed Class 7 claims were to be given an opportunity to tender a portion of the shares of New Common Stock that the holders would otherwise receive in respect of their claims, up to a maximum of $50,000,000, to Onex and certain other creditor participants. Because the Debtors believed that that the terms of the Onex proposal were even more favorable to the Debtors and their creditors than those of the PCM/AG Investment, the Debtors executed the Original Onex Equity Commitment Letter. The Revised Onex Equity Commitment Letter Subsequent to the execution of the Onex Letter, the Debtors, together with their professionals and the official committee of unsecured creditors and its professionals, continued to engage in discussions with the Initial Investors and Onex regarding higher or better offers. In that regard, the Debtors received a new proposal from Amalgamated Gadget, without the participation of Pequot Capital. Because the Debtors, in consultation with the Creditors' Committee, determined that the Amalgamated Gadget Proposal was the best proposal received to date, the Debtors intended to pursue the Amalgamated Gadget Proposal. This, however, did not stop the bidding process. The Debtors received new proposals from Onex and AG. After the receipt and consideration of competing proposals, the Debtors, again in consultation with the Creditors' Committee, determined that the last proposal submitted by Onex would be the most beneficial to both the Debtors' estates and their creditors. The Creditors' Committee concurs with the Debtors' decision. The salient terms of the Revised Onex Commitment are: A. Onex will invest up to $150,000,000 to purchase a separate class of common stock of reorganized Magellan. The Plan will be modified to reflect the terms and conditions of the Revised Onex Commitment and its term sheet; B. In exchange for the $150,000,000 investment, Onex will receive, as of the effective date of the Modified Plan, shares of MVS Securities, which will represent up to 34.48% of this $150,000,000 investment, $75,000,000 will be offered to holders of general unsecured claims in Class 7 under the Modified Plan as a rights offering which will be backstopped by Onex, and $75,000,000 will be purchased by Onex directly. C. The MVS Securities will be identical to the New Common Stock to be issued to creditors under the Modified Plan, except MVS Securities will have: 1. in the aggregate 50% of the voting rights pertaining to all of reorganized Magellan's outstanding common stock; and 2. the right to elect certain directors. The MVS Securities will automatically convert into shares of New Common Stock having equivalent economic equity interests in reorganized Magellan: 1. upon the transfer of the MVS Securities to any person other than Onex or an entity controlled by Onex; and 2. if either: a. the number of outstanding MVS Securities is less than 15.67% of the number of MVS Securities and shares of New Common Stock issued on the Effective Date; or b. MVS Securities represent less than 10% of the outstanding economic common equity interests in reorganized Magellan. Onex and its affiliates may also convert shares of New Common Stock that they may acquire into MVS Securities having equivalent economic equity interests unless no MVS Securities are then outstanding. D. The holders of allowed Senior Note claims will receive New Senior Notes on account of the claims in the aggregate principal amount equal to the principal amount of the Senior Notes. Accrued and unpaid interest through the Effective Date will be paid in cash or additional New Senior Notes, at Magellan's option, on the Effective Date. The interest due on the Senior Notes will be a combined rate of interest of 10 3/8%. The New Senior Notes will: 1. bear interest at the rate of 9 3/8% per annum; 2. mature in November 2008; 3. not be contractually subordinated to any other debts or claims; 4. otherwise have substantially the same terms as the existing Senior Note Indenture. This is subject to the approval of holders of Class 1 claims. Magellan and Onex will exert their reasonable best efforts to obtain this consent. E. The Modified Plan will provide that: 1. If the holders of allowed Class 1 claims who have executed lock-up agreements applicable to the Plan consent to the treatment of the Senior Note claims, $50,000,000 of the proceeds of the sale of the MVS Securities will be used to make cash payment to holders of Class 1 claims to reduce the principal amount of the New Senior Secured Obligations to be issued under the Modified Plan; 2. If the holders of allowed Class 1 claims who have executed lock-up agreements applicable to the Plan do not consent to the treatment of Senior Note claims, $50,000,000 of the proceeds of the Investment will be used to reduce the amount of New Senior Notes to be issued pursuant to the Modified Plan; and 3. The remainder of the proceeds will be used for general working capital purposes. F. The initial Board of Directors of reorganized Magellan will consist of seven directors: 1. Five directors will initially be designated by Onex, two of whom will be members of management of reorganized Magellan and at least one of whom will qualify as an independent director; 2. Two additional directors having three-year terms will be selected by the Creditors' Committee, of which one will qualify as an independent director, and both of which will be subject to Onex's approval, which approval will not be unreasonably withheld. G. The charter and bylaws of reorganized Magellan in effect on the Effective Date will provide, among other things: 1. The holders of the MVS Securities will vote: a. as a separate class to elect three directors; and b. together with the holders of the New Common Stock to elect two directors; 2. Until the MVS Securities represent less than the Minimum Hold, the holders of the MVS Securities will be entitled to cast a number of votes equal to the aggregate number of shares of New Common Stock outstanding at the time of any vote; 3. Two directors will be elected by the holders of New Common Stock voting as a separate class after the initial three-year term of directors selected by the Creditors' Committee or to replace any director or their successor; 4. After all MVS Securities are converted into New Common Stock, all common shareholders will have the right to vote together to elect all directors in accordance with applicable law; and 5. All affiliated party transactions between reorganized Magellan and Onex or any of its affiliates must be approved by either: a. a majority of the directors elected by the holders of the New Common Stock, voting as a separate class; or b. holders of a majority of the New Common Stock, voting as a separate class. H. Onex's obligation to make the Investment is conditioned on a number of items, including: 1. The filing of the Modified Plan, in form and substance materially consistent with the Plan and reasonably satisfactory to Onex; The Modified Plan will include a provision permitting Onex to offer holders of allowed Class 7 claims an opportunity to tender a portion of the shares of New Common Stock that the holders are otherwise entitled to receive in respect of their claims, up to a maximum of $50,000,000, to Onex at a price determined based upon a pre-investment total equity value of $225,000,000. 2. An order confirming the Modified Plan, in form and substance reasonably satisfactory to Onex, will have been entered and in full force and effect; 3. No material adverse change will have occurred; 4. Compliance with a revenue and EBITDA condition; 5. The Debtors will have cash or availability as of the Effective Date, after giving effect to $47,500,000 of the proceeds of the Investment, but taking into account distributions under the Modified Plan, of at least $20,000,000, and projected cash or availability in the amount for 18 months thereafter; 6. The total fees and expenses incurred from and after May 1, 2003, of the legal advisors to Magellan, the Creditors' Committee and the existing senior secured lenders' agent related to the Chapter 11 Cases, Healthcare Partners, Inc., Houlihan Lokey, Alvarez & Marsal, Gleacher Partners, LLC and Kekst will not exceed $25,000,000; 7. Either the New Facilities will have closed on substantially the terms set forth in the Plan Terms and will be in full force and effect or the Senior Secured Credit Agreement will be paid in full in cash with the proceeds of an exit facility the terms of which are as or more favorable to reorganized Magellan as the New Facility; and 8. The New Aetna Note and the Aetna Purchase Option will have been executed on substantially the terms set forth in the Plan Terms and will be in full force and effect. I. Onex has the right to terminate the Revised Onex Commitment upon the occurrence of certain events, including: 1. failure to file the Modified Plan on or before July 15, 2003; 2. failure to file a disclosure statement related to the Modified Plan on or before July 15, 2003; 3. failure of the Bankruptcy Court to approve the Revised Onex Commitment on or before July 15, 2003; 4. failure to obtain Bankruptcy Court approval of the Modified Disclosure Statement on or before September 15, 2003; 5. the Bankruptcy Court does not confirm the Modified Plan on or before November 15, 2003; 6. the Modified Plan does not become effective on or before December 15, 2003; 7. the Debtors will breach any material provision of the Revised Onex Commitment; 8. the Modified Plan is modified to provide for any terms materially adverse to Onex or inconsistent with the terms of the Revised Onex Commitment; and 9. after filing the Modified Plan, Magellan: a. submits a plan that is materially adverse to Onex and materially inconsistent with the Revised Onex Commitment; or b. moves to withdraw or withdraws the Modified Plan. J. The Revised Onex Commitment provides for the payment of various fees, indemnification and expense reimbursement: 1. The Debtors have agreed to reimburse Onex for all reasonable and documented out-of-pocket expenses incurred by Onex after February 14, 2003 directly related to the negotiation, preparation, execution and delivery of the Original Onex Equity Commitment Letter and the term sheet; provided that the expenses will not exceed $1,000,000, plus any expenses incurred in connection with obtaining the necessary state regulatory approvals in connection with the Investment. 2. The Debtors are required to indemnify Onex from and against all losses, claims, damages, liabilities and other expenses to which they may become subject in connection with or relating to the Revised Onex Commitment, any other agreement between Magellan and Onex, or the use of the proceeds of the Investment. The Indemnification Obligation is to be paid to the Indemnified Party on an as-incurred monthly basis. The Debtors are not required to indemnify an Indemnified Party for: a. that party's gross negligence or willful misconduct; or b. disputes arising from an Indemnified Party's breach of the Revised Onex Commitment or breach of any other agreement between an Indemnified Party and the Debtors. 3. If the Debtors do not consummate the investment contemplated under the Revised Onex Commitment and consummate an equity investment with another party on or before June 30, 2004, the Debtors are required to pay Onex a break-up fee equal to $4,000,000, unless Onex has breached its obligations; and 4. The Debtors are required to pay Onex a closing fee equal to 1.75% of the aggregate purchase price of the Investment payable solely upon the closing of the Investment. By this motion, the Debtors ask the Court to approve the Revised Onex Commitment, including the Expense Reimbursement, the Indemnification, the Break-Up Fee and the Closing Fee -- ECL Obligations. The Debtors have determined, in the exercise of their business judgment, that the Revised Onex Commitment will: -- best serve the Debtors, their creditors, and all parties- in-interest; -- expedite their successful emergence from Chapter 11; and -- assure their long-term viability. The Debtors have made this determination fully taking into account amounts that will be payable under the PCM/AG Equity Commitment Letter previously approved by the Court. The Revised Onex Commitment and the transactions contemplated will provide the Debtors with a direct equity investment equal to $150,000,000, the proceeds of which will be used by Magellan under the Modified Plan to reduce either the principal amount of New Senior Notes or the principal amount of New Senior Secured Obligations and for general corporate purposes, and up to $50,000,000 to fund a cash payment to holders of Class 7 claims in lieu of issuing shares of New Common Stock to them under the Modified Plan to the extent holders make the election. Mr. Karotkin asserts that these benefits to the Debtors, their estates and the entire reorganization effort from the Revised Onex Commitment are self-evident and clearly warrant its approval: 1. The Debtors, upon consummation of the Modified Plan, will have more cash thereby reducing their overall leverage and assuring their ability to satisfactorily weather any downturns in their business operations or the industry; 2. The additional investment will enable the Debtors to make appropriate investments in the business, like information technology and other infrastructure, to ensure its viability; 3. The value at which the equity is being purchased is substantially above the original equity commitment proposal approved by the Court and the equity value set forth in the Disclosure Statement; and 4. The Revised Onex Commitment provides an alternative for unsecured creditors to receive cash under the Modified Plan rather than New Common Stock at a value above the value attributed to the stock by the Debtors' financial advisors as set forth in the Disclosure Statement. Simply stated, in addition to providing significant additional cash at a higher value to the estates and significantly deleveraging the enterprise, the Revised Onex Commitment also enables creditors to participate in the investment and to opt for early cash out. Amalgamated Gadget, the unsuccessful bidder, advised the Debtors that it will oppose this request, despite the payment of its previously authorized break-up fee and other payments, arguing that the Debtors do not need an equity investment in excess of the originally approved $50,000,000 PCM/AG proposal. Mr. Karotkin contends that the response to Amalgamated Gadget's position is quite obvious. First, the Debtors never stated that a $50,000,000 equity investment was all that was needed or the optimal amount for the Debtors' reorganized businesses. Rather, the Debtors' position was quite clear that this was a threshold amount, which would permit the Debtors to successfully emerge from Chapter 11. Furthermore, Mr. Karotkin says, it is indeed a bit ironic for Amalgamated Gadget to take this position when, as part of the bidding process, it proposed to make an equity investment of $125,000,000. More importantly, Mr. Karotkin adds, the additional equity infusion by Onex will significantly improve the balance sheet of the reorganized Debtors and provide them with the liquidity to address the uncertainties of their business environment. In fact, the Revised Onex Commitment will avoid the problem often confronted in Chapter 11 cases -- debtors emerge from Chapter 11 overleveraged at the insistence of distressed debt investors who must realize a quick liquidity event, and are shortly back in Chapter 11 because they simply did not provide themselves with enough leeway and cushion to address any aberration in their business operations. The Debtors do not want to suffer the same fate. Amalgamated Gadget, a disgruntled bidder, which initially offered to purchase equity at a valuation $147,000,000 less than that contained in the Revised Onex Commitment, hardly has a basis to cry foul and challenge the sound business judgment exercised by both the Debtors and the Creditors' Committee. The Debtors acknowledge that pursuing the transaction contemplated by the Revised Onex Commitment may trigger the Debtors' obligation to pay the break-up fee in an amount up to $1,000,000 and the remaining portion of the commitment fee of $750,000 under the terms of the PCM/AG Equity Commitment Letter. The Debtors submit, however, that incurring the expenses is more than justified by the substantially increased investment commitment contained in the Revised Onex Commitment. As demonstrated, the incremental benefit to both the Debtors and their creditors from the Revised Onex Commitment is self-evident and far outweighs the additional expenses incurred with respect to the PCM/AG Equity Commitment Letter. After months of soliciting investment proposals from various creditor constituencies, including the Senior Lenders, the Debtors, with the advice of their advisors and the concurrence of the Creditors' Committee, have determined that the terms and conditions of the Revised Onex Commitment are the most beneficial. The Revised Onex Commitment is the product of arm's-length negotiations between the Debtors, Onex and the Creditors' Committee; was the subject of active bidding that substantially increased value; and is not in any way tainted by self-dealing or manipulation. Mr. Karotkin assures the Court that the ECL Obligations will not chill or discourage potential investment in the reorganized Debtors. For all intents and purposes, the bidding process has concluded and the Debtors intend to proceed expeditiously to amend the Plan and proceed to confirmation. Moreover, the Commitment Fee is only payable if the transaction with Onex closes and the Break-Up fee only is payable if a more favorable transaction actually is consummated. According to Mr. Karotkin, the ECL Obligations also are a fair and reasonable percentage of the proposed equity investment. The $4,000,000 Break-Up Fee represents only 2% of the $200,000,000 proposed investment. Accordingly, the Break-Up Fee is well within the realm of break-up fees that have been approved by courts. Furthermore, assuming that the Modified Plan is consummated as contemplated, the Closing Fee that the Debtors would be required to pay represents only 1.75% of the aggregate actual cash investment to be made by Onex pursuant to the Revised Onex Commitment. In the event that the Modified Plan is not consummated, the Debtors would be obligated to pay Onex the 2% Break-Up Fee only. The Debtors submit that the fees are reasonable, particularly when considered in the context of the clear and substantial benefit the Revised Onex Commitment provides to the Debtors and to the entire reorganization effort. In sum, the Revised Onex Commitment represents a significant increase in value, provides the Debtors with greater flexibility and substantially enhances the Debtors' post-reorganization balance sheet. Under these circumstances, Mr. Karotkin asserts, it should be approved. (Magellan Bankruptcy News, Issue No. 11: Bankruptcy Creditors' Service, Inc., 609/392-0900) MANITOWOC: Weaker-than-Expected Performance Spurs S&P Downgrades ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior secured bank loan ratings on The Manitowoc Co. Inc. to 'BB-' from 'BB' and its subordinated debt rating to 'B' from 'B+'. The actions follow the Manitowoc, Wisconsin-based company's weaker-than-expected operating performance due to the prolonged weakness in the crane market, especially in the crawler crane business, and in the marine services operations. The outlook is stable. Manitowoc has leading positions as a provider of cranes, food- service equipment, and marine services, with broad positions in those three diverse segments and good customer, product, and geographic diversity. The company has about $660 million in debt outstanding. The crane business has deteriorated as a result of a severe decline in nonresidential construction spending of about 10% in 2003, after a 16% decline in 2002. The weakness in Manitowoc's crane operations was more pronounced in the heavy-duty/high- capacity crawler crane market. Worldwide, volumes have declined for several years, and this has severely affected earnings in the crawler crane segment. "Operating performance should improve because of several cost- cutting and restructuring initiatives and a gradual improvement in demand," said Standard & Poor's credit analyst John Sico. "Although we expect challenges in the crane operations to continue for the near-term, we expect the company to continue generating free cash flow to gradually pay down debt over time to support the ratings at the current level." MASSEY ENERGY: Reports Improved Second Quarter Financial Results ---------------------------------------------------------------- Massey Energy Company (NYSE: MEE) reported financial results for its second quarter ended June 30, 2003. Produced coal revenues for the quarter were $325.3 million, a decrease of 2% from $330.9 million for the comparable 2002 period. Massey reported an after- tax loss for the second quarter of $2.2 million, compared to a loss of $16.5 million for the comparable period in 2002. The second quarter 2002 loss included a pre-tax charge of $25.6 million, $17.1 million after tax, related to the Harman jury verdict, which is currently pending rulings on 2002 post-trial motions. Coal sales volume for the quarter was 10.8 million tons in 2003, an increase of 5% from 10.3 million tons in 2002. EBITDA for the second quarter of 2003 totaled $50.8 million, a 55% increase from $32.7 million in the comparable 2002 period. "Our success in improving our cash costs per ton helped us achieve our projected EBITDA for the second quarter," said Don L. Blankenship, Massey's Chairman and CEO. "Reducing the costs we can control and mitigating the impact of the ones we can't continue to be our foremost objectives." Blankenship highlighted the continued success of the Company's purchasing and maintenance programs, which contributed to improvements in operational efficiency and the decrease in average cash costs per ton to $26.97 in the second quarter of 2003 from $28.66 in the first quarter of 2003 and $27.74 (excluding the Harman charge) in the second quarter of 2002. The Company reported that marketplace demand and Massey's coal shipments were negatively impacted during the quarter by a continuation of the weak U.S. economy, a cool early summer and record rainfall. "We were pleased, nevertheless, to increase our committed tonnage for 2004 by over 6 million tons compared to the end of the first quarter," said Blankenship. The Company also reported that it was successful in completing the refinancing of its previously existing revolving credit facility. During the quarter, it initiated the first step in its refinancing by issuing $132 million in 4.75% Convertible Senior Notes due May 15, 2023. Massey's total debt was $603.3 million at the end of the second quarter of 2003, up from $588.9 million at the end of the first quarter. During the quarter the Company added $19.5 million to the restricted funds used to collateralize its self- insurance and bonding programs, bringing the total collateralized funds to $64.9 million at the end of the second quarter. After the Company utilized the proceeds from its newly issued 4.75% Convertible Senior Notes to reduce its previously existing revolving credit facility, it ended the second quarter with a balance of $130.5 million outstanding under this facility, compared to $263.7 million at the end of the first quarter. Available liquidity at June 30, 2003 was $140.9 million, including $116 million on its bank revolver and $24.9 million in cash. The Company also had $57.8 million outstanding under the accounts receivable financing program at June 30, 2003. Long-term debt totaled $415 million, consisting of $283 million of 6.95% Senior Notes due March 1, 2007 and $132 million of the 4.75% Convertible Senior Notes. Total debt-to-book capitalization ratio at June 30, 2003 was 43.5%, as compared to 42.8% at March 31, 2003. Subsequent to quarter-end, the Company completed the refinancing of its previously existing revolving credit facility with the execution of a $355 million secured financing package, including a $105 million revolving multi-year credit facility maturing on January 1, 2007, and a $250 million 5-year term loan maturing on July 1, 2008, with an early maturity date of January 1, 2007 for the term loan if the Company's existing 6.95% Senior Notes are not refinanced by that date. A portion of the proceeds from the term loan was used to repay all outstanding amounts under the previously existing revolving credit facilities, as well as Massey's accounts receivable financing program. There are currently no borrowings under the new $105 million revolving credit facility or the accounts receivable financing program. The accounts receivable financing program can provide additional liquidity of up to $80 million, depending on available supporting receivables. Also subsequent to the quarter, Massey reached settlement terms with Appalachian Power Company, a subsidiary of American Electric Power, in its contract dispute, with no material impact on the Company's financial position, cash flows or results of operations. The Company announced yesterday the settlement of its property and business interruption insurance claim related to the October 2000 slurry spill at its Martin County Coal subsidiary. The insurance carriers agreed to pay $21 million to settle the claim and the Company anticipates recording earnings per share of approximately $0.13 related to this settlement in its third quarter, after adjusting for a previously booked receivable and claim settlement expenses. Coal revenues of $628.3 million for the first six months of 2003 decreased by 4% from $654.4 million for the same period in 2002. Tons sold in the first half remained virtually flat at 20.7 million tons in 2003 compared to 20.8 million tons in 2002. For the first six months of 2003, Massey's net loss was $11.8 million, or $0.16, before a $7.9 million, or $0.10 per share, non-cash charge to record the cumulative effect of an accounting change resulting from the adoption of SFAS 143, "Accounting for Asset Retirement Obligations," the new accounting standard for recording reclamation liabilities. Including this charge, the Company reported a loss of $19.7 million or $0.26 per share, as compared to a loss of $20.7 million or $0.28 per share during the same period in 2002. EBITDA for the first six months in 2003 was $88.1 million compared with $76.0 million for the same period in 2002. "Looking forward to the second half of 2003 and to 2004, we will remain focused on our costs and on future opportunities for Massey," said Blankenship. The Company reported that further industry production decreases throughout Central Appalachia and the high price of natural gas kept pricing firm as more utilities reentered the market to negotiate contracts. "However, permitting for coal producers in Central Appalachia still remains problematic," stated Blankenship. "We are pleased to have received more surface mine permits from the State of West Virginia, but several of our large permits are now pending review by Federal authorities." The Company projects sales of 42 to 43 million tons in 2003, at an expected average sales price of $31.00 per ton, compared to $31.30 for the full year 2002. Sales commitments have been received for virtually all calendar 2003 projected shipments. Sales commitments for 2004 currently total over 32 million tons. The Company anticipates shipping between 10.5 and 11.5 million tons during the quarter ending September 30, 2003, at an estimated average price per ton of between $30.75 and $31.00. "July has been relatively weak for Massey, given the miners' vacations and some minor shipping and production delays, but we hope to offset some of this weakness later in the quarter," said Blankenship. Blankenship noted that operations at Massey's Rockhouse longwall resumed, as projected, during early May with its newly installed higher horsepower shearer. "Operations management so far is very pleased with the greater cutting productivity afforded by this new equipment," he commented. The Company projects earnings per share for the third quarter of between $0.08 and $0.18 and EBITDA of between $65 and $75 million, including the net effect of the business interruption claim settlement. Blankenship expressed some concern about the continuing weakness in the overall economy and its effect on coal demand from the manufacturing sector, although there have been recent indications of some economic improvement. He noted that the weakness of the dollar could have a positive impact on the competitiveness of United States coal exports, including the metallurgical coal that Massey markets in Western Europe. The weak dollar could also slow the rate of coal imports. Capital expenditures during the second quarter of 2003 totaled $39.3 million, compared to $47.5 million in the prior year second quarter. The Company anticipates maintenance capital spending of approximately $100 to $125 million for 2003. Depreciation, depletion and amortization totaled $47.5 million in the second quarter of 2003, compared to $50.1 million for the prior year second quarter. DD&A is currently expected to total $190 to $195 million in 2003. Massey Energy Company, headquartered in Richmond, Virginia, is the fourth largest coal company in the United States based on produced coal revenue. As reported in Troubled Company Reporter's July 15, 2003 edition, Standard & Poor's Ratings Services revised its outlook on Massey Energy Company to stable from negative. At the same time, Standard & Poor's assigned its BB+ rating to Massey's $355 million secured credit facility. In addition, Standard & Poor's affirmed its existing ratings on the company. "The outlook revision reflects the enhancement to Massey's liquidity with the establishment of its new bank credit facility, which has alleviated near term maturity concerns," said credit analyst Dominick D'Ascoli. The new $355 million bank credit facility was rated 'BB+', one notch above the corporate credit rating. The new facility consists of a $250 million term loan due 2008 and a $105 million revolver due 2007 and is secured by various assets including certain account receivables, inventory, and certain property, plant & equipment. The term loan has a manageable amortization schedule of $0.6 million per quarter until maturity, and an early maturity trigger based on whether Massey's existing 6.95% senior notes are refinanced before January 1, 2007. The ratings reflected its substantial coal deposits and contracted production, which are tempered by high costs that have increased volatility in the company's financial performance. MERRILL LYNCH: Fitch Rates Classes B-4 & B-5 Notes at BB+/B+ ------------------------------------------------------------ Fitch rates Merrill Lynch Mortgage Investors, Inc.'s (MLMI) $1 billion mortgage pass-through certificates, series MLCC 2003-D, as follows: -- $992.8 million class A, X-A-1, X-A-2, X-B and A-R (senior certificates) 'AAA'; -- $10.8 million class B-1 certificates 'AA+'; -- $8.2 million class B-2 certificates 'A+'; -- $4.6 million class B-3 certificates 'BBB+'; -- $2.6 million class B-4 certificates 'BB+'; -- $2 million class B-5 certificates 'B+'. The 'AAA' rating on the senior certificates reflects the 3.10% subordination provided by the 1.05% class B-1, 0.80% class B-2, 0.45% class B-3, 0.25% privately offered class B-4, 0.20% privately offered class B-5 and 0.35% privately offered class B-6 certificates (which are not rated by Fitch). Classes B-1, B-2, B- 3, B-4 and B-5 are rated 'AA+', 'A+', 'BBB+', 'BB+' and 'B+', respectively, based on their respective subordination. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the servicing capabilities of Cendant Mortgage Corporation, rated 'RPS1-' by Fitch. The trust consists of 2,852 conventional, fully amortizing, primarily 25-year adjustable-rate mortgage loans secured by first liens on one- to four-family residential properties, with an aggregate principal balance of $1,024,596,109 as of the cut-off- date (July 1, 2003). Each of the mortgage loans are indexed off the one-month LIBOR or six-month LIBOR, and all of the loans pay interest only for a period of ten years following the origination of the mortgage loan. The average unpaid principal balance as of the cut-off-date is $359,255. The weighted average original loan- to-value ratio is 66.09%. The weighted average effective LTV is 63.02%. The weighted average FICO is 731. Cash-out refinance loans represent 35.08% of the loan pool. The three states that represent the largest portion of the mortgage loans are California (20.98%), Florida (9.57%) and New York (5.72%). All of the mortgage loans were either originated by Merrill Lynch Credit Corporation pursuant to a private label relationship with Cendant Mortgage Corporation, or acquired by MLCC in the course of its correspondent lending activities, and underwritten in accordance with MLCC underwriting guidelines as in effect at the time of origination. Any mortgage loan with an OLTV in excess of 80% is required to have a primary mortgage insurance policy. There are loans referred to as 'Additional Collateral Loans', which are secured by a security interest, normally in securities owned by the borrower, which generally does not exceed 30% of the loan amount. Ambac Assurance Corporation provides a limited purpose surety bond, which guarantees that the trust receives certain shortfalls and proceeds realized from the liquidation of the additional collateral, up to 30% of the original principal amount of that additional collateral loan. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. MLMI, the depositor, will assign all its interest in the mortgage loans to the trustee for the benefit of certificate holders. For federal income tax purposes, an election will be made to treat the trust fund as multiple real estate mortgage investment conduits. Wells Fargo Bank Minnesota, National Association will act as trustee. METALS USA: Preparing to Resell 5.5 Mill. Shares of Common Stock ---------------------------------------------------------------- Pursuant to Rule 424(b)(3) under the Securities Act of 1933, Metals USA delivers to the Securities and Commission a prospectus relating to up to 5,500,000 shares of common stock. Metals USA is registering the shares of common stock to permit the resale of the shares of common stock by the holders from time to time after July 23, 2003. They will not receive any of the proceeds from the sale by the selling shareholders of the shares of common stock. Their common stock was approved for listing on the American Stock Exchange on May 28, 2003. In the future, their common stock may not meet the continued listing requirements of the AMEX. Previously, their common stock was quoted on the OTC Bulletin Board. Information with respect to OTCBB quotations reflects inter-dealer prices without retail markup, markdown or commission and may not represent actual transactions, and quotations on the OTCBB are sporadic. In the event that Metals USA's common stock will be de-listed from the AMEX due to low stock price, they may become subject to special rules, called "penny stock rules" that impose additional sales practice requirements on broker-dealers who sell their common stock. The rules require, among other things, the delivery, prior to the transaction, of a disclosure schedule required by the Securities and Exchange Commission relating to the market for penny stocks. The broker-dealer also must disclose the commissions payable both to the broker-dealer and the registered representative and current quotations for the securities, and monthly statements must be sent disclosing recent price information. The 5,500,000 shares of common stock offered will be freely tradable immediately following the offering. In addition, 14,500,000 of their remaining 14,654,710 outstanding shares are also available for sale in the public market at any time. Sales of substantial amounts of the common stock may have a negative effect on the market price of the common stock. Under the terms of the Reorganization Plan, the unsecured creditors are to receive, upon resolution of all disputed creditor claims and completion of distributions, 20,000,000 shares of common stock in the reorganized Company to discharge and in exchange for the $367,300,000 of unsecured debt that had been outstanding upon commencement of the Chapter 11 proceedings. Pursuant to the Reorganization Plan, they entered into a registration rights agreement with the selling shareholders that requires them to file a registration statement with the SEC to register for resale the shares of common stock issued to the selling shareholders as unsecured creditors under the Reorganization Plan. They are required to cause the registration statement to remain effective until all the shares have been resold or, if earlier, October 31, 2005. They are also required to permit the inclusion of such shares on a "piggyback" basis in certain other registration statements filed by their Company until such date. They are required to pay all costs of compliance with the registration rights agreement and the reasonable fees and expenses of a single counsel for holders of such shares in connection therewith. Except for the ownership of the shares of common stock offered, the selling shareholders have not had any material relationship with them within the past three years. A full-text copy of the prospectus is available for free at: http://www.sec.gov/Archives/edgar/data/1038363/000104746903024854/a2115201z424b3.htm (Metals USA Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) METRIS MASTER: Fitch Cuts Ratings on $3.6-Bil. Worth of Notes ------------------------------------------------------------- Fitch Ratings downgrades the class A, class B, and class C notes of the below listed series issued from Metris Master Trust and places these series on Rating Watch Negative. The actions, which affect approximately $3.6 billion of credit card backed securities, reflect persistent deterioration in master trust credit quality, the weakening seller/servicer profile, as well as the challenging regulatory landscape in the subprime credit card segment. These actions do not impact any trust issued series that are insured by MBIA, Inc. Since Fitch's last rating action in October 2002, trust credit quality has continued to deteriorate. Reported gross losses have been consistently above 20.0% since the beginning of the year, averaging 21.26% year-to-date in 2003 compared to 15.82% in 2002 and 12.79% in 2001. While delinquencies have shown some stabilization and a slight improvement in recent months, they remain at high levels, indicating that trust losses are unlikely to recede over the near-term. Also, despite management's efforts to reposition the portfolio through tighter underwriting and more active account management strategies, Fitch believes such initiatives are unlikely to result in improved performance measures over the immediate term. Fitch is also increasingly concerned over eroding excess spread levels, which have fallen to historical lows, and increased the risk of early amortization. Excess spread levels have declined significantly over the past few months, and for many series are below 2%, as rising loss rates continue to offset the trusts lower funding costs. At June 2003, one-month and three-month average excess spread stood at 1.14% and 1.93%, respectively. With trust funding costs unlikely to decline further and credit losses expected to remain above 20%, Fitch expects excess spread to remain under pressure. While under the terms of most ABS series issued out of the master trust, the base rate trigger is tripped if the three-month average excess spread falls below zero, the term and conditions of the recently negotiated conduit facilities are considerably more restrictive. Fitch presently rates Metris Companies Inc. and its Direct Merchants Credit Card Bank, N.A. bank subsidiary "CCC" and "B", respectively, with a Negative rating outlook. These ratings reflect the company's weak operating fundamentals and portfolio credit quality as well as near-term liquidity and long-term funding concerns. Challenges on the liquidity front include significant ABS maturities coming due in 2004 as well as the recently accelerated mandate to eliminate the remaining $565 million of deposits at DMCCB by the end of September 2003. While the deposit take-out had been specified in the revised operating agreement signed in March 2003, Fitch believes its acceleration signals heightened regulator concerns. When modeling revised collateral performance expectations, Fitch employed several stress scenarios, incorporating a full purchase rate stress in conjunction with the stresses applied to other key variables. The decision to emphasize the full purchase rate stress scenario reflects Fitch's concern that Metris would be unable to fund new purchases on trust designated accounts in the event of insolvency, bankruptcy, or receivership. Also incorporated into our stresses, is the potential for a transfer of servicing whereby the servicing fee is increased beyond the 2.0% specified in outstanding term series. After reviewing these stress scenarios, Fitch believes available credit enhancement is no longer commensurate with the previously assigned ratings. As such, ratings on outstanding trust series are adjusted as indicated below. Rating Actions Series 2001-4 -- $372.93 Million Class A Floating Rate Notes to 'A-' from 'AA-'; -- $66.29 Million Class B Floating Rate Notes to 'BB+' from 'BBB+'; -- $60.77 Million Class C Floating Rate Notes to 'B' from 'BBB-'. Series 2001-3 -- $484.81 Million Class A Floating Rate Notes to 'A-' from 'AA-'; -- $86.19 Million Class B Floating Rate Notes to 'BB+' from 'BBB+'; -- $79.01 Million Class C Floating Rate Notes to 'B' from 'BBB-'. Series 2001-2 -- $559.39 Million Class A Floating Rate Notes to 'A-' from 'AA-'; -- $99.45 Million Class B Floating Rate Notes to 'BB+' from 'BBB+'; -- $91.16 Million Class C Floating Rate Notes to 'B' from 'BBB-'. Series 2001-1 -- $454.97 Million Class A Floating Rate Notes to 'A-' from 'AA-'; -- $80.88 Million Class B Floating Rate Notes to 'BB+' from 'BBB+'; -- $64.03 Million Class C Floating Rate Notes to 'B' from 'BBB-'. Series 2000-3 -- $372.9 Million Class A Floating Rate Notes to 'A-' from 'AA'; -- $66.29 Million Class B Floating Rate Notes to 'BB+' from 'A-'; -- $60.77 Million Class C Floating Rate Notes to 'B' from 'BBB'. Series 2000-1 -- $447.52 Million Class A Floating Rate Notes to 'A-' from 'AA-'; -- $67.96 Million Class B Floating Rate Notes to 'BB+' from 'BBB+'; -- $84.53 Million Class C Floating Rate Notes to 'B' from 'BBB-'. MICROBEST INC: Ahearn Jasco Steps Down as Independent Auditors -------------------------------------------------------------- On July 7, 2003, Ahearn, Jasco + Company, P. A. provided a letter to the Board of Directors of Microbest, Inc., in which they resigned as the Company's independent auditors and certified public accountants. The accountants' report on the financial statements of the Company for the fiscal years ended December 31, 2001 and 2000 expressedB doubt as to the Company's ability to continue as a going concern. Although Microbest Inc. has been in existence since 1993, the Company has not been able to develop its operating plan to the point where it can sustain profitable operations. The Company has been involved essentially in product development and market testing and development since it was founded. In 1997 the Company began concentrating its marketing efforts in the food service industry and more recently in the Janitorial and Sanitary (Jan/San) Distributor market and has been successful in developing a modest presence for its products in these markets. For the two years and nine months ended September 30, 2002, the company generated $1,681,043 in net sales, recorded net losses of $2,425,753 and also generated $1,416,799 from financing activities during this period to help fund the shortfall in working capital. The business of developing, marketing and selling the Company's biological cleaning products is capital intensive. The Company intends to continue its selling and marketing efforts and will require additional capital in order to continue operating at the current level, to expand its business, and to fund production and development costs. Additional capital financing may not be available. Without such financing, the Company will not be able to continue at its present operational level or fully implement its business strategy. LIQUIDITY AND CAPITAL RESOURCES Since February 16, 2001 the Company has relied on financial commitments, from Forward Looking Technologies Inc., a venture capital group specializing in funding emerging growth technology companies, with an emphasis on solutions to pressing environmental issues to meet its shortfall in operating capital. Between February 2001 and June 2002 the Company received $669,225 from FLT for which it issued 5,536,947 restricted shares of common stock without registration in reliance upon section 4 (2) of the Securities Act of 1933. The stock was issued at a 25% discount to the market, in accordance with the terms of the commitment. The FLT commitment terminated in August 2002 because of their liquidity situation and the lawsuits referred to above. On August 10, 2002 the Company received a "Memorandum of Understanding/Term Sheet" from Roan/ Myers Associates, L.P., Investment Bankers regarding a proposal to privately offer and sell a minimum of $3 million to a maximum of $5 million of the Company's securities in a private placement transaction in reliance upon an exemption from registration pursuant to Section 4 (2) of The Securities Act of 1933. One of the terms for this offering was that the Company's common stock would be trading on the OTC/BB. The Company does not believe that its common stock will be approved for trading on the OTC/BB at this time. Accordingly, this proposed offering is no longer viable and is considered terminated. The Company raised substantially all its invested funds through the private sales of its common stock relying on exemptions from registration under the Securities Act of 1933. These sales of stock are costly to the Company because of the decline in the market price of the Company's common stock over the past few years. The low bid price dropped to a low of $.05 after being removed from the OTC/BB on January 20, 2000 because of Rule 6530. For the past three years the shares have been traded as low as $0.04 per share on the National Quotation Bureau's Electronic Quote System. Management believes not being able to trade on the OTC/BB has had and will continue to have a negative impact on the price of the stock. If the Company is unable to raise additional capital in the future through the sale of its common stock or is unable to find alternative sources of investor funds, the Company's ability to continue will be in jeopardy. Due to insufficient cash generated from operations, the Company presently does not have cash available to pay its already incurred accounts payable and other liabilities. Obligations are being met on a day-to-day basis as cash becomes available. There can be no assurance given that the Company's present flow of cash, both from operations and any new financial commitments, will be sufficient to meet current and future obligations. The Company continues to require additional investment capital to fund operations and development. As such, these factors, as well as other factors discussed in "financial condition" below, raise substantial doubt about the Company's ability to continue as a going concern. In the opinion of management the Company will not be able to continue operations without a major infusion of funds. As a result of the License Agreement executed with Purity Products, Inc. on October 5, 2002 the amount of funding required will be significantly less than the $3-5 million anticipated by the funding proposal from RMA mentioned above. Management believes that if a funding between $500,000 and $1 million is not received the Company will not be able to continue. MICROBEST INC: Fails to Comply with SEC Reporting Requirements -------------------------------------------------------------- Microbest, Inc. is not in compliance with the reporting requirements pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 in that it filed Form 10-QSB for the quarter ended September 30, 2002 without the required review by an independent accountant; it has not filed Form 10-KSB, for the year ended December 31, 2002; it has not filed Form 10-QSB, for the quarter ended March 31, 2003 and anticipates it will not timely file Form 10-QSB for the quarter ended June 30, 2003, all because the Company lacks the funds to pay its independent auditor for the required audit and reviews. The Company continues to be unable to generate positive cash flow from operations. The Company had previously met the shortfall in its cash flow through the private placement sale of unregistered shares of its common stock. In the fall of 2002 the NASD blocked the return of trading of the Company's common stock to the OTC/BB, because of a legal matter involving major stockholders, which does not involve the Company. This action by the NASD has effectively removed this source of funding to the Company. Management continues to seek a resolution to this problem but can give no assurance that it will be successful. On May 31, 2003 the Company closed its executive offices at 751 Park of Commerce Drive, Suite 122, Boca Raton, FL 33487 as an economy measure and moved to smaller executive offices at 5840 Corporate Way, Suite 200, West Palm Beach, FL 33407. MIRANT CORP: Wins Interim Nod to Hire Haynes & Boone as Counsel --------------------------------------------------------------- Pending the final hearing for the Application, Bankruptcy Court Judge Lynn approves the Mirant Debtors' employment of Haynes and Boone on an interim basis, as of July 14, 2003. * * * The Debtors expect Haynes and Boone to: (a) take all necessary actions to protect and preserve the estates of the Debtors, including the prosecution of actions on the Debtors' behalf, the defense of any actions commenced against the Debtors, the negotiation of disputes in which the Debtors are involved, and the preparation of objections to claims filed against the Debtors' estates; (b) prepare, on the Debtors' behalf, all necessary motions, applications, answers, orders, reports, and papers in connection with the administration and prosecution of the Debtors' Chapter 11 cases; (c) assist the Debtors in connection with any proposed sale of assets pursuant to Section 363 of the Bankruptcy Code; (d) advise the Debtors in respect of bankruptcy, energy, real estate, regulatory, securities, labor law, intellectual property, licensing and tax matters or other services as requested; and (e) perform all other legal services in connection with these Chapter 11 cases. Compensation will be payable to Haynes and Boone on an hourly basis, plus reimbursement of actual, necessary expenses incurred by Haynes and Boone. The primary Haynes and Boone attorneys and paralegals who will represent the Debtors and their current standard hourly rates are: Robin E. Phelan Partner $550 Judith Elkin Partner 495 Ian T. Peck Associate 245 Meredyth A. Purdy Associate 260 Kim Morzak Paralegal 160 (Mirant Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONAL WINE: S&P Affirms Credit & Debt Ratings After Review ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B-' corporate credit rating and 'CCC+' senior unsecured debt rating on alcoholic beverage distributor National Wine & Spirits Inc. At the same time, Standard & Poor's has withdrawn its 'B' senior secured bank loan rating on NWS following the company's recent refinancing of its bank facility. (The new bank facility is not rated.) All ratings are removed from CreditWatch where they were placed Jan. 6, 2003. The ratings outlook on the Indianapolis, Indiana-based NWS is negative. About $98 million of total debt (including notes payable to stockholders) was outstanding at March 31, 2003. The rating affirmation concludes Standard & Poor's review of NWS' financial profile and operating performance following the company's loss of several key suppliers' business in Illinois. This included the termination of distribution rights for Diageo, Pernod Ricard, Future Brands, and Canandaigua Wine Company brands in the state of Illinois during the fiscal year ended March 31, 2003. Standard & Poor's estimates that the amount of revenues for these affected brands together total approximately 32% of total revenues for fiscal 2003. Subsequently, NWS was chosen as a strategic distributor of Diageo and chosen as the exclusive distributor of Diageo spirits and wine brands in Indiana. In Michigan, the company has been selected as the exclusive broker and authorized distribution agent of Diageo and Schieffelin & Somerset spirits brands and as the exclusive distributor of Diageo "mixed spirits drinks." These agreements have removed some uncertainty for the company regarding its distribution rights in these two states. Although Standard & Poor's remains concerned about NWS' ability to replace the distribution of the lost business in Illinois, an agreement with Glazer's Wholesale Drug Company to form a strategic partnership to secure new business in Illinois will likely provide some new opportunities. In addition, NWS reduced debt by about $11.5 million in fiscal 2003, and expects further debt reduction in 2004 due to the collection of accounts receivable and inventory liquidation related to the lost distribution rights in Illinois. Despite expectations for reduced sales and profitability in fiscal 2004, cost-cutting initiatives underway and reduced interest expense associated with lower debt levels should enable NWS to stabilize credit measures. However, further loss of distribution rights and the inability to replace lost revenues with distribution of competing suppliers' brands could hurt NWS' credit measures. "The ratings reflect NWS' high (yet declining) debt levels, participation in the highly competitive and consolidating U.S. alcohol distribution industry, and its recent loss of distributor rights, yet unique industry protections mandated by law. NWS is a distributor of wine and spirits in Indiana, Michigan, and Illinois, and also holds a 25% stake in a Kentucky distribution company," said Standard & Poor's credit analyst Nicole Delz Lynch. The alcoholic beverage market is stable, mature, and non-cyclical. Whereas the distribution business was once highly fragmented, consolidation has more recently led to regional domination by two or three companies in the states where National Wine competes. NEXMED INC: Secures $1.8MM Line of Credit from GE Life Science -------------------------------------------------------------- NexMed, Inc. (Nasdaq: NEXM), a developer of innovative transdermal treatments based on its NexACT(R) proprietary drug delivery technology, has entered into an agreement for a $1.85 million line of credit with GE Life Science and Technology Finance, a unit of GE Commercial Finance, for the purchase of equipment for its manufacturing and laboratory facilities. NexMed's state-of-the-art manufacturing facility is intended to serve as the base of operations for the manufacture and quality control of Alprox-TD(R) and other NexACT-based products under development. The facility is designed to meet GMP standards and, subject to FDA approval, is capable of producing over 100 million units of Alprox-TD(R) per year when operating at full commercial capacity. The 31,000 sq. ft. facility also includes laboratories, warehouse and executive and administrative areas. Ms. Vivian Liu, acting chief financial officer for NexMed, said, "We are very pleased to receive this line of credit which will free up cash for our U.S. development activities." Ms. Liu further added, "At our current level of expenditures, we have over a year's cash reserves and this credit line will further bolster our financial position." NexMed, Inc. is an emerging pharmaceutical and medical technology company, with a product pipeline of innovative topical drug treatments based on the NexACT(R) transdermal delivery technology. Its lead NexACT(R) product under development is the Alprox-TD(R) cream treatment for male erectile dysfunction. NexMed is also working with various pharmaceutical companies to explore the introduction of its NexACT(R) delivery system into their existing drugs as a means of developing new patient-friendly transdermal products and extending patent lifespans. GE Life Science and Technology Finance, a unit of GE Commercial Equipment Financing, which is a division of GE Commercial Finance, provides financial solutions for life science companies throughout the USA and Canada with a portfolio exceeding $400MM in served assets, representing over 275 customers. Visit their Web site at http://www.gelstf.com GE is a diversified services, technology and manufacturing company with operations worldwide. * * * Going Concern Uncertainty In the Company's Form 10-K filed on March 31, 2003, NexMed Inc., reported: "OUR INDEPENDENT ACCOUNTANTS HAVE DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN FOR A REASONABLE PERIOD OF TIME. "As a result of our losses to date, working capital deficiency and accumulated deficit, our independent accountants have concluded that there is substantial doubt as to our ability to continue as a going concern for a reasonable period of time, and have modified their report in the form of an explanatory paragraph describing the events that have given rise to this uncertainty. Our continuation is based on our ability to generate or obtain sufficient cash to meet our obligations on a timely basis and ultimately to attain profitable operations. Our independent auditors' going concern qualification may make it more difficult for us to obtain additional funding to meet our obligations. We anticipate that we will continue to incur significant losses until successful commercialization of one or more of our products, and we may never operate profitably in the future. "WE WILL NEED SIGNIFICANT FUNDING TO COMPLETE OUR RESEARCH AND DEVELOPMENT EFFORTS. "Our research and development expenses for the years ended December 31, 2002, 2001, and 2000 were $21,615,787, $12,456,384, and $6,892,283, respectively. Since January 1, 1994, when we repositioned ourselves as a medical and pharmaceutical technology company, we have spent $50,695,348 on research and development. We anticipate that our expenses for research and development will not increase in 2003. Given our current lack of cash reserves, we will not be able to advance the development of our products unless we raise additional cash reserves through financing from the sale of our securities and/or through partnering agreements. If we are successful in entering partnering agreements for our products under development, we will receive milestone payments, which will offset some of our research and development expenses. "As indicated above, our anticipated cash requirements for Alprox-TD(R) through the NDA filing in the first half of 2004, will be approximately $15 million. Completion of the open label study is not a prerequisite for our NDA filing. We may not be able to arrange for the financing of that amount, and if we are not successful in entering enter into a licensing agreement for Alprox-TD(R), we may be required to discontinue the development of Alprox-TD(R). "We will also need significant funding to pursue our product development plans. In general, our products under development will require significant time-consuming and costly research and development, clinical testing, regulatory approval and significant additional investment prior to their commercialization. The research and development activities we conduct may not be successful; our products under development may not prove to be safe and effective; our clinical development work may not be completed; and the anticipated products may not be commercially viable or successfully marketed. Commercial sales of our products cannot begin until we receive final FDA approval. The earliest time for such final approval of the first product which may be approved, Alprox-TD(R), is sometime in early 2005. We intend to focus our current development efforts on the Alprox-TD(R) cream treatment, which is in the late clinical development stage." NICHOLAS-APPLEGATE: S&P Keeps Watch on Low-B Class D Note Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on the class C and D notes issued by Nicholas-Applegate CBO II Ltd., a high- yield arbitrage CBO transaction, on CreditWatch with negative implications. At the same time, the ratings on the class A and B notes are affirmed based on the level of overcollateralization available to support the notes. The CreditWatch placements reflect factors that have negatively affected the credit enhancement available to support the rated notes since the transaction was originated in April 2001. These factors include a decline in the weighted average coupon generated by the fixed-rate assets within the collateral pool, par erosion of the collateral pool, and negative migration of the credit quality of the performing assets within the pool. Standard & Poor's noted that the weighted average coupon generated by the performing fixed-rate assets in the portfolio has declined since origination. According to the most recent available monthly trustee report (June 20, 2003), the weighted average coupon was 9.71%, less than the minimum required ratio of 9.80%, and compared to a weighted average coupon of approximately 9.83% as of the transaction's effective date. Furthermore, Standard & Poor's noted that as a result of asset defaults, the overcollateralization ratios for the transaction have deteriorated since the transaction was originated. As of the June 20, 2003 trustee report, the class A overcollateralization ratio was still in compliance with a ratio of 140.11%, versus the minimum required ratio of 126.5%; however, the ratio decreased from an approximate ratio of 147.98% at origination. The class B overcollateralization ratio was still in compliance with a ratio of 117.28%, versus the minimum required ratio of 111.0%; however, this ratio decreased from an approximate ratio of 124.0% at origination. The class C overcollateralization ratio was still in compliance with a ratio of 109.7%, versus the minimum required ratio of 106.5%; however, this ratio decreased from an approximate ratio of 116.02% at origination. Finally, the class D overcollateralization ratio was still in compliance with a ratio of 104.77%, versus the minimum required ratio of 104.6%; however, this ratio decreased from an approximate ratio of 110.83% at origination. The transaction is currently failing the minimum par value test with a current ratio of 104.77%, versus a required ratio of 109.3%. As part of its analysis, Standard & Poor's will be reviewing the results of current cash flow runs generated for Nicholas-Applegate CBO II Ltd. to determine the level of future defaults the rated notes can withstand under various stressed default timing and interest rate scenarios, while still maintaining their ability to pay all of the interest and principal due on the notes. The results of these cash flow runs will be compared with the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the notes remain consistent with the credit enhancement available to support the notes. Standard & Poor's will remain in contact with Nicholas-Applegate Capital Management, the collateral manager for the transaction. RATINGS PLACED ON CREDITWATCH NEGATIVE Nicholas-Applegate CBO II Ltd. Rating Class To From Current Balance ($ mil.) C BBB/Watch Neg BBB 13.75 D BB-/Watch Neg BB- 10.00 RATINGS AFFIRMED Nicholas-Applegate CBO II Ltd Class Rating Current Balance ($ mil.) A AAA 166.478 B A- 32.400 NRG ENERGY: Court Approves PricewaterhouseCoopers as Accountants ---------------------------------------------------------------- Pursuant to Section 327(a) of the Bankruptcy Code, the NRG Energy Debtors sought and obtained the Court's authority to employ PricewaterhouseCoopers LLP to perform auditing, accounting consultation and tax advisory services in these cases, effective as of the Petition Date. According to Scott J. Davido, General Counsel of NRG Energy, Inc., the Debtors are familiar with PwC's professional standing and reputation. PwC has a wealth of experience in providing audit, accounting consultation and tax advisory services in restructurings and reorganizations and enjoys an excellent reputation for services it has rendered in large and complex Chapter 11 cases. In 1995, PwC was engaged to provide auditing, accounting consultation and tax advisory services to the Debtors for the year ended December 31, 1995. Since then, PwC has developed a great deal of institutional knowledge regarding the Debtors' operations, finance and systems. PwC's experience and knowledge will be valuable to the Debtors in its efforts to reorganize. Specifically, PwC will provide these services: A. Auditing and Accounting Consultation (a) audits of the financial statements of the Debtors as may be requested from time to time or as required by the Securities and Exchange Commission including Forms 10K under applicable law; (b) audits of any benefit plans as may be required by the Department of Labor or the Employee Retirement Income Security Act, as amended; (c) audits of any statutory related financial statements as required by applicable laws or as requested by the Debtors; (d) review of the unaudited quarterly financial statements of the Debtors as may be requested from time to time or as required by the Securities and Exchange Commission including Forms 10-Q under applicable law; and (e) performance of other related accounting consultation services for the Debtors as may be necessary or desirable. B. Tax Advisory (a) review and assistance in the preparation and filing of any tax returns; (b) advice and assistance regarding tax planning issues, including calculating net operating loss carry forwards and the tax consequences of any proposed reorganization plans, and assistance in the preparation of any Internal Revenue Service ruling requests regarding the future tax consequences of alternative reorganization structures; (c) assistance regarding existing and future IRS examinations; and (d) any and all other tax assistance as maybe requested from time to time. Moreover, the Debtors and PwC agreed that: (1) any controversy or claim with respect to, in connection with, arising out of, or in any way related to this Application or the services provided by PwC to the Debtors, including any matter involving a successor in interest or agent of any of the Debtors or of PwC will be brought in the Bankruptcy Court or the District Court for the Southern District of New York if the District Court withdraws the reference; (2) they consent to the jurisdiction and venue of the court as the sole and exclusive forum for the resolution of claims, causes of actions or lawsuits; (3) they waive trial by jury, the waiver being informed and freely made; (4) if the Bankruptcy Court, or the District Court if the reference is withdrawn, does not have or retain jurisdiction over the foregoing claims and controversies, PwC and the Debtors, and any and all successors and assigns thereof, will submit first to non-binding mediation; and, if mediation is not successful, then to binding arbitration, in accordance with the dispute resolution procedures set forth in this Application; and (5) judgment on any arbitration award may be entered in any court having proper jurisdiction. David Schroeder, a PricewaterhouseCoopers partner, assures Judge Beatty that PwC: (1) has no connection with the Debtors, its creditors or other parties-in-interest in these Chapter 11 cases, (2) does not hold any interest adverse to the Debtors' estates; and (3) is a "disinterested person" as defined within Section 101(14) of the Bankruptcy Code. Mr. Schroeder states that it is PwC's policy and intent to update and expand its ongoing relationship search for additional parties-in-interest. If any new relevant facts or relationships are discovered or arise, PwC will promptly file a supplemental affidavit. PwC will be compensated in accordance with the procedures set forth in Sections 330 and 331 of the Bankruptcy Code. PwC's customary hourly rates are subject to periodic adjustments: Partners $490 - 690 Managers/Directors 325 - 550 Associates/Senior Associates 150 - 325 Administration/Paraprofessionals 75 - 140 In addition, PwC will seek reimbursement of the out-of-pocket expenses incurred in providing the services. (NRG Energy Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) OMNOVA SOLUTIONS: Will Cease Heat Transfer Printing Product Line ---------------------------------------------------------------- OMNOVA Solutions (NYSE: OMN) will discontinue its heat transfer printing product line which serves the apparel and home furnishings industry. The heat transfer printing product line has approximately $8 million in sales. The exit process will be phased, with completion anticipated near the end of 2003. "We regret our departure from the apparel and home furnishings heat transfer industry," said Judy Robbins, Product General Manager. "After a 31 year close working relationship with the industry, this was not a decision made easily or lightly. Decreased demand and the industry's migration to off-shore sources have led us to conclude that exiting the market now is the appropriate move for OMNOVA. "During the transition period we will work closely with our customers to help them with the transition," said Robbins. OMNOVA will put greater focus on its more strategic decorative laminates and home furnishings direct-print businesses which have shared manufacturing resources with heat transfer at the Company's Monroe, North Carolina facility. "This move will have a significant, positive impact on OMNOVA's ability to respond quickly to customer needs in the global paper laminates marketplace and in direct print," said Henry Foxx, Vice President and General Manager of OMNOVA Solutions' decorative laminates business. "It allows us to leverage recent operational enhancements we have made in delivering high fidelity designs." OMNOVA Solutions will reorganize the Monroe, North Carolina facility to optimize its focus on decorative laminates and direct print, and will close its heat transfer sales office in New York City. In addition, the Company will consolidate its Charlotte, North Carolina sales office into the nearby Monroe plant. OMNOVA Solutions will take a charge of approximately $7.4 million to be incurred over the third and fourth quarters of 2003, primarily as a result of the decision to discontinue the heat transfer printing product line. About $1.8 million of this charge is cash-related. The Company expects an annual benefit of about $3 million due to this action. OMNOVA Solutions is a technology-based company with 2002 sales of $681 million and 2,300 employees worldwide. OMNOVA is an innovator of decorative and functional surfaces, emulsion polymers and specialty chemicals. As reported in Troubled Company Reporter's May 13, 2003 edition, Fitch Ratings assigned a 'BB' rating to OMNOVA Solutions Inc.'s proposed $165 million senior secured notes due 2010 and a rating of 'BB+' to Omnova's proposed senior secured credit facility. ON SEMICONDUCTOR: July 4 Net Capital Deficit Widens to $750 Mil. ---------------------------------------------------------------- ON Semiconductor Corp. (NASDAQ: ONNN) announced that total revenues in the second quarter of 2003 were $256 million, a decline of 5 percent from the previous quarter. As a result of cost-cutting measures, the company's gross margin increased by 100 basis points to 28.6 percent from 27.6 percent in the first quarter of 2003. During the second quarter of 2003, the company reported a net loss of $58 million that included $35 million, or $0.20 per share of restructuring and other charges. The company reported a revised net loss of $51 million for the first quarter of 2003 that included a $22 million, or $0.12 per share charge relating to a change, made in the second quarter but effective as of Jan. 1, 2003, in the company's method of accounting for actuarial gains and losses relating to its defined benefit pension obligations. The company provides additional details on this change in the "Accounting Changes" section of this release. The net loss for the first quarter of 2003 also included a $3.5 million, or $0.02 per share loss on debt prepayment. The decline in second quarter revenues was primarily the result of weakness in the automotive and wireless sectors coupled with higher than expected price declines in all markets. On a mix adjusted basis, average selling prices in the second quarter of 2003 were down approximately 4 percent from the first quarter of 2003. The restructuring and other charges of $35 million in the second quarter of 2003 included a $21 million non-cash impairment of developed technology from the 2000 acquisition of Cherry Semiconductor, $11 million of other non-cash asset impairments, and a $3 million cash charge for employee separation, contract and lease termination costs. EBITDA for the second quarter of 2003 was $20 million and included $35 million of restructuring and other charges. Revised EBITDA for the first quarter of 2003 was $26 million and included the $22 million charge relating to a change in the company's method of accounting as well as the $3.5 million loss on debt prepayment. A reconciliation of this non-GAAP financial measure to the company's net loss and net cash provided by operating activities prepared in accordance with U.S. GAAP is set out in the attached schedule. "Our cost-reduction efforts enabled us to improve our gross margin and to offset the weakness in some of our end-markets," said Keith Jackson, ON Semiconductor president and CEO. "We have greatly improved our efficiencies through these efforts and we are working to increase our intellectual property and strengthen our new product portfolio as part of our efforts to drive higher margins and increase revenues." ACCOUNTING CHANGES In the second quarter of 2003, the company changed its method of accounting for actuarial gains and losses relating to its defined benefit pension obligations. Historically, the company amortized a portion of its actuarial gains or losses to expense over future periods. Effective Jan. 1, 2003, the company will no longer defer actuarial gains or losses, but will recognize such gains or losses during the fourth quarter of each year, the period when the company prepares its annual pension plan actuarial valuations. The cumulative effect of this accounting change required a $22 million or $0.12 per share charge in the company's revised first-quarter results. In the second quarter of 2003, the company began consolidating the financial results of its majority-owned investment in Leshan Phoenix Semiconductor following recent guidance from the Financial Accounting Standards Board. In the past, the company had accounted for this investment under the equity method. Consolidation of the company's investment, required because its economic interest in Leshan is proportionately greater than its actual ownership interest, did not impact the company's previously reported operating results or stockholders' deficit. Previously reported financial information will be revised for comparative purposes. As a result of the Leshan consolidation, the company's second quarter revenues increased by approximately $2 million while EBITDA increased by approximately $5 million. At July 4, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $750 million. THIRD QUARTER AND 2003 OUTLOOK "Based upon booking trends, backlog levels and estimated turns levels, we anticipate that total revenues will be roughly flat in the third quarter," Jackson said. "We expect that our gross margins will increase slightly as a result of our ongoing cost- reduction measures. We have driven costs down faster than expected and reduced our break-even level, but we need price stability and stronger end-market growth to achieve profitability. While price declines have moderated, we do not currently expect sufficient end-market growth to enable the company to achieve positive earnings per share in the fourth quarter of 2003." ON Semiconductor offers an extensive portfolio of power and data management semiconductors and standard semiconductor components that address the design needs of today's sophisticated electronic products, appliances and automobiles. For more information, visit ON Semiconductor's Web site at http://www.onsemi.com PAC-WEST TELECOMM: 2nd Quarter Results Show Marked Improvement -------------------------------------------------------------- Pac-West Telecomm, Inc. (Nasdaq: PACW), a provider of integrated communications services to service providers and small and medium- sized enterprises in the western U.S., announced its results for the second quarter ended June 30, 2003. Hank Carabelli, Pac-West's President and CEO, said, "Our second quarter was atypical due to a number of significant negotiated agreements. The benefits received from these agreements are not indicative of anticipated future performance. This recurring pattern of incumbent local exchange carriers forcing competitors to pursue legal actions to enforce agreements emphasizes the inherent volatility in our industry. Periodic impacts aside, we achieved robust quarterly growth as evidenced by 20% sequential line growth and 7% sequential minutes of use growth, while continuing our focus on delivering Five-Star Customer Service and growing our business as efficiently as possible." Ravi Brar, Pac-West's CFO, commented, "Adjusting for negotiated agreements in the second quarter, we reported 17% sequential revenue growth while maintaining expenses at essentially unchanged levels. We continue to see strength in our SME and SP lines of business, as line and minutes of use growth offset competitive pricing pressures." Revenues Pac-West's total revenues for the second quarter 2003 were $45.7 million, a 50% increase from revenues of $30.5 million in the first quarter of 2003, and a 19% increase from revenues of $38.5 million in the second quarter of 2002. Revenues for the second quarter of 2003 were inclusive of a combined $10.0 million in revenues deferred in previous periods from both SBC California and Verizon Communications. Excluding these amounts, Pac-West's total revenues for the second quarter 2003 were $35.7 million, an increase of 17% from first quarter 2003 revenues of $30.5 million due to line and usage growth offsetting the previously expected reductions in reciprocal compensation rates. Expenses Cost of sales was $7.0 million in the second quarter of 2003, a decrease of 35% from $10.7 million in the first quarter of 2003, and a decrease of 50% from $14.0 million in the second quarter of 2002. Cost of sales for the second quarter of 2003 was inclusive of $4.1 million in negotiated supplier credits for the period. Excluding these credits, cost of sales was $11.1 million, a minimal sequential quarterly increase of 4% primarily associated with line growth. SG&A expenses were $14.0 million in the second quarter of 2003, a decrease of 6% from $14.9 million in the first quarter of 2003, and a 14% decrease from $16.2 million in the second quarter of 2002. SG&A expenses for the second quarter of 2003 included a negotiated supplier credit of approximately $0.8 million. Excluding this credit, SG&A expenses were $14.8 million for the second quarter of 2003, essentially unchanged at a 1% decrease from the previous quarter. Net Income (Loss) Net income for the second quarter of 2003 was $9.2 million, compared to a net loss of $10.3 million for the first quarter of 2003, and net loss of $13.4 million for the second quarter of 2002. Net income for the second quarter of 2003 was inclusive of $10.0 million in revenues deferred from previous periods and $4.9 million in negotiated supplier credits. Basic and diluted net income per share for the second quarter of 2003 was $0.25, as compared to a net loss per share of $0.28 in the first quarter of 2003, and net loss per share of $0.37 in the second quarter of 2002. EBITDA EBITDA (earnings before interest expense, net; income taxes; depreciation and amortization) for the second quarter of 2003 was $24.6 million, an increase from $4.9 million for the first quarter of 2003, and a loss of $8.1 million in the second quarter of 2002. Although EBITDA is not a measure of financial performance under generally accepted accounting principles, we believe it is a common measure used by analysts and investors in comparing the company's results with those of its competitors as well as a means to evaluate the company's capacity to meet its service obligations. The company uses EBITDA as an internal measurement tool and has included EBITDA performance goals in its 2003 company wide compensation package. Accordingly, we are including EBITDA in our discussion of financial performance, as we believe that its presentation provides useful and relevant information. EBITDA for the second quarter of 2003 was inclusive of the previously discussed combined $10.0 million in revenues deferred from previous periods and $4.9 million in negotiated supplier credits. Liquidity As of June 30, 2003, the company had cash and short-term investments totaling $54.0 million, an increase of $2.1 million from $51.9 million in cash at the end of the first quarter of 2003. The cash flow provided from operations was offset by uses of cash during the quarter, including $2.1 million in capital lease payments, $4.2 million in remaining fiber IRU payments, and $1.4 million in capital expenditures. Lines in Service and Minutes of Use Total DS-0 equivalent lines in service, which include SP and on- network SME DS-0 line equivalents, were 403,751 in the second quarter of 2003, a 20% increase sequentially from 337,294 lines at the end of the first quarter of 2003, and a 26% year-over-year increase from 320,042 lines at the end of the second quarter of 2002. Total minutes of use were 10.0 billion in the second quarter of 2003, a 7% increase from 9.4 billion minutes in the first quarter of 2003, and a 30% increase from 7.7 billion minutes in the second quarter of 2002. Nasdaq Listing Update Pac-West has received a determination by a Nasdaq Listing Qualifications Panel which, subject to certain conditions, provides the company until September 22, 2003 to regain compliance with the Nasdaq Stock Market's minimum bid requirement. If the company does not regain compliance prior to this date, the company may implement the reverse share split approved by its shareholders at its annual shareholder meeting on June 9, 2003, with the purpose of regaining compliance for continued listing on the Nasdaq SmallCap Market. Founded in 1980, Pac-West Telecomm, Inc. (Nasdaq: PACW) is one of the largest competitive local exchange carriers headquartered in California. Pac-West's network carries over 100 million minutes of voice and data traffic per day, and an estimated 20% of the dial- up Internet traffic in California. In addition to California, Pac- West has operations in Nevada, Washington, Arizona, and Oregon. For more information, please visit Pac-West's Web site at http://www.pacwest.com * * * As reported in Troubled Company Reporter's May 1, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit rating on Stockton, Calif.-based competitive local exchange carrier Pac-West Telecomm Inc. to 'D' from 'CC'. The rating on the 13.5% senior notes due 2009 has been lowered to 'D' from 'C'. S&P explained, "Given the company's significant dependence on reciprocal compensation (the rates of which the company expects to further decline in 2003) and its limited liquidity, Pac-West will likely find the implementation of its business plan continue to be challenging." PCNET INT'L: Defaults on Obligations Under Plan of Arrangement -------------------------------------------------------------- PCNET International Inc. (TSX-V: PCT) has released its quarter three financial statements and management discussion and analysis for the three and nine month periods ending May 31, 2003 and has provided an update on the status of its CCAA process. CCAA Process As of the date of the release of the interim financial statements, PCNET is still operating under its court ordered Companies Creditors Arrangements Act protection. PCNET was granted protection on September 30, 2002 to enable management to financially and operationally restructure the company. Since that date a number of important milestones and deadlines have been reached or set. - On December 4, 2002, 100% of voting creditors approved the company's Plan of Arrangement and Compromise. - An original payment date of January 17, 2003 was set. - An extension of this payment was twice obtained revising the payment date to April 25, 2003 and June 4, 2003. On June 6, 2003 the company announced that it had arranged to place the funds required to make payment under a revised version of its plan of arrangement in trust. At that time, that company also announced that it had obtained agreements in principal with three creditors agreeing to defer their right to receive funds under the plan. Since that date PCNET's primary objective and focus has been to conclude definitive agreements with these parties. Currently the company has completed the final form of agreements for two of these parties and all three agreements will be executed simultaneously. In anticipation of this the company has scheduled a court date on August 19, 2003 for the Monitor to obtain final court approval of these revisions to the plan and to revise the payment date to the closing date of the revisions. Until this date however, PCNET International Inc is in technical default of its obligations under its Plan of Arrangement and Compromise. Failure to obtain court approval of the revised plan would result in the termination of CCAA protection. Furthermore, should a negative action be launched by a creditor or group of creditors, the company could have its Stay of Proceedings lifted, losing its CCAA protection. However, the company is confident that the revised payment terms are acceptable to the three creditors and the remaining creditors will receive funds as contemplated in the Plan of Arrangement and Compromise just after the scheduled court date. Accordingly from PCNET's point of view, there would be little benefit to a removal of the Stay of Proceedings vs. receiving the payments as contemplated by the plan of the revised payment date. However, there can be no assurance that the company will complete and/or obtain approval for the transaction and continue as a going concern. Amalgamation with Technovision Systems Inc. The company's negotiations with Technovision Systems Inc with regards to the proposed merger are progressing rapidly. Directly as a result of this proposed strategic transaction, PCNET has conditionally obtained the capital for the revised CCAA payment obligation through a loan from Technovision Systems Inc. In anticipation of concluding a definitive merger agreement, the companies have called extra-ordinary meetings of the shareholders for September 15, 2003. If the definitive agreements are signed prior to the mailing dates required for these meetings, shareholder will be asked to vote approval for the proposed merger during the meeting. Going Concern Based on the factors above, the company is reasonably optimistic that a successful conclusion to its CCAA process will be achieved. Accordingly, the company has not made adjustments to its financial statements that would otherwise be required by a non-going concern entity under Canadian generally accepted accounting principles. Restructuring Results Financial results Q3 2003 have shown further improvement over the preceding quarter. PCNET achieved a consolidated EBITDA of $55,688, an increase of $11,440 over Q2. Excluding the EBITDA losses generated by PCNET's retail computer operations, ISP operations generated $78,367 and increase of $28,314 over Q2. PCNET is also pleased to report that churn results experienced during the CCAA restructuring period to May 31, 2003 have so far have been consistent with its historical average churn. PCNET International Inc. (TSX-V: PCT) is a leading Internet Access Provider with its head office in Victoria British Columbia. Since its inception in 1995, PCNET has grown to be one of Western Canada's largest ISPs. PCNET provides a full range of retail and wholesale Internet services including dial-up and high speed Internet access, Web site hosting, server co-location and computer hardware sales. PEABODY ENERGY: Shareholders Complete Secondary Public Offering --------------------------------------------------------------- Peabody Energy announced that a public offering of 5.4 million shares under Peabody's shelf registration statement has been priced at $31.61 per share. The offering's underwriters were also granted an over-allotment option to purchase an additional 810,000 shares at the offering price of $31.61. Selling shareholders include Lehman Brothers Merchant Banking Partners II L.P. and its affiliates. The company did not sell any shares through the offering. Selling shareholders will receive all net proceeds. The offering was made through a group of underwriters led by Lehman Brothers Inc. The sale reduces Lehman Brothers Merchant Banking Partners II L.P. interest in Peabody to 19 percent. 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 $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. PETROLEUM GEO-SERVICES: S&P Drops Corporate Credit Rating D ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Petroleum Geo-Services ASA to 'D' from 'CC' following the company's announcement that it has voluntarily filed for Chapter 11 bankruptcy protection. The ratings were removed from CreditWatch with negative implications, where they were placed Dec. 30, 2002. The ratings on Oslo Seismic Services Inc. continue to be rated 'CC' and are on CreditWatch with developing implications, where they will remain until PGO either emerges from bankruptcy protection or Oslo Seismic becomes entangled in PGO's bankruptcy proceedings. "After PGO emerges from bankruptcy protection, Standard & Poor's will assign new ratings to PGO and Oslo Seismic based on their prospective creditworthiness," said Standard & Poor's credit analyst Bruce Schwartz. PGO's bankruptcy filing follows a previously announced agreement with a majority of PGO's banks and bondholders and its largest shareholders to support its plan of reorganization. This bankruptcy filing will be at the parent company (PGS) level only and is not intended to involve the company's operating subsidiaries, which should leave subsidiary creditors (i.e., Oslo Seismic) unaffected. If the prepackaged bankruptcy process works as intended, PGO's creditors will receive less than par value on their debt holdings although the company will have a capital structure that should enable it to better weather turbulent conditions. The proposed restructuring will reduce PGO's total debt to about $1.3 billion from approximately $2.5 billion through conversion of the existing bank and bond debt into new debt and a majority of PGS's post- restructuring equity. PGO intends for the restructuring to be completed before year end. PETROLEUM GEO: Wants to Hire Ordinary Course Professionals ---------------------------------------------------------- Petroleum Geo-Services ASA reports that in the ordinary course of its business it utilizes various professionals, including accountants, tax consultants, attorneys or law firms and other professionals. To avoid any disruption in the Company's business operations, the Debtor asks the U.S. Bankruptcy Court for the Southern District of New York for permission to continue employing these Ordinary Course Professionals, without the need to submit separate retention applications and obtain separate orders for each individual professional. The Debtor wants to employ these OCPs on an "as needed" basis, without requiring each firm to file and serve a retention application prior to rendering its professional services on three conditions: a) a Retention Declaration will be filed with this Court and served upon: i) the United States Trustee, ii) any committee appointed in this case, and iii) those parties who have filed notices of appearance in this case; b) each Retention Declaration must comply with Bankruptcy Rules 2014 and 5002, otherwise, the relevant Retention Declaration must explain why the affiant believes departure from the Bankruptcy Rules is justified under the circumstances; and c) the acceptance of employment by any professional will constitute a representation by such professional: i) the professional does not represent or hold any interest adverse to the Debtor or its estate; ii) the professional agrees to be compensated by the Debtor based on hourly or other rates not greater than customarily charged; and iii) the professional shall be entitled to reimbursement only for actual and necessary expenses incurred. The Debtor agrees to cap Ordinary Course Professional compensation at: a) $60,000 per month per professional; or b) $300,000 per month, in the aggregate, for all Ordinary Course Professionals. Petroleum Geo-Services ASA, headquartered in Lysaker, Norway is a technology-based service provider that assists oil and gas companies throughout the world. The Company filed for chapter 11 protection on July 29, 2003 (Bankr. S.D.N.Y. Case No. 03-14786). Matthew Allen Feldman, Esq., at Willkie Farr & Gallagher represents the Debtor in its restructuring efforts. As of May 31, 2003, the Debtor listed total assets of $3,686,621,000 and total debts of $2,444,341,000. PG&E NATIONAL: Signs-Up Whiteford Taylor as Local Counsel --------------------------------------------------------- The PG&E National Energy Group Debtors further require the assistance of counsel located in Maryland to pursue a successful reorganization of their debts, help them perform their duties as debtors and debtors-in-possession and under State and Federal laws, advise them on the legal aspects of contracts, leases, financings, and other business matters, defend them in litigation and to prosecute litigation on their behalf. In short, the Debtors require the full range of traditional business legal services as well as legal services unique to a bankruptcy reorganization proceeding. Accordingly, the Debtors seek to employ Whiteford, Taylor & Preston LLP as their local co-counsel. The Debtors have selected WT&P to represent them in these cases because the firm has "considerable experience in insolvency and bankruptcy matters, including representation of debtors in large Chapter 11 cases." Thus, the Debtors believe that WT&P is well qualified to represent them. The Debtors submit that the employment of WT&P is appropriate under Sections 327, 328 and 1107 of the Bankruptcy Code. The NEG Debtors want WT&P to: (a) provide legal advice with respect to their powers and duties as debtors-in-possession and in the operation of their business and management of their property; (b) represent them in defense of any proceedings instituted to reclaim property or to obtain relief from the automatic stay under Section 362(a) of the Bankruptcy Code; (c) prepare any necessary applications, answers, orders, reports and other legal papers, and appearing on their behalf in proceedings instituted by or against them; (d) assist in the preparation of schedules, statements of financial affairs, and any amendments which the Debtors may be required to file in these cases; (e) assist in the preparation of a plan and a disclosure statement; (f) assist with other legal matters, including, securities, corporate, real estate, tax, intellectual property, employee relations, general litigation, and bankruptcy legal work; and (g) perform all of the legal services which may be necessary or desirable. WT&P's principal attorneys designated to represent the Debtors and their existing standard hourly rates range from $140 to $375. The paralegals charge $135 an hour. The Debtors will also reimburse WT&P for its actual, necessary expenses. Section 328(a) of the Bankruptcy Code permits the employment of a professional "on any reasonable terms and conditions of employment, including on a retainer." With respect to this, the Debtors want to employ WT&P under an evergreen retainer "because of the extensive legal services required, the cost of which cannot be estimated." Sanford L. Hartman, NEG Vice President and General Counsel tells the Court that WT&P has received from the Debtors of $200,000 as a retainer toward the services rendered and expenses incurred through the filing of the Chapter 11 cases. WT&P has drawn down on this retainer before the bankruptcy petitions for services associated with preparing for these cases. In a Verified Statement of WT&P Attorneys, Martin T. Fletcher, Esq., attests that WT&P represents no interest adverse to the NEG Debtors or to their estates. The firm is a "disinterested person" within the meaning of 11 U.S.C. Section 101(14). (PG&E National Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) PILLOWTEX CORP: UNITE Airs Disappointment with Bankruptcy Filing ---------------------------------------------------------------- UNITE President Bruce Raynor issued this statement on the Pillowtex Chapter 11 filing Wednesday: "UNITE is deeply disappointed but not surprised by the announcement by the Pillowtex corporation that they are closing 16 facilities and filing for Chapter 11 bankruptcy. UNITE has represented workers in some of these facilities for over 60 years, and while we feel this is a devastating loss for our members and their families, we are committed to carrying on our fight to save as many jobs as possible during the next phase of this process. There are three key areas in which the union will pursue the interests of our members. 1) UNITE believes that there will be an auction period during this bankruptcy, and is committed to working with and strengthening potential bidders who wish to buy parts of this company and maintain domestic production in current facilities. UNITE will strongly oppose efforts by bidders who seek to purchase brand names for manufacturing offshore. 2) UNITE recognizes that some facilities will not be re-opened or operated in the future, and that many of our members may not be able to return to work. UNITE will see that the worker's interests are still protected in this process by seeking representation on the creditor's committee during the bankruptcy process. It is UNITE's position that Pillowtex Corp. has violated the Collective Bargaining Agreements with UNITE in many ways. UNITE believes that Pillowtex violated the WARN Act by not providing workers with a 60 day notice, nor providing 60 days pay in lieu thereof. In addition, the company should have treated this decision as a lay off, and maintained medical benefits to its employees. By terminating employees, the company has ended medical benefits prematurely. UNITE also intends to pursue vacation pay and any other monies owed to workers as per the terms of the collective bargaining agreements. 3) UNITE is working closely with state, local, federal, community, Canadian, provincial, and non-profit agencies to provide clear information about unemployment benefits, Trade Adjustment Assistance programs, and other programs for workers and their families. At the end of the day, UNITE believes that the responsibility for this tragedy lies squarely at the feet of government officials in Washington, in both Democratic and Republican administrations, who have created trade policies that are destroying the textile industry and manufacturing as a whole throughout America. Those elected officials who have supported FAST TRACK, NAFTA, and Permanent Normal Trade Relations with China have placed American workers and U.S. companies in an impossible position of competing with poverty wages and sweatshop conditions. These trade agreements have created an unsustainable trade deficit which threatens to topple our economy, while laying ruin to communities where Pillowtex workers have worked hard, paid their taxes, and served their country. These workers deserve a trade and manufacturing policy that strengthens our communities, rather than rewarding the global search for cheap labor." POLAROID: Cardinale & Maiorelli Ask Court to Set Aside Sale Order ----------------------------------------------------------------- Frederick B. Rosner, Esq., at Jaspan Schlesinger Hoffman LLP, in Wilmington, Delaware, recalls that on July 3, 2002, the Court approved the Polaroid Debtors' sale of substantially all of their assets. Consequently, the Sale to OEP Imaging Corporation closed on July 31, 2002. In November and December 2002, the Court received a series of Examiner Request Letters from: (1) Leonard Lockwood, a Polaroid shareholder; (2) George Maiorelli, another Polaroid shareholder; and (3) John Gignac, First Vice President of the Polaroid Retirees Association. The Examiner Request Letters raised allegations of fraud and mismanagement, and accordingly sought the appointment of an examiner or equity committee to investigate the allegations. The Debtors and the Creditors' Committee jointly objected to the appointment of an examiner. Accordingly, the Court directed the appointment of Perry M. Mandarino, CPA, as the Examiner, charged specifically with determining whether the Accounting Problems resulted in: (a) the material undervaluing of the Debtors' assets; or (b) the inappropriate liquidation of the Debtors' assets. Although the Examiner Orders did not specifically include within their scope the allegations of self-dealing by Polaroid insiders and the intentional non-disclosure to the Court, the Investigation nevertheless, has adduced evidence concerning the charges. In addition, the Examiner also obtained discovery under Rule 2004 of the Federal Rules of Bankruptcy Procedure. William V. Cardinale and Mr. Maiorelli fully participated in the discovery by attending all the examinations held and reviewing the documents produced. Currently, the thorough investigation of the Accounting Problems is ongoing. Mr. Rosner reports that to date, the Examiner, who is expecting to file his report on August 15, 2003, has reviewed more than 200,000 pages of documents and has taken or scheduled examinations of more than 15 witnesses. Given these developments, Messrs. Cardinale and Maiorelli ask the Court to set aside the Sale Order that approved and authorized: (a) the OEP Asset Purchase Agreement; (b) the sale of substantially all of the Debtors' assets, claims, and encumbrances, free and clear of liens, to OEP Imaging Corporation; and (c) the assumption and assignment of certain executory contracts and unexpired leases to OEP Imaging Corporation. Rule 60(b) of the Federal Rules of Civil Procedure provides courts with discretion to relieve a party from a final order for six enumerated reasons, including: a) mistake, inadvertence, surprise, or excusable neglect; b) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); c) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; and d) any other reason justifying relief from the operation of the judgment. Mr. Rosner believes that upon the completion of the Investigation, the filing of the Examiner's Report, and the analysis of the resulting evidence, the facts of this case will warrant relief under Civil Rule 60(b)(1), (2), (3) or (6). Mr. Rosner continues that although Civil Rule 60(b)(1) provides "mistake, inadvertence, surprise, [and] excusable neglect" as grounds for relief, the Rule does not define the terms. Courts have held that where the surprise occurs during the trial, the appropriate remedy is not "reversal after an unfavorable verdict, but a request for a continuance at the time surprise occurs." Mr. Rosner explains that the "surprise" will likely involve discovery of facts and circumstances that the Debtors' assets were materially undervalued, resulting in an inappropriate liquidation of the Debtors' assets. Since the accounting problems were not known at the time the Sale Order was entered, Messrs. Cardinale and Maiorelli did not then seek a continuance. However, having learned of the allegations, Messrs. Cardinale and Maiorelli led the effort that resulted in the appointment of the Examiner and have participated in the investigation. Moreover, Messrs. Cardinale and Maiorelli believe that additional "surprise" would be provided by the forthcoming evidence of self- dealing that was not disclosed to the Court. Messrs. Cardinale and Maiorelli's analysis of the available evidence, upon the completion of the investigation and the publication of the Examiner's Report, will provide the "surprise" that will demonstrate the appropriateness of relief under Civil Rule 60(b)(1). Moreover, according to Messrs. Cardinale and Maiorelli's analysis, available evidence upon completion of the Investigation and publication of the Examiner's Report will provide "newly- discovered evidence" that satisfies the requirements set forth in United States v. McGauhey, 977 F.2d 1067 1075 and will demonstrate the appropriateness of relief under Civil Rule 60(b)(2). The present case involves serious allegations of fraud and mismanagement. Mr. Rosner notes that pertaining to "fraud", courts have discretion either to set aside a judgment or order. Both intentional and unintentional misrepresentations as well as failures to disclose are sufficient basis for relief. According to Mr. Rosner, the failure to respond truthfully to discovery requests may be sufficient enough to set aside a judgment. Messrs. Cardinale and Maiorelli's analysis of the available evidence upon completion of the Investigation and publication of the Examiner's Report will provide the evidence of unintentional and intention misrepresentations that will demonstrate the appropriateness of relief under Civil Rule 60(b)(3). Messrs. Cardinale and Maiorelli's analysis of the available evidence upon completion of the Investigation and publication of the Examiner's Report will provide "extraordinary circumstances" that will demonstrate the appropriateness of relief under Civil Rule 60(b)(2). In addition to the specific situations enumerated in Civil Rule 60(b) where relief from a judgment or order is warranted, there are also statutory provisions for the court to "entertain an independent action to relieve a party from a judgment, order, or proceeding . . . or to set aside a judgment for fraud upon the court." Cardinale and Maiorelli's analysis of the available evidence upon completion of the Investigation and publication of the Examiner's Report may provide evidence of undervaluation of assets, self dealing, and intention misrepresentation, all of which may support a characterization of "fraud on the court" that may demonstrate the appropriateness of relief under Civil Rule 60(b)(2). Mr. Rosner concludes that this is a complex case involving significant allegations concerning the Debtors' improper accounting methods and practices. Additional allegations have been made that the sale of the Debtors' assets resulted from self-dealing of Polaroid insiders and intentional nondisclosure to the Court. "Material undervaluation of the Debtors' assets would have resulted in an inappropriate liquidation of the Debtors' assets. Self-dealing and non-disclosure of material information to the Court concerning the Sale Motion, once proven, should not be countenanced," Mr. Rosner says. (Polaroid Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-0900) RIVERWOOD INT'L: Majority of Noteholders Consents to Amendments --------------------------------------------------------------- Riverwood International Corporation announced that as of 3:05 p.m., New York City time, on July 30, 2003, it had received the consents of holders of at least a majority of the outstanding principal amount of each of its 10-7/8% Senior Subordinated Notes due 2008 (CUSIP No. 769507AJ3), 10-5/8% Senior Notes due 2007 issued in July 1997 (CUSIP No. 769507AM6) and 10-5/8% Senior Notes due 2007 issued in June 2001 (CUSIP No. 769507AQ7), in the solicitations of consents to the proposed amendments to the indentures governing each issue of Notes. By the terms of the consent solicitations, as of the time of this announcement, consents to the proposed amendments may no longer be revoked and related tenders of Notes may no longer be withdrawn. By the terms of the consent solicitations, the consent expiration date for each consent solicitation was yesterday at 5:00 p.m., New York City time. Each holder of Notes who validly consented to the proposed amendments with respect to such issue of Notes at or prior to yesterday 5:00 p.m., New York City time, will be entitled to a consent payment in the amount of $2.50 per $1,000 principal amount of Notes with respect to which consents are delivered. Holders who tender their Notes after such time and date will not be entitled to receive the consent payment. The purpose of each of the consent solicitations is to amend the applicable indenture to eliminate substantially all of the restrictive covenants, certain repurchase rights and certain events of default and related provisions contained in such indenture. Riverwood and the trustee under each indenture intend to execute a supplemental indenture with respect to such indenture promptly after this announcement. As of 3:05 p.m. New York City time, Wednesday, the following principal amount of Notes had been tendered: approximately $293.5 million of the $400.0 million outstanding principal amount of the 10-7/8% Senior Subordinated Notes due 2008; approximately $150.6 million of the $250.0 million outstanding principal amount of the 10-5/8% Senior Notes due 2007 issued in July 1997; and approximately $160.6 million of the $250.0 million outstanding principal amount of the 10-5/8% Senior Notes due 2007 issued in June 2001. Riverwood is making a separate offer with respect to each issue of Notes, and no offer is conditioned on the consummation of any other offer. Consummation of each offer is subject to certain conditions, including (1) the consummation of the merger of Graphic Packaging International Corporation with a subsidiary of Riverwood's parent, Riverwood Holding, Inc. upon terms satisfactory to Riverwood, (2) the consummation of certain financing transactions related to such merger upon terms satisfactory to Riverwood, and (3) the receipt of the requisite consents with respect to the applicable proposed amendments and the execution of the related supplemental indenture to the indenture governing the relevant issue of Notes. Subject to applicable law, Riverwood may, in its sole discretion, waive or amend any condition to any offer or solicitation, or extend, terminate or otherwise amend any offer or solicitation. Goldman, Sachs & Co. is the dealer manager for the offers and solicitation agent for the solicitations. MacKenzie Partners, Inc. is the information agent and U.S. Bank National Association is the depositary in connection with the offers and solicitations. The offers and solicitations are being made pursuant to an Offer to Purchase and Consent Solicitation Statement, dated July 10, 2003, and the related Consent and Letter of Transmittal, which together set forth the complete terms of the offers and solicitations. Copies of the Offer to Purchase and Consent Solicitation Statement and related documents may be obtained from MacKenzie Partners, Inc. at (800) 322-2885. Additional information concerning the terms of the offers and the solicitations may be obtained by contacting Goldman, Sachs & Co. at (800) 828-3182. Riverwood, headquartered in Marietta, Georgia, is a leading provider of paperboard packaging solutions and paperboard to multinational beverage and consumer products companies. As previously reported in Troubled Company Reporter, Standard & Poor's said that its ratings on Riverwood International Corp., including its single-'B' corporate credit rating, remain on CreditWatch with positive implications where they were placed on May 9, 2002. RMH TELESERVICES: June 30 Working Capital Deficit Widens to $9MM ---------------------------------------------------------------- RMH Teleservices, Inc. (Nasdaq NMS: RMHT), a provider of customer relationship management services, announced that net revenues for the three months ended June 30, 2003 increased 21% to $68.7 million from $56.6 million in the same period of the prior year. For the third quarter of fiscal 2003, the Company reported a net loss of $4.3 million compared to a net loss of $14.4 million for the third quarter of fiscal 2002. During the third quarter of 2003, the Company's results were impacted by lower revenue growth due to a decline in outbound capacity following implementation of new telemarketing legislation and lower-than-expected demand from clients, and the strengthening of the Canadian dollar compared to the U.S. dollar. The effect of the currency fluctuation negatively impacted operating results by approximately $2.0 million. In addition, the Company recorded a charge of approximately $1.0 million in connection with its previously announced closure of several outbound facilities in the United States. The Company also incurred approximately $2.0 million of expense associated with the transition of outbound capacity to inbound capacity and offshore expansion initiatives. For the nine months ended June 30, 2003, net revenues increased 26% to $220.1 million from $174.5 million in the same period of the prior year. The Company reported a year-to-date net loss of $4.7 million compared to a net loss of $17.7 million for the same period in the prior year. RMH Teleservices' June 30, 2003 balance sheet shows that its total current liabilities exceeded its total current assets by about $9 million, while its total shareholders' equity dwindled to about $27 million. John A. Fellows, Chief Executive Officer, stated, "Our financial performance for the quarter was impacted by the new telemarketing regulations, the migration of business from outbound to inbound services, our launch in the Philippines, and the significant strengthening of the Canadian dollar. We believe that our strategy of shifting the focus of the business to service-oriented opportunities and offering services overseas is the right strategy and that our client relationships make us well positioned to operate successfully. During the fourth quarter, we expect to reduce exposure to currency fluctuation by implementing changes to our hedging program and restructuring certain service agreements." Mr. Fellows added, "During the quarter, we continued to ramp new business with two major inbound clients in facilities that were previously dedicated to sales-oriented outbound business. We have also begun to take directory assistance calls in the Philippines, and will be building out those operations rapidly over the next several quarters." John R. Schwab, Chief Financial Officer, commented, "Given the continued volatility of U.S. versus Canadian exchange rates, the transition from outbound to inbound services, and the modification of certain client contracts, it is difficult for us to assess the potential impact of these variables on the Company's financial performance in the fourth quarter; however, we expect revenues to be in the range of $65 to $70 million and expect financial results to improve modestly over the third quarter of 2003. Mr. Fellows concluded, "As we continue to build our pipeline for new business, our entire management team remains focused on operating at optimum efficiency levels in North America while accelerating our growth into international markets. Our entry into the Philippines is the first step in our strategy to grow with our clients on a worldwide basis. This market presents us with another opportunity to provide clients with high quality services with an even lower cost of delivery." RMH is a provider of customer relationship management services for major corporations in the technology, telecommunications, financial services, insurance, retail, transportation and logistics industries. Founded in 1983, the Company is headquartered in Newtown Square, Pennsylvania, employs approximately 11,500 people and has approximately 7,400 workstations across 14 facilities throughout the United States, Canada and the Philippines. To learn more about RMH, please reference the Company's Web site at http://www.rmh.com SI TECHNOLOGIES: Pulls Plug on Grant Thornton's Engagement Pact --------------------------------------------------------------- The Audit Committee of SI Technologies, Inc., has notified Grant Thornton LLP, Irvine, California, that it is terminating Grant Thornton as the Company's independent auditors effective July 16, 2003. The Company's Audit Committee has selected the firm of McGladrey & Pullen, 222 South Harbor Blvd., Suite 800, Anaheim, CA 92805, as the Company's new independent auditors effective July 16, 2003. For the year ended July 31, 2001, Grant Thornton issued an opinion which included an emphasis paragraph related to the going concern of the Company. The Company did not dispute this opinion. No such going concern paragraph was included in the opinion for the fiscal year ended July 31, 2002. SI Technologies, Inc. is a leading designer, manufacturer and marketer of high-performance industrial sensors/controls and engineered equipment and systems. SK GLOBAL: Asks Court to Approve BSI Appointment as Claims Agent ---------------------------------------------------------------- Section 156(c) of Title 28 of the United States Code, which governs the staffing and expenses of the Bankruptcy Court, authorizes the court to use facilities other than those of the clerk's office for the administration of bankruptcy cases. It provides: Any court may utilize the facilities or services, either on or off the court's premises, which pertain to the provision of notices, dockets, calendars, and other administrative information to parties in cases filed under the provisions of title 11, United States Code, where the costs of such facilities or services are paid for out of the assets of the estate and are not charged to the United States. Given the size and complexity of its Chapter 11 case, SK Global America Inc., believes that the most effective and efficient manner in which to accomplish the process of notifying creditors and receiving, docketing, maintaining, photocopying, and transmitting proofs of claim is to engage an independent third party to act as the noticing and claims agent. The Debtor selected Bankruptcy Services, LLC, to fill that role, and seeks the Court's authority to employ BSI as the Court's noticing agent and the Debtor's claims and balloting agent pursuant to the terms and conditions of BSI's Standard Bankruptcy Services Agreement. Scott E. Ratner, Esq., at Togut, Segal & Segal LLP, in New York, relates that, at the Debtor's or the Clerk's Office's request, BSI will: (a) relieve the clerk's office of all noticing under any applicable bankruptcy rule and processing of claims; (b) at any time, upon request, satisfy the Court that BSI has the capability to efficiently and effectively notice, docket and maintain the proofs of claim; (c) notify all creditors of the filing of the bankruptcy petition and of the setting of the first meeting of creditors, pursuant to 11 U.S.C. Section 341(a), under the proper provision of the Bankruptcy Code; (d) provide notice of a last date for the filing of a proof of claim and a form for filing a proof of claim to each creditor notified of the filing; (e) maintain an up-to-date copy of the Debtor's schedules which lists all creditors and amounts owed; (f) provide the creditor with the scheduled amount and classification of its claim; (g) file with the clerk a certificate of service within 10 days, which includes a copy of the notice, a list of persons to whom it was mailed, and the date mailed; (h) microfilm, or by some similar electronic means, reproduce the first page of any proof of claim; (i) after reproducing, remove all proofs of claim from the office of the clerk to the outside claims agent; (j) maintain all proofs of claim filed; (k) maintain an official claims register by docketing all proofs of claim on a claims register; (l) maintain all original proofs of claim in correct claim number order, in an environmentally secure area and protect the integrity of these original documents from theft and alteration; (m) transmit to the clerk an official copy of the claims register on a weekly basis, unless authorized by the clerk on a different schedule; (n) maintain an up-to-date official mailing list for all entities, which will be available upon request of a party- in-interest or the clerk; (o) be open to the public for examination of the original proofs of claim, without charge, during regular business hours; (p) maintain a telephone staff to handle the inquiries as related to procedures in filing proofs of claim; (q) make any necessary changes to the claims register pursuant to Court order; (r) make all original documents available to the clerk on an expedited and immediate basis; (s) provide notices to any entities, not limited to creditors, that the Debtor or the Court deem necessary for an orderly administration of the bankruptcy case; and (t) at the close of the case, box and ship all original documents in proper format, as provided by the clerk's office, to the Federal Archives and Record Administration located at Central Plains Region, 200 Space Center Drive, Lee's Summit, MO 64064. SK Global will pay all of BSI's customary fees and expenses: As Claims Agent Set-Up Fee WAIVED Claims Docketing: Document Handling WAIVED Document Storage WIAVED Input Records: Tape/Diskette $0.10/each Other Data Formats $125/hour Input Filed Claims $0.95/claim + hourly rates Database Maintenance and Claims Tracking $250 + $0.10/creditor/month As Balloting Agent Per check or Form 1099 $1.50/each Per record $0.25/each Special reports $0.10/page Database Maintenance WAIVED For Mailing/Noticing Services First Page Print & Mail $0.20/page Additional Pages $0.10/page Single Page (Duplex) $0.24/each Change of Address input $0.46/each E-mail service Priced by volume Reports $0.10/page Photocopies $0.15/page Labels $0.05/each Fax $0.50/page Document Imaging $0.40/image Fees for Professional Kathy Gerber $210 per hour Senior Consultants $185 per hour Programmer $130 - $160 per hour Associate $135 per hour Data Entry/Clerical $40 - $60 per hour Schedule Preparation $225 per hour BSI President Ron Jacob assures the Court that the company is a disinterested person as that term is used in Section 327 of the Bankruptcy Code and has no interest adverse to the Debtor, its creditors, or any other party-in-interest, or their attorneys and accountants. (SK Global Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) SMITHFIELD FOODS: Provides Earnings Expectations for Fiscal Q1 -------------------------------------------------------------- Smithfield Foods, Inc. (NYSE: SFD) expects earnings per share for its first quarter of fiscal 2004, ended July 27, to be in the range of $.18-$.21 per diluted share. The company reported $.11 per diluted share in the first quarter of fiscal 2003. Smithfield has approximately 109 million shares outstanding. The company attributes the improvement in earnings to dramatically improved results in the hog production group as a result of a 25 percent increase in live hog prices during the quarter. Live hog market prices were about 20 percent, or about $18 per head, above the first quarter of fiscal 2003 and the hog production group will report a substantial profit after three consecutive quarters of losses. Improved hog production results are being substantially offset by continuing weak margins on fresh pork as a result of increased live hog prices and the seasonal impact historically associated with pork operations in summer months. The company's beef operations continue to experience strong margins with profits well above last year, in spite of higher cattle costs. International results are below those of a year ago. The company noted that market conditions in pork processing are slowly improving and that frozen inventories of all proteins are below year-ago levels. Indications point toward production of all proteins to be lower in calendar 2003, suggesting improving fresh meat prices. The company noted that it continues to believe that earnings in fiscal 2004 will be well above those in fiscal 2003. On July 29, the United States Bankruptcy Court for the Western District of Missouri approved Farmland Industries, Inc.'s motion to establish bid procedures for the sale of its pork assets. Under the court's order, Smithfield has been officially designated the "stalking horse" bidder in a process in which additional bids for Farmland's pork assets will be solicited for a period of 45 days. As the stalking horse bidder, Smithfield will be entitled to receive a $10 million breakup fee if a superior bid is selected. Should the company be successful in purchasing Farmland, closing is anticipated to occur in late September or early October. With annualized sales of $8 billion, Smithfield Foods is the leading processor and marketer of fresh pork and processed meats in the United States, as well as the largest producer of hogs. For more information, visit http://www.smithfieldfoods.com As reported in Troubled Company Reporter's July 17, 2003 edition, Standard & Poor's Ratings Services placed its 'BB+' corporate credit rating and senior secured notes ratings on leading hog producer and processor Smithfield Foods Inc., on CreditWatch with negative implications. The 'BB' senior unsecured and 'BB-' subordinated debt ratings on Smithfield Foods were also placed on CreditWatch with negative implications. SPIEGEL: Court Approves Watson Wyatt Engagement as Consultant ------------------------------------------------------------- The Spiegel Group Debtors obtained permission from the Court to employ Watson Wyatt as consultant on employee benefit matters, 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 (Spiegel Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) TERAYON COMMS: Second Quarter Net Loss Burgeons to $13 Million -------------------------------------------------------------- Terayon Communication Systems, Inc. (Nasdaq: TERN), a leading provider of broadband solutions, announced financial results in line with its previously-raised guidance for the second quarter ended June 30, 2003. Revenues for the second quarter of 2003 were $30.6 million, an increase of 37% compared to $22.4 million for the second quarter of 2002, and an increase of 37% from $22.3 million for the first quarter of 2003. Net loss for the second quarter of 2003 was $13.1 million, compared to a net loss of $3.7 million for the second quarter of 2002, and a net loss of $24.0 million for the first quarter of 2003. "We are pleased with our progress this quarter and the continued positive momentum we are seeing with cable operator interest in our DOCSIS 2.0 solutions," said Zaki Rakib, Terayon's Chief Executive Officer. "In addition, we believe we are well positioned to capitalize on our DOCSIS 2.0 and digital video leadership positions as the cable industry works to meet the bandwidth management challenges presented by the expected growth of High Definition TV, Video on Demand, and new IP based services required to compete against telecom and satellite offerings. Going into the second half of 2003, we remain focused on achieving sustainable profitability through growing revenues, improving margins via product cost reductions, and prudent operating expense management." Terayon ended the second quarter with $161.9 million in cash and short-term investments, and $65.1 million in convertible debt. Accounts receivable days sales outstanding (DSO) for the second quarter of 2003 was 70 days, compared with 71 days reported for the quarter ended March 31, 2003. For the third quarter of 2003, Terayon expects to report revenue in the range of $33 million to $36 million and anticipates a net loss in the range of $0.14 to $0.16 per share. Terayon Communication Systems, Inc. provides innovative broadband systems and solutions for the delivery of advanced voice, data and video services that are deployed by the world's leading cable television operators. Terayon, headquartered in Santa Clara, California, has sales and support offices worldwide, and is traded on the Nasdaq under the symbol TERN. Terayon is on the Web at http://www.terayon.com * * * As previously reported, Standard & Poor's revised its outlook on cable Internet equipment company Terayon Communications Systems Inc., to negative from stable after Terayon said that it had expected lower revenues for the June 2002 quarter than it had previously. At the same time, Standard & Poor's affirmed Santa Clara, California-based Terayon's single-'B'-minus corporate credit rating and triple-'C' subordinated debt rating. TEXAS PETROCHEMICALS: Wants to Pay Critical Vendors' Claims ----------------------------------------------------------- Texas Petrochemicals LP and its debtor-affiliates ask for permission from the U.S. Bankruptcy Court for the Southern District of Texas to pay the prepetition claims of critical vendors. The Debtors relate that in connection with the operation of their business, they have historically obtained raw materials and other goods and services from various trade vendors and suppliers on favorable credit terms. The Debtors' ability to continue to obtain these goods and services on customary short-term credit is a critical part of the Debtors' business plan to maintain operations and to meet long-term liquidity needs during these cases. On average, the Debtors receive approximately $38 million per month in short term trade credit from its trade creditors. The loss of such goods, services and trade credit could force the Debtors' business into liquidation. To preserve and maximize the value of the Debtors' estates, the Debtors must continue to obtain these materials and services from their vendors, and on the credit terms that are at least as favorable to the Debtors. However, the Debtors do not believe that their vendors will extend to them Customary Trade Credit Terms postpetition if the Debtors cannot provide them with adequate assurance that their prepetition and postpetition claims will be paid in full. In addition, Debtor also believes that, without that adequate assurance, it is possible that certain providers will discontinue providing those critical materials and services to Debtors in the future. Accordingly, the Debtors request the Court to grant administrative expense priority status to the prepetition claims of these vendors. The Debtors estimate that the amount of the Prepetition Claims owing to the Critical Vendors totaling $21 million. During the prepetition period, the Debtors under took a lengthy process of identifying and selecting the vendors, suppliers and service providers that are critical to their business. The Critical Vendors generally fall into 4 categories: a) Crude Butadine Suppliers Crude butadiene is fundamentally in short supply worldwide and reliable supply is the basis for TPC's butadiene and butene-1 sales market share. The value of the Debtors business will decline due to the inability of the plant to run at rates high enough to achieve positive economic contribution. b) Isobutane Suppliers Isobutane is critical to the Debtors' specialties chemicals and MTBE business. There are only two suppliers that can provide the Debtors with a reliable, adequate supply of isobutane. The Debtors have no alternatives. c) Natural Gas Suppliers The Debtors obtain their natural gas on a "base load" basis through an industrial gas system owned and operated by Centerpoint Energy, which provides stability to the Debtors' pressure and volume into the gas header at the plant. d) Maintenance Contractors These service vendors perform all ongoing maintenance functions for its facilities. The Debtors have utilized this firm for several years, and therefore, the maintenance contractors at Debtors facilities are intimately familiar with the intricacies of the Debtors' sixty-year old plant. Texas Petrochemicals LP, headquartered in Houston, Texas, along with its debtor-affiliates, are one of the largest producers of butadiene, butene-1 and third largest producer of methyl tertiary- butyl ether in North America. The Company filed for chapter 11 protection on July 20, 2003 (Bankr. S.D. Tex. Case No. 03-40258). Mark W. Wege, Esq., at Bracewell & Patterson, LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $512,417,000 in total assets and $448,866,000 in total debts. TRITON CDO IV: S&P Lowers & Removes B Class B Rating from Watch --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class B notes issued by Triton CDO IV Ltd., an arbitrage CBO transaction originated in December 1999, and managed by Triton Partners. At the same time, the rating on the class B notes is removed from CreditWatch with negative implications, where it was placed July 24, 2003. In addition, the 'A' rating on the class A notes is affirmed due to the level of overcollateralization available to support the notes. The lowered rating is driven by several factors. These include not only continuing par erosion of the collateral pool securing the rated notes and a negative migration in the overall credit quality of the assets within the collateral pool, but also a significant outflow of cash available to support the rated notes due to the interest rate hedge instruments. Since the previous rating action, where the ratings on both the class A and B notes were lowered Sept. 30, 2002, approximately $9.4 million in new asset defaults have occurred. According to the most recent monthly report (June 16, 2003), the class A/B overcollateralization ratio is at 105.6% versus its minimum required ratio of 121.0%. However, following a $17.328 million paydown to the class A notes on the June 24, 2003 payment date, the class A/B overcollateralization ratio has improved to a value of approximately 107%. The credit quality of the collateral pool has also deteriorated somewhat since the previous rating action. As per the most recent monthly report (June 16, 2003), approximately 22.24% of the assets in the portfolio currently come from obligors with Standard & Poor's ratings of 'CCC+' or below, and 9.9% of the performing assets within the collateral pool come from obligors with ratings on CreditWatch negative. Furthermore, the transaction is not in compliance with Standard & Poor's Trading Model test, a measure of the overall credit quality within the portfolio to support the rating on a given tranche issued by the CDO. In addition, the transaction's rated liabilities are significantly over-hedged at the present time, leading to an outflow of interest cash required to be paid to the hedge counterparty on each payment date, reducing the amount of cash available to de-lever the senior notes. On the last payment date, $4.869 million was paid out to the hedge counterparty. Standard & Poor's has reviewed the results of the current cash flow runs generated for Triton CDO IV Ltd. to determine the level of future defaults the rated tranches can withstand under various stressed default timing and interest rate scenarios, while still paying all of the rated interest and principal due on the notes. After the results of these cash flow runs were compared with the projected default performance of the performing assets in the collateral pool, it was determined that the rating currently assigned to the class B notes was no longer consistent with the amount of credit enhancement available, resulting in the lowered rating. Standard & Poor's will continue to monitor the performance of the transaction to ensure that the ratings reflect the amount of credit enhancement available. RATING LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Triton CDO IV Ltd. Rating Class To From Current Balance ($ mil.) B B BB+/Watch Neg 26.750 RATING AFFIRMED Triton CDO IV Ltd. Class Rating Current Balance ($ mil.) A A 101.872 UNIVERSAL ACCESS: Board Approves 1-For-20 Reverse Stock Split ------------------------------------------------------------- Universal Access Global Holdings Inc. (Nasdaq: UAXS), a leading communications and network integrator, announced that the Company's Board of Directors has approved a one for twenty (1-for-20) reverse stock split. At the Company's annual meeting of stockholders held July 21, 2003, stockholders authorized the board to effect a reverse split at any one of three ratios, including 1- for-20. The Company's common stock will begin trading on a reverse-split basis on August 11, 2003. As a result of the reverse stock split, every 20 shares of the Company's common stock will be combined into one share of the Company's common stock. The reverse stock split affects all shares of common stock, stock options and warrants of the Company outstanding immediately before the effective time of the reverse stock split. The number of shares of common stock issuable upon exercise of outstanding options and warrants will decrease by a factor of 20, and the exercise price per share of these options and warrants will increase by a factor of 20. No fractional shares will be issued as a result of the reverse split. Instead, the Company's transfer agent will aggregate fractional shares and sell them on the open market. After the sale is complete, stockholders will receive a cash payment in an amount equal to their pro rata share of the total net proceeds of the sale. The number of shares of the Company's common stock currently outstanding is approximately 229 million. Shares of the Company's common stock will trade on the Nasdaq SmallCap Market under the symbol UAXSD for 20 trading days after the reverse split goes into effect. After that period, trading will resume under the current symbol UAXS. Wells Fargo Bank Minnesota, N.A. has been retained to manage the exchange of stock certificates. The reverse stock split is intended to help the Company regain compliance with the minimum bid price requirement for continued listing on the Nasdaq SmallCap Market. The Company received a Nasdaq Staff Determination on June 3, 2003 indicating that the Company fails to comply with the $1.00 per share minimum bid price requirement for continued listing set forth in Marketplace Rule 4310c(4) and that its securities are, therefore, subject to delisting from the Nasdaq SmallCap Market. On July 24, 2003, the Company had a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. There can be no assurance the Panel will grant the Company's request for continued listing. The Company anticipates that its common stock will continue to be quoted on the Nasdaq SmallCap Market pending the Panel's decision. Universal Access (Nasdaq: UAXS) specializes in telecommunications network integration and off-network provisioning for carriers, service providers, cable companies, system integrators and government customers worldwide. The company is dedicated to alleviating communication bottlenecks by leveraging its proprietary information databases in combination with its strategically deployed network interconnection facilities. By provisioning across multiple networks of competing global service providers, Universal Access provides its clients with a timely and cost-effective means of extending their network reach and maximizing the utilization of their own network assets. Universal Access' customers include a wide range of leading companies. Universal Access is headquartered in Chicago, IL. Additional information is available on the company's Web site at http://www.universalaccess.net At December 31, 2002, Universal Access' balance sheet shows a working capital deficit of about $12 million, while total shareholders' equity has further shrunk to about $9 million from about $100 million a year ago. U.S. RESTAURANT: Retires $47.5 Million in Senior Unsecured Notes ---------------------------------------------------------------- U.S. Restaurant Properties, Inc. (NYSE:USV) has retired $47.5 million in Senior Unsecured Notes due August 1, 2003. The amount was funded by the Company's recent issuance of Series B Preferred stock, borrowings under the Company's existing line of credit, and internally generated sources, including dispositions of certain underperforming properties. Robert Stetson, CEO commented, "The retirement of the Senior Unsecured Notes further strengthens our balance sheet, reduces interest expense, and puts U.S. Restaurant Properties in a better position to fund future growth." The notes were originally issued in October 1998 at an interest rate of 8.22%. The company also addressed preliminary second quarter operating results. Stacy Riffe, CFO, commented, "We expect second quarter earnings to be somewhat below consensus estimates due primarily to lower percentage rents, principally from Burger King tenants, and higher than anticipated costs associated with our Fina redeployment efforts. While we have been pleased with the progress made in our Fina redeployment effort, the costs associated with the redeployment have been greater than originally budgeted. As the majority of the Fina properties have been successfully redeployed, transition-related expenses are substantially behind us." For the three months ended June 30, 2003, total percentage rents were approximately 5.8% of the Company's total rental revenue, including $0.2 million attributable to a prior year tenant sales audit. Excluding the prior year tenant sales audit amount, percentage rent comprised 4.6% of total rental revenue. Burger King percentage rents comprised approximately 3.1% of total rental revenue. Additional details regarding second quarter results will be available when the Company releases earnings on August 5, 2003. The Company will hold a conference call on Wednesday, August 6, 2003, at 3:00 p.m. CDT to review its second quarter results. The call can be accessed toll free at (877) 691-0877, or via webcast by going to: http://www.companyboardroom.com/company.asp?ticker=usv&client=cb at least 15 minutes prior to the start of the call. A web replay will be available shortly after the call for 14 days. A digital replay of the conference call will be available until midnight August 20, 2003 by dialing (877) 519-4471 and entering reference number 4043644. U.S. Restaurant Properties, Inc. is a non-taxed financial services and real estate company dedicated to acquiring, managing and financing branded chain restaurants, such as Arby's, Chili's, Burger King, and Pizza Hut, and selected service retail properties. As of June 30, 2003, the Company owned 801 properties located in 48 states. * * * Liquidity and Capital Structure Outstanding debt at December 31, 2002, totaled $353 million, or 46.6% of total capitalization. The Company's interest expense coverage ratio for the quarter was 2.6 times FFO. The average interest rate declined to just over 5% for the quarter. Other than regularly scheduled debt amortization, the Company must reduce its line of credit by $5.0 million by May 31, 2003, and has $47.5 million in senior notes that are due August 1, 2003. In anticipation of these maturities, management is discussing various financing alternatives with its creditors. USDATA CORP: Inks Pact to Sell All Assets & Debts to Tecnomatix --------------------------------------------------------------- USDATA Corporation (OTCBB:USDC) has signed an agreement for the sale of substantially all of its assets and liabilities to Tecnomatix Technologies Ltd., in consideration for the issuance of up to 1,011,747 Tecnomatix shares, subject to certain adjustments. Based on the last sale price of $10.16 per Tecnomatix share as of July 29, 2003, the shares to be issued as consideration for the acquisition have a value of approximately $10.3 million. The transaction is expected to close in September 2003 and is subject to customary approvals and closing conditions, including approval of the stockholders of USDATA. USDATA has aggregate liquidation preferences on its outstanding preferred stock in excess of $56.0 million. USDATA expects that the value of its remaining assets after completion of the Tecnomatix transaction will be significantly less than these preferred stock liquidation preferences. Further information is available at http://www.usdata.com/tecnomatix Now in its 28th year, USDATA Corporation, headquartered in Richardson, Texas is a leading global provider of software and services that give enterprises the knowledge and control needed to perfect the products they produce and the processes they manage. Based upon a tradition of flexible service, innovation and integration, USDATA's software currently operates in a variety of industries in more than 60 countries around the globe. Customers include seventeen of the top twenty-five manufacturers. USDATA's software heritage has emerged from manufacturing and process automation solutions and has grown to encompass vast product knowledge and control solutions. The company has a global network of distribution and support partners. For more information, visit USDATA at http://www.usdata.com USEC INC: 2nd Quarter Results Show Improved Business Operations --------------------------------------------------------------- USEC Inc. (NYSE:USU) reported second quarter 2003 results that show improved business operations with a gross profit margin of 12.6 percent compared to 9.7 percent in the same quarter last year. The improvement is the result of cost-control initiatives in production operations and lower purchase costs from Russia. In addition, with the successful accomplishment of the American Centrifuge program milestones, USEC is accelerating the deployment timetable by one year. USEC reported net income for the second quarter ended June 30, 2003, of $4.3 million or $.05 per share compared to $7.1 million or $.09 per share in the same quarter last year. For the six-month period ended June 30, 2003, net income was $6.4 million or $.08 per share, compared to $11.4 million or $.14 per share in the same period last year. During the six-month period, spending on advanced technology was $13.7 million higher than the same period in 2002 due to the opportunity and decision to accelerate the timetable for the American Centrifuge. Results for the six-month period in 2002 included a special credit of $4.2 million (after tax) from a favorable change in cost estimate for consolidating plant operations. Taking into account this year's accelerated American Centrifuge program spending and last year's special credit, income from core business activities in 2003 is higher than comparable periods last year, as reflected in higher gross margins. "Progress in meeting or exceeding our milestones for the American Centrifuge has encouraged us to accelerate our schedule so that we might shave significant time off our ultimate goal of operating the most efficient commercial centrifuge plant in the world," said William H. Timbers, USEC president and chief executive officer. "Our accelerated American Centrifuge timetable will increase spending that in turn will lower net income in the short term. However, this initiative should result in USEC gaining the benefits sooner of lower production costs that should extend for many years to come." "Our focus on reducing costs is having a positive impact on our cost of sales and is supporting an improved gross margin, year- over-year," he said. "Our core business continues to operate well. We are signing long-term commitments with key customers, lowering our cost structure and improving production efficiency at our Paducah plant." Revenue Higher; Cost of Sales Improve Revenue for the second quarter was $322.4 million, a 2 percent increase over $316.2 million for the same quarter a year ago. The increase reflects higher sales of natural uranium that totaled $51.7 million, compared to $23.0 million for the second quarter last year. The volume of the Separative Work Unit component of low-enriched uranium sold decreased 3 percent compared to the same period a year earlier. For the six-month period, SWU sales volume improved by 3 percent over the same period last year; in both periods the variation was due mainly to the timing and movement of customer orders. USEC continues to project that the average SWU price billed to customers in 2003 will be about 1.5 percent lower than in 2002 as deliveries are made under lower-priced contracts signed several years ago. Contracts signed more recently at higher market prices will be realized in future periods and will help offset lower-priced contracts. Lower production and purchase costs were the drivers for a 6 percent reduction in the unit cost of sales per SWU the six-month period. For the same period, unit production costs improved by 4 percent reflecting lower labor costs during the labor strike in Paducah, Kentucky and more efficient operations. The Company's purchase costs per SWU declined beginning January 2003 as new pricing terms under the Megatons to Megawatts program with Russia went into effect. The full effect of the lower production and purchase costs will also benefit cost of sales in future periods due to the Company's average inventory cost methodology and significant SWU inventories. USEC expects its gross profit margin for 2003 will be approximately 10 percent. At June 30, 2003, USEC's cash balance was $158.3 million. For the quarter, cash flow from operating activities was $43.2 million, compared to $84.4 million in the same period a year ago. For the six-month period, cash flow from operating activities was $23.1 million, compared to $270.5 million in the same period in 2002 when high customer collections followed record revenue in late 2001. Cash flow in the 2003 six-month period benefited from higher sales of uranium but was reduced by deliveries against advances from customers that result in non-cash revenue, increased purchases under the Russian Contract, and the timing of customer collections. The Company has no short-term debt, and debt to total capitalization is a modest 36 percent. Because USEC's customers place orders under their long-term contracts generally on a 12- to 24-month cycle, quarterly comparisons of USEC's financials are not necessarily indicative of the Company's longer-term results. American Centrifuge Lead Cascade and Commercial Plant Accelerated USEC is aggressively moving forward with its plan to demonstrate the American Centrifuge technology, with the goal of deploying a centrifuge plant by the end of the decade. The Company expects to achieve the fifth milestone, the manufacture of a centrifuge rotor tube, ahead of the November 2003 milestone date. Engineering, manufacturing and testing of major components continue in Oak Ridge, Tennessee. Refurbishment of a demonstration facility in Piketon, Ohio, with a lead cascade containing up to 240 full-scale centrifuge machines, is slated to begin in 2004, with the demonstration expected to begin in 2005. A successful year of experience with its American Centrifuge has given USEC the confidence to accelerate its schedule for commercial plant deployment by one year. Since the DOE - USEC Agreement was signed in June 2002, USEC has met or exceeded each of the first four milestones. We now plan to submit our commercial plant NRC license application in August 2004, seven months ahead of schedule. Beginning commercial centrifuge operations earlier should bring substantial savings by enabling the Company to replace higher cost production a year earlier than previously projected. USEC expects to begin capitalizing costs associated with a commercial facility sooner under the new timetable. The Company's spending on the American Centrifuge technology accounted for almost all of its advanced technology spending, which totaled $11 million during the quarter, compared to $4.5 million in the same period last year. Due to the acceleration of the American Centrifuge demonstration, USEC now expects spending for the full year to be about $45 million. USEC has not changed its total spending estimate of $150 million for the American Centrifuge demonstration but expects to spend that amount in less than the five years originally projected in June 2002. The Company's cost estimate of $1 - $1.5 billion to construct a 3.5 million SWU commercial centrifuge plant has not changed. During the quarter, USEC ended its funding for research and development of the SILEX laser-based uranium enrichment process and has focused its efforts on the American Centrifuge. The Company had been funding SILEX research since 1996 but recently concluded it is unlikely that this laser technology can be used to meet USEC's production needs and further investment would not be prudent. USEC is resolving issues relating to termination of the agreement with Silex Systems Limited. Labor Issues Resolved On June 25, members of the Paper, Allied-Industrial, Chemical and Energy Workers International Union, Local 5-550 voted to accept a new eight-year contract with USEC and returned to work. The 635 employees, who make up about half of the workforce at the Paducah plant, went on strike February 4. The new contract includes annual pay increases of 2 to 3 percent and an improved pension supplement. PACE employees will increase their share of health insurance costs and have agreed to work-assignment flexibility designed to improve operational efficiency at the Paducah plant. In November 2002, USEC announced it would reduce its workforce at Paducah by 200 during 2003. During the work stoppage, additional efficiencies were identified and the Company expanded the workforce reduction to 219, which was completed in July. The Company expects to save about $19 million annually in operating costs from the workforce reductions. In July, the Department of Energy informed USEC that it would not extend funding for a uranium deposit removal program at the Portsmouth plant beyond September 30, 2003. USEC continues to work with DOE to secure additional funding for this important decontamination project but has begun preparations to lay off approximately 116 employees. If the funding is not secured, USEC estimates its share of severance expense would result in a charge against net income of $1.5 - $2 million (after tax), which would be recorded later this year. Other programs, such as cleaning up contaminated natural uranium, site preparation for the American Centrifuge Demonstration Facility, and the cold standby program are expected to be funded by DOE for the coming federal fiscal year. Other Business Matters -- USEC continues to work with DOE to remediate the 9,500 metric tons of contaminated uranium DOE transferred to the Company prior to USEC's privatization. USEC is on track to clean up the initial 2,800 metric tons of uranium under the DOE-USEC Agreement by the September 2003 target. The Company continues to anticipate that DOE will remediate an additional 2,116 metric tons of uranium that DOE was obligated to transfer to USEC as of March 31, 2003. DOE is obligated to remedy all remaining uranium. -- USEC has been conducting cold standby contract services for DOE at the Portsmouth plant under a letter agreement. The Company expects to conclude negotiations on a definitive contract in the current quarter, and expects to earn fees and collect retainage retroactive to July 2001 as soon as the contract is signed. Continuation of the program is subject to DOE funding and Congressional appropriations. -- Negotiations are ongoing with DOE and the Ohio Valley Electric Corporation to resolve issues surrounding the termination of a power purchase agreement. The date for payment of the termination costs has been extended to December 31, 2003. -- Negotiations continue with federal and South Carolina environmental regulators over USEC's share of the cost of cleaning up a depleted uranium processing site operated by a bankrupt contractor, Starmet. -- The Japanese government temporarily shut down 17 reactors in the past year for special inspections. Four reactors have been returned to service and the operator is seeking permission to return the remainder to service. USEC supplies about half of the low-enriched uranium for these reactors. The Company does not expect 2003 revenue to be affected, but revenue is expected to be reduced in 2004 and possibly 2005 due to delays in refueling the affected reactors. Earnings Guidance Updated USEC's uranium enrichment business remains on target for improving gross margin in 2003 to at least 10 percent. The improvement is due to lower production costs and improved efficiency at the Paducah plant, and lower purchase costs from Russia. Revenue from SWU is expected to be $1.1 billion and uranium revenue is expected to be $160 million for the year, including $60 million in sales using uranium purchased from third-party suppliers and uranium generated from underfeeding in the enrichment process. While the gross profit is expected to improve year-over-year, increased costs for accelerating demonstration of the American Centrifuge technology will reduce net income. These increased costs will have an after-tax effect of reducing net income by $5 million. Based on the higher level of American Centrifuge spending in 2003, USEC expects net income for the year in a range of $9 to $11 million. Earnings and cash flow are driven by business performance and are dependent on a number of key factors, including: -- Achieving targets for sales and average prices billed to customers. -- Resolution as planned of the current business matters listed above. In addition, if DOE funding is not secured for deposit removal at Portsmouth, USEC's share of severance expenses could result in an after-tax charge against net income of $1.5 - $2.0 million. USEC's quarterly earnings profile has historically shown a loss for the third quarter, but changes in the timing and movement of sales from the second quarter indicate that net income should be more consistent each quarter in 2003. Cash flow from operating activities in 2003 is expected to be in a range of $30 to $40 million. The cash flow projection is lower due to timing of customer collections and payments to Russia, and additional spending on the American Centrifuge. Absent these timing items, cash flow from operations would have been higher than originally forecast. USEC Inc., a global energy company, is the world's leading supplier of enriched uranium fuel for commercial nuclear power plants. As reported in Troubled Company Reporter's June 27, 2003 edition, Standard & Poor's Ratings Services revised its outlook on global enriched uranium supplier USEC Inc., to stable from negative as concerns about the emergence of a potential competitor have eased somewhat. At the same time, Standard & Poor's affirmed its 'BB' corporate credit rating on the company. Bethesda, Maryland-based USEC has $500 million in debt. VINTAGE PETROLEUM: Will Host Q2 2003 Conference Call on August 7 ---------------------------------------------------------------- Vintage Petroleum, Inc. (NYSE:VPI) will hold its quarterly conference call and live webcast to discuss its second quarter results and 2003 outlook on Thursday, August 7, 2003, at 4:00 p.m. Eastern time (3:00 p.m. Central time). S. Craig George, President and Chief Executive Officer; William L. Abernathy, Executive Vice President and Chief Operating Officer; and William C. Barnes, Executive Vice President and Chief Financial Officer will be speaking for the company. Interested parties may access the webcast by visiting the Vintage Petroleum Web site at http://www.vintagepetroleum.comand selecting the microphone icon or at http://www.companyboardroom.comand typing VPI in the ticker search box and selecting "Go". To listen to the internet broadcast, participants will need a multimedia computer with speakers and the Windows media player installed. Download from http://www.microsoft.com/windows/windowsmedia/download/default.asp and test the software prior to the call. The webcast and the accompanying slide presentation will be available for replay at the Vintage Petroleum, Inc.'s Web site. Vintage Petroleum, Inc. is an independent energy company engaged in the acquisition, exploitation and exploration and development of oil and gas properties and the marketing of natural gas and crude oil. Company headquarters are in Tulsa, Oklahoma and its common shares are traded on the New York Stock Exchange under the symbol VPI. For additional information, visit the company Web site at http://www.vintagepetroleum.com As previously reported, Standard & Poor's assigns its 'BB-' rating to Vintage Petroleum Inc.'s $250 million Note Issue. Ratings on Vintage Petroleum Inc. reflect the company's participation in the volatile independent oil and gas exploration and production (E&P) industry, an aggressive financial profile, and significant political risk associated with Argentina, which accounts for about 35% of Vintage's production. Outlook The negative outlook reflects continued uncertainty regarding the fiscal regime in Argentina, limited internal financial flexibility, and a likely continued decline in production through 2003 due to a starkly reduced 2002 capital budget. Significant further deterioration in any of these conditions could lead to a downgrade of Vintage's ratings. Conversely, management's ability to deliver on its rather aggressive plan to apply proceeds from asset sales and cash flow generated by stronger than currently expected oil and natural gas prices could restore ratings stability. VISHAY: Proposed $450-Mill Sub. Convertible Notes Gets B+ Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'B+' rating to Vishay's proposed $450 million subordinated convertible notes due 2023. At the same time, Standard & Poor's affirmed its 'BB' corporate credit and senior unsecured bank loan ratings on Vishay Intertechnology Inc. The outlook is stable. Vishay had $724 million of debt outstanding as of March 31, 2003. Malvern, Pennsylvania-based Vishay has strong market positions in a broad range of electronic components, such as capacitors and resistors (passives), as well as diodes and transistors (actives). Proceeds from the bond offering are expected to be used to repay drawn amounts on the company's revolving credit facility and to redeem the 5-3/4% general semiconvertible notes, with remaining amounts to be used for general corporate purposes, including retiring other debt. Along with the bond offering, Vishay will amend its existing revolving credit facility, extending the maturity to 2007 from 2005 and relaxing the minimum tangible net worth and minimum EBIT covenants. "A modest increase in short-term funded debt resulting from the refinancing will cause Vishay's debt protection metrics to weaken somewhat from recent levels," said Standard & Poor's credit analyst Joshua Davis. "Further gradual improvements in profitability will likely lead to improvements in debt protection in coming quarters." WABASH NATIONAL: 3.25% Note Offering Increased by $25 Million ------------------------------------------------------------- Wabash National Corporation (NYSE: WNC) announced the Initial Purchasers have exercised their option to purchase an additional $25 million of 3.25% convertible senior unsecured notes due 2008 in a Rule 144A offering, for a total transaction size of $125 million. The purchase of the additional notes is expected to close simultaneously with the purchase of the $100 million in notes previously announced, on or about August 1, 2003. Wabash National intends to use the net proceeds from the total offering to repay a portion of its outstanding indebtedness. The terms of the additional notes being sold are identical to the $100 million previously announced and are convertible under certain circumstances into shares of Wabash National's common stock at an initial conversion rate of 52.0833 shares per $1,000 principal amount of notes. This represents a conversion price of $19.20 per common share, or a conversion premium of 25% over the closing price on July 28, 2003 of $15.36. The notes bear interest at 3.25% per annum payable semi-annually. The notes and the shares of common stock of Wabash National issuable upon the conversion of the notes have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration. 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. WACKENHUT CORRECTIONS: Will Publish 2nd Quarter Results on Aug 7 ---------------------------------------------------------------- Wackenhut Corrections Corporation (NYSE: WHC) will release its 2003 Second Quarter financial results on Thursday, August 7, 2003. This will be followed by a conference call at 2:30 PM (Eastern Standard Time) on the same day. Hosting the call for WCC will be George C. Zoley, Chairman and Chief Executive Officer, accompanied by Wayne H. Calabrese, Vice Chairman, President and Chief Operating Officer, John G. O'Rourke, Chief Financial Officer, David Watson, Treasurer and Vice President of Finance and Brian Evans, Vice President and Chief Accounting Officer. To participate in the teleconference, please contact one of the following numbers 5 minutes prior to the scheduled start time. 1-800-839-6806 (U.S. only) 1-402-220-3724 (International) Conference Call Title: "Wackenhut Corrections Earnings" In addition, a live web-cast of the conference call may be accessed on the Company's investor relations home page at http://www.wcc-corrections.com A web-cast audio replay of the conference call will also remain available on the Web site for 30 days. If you are unable to participate in the conference call, a telephonic replay will be available from August 7 through September 8. The replay number is 1-800-839-6806 (U.S.) and 1- 402-220-3724 (International). If you have any questions, please contact WCC at (561) 999-7306. WCC is a world leader in the delivery of correctional and detention management, health and mental health services to federal, state and local government agencies around the globe. WCC offers a turnkey approach that includes design, construction, financing and operations. The Company represents 31 government clients servicing 48 facilities in the United States, Australia, South Africa, New Zealand, and Canada with a total design capacity of approximately 36,000 beds. As reported in Troubled Company Reporter's May 5, 2003 edition, Standard & Poor's Ratings Services placed its 'BB-' corporate credit and 'BB' senior secured debt ratings on Wackenhut Corrections Corp., on CreditWatch with negative implications. Negative implications mean that the ratings could be lowered or affirmed, following Standard & Poor's review. Boca Raton, Florida-based WCC, a provider of a comprehensive range of prison and correctional services, had about $125 million of debt outstanding at Dec. 29, 2002. WELLS FARGO: Fitch Takes Rating Actions to Series 2003-9 Notes -------------------------------------------------------------- Wells Fargo Mortgage Pass-Through Certificates, series 2003-9 class I-A-1 through I-A-16, II-A-1, A-PO, I-A-R and I-A-LR (senior certificates, $1.026 billion) are rated 'AAA' by Fitch Ratings. In addition, Fitch rates the following classes: -- Class I-B-1 ($9.8 million) 'AA'; -- Class II-B-1 ($1.7 million) 'AA'; -- Class I-B-2 ($4.5 million) 'A'; -- Class II-B-2 ($601,000) 'A'; -- Class I-B-3 ($2.6 million) 'BBB'; -- Class II-B-3 ($450,000) 'BBB'. -- Privately offered Class I-B-4 ($1.5 million) 'BB'; -- Privately offered Class II-B-4 ($300,000) 'BB'; -- Privately offered Class I-B-5 ($1.1 million) 'B'; -- Privately offered Class II-B-5 ($300,000) 'B'. The 'AAA' rating on the Group I senior certificates reflects the 2.75% subordination provided by the 1.30% class I-B-1, 0.60% class I-B-2, 0.35% class I-B-3, 0.20% privately offered class I-B-4, privately offered 0.15% class I-B-5, and 0.15% privately offered class I-B-6 certificates (not rated by Fitch). The 'AAA' rating on the Group II senior certificates reflects the 1.20% subordination provided by the 0.55% class II-B-1, 0.20% class II-B-2, 0.15% class II-B-3, 0.10% privately offered class II-B-4, privately offered 0.10% class II-B-5 and 0.10% privately offered class II-B-6 certificates (not rated by Fitch). Fitch believes the amount of credit enhancement available will be sufficient to cover credit losses. The ratings also reflect the high quality of the underlying collateral, the integrity of the legal and financial structures and the master servicing capabilities of Wells Fargo Bank Minnesota, N.A. (WFBM), rated 'RMS1' by Fitch. The mortgage loans have been divided into two groups. The class I and II certificates represent an ownership interest in the Group I and Group 2 mortgage loans, respectively. Loan Group 1 consists of fully amortizing, one- to four-family, fixed interest rate, first-lien mortgage loans, substantially all of which have original terms to maturity of approximately 30 years. The weighted average original loan to value ratio (OLTV) of the pool is approximately 65.37%. Approximately 3.27% of the mortgage loans have an OLTV greater than 80%. The weighted average coupon of the pool is approximately 5.841%. The weighted average FICO is 731. The three states represent the largest portion of the mortgage loans are California (49.29%), New York (11.05%), and Maryland (3.96%). Loan Group 2 consists of fully amortizing, one- to four-family, fixed interest rate, first-lien mortgage loans, substantially all of which have original terms to maturity of approximately 15 years. The weighted average OLTV of the pool is approximately 58.54%. Approximately 0.83% of the mortgage loans have an OLTV greater than 80%. The weighted average coupon of the pool is approximately 5.304%. The weighted average FICO is 736. The three states representing the largest portion of the mortgage loans are California (38.55%), New York (5.88%), and Illinois (4.68%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. Approximately 98.54% of the mortgage loans in Group I and all of the mortgage loans in Group II were originated in conformity with the underwriting standards of Wells Fargo Home Mortgage, Inc. The remaining approximate 1.46% of the mortgage loans in Group I were purchased by WFHM in bulk purchase transactions. WFHM sold the loans to Wells Fargo Asset Securities Corporation, a special purpose corporation, and deposited the loans into the trust. The trust issued the certificates in exchange for the mortgage loans. WFBM, an affiliate of WFHM, will act as master servicer and custodian. Wachovia Bank, N.A. will act as trustee. An election will be made to treat the trust as two real estate mortgage investment conduits for federal income tax purposes. WORLDWIDE WIRELESS: Intends to File for Liquidation of Company -------------------------------------------------------------- Worldwide Wireless Networks Inc. (OTC BB: WWWN), provides an update on the progress of the Chapter 11 Bankruptcy Filing. As previously announced, WWWN filed for Chapter 11 Bankruptcy on September 11, 2002. The case number is SA 02-17020 JB. The filing occurred with the U.S. Bankruptcy Court located at 411 West Fourth St., Santa Ana, California 92701-8000. On October 16, 2002, the Court approved the sale of the operating assets of WWWN. On October 18, 2002, WWWN concluded the sale of all its operating assets for a cash amount of $550,000. After the sale of the operating assets of the business, WWWN sought to sell the public shell. The Creditors committee engaged the firm of Squar Milner to lead the process for the search for a buyer for the shell. With the assistance of WWWN various potential buyers were identified and negotiations were commenced with several of the parties. Unfortunately, no party was able to provide an offer that was considered viable to the creditor's committee. As such, a determination has been made to liquidate Worldwide Wireless Networks. As a result of liquidating WWWN, there will not be sufficient assets to distribute anything to shareholders. All remaining equity value will be completely extinguished. "Unfortunately, we were unsuccessful in selling the public shell," stated Mr. Jerry Collazo, President and acting CEO of Worldwide Wireless Networks. "My goal was to find an appropriate buyer for the public shell that would give WWWN shareholders an opportunity to regain some of their lost equity value. The cost of completing the sale of the public shell required that we receive a minimum purchase amount for the shell. Unfortunately, no acceptable purchaser appeared with a reliable offer. I truly regret the decision that needed to be made as it is a total loss for all equity holders." Worldwide Wireless Networks was a data-centric wireless communications company headquartered in Orange, California. The Company specialized in high-speed, broadband Internet access using an owned wireless network. WYNN RESORTS LTD: S&P Junks Subordinated Debentures at CCC+ ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC+' rating to Wynn Resorts Ltd.'s $250 million 6% convertible subordinated debentures due July 15, 2015. Proceeds from the notes will be used to help finance the company's Macau project and for general corporate purposes, including the contribution of approximately $44 million to Wynn Resorts Funding, LLC, a wholly-owned subsidiary, to purchase U.S. government securities for the payment of the first three years of scheduled interest payments on the notes. In addition, a 'B' corporate credit rating was assigned to the company. The outlook is developing. Wynn Resorts, a holding company with no operations of its own, was formed in 2002. The company's primary efforts, through its subsidiaries, have been focused on designing and developing two casino resorts: one on the Las Vegas Strip (Wynn Las Vegas) and the other in Macau (Wynn Macau S.A.). Standard & Poor's currently maintains a 'B' corporate credit rating on the Las Vegas subsidiary, Wynn Las Vegas, LLC. With no operations, Wynn Resorts is dependent upon its subsidiaries to fund its debt service obligations, including the newly issued subordinated debentures. However, the subsidiaries have no obligation to pay any amounts due on the debentures or to provide Wynn Resorts with funds for the payment of its obligations. In addition, the subsidiaries currently have no operations or earnings and the debt agreements at Wynn Las Vegas contain restrictions on the ability to distribute funds to Wynn Resorts. Ultimate repayment of the notes is expected to stem from the successful development, opening, and operation of both Wynn Macau and Wynn Las Vegas. The notes are subject to redemption at the company's option beginning on July 20, 2007, either in the form of common shares, cash, or a combination of both. "Ratings for Wynn Resorts reflect its high amount of consolidated debt; the execution risk in building, designing, and operating a $2.4 billion property on the Las Vegas Strip; the risks associated with constructing and operating a casino in Macau; and the competitive market environments in both Las Vegas and Macau," said Standard & Poor's credit analyst Michael Scerbo. * J. Edward Houston Joins Hillsboro Group as Chairman and CEO ------------------------------------------------------------- Hillsboro Group, Inc. (OTC Bulletin Board: HLBO) recently hired J. Edward Houston, with over 40 years of financial services and legal experience, as Chairman and CEO. Mr. Houston served six years as a United States Federal Bankruptcy Judge, in addition to being the President, CEO and a director of Barnett Bank of South Florida for six years; Chairman of the Board, President and CEO of South Florida Savings & Loan for two years; Chairman of the Board, President and CEO of Old Dominion Insurance Co., Property and Casualty Issuer, for five years; President, CEO and a Director of Barnett Leasing Company and President, CEO and director of Great American Bank. More recently, Mr. Houston was President and CEO of Port Dania, Inc., a Savoy Shipping Company. Mr. Houston has been a member of the Board of Directors of Avatar Holdings, Inc. and Barnett Bank Trust Company. "Ed brings a tremendous amount of experience and expertise coupled with lifelong contacts covering a broad spectrum of the business world," said Ted Molinari of the Hillsboro Group. "I look forward to building a strong institutional financial services firm concentrating on Capital Markets, Investment banking and asset management, utilizing the diverse talent of the Hillsboro team," said Mr. Houston. Hillsboro Group, Inc. is a financial services holding company that has identified a NYSE and an NASD broker dealer with whom they are in final discussions to acquire subject to final approval of all regulatory bodies. The Company will offer a variety of services for institutional investors and growth companies. Subsidiaries of Hillsboro Group, Inc. together will comprise a full-service investment bank and institutional securities firm focused on the small to middle markets. Hillsboro will offer financial advisory, capital raising, mergers and acquisitions, and restructuring services to small and mid-cap companies. The firm will provide outstanding trade execution in the equity markets, as well as fundamental research and asset management capabilities to institutional investors. * BOOK REVIEW: Risk, Uncertainty and Profit ------------------------------------------- Author: Frank H. Knight Publisher: Beard Books Softcover: 381 pages List Price: $34.95 Review by Gail Owens Hoelscher Order your personal copy today at http://www.amazon.com/exec/obidos/ASIN/1587981262/internetbankrupt The tenets Frank H. Knight sets out in this, his first book, have become an integral part of modern economic theory. Still readable today, it was included as a classic in the 1998 Forbes reading list. The book grew out of Knight's 1917 Cornell University doctoral thesis, which took second prize in an essay contest that year sponsored by Hart, Schaffner and Marx. In it, he examined the relationship between knowledge on the part of entrepreneurs and changes in the economy. He, quite famously, distinguished between two types of change, risk and uncertainty, defining risk as randomness with knowable probabilities and uncertainty as randomness with unknowable probabilities. Risk, he said, arises from repeated changes for which probabilities can be calculated and insured against, such as the risk of fire. Uncertainty arises from unpredictable changes in an economy, such as resources, preferences, and knowledge, changes that cannot be insured against. Uncertainty, he said "is one of the fundamental facts of life." One of the larger issues of Knight's time was how the entrepreneur, the central figure in a free enterprise system, earns profits in the face of competition. It was thought that competition would reduce profits to zero across a sector because any profits would attract more entrepreneurs into the sector and increase supply, which would drive prices down, resulting in competitive equilibrium and zero profit. Knight argued that uncertainty itself may allow some entrepreneurs to earn profits despite this equilibrium. Entrepreneurs, he said, are forced to guess at their expected total receipts. They cannot foresee the number of products they will sell because of the unpredictability of consumer preferences. Still, they must purchase product inputs, so they base these purchases on the number of products they guess they will sell. Finally, they have to guess the price at which their products will sell. These factors are all uncertain and impossible to know. Profits are earned when uncertainty yields higher total receipts than forecasted total receipts. Thus, Knight postulated, profits are merely due to luck. Such entrepreneurs who "get lucky" will try to reproduce their success, but will be unable to because their luck will eventually turn. At the time, some theorists were saying that when this luck runs out, entrepreneurs will then rely on and substitute improved decision making and management for their original entrepreneurship, and the profits will return. Knight saw entrepreneurs as poor managers, however, who will in time fail against new and lucky entrepreneurs. He concluded that economic change is a result of this constant interplay between new entrepreneurial action and existing businesses hedging against uncertainty by improving their internal organization. Frank H. Knight has been called "among the most broad-ranging and influential economists of the twentieth century" and "one of the most eclectic economists and perhaps the deepest thinker and scholar American economics has produced." He stands among the giants of American economists that include Schumpeter and Viner. His students included Nobel Laureates Milton Friedman, George Stigler and James Buchanan, as well as Paul Samuelson. At the University of Chicago, Knight specialized in the history of economic thought. He revolutionized the economics department there, becoming one the leaders of what has become known as the Chicago School of Economics. Under his tutelage and guidance, the University of Chicago became the bulwark against the more interventionist and anti-market approaches followed elsewhere in American economic thought. He died in 1972. ********* 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 ***