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/raid1/www/Hosts/bankrupt/TCR_Public/030918.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, September 18, 2003, Vol. 7, No. 185 Headlines ACTERNA CORP: Plan Filing Exclusivity Extended Until December 31 ADVANCE AUTO: S&P Ups Corporate Credit Rating One Notch to BB AFC ENTERPRISES: Will Publish Mid-Quarter Update for Q3 Friday AIR CANADA: Request Court to Fix November 15 Claims Bar Date ALAMOSA: Planned Debt Restructuring Prompts S&P to Lower Ratings ALLIANCE COMMS: Wants to Continue Hiring Ordinary Course Profs. AM COMMS: Has Until October 4 to File Schedules & Statements AMERCO: Wants Go-Signal to Assume 2 Imperial Finance Agreements AMES: Court Fixes Uniform Monroeville Property Bidding Protocol APARTMENT INVESTMENT: Board Declares Preferred Stock Dividends APARTMENT INVESTMENT: Tom Novosel Steps Down as SVP and CAO APOGENT TECHNOLOGIES: Commences Tender Offer for 8% Senior Notes APPLICA INC: Expects September Quarter Sales to Trail Estimates AURORA FOODS: Continues Financial Restructuring Negotiations AVALON HOTEL: Paul Brenneke-Led Investor Group Takes Over Avalon AZCO MINING: PricewaterhouseCoopers Resigns as Accountants AZTEC CRANE CORPORATION: Case Summary & 11 Unsecured Creditors BAC SYNTHETIC: Class D & E Floating-Rate Notes Get D Ratings BGR CORP: Taps Epstein Weber to Replace Sellers & Anderson BMC INDUSTRIES: Banks Further Extend Waiver Until November 14 BURLINGTON INDUSTRIES: ASM Capital Buys 12 Claims Totaling $1.3M CALYPTE: Receives LOI for $4MM Purchase Order from World Vision CHART INDUSTRIES: Emerges from Prepack. Bankruptcy Proceedings CENTRAL UTILITIES: Files for Chapter 11 Protection in E.D. Texas CENTRAL UTILITIES: Case Summary & 7 Largest Unsecured Creditors CHIPPAC INC: Will Publish Third-Quarter Results on October 29 CONE MILLS: WL Ross Offers to Purchase All of Company's Assets CONE MILLS: S&P Drops Rating to D After Interest Nonpayment CONSECO FINANCE: US Bank and Wells Want to Alter Financing Pacts CONSECO: S&P's CCC+ Counterparty Credit Rating on Watch Positive CONSTELLATION BRANDS: Will Publish Q2 Results by Month-End COVANTA ENERGY: Court Approves Mezerhane et al., Settlement Pact DELTA FIN'L: Calls Morrison's Countersuit "Completely Baseless" ENRON CORP: Seeks Go-Signal to Terminate Employee Benefits Trust EQI FINANCING: Fitch Rates Class C Bonds at Speculative Level EXIDE TECHNOLOGIES: Court Approves Amended Disclosure Statement FURR'S RESTAURANT: Texas Court Confirms Plan of Reorganization GENERAL DATACOMM: Emerges from Bankruptcy Proceedings GENERAL DATACOMM: Implements One-for-Ten Reverse Stock Split GMAC COMM'L: Fitch Takes Rating Actions on Series 1999-C1 Notes HARVEST NATURAL: Inks Pact to Sell 34% Interest in LLC Geoilbent IMPERIAL PLASTECH: Court Extends CCAA Protection Until Nov. 30 INT'L ISOTOPES: Completes Shareholder Rights Offering IVACO INC: Commences Restructuring Under CCAA in Ontario IVACO: Steelworkers Will be Involved in Company's Restructuring KB HOME: Third Quarter Results Reflect Significant Improvement KMART CORP: Secures Court Clearance for JDA Settlement Agreement KNOWLES ELEC.: S&P Revises Outlook to Positive over Refinancing LENNAR CORP: Reports Improved Third Quarter 2003 Performance LTWC CORP: Ex-Auditor BDO Seidman Airs Going Concern Uncertainty MAGELLAN HEALTH: Wants to Reject New York Regional Center Lease MET-COIL SYSTEMS: Wants Court to Fix November 14 Claims Bar Date METRIS COMPANIES: Consummates Sale of $590 Million Portfolio METRIS COS.: Replaces $610 Million ABS Debt from Metris Master MILLER INDUSTRIES: NYSE Accepts Plan to Meet Listing Guidelines MIRENCO INC: Hires Stark Winter as New Independent Accountants NORSTAN INC: August 2 Working Capital Deficit Tops $18 Million NORTHWESTERN CORP: Receives Court Approval of First Day Motions NRG ENERGY: Stone & Shaw Constructors Want Examiner Appointed OHIO CASUALTY: CEO Will Present at Morgan Stanley Conference OWENS-ILLINOIS: Building Glass Container Plant in Windsor, Colo. PACIFIC GAS: Reaches Rate Case Settlement with Consumer Groups PATCH SAFETY: Initiates Financial and Management Restructuring PCS RESEARCH: Shoos-Away Grant Thornton and Hires Peterson & Co. PG&E NATIONAL: Court Okays Whiteford Taylor as Local Counsel PHOTOCHANNEL: Closes $2.7MM Private Placement of Common Shares PILLOWTEX: Court Okays Proposed De Minimis Asset Sale Protocol PRIMUS TELECOMMS: Redeeming $33.6 Million of 11.75% Senior Notes QUIN-T CORP: Unknown Creditors' Claims Bar Date Set for Sept. 26 ROMNET SUPPORT: Company to be Sold at Public Foreclosure Sale SAFETY-KLEEN: Sale of Waste Facilities to Energis for $5M Okayed SEMCO ENERGY: Inks Definitive Pact to Sell Alaska Pipeline Co. SFMB ACQUISITION: October 3, 2003 Fixed as Claims Bar Date SMART & FINAL INC: Divests Food & Supply Merchant Repositions SPIEGEL GROUP: Independent Examiner Discloses Irregularities STOCKHORN CDO: S&P Ratchets Class E Notes Rating to BB- from BB SUREBEAM: Names Terrance Bruggeman New Chief Executive Officer TITAN: Acquisition by Lockheed Spurs S&P to Keep Ratings Watch TRICO MARINE: Completes Asset Sale to Enhance Liquidity Position TRICO MARINE: S&P Says Ratings Unaffected by Sale of Vessels TWINLAB CORP: Seeks Nod to Tap P.J. Solomon as Investment Banker UNITED AIRLINES: Court Approves Implementation of Selective KERP US FLOW CORP: Look for Schedules and Statements by October 12 U.S. WIRELESS DATA: Secures $2.75-Mill. Bridge Loan from Brascan VIRCO MFG. CORP: Wells Fargo Waives Second Quarter Covenants WARNACO GROUP: Third Point Management Discloses 5% Equity Stage WEIRTON STEEL: Solid Waste Demands Decision on Disposal Contract WICKES INC: Nasdaq Will Delist Shares from SmallCap Market W.R. GRACE: Montana Dist. Court Orders Debtor to Pay $54.5 Mill. * Unions Propose Protection for Workers of Bankrupt Companies * DebtTraders' Real-Time Bond Pricing ********* ACTERNA CORP: Plan Filing Exclusivity Extended Until December 31 ---------------------------------------------------------------- Acterna Corp., and its debtor-affiliates obtained approval from the Court to extend their Exclusive Periods. The Debtors have the exclusive right to file a Plan until December 31, 2003, and the exclusive right to solicit acceptances of that Plan from creditors until February 28, 2004. The Debtors have filed a reorganization plan and disclosure statement on August 4, 2003. But out of abundance of caution, the Debtors believe that the current deadline to present a plan should be extended should the Plan not be confirmed or be confirmed but not effective. (Acterna Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADVANCE AUTO: S&P Ups Corporate Credit Rating One Notch to BB ------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on Advance Auto Parts, Inc. and Advance Stores Co. Inc. (the primary operating subsidiary). The corporate credit rating was raised to 'BB' from 'BB-'. The outlook is positive. Approximately $532 million of debt is affected by this action. "The upgrade reflects Advance Auto's continued improvement in operating performance and reduced debt levels that has led to improved credit protection measures," said Standard & Poor's credit analyst Patrick Jeffrey. The integration of Discount Auto Parts has continued to go well, with the full integration of non- Florida stores completed and systems and re-merchandising initiatives in the Florida stores accomplished. Standard & Poor's believes Advance Auto will continue to generate significant free cash flow in future years that should result in further debt level reductions and improved credit protection measures. The ratings on Roanoke, Virginia-based Advance Auto Parts and its primary operating subsidiary, Advance Stores, reflect the company's aggressive acquisition history and somewhat high leverage. These risks are mitigated by Advance's leading position in the auto supply retail segment, improved operating performance in the past two years, and its success in integrating previous acquisitions. Liquidity is provided by a $160 million revolving credit facility, most of which was available as of July 12, 2003, and cash of about $46 million as of July 12, 2003. Advance is also expected to continue to generate significant free cash flow in future years. In April 2003, the company refinanced its subordinated debt and senior discount notes with bank debt. While this structure increases annual bank loan amortization somewhat, these maturities are expected to be funded through internally generated cash flow and borrowings under the revolving facility. AFC ENTERPRISES: Will Publish Mid-Quarter Update for Q3 Friday -------------------------------------------------------------- AFC Enterprises, Inc. (Nasdaq: AFCE), the franchisor and operator of Popeyes(R) Chicken & Biscuits, Church's Chicken(TM), Cinnabon(R) and the franchisor of Seattle's Best Coffee(R) in Hawaii, on military bases and internationally, announced that its mid-quarter business update for the third quarter 2003 will be released before the market opens on Friday, September 19, 2003. The 2003 mid-quarter business update will focus on AFC's performance in the first two periods of the third quarter 2003, which concluded on September 7, 2003, in addition to providing an overall update on the business. AFC Enterprises, Inc. is the franchisor and operator of 4,006 restaurants, bakeries and cafes as of July 14, 2003, in the United States, Puerto Rico and 35 foreign countries under the brand names Popeyes(R) Chicken & Biscuits, Church's Chicken(TM), Cinnabon(R) and the franchisor of Seattle's Best Coffee(R) in Hawaii, on military bases and internationally. AFC's primary objective is to be the world's Franchisor of Choice(R) by offering investment opportunities in highly recognizable brands and exceptional franchisee support systems and services. AFC Enterprises had system-wide sales of approximately $2.7 billion in 2002 and can be found on the World Wide Web at http://www.afce.com * * * As reported in Troubled Company Reporter's September 1, 2003 edition, Moody's Investors Service lowered all ratings of AFC Enterprises: * $275 million secured credit facility rating to B1 from Ba2, * Senior implied rating to B1 from Ba2, and the * Long-term issuer rating to B2 from Ba3. With approximately $275 million of debt affected, all ratings remain under review for possible further downgrade. AIR CANADA: Request Court to Fix November 15 Claims Bar Date ------------------------------------------------------------ Air Canada and its debtor-affiliates ask Mr. Justice Farley to establish guidelines for the filing of claims against their estates. These claims will then be determined for voting and distribution purposes under a Plan of Arrangement that the Applicants will present. While the Applicants have not yet filed a Plan with the Court, they believe that the establishment and commencement of a claims process for creditors will expedite their restructuring process. Murray A. McDonald, President of Ernst & Young Inc., the Court- appointed monitor, informs Mr. Justice Farley that the Applicants are currently unable to estimate the value of claims, which will be filed as there are numerous issues to be encountered with respect to the nature and valuation of such claims. Undertaking the process of calling for, reviewing and ultimately determining the universe of claims will allow the Applicants to move the development of the Plan and the determination of the value of creditors' claims in parallel. "Ultimately this will permit the Applicants to establish a timetable for voting on a Plan, which provides a reasonable opportunity for the creditors and other stakeholders to review and discuss the Plan as required while avoiding any undue delay as a result of the time required to ultimately determine the value of creditors' claims. In addition, having this information available to the Applicants earlier in the process of developing its Plan will allow a more refined Plan to be initially developed and presented," Mr. McDonald says. Mr. McDonald relates that the claims process will establish the claims against the Applicant as at April 1, 2003 as well as claims arising out of the repudiation or termination by an Applicant of contract, leases or any other such agreements after April 1, 2003. The Applicants expect that Pre-Filing Claims may be received from: * Trade Creditors -- Preliminary analysis conducted to date by the Applicants suggest that they owe $350,000,000 to 7,000 creditors who supplied goods and services before April 1, 2003; * Lenders/Bondholders -- The Applicants' records indicate that the amount of outstanding bank, bond or other indebtedness is $4,200,000,000 including $1,300,000,000 of claims that may be subordinated to some or all of the other unsecured claims depending on legal interpretation; * Employees -- There are currently numerous grievances filed by the Applicants' employees or unions relating to claims which existed or events which occurred before April 1, 2003. Certain of these grievances date as far back as 1981. Currently, the Applicants and their labor unions have not agreed on an alternative process to resolve these outstanding grievances. The Applicants expect that grievances arising before April 1, 2003 will be treated similarly to any other claims against them that arise before April 1, 2003 and that the Pre-Filing Claims will be filed in accordance with the proposed process. However, in the event a consensual resolution of these issues is reached, the Applicants note that there is adequate time to seek approval of such settlement from the Court before the proposed deadline for filing claims; and * Litigants -- There are numerous litigation type claims outstanding against the Applicants relating to issues arising on or before April 1, 2003. The Applicants have insurance in place with respect to some of the claims, but not all. The Applicants expect that claims will be filed for all non-insured litigation. As many of these claims are in the preliminary stages, the Applicants, however, cannot estimate the potential value of these claims. The Applicants expect that Restructuring Claims may be received from numerous creditors, including, in particular: * Aircraft Lessors -- The Applicants have undertaken an extensive process involving the repudiation or renegotiation of aircraft leases with a view to reducing aircraft leasing costs to current market rates. As the renegotiation process is still ongoing, the Applicants are unable to estimate the value of the Restructuring Claims they expect to receive in respect of these renegotiations at the current time. They, however, expect the total claim amount to be significant; * Trade Suppliers/Real Property Lessors -- The Amended and Restated Initial CCAA Order provides that the Applicants may terminate premises leases or terminate arrangements or agreements in the course of their restructuring and deal with the consequences in the Plan. The Applicants have and continue to work through the process of reviewing all of their existing contracts, leases and agreements to determine whether there are opportunities to reduce the cost base. As a result, the Applicants have terminated several contracts and renegotiated several others. This review process is still ongoing. The Applicants are unable to estimate the value of Restructuring Claims which may be filed in connection with these repudiations and renegotiations; and * Employees -- The Applicants negotiated amendments to their collective agreements under the Court-supervised mediation process directed by Mr. Justice Warren Winkler, which allowed them to reduce future labor costs. The Applicants may receive Restructuring Claims from certain employees with respect to these concessions. If those claims are filed, the Applicants will review the claims together with their counsel and the Monitor, to determine the validity and to estimate the value of such claims. Creditors holding these claims are excluded from filing any proof of claim: (a) Claims secured by the "Administration Charge", the "CCAA Lender's Charge", the CIBC charge, and the "Directors' Charge" in accordance with the Amended and Restated Initial CCAA Order; (b) that portion of a claim arising from a cause of action for which the Applicants are fully insured; (c) claims which are the subject of a deemed trust created pursuant to the Pension Benefits Standards Act, 1985, R.S.C. 1985, c.32 (Second Supplement); and (d) any other claim which is designated as an Excluded Claim by the Plan or any Court order. In the past, normal practice in a CCAA restructuring has been to include material calling for the submission of proofs of claim with the Plan when the information circular was distributed to stakeholders. In Air Canada's case, however, Mr. McDonald maintains that there is a significant benefit to calling for claims from the creditors in parallel with the formulation of the Plan. The large number of creditors and the complexity of the issues expected to be encountered in respect of these claims suggest that it may take a significant period of time to review and value claims. The delay associated with not undertaking a call for claims until the Plan is distributed could result in an unusually long time period between the filing of the Plan and the creditors' meetings held to consider and vote on the Plan. Notice To File Claims The Applicants propose that any creditor asserting a claim which arose on or before September 17, 2003 be required to file a proof of claim with the Monitor before 5:00 p.m. on November 15, 2003. The Applicants will propose a supplemental deadline for filing claims arising after September 17, 2003 at a later date. Known creditors will be notified of the requirement to file proofs of claim before November 15, 2003 by these means: (a) The Applicants will distribute proof of claim forms and related instructions and filing information by regular mail to all known creditors, other than employees, no later than September 30, 2003; (b) The Applicants will send a copy of the Proof of Claim Package to the counsel of each union no later than September 30, 2003. The unions will then coordinate the copying, distribution, completion and filing of a Proof of Claim for each represented employee; (c) The Applicants will send a notice by September 22, 2003 to each party identified to them by the Canadian Depository for Securities Limited and the Depository Trust and Clearing Corporation as holding securities issued by an Applicant as of August 31, 2003. The Notice will advise the CDS/DTC Participant of the Applicants' CCAA proceedings and request the CDS/DTC Participant to provide information regarding its clients for whose account it held securities of an Applicant: (1) The full name of the client; (2) The type of security beneficially owned by the client as of August 31, 2003; (3) The face value of the securities beneficially owned by the client on August 31, 2003; (4) The full mailing address of the client; and (5) The telephone number and facsimile number of the client, if known. The Applicants will not request information with respect to clients who have specifically provided written instructions to the CDS/DTC Participant not to disclose personal information. Nevertheless, the Applicants will require the CDS/DTC Participant to disclose the total number of Protected Clients and the types and face value of securities the Protected Clients held as of August 31, 2003. The Applicants will then send a Proof of Claim Package to each client identified by a CDS/DTC Participant by ordinary mail as soon as practicable and send to each CDS/DTC Participant a Proof of Claim Package for each Protected Client identified by the CDS/DTC Participant. The CDS/DTC Participant will forward the Package to the Protected Clients; (d) The Applicants will place notices addressed to all potential creditors in major newspapers including The Globe and Mail (National Edition), The National Post, La Presse (a French translation) and The Wall Street Journal (National Edition) on two separate days; (e) The Applicants will post a notice addressed to 6-3/8% DM 200,000,000 Interest Adjustible Subordinated Bonds 1987ff, 6-5/8% DM 200,000,000 Bearer Bonds of 1998/2005 and 10% EUR 150,000,000 Bearer Bonds of 2001/2006 before September 30, 2003 in the Federal Gazette (Bundesanzeiger) of the Federal Republic of Germany; (f) The Applicants will post a notice addressed to 10.25% Euro 200,000,000 Senior Notes before September 30, 2003 in the Luxembourg Wort; (g) The Applicants will post a copy of the Proof of Claim Package on their website and that of their counsel from September 22, 2003 until the first date approved by the Court for meetings of their creditors; (h) The Applicants will post a notice on their internal employee Intranet advising employees of where to obtain a copy of the Proof of Claim Package; and (i) The Monitor will send a copy of the Proof of Claim Package, by ordinary mail, as soon as practicable after receipt of a request for a package, to any person claiming to be a creditor and requesting such material before the November 15, 2003 Bar Date. Submission and Review of Claims Creditors will be asked to submit their proofs of claim to the Monitor. The Monitor will supervise the receipt, collection and examination of claims with the assistance of the Applicants. In consultation with the Applicants and its counsel, the Monitor may: (i) admit any claim in its entirety; (ii) revise the claim for voting or distribution purposes; or (iii) disallow the claim for voting or distribution purposes. Creditors whose claims have been revised or disallowed will receive a "Notice of Revision or Disallowance". Notices of Revision or Disallowance with respect to Claims arising by September 17, 2003 will be distributed by the Monitor no later than 35 days before the date set for the meetings of creditors. Creditors who intend to dispute a Notice of Revision or Disallowance must deliver a Dispute Notice to the Monitor within ten days of the Notice of Revision or Disallowance. Upon receipt of a Dispute Notice, the Monitor, in consultation with the Applicants, may attempt to consensually resolve the issue with the creditor or deliver a copy of the Creditor's Dispute Notice to a supervising claims officer to be appointed by the Applicants. ACPA Objects The claims procedure is not acceptable to the Air Canada Pilots Association. Richard B. Jones, Esq., at Jones, Rogers LLP, in Toronto, Ontario, explains that the proposed claims procedure has important areas in which the rights of creditor claimants are left quite ambiguous. Mr. Jones asserts that the Claims Procedure will require careful study, comment and communication between the Applicants and the ACPA before it can be settled in proper form. The proposed procedures profoundly affects the rights of all creditors of Air Canada and their comments must be reflected in it. (Air Canada Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) ALAMOSA: Planned Debt Restructuring Prompts S&P to Lower Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Alamosa Holdings Inc. (an affiliate of Sprint PCS) and related entities following the company's announcement of its financial restructuring plan. All ratings for Alamosa were placed on CreditWatch with negative implications. The corporate credit rating on Alamosa is 'CC'. The actions are based on Alamosa's proposed financial restructuring plan, which includes an offer to exchange $650 in new senior notes and $250 in convertible preferred stock for $1,000 in accreted value of all of the company's existing bonds. The deal also proposes a prepackaged Chapter 11 reorganization plan that would be executed if at least 97% of bondholders do not consent to the exchange offering. In the event of a Chapter 11 reorganization, bondholders are expected to receive the same consideration as in the previously described exchange offer. "Because the consideration being offered by the company in exchange for the existing debt represents a discount to its accreted value, Standard & Poor's would view completion of the deal as a distressed exchange and tantamount to a default on original debt issue terms," explained credit analyst Eric Geil. "The company's intent to execute a prepackaged Chapter 11 reorganization in order to effect the exchange offer increases the distressed characteristics of the transaction." Upon completion of the exchange offering, the corporate credit rating on Alamosa will be lowered to 'SD', denoting a selective default, and the senior unsecured debt ratings will be lowered to 'D'. Subsequent to the selective default or bankruptcy filing, Standard & Poor's expects to reassign the 'CCC+' corporate credit rating because of weak wireless business conditions, despite the planned $240 million debt reduction. ALLIANCE COMMS: Wants to Continue Hiring Ordinary Course Profs. --------------------------------------------------------------- Alliance Communications, Inc., and its debtor-affiliates are seeking approval from the U.S. Bankruptcy Court for the District of Delaware to continue the employment of the professionals they utilize in the ordinary course of their businesses. The Debtors' ability to facilitate continued effective business operations under Chapter 11 protection, allowing the Debtors to effectuate the sale of the Alliance LP Assets and secure the confirmation of the Prepackaged Plan is dependent, in large part, upon the uninterrupted supply of services furnished by the ordinary course professionals who supply services beyond the scope of Chapter 11 counsel. For instance, the Debtors have ordinary course needs for small but distinctive areas of legal advice; such as, corporate legal advice, advice on the Federal Communications Commission (FCC) and for the prosecution of bad check cases and other routine minor matters. The Debtors are concerned that some of the ordinary course professionals may either refuse or be unable to do business with them following the filing of these Chapter 11 cases unless the amounts owed to the ordinary course professionals are paid on a timely basis. If the Debtors are not able to secure the uninterrupted supply of these services, their efforts at continuing effective business operations in order to sell the Alliance LP Assets will be severely handicapped or permanently undermined to the significant detriment of the Debtors, their estates and their creditors. The Debtors have identified about: a) $30,000 in expenses that may need to be paid to B&H LLP, an ordinary course professionals that provide corporate advice to the Debtors; b) $20,000 in expenses that may need to be paid to Cole Raywird who provides FCC advice to the Debtors; and c) $15,000 in expenses that may need to be paid to local counsel for the prosecution of minor debt collection cases and other routine matters during the Chapter 11 process in order to assure the Debtors of their ability to continue to operate their businesses. Headquartered in Denver, Colorado, Alliance Communications, LLC is a cable television operator. The Company filed for chapter 11 protection on September 8, 2003 (Bankr. Del. Case No. 03-12776). William David Sullivan, Esq., at Elzufon Austin Reardon Tarlov & Mondell PA represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets of more than $50 million and debts of over $100 million. AM COMMS: Has Until October 4 to File Schedules & Statements ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware gave AM Communications and its debtor-affiliates an extension to file their schedules of assets and liabilities, statements of financial affairs and lists of executory contracts and unexpired leases required under 11 U.S.C. Sec. 521(1). The Debtors have until October 4, 2003, to file their Schedules of Assets and Liabilities and Statements of Financial Affairs. Headquartered in Quakertown, Pennsylvania, AM Communications, Inc., and its debtor-affiliates provide services to the television, cable and wireless industry, their services include installation and maintenance of television lines and wireless systems in the Northeastern and Southeastern parts of the U.S. The Company filed for chapter 11 protection on August 28, 2003 (Bankr. Del. Case No. 03-12689). Steven M. Yoder, Esq., Neil B. Glassman, Esq., and Christopher A. Ward, Esq., at The Bayard Firm represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $29,886,155 in total assets and $25,641,048 in total debts. AMERCO: Wants Go-Signal to Assume 2 Imperial Finance Agreements --------------------------------------------------------------- In April 2003, Amerco and U-Haul International, Inc., entered into two premium finance agreements with Imperial Premium Finance, Inc. Under the Premium Finance Agreements, Amerco financed $23,436,835 in insurance premiums for the policies, payable in nine combined monthly installments equal to $2,647,474 from May 1, 2003 through January 1, 2004. As of the Petition Date, Amerco was current in its payment obligations under the Premium Finance Agreements, and has remained current postpetition. Pursuant to Section 365 of the Bankruptcy Code, the Debtors ask the Court to: (a) authorize Amerco's assumption of the two Premium Finance Agreements with Imperial; (b) grant Imperial the right to cancel the Premium Finance Agreements in the event that Amerco does not make timely payments under the Premium Finance Agreements; (c) grant Imperial a security interests in all rights, title and interest to the Policy; and (d) authorize Amerco to enter into similar premium finance arrangements with Imperial as the need for insurance premium financing arises in the ordinary course of the Debtors' businesses. Bridget R. Peck, Esq., at Beesley, Peck & Matteoni, Ltd., in Reno, Nevada, contends that Amerco's assumption of the Premium Finance Agreements will not subject any of the Debtors' creditors to economic risks of a nature different than those that have previously been accepted because all creditors know, or should know, that Amerco is subject to extensive business insurance requirements, and the Premium Finance Agreements are merely a mechanism to finance those insurance costs. Indeed, if Amerco were to discontinue payments under the Premium Finance Agreements -- thereby risking cancellation of the Policies, its business operations and by extension, its creditors, would be subjected to far greater risks than any risk associated with Amerco's request. In addition, Ms. Peck argues that: (a) The risk that any creditor will be prejudiced by Amerco's continued payment under the Premium Finance Agreements is remote as Amerco's obligations arising under the Premium Finance Agreements are small compared to the total amount of its outstanding indebtedness; (b) It is neither uncommon nor unusual for companies like Amerco and U-Haul to enter into insurance premium financing arrangements as a cost-spreading measure to ensure the maintenance of adequate business insurance coverage to conduct their business operations; (c) The Debtors does not believe that the Premium Finance Agreements contain any terms that are unusual in these types of transactions, as they were negotiated between the parties at arm's length; and (d) Amerco relies heavily on the ability to obtain, and therefore to finance, sufficient insurance coverage from time to time in the ordinary course of its business operations. (AMERCO Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMES: Court Fixes Uniform Monroeville Property Bidding Protocol --------------------------------------------------------------- At the Ames Department Stores Debtors' request, the Court requires any party wishing to submit a higher and better offer for the Monroeville Property to deliver its bid in writing to: (1) The Debtors' co-bankruptcy counsel ---------------------------------- Togut, Segal & Segal LLP, One Penn Plaza, New York, New York, 10119, Attention: Neil Berger, Esq. (2) The Debtors ----------- Ames Department Stores 40 Cold Spring Road, Rocky Hill, Connecticut 06067, Attention: Mr. Rolando de Aguiar (3) Counsel for PDMS ---------------- Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A., Towers at Erieview, Suite 2600, 1301 East Ninth Street, Cleveland, Ohio 44114, Attention: Richard S. Rivitz, Esq. (4) Counsel for the Committee ------------------------- Otterbourg Steindler Houston & Rosen, P.C., 230 Park Avenue, New York, New York 10169, Attention: Scott L. Hazan, Esq. (5) Counsel for KIMCO ----------------- Morgan Lewis & Bockius LLP 101 Park Avenue, 46th Floor, New York, New York 10178-0060, Attention: Neil Herman, Esq. (6) Counsel for the IDA ------------------- George Young, Esq., 633 Long Run Road, McKeesport, Pennsylvania 15132 (7) Counsel for Prudential ---------------------- Alston & Bird, LLP, 1201 West Peachtree Street, Atlanta, Georgia 30309, Attention: Steven D. Collier, Esq. (8) Everest ------- Westgate Corporate Center, 477 Martinsville Road, Liberty Center, New Jersey 07938, Attention: Richard E. Buckley, Esq. (9) The Easement Party ------------------ Monroeville Zamagias Limited Partnership, 336 Fourth Avenue, The Times Building, Pittsburgh, Pennsylvania 15222, Attention: Marcus Zamagias All bids must be received not later than 5:00 p.m. on September 23, 2003. The Court also rules that only qualified bids will be eligible to participate in the Auction on September 25, 2003. A qualified bid must: (a) be on substantially the same terms as contained in the Purchase Agreement, other than the $1,700,000 purchase price; (b) exceed the purchase price recited in the Purchase Agreement by at least $134,000; (c) be accompanied by a certified check or money order payable to, or complete a wire transfer of funds to, Togut, Segal & Segal LLP, as attorneys for the Debtors, which is equal to 10% of the purchase price of the bid, to be held in escrow and be: * applied toward the purchase price if the bid is approved by the Court and automatically deemed non-refundable; * retained by the Debtors if the sale is approved by the Court, but the successful Bidder fails to timely close; * refunded in full after the 11th day following the Sale Hearing if the bid is not approved, unless that bid is the second highest and best bid, as determined by the Debtors, in which case the Deposit will be refunded one business day after the closing on the sale of the Property to the successful Bidder; or * utilized for the Break-Up Fee payment to PDMS as authorized by the Court; (d) remain open and irrevocable until 11 days following the Sale Hearing, and the second highest and best bid will remain open and irrevocable until a closing on the sale of the Property, so that it may be accepted and consummated subject to an appropriate Court order if the bid selected and approved by the Court at the Sale Hearing is not consummated; (e) provide for the closing to occur not later than 15 days after the Court enters an order authorizing the sale of the Property to the successful Bidder; (f) contain proof of the bidder's financial capability to pay the balance of the purchase price approved by the Court to the reasonable satisfaction of the Debtors; and (g) be considered a "firm bid" and not contain any due diligence or financial contingencies, or any material contingencies or conditions precedent other than those set forth in the Purchase Agreement. The Court directs that, after the initial offers, all bidding at the Auction by Qualified Bidders will proceed in increments of at least $50,000, provided that following the commencement of the Auction, the Debtors, in consultation with Kimco and the Committee, may vary the amount of the Subsequent Bid Increment as necessary or desirable for their estates. (AMES Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 609/392-0900) APARTMENT INVESTMENT: Board Declares Preferred Stock Dividends -------------------------------------------------------------- Apartment Investment and Management Company (NYSE: AIV) a Denver- based owner and operator of apartment communities, announced that its Board of Directors has declared dividends on its Class D, G and T Cumulative Preferred Stock and on its Class P Convertible Cumulative Preferred Stock. Dividend information follows: Class of Beginning of End of Per Share Preferred Stock Dividend Period Dividend Period Dividend Declared --------------- --------------- --------------- ---------- 8-3/4% Class D Preferred July 15, 2003 October 14, 2003 $0.546875 9-3/8% Class G Preferred July 15, 2003 October 14, 2003 $0.5859375 8% Class T Preferred July 31, 2003 October 14, 2003 $0.4167 9% Class P Preferred July 15, 2003 October 14, 2003 $0.5625 Dividends on shares of Class D, G and T Cumulative Preferred Stock and Class P Convertible Cumulative Preferred Stock are payable on October 15, 2003 to shareholders of record on October 1, 2003. Aimco (S&P, BB+ Corporate Credit Rating, Stable) is a real estate investment trust headquartered in Denver, Colorado owning and operating a geographically diversified portfolio of apartment communities through 19 regional operating centers. Aimco, through its subsidiaries, operates approximately 1,760 properties, including approximately 313,000 apartment units, and serves approximately one million residents each year. Aimco's properties are located in 47 states, the District of Columbia and Puerto Rico. Aimco common stock is included in the S&P 500. APARTMENT INVESTMENT: Tom Novosel Steps Down as SVP and CAO ----------------------------------------------------------- Apartment Investment and Management Company (NYSE: AIV) announced that Tom Novosel, senior vice president and chief accounting officer, has resigned effective September 15, 2003. Mr. Novosel has chosen to return to Chicago, in order to live closer to his children, and return to public accounting. Mr. Novosel will be joining the firm BDO Seidman LLP. "Tom made significant contributions while at Aimco, and we are sorry to see him go," said Terry Considine, Aimco's chairman and chief executive officer. "We wish him the best in his new endeavor and understand the priority of family." Aimco is actively engaged in a search to fill the chief accounting officer position. In the interim, Aimco's corporate controllers will report to Paul McAuliffe, Aimco's chief financial officer. Aimco (S&P, BB+ Corporate Credit Rating, Stable) is a real estate investment trust headquartered in Denver, Colorado owning and operating a geographically diversified portfolio of apartment communities through 19 regional operating centers. Aimco, through its subsidiaries, operates approximately 1,760 properties, including approximately 313,000 apartment units, and serves approximately one million residents each year. Aimco's properties are located in 47 states, the District of Columbia and Puerto Rico. Aimco common stock is included in the S&P 500. APOGENT TECHNOLOGIES: Commences Tender Offer for 8% Senior Notes ---------------------------------------------------------------- Apogent Technologies Inc. (NYSE: AOT) commenced a cash tender offer and consent solicitation for all of its $325 million principal amount of 8% Senior Notes due 2011. Under the terms of the tender offer, Apogent is offering to purchase the Notes at a price for each $1,000 principal amount tendered equal to the present value on the early settlement date of the principal and interest that would accrue until maturity, determined by reference to a fixed spread of 100 basis points over the bid-side yield to maturity of the 4.25% United States Treasury Note due August 15, 2013, minus the $30.00 consent payment described below. The pricing of the tender offer is expected to occur on Thursday, September 25, 2003 at 2:00 p.m., New York City time. The tender offer will expire at 5:00 p.m., New York City time on October 15, 2003, unless extended by Apogent. In conjunction with the tender offer, Apogent is soliciting consents from holders of the Notes to eliminate certain restrictive covenants and events of default under the Indenture and the Notes, as further detailed in the Offer to Purchase and Consent Solicitation Statement dated September 16, 2003. Any holder who tenders Notes pursuant to the tender offer must also deliver a consent to the proposed amendments to the Indenture. Holders who validly tender their Notes pursuant to the tender offer will be deemed to have delivered their consents by such tender. Holders who tender their Notes on or prior to 5:00 p.m., New York City time on September 25, 2003, will also be eligible to receive the consent payment, which is equal to $30.00 per $1,000 principal amount of Notes. Subject to the terms and conditions of the tender offer and the consent solicitation, holders who validly tender their Notes and thereby deliver their consents on or prior to 5:00 p.m., New York City time, on the Consent Date will be paid in respect of Notes accepted for purchase the total consideration (namely the Tender Offer Consideration and the consent payment), on the early settlement date, which is expected to be the date on or promptly after Apogent first accepts tendered Notes after the Consent Date. Subject to the terms and conditions of the tender offer and the consent solicitation, holders who validly tender their Notes after the Consent Date, but on or prior to the Expiration Date, will only be paid in respect of Notes accepted for purchase the Tender Offer Consideration on the final settlement date, which is expected to be promptly after the Expiration Date. In addition to the Tender Offer Consideration, holders whose Notes are purchased in the tender offer will also receive accrued and unpaid interest from the last interest payment date to, but not including, the applicable settlement date, payable on the applicable settlement date. Consummation of the tender offer, and payment of the Tender Offer Consideration and consent payment, is subject to the satisfaction or waiver of various conditions. The offer and the solicitation are not subject to any financing condition or minimum condition. The Company intends to use borrowings under its $500 million revolving credit facility or proceeds from a new offering of securities, together with other available funds, to fund the purchase of the Notes and the payments for consents in connection with the tender offer and the consent solicitation. Apogent's borrowing cost under the revolving credit facility is currently LIBOR plus 1.25%, which today would be equal to approximately 2.4% per annum. To the extent that borrowings under the revolving credit facility are used as the source of funds, subject to market conditions and other factors, the Company may seek to repay such borrowings with the net proceeds from a new offering of securities. Statements contained in this press release regarding the possibility of a new offering shall not constitute an offer to sell or a solicitation of an offer to buy any securities. The securities to be offered in any new offering may not be registered under the Securities Act of 1933 and if so may not be offered or sold in the United States, except pursuant to an applicable exemption from such registration requirements. Lehman Brothers is acting as the sole dealer manager for the tender offer and solicitation agent for the consent solicitation. The information agent for the tender offer and consent solicitation is Georgeson Shareholder Services and the depositary is The Bank of New York. * * * As reported in Troubled Company Reporter's September 1, 2003 edition, Moody's Investors Service withdrew the Ba1 rating of Portsmouth, New Hampshire-based Apogent Technologies, Inc.'s $500 million bank credit facility maturing December 2005. In July 2003, Apogent replaced this facility with a new five-year $500 million bank credit facility maturing in 2008. The new bank credit facility maturing in 2008 is not rated. The remaining ratings of Apogent are unchanged: - Ba1 senior implied - Ba1 issuer rating - Ba1 senior unsecured notes of $325 million due 2011 - Ba1 senior unsecured convertible notes of $300 million due 2021 - Ba2 senior subordinated notes of $250 million due 2013 APPLICA INC: Expects September Quarter Sales to Trail Estimates --------------------------------------------------------------- Applica Incorporated (NYSE: APN) anticipates sales for the quarter ending September 30, 2003 will fall short of management's earlier estimates. Management now expects sales to be approximately $175 million for the third quarter. Applica also reported that it had received a cash distribution of $51.4 million related to the sale by its joint venture company, Anasazi Partners, of its equity interest in ZonePerfect Nutrition Company. The Company will use a portion of the proceeds to repurchase an additional $25 million of its 10% notes in October 2003. Applica repurchased $30 million of such notes in July 2003. Also, the Company is considering the payment of bonuses to two members of senior management involved in the transaction, which could partially offset the gain from the joint venture in the third quarter. Applica Incorporated and its subsidiaries (S&P, B+ Corporate Credit Rating, Stable) are manufacturers, marketers and distributors of a broad range of branded and private-label small electric consumer goods. The Company manufactures and distributes small household appliances, pest control products, home environment products, pet care products and professional personal care products. Applica markets products under licensed brand names, such as Black & Decker(R), its own brand names, such as Windmere(R), LitterMaid(R) and Applica(TM), and other private- label brand names. Applica's customers include mass merchandisers, specialty retailers and appliance distributors primarily in North America, Latin America and the Caribbean. The Company operates manufacturing facilities in China and Mexico. Applica also manufactures products for other consumer products companies. Additional information regarding the Company is available at http://www.applicainc.com AURORA FOODS: Continues Financial Restructuring Negotiations ------------------------------------------------------------ Aurora Foods Inc. (OTC Bulletin Board: AURF), a producer and marketer of leading food brands, reported that, based upon substantial progress made in discussions among the Company, its creditors and J.W. Childs, the Company has requested that its senior lenders and noteholders formally extend the forbearance agreements which expired in accordance with their terms on September 15, 2003. While discussions continue, none of the Company's creditors has taken any action to enforce remedies arising out of the Company's decisions to defer paying interest on its outstanding senior subordinated notes and to suspend its divestiture program. The Company continues to receive funding under its receivables facility and, as of September 15, 2003, the Company had liquidity of approximately $34 million comprised of cash and availability under the receivables facility. There also are more than 125 vendors with estimated annual purchases of $250 million who are participating in Aurora's vendor lien program and the Company believes it has sufficient liquidity to fund its operations through completion of the restructuring. As previously announced, Aurora is undertaking a comprehensive financial restructuring to reduce its outstanding indebtedness, strengthen its balance sheet and improve its liquidity. As part of the restructuring, the Company entered into a definitive agreement on July 11, 2003 with an affiliate of J.W. Childs Associates, L.P., pursuant to which J.W. Childs agreed to make a $200 million investment for a 65.6% equity interest in the reorganized Company. Since the date of the announcement of the definitive agreement with J.W. Childs, the Company has engaged, and continues to engage, in discussions with J.W. Childs, the Company's senior lenders and noteholders regarding the terms of the restructuring. The Company believes that substantial progress is being made towards consummating the restructuring. However, no assurance can be given that this progress will continue, that its discussions will lead to an agreement, that the conditions to closing the restructuring will be satisfied, or that the restructuring ultimately will be consummated. Moreover, if the restructuring is consummated, it could be consummated on terms materially different than the terms contemplated by the definitive agreement with J.W. Childs. Aurora Foods Inc., based in St. Louis, Missouri, is a producer and marketer of leading food brands, including Duncan Hines(R) baking mixes; Log Cabin(R), Mrs. Butterworth's(R) and Country Kitchen(R) syrups; Lender's(R) bagels; Van de Kamp's(R) and Mrs. Paul's(R) frozen seafood; Aunt Jemima(R) frozen breakfast products; Celeste(R) frozen pizza and Chef's Choice(R) skillet meals. More information about Aurora may be found on the Company's Web site at http://www.aurorafoods.com AVALON HOTEL: Paul Brenneke-Led Investor Group Takes Over Avalon ---------------------------------------------------------------- The Avalon Hotel & Spa on the Willamette River waterfront has been purchased by Portland developer Paul Brenneke and a group of investors, Brenneke said Tuesday. Brenneke and his investor group purchased the popular luxury hotel and spa and the adjacent Rivers Restaurant for a reported $10.6-million in a Multnomah County deed dated Sept. 11, 2003, according to Brenneke. "We are very excited about the new beginning and new management of the hotel, spa, and restaurant," said Brenneke. "This signals a very positive new day for the Avalon." According to court records, the former owners of the hotel, spa, and restaurant filed bankruptcy in Multnomah County on Sept. 15. The Avalon Hotel & Spa, located at 0455 S.W. Hamilton Court, Portland, bears the distinction of being Oregon's only member of the Small Luxury Hotels of the World. AZCO MINING: PricewaterhouseCoopers Resigns as Accountants ---------------------------------------------------------- On September 5, 2003, PricewaterhouseCoopers LLP resigned as the independent accountants for Azco Mining Inc. PWC's reports on the Company's consolidated financial statements as of and for the years ended June 30, 2002 and June 30, 2001 included a separate paragraph expressing substantial doubt regarding the ability to continue as a going concern. Azco Mining Inc., is a mining company incorporated in Delaware. Its general business strategy is to acquire, explore and develop mineral properties. The Company's principal assets are the 100% owned Black Canyon Mica Project in Arizona and an interest in the Piedras Verdes Project in Sonora, Mexico. The Company is currently focused on producing high quality muscovite mica and feldspathic sand that is produced as a by-product of mica. AZTEC CRANE CORPORATION: Case Summary & 11 Unsecured Creditors -------------------------------------------------------------- Debtor: Aztec Crane Corporation 1511 W 34th Street Houston, Texas 77018-6213 Bankruptcy Case No.: 03-42844 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Tavaero Jet Center Inc. 03-42846 Type of Business: Crane service for North-Central Texas Chapter 11 Petition Date: September 9, 2003 Court: Southern District of Texas (Houston) Judge: Karen K. Brown Debtors' Counsel: Aaron Keiter, Esq. Strother Keiter & Mulder, P.C. 4545 Mt. Vernon Houston, TX 77006-5905 Tel: 713-706-3636 Fax: 713-706-3622 Total Assets: Estimated Debts: ------------- ---------------- Aztec Crane Corporation $5,998,000 $1MM to $10MM Tavaero Jet Center $8,691,000 $100K to $500K A. Aztec Crane's Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ CIT Group Vendor $1,000,000 Financial Federal Credit, Vendor $230,000 Inc. Chase Small Business Vendor $50,000 CitiCapital Vendor $19,905 Charles O. Johnson Rent $8,750 Bank One Vendor $5,070 City of Houston $1 Lewis Crane & Hoist, Ltd. Vendor $1 B. Tavaero Jet Center's Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ City of Houston Vendor $92,066 City of Arlington Vendor $78,000 Aviall Vendor $1,023 BAC SYNTHETIC: Class D & E Floating-Rate Notes Get D Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings to 'D' on two tranches of BAC Synthetic CLO 2000-1 Ltd.'s floating-rate notes due October 2005, and removed them from CreditWatch where they were placed July 15, 2002. The ratings reflect the valuation prices of previously defaulted reference credits as well as credit deterioration in the $10 billion pool of reference credits. The notional amount of the reference pool will be reduced as a result of the defaults. The ratings also reflect the level of credit enhancement provided by subordination, BAC's ability to meet its payment obligations as issuer of the notes, and BAC's commitment to follow strict guidelines established for maintenance of the pool of reference credits. RATINGS LOWERED AND REMOVED FROM CREDITWATCH BAC Synthetic CLO 2000-1 Ltd. Class Rating To From D D CCC-/Neg E D CCC-/Neg BGR CORP: Taps Epstein Weber to Replace Sellers & Anderson ---------------------------------------------------------- The independent auditor for BGR Corporation, Sellers & Anderson, L.L.C. was dismissed by the Board of Directors on July 28, 2003. The Board of Directors approved the decision to change the Company's independent auditors. Previously, the firm of Sellers & Anderson, LLC was BGR's (formerly known as Cortex Systems Inc.) auditor of record through the quarter ended March 31, 2003. The reports of Sellers & Anderson, LLC on the financial statements of Cortex Systems Inc. contained a going concern opinion on the financial statements for the year ended June 30, 2002. The Company retained the accounting firm of Epstein, Weber & Conover, PLC to serve as independent accountants to audit its financial statements beginning with the year ended June 30, 2003. This engagement was effective July 28, 2003. BMC INDUSTRIES: Banks Further Extend Waiver Until November 14 ------------------------------------------------------------- BMC Industries, Inc. (OTCBB:BMMI) announced that its bank group has granted the company an additional 60-day waiver of required compliance with certain covenants under its credit agreement. The company's banks granted an initial two-week waiver to BMC on June 30, 2003, and a subsequent 60-day waiver on July 15, 2003, following notice by BMC to its bank group that the company expected to fall outside of compliance with certain covenants and obligations under its credit agreement as of June 30, 2003. The waiver also extends the time period for BMC to make certain scheduled principal and fee payments and further defers all interest payment obligations until November 14, 2003, the termination date of this waiver extension. The agreement defers interest totaling approximately $3.2 million, a combination of interest payments deferred to date and further interest payments coming due through November 14, 2003. The earlier agreement, subject to certain conditions, had deferred interest payments until September 15, 2003. As previously announced, the banks and the company have agreed that no additional borrowings will be extended during the waiver period. Discussions continue between BMC, its banks and the company's advisors, regarding a longer-term resolution of the situation. BMC Industries, Inc., founded in 1907, is comprised of two business segments: Optical Products and Buckbee-Mears. The Optical Products group, operating under the Vision-Ease Lens trade name, is a leading designer, manufacturer and distributor of polycarbonate and glass eyewear lenses. Vision-Ease Lens also distributes plastic eyewear lenses. Vision-Ease Lens is a technology and a market share leader in the polycarbonate lens segment of the market. Polycarbonate lenses are thinner and lighter than lenses made of other materials, while providing inherent ultraviolet filtering and impact resistant characteristics. The Buckbee-Mears group is the only North American manufacturer of aperture masks, a key component in color television picture tubes. For more information about BMC Industries, Inc., visit the company's Web site at http://www.bmcind.com BURLINGTON INDUSTRIES: ASM Capital Buys 12 Claims Totaling $1.3M ---------------------------------------------------------------- As of August 19, 2003, 12 claims against Burlington Industries, Inc., and its debtor-affiliates, have been transferred to ASM Capital Inc. aggregating $1,352,625. The Claims are: Transferor Amount ---------- ------ BB&T Factors Corp $39,091 Broach Bodle Kinley 116,431 Buffalo Color Corp 487,052 Cotswald Industries 116,431 Defender Services 45,703 Mount Vernon Mills 135,337 Poly One 107,970 Printcraft Company 14,985 Sayre Enterprises 18,010 Sherman Textile 24,785 Sulzer Textile, Inc. 219,556 Union Transport/UTI United States 27,274 --------- TOTAL $1,352,625 (Burlington Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) CALYPTE: Receives LOI for $4MM Purchase Order from World Vision --------------------------------------------------------------- Calypte Biomedical Corporation (OTC Bulletin Board: CYPT), the developer and marketer of the only two FDA approved HIV-1 antibody tests that can be used on urine samples, as well as an FDA approved serum HIV-1 antibody Western blot supplemental test, has received a letter from World Vision Africa, one of the largest NGOs (non-government organization) in Africa, outlining an intent to purchase $4 million of Calypte's urine based HIV/AIDS tests. In a letter dated September 16, 2003, Mr. Dida Guyo, Procurement Officer for World Vision's Africa Regional Office in Nairobi, Kenya, stated that World Vision Africa spends over $1 million quarterly on HIV tests and that World Vision Africa commits to change this quarterly purchase of HIV tests from the standard blood tests to Calypte Biomedical's urine based HIV/AIDS test. The purchase is contingent upon the imminent approval of Calypte's urine based tests by the Kenyan National Laboratory. Mr. Guyo stated that since the urine tests have been approved by the FDA, WHO and in neighboring Uganda, then he sees the Kenyan approval process a formality. Mr. Guyo also stated that there is strong support in Africa for non-invasive HIV/AIDS tests. Jay Oyakawa, President of Calypte stated, "We are aggressively coordinating our efforts to receive final approval from the Republic of Kenya and believe that approval is imminent." World Vision is an international Christian relief and development organization working to promote the well being of all people -- especially children. In 2002, World Vision offered material, emotional, social and spiritual support to 85 million people in 96 countries. Calypte Biomedical Corporation -- whose June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $11 million -- headquartered in Alameda, California, is a public healthcare company dedicated to the development and commercialization of urine-based diagnostic products and services for Human Immunodeficiency Virus Type 1 (HIV-1), sexually transmitted diseases and other infectious diseases. Calypte's tests include the screening EIA and supplemental Western Blot tests, the only two FDA-approved HIV-1 antibody tests that can be used on urine samples. The company believes that accurate, non- invasive urine-based testing methods for HIV and other infectious diseases may make important contributions to public health by helping to foster an environment in which testing may be done safely, economically, and painlessly. Calypte markets its products in countries worldwide through international distributors and strategic partners. Current product labeling including specific product performance claims can be found at http://www.calypte.com CHART INDUSTRIES: Emerges from Prepack. Bankruptcy Proceedings -------------------------------------------------------------- Chart Industries, Inc. (OTCPK:CTITQ) announced its consummation of the joint prepackaged Plan of Reorganization, which had been confirmed by an order of the United States Bankruptcy Court for the District of Delaware entered on September 4, 2003. As a result of the Plan's consummation, the Company's former senior debt of approximately $256 million has been converted into a $120 million term loan and an initial 95% equity ownership position in the reorganized Company. Chart's former shareholders are receiving 5% of the reorganized Company, with an opportunity to acquire up to an additional 5% of equity under certain conditions through the exercise of warrants. Additionally, all general unsecured creditors will be paid in full on their prepetition claims or otherwise have their prepetition claims reinstated. The Company's $40 million debtor-in-possession financing facility has been converted into an amended and restated $40 million revolving credit facility. This financing is expected to provide the reorganized Company with sufficient funding to continue to operate and meet its obligations. As a result of the Plan consummation, William Allen, Chief Restructuring Officer (and a principal with TRG, a crisis management and turn-around firm engaged by the Company), has assumed the position of Chart's interim CEO and is a new member of Chart's Board of Directors. Mr. Allen, commenting on the Reorganization, stated, "I am very pleased with the work that was performed by the Senior Lenders, the management team, employees, outside professionals and former Board of Directors to complete the Plan of Reorganization and to emerge from Chapter 11 in a little over two months. We were able to complete the reorganization with no disruption to our customers, suppliers and employees." Allen added, "Concurrently with the Plan of Reorganization we have been focusing on improving the performance of the Company's various businesses and reducing the cost of operations. We still have work to do to improve the return to the Company's shareholders, but we are well under way to meeting our operational restructuring goals." "Chart has emerged from Chapter 11 with a new capital structure and a solid balance sheet. The Company is now poised to take advantage of the fundamental strength of its businesses. I look forward to working with the new Board, senior management, the employees and our business partners to return Chart to profitability and achieve its full potential," Allen concluded. Chart Industries, Inc. is a leading global supplier of standard and custom-engineered products and systems serving a wide variety of low-temperature and cryogenic applications. Headquartered in Cleveland, Ohio, Chart has domestic operations located in nine states and an international presence in Australia, China, the Czech Republic, Germany and the United Kingdom. For more information on Chart Industries, Inc. visit the Company's Web site at http://www.chart-ind.com For more information on the Company's prepackaged Chapter 11 case, visit http://www.bmccorp.net/chart CENTRAL UTILITIES: Files for Chapter 11 Protection in E.D. Texas ---------------------------------------------------------------- On August 29, 2003 Central Utilities Production Corporation filed a Bankruptcy Petition, under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court of the Eastern District of Texas, file number 03-44067. The Trustee is William T. Neary. Central Utilities Production Corporation, is an independent energy company engaged in the development and operation of oil and gas producing properties. The Company's current operations are focused in Texas and Kentucky. During the year ended December 31, 2001, the Company acquired oil and gas properties in Kentucky and Texas. The Company began production of these properties in the year ended December 31, 2001. The Company was formed as Enpetro Mineral Pool, Inc. in October 2000. Enpetro acquired certain oil and gas properties for the issuance of its common shares. Enpetro valued its acquisition of the oil and gas properties on the basis of the estimated fair value of those oil and gas properties, primarily interests in oil and gas leases. The valuation was assessed by an outside party certified to be a specialist in determining oil and gas reserves and valuation of the related properties. The value was determined to be $26,112,698. Enpetro had no other significant assets or operations. Enpetro entered into an Agreement and Plan of Reorganization in which it was acquired by Accord Advanced Technologies, Inc. Accord had previously been a reconditioner and modifier of multi- chamber semiconductor equipment. Accord is a publicly traded company. Accord's only operating subsidiary filed to liquidate under Chapter 7 of the United States Bankruptcy Code in 2000 and had no operations at the time of the merger. The Agreement and Plan of Reorganization stipulated that Accord acquire all of the outstanding voting shares of Enpetro for 228,000,000 post reverse split common shares of the Accord. The shareholders of Enpetro held an interest of approximately 92% in Accord effective with the acquisition. A name change occurred at the time of the acquisition from Accord Advanced Technologies, Inc. to Central Utilities Production Corp. CENTRAL UTILITIES: Case Summary & 7 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Central Utilities Production Corp. 1039 North I-35 E. #301 Carrollton, Texas 75006 Bankruptcy Case No.: 03-44067 Type of Business: Oil and gas exploration and production. Chapter 11 Petition Date: August 29, 2003 Court: Eastern District of Texas (Sherman) Judge: Brenda T. Rhoades Debtor's Counsel: William Tranthom, Esq. 1710 W. University, Suite A Denton, TX 76201 Total Assets: $74,000,000 Total Debts: $3,000,000 Debtor's 7 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ G&M Management and Trade Debt $400,000 Successway Holding Ltd. 488 Madison Avenue 12th Floor New York, NY 10022 Travell Energy Trade Debt $350,000 5050 Woodburn Bowling Green, KY 42104 Greg Frost Trade Debt $220,000 EWC Trade Debt $24,250 Hardin County Tax Trade Debt $19,549 Authority James R. Daffrin, CPA Trade Debt $9,380 Computer Share $3,024 CHIPPAC INC: Will Publish Third-Quarter Results on October 29 ------------------------------------------------------------- ChipPAC, Inc. (Nasdaq: CHPC), one of the world's largest and most diversified providers of semiconductor assembly and test services, will hold a conference call with investors and analysts on Wednesday, October 29, 2003 at 5:00PM EST (2:00PM PST) to discuss results for the Company's third quarter 2003 and business outlook. The news release announcing the third quarter 2003 results will be disseminated on October 29, 2003 after the market closes. The dial-in number for the live audio call beginning at 5:00PM EST (2:00PM PST) is (973) 321-1070. The password confirmation is 4183207. Please call in at 4:50PM EST (1:50PM PST) to avoid delays. A live webcast of the conference call will be available on ChipPAC's Web site at http://www.chippac.com A replay of the call will be available from 8:00PM EST (5:00PM PST) on Wednesday, October 29 through midnight EST (9:00PM PST) on Wednesday, November 5 at http://www.chippac.comand by telephone at (973) 341-3080. The pass code for the replay is 4183207. ChipPAC (S&P, BB- Bank Loan Rating, Negative) is a full-portfolio provider of semiconductor packaging design, assembly, test and distribution services. The company combines a history of innovation and service with more than a decade of experience satisfying some of the largest customers in the industry. With advanced process technology capabilities and a global manufacturing presence spanning Korea, China, Malaysia and the United States, ChipPAC has a reputation for providing dependable, high quality packaging solutions. For more information, visit the company's Web site at http://www.chippac.com CONE MILLS: WL Ross Offers to Purchase All of Company's Assets -------------------------------------------------------------- Cone Mills Corporation (NYSE: COE), the world's leading denim producer, has received an offer from WL Ross & Co. to purchase substantially all of the assets of the Company. The transaction will enable Cone Mills to strengthen its leadership in denim and improve its ability to compete in the global textile marketplace. The transaction would require Cone Mills to file a voluntary petition for relief under Chapter 11 with the U.S. Bankruptcy Court in the next several days and is expected to be consummated pursuant to section 363 of Chapter 11 of the U.S. Bankruptcy Code. The proposed transaction would be subject to Board and Bankruptcy Court approval and higher and better offers. The Company expects to complete the transaction within 90 days. Following the proposed transaction, WL Ross & Co. plans to operate Cone Denim and Burlington Industries' Mexican denim operation, which will become part of WL Ross & Co. following the successful close of its acquisition of Burlington, expected in October. Cone Mills expects to maintain a significant U.S. employee base, including a substantial number of manufacturing jobs. Headquarters will remain in Greensboro, N.C. Company Expects to Conduct Business as Usual Throughout the transaction, Cone Mills expects to conduct business as usual, with no interruptions in its operations or delays in meeting commitments to its customers, which include such well- known names as Levi Strauss, The Gap and V.F. Corporation. Cone Mills has received proposals from several major financial institutions and expects to reach an agreement for debtor-in- possession financing by the end of this week, which would be used to fund operations prior to the completion of the transaction. The DIP financing would be subject to the approval of Cone Mills' current lending group. During the third quarter of 2003, the Company has experienced a continuing decline in denim sales coupled with higher raw material costs, resulting in reduced profit margins and cash flow. As a result of its deteriorating liquidity, the Company failed to make its scheduled bond interest payment of $4.1 million on September 15, 2003. The Company has a 30-day grace period before it is considered in default on its bond indebtedness. The Company expects to be in a position to disclose the full details of the proposed transaction with WL Ross & Co. in the next few days. It is not expected that the proceeds of the proposed transaction will be sufficient to satisfy the Company's secured indebtedness. As a result, there is not expected to be any recovery for the Company's shareholders. Necessary Response to Industry-Wide Impact of Low-Cost Imports John L. Bakane, Chief Executive Officer of Cone Mills, said, "This transaction is consistent with Cone Mills' operating strategy of migrating to lower-cost manufacturing platforms and is intended to help ensure that Cone Mills continues to play a key role in the consolidation and rationalization of denim manufacturing in the Western Hemisphere. It is a necessary strategic response to the devastating impact of low cost Chinese imports, as well as the economic slowdown. "Unsound trade policies are pummeling the U.S. textile industry. Since January 2002 alone, 50 U.S. textile plants have closed and 30,000 jobs have been lost. And now we're under assault by a new surge of imported Vietnamese jeans made of Chinese denim that's been sparked by the recently relaxed trade agreement with Vietnam, which, in turn, has caused a severe imbalance in U.S. denim supply and demand in the last four months. Making matters worse are the retail inventory liquidations now under way and continued price deflation even in the face of higher cotton costs. While we returned the Company to profitability in 2002, the events of this year have been such that we simply cannot support our present capital structure in the face of current market conditions." 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 printers 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. For more information on the Company, visit http://www.cone.com CONE MILLS: S&P Drops Rating to D After Interest Nonpayment ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its 'CCC+' long-term corporate credit and senior secured debt ratings on textiles manufacturer Cone Mills Corp. to 'D'. Greensboro, North Carolina-based Cone Mills had about $157.9 million in total debt outstanding at June 30, 2003. The ratings downgrade follows Cone Mills' announcement that it has received an offer from WL Ross & Co. to purchase substantially all of the assets of the company. The transaction will require Cone Mills to file a voluntary petition for relief under Chapter 11 with the U.S. Bankruptcy Court over the next several days. In addition, as a result of its deteriorating liquidity, the company failed to make a scheduled $4.1 million interest payment due Sept. 15, 2003, on its senior secured debentures. Cone Mills has a 30- day grace period before it is considered in default on its bond indebtedness. However, it is not expected that the proceeds of the asset sales will be sufficient to satisfy the company's secured debt position, and the transaction is expected to be completed within 90 days. Cone Mills is the world's largest producer of denim fabrics and one of the largest commission printers of home furnishings fabrics in North America. CONSECO FINANCE: US Bank and Wells Want to Alter Financing Pacts ---------------------------------------------------------------- U.S. Bank and Wells Fargo, as Trustees for certain Securitization Trusts, ask the Court to approve: 1) the allocation of the Allowed Claim to holders of Manufactured Housing Certificates guaranteed by Conseco Finance Corp.; 2) the estimation and allocation of Allowed Claims to holders of Home Equity/Home Improvement and Recreational Vehicle Trust, also known as HE/HI/REC Securitization Trusts, guaranteed by Conseco Finance Corp.; and 3) the Reserve Account for the benefit of holders of HE/HI/REC Securitization Certificates. U.S. Bank is Trustee to 137 securitization trusts. Wells Fargo is Trustee for two securitization trusts. Stephen M. Mertz, Esq., at Faegre & Benson, in Minneapolis, Minnesota, explains that U.S. Bank objected to the CFC Debtors' Third Amended Joint Plan of Liquidation because: a) the Plan failed to provide for the allocation of the MH Allowed Claim to holders of the MH B-2 Guarantee Claims; b) the Plan did not provide a distribution to holders of certificates of HE/HI/REC Securitization Trusts; and c) the Plan did not provide for distributions regarding breaches of representations and warranties by CFC with to the holders of certificates of HE/HI/REC Securitization Trusts. On June 19, 2003, U.S. Bank and the Official Committee of Unsecured Creditors of the CFC Debtors reached a stipulation resolving these objections. Advisors to the Creditors' Committee told the Securitization Trustees that the allocation of the MH Allowed Claim was calculated by adding the impairment incurred prior to the CFC Petition Date to an amount calculated by estimating and discounting projected shortfalls in payments of scheduled principal and interest, using a servicing fee of 50 basis points. The payment was assumed to be senior and not subordinate in the relevant payment waterfall. CFC used a number of material assumptions including, but not limited to: -- future default rates; -- future repayment rates; and -- loss severities. The same methodology was used in calculating projections for the home/equity improvement and recreational vehicle B-2 Certificates. These iterations resulted in the establishment of a $5,000,000 reserve for the benefit of the HE/HI/REC Securitization Trusts. (Conseco Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSECO: S&P's CCC+ Counterparty Credit Rating on Watch Positive ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC+' counterparty credit rating to life & health insurer Conseco Inc. (OTC BB:CNCEQ), and then placed the rating on CreditWatch with positive implications. In addition, Standard & Poor's assigned its 'CCC+' rating to CNCEQ's $1.3 billion bank loan issued in conjunction with the company's emergence from bankruptcy and then placed the rating on CreditWatch with positive implications. The 'B+' counterparty credit and financial strength ratings on Bankers Life & Casualty Co., Colonial Penn Life Insurance Co., Conseco Annuity Assurance Co., Conseco Health Insurance Co., Conseco Life Insurance Co., and Conseco Life Insurance Co. of NY remain on CreditWatch positive where they had been placed on Sept. 11, 2003. "The ratings actions largely reflect the weak operating capital at CNCEQ's insurance subsidiaries, as well as the current uncertainty concerning the levels of cash flow and earnings the company can generate, post-bankruptcy, to cover its fixed charges," said Standard & Poor's credit analyst Jon Reichert. As of June 30, 2003, the combined NAIC risk-based capital ratio of the insurance subsidiaries was 173%. The positive CreditWatch listing reflects the expected proceeds to CNCEQ from the sale of the GM Building, reported in the press at $1.4 billion, which could result in an operating capital increase of about $380 million for the insurance operations. The ultimate ratings level for CNCEQ will incorporate the capital strength of the operating units on actual receipt of the GM Building proceeds, as well as the company's capital structure after emerging from bankruptcy and its expected fixed-charge coverage. With its emergence from bankruptcy, CNCEQ is preparing a balance sheet in accordance with fresh start accounting as required by AICPA Statement of Position 90-7. The CreditWatch is expected to be resolved once the GM Building proceeds have been received and deployed, and Standard & Poor's has reviewed the fresh start balance sheet and related financial materials. If the ratings on CNCEQ are upgraded, they will likely be in the 'B' category. At the time of the CreditWatch resolution, Standard & Poor's will also comment on whether the recovery prospects of the bank debt are strong enough to justify a notching up of the bank loan rating from the counterparty credit rating. CONSTELLATION BRANDS: Will Publish Q2 Results by Month-End ---------------------------------------------------------- Constellation Brands, Inc. (NYSE: STZ), a leading international producer and marketer of beverage alcohol brands, will be reporting financial results for the Second Quarter ended August 31, 2003, on Tuesday, September 30, 2003 immediately after market hours. A conference call to discuss the financial results and outlook will be hosted by Richard Sands, Chairman and CEO and Tom Summer, Executive Vice President and CFO on Tuesday, September 30, 2003 at 5:00 p.m. (Eastern). The news media is invited to listen-only on this call. The conference call can be accessed by dialing +412-858-4600 beginning at 4:50 p.m. (Eastern). A live listen-only web cast of the conference call is available on the Internet at the Company's Web site, http://www.cbrands.comunder Investors. Financial and statistical information discussed in the conference call and a reconciliation of any reported (GAAP) financial measures with comparable or non-GAAP financial measures will also be available when the call begins on the Company's Web site under Investors by selecting Financial Information/Financial Reports. If you are unable to participate in the conference call, there will be a replay available by dialing +412-858-1440 from approximately 7:00 p.m. (Eastern) on September 30, 2003 through 9:00 a.m. (Eastern) on Wednesday, October 15, 2003. Digital Playback Instructions -- Courtesy of ChorusCall 1. Dial +412-858-1440. 2. Enter '419' when prompted for your account number followed by the # sign. 3. Please press '1' to play recorded conference. 4. Please enter '326809' when prompted to enter the conference number followed by the # sign. 5. Please clearly state your name and company name when prompted to do so followed by any key. 6. Please press '1' to begin the conference playback. Note: You may press '0' at anytime during the conference to hear the detailed instructions menu. You may press '2' at anytime during the conference to stop the playback entirely. You will be placed in the introduction menu. Constellation Brands, Inc. (S&P, BB Corporate Credit and Senior Unsecured Debt Ratings) 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. COVANTA ENERGY: Court Approves Mezerhane et al., Settlement Pact ---------------------------------------------------------------- The Covanta Energy Debtors and the Venezuelan Parties -- Nelson Mezerhane and Fondo de Valores Inmobiliarios SACA -- engaged in extensive discussions to resolve their dispute, which resulted in the execution of the Settlement Agreement. Without admitting to any wrongdoing or liability, the Settlement Agreement provides that: (a) Covanta will voluntarily dismiss, with prejudice, its claims against the Venezuelan Parties in the Lawsuit, and any other existing or future claims arising from or in connection to the Memorandum of Understanding, the Permits or the Casino Project; (b) The Venezuelan Parties will voluntarily dismiss, with prejudice, the Counterclaims against Covanta in the Lawsuit, and, along with ITC, any other existing or future claims arising from or in connection to the Memorandum of Understanding, the Permits or the Casino Project; and (c) Covanta and the Venezuelan Parties will provide a mutual release of any further obligations under the Memorandum of Understanding, and the Parties will provide a mutual release of any other obligations arising from or in connection to the Permits or the Casino Project. Pursuant to Section 363 of the Bankruptcy Code and Rule 9019 of the Federal Rules of Bankruptcy Procedure, Covanta obtained the Court's approval of the terms of the Mutual Settlement, Waiver and Release Agreement, dated as of June 16, 2003 it executed with the Venezuelan Parties and ITC. Backgrounder On January 13, 1999, Covanta Energy Corporation and the Venezuelan Parties -- Nelson Mezerhane and Fondo de Valores Inmobiliarios SACA -- entered into a Memorandum of Understanding agreeing to engage in a Casino Project and form a new corporation to carry out the Casino Project. Half of the corporation's shares were to be owned by the Debtors while the Venezuelan Parties would control the other half. Inversora Turistica Caracas, S.A., not a party to the Memorandum of Understanding, holds certain permits the Republic of Venezuela issued in connection with the Casino Projects. The Memorandum of Understanding required the Debtors and the Venezuelan Parties to contribute $200,000 each to the Casino Project to cover expenses incurred while the casino and entertainment areas were designed and planned. Presently, the Debtors and the Venezuelan Parties dispute on each other's degree of compliance with the agreement. Funding for the Casino Project was to come from the sale of debt and equity by the new corporation pursuant to the Memorandum of Understanding. Covanta retained Peckham, Guyton, Albers & Viets to draw up plans for the Casino. Peckham was never paid for its work in connection with the Casino Project. As part of the Debtors' efforts to sell and dispose of their assets in the entertainment industry, Covanta withdrew from the Casino Project in September 1999 in accordance with the provisions of the Memorandum of Understanding. Following that, on October 6, 1999, Peckham filed a suit against Covanta and Ogden Entertainment, Inc., in the U.S. District Court for the Eastern District of Missouri to recover payment for architectural design services performed in connection with the Casino Project. On April 17, 2000, Covanta filed a third-party action against the Venezuelan Parties in the Missouri District Court for breach of contract, indemnification, conversion, fraud, unjust enrichment and equitable subrogation. Covanta alleged that the Claims Peckham made against it were properly made against the Casino Project. The Debtors say the Venezuelan Parties were liable under any judgment that Peckham may obtain against Covanta. On December 19, 2000, the Third-Party Complaint was transferred to the U.S. District Court for the Southern District of Florida. On February 28, 2001, Covanta and Peckham settled Peckham's action against Covanta and Ogden Entertainment for $530,000. The settlement provided, among other things, Peckham's general release of any claim against Covanta and Ogden in connection with the Casino Project. In their answer to the Third-Party Complaint, the Venezuelan Parties asserted counterclaims against Covanta, claiming an offset against any judgment entered in favor of Covanta. The Venezuelan Parties alleged that the Debtors breached the Memorandum of Understanding by failing to pay its share of the development costs incurred before Covanta withdrew from the Memorandum of Understanding. The Venezuelan Parties further alleged damages in excess of $1,000,000. (Covanta Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) DELTA FIN'L: Calls Morrison's Countersuit "Completely Baseless" --------------------------------------------------------------- Delta Financial Corporation (AMEX: DFC), a specialty consumer finance company that originates, securitizes and sells non- conforming mortgage loans, received a countersuit to a lawsuit the Company filed in July 2003 against James E. Morrison, president of Delta Funding Residual Management, Inc., the managing member for Delta Funding Residual Exchange Company, LLC and the two entities he controls to enforce DFC's management and operating agreements with DFRM and the LLC. Morrison filed the countersuit on behalf of DFRM and the LLC. DFC believes this countersuit is completely baseless. DFRM and the LLC were created as part of a series of debt restructuring actions DFC took in early 2001 to recapitalize the company to permit its ongoing operation at that time, and are unaffiliated with Delta Financial Corporation. DFC brought suit against Morrison and the entities he controls to recover approximately $142 thousand that is clearly and unconditionally owed to the Company and that Morrison intentionally withheld. DFC's suit against Morrison charged Morrison and DFRM with breach of contract and breach of fiduciary duty. Although DFC has still not received Morrison's answer, it was served Tuesday with an unverified complaint, in which Morrison alleges that DFC's revision to estimates nearly two years ago that resulted in a write down in the value of certain of the Company's assets permits Morrison and the entities he controls to breach their agreements, and further entitles the LLC and DFRM to monetary damages of at least $110 million. "Baseless, without merit and a transparent attempt to justify his own wrongdoing and shift focus away from himself is the only possible explanation of Morrison's suit," Marc E. Miller, DFC's general counsel explained. "We are confident that when the Court forces him to defend the case brought against him and to prove his counter-allegations, he will fail." Background In February 2001, DFC proposed an exchange offer in order to deal with its financial difficulties at that time. Three of DFC's bondholders - among the most prominent institutional investors in the marketplace, who together held the majority of DFC's bonds - hired a leading financial advisor with specific expertise in these situations, to advise them with regard to protecting their investment. The bondholders' expert reviewed DFC's financials, discussed the possibility of DFC filing for bankruptcy or attempting a workout, and ultimately recommended that the bondholders enter into the proposed exchange offer with DFC, as a preferable alternative to forcing DFC into bankruptcy. DFC provided full disclosure in the exchange offer prospectus filed with the SEC and the assets were valued as accurately as possible by Delta as of the date Delta estimated their value, using the same assumptions that it used to value other similar assets it owned. Following the overwhelming acceptance of the exchange offer, intervening market conditions which were out of the Company's control - including the events of September 11th, a precipitous drop in interest rates (to levels not seen in over 40 years), recession, threat of war and other geopolitical risks - dramatically lowered the value of interest-rate and credit- sensitive assets (like those transferred to the LLC in the exchange offer). In response, in November 2001, DFC lowered its estimates of the value of the excess cashflow certificates it held, as it was required to do in accordance with generally accepted accounting principals (GAAP). Similar write-downs were taken by many of DFC's competitors for the same reason and, indeed, by countless other companies outside our sector which also held interest-rate and credit- sensitive assets, to account for these virtually unprecedented events. "Although Mr. Morrison has cast our original estimates, and later downward revision, of the value of the excess cashflow certificates as a somehow nefarious and harmful plot, in fact these estimates were irrelevant to investor decisions. At the time of the original estimates, the only assets of interest to the bondholders were the excess cashflow certificates that secured their debt, and one way or another, they would come to own them. The only question was whether the bondholders should pursue the assets through the exchange offer or through bankruptcy. In either event, the value of the assets would not change. The exchange offer gave the bondholders these assets without the significant costs of bankruptcy, i.e., professional fees and other claims from potential creditors, among other things. Thus, no matter what the valuation of these assets were, the bondholders were better off than if Delta declared bankruptcy," Mr. Miller explained. "Several facts are important in addition to the fact that the defensive countersuit entirely lacks merit," Mr. Miller added. "Morrison has been aware of the revised estimates that form the basis of his claim for almost two years and has never raised a single concern until he decided to breach his agreement with Delta. Second, he ignored our repeated requests that he tell us of his concerns and give us the opportunity to address them. Instead, he filed a surprise lawsuit after we afforded him the courtesy of substantial additional time to respond to our lawsuit. Finally, his claims are meant solely to distract attention from, and do not justify, Mr. Morrison's own indefensible breach of contract or breach of fiduciary duty to the LLC members," Mr. Miller further explained. "We will aggressively prosecute our claims and defend this baseless countersuit to protect our shareholders' interests. We are confident that Morrison's transparent attempt to deflect attention from his own misconduct will be rejected by the Court," concluded Mr. Miller. Founded in 1982, Delta Financial Corporation is a Woodbury, New York-based specialty consumer finance company that originates, securitizes and sells non-conforming mortgage loans. Delta's loans are primarily secured by first mortgages on one- to four-family residential properties. Delta originates home equity loans primarily in 26 states. Loans are originated through a network of approximately 1,500 independent brokers and the Company's retail offices. Since 1991, Delta has sold approximately $8.4 billion of its mortgages through 36 securitizations. ENRON CORP: Seeks Go-Signal to Terminate Employee Benefits Trust ---------------------------------------------------------------- Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that Enron Corporation maintains the Enron Corp. Medical Plan for Inactive Participants -- the Enron Plan. Under the Enron Plan, certain retirees of Enron's affiliated federally regulated gas pipeline companies and their operators, including Florida Gas Transmission Company, Transwestern Pipeline Company, Enron Liquids Pipeline Company and Northern Plains Natural Gas Company, which operates Northern Border Pipeline Company, receive medical and life insurance benefits. The benefits received by the Pipeline Companies' and NNG's former employees and their eligible spouses and dependents include reimbursement for medical benefits, prescription drugs and life insurance. To provide a centralized repository for cash contributions from the Pipeline Companies and NNG that is used in the funding of the Retiree Benefits, Enron established the Enron Gas Pipeline Employee Benefit Trust on March 1, 1993. The Trust, an entity separate from the Debtors' estates, is a "voluntary employees' beneficiary association" commonly referred to as VEBA. In addition, Mr. Rosen informs the Court that the Trust was established in accordance with the Policy Statement Regarding Post-Employment Benefits Other than Pensions issued by the Federal Regulatory Commission. Pursuant to the FERC Policy and as specifically provided in the various FERC proceedings affecting the Pipeline Companies and NNG, the companies are permitted to build into their current rate structures the cost of Retiree Benefits. To qualify to pass through the costs, the liability for the benefits was required to be determined on an accrual basis, consistent with the provisions of the Statement of Financial Accounting Standards No. 106 and, inter alia, the amounts charged for the benefits were set aside in an irrevocable external trust meeting the requirements of Section 501(c)(9) of the Tax Code. According to Mr. Rosen, the estimated present value of Retiree Benefit obligations for the Pipeline Retirees, valued as of December 31, 2002, is $75,000,000. As of May 31, 2003, the Trust held about $31,661,139 in assets, composed of cash, cash equivalents and mutual fund investments. Thus, the liability for Retiree Benefits exceeds the value of assets reserved of those purposes by $43,338,861. As settlor of the Trust, Enron's sole involvement with the Trust is to maintain and administer the Trust and its assets and to oversee investments. Thus, Enron's employees expend substantial time and effort in providing services to the Trust. Enron has no obligation or direct liability to fund the Trust for the benefit of the Pipeline Retirees. Likewise, the Trust's beneficiaries are, or relate to, former employees of non-debtor entities. Accordingly, Mr. Rosen concludes, the Debtors' estates derive little or no direct benefit from Enron's continued maintenance of, and involvement with, the Trust. Moreover, certain Enron employees serve in fiduciary roles with respect to the Trust and are exposed to potential fiduciary liability under ERISA, for which Enron maintains fiduciary liability insurance and provides its employees with indemnification protection, both of which represent additional costs and potential liabilities to which the Debtors are exposed. The Debtors are in the process of maximizing the value they may realize through a sale or other disposition of their operating businesses. In line with this process, the Debtors entered into certain agreements and transactions pursuant to which the Pipeline Companies and other of the Debtors' U.S. energy transmission assets will be contributed to the new corporate entities that are eventually intended to emerge from the Debtors' estates as going concerns, the value of which will ultimately be distributed to creditors as part of a Chapter 11 plan. The Debtors' continued maintenance and administration of the Trust would not make any sense in light of the future of the Pipeline Companies. Furthermore, NNG has demanded that its allocable interest in the Trust be transferred, as required by the transaction documents governing NNG's disposition. The administrative committee of the Trust is charged with the administration of the Trust. The Debtors and the Trust Committee spent a great deal of time and effort to determine the most efficient method of terminating the Trust while ensuring that the Pipeline Retirees will continue to receive their Retiree Benefits without interruption. Once Enron initiates the termination of the Trust, the Trust Committee, pursuant to the Trust Agreement, is authorized to make the determination of what portion of the Trust's assets are allocable to, and be distributed to, any participating employer in the Trust. To this end, the Debtors, in consultation with the Trust, propose to: (a) terminate the Trust; (b) apportion the Trust's assets among the Pipeline Companies and NNG according to the contributions and liabilities associated with each of the Pipeline Companies and NNG, as determined in consultation with the Committee; (c) have each of the Pipeline Companies establish new trusts, or a single trust with separate sub-accounts for each of the Pipeline Companies, which trusts qualify under Section 501(c)(9) of the Tax Code, and which trusts will thereafter provide a funding mechanism for the Pipeline Companies to fund the Retiree Benefits; and (d) have each of the Pipeline Companies continue to participate in the Enron Plan, or adopt plans providing for substantially comparable Retiree Benefits. As of June 30, 2002 -- the Determination Date, the breakdown of assets and liabilities allocable to each of the Pipeline Companies and NNG, and the relative percentage in the assets and liabilities were: Liability Asset Allocation Pipeline Company Allocation Allocation Percentage ---------------- ---------- ---------- ---------- Northern Natural $50,330,000 $22,550,000 71.9% Gas Company Florida Gas 10,150,000 4,540,000 14.5% Transmission Co. Transwestern 4,830,000 2,160,000 6.9% Pipeline Co. Enron Liquids 2,800,000 1,250,000 4.0% Pipeline Company Northern Plains 1,890,000 846,000 237% Natural Gas Co. Once the termination request is approved, Mr. Rosen states that each of the Pipeline Companies and NNG will maintain, or will be a party to, a separate trust intended to qualify as a voluntary employees' beneficiary association under Tax Code Section 501(c)(9). The Debtors will instruct the trustee of the Trust to distribute the Final Percentage Interest to the trust of the Pipeline Companies and NNG after: (a) appropriate notice to the Debtors that the trusts are in effect; (b) receipt of evidence by the Debtors that the trusts have received a favorable determination from the Internal Revenue Service that the trust qualifies under Section 501(c)(0) of the Tax Code, and (c) the express assumption by the Pipeline Companies and NNG of liability for the Retiree Benefits. The Trust assets are mainly invested in mutual fund shares, with the balance held in short-term investment funds and cash equivalents to provide needed liquidity. To expedite the distribution of Trust assets, the Debtors will instruct the Trustee to either distribute the mutual fund shares in kind, or will have them liquidated and distributed in cash, as the Debtors determine at the time of distribution. While the Pipeline Companies remain Enron affiliates, each of them will continue to provide Retiree Benefits in accordance with the terms of the Enron Plan. However, each of the Pipeline Companies will have the option to adopt their own plans providing the benefits. Utilizing a funding vehicle that qualifies for the same tax treatment as the Trust, combined with the requirement that benefits continue to be provided in accordance with the Enron Plan, or similar plans of the Pipeline Companies, should result in a seamless transition for the Pipeline Retirees from the benefits paid under a trust administered by Enron to trusts administered by the Pipeline Companies. In this manner, there will be no substantive impact on the Retiree Benefits received by the Pipeline Retirees. Accordingly, the Debtors seek the Court's authority, pursuant to Sections 105 and 363 of the Bankruptcy Code, to: (a) terminate the Trust, (b) apportion the Trust's assets among the Pipeline Companies and NNG, on a pro rata basis determined according to the contributions and liabilities associated with each of the Pipeline Companies and NNG, and (c) transfer the assets to qualifying trusts maintained for the benefit of the Retirees of the Pipeline Companies and NNG. Mr. Rosen argues that the request should be granted because: (i) while certain of the Debtors' expenses are paid by the Trust or directly reimbursed by the Pipeline Companies, the costs associated with the time expended by the Debtors' employees with respect to Trust-related activities is a direct cost to their estates for which there is no reimbursement; (ii) the benefits of the Trusts do not -- and never will -- run to the Debtors' estates or their employees and retirees; (iii) certain of the Debtors' employees who administer the Trust and the Retiree Benefits expose themselves to fiduciary liability for their actions; for which the Debtors maintain insurance coverage, and which expose the Debtors to potentially costly claims for indemnification by the employees; (iv) it makes good business sense that each of the Pipeline Companies and NNG actually possess and administer the assets related to their contributions toward the cost of those benefits since the Pipeline Companies and NNG are obligated to provide Retiree Benefits to their retirees; (v) each of the Pipeline Companies and NNG has, or will have, the ability and resources to maintain their own benefits for current and former employees, including the Pipeline Retirees; (vi) under current circumstances, it no longer makes business sense for the Debtors to aggregate and administer the assets and liabilities associated with the Trust and the Retiree Benefits; and (vii) while the Debtors acknowledge that Section 1114 of the Bankruptcy Code may impose restrictions on their ability to modify or terminate certain retiree benefit programs maintained for the benefit of the Debtors' retirees, this restriction neither extends to non-debtors nor precludes non-debtors from modifying the administration, maintenance or structure of their own retiree benefit programs as the programs are administered by a Chapter 11 Debtor. (Enron Bankruptcy News, Issue No. 79; Bankruptcy Creditors' Service, Inc., 609/392-0900) EQI FINANCING: Fitch Rates Class C Bonds at Speculative Level ------------------------------------------------------------- The following classes of EQI Financing Partnership I, L.P.'s commercial mortgage bonds, series 1997-1, are downgraded and removed from Rating Watch Negative by Fitch Ratings. -- $50.6 million class B bonds to 'A-' from 'A'; -- $10 million class C bonds to 'BB' from 'BBB-'. The class B and class C bonds were placed on Rating Watch Negative effective July 28, 2003, following the receipt and analysis of fiscal year-end 2002 financial information. In addition, Fitch affirms the $4.5 million class A bonds at 'AAA'. The rating actions follow Fitch's annual review of the transaction, which closed in February 1997. The bonds are secured by cross-collateralized and cross-defaulted first mortgages on twenty hotel properties consisting of sixteen Hampton Inns, two Holiday Inns, one Residence Inn and one Comfort Inn. As of the August 2003 distribution date, the overall balance of the bonds has been reduced by approximately 26%, to $65.1 million from $88 million at issuance. The properties are owned by the issuer, a bankruptcy remote special-purpose entity (SPE) and a wholly owned subsidiary of Equity Inns, Inc., a publicly traded real estate investment trust. The downgrades are primarily attributable to the continued declining performance of the portfolio. Fitch stressed net cash flow has been decreasing each year since 1998 and the trailing twelve month June 30, 2003 stressed NCF is down 35% from issuance. The corresponding Fitch stressed debt service coverage ratio for the pool, based on a refinance constant of 10.48% and Fitch's stressed TTM June 30, 2003 NCF, decreased to 1.46x from a 1.65x at issuance. The decline in performance is generally attributed to increased competition and the impact of the current economic conditions on the properties. Fitch recognizes that the hotel industry has been hit especially hard by the events of Sept. 11, 2001 and the subsequent economic downturn, and factored these circumstances into its analysis. However, because the pool's performance had already been in decline, these factors had an even bigger impact on the subject pool. While the previous release of three properties, at a prepayment price of 125% of the allocated loan balances, and amortization have benefited the pool at the top, the continued declining overall performance of the collateral has placed stress on the lower rated classes. Fitch will continue to monitor the financial performance of the pool for further declines and should performance continue to weaken, the ratings may need to be reviewed. EXIDE TECHNOLOGIES: Court Approves Amended Disclosure Statement --------------------------------------------------------------- On September 8, 2003, Judge Carey approved the Exide Technologies Debtors' Second Amended Disclosure Statement after finding that it contains adequate information pursuant to Sections 1125(a) and (b) of the Bankruptcy Code. Consequently, Judge Carey authorized the Debtors to solicit acceptances of the Plan. All earlier versions of the Disclosure Statement and the Plan will be of no force or effect. The Debtors are permitted to make non-substantive conforming changes to the Plan and Disclosure Statement. (Exide Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) FURR'S RESTAURANT: Texas Court Confirms Plan of Reorganization -------------------------------------------------------------- Furr's Restaurant Group, Inc. announced that the Bankruptcy Court for the Northern District of Texas overseeing the Company's pending Chapter 11 cases confirmed the Company's Plan of Reorganization and approved the related sale of substantially all of its assets to Buffet Partners, L.P. The transaction is valued at approximately $29 million, consisting of $25.8 million in cash and the assumption of certain liabilities. Closing of the transaction is targeted for September 30, 2003. The Plan provides for unsecured creditors to share in the proceeds of a trust that will be funded with $1.75 million and the proceeds of any recoveries on preference and other bankruptcy claims. After payment of administrative expenses and priority claims, the balance of the proceeds of the sale will be distributed to the Company's senior secured lenders. After completing the wind-up of its estate over the next several months, the Company and its subsidiaries will be dissolved. William Snyder, acting CEO of the Company and a principal of Corporate Revitalization Partners, LLC of Dallas, stated: "We are very pleased that we have successfully resolved the Company's bankruptcy proceedings and that the sale of the Company's business to Buffet is going forward. We have worked hard with our senior secured lenders and the Unsecured Creditors Committee to complete our bankruptcy proceedings and the auction process that resulted in the sale of the Company's assets to Buffet. This transaction will allow our customers and more than 3000 employees to have confidence that the Furr's cafeteria business begun in Lubbock in 1947 will continue on a sound footing." Sam Stricklin, a partner at Bracewell & Patterson, LLP, the Company's bankruptcy counsel, stated: "We had to overcome a number of significant legal and business hurdles to bring these proceedings to a successful conclusion. The agreement of the Unsecured Creditors Committee and the Company's senior secured lenders to work with the Company as co-proponents of its plan of reorganization made it possible for us to focus on the process of seeking a buyer for the Company which was successfully concluded this week." The Company, together with Cafeteria Operators, L.P. and its other subsidiaries, filed its voluntary petition in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas on January 6, 2003. The Company operates 55 restaurants in six southwestern and western states. The Company also operates Dynamic Foods, its food preparation, processing and distribution division, in Lubbock, Texas. Buffet is a newly organized company affiliated with the Private Equity Group of Cardinal Investment Company, Inc. ("Cardinal"). Cardinal is an investment firm founded in 1974 and is based in Dallas, Texas. Its mission is to successfully invest the capital of the firm's partners and their associates. Cardinal invests in a wide range of public and private securities utilizing a team of professionals dedicated to each market. Its current and former investments in the retail and restaurant industries include Cafe Express, Restoration Hardware, DF&R Restaurants (d/b/a Don Pablo's and Harrigan's) and Ace Cash Express. The Company was advised by Murphy Noell Capital LLC, a Westlake Village, California based investment banking firm, in its negotiations with Buffet. Matt Sodl, Principal of Murphy Noell, stated: "We were gratified by the degree of interest shown in Furr's, which we believe reflects the quality of the successful turnaround work by the Furr's management team and the market's perception that these 55 restaurants combined with the Dynamic Foods commissary operation and the successful Furr's Family Buffet concept developed by the Company in El Paso, Texas, will provide a good base for future growth." GENERAL DATACOMM: Emerges from Bankruptcy Proceedings ----------------------------------------------------- General DataComm Industries, Inc., emerged from bankruptcy on September 15, 2003, the effective date of the plan of reorganization, which had previously been approved by the United States Bankruptcy Court for the District of Delaware. Under the terms of the Plan, creditors will receive payment of 100% of their claims over a five-year period, and shareholders will retain their shares subject to a one-for-ten reverse stock split effective as of the Effective Date. General DataComm develops and evolves smart solutions that maximize the use of current infrastructure and reduce the cost of ownership, by providing concurrent IP and traditional voice and data solutions in a managed and NEBS-compliant environment. For more information log on to http://www.gdc.com GENERAL DATACOMM: Implements One-for-Ten Reverse Stock Split ------------------------------------------------------------ General DataComm Industries, Inc., emerged from bankruptcy on September 15, 2003, the effective date of the plan of reorganization. The bankruptcy court had previously approved the Company's plan of reorganization on August 5, 2003. As part of the plan of reorganization, effective September 16, 2003 there will be a one-for-ten reverse split of the Common Stock and Class B stock. Certificates for shares of GDC existing Common Stock must be surrendered in order for stockholders to receive new certificates for its Common Stock at a ratio of one share for every ten shares of existing Common Stock. No fractional shares will be issued and instead cash will be paid for fractional shares. Accordingly, a shareholder owning less than 10 shares of existing Common Stock as of that date will receive no shares of new Common Stock. The issuance and distribution of shares of New Common Stock Certificates, which will be processed by the Company's transfer agent, American Stock Transfer & Trust Company, will take place as soon as possible after September 16, 2003. The transfer agent will mail letters of transmittal to stockholders of record who must return their old Common Stock certificates with the executed letter of transmittal in order to receive New Common Stock Certificates. The same procedure will apply to the Company's Class B stock, which is not publicly traded. The Common Stock has ceased to be quoted on the Pink Sheets under the symbol GDIIQ, and GDC's Common Stock will now be quoted on both the Over-The-Counter Bulletin Board and the Pink Sheets under the new ticker symbol, GNRD. Immediately following the effective date of the plan of reorganization, there will be approximately 3.2 million shares of Common Stock outstanding and approximately 200,000 shares of Class B Stock outstanding. This reduction in outstanding shares substantially reduces the public float of the Common Stock and may adversely affect the liquidity (or the ability of investors to purchase or sell quickly) and market price of the Common Stock. In addition, the occurrence of sales of a significant number of shares of Common Stock, or the perception that these sales could occur, may adversely affect the stock price. General DataComm develops and evolves smart solutions that maximize the use of current infrastructure, reduce the cost of ownership and increase revenues by providing concurrent IP and traditional voice and data solutions for managed NEBS-compliant and Enterprise environments. GMAC COMM'L: Fitch Takes Rating Actions on Series 1999-C1 Notes --------------------------------------------------------------- GMAC Commercial Mortgage Securities, Inc.'s mortgage pass-through certificates, series 1999-C1, are upgraded by Fitch Ratings as follows: -- $66.7 million class B to 'AAA' from 'AA'; -- $66.7 million class C to 'AA' from 'A'; -- $86.7 million class D to 'BBB+' from 'BBB'; -- $20.0 million class E to 'BBB' from 'BBB-'. Fitch also affirms the following classes: -- $127.0 million class A-1 'AAA'; -- $680.7 million class A-2 'AAA'; -- Interest only class X 'AAA'; -- $83.4 million class F 'BB'; -- $13.3 million class G 'BB-'; -- $26.7 million class H 'B'; -- $20.0 million class J 'B-'. The $20.2 million class K-1 is not rated by Fitch. The upgrades and affirmations follow Fitch's annual review of the transaction, which closed in February 1999. The upgrades reflect increases in subordination levels due to amortization and loan payoffs. As of the September 2003 distribution date, the transaction's aggregate principal balance has decreased 9.2%, to $1.2 billion from $1.3 billion at issuance. In addition, eight loans (2.5%) are defeased. GMAC Commercial Mortgage Corp, the master servicer, collected year-end 2002 financials for 88% of the non-defeased pool balance. Based on the information provided the resulting YE 2002 weighted average debt service coverage ratio is 1.58 times compared to 1.61x at YE 2001 and 1.45x at issuance for the same loans. Currently, five loans (1.8%) are in special servicing, of which three (1.3%) are over 90 days delinquent. The largest specially serviced loan (0.7%) is secured by an office property in Pontiac, MI and is over 90 days delinquent. The occupancy has declined significantly and the borrower was unable to meet debt service obligations. A discounted payoff or note sale has been proposed as a possible workout. The next largest specially serviced loan (0.4%) is secured by five multifamily properties located in northwestern Illinois and is current. The loan is now performing, a lockbox is in place and the loan is expected to return the master servicer. Fitch applied various stress scenarios including assumed losses on some of the loans of concern. Even under these stress scenarios subordination levels remain sufficient to justify the rating actions. Fitch will continue to monitor this transaction for any change in performance. HARVEST NATURAL: Inks Pact to Sell 34% Interest in LLC Geoilbent ---------------------------------------------------------------- Harvest Natural Resources, Inc. (NYSE: HNR) has signed an agreement to sell its 34 percent interest in LLC Geoilbent to a nominee of YUKOS Oil Company for $69.5 million. Harvest will also receive $5.5 million as repayment of intercompany loans and payables owed to Harvest by Geoilbent. Closing of the Geoilbent sale is conditioned upon final consents from the Russian Ministry for Antimonopoly Policy and Support for Entrepreneurship and the European Bank for Reconstruction and Development. The transaction is expected to close in the fourth quarter. Harvest President and Chief Executive Officer, Dr. Peter J. Hill, said, "Our commitment to Russia remains strong. We look forward to redeploying capital to Russian growth projects while maintaining our focus in Venezuela. The sale of our interest in Geoilbent at an attractive price further demonstrates our ability to execute against our primary strategic goal of timely value harvest. As minority owner, our continuing investment in Geoilbent proved to be inconsistent with our stated objective of investing in properties in which we have operating and financial control, have significant recoverable reserves, and appropriate governance with our partners." Net cash proceeds after payment of expenses are estimated to be approximately $73 million. Harvest intends to use the cash proceeds to acquire and develop properties in Russia and Venezuela and for general corporate purposes. Harvest Natural Resources, Inc. (S&P, B- Corporate Credit Rating, Stable), headquartered in Houston, Texas, is an independent oil and gas exploration and development company with principal operations in Venezuela. For more information visit the Company's Web site at http://www.harvestnr.com IMPERIAL PLASTECH: Court Extends CCAA Protection Until Nov. 30 -------------------------------------------------------------- Imperial PlasTech Inc. (TSX: IPQ) announced that the PlasTech Group, being Imperial PlasTech and its subsidiaries, Imperial Pipe Corporation, Imperial Building Products Corporation, Ameriplast Inc. and Imperial Building Products (U.S.) Inc., obtained a further order under the Companies' Creditors Arrangement Act, in connection with the proceedings commenced by the PlasTech Group under the CCAA on July 3, 2003. The Fifth Order provides for the extension of the period of the stay imposed under the CCAA to November 30, 2003, in order to facilitate the continued restructuring of the PlasTech Group. In order to meet growing demand for their product, the PlasTech Group has negotiated favourable price and credit terms with their resin suppliers. In certain instances, the credit being provided to the PlasTech Group by resin suppliers is secured by a charge against the assets of the PlasTech Group and by a guarantee given by A.G. Petzetakis SA, a significant shareholder of Imperial PlasTech. Accordingly, the Fifth Order approved an increase in the amount of the charge in favour of resin suppliers from CDN$1.0 million to US$2.0 million. As consideration for guaranteeing certain of the PlasTech Group's resin purchases, A.G. Petzetakis will be paid a fee equal to 50% of the difference between the cost of resin that is not guaranteed and the cost of resin that is guaranteed by A.G. Petzetakis. The terms upon which A.G. Petzetakis has agreed to guarantee the PlasTech Group's obligations to resin suppliers were also approved in the Fifth Order. The Fifth Order also approved the agreement between the PlasTech Group and Chevron Phillips Chemical Company LP which settles ongoing litigation commenced by the parties prior to CCAA proceedings. Imperial Pipe had claimed against Chevron Phillips for defective resin and Chevron Phillips had claimed against Imperial Pipe Corporation and Ameriplast Inc. for unpaid resin supply. Pursuant to the agreement, Chevron Phillips has agreed to credit Imperial Pipe in the amount of US$250,000 against US$1,737,338 owing to Chevron Phillips for unpaid resin. After the set off, the net amount of indebtedness owing by Ameriplast and Imperial Pipe to Chevron Phillips is US$1,487,343.33 which is unsecured and remains subject to compromise in the restructuring proceedings. As part of the settlement, Chevron Phillips has committed itself to vote the full amount of the net claim in favour of the plan of compromise and arrangement to be filed by the PlasTech Group. This settlement will allow the PlasTech Group the opportunity to rebuild a positive relationship with Chevron Phillips, an important resin supplier. Finally, in light of the CCAA proceedings, the Fifth Order extended the time for holding the annual general meeting of shareholders of Imperial PlasTech to a date to be determined by further order of the Court. The PlasTech Group is a diversified plastics manufacturer supplying a number of markets and customers in the residential, construction, industrial, oil and gas and telecommunications and cable TV markets. Currently operating out of facilities in Peterborough Ontario, Edmonton Alberta and Atlanta Georgia, the PlasTech Group intends to focus on the growth of its core businesses while assessing any non-core businesses. For more information, please access the group's Web site at http://www.implas.com INT'L ISOTOPES: Completes Shareholder Rights Offering ----------------------------------------------------- International Isotopes Inc. (Pink sheets INIS) announces the successful conclusion of its shareholder rights offering. The total shareholder subscription and over subscriptions equaled $1,312,514, including a debt to equity conversion of $906,806. International Isotopes Inc. has successfully completed its rights offering to shareholders on September 12, 2003. The Securities and Exchange Commission had declared the registration statement for the rights offering effective on July 28, 2003, and the Company had commenced the offering on August 12, 2003. Under the offering the Company offered 38,229,157 Units (each Unit included (i) one share of common stock, (ii) one warrant to purchase another share of common stock for $.04, and (iii) one warrant to purchase an additional share of common stock for $.05) to its shareholders. Shareholders received one Right for each share owned and shareholders who fully subscribed were provided the additional privilege of over subscribing for up to an additional 14,500,000 Units. The total amount raised from the rights offer was $1,312,514, which corresponds to 100% of the basic shareholder subscription and an additional 38% of the over subscription amount permitted under the offering. Of the total amount received by the Company, $906,806 was subscribed through shareholder conversion of debt to equity and an additional $405,677 was provided as cash. Under the terms of the rights offering the Company will issue 43,750,467 shares of common stock to participants bringing the total number outstanding to 139,232,360. In addition, the participants of the rights offer will receive an aggregate of 43,750,467 Series A warrants and 43,750,467 Series B warrants, which can be used to purchase additional shares of common stock for $0.04 and $0.05 respectively. The majority of net proceeds from the rights offer will be invested into equipment, hardware, and facilities in order to further expand production capability as evidenced by the Company's recent announcement of the start of Lutetium-177 sales. Company Chief Executive Officer Steve T. Laflin stated, "We are very pleased with the level and amount of participation of our shareholders in the rights offering. I believe their strong participation reflects not only the Company's improved overall financial position, but also the shareholders' growing optimism for the future success of this Company." Laflin added, "I would like to thank those shareholders for their participation and their continued support of the Company." International Isotopes Inc. -- whose June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $350,000 -- current operations include production or processing of reactor isotopes for various medical or industrial applications; contract manufacturing of a full range of nuclear medicine calibration and reference standards; and processing gemstone which has undergone irradiation for color enhancement. IVACO INC: Commences Restructuring Under CCAA in Ontario -------------------------------------------------------- Ivaco Inc., and its Canadian subsidiaries, excluding IMT Corporation, have obtained an order from the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act (CCAA) that will facilitate the implementation by Ivaco and its Canadian subsidiaries of a restructuring plan that would allow the Company to return to profitability as a leading North American supplier of steel and steel products. Simultaneously, the Ivaco entities that received CCAA protection have also applied to the Court in the Eastern District of Michigan for similar protection of their U.S. assets. The Company has also announced that its U.S. manufacturing operations are being discontinued. Ernst & Young has been appointed by the Ontario Court as monitor in the CCAA proceedings. The Company has retained UBS Securities LLC of New York as its financial advisor in connection with the restructuring. "These restructuring measures are required to address the recent and dramatic adverse impact on our Company of problems that have affected the North American steel industry as a whole", said Paul Ivanier, President and Chief Executive Officer of Ivaco. "Working with our lenders and stakeholders, we have begun to develop a plan of restructuring which, we believe, will maximize our enterprise value and see our core businesses emerge as financially healthy operations", stated Mr. Ivanier. The Company also announced the appointment of Gordon Silverman as its Chief Restructuring Officer. Mr. Silverman, who has worked with the Company for 31 years, will head a team that will implement the changes required to return the operations to profitability. The Company has at the same time appointed an independent Committee of its Board to oversee the restructuring. Ivaco's restructuring plan consists of the following key components: - the consolidation of the Canadian operations in order to create a more efficient corporate structure; - continuing the program for the sale of non-core assets; - the renegotiation of various operating and labour agreements; - the settlement of debts, including trade liabilities and legal obligations; - continuing sales and distribution operations in the United States; and - the discontinuance and sale or liquidation of all of the Company's United States manufacturing operations. - Ivaco also announced that up to $50 million of debtor-in- possession financing has been made available by GE Canada Finance Inc., which will provide the working capital required to continue operations during the restructuring process. The steel and steel products industries have been beset by serious difficulties over the past few years caused, in part, by the broad economic downturn that has affected the North American economy for the last three years. As a result of this downturn, production and capital expenditures have declined throughout the North American economy, reducing the demand for steel, fabricated steel products and precision machined components produced and sold by Ivaco. In addition, the increase in imports of steel products from offshore countries has also had a negative impact on Ivaco's revenues and margins. Compounding these difficulties for Canadian manufacturers is the recent and sudden rise in the value of the Canadian dollar against the U.S. dollar. Approximately 70% of Ivaco's revenues are denominated in U.S. dollars. The rise in the Canadian dollar relative to the U.S. dollar since the beginning of 2003 had the effect of reducing Canadian dollar revenues on United States sales in the second quarter of 2003 by 10% compared to the second quarter of 2002. Ivaco's EBITDA has been negatively impacted by approximately $60 million on an annualized basis in 2003, as a result of the surge in the Canadian dollar to the $0.73 level. At the same time as currency fluctuations depressed revenues, a number of factors increased Ivaco's cost of production. Both Ivaco Rolling Mills and the Sivaco Quebec division entered into new labour contracts in late 2002, which substantially increased labour and pension costs for those businesses. Ivaco and its subsidiaries are also subject to substantial pension and legacy costs including those from discontinued operations. The price of scrap metal, one of the most significant inputs to the production of steel, increased substantially in 2003. Energy and transportation costs also increased significantly during the same period. In October 2002, the United States Department of Commerce imposed an anti-dumping duty deposit rate of 9.9% on the import into the United States of certain types of wire rod manufactured by Ivaco. As a result, Ivaco is required to deposit 9.9% of the value of certain wire rod shipments to the United States, which has had a dramatic and adverse impact on Ivaco's profitability and cash flow. Ivaco is a Canadian corporation and is a leading North American producer of steel, fabricated steel products and precision machined components. Ivaco's modern steel operations include Canada's largest rod mill, which has a rated production capacity of 900,000 tons of wire rods per annum. In addition, its fabricated steel products operations have a rated production capacity in the area of 400,000 tons per annum of wire, wire products and processed rod, and over 200,000 tons per annum of fastener products. Shares of Ivaco are traded on The Toronto Stock Exchange (IVA). IVACO: Steelworkers Will be Involved in Company's Restructuring --------------------------------------------------------------- Lawrence McBrearty, National Director of the United Steelworkers, said Tuesday that, as a stakeholder in the future of Ivaco Inc., the union will be involved in the restructuring of the Montreal- based steel company, which has filed for bankruptcy protection under the Companies' Creditors Arrangement Act. "Our 1,700 members employed by Ivaco deserve a voice in ways to bring Ivaco back to profitability," McBrearty said. "The union fully intends to be involved, to protect the rights of our members, and preserve jobs in the communities that depend on those jobs." McBrearty said the Steelworkers' union has lobbied the federal government for over three years to recognize the crisis in the Canadian steel industry, so far to no avail. "The government has sat on its hands while cheap imports have flooded the Canadian market. Tariffs won't solve all the problems facing the industry, but they would assist by providing some breathing space for good companies to get back on their feet." Wayne Fraser, the Steelworkers' Ontario/Atlantic director, also blamed the Government of Ontario for the high cost of hydro, which contributes to the cost of running facilities like the rolling mills in Eastern Ontario and the Ingersoll Fasteners Division. "Stability in terms of infrastructure is an important part of healing the steel industry," he said. McBrearty, Fraser and Quebec Director Michel Arsenault said the union's involvement in any restructuring is all about maintaining jobs and sustaining communities. The United Steelworkers represents about 180,000 men and women working in every sector of Canada's economy. About 40,000 are employed in the steel industry. To find out more about the Steelworkers' campaign on steel and steel trade, go to http://www.uswa.ca Click on "Bargaining, Campaigns & Political Action". KB HOME: Third Quarter Results Reflect Significant Improvement -------------------------------------------------------------- KB Home (NYSE: KBH), one of the largest homebuilders in the United States and France, announced record financial results for its third quarter ended August 31, 2003. Highlights include: * The Company's total revenues in the third quarter of 2003 reached $1.44 billion, an all-time third quarter high, up 12% from the previous high of $1.29 billion posted in 2002. Net income for the third quarter of 2003 totaled $97.8 million, the highest level for any third quarter in the Company's history, increasing 17% from $83.9 million in the third quarter of 2002. Diluted earnings per share also established a new third quarter record of $2.33 in 2003, increasing 19% from $1.95 per diluted share in the third quarter of 2002. * During the first nine months of 2003, the Company delivered 18,457 homes compared with 17,520 delivered in the first nine months of 2002. Total revenues for the first three quarters of 2003 reached $3.98 billion, up 19% from $3.35 billion in the first three quarters of 2002. The Company's construction operating margin improved 60 basis points to 8.8% for the nine months ended August 31, 2003 and fueled a 22% increase in net income to $232.0 million from $190.6 million for the nine months ended August 31, 2002. Diluted earnings per share for the first three quarters of 2003 set a new Company record of $5.51, advancing 28% from the prior record of $4.29 per share in the same period of 2002. The Company continued its share buyback activity in 2003, completing the repurchase of two million shares of its common stock during the nine-month period ended August 31. * Company-wide net orders for the quarter ended August 31, 2003 established a new third quarter record, increasing 16% to 7,319 from the 6,319 net orders reported for the same quarter of 2002. Year-over-year net order growth was driven by higher net orders from the Company's operations in the Southwest and Southeast regions of the U.S., and in France. The Company's recent acquisitions have significantly expanded its territory in the Southeast region and set the stage for continued net order momentum. * Backlog at August 31, 2003, in terms of both units and dollars, was the highest of any quarter-end in the Company's history. The dollar value of backlog at August 31, 2003 totaled approximately $3.40 billion, up 29% from the same period of 2002, and represents a strong pipeline of future revenues for the remainder of 2003 and the first half of 2004. The Company's backlog at August 31, 2003 stood at 16,572 units, which was up 3,011 units or 22% from 13,561 units at August 31, 2002. * Subsequent to the quarter-end, on September 5, 2003, the Company completed the acquisition of Chicago, Illinois- based Zale Homes, a privately-held builder of single- family homes. Zale generated revenues of just over $100 million and delivered approximately 300 homes in the greater Chicago area in 2002. The acquisition marks the Company's entry into the Chicago market, the fifth largest single-family homebuilding market in the United States. "The acquisition of Zale, one of the leading homebuilders in Chicago, is an exciting step toward strategically positioning KB Home in one of the largest markets in the U.S. as well as in the Midwest, where the potential for growth is strong," said Bruce Karatz, chairman and chief executive officer. "The acquisition extends the reach of KB Home beyond the Sunbelt and gives us a new opportunity to further diversify our operations into a dynamic market. The Zale family has developed an outstanding reputation during its more than 50 years in the homebuilding industry as a result of its customer-oriented approach and commitment to quality, making Zale an excellent fit with KB Home." Total revenues for the third quarter of 2003 amounted to $1.44 billion, up 12% from the year-earlier quarter revenues of $1.29 billion. Housing revenues rose 11% to $1.39 billion from $1.25 billion in the year-earlier quarter as a result of increases in both unit volume and average selling prices. Unit deliveries rose 6% to 6,850 in the third quarter of 2003 from 6,490 in the same quarter of 2002, while the Company's overall average selling price rose 5% to $203,600 in 2003 from $193,100 in 2002. The year-over- year growth in the Company's average selling price in 2003 reflected increases in all of the Company's geographic regions except its Southeast region. Construction operating income for the third quarter increased 16% to $137.3 million in 2003 from $118.8 million in the year-earlier quarter due to the combined effects of higher unit volume and an improved operating margin. The Company's housing gross margin increased 140 basis points to 22.8% for the three months ended August 31, 2003 from 21.4% for the same period of 2002 primarily due to operating efficiencies achieved as well as the favorable pricing environment. The Company's construction operating margin increased to 9.7% in the third quarter of 2003 from 9.4% in the third quarter of 2002. Net income rose to an all-time third quarter high of $97.8 million in 2003, up 17% from $83.9 million in the third quarter of 2002. "The Company's record financial results for the third quarter demonstrated the continued merits of the Company's operational business model," Karatz said. "During the quarter, our margins continued to expand as we maintained adherence to our operational disciplines and achieved efficiencies. In addition, strong demand by our customers against a backdrop of economic growth and improving consumer confidence reinforced the positive operating climate. Our outlook for the remainder of 2003 and our current view of 2004 are favorable as we anticipate being able to maintain our margins in light of current macroeconomic trends." The Company generated 7,319 net orders for the quarter ended August 31, 2003, which marked a new third quarter record and represented an increase of 16% from the 6,319 net orders posted for the same quarter of 2002. In each month of the quarter, the Company's net orders were up on a year-over-year basis. The third quarter net order growth propelled the Company's backlog to the highest quarter-end level in its history. The Company's backlog value reached approximately $3.40 billion at August 31, 2003, a 29% increase compared to $2.64 billion at August 31, 2002. Total backlog units at August 31, 2003 were up 22% year-over-year to 16,572 units due to increases in all geographic regions in which the Company operates except for its Central region. The record backlog at the end of the third quarter supports the Company's growth goals for delivery volume in 2004. "The demand for affordable single-family homes remained solid during the quarter and pushed our backlog to an all-time high," said Karatz. "Although interest rates have moved up over the past couple of months, our Company-wide net orders for the month of August 2003 still showed a double-digit percentage year-over-year increase. While interest rates continue to remain at historic lows, we believe that the adverse impact on demand of a further uptick in interest rates would be offset by the favorable effects of economic recovery and improving consumer sentiment as well as the constrained supply of new and existing home inventory." KB Home (Fitch, BB- Senior Subordinated and BB+ Senior Unsecured Debt Ratings, Stable) is one of America's largest homebuilders with domestic operating divisions in the following regions and states: West Coast -- California; Southwest -- Arizona, Nevada and New Mexico; Central -- Colorado and Texas; and Southeast -- Florida, Georgia and North Carolina. Kaufman & Broad S.A., the Company's majority-owned subsidiary, is one of the largest homebuilders in France. In fiscal 2002, the Company delivered 25,565 homes in the United States and France. It also operates KB Home Mortgage Company, a full-service mortgage company for the convenience of its buyers. Founded in 1957, KB Home is a Fortune 500 company listed on the New York Stock Exchange under the ticker symbol "KBH." For more information about any of KB Home's new home communities, visit the Company's Web site at http://www.kbhome.com KMART CORP: Secures Court Clearance for JDA Settlement Agreement ---------------------------------------------------------------- The Kmart Corporation Debtors obtained the Court's approval of their settlement agreement with JDA Software, Inc. to resolve JDA's claims against the estates. JDA asserts a $291,597 administrative expense claim, $1,865,450 in outstanding unsecured prepetition claims and $737,155 in damages arising from rejected agreements. As of the Petition Date, the Debtors and JDA were parties to four agreements concerning the development of software that would enable the Debtors to open a store in Port of Spain, Trinidad and subsequent stores in the Caribbean. However, based on a number of factors, the Debtors determined to reject all four agreements. The Debtors dispute JDA's Administrative Expense Claim. Their evaluation of the Prepetition Claim also found support for all but $45,000 of the amounts outstanding as of the Petition Date. The Debtors also believe that JDA's rejection damages may be overstated. After discussion between parties, JDA agreed to consider the Administrative Expense Claim as a Lease Rejection Claim under Class 5 for $2,894,205. In addition, JDA and the Debtors agree to reduce the Prepetition Claim to $2,800,000. The parties also agree to amend and extend a Software License Agreement and a Software Maintenance Agreement, which the Debtors assumed pursuant to their Plan. Under the Assumed Agreements, the Debtors license and receive support for software used in automated replenishment and layout planning. (Kmart Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 609/392- 0900) KNOWLES ELEC.: S&P Revises Outlook to Positive over Refinancing --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Knowles Electronics Holdings to positive from negative. At the same time, Standard & Poor's affirmed its 'CCC+' corporate credit and bank loan ratings, as well as its 'CCC-' rating of the company's subordinated notes. "The outlook revision is primarily based on Knowles' recent refinancing of its bank facility and divestiture of three noncore businesses. Together, these actions have eliminated debt maturities until 2006 and bolstered near-term liquidity," said Standard & Poor's credit analyst Bruce Hyman. Itasca, Illinois-based Knowles designs and manufactures components for the hearing-aid market, as well as other acoustic products such as microphones and receivers for headsets and surveillance equipment. As of June 30, 2003, Knowles had $288.7 million of total debt outstanding. LENNAR CORP: Reports Improved Third Quarter 2003 Performance ------------------------------------------------------------ Lennar Corporation (NYSE: LEN and LEN.B), one of the nation's largest homebuilders, reported earnings for its third quarter ended August 31, 2003. Third quarter net earnings in 2003 were $201.6 million, or $2.43 per share diluted, compared to net earnings of $142.2 million, or $1.83 per share diluted, in the third quarter of 2002. Earnings per share amounts and average shares outstanding for 2003 and 2002 have been adjusted to reflect the effect of the Company's April 2003 10% Class B common stock distribution. Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, "Our record results for the third quarter are attributable to continued strength in the homebuilding market and our disciplined approach to managing our business, which we call 'The Lennar Process'. This process allows us to generate sustainable strong returns on capital and equity while remaining focused on protecting our conservative balance sheet." Mr. Miller continued, "We have continued to expand our proven and very successful dual marketing strategy into each of our markets, which has enabled us to increase market share. We have also continued to improve our already strong gross margins by creating programs to reduce construction costs while improving quality." Mr. Miller concluded, "Based on our record performance and strong backlog entering the fourth quarter, we are comfortable increasing our EPS goal for fiscal 2003 to $8.90 from $8.50 per share. Additionally, even with the recent rise in interest rates and lumber prices, as well as a slower refinance market, we remain well positioned to deliver 37,000 homes and achieve our stated goal of $9.50 per share in fiscal 2004." RESULTS OF OPERATIONS THREE MONTHS ENDED AUGUST 31, 2003 COMPARED TO THREE MONTHS ENDED AUGUST 31, 2002 Homebuilding Revenues from sales of homes increased 21% in the third quarter of 2003 to $2.0 billion from $1.7 billion in the same period last year. Revenues were higher due primarily to a 13% increase in the number of home deliveries and a 6% increase in the average sales price. New home deliveries increased to 7,929 homes in the third quarter of 2003 from 6,993 homes in the same period last year. In the third quarter of 2003, new home deliveries were higher in most of the Company's markets, primarily in California and Illinois, compared to 2002. The average sales price on homes delivered increased to $257,000 in the third quarter of 2003 from $242,000 in 2002, primarily due to an increase in the average sales price in some of the Company's markets, combined with changes in product and geographic mix. Gross profits on home sales increased to $483.9 million in the third quarter of 2003, compared to $377.8 million in 2002. Gross margin percentages on home sales were 23.7% (25.3% excluding interest) in 2003, compared to 22.3% (24.5% excluding interest) in 2002. Margins were positively impacted by a greater contribution from a strong California market, combined with lower interest costs due to a lower debt leverage ratio while the Company continues to grow. Selling, general and administrative expenses as a percentage of revenues from home sales were 10.8% in the third quarter of 2003 compared to 10.6% in the same period in 2002. Gross profits on land sales totaled $7.8 million in the third quarter of 2003, compared to $8.2 million in the same period in 2002. Equity in earnings from unconsolidated partnerships was $25.1 million in the third quarter of 2003, compared to $4.2 million in the same period last year. Management fees and other income, net totaled $4.9 million in the third quarter of 2003, compared to $7.1 million in the same period in 2002. Land sales, equity in earnings from unconsolidated partnerships and management fees and other income, net may vary significantly from period to period depending on the timing of land sales and other transactions by the Company and unconsolidated partnerships in which it has investments. In the three months ended August 31, 2003, homebuilding results reflect reclassifications within the statement of earnings that have been made to interest expense (included in cost of sales), equity in earnings from unconsolidated partnerships and management fees and other income, net. Prior year amounts have been reclassified to conform to the 2003 presentation. These reclassifications have no impact on reported net earnings. Financial Services Operating earnings for the Financial Services Division increased to $49.3 million in the third quarter of 2003 from $30.1 million in the same period last year. The significant increase in the Division's mortgage and title operating earnings was primarily due to an extremely strong refinance environment in the third quarter of 2003, compared to 2002. Corporate General and Administrative Expenses Corporate general and administrative expenses as a percentage of total revenues were 1.2% in the third quarter of 2003, compared to 1.1% in the same period last year. NINE MONTHS ENDED AUGUST 31, 2003 COMPARED TO NINE MONTHS ENDED AUGUST 31, 2002 Homebuilding Revenues from sales of homes increased 28% in the nine months ended August 31, 2003 to $5.4 billion from $4.2 billion in the same period last year. Revenues were higher due primarily to a 19% increase in the number of home deliveries and an 8% increase in the average sales price. New home deliveries increased to 20,956 homes in the nine months ended August 31, 2003 from 17,683 homes in the same period last year. In the nine months ended August 31, 2003, new home deliveries were higher in most of the Company's markets, primarily in California and Illinois, compared to 2002. The average sales price on homes delivered increased to $257,000 in the nine months ended August 31, 2003 from $237,000 in the same period last year, primarily due to an increase in the average sales price in some of the Company's markets, combined with changes in product and geographic mix. Gross profits on home sales increased to $1.2 billion in the nine months ended August 31, 2003, compared to $0.9 billion in 2002. Gross margin percentages on home sales were 22.8% (24.6% excluding interest) in 2003, compared to 21.8% (24.0% excluding interest) in 2002. Margins were positively impacted by a greater contribution from a strong California market, combined with lower interest costs due to a lower debt leverage ratio while the Company continues to grow. Selling, general and administrative expenses as a percentage of revenues from home sales were 11.3% in the nine months ended August 31, 2003 compared to 11.2% in the same period in 2002. Gross profits on land sales totaled $25.1 million in the nine months ended August 31, 2003, compared to $2.1 million in the same period in 2002. Equity in earnings from unconsolidated partnerships was $45.0 million in the nine months ended August 31, 2003, compared to $17.1 million in the same period last year. Management fees and other income, net totaled $15.6 million in the nine months ended August 31, 2003, compared to $25.5 million in the same period in 2002. Land sales, equity in earnings from unconsolidated partnerships, and management fees and other income, net may vary significantly from period to period depending on the timing of land sales and other transactions by the Company and unconsolidated partnerships in which it has investments. In the nine months ended August 31, 2003, homebuilding results reflect reclassifications within the statement of earnings that have been made to interest expense (included in cost of sales), equity in earnings from unconsolidated partnerships and management fees and other income, net. Prior year amounts have been reclassified to conform to the 2003 presentation. These reclassifications have no impact on reported net earnings. Financial Services Operating earnings for the Financial Services Division increased to $120.9 million in the nine months ended August 31, 2003 from $80.2 million in the same period last year. The significant increase in the Division's mortgage and title operating earnings was primarily due to an extremely strong refinance and housing environment in the nine months ended August 31, 2003, compared to 2002. Corporate General and Administrative Expenses Corporate general and administrative expenses as a percentage of total revenues were 1.3% in the nine months ended August 31, 2003, compared to 1.2% in the same period in 2002. Lennar Corporation, founded in 1954, is headquartered in Miami, Florida and is one of the nation's leading builders of quality homes for all generations, building affordable, move-up and retirement homes. Under the Lennar Family of Builders banner, the Company includes the following brand names: Lennar Homes, U.S. Home, Greystone Homes, Village Builders, Renaissance Homes, Orrin Thompson Homes, Lundgren Bros., Winncrest Homes, Sunstar Communities, Don Galloway Homes, Patriot Homes, NuHome, Barry Andrews Homes, Concord Homes, Summit Homes, Cambridge Homes, Seppala Homes, Coleman Homes, Genesee and Rutenberg Homes. The Company's active adult communities are primarily marketed under the Heritage and Greenbriar brand names. Lennar's Financial Services Division provides mortgage financing, title insurance, closing services and insurance agency services for both buyers of the Company's homes and others. Its Strategic Technologies Division provides high-speed Internet access, cable television and alarm installation and monitoring services to residents of the Company's communities and others. Previous press releases may be obtained at http://www.lennar.com * * * As reported in Troubled Company Reporter's February 7, 2003 edition, Standard & Poor's Ratings Services raised its corporate credit rating on Lennar Corp., to 'BBB-' from 'BB+'. At the same time, ratings are raised on approximately $2.185 billion senior debt, including bank lines, and on $254 million subordinated debt. The company's outlook is revised to stable from positive. The ratings and outlook acknowledge Lennar's solid market position, highly profitable operations, successful track record of integrating acquisitions, and sound financial risk profile. These credit strengths, coupled with management's discipline with regard to debt leverage, should enable Lennar to perform solidly even if housing demand does soften. RAISED RATINGS Lennar Corp. Ratings To From -- ---- Corporate credit BBB-/Stable BB+/Positive $2.185 bil. sr debt BBB- BB+ $254.19 mil. sub debt BB+ BB- U.S. Homes Corp. Ratings To From -- ---- Corporate credit BBB- BB+ $2.181 mil. sr debt BBB- BB+ $6.187 mil. sub debt BB+ BB- LTWC CORP: Ex-Auditor BDO Seidman Airs Going Concern Uncertainty ---------------------------------------------------------------- As previously disclosed, on July 23, 2003, LTWC Corporation and four of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (Case No. 03-12272). The Debtors also entered into an agreement to sell substantially all of their assets (other than cash and cash equivalents) to Markado, Inc., pursuant to Section 363 of the Bankruptcy Code. On August 22, 2003, BDO Seidman, LLP resigned as the Company's principal accountant responsible for auditing the Company's financial statements. If the asset sale is consummated the Company plans to wind-down its operations and does not anticipate appointing another principal accountant responsible for auditing the Company's financial statements. BDO's report on the financial statements of the Company for the fiscal year ended December 31, 2002 contained an explanatory paragraph which noted that the Company had suffered recurring losses and negative cash flow from operations. Such explanatory paragraph also noted that these conditions raised substantial doubt about the Company's ability to continue as a going concern. MAGELLAN HEALTH: Wants to Reject New York Regional Center Lease --------------------------------------------------------------- Debtor Magellan Behavioral Health, Inc. was a party to an August 14, 1991 non-residential property lease with TST/Commerz East Building LP and TST 666 Third LLC. The Lease governs certain premises located at 666 Third Avenue in New York. The Debtors use the Premises for a regional service center to provide customer support to their customers. As part of their internal operational restructuring program, the Debtors determined to combine many of their regional service centers into fewer, larger care management centers located throughout the country to decrease operating costs. The Debtors closed, or are in the process of closing, many of their regional service centers. The Debtors also expanded a select few centers to serve as large care management centers to provide services to the Debtors' customers and their members. One of the service centers to be closed is the New York service center. The Debtors will consolidate their New York operations into the care management center located in Parsippany, New Jersey. The Debtors and their advisors reviewed and analyzed the Lease to determine its economic value in the perspective of their reorganization. Based on the results, the Debtors have determined to reject the Lease. Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, in New York, explains that the Debtors no longer have a use for the Premises relating to the Lease. Despite the Debtors' efforts, they have been unable to reach an agreement with TST regarding a consensual early termination of the Lease. Moreover, the rent under the Lease is at or above market rate. Accordingly, there is no potential value that might be realized by a future sale of the Lease. Thus, the Debtors have determined to reject the Lease and avoid the incurrence of any additional expenses with respect to it. The rejection will also result in a $7,200,000 reduction in monthly rental costs over the next 4.5 years. Thus, the Debtors seek the Court's authority to reject the Lease effective as of September 30, 2003. This will give the Debtors time to vacate the Premises. In addition, the Debtors propose that any claim for damages arising as a result of the rejection of the Lease must be filed within 30 days after Court approval of the rejection. (Magellan Bankruptcy News, Issue No. 13: Bankruptcy Creditors' Service, Inc., 609/392-0900) MET-COIL SYSTEMS: Wants Court to Fix November 14 Claims Bar Date ---------------------------------------------------------------- Met-Coil Systems Corporation, is asking the U.S. Bankruptcy Court for the District of Delaware to fix November 14, 2003, as the date by which all its creditors must file their proofs of claim or be forever barred from asserting that claim. The Debtor points out that the requested Bar Date will provide ample time for mailing thousands of Bar Date Notices and allowing the Debtor's creditors a reasonable opportunity to prepare and file proofs of claim. All proofs of claim, to be deemed timely-filed, must be received on or before 4:00 p.m. (Pacific Time) on Nov. 14. Claim forms must be delivered: (a) if by mail, Bankruptcy Management Corporation Attn: Met-Coil Systems Corporation Claims Processing P.O. Box 1033 El Segundo, CA 90245-1033; or (b) if delivery by hand, courier or overnight service, Bankruptcy Management Corporation Attn: Met-Coil Systems Corporation, Claims Processing 1330 East Franklin Avenue El Segundo, California 90245 Claimholders exempted from the Bar Date are those that hold claims which are: a) already been properly filed with the Claims Docketing Center or the Clerk of the Court; b) listed on the Schedules and not described as "disputed," "contingent" or "unliquidated"; c) already paid by the Debtor with the authorization of this Court; and d) previously fixed and allowed by an order of this Court. Additionally, the Debtor requests that proofs of claim for any rejection damages claim arising during this case, be filed: i) by the later of 30 days after the effective date of rejection of such executory contract or unexpired lease or ii) pursuant to a Court-approved notice or iii) the Bar Date. Headquartered in Westfield, Massachusetts, Met-Coil Systems Corporation manufactures coil sheet metal processing equipment and integrated systems for producing blanks from sheet metal coils. The Company filed for chapter 11 protection on August 26, 2003 (Bankr. Del. Case No. 03-12676). James C. Carignan, Esq., and Jason W. Harbour, Esq., at Morris Nichols Arsht & Tunnell represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed more than $10 million in assets and more than $50 million in debts. METRIS COMPANIES: Consummates Sale of $590 Million Portfolio ------------------------------------------------------------ Metris Companies Inc. (NYSE:MXT) has closed on the sale of a portfolio of approximately 160,000 credit card accounts and $590 million in receivables. The Company announced the sale of approximately $145 million of accounts and receivables from Direct Merchants Credit Card Bank, its wholly owned subsidiary, and approximately $445 million of receivables from Metris Receivables, Inc., its wholly owned subsidiary, which were held by the Metris Master Trust prior to the sale. The Company will set aside a portion of the proceeds from this sale to support compliance with its agreement with the Office of the Comptroller of the Currency to eliminate the risk associated with the federally insured deposits at Direct Merchants Credit Card Bank. As a result of the sale, Metris will take a third- quarter 2003 pre-tax charge of approximately $75 to $85 million, which will include a write-down of consumer-based intangibles associated with the sold receivables. The sale will result in a small cash increase for the Company due to its financing structure. The loss associated with the portfolio sale will be largely offset by a gain to be realized in the third quarter from the previously announced sale of the membership and warranty products and operations of Metris' enhancement services business. "We are pleased to announce the closing of this portfolio sale," said David Wesselink, Metris Chairman and CEO. "The transaction provides multiple advantages for the Company, including enhancing our overall liquidity position while supporting our efforts to meet our regulatory requirements of eliminating the deposit risk at our bank." Metris Companies Inc. (NYSE:MXT) (S&P, CCC- Long-Term Counterparty Credit and Senior Unsecured Debt Ratings, Negative), based in Minnetonka, Minn., is one of the largest bankcard issuers in the United States. The company issues credit cards through Direct Merchants Credit Card Bank, N.A., a wholly owned subsidiary headquartered in Scottsdale, Ariz. For more information, visit http://www.metriscompanies.comor http://www.directmerchantsbank.com METRIS COS.: Replaces $610 Million ABS Debt from Metris Master -------------------------------------------------------------- Metris Companies Inc. (NYSE:MXT) announced that Metris Receivables, Inc., its wholly owned subsidiary, through the Metris Master Trust, has replaced the $610 million 2001-1 series asset- backed securitization from the MMT. The 2001-1 series was scheduled to begin an accumulation period on November 1, 2003 and mature in January 2004. The replacement of the 2001-1 series also meets the requirements of the Company's existing conduit providers that the Company secure an additional funding commitment no later than September 30, 2003. The new private conduit, series 2003-1, matures February 28, 2004. "We are pleased to have met this funding requirement," said David Wesselink, Metris Chairman and CEO. "Today's announcement represents further progress in the Company's efforts to enhance our overall liquidity position." Metris Companies Inc. (NYSE:MXT) (S&P, CCC- Long-Term Counterparty Credit and Senior Unsecured Debt Ratings, Negative), based in Minnetonka, Minn., is one of the largest bankcard issuers in the United States. The company issues credit cards through Direct Merchants Credit Card Bank, N.A., a wholly owned subsidiary headquartered in Scottsdale, Ariz. For more information, visit http://www.metriscompanies.comor http://www.directmerchantsbank.com MILLER INDUSTRIES: NYSE Accepts Plan to Meet Listing Guidelines --------------------------------------------------------------- Miller Industries, Inc. (NYSE: MLR) has been notified by the New York Stock Exchange that the NYSE has accepted the Company's plan to regain compliance with the NYSE's continued listing standards relating to shareholders' equity and market capitalization within an 18 month timeframe. * * * As reported in Troubled Company Reporter's August 22, 2003 edition, Miller Industries' Junior Credit Facility matured and was due and payable on July 23, 2003, under which $13.8 million was outstanding June 30, 2003. The Company has not yet repaid or refinanced the outstanding principal and interest under the Junior Credit Facility. The Company's failure to repay all outstanding principal, interest and any other amounts due and owing under the Junior Credit Facility on the maturity date constituted an event of default under the Junior Credit Facility and also triggered an event of default under the Senior Credit Facility cross-default provisions. Pursuant to the terms of the Intercreditor Agreement, the junior lender agent and the junior lenders are prevented from taking any enforcement action or exercising any remedies against the Company, its subsidiaries or their respective assets in respect of such event of default during a standstill period which will expire on the earlier of: (i) November 26, 2003 (the date which is 120 days after the date that written notice was given by the junior lender agent to the senior lender agent of its intent to commence an enforcement action as a result of the occurrence of the Junior Credit Facility defaults), subject to extension by notice from senior lender agent to junior lender agent to April 24, 2004 (the date which is 270 days after the date of the Junior Notice); (ii) the acceleration of the maturity of the obligations of the Company under the Senior Credit Facility by the senior lender agent, and (iii) the commencement of any bankruptcy, insolvency or similar proceeding against the Company or certain of its subsidiaries. On August 5, 2003, the senior agent gave a payment blockage notice to the junior agent, thereby preventing the junior agent and junior lenders from receiving any payments from the Company in respect of the Junior Credit Facility while such blockage notice remains in effect. This payment blockage will expire on the earlier of (i) February 1, 2004 (subject to an extension to May 1, 2004) if the Standstill Period is extended from November 26, 2003 to April 24, 2004 at the election of the senior lender agent by notice to the junior lender agent as described above, or (ii) the date that the Senior Credit Facility defaults giving rise to the payment blockage notice have been cured or waived. An event of default has also occurred under the Junior Credit Facility and the Senior Credit Facility as a result of the auditor's report for the Company's December 31, 2002 financial statements including an explanatory paragraph that referred to uncertainty about the Company's ability to continue as a going concern for a reasonable period of time. These existing events of default under the Senior Credit Facility could result in the acceleration of the amounts due under the Senior Credit Facility as well as other remedies if not waived by the senior lenders. There is no assurance that the Company will be able to obtain such a waiver from the senior lenders or a waiver from the junior lenders of any events of default that have occurred. The Company is currently in discussions with the lenders under the Junior Credit Facility to extend the maturity date of the Junior Credit Facility and/or to refinance the Junior Credit Facility. The Company has also entered into discussions with the lenders under the Senior Credit Facility to refinance the Senior Credit Facility. There can be no assurance that the Company will be able to extend the maturity date of the Junior Credit Facility or refinance either or both Credit Facilities. Finally, the Company recently submitted a plan to the New York Stock Exchange for regaining compliance with the NYSE's continued listing standards. The plan is centered on focusing all the Company's resources, manpower as well as financial, on returning the manufacturing operations to their historically profitable levels. The NYSE may take up to 45 days to review and evaluate the plan. Miller Industries is the world's largest manufacturer of towing and recovery equipment. The Company markets its towing and recovery equipment under a number of well-recognized brands, including Century, Vulcan, Chevron, Holmes, Challenger, Champion and Eagle. MIRENCO INC: Hires Stark Winter as New Independent Accountants -------------------------------------------------------------- On July 23, 2003, Mirenco Inc.'s Board of Directors approved minutes terminating the services of Grant Thornton, LLP of Kansas City, Missouri as the Company's independent auditors. The termination of Grant Thornton resulted from a business decision made by the Board of Directors because of cost considerations. The Company formally notified Grant Thornton, concurrent with the Board's approval of minutes of the Board Meeting where the decision was made. The accountant's report on the financial statements for the past two years contained a going concern opinion expressing substantial doubt about the ability of the Company to continue as a going concern for the fiscal year ended December 31, 2002. For the most recent year Grant Thornton issued a material weakness in internal control report advising Mirenco that the controls necessary to develop reliable financial statements do not exist. The Company's Board of Directors discussed this reportable event with Grant Thornton and has authorized Grant Thornton to fully respond to inquiries of the successor accountant regarding this matter. On July 23, 2003, the Board of Directors approved minutes which approved the retention of the accounting firm of Stark, Winter, Schenkein & Co., LLP, Certified Public Accountants of Denver, Colorado as its independent auditors for the fiscal year ending December 31, 2003. Grant Thornton's issuance of a material weakness in internal control report was dated April 14, 2003 on April 22, 2003 in draft form to the COO and CFO of the Company. The letter, which formalized Grant Thornton's previous communications to the Board of Directors and management, was issued May 28, as follows: "We believe that the following significant deficiencies are indicative of a control environment that lacks a sufficient level of control consciousness. This lack of control consciousness is the primary reason for our conclusion that these significant deficiencies, in the aggregate, constitute material weaknesses in the design and operation of internal control under standards established by the American Institute of Certified Public Accountants. "During the audit, we noted several accounts that required adjustment. When these accounts were analyzed for the year-end audit, six adjustments were made in total. These adjustments, which impacted every financial statement classification, reduced pre-tax income by $690,000. The most significant adjustment was for impairment of the corporate office building, which resulted in a loss of $677,000. This issue was brought to the attention of the Board of Directors, Audit Committee and former chief financial officer earlier in the year and should have been addressed before year-end. In addition, the current accounting personnel must become familiar with new SEC reporting regulations and reporting requirements to ensure that a comprehensive understanding of the processes for accumulating and reporting financial information is present. Furthermore, the Company must draft the financial statements and strive to complete the reporting requirement in a more timely fashion. The efficiency, timeliness and accuracy of financial reporting is imperative to compliance with the SEC reporting requirements." NORSTAN INC: August 2 Working Capital Deficit Tops $18 Million -------------------------------------------------------------- Norstan, Inc. (Nasdaq:NRRD), a leading provider of communications technology solutions and services, reported revenues of $56.9 million for the first quarter of fiscal 2004 ended August 2, 2003, a 9.2% increase over the $52.1 million reported in the same period last year. Gross margin of 28.1% for the first quarter of fiscal 2004 was down from 31.7% recorded a year ago as a result of a changing product mix and lower utilization rates during the quarter. Norstan recorded an operating loss of $2.9 million for the first quarter of fiscal 2004 versus net income of $769,000 in the same period last year, which was attributable to the company's ongoing investment in expansion into tier one markets and continued gross margin pressure. Norstan recorded a first quarter net loss from continuing operations of $2.0 million, as compared to net income of $43,000 in the same period for fiscal 2003. During the quarter, Norstan recorded a net gain on the disposal of real estate received as part of the Vadini arbitration settlement of $155,000. Net loss for the first quarter of fiscal 2004 totaled $1.9 million, compared to net income of $2.2 million in the first quarter of fiscal 2003. "While our revenue growth improved as compared to last year in spite of continued market softness in IT spending, the operating loss was larger than we had anticipated," said James C. (Jim) Granger, president and chief executive officer at Norstan. "We will continue to adjust our cost model with a view toward achieving long term profitability. We believe our strategy of expansion into cities, such as New York, San Francisco, Atlanta and Chicago, is the right one to position Norstan for the future." Revenues decreased 3.6% from the $59.0 million generated in the fourth quarter of fiscal 2003. Gross margin remained relatively flat from the 28.4% reported last quarter. Net loss from continuing operations increased quarter over quarter from the net loss of $959,000, or $0.08 per share, reported in the fourth quarter of fiscal 2003. Net income declined sequentially from the $1.7 million net income, or $0.13 per diluted share, reported in the fourth quarter. Norstan recorded a net gain on discontinued operations of $2.7 million in the fourth quarter of fiscal 2003 as a result of the accelerated payment from NetWolves in connection with the sale of Norstan Network Services in the first quarter of fiscal 2003. As part of Norstan's continued focus on right-sizing the cost model to ensure long term profitability, the Company anticipates recording a restructuring charge in the second quarter of fiscal 2004 ranging from $1.5 - $2.0 million, related to a reduction in work force of approximately 75-100 people. The execution of this action is anticipated to be completed by the end of Norstan's second quarter. At the same time Norstan will continue to build its workforce in technology expertise and geographies of opportunity to augment the company's growth. The company will continue to manage expenses to better align resources with market demand. At August 2, 2003, Norstan's balance sheet shows that its total current liabilities exceeded its total current assets by about $18 million. Norstan's first quarter results placed the company out of compliance with one specific covenant contained in the agreement governing the company's primary credit facility. Norstan's lenders have waived this covenant violation. The anticipated restructuring charge and a continuation of the factors contributing to Norstan's first quarter loss will cause the company to be out of compliance with its lending agreement in the second fiscal quarter of 2004. Norstan's management is engaged in discussions with the company's current lenders regarding these matters. Additionally, the company is conducting discussions with other financial institutions concerning Norstan's long-term credit financing needs. Quarterly Highlights: -- Mercedes Benz Canada selected Norstan Canada, Ltd., to supply an Internet Protocol (IP) voice and data system for the company's new Toronto headquarters facility, lowering the company's maintenance costs and streamlining the management of its voice and data communications. -- Norstan Communications was chosen by the City of Coquitlam, one of North America's leading high-tech cities, to install a new Nortel Network's IP telephony system, including 700 phones and a new, advanced, data infrastructure that links 15 sites throughout the city, providing a savings to Coquitlam's taxpayers. -- Rice Memorial Hospital selected Norstan Communications to deploy a wireless voice over IP network on a Distributed Antenna System (DAS), improving communications for hospital staff and patient care. -- Norstan Communications entered a distribution agreement with Ascendent Telecommunications, a leading developer of mobility and disaster recovery technology solutions for voice communications. Fiscal 2004 Outlook While Norstan's management remains optimistic the Company will be profitable over the longer term, the Company believes it is unwise to provide detailed guidance on near term revenues and earnings per share. Norstan, Inc. (Nasdaq:NRRD), the technology services people who improve the way their customers communicate. A full-service telecommunications solutions company that delivers voice and data technologies and services, and remanufactured equipment to select corporate end-users and channel partners. Norstan also offers a full range of technologies for call center design, messaging, infrastructure, conferencing and mobility. Norstan has offices throughout North America. To learn more, visit the Norstan Web site at http://www.norstan.com NORTHWESTERN CORP: Receives Court Approval of First Day Motions --------------------------------------------------------------- NorthWestern Corporation has received approval from the U.S. Bankruptcy Court for the District of Delaware for a series of the company's "first day" motions. Following a hearing held on September 15, 2003, the court approved, among other things, motions related to: -- Normal payment of employee salaries, wages and benefits; -- Payment to suppliers for the post-petition delivery of goods and services; -- Allowance to pay unpaid property taxes to counties in the State of Montana; -- Continuation of bank accounts and existing cash management system; and -- Continuation of forward power contracts and the ability to enter into such contracts in the ordinary course of business. Additionally, the court approved, under interim order, access to $50 million of the $100 million debtor-in-possession financing facility arranged by the company with Bank One, N.A. These funds, in addition to unrestricted cash and normal cash flow, will provide sufficient liquidity to continue normal operations, including the procurement of energy supplies, as the Company restructures. "The approval of our first day motions helps ensure that NorthWestern can maintain its focus on serving our customers and delivering reliable energy services as we work to strengthen our financial platform," said Gary G. Drook, NorthWestern's President and Chief Executive Officer. As previously announced, NorthWestern Corporation filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code on Sept. 14, 2003, with the U.S. Bankruptcy Court for the District of Delaware. The case number is 03-12872 (PJW), and the presiding judge is the Honorable Peter J. Walsh. NorthWestern Corporation is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving more than 598,000 customers in Montana, South Dakota and Nebraska. NorthWestern also has investments in Expanets, Inc., a nationwide provider of networked communications and data solutions to small and mid-sized businesses; and Blue Dot Services Inc., a provider of heating, ventilation and air conditioning services to residential and commercial customers. NRG ENERGY: Stone & Shaw Constructors Want Examiner Appointed ------------------------------------------------------------- Andrew Dash, Esq., at Brown, Rudnick, Berlack, Israels, LLP, in New York, relates that an important part of the NRG Energy Debtors' Plan is the Xcel Settlement. The Debtors are seeking to proceed with balloting and confirmation even though the Xcel Settlement Agreement and a related Release Based Amount Agreement are still being negotiated. Mr. Dash tells the Court that the Debtors' Disclosure Statement, the Xcel Settlement and Plan provide for impermissibly broad releases of Xcel, NRG's ultimate parent, and certain affiliates from both derivative and direct claims. The fundamental terms of the Xcel releases are not contained in either the Plan nor the Disclosure Statement, but in the Term Sheet attached as Exhibit A to the Plan and a Plan Support Agreement attached as Exhibit B to the Plan. The Releases Benefiting Xcel The term "Released Parties" is defined in the Term Sheet to include Xcel, its officers, directors, and affiliates. The term "NRG Released Causes of Action" is defined in the Term Sheet to include all claims relating to any matter related to NRG. The Plan requires that the order confirming the Plan: (a) contain an express finding that "all NRG Released Causes of Action to be specified by Xcel are the exclusive property of the Debtors pursuant to Section 541 of the Bankruptcy Code," and (b) permanently enjoin any creditor of the Debtors from pursuing any NRG Related Causes of Action against any of the Released Parties, including, without limitation, commencing or continuing any actions or other proceedings. Proposed Distributions to Class 6 The Released-Based Amount and the Release Election Under the Plan, the Debtors' general unsecured creditors may receive distributions consisting of its pro rata share of New NRG Senior Notes and New NRG Common Stock. If the claimant "elects" to release its claims against Xcel in accordance with the Release Election, the claimant may receive an additional distribution consisting of a pro rata share of the Released-Based Amount based on the claimant's allowed claim against the Debtors compared to the aggregate of other allowed general unsecured claims against the Debtors, including some or all of Stone and Shaw's NRG Claims. The Released-Based Amount is a fund up to $390,000,000, which Xcel is to contribute, together with its claims against the Debtors and parties related to the Debtors, in exchange for the releases in Xcel's favor of All Other Claims. The Released-Based Amount is payable in cash or, under certain circumstances in connection with a specified downgrade in the credit ratings on Xcel's own unsecured publicly-held notes, in so-called "XEL Stock," the precise terms of which none of the Plan, the Term Sheet and the Plan Support Agreement makes clear. To the extent that creditors elect, in accordance with the Release Election, not to receive their pro rata shares of the Released-Based Amount, the Term Sheet contemplates that the aggregate amount of the pro rata shares will be credited against and deducted from the amount of Xcel's contributions due under the Plan. The "details as to how to calculate the Released-Based Amount payable by Xcel to NRG at any time" are to be specified in a separate agreement, which has not been finalized and many of the terms of which have not been disclosed, among NRG, Xcel, the Committee, the Global Steering Committee and the Noteholder Group. Disclosure Statement Mr. Dash also notes that the Disclosure Statement does not contain adequate disclosure as to: (a) the rationale and bases for the proposed settlement and release of claims against Xcel embodied in the Term Sheet; (b) the nature and value of the Debtors' and individual creditors' direct claims against Xcel that are being settled and released under the Plan; (c) the reasons why a separate $112,000,000 cash payment is being made by Xcel to the Separate Bank Settlement Group outside of the Plan or the nature and value of the claims held by the Separate Bank Settlement Group against Xcel; (d) the tax benefits to be derived by Xcel as a result of the proposed settlement and whether the Xcel Settlement is sufficient and fair in light of the benefits; (e) the rationale underlying the allocation of the total of up to $752,000,000 Xcel contributions amongst the Separate Bank Settlement Payment -- $112,000,000; the Released- Based Amount -- $390,000,000; and the fund for settlement of NRG-derivative claims -- $250,000,000; and whether the allocation is fair and supportable; and (f) why only members of the Noteholders Group and Separate Bank Group will be entitled to designate directors of the reorganized Debtors. An Examiner Must be Appointed By this motion, Stone & Webster, Inc. and Shaw Constructors, Inc. ask the Court to appoint an examiner pursuant to Section 1104(c) of the Bankruptcy Code, with the authority to conduct an investigation into the settlement among NRG Energy, Inc. and related subsidiaries, Xcel Energy, Inc., most of the holders of certain NRG notes, and certain of NRG's bank lenders. Stone and Shaw assert that the Examiner's principal role should be to conduct a full, fair and, most importantly, independent investigation of the rationale, terms and benefits of the Xcel Settlement. To that end, Stone and Shaw propose that the Examiner will have duties to: (a) investigate the terms of, merits of and rationale for the Xcel Settlement; (b) investigate the nature and value of the claims to be released under the Plan and the Xcel Settlement in favor of Xcel and Xcel's officers, directors and other affiliates; (c) investigate the terms of, merits of, rationale for and value of all benefits given under the Xcel Settlement to the Debtors and non-Debtors, including, without limitation, the potential tax benefits accruing to Xcel and the value of the claims being released; (d) investigate the relationships among the parties to the Xcel Settlement and the roles played by the individuals and by the Noteholders and Separate Bank Group in negotiating it; (e) prepare and file with the Court a report on or before the date 45 days after the date of the examiner's appointment by the United States Trustee and approval of its appointment by the Court in accordance with Section 1104(d) of the Bankruptcy Code and Rule 2007.1(c) of the Federal Rules of Bankruptcy Procedure, which Examiner Report will set forth the examiner's findings resulting from the examiner's performance of the foregoing duties; and (f) serve the Examiner Report when so filed on counsel to Stone and Shaw, the Debtors' counsel, the Committee's counsel, the United States Trustee, and parties-in- interest who have requested service of the papers in these Chapter 11 cases. To give the Examiner sufficient time to perform its duties and to give the Court, the Debtors, Stone and Shaw and other parties-in- interest sufficient time to review and evaluate the Examiner Report, and as the Examiner Report's findings may affect the Court's and creditors' evaluation of the Plan, Stone and Shaw propose that any hearing on confirmation of the Plan be rescheduled to a date at least 30 days after the Examiner Report Deadline. In furtherance of the Examiner Duties, Stone and Shaw ask the Court to order that: (a) the Debtors and their agents will provide to the Examiner full and unfettered access to the Debtors' books and records, and (b) the Examiner will have the right to request and conduct discovery of the Debtors and any individuals or other entities in accordance with Bankruptcy Rule 2004. Pursuant to the plain language of the Section 1104(c)(2) of the Bankruptcy Code, the appointment of an examiner is mandatory at the request of a party-in-interest when a trustee has not been appointed and the Debtors' fixed, liquidated and unsecured debts exceed $5,000,000. Mr. Dash says that it is undisputed that the Debtors' fixed, liquidated and unsecured debts, other than debts for goods, services, or taxes, or owing to an insider, far exceed $5,000,000. Therefore, Section 1104(c)(2) mandates the approval of Stone and Shaw's request for the appointment of an examiner. (NRG Energy Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) OHIO CASUALTY: CEO Will Present at Morgan Stanley Conference ------------------------------------------------------------ Ohio Casualty Corporation's (Nasdaq:OCAS) chief executive officer will be one of the speakers at the Morgan Stanley 2003 Convertible Conference in Telluride, CO on Tuesday, September 23, 2003. President and CEO Dan R. Carmichael, CPCU, will speak in a live Internet broadcast beginning at 11 a.m. EDT (9 a.m. MDT), discussing a financial presentation entitled "Building Competitive Advantage." The Webcast presentation can be heard live at http://customer.nvglb.com/MORG007/092303a_cf/default.asp?entity=ohiocasualty (Due to the length of this URL, it may be necessary to copy and paste this hyperlink into your Internet browser's URL address field.) A playback of the presentation can also be accessed at this address for 60 days. Ohio Casualty Corporation (S&P, BB Senior Unsecured Debt, B+ Subordinated Debt, B Preferred Share Ratings) is the holding company of The Ohio Casualty Insurance Company, which is one of six property-casualty subsidiary companies that make up Ohio Casualty Group. The Ohio Casualty Insurance Company was founded in 1919 and is licensed in 49 states. Ohio Casualty Group is ranked 45th among U.S. property/casualty insurance groups based on net premiums written (Best's Review, July 2003). The Group's member companies write auto, home and business insurance. Ohio Casualty Corporation trades on the NASDAQ Stock Market under the symbol OCAS and had assets of approximately $5.0 billion as of June 30, 2003. OWENS-ILLINOIS: Building Glass Container Plant in Windsor, Colo. ---------------------------------------------------------------- Owens-Illinois, Inc., (NYSE: OI) has selected a site near Windsor, Colo., to build its new glass container manufacturing plant. Plans for the new plant were first announced in February 2003. Since that time, company officials have worked with local economic development boards, state and local government officials, environmental agencies, as well as civic leaders in northeast Colorado and southeast Wyoming to select a site location. O-I evaluated potential site locations based on operational and logistical criteria including proximity to its customer base and accessibility to natural gas, power, highway, railroad and workforce. "We are pleased to become part of northern Colorado and the Windsor community. We look forward to working with the state of Colorado, Weld County and the town of Windsor in continuing what we hope to be a successful partnership. Our new high-productivity plant will be among the most efficient glass container plants in the world and will incorporate the latest in O-I glass technology including O-I patented and proprietary machines, environmental technology, equipment, designs and know-how," said Joseph H. Lemieux, Owens-Illinois chairman and chief executive officer. Construction on the approximately 500,000-square-foot facility will begin once designs are finalized and permit applications are approved. The plant is expected to start production in January 2005. With the new Windsor facility, Owens-Illinois will have 25 glass container manufacturing plants in North America, 19 of which are in the U.S. Owens-Illinois is the largest manufacturer of glass containers in North America, South America, Australia and New Zealand, and one of the largest in Europe. O-I also is a worldwide manufacturer of plastics packaging with operations in North America, South America, Europe, Australia and New Zealand. Plastics packaging products manufactured by O-I include consumer products (blow molded containers, injection molded closures and dispensing systems) and prescription containers. Copies of Owens-Illinois news releases are available at the Owens- Illinois Web site at http://www.o-i.comor at http://www.prnewswire.com PACIFIC GAS: Reaches Rate Case Settlement with Consumer Groups -------------------------------------------------------------- Pacific Gas and Electric Company has joined with The Utility Reform Network, the California Public Utilities Commission Office of Ratepayer Advocates, Aglet Consumer Alliance, the Modesto Irrigation District, the Natural Resources Defense Council, and the Agricultural Energy Consumers Association to request that the CPUC approve a comprehensive settlement agreement reached among these parties in PG&E's 2003 General Rate Case. The settlement agreement is intended to resolve all disputed issues among the settling parties in this phase of the GRC, with the exception of PG&E's request that the CPUC include funding for a PG&E contribution to its employee pension fund. The pension fund contribution issue, as well as other issues raised by non-settling parties, will be addressed in the ongoing regulatory process at the CPUC. According to the terms of the settlement, PG&E would receive an increase in revenues of approximately $236 million for its electric distribution operations, $52 million for its gas distribution operations, and $38 million for its electric generation operations. These amounts would be adjusted upward by approximately $75 million if the CPUC grants PG&E's request for funding to make a pension contribution. The settlement represents a significant reduction from the increases PG&E sought in its November 2002 application of $447 million for its electric distribution operations, $105 million for its gas distribution operations, and $149 million for its electric generation operations. (NOTE: In a generation settlement agreement currently awaiting approval by the CPUC, PG&E had already reduced its request for an increase in electric generation revenues to $82 million. This settlement resolves those issues not previously settled.) It is anticipated that there would be no increase in retail customer electric rates, as the increases stemming from this settlement would be offset by decreases in other areas. Residential gas customers would see an increase in the average natural gas bill of approximately $0.86 per month, from $37.95 to $38.81. PG&E also agreed to enhance its customer service Quality Assurance Program by redefining some existing customer service standards and adding new standards as recommended by ORA. The settlement would also formalize PG&E's voluntary "Safety Net" program. Additionally, PG&E agreed to provide the CPUC quarterly reports regarding these important customer service programs. The settlement would also provide for yearly adjustments in revenues in 2004, 2005 and 2006 based upon growth in the Consumer Price Index. The settlement, which would be effective as of January 1, 2003, would also provide that PG&E's next GRC would determine revenues for 2007. The next steps in the CPUC regulatory review process include a 45- day comment period, although the parties have requested that this period be shortened. Depending on the comments submitted, a hearing may be held regarding the settlement. The parties have requested that the CPUC issue a final decision approving this settlement agreement and resolving all remaining issues, including PG&E's request for a pension fund contribution, on or before February 5, 2004. For more information about Pacific Gas and Electric Company, visit http://www.pge.com PATCH SAFETY: Initiates Financial and Management Restructuring -------------------------------------------------------------- Patch Safety Services Ltd., intends to undertake a major financial and management restructuring that will greatly enhance the Company's ability to exploit the opportunities created by the current strong market environment for oilfield services. In addition, Jennings Capital Inc., as Agent, will raise a maximum of $2.3 Million by way of Special Warrants, at an offering price of $0.115 per Special Warrant which will entitle the holder to acquire, at no additional cost, one common share for each Special Warrant. Completion of the Restructuring will be conditional upon various matters including the approval of the Restructuring by the TSX Venture Exchange. The TSXV has advised the Company that the Restructuring will not require the approval of the existing Patch shareholders. While Patch is a fundamentally sound company with an excellent operations team, good equipment and a strong customer base, it has struggled under an excessive debt load since undertaking a major expansion in the fall of 2001, the same time at which oil prices, gas prices and oilfield service activity declined sharply. Patch has been unable to pay the principal obligations of its Series 1 and Series 2 Convertible debentures due September 30, 2002, and anticipates being unable to make further payments due September 30, 2003. On August 30, 2003 Patch was unable to pay the principal repayment obligations of its 6% convertible debentures. Patch has been in default of its senior secured lending covenants under its existing credit facilities and has been operating under letters of forbearance from its bank since March, 2002. Without additional equity financing, it is unlikely that Patch will be able to resolve these debt issues in the near future. The Restructuring described herein is intended to resolve Patch's debt problems and provide Patch with a strong financial foundation from which to continue its long term growth strategy in the highly fractured oilfield safety sector. The restructuring has four major components: a private placement of equity through the sale of Special Warrants convertible into Common Shares; a reduction and replacement of outstanding debentures with new convertible debentures; a new senior lending facility that includes rescheduling the repayment terms of its term debt; and a new Chief Executive Officer and Board of Directors. Each is explained in detail below. Private Placement Patch intends to offer by way of private placement up to 20 million (20,000,000) Special Warrants from treasury at a price of $0.115 per Special Warrant. Each Special Warrant will be exercisable into one Common Share of the Company without the payment of any additional consideration. The gross proceeds from the private placement before expenses estimated at $200,000 will be $2.3 million if the offering is fully subscribed. Use of proceeds will be to reduce outstanding debentures by 50% from $1,947,500 to $973,750. The remainder will be applied to working capital to put certain bank lending covenants back on side and give Patch significantly increased financial strength. If the Special Warrants are fully subscribed and converted to Common Shares, Patch's Common Shares issued and outstanding will increase from 9,691,833 to 29,691,833. This will represent approximately an additional 200% of the issued and outstanding Common Shares. New Convertible Debentures The holders of $1,947,500 principal amount of existing debentures have agreed to accept replacement convertible debentures for up to $973,750. The debentures fully mature in three years, pay interest of 7.5% per annum on a monthly basis, and can be converted into Common Shares of Patch at $0.30 per share at any time at the option of the holder. Half the principal amount of the debentures is due in 18 months with the remainder due in 36 months. Patch has a prepayment option by which the debentures may be redeemed at the rate of 1/36 of the amount outstanding on a monthly basis so long as such payments are permitted with the covenants in place with Patch's senior secured lender. Patch has the ability to force the full redemption of the debentures at any time should the Common Shares of Patch trade at $0.45 per share or higher for 20 trading days. The convertible debenture holders also have the right to accept up to 25% of the convertible debentures in the form of Special Warrants identical to those issued in respect of the offering described herein. If all debenture holders choose to accept the maximum amount permitted in Special Warrants, this could result in the issuance of an additional 2,116,305 Special Warrants. Restructured Senior Bank Debt Patch has received a Term Sheet from its existing senior secured lender, by which the Bank will conditionally put in place a new lending facility that will allow Patch to conduct its business in a normal fashion. The Bank will convert $930,500 in long-term capital loan with monthly principal payments of $46,875 due in full in September, 2005 to a new term loan whereby the principal payments are reduced to $25,848 per month with full repayment due in August 2006. The $1.5 million revolving credit facility secured by accounts receivable will remain in place. The Bank has agreed to restructure this debt conditional upon a successful minimum subscription of $1.6 million pursuant to the offering described herein to reduce outstanding debenture debt by $973,750 and reduce the revolving credit facility by $626,250. New CEO, Board of Directors Once the private placement and debt restructurings have taken place, Gerald Maetche will resign as President and CEO and be replaced by David L. Yager who will assume the position of Chairman and CEO. Mr. Yager has over 30 years of diversified oilfield service experience, most recently as a founder, President and Director of Integrated Production Services Ltd. before it was taken private in July, 2002. Prior thereto he was a founder, officer and Director of Tesco Corporation and a predecessor company. Gerald Maetche will remain with Patch in the newly created position of Vice-President Business Development. In this capacity he will be able to continue to fulfill his vision of a larger oilfield safety company with a broader services offering that has the capacity to better serve its customers and investors in the future. With the exception of Robert Petryk, the current Board of Directors of Patch has agreed to resign. Doug Robinson and James Hill, both of Calgary, will join Mr. Yager and Mr. Petryk on the new Patch board. Doug Robinson has over 35 years of oilfield service experience, most recently as Chairman and CEO of Integrated Production Services Ltd. prior to it being taken private. Before that Mr. Robinson held a number of senior oilfield service management positions including CEO of Computalog Ltd., CEO of NorJet Geotechologies Inc., and was a founder and President of Norwest Shooters Ltd. James Hill brings extensive oilfield service financial expertise to the new Patch board. Mr. Hill is currently the Chief Financial Officer of Integrated Production Services, Inc. Prior thereto he was the CFO of Integrated Production Services Ltd., Executive Vice-President and CFO of Dalsa Corporation, and CFO of Canadian Fracmaster Ltd. Robert Petryk is a professional engineer with experience in the service and producing sectors. Mr. Petryk is the President and CEO of Redwood Energy Ltd. Prior thereto he was the Senior Vice- President, North American operations, with Fracmaster Ltd. and was Vice-President, Operations with PetroRep Resources Ltd. Members of the proposed new Board of Directors and management team will collectively acquire up to 25% of the offering, with the largest single subscription to be made by Mr. Yager for at least 2,500,000 Special Warrants. None of the proposed new directors or new members of the management team currently hold any securities of the Company. Looking Ahead If the private placement is successful, it is anticipated that the transactions discussed herein will be completed as quickly as possible. David Yager, who has acted as a financial consultant to Patch since May, had the following comments on Patch and its prospects. "In the past four months I've determined that Patch is a good company with good people, good equipment and good clients but a bad balance sheet. Patch has a great team of capable, motivated and experienced oilfield service professionals, the most important ingredient for success in this business. I'm delighted to have the opportunity to work with these people and to continue to build the oilfield safety company of the future." Since 2000 Patch has established itself as an industry leader in oilfield safety services. Core business areas include breathing equipment for personnel operating in high hazard environments, fire/shower units for worker and equipment protection where flammable or corrosive substances are employed, safety training, and downwind monitoring. Patch operates from seven service centers strategically located in the major producing areas of Western Canada. PCS RESEARCH: Shoos-Away Grant Thornton and Hires Peterson & Co. ---------------------------------------------------------------- On September 8, 2003, PCS Research Technology Inc. dismissed the accounting firm of Grant Thornton LLP as the independent accountant to audit the Company's financial statements. The Company's Board of Directors approved the dismissal of Grant Thornton. The December 31, 2002 report was modified as to an uncertainty relative to the Company's ability to continue as a going concern. The Company engaged Peterson & Co. as its new independent accountants as of September 12, 2003. PCS Research Technology, Inc.'s June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $1.8 million. PG&E NATIONAL: Court Okays Whiteford Taylor as Local Counsel ------------------------------------------------------------ The PG&E National Energy Group Debtors obtained permission from the Court to employ Whiteford, Taylor & Preston LLP as their local co-counsel. With the Court's approval, WT&P will: (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. (PG&E National Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) PHOTOCHANNEL: Closes $2.7MM Private Placement of Common Shares -------------------------------------------------------------- PhotoChannel Networks Inc. (TSX.V: PNI), a global digital imaging network company, received completed subscriptions agreements for $2,765,000. Closing is subject to TSX Venture Exchange approval. As originally announced August 26, 2003, subscriptions and funds have been received for 25,200,000 common shares of PhotoChannel at a price of CDN$0.10 per share for proceeds of $2,520,000. These shares will be subject to a four-month hold period from the date of issuance. The PhotoChannel Limited Partnership sold an additional 245 units, at $1,000 per LP Unit, for proceeds of $245,000. Each LP Unit is subject to a call option agreement, which entitles PhotoChannel to acquire each LP Unit by way of issuance of 10,000 common shares of the Company. PhotoChannel will seek the approval of the TSX for the Option Agreement(s) to be entered into with new limited partners of PhotoChannel LP. The term of the Option Agreement(s) will expire on the earlier of exercise by the Company or June 30, 2004. Upon conversion, all securities will be subject to a four month hold period. Insiders participating in these financings include: Peter Scarth, Peter Fitzgerald, Kyle Hall and Cory Kent. In addition, the Company has agreed to issue First Associates Investments Inc. 500,000 warrants for services, each exercisable to acquire one common share at a price of $0.10 per share at any time on or before December 20, 2004. PhotoChannel is a technology producer and integrated provider of services enabling retailers and other members of the PhotoChannel Network to meet the needs of their film and digital photography customers. PhotoChannel has created and manages the PhotoChannel Network environment whose focus is delivering photo e-processing orders from origination to fulfillment under the control of the originating retailer. Additional information is available at http://www.photochannel.com. On February 21, 2002, PhotoChannel announced it granted to PhotoChannel Networks Limited Partnership software license to commercially exploit the PhotoChannel Network in Canada. It is a condition of the PhotoChannel LP that each limited partner enter into an agreement with PhotoChannel, pursuant to which PhotoChannel has the right to acquire the LP Units from the limited partner, at any time on or before June 30, 2004. Investors in the PhotoChannel Limited Partnership include TELUS Corporation, Discovery Capital Corporation, Peter Scarth and Kyle Hall. The Company's June 30, 2003, balance sheet discloses a net capital deficit of about CDN$2.6 million. PILLOWTEX: Court Okays Proposed De Minimis Asset Sale Protocol -------------------------------------------------------------- Pillowtex Corporation and its debtor-affiliates obtained the Court's authority to implement these Miscellaneous Sale Procedures: A. Transactions subject to the Miscellaneous Sale Procedures The Miscellaneous Sale Procedures will only apply to asset sale transactions involving, in each case: (1) the transfer of $1,000,000 or less in total consideration, as measured by the amount of cash and other consideration to be received by the Debtors on account of the assets to be sold; and (2) aggregate cure costs of less than $200,000 in connection with the assumption and assignment of any related executory contracts and unexpired leases, pursuant to Section 365 of the Bankruptcy Code. The Debtors will be permitted to sell assets that are encumbered by liens, claims, encumbrances or other interests only if those liens and other interests are capable of monetary satisfaction or the holders of those liens and interests consent to the sale. Further, the Debtors will be permitted to sell assets co-owned by a Debtor and a third party pursuant to the Miscellaneous Sale Procedures only to the extent that the sale does not violate Section 363(h) of the Bankruptcy Code. Any proceeds realized from the sale of the Debtors' assets will be applied in accordance with the Debtors' postpetition financing arrangements, applicable law and any relevant Court orders. B. Notice and Opportunity to Object Other than with respect to De Minimis Sales, after any Debtor enters into a contract or contracts contemplating a transaction that is subject to the Miscellaneous Sale Procedures, the Debtors will file a notice of the Proposed Sale with the Court and serve the Sale Notice by overnight delivery or telecopier on all Interested Parties. The Sale Notice will include these information: -- a description of the assets that are subject to the Proposed Sale and their locations; -- the identity of the non-debtor party to the Proposed Sale and any relationships of the party with the Debtors; -- the identities of any parties holding liens on or other interests in the assets and a statement, indicating that all liens or interests are capable of monetary satisfaction; -- the major economic terms and conditions of the Proposed Sale; -- the executory contracts and unexpired leases, if any, that the applicable Debtors propose to assume and assign in connection with the Proposed Sale and the related cure amounts that the applicable Debtors propose to pay with respect to each contract or lease; and -- instructions regarding the procedures to assert objections to the Proposed Sale. Interested Parties will have 10 business days to object to the Proposed Sale. If no objections are properly asserted, the Debtors will be authorized to consummate the Proposed Sale. If any significant economic terms of the Proposed Sale are amended after transmittal of the Sale Notice, but prior to the expiration of the Notice Period, the Debtors must send a revised Sale Notice to all Interested Parties describing the amendments. Accordingly, the Notice Period will recommence on the transmittal date of the revised Sale Notice. C. Objection Procedures Any objections to a Proposed Sale must be in writing, filed with the Court and served on the Interested Parties and the Debtors' counsel so as to be received prior to the expiration of the Notice Period. Each objection must state the grounds for objection. Any objection may be resolved without a Court hearing; provided, however, that if any significant economic terms of the Proposed Sale are modified by the Consent Order, the applicable Debtors must: -- provide the Interested Parties with five business days' prior notice of the Consent Order and an opportunity to object to the terms of the Consent Order by providing a written statement of objection to the Debtors' counsel; and -- certify to the Court that the notice was given and no Interested Party asserted an objection to the Consent Order. If an objection is not resolved on a consensual basis, the Debtors may schedule the Proposed Sale and the Objection for a hearing at the next available omnibus hearing date. D. De Minimis Asset Sale Transactions Notwithstanding the notice procedures discussed, the Debtors are authorized without following the proposed Notice Procedures under the Miscellaneous Sale Procedures and without further Court Order to consummate any asset sale transaction -- De Minimis Sale -- involving: (1) the transfer of $10,000 or less in total consideration, (2) no proposed assumption and assignment of any executory contracts, and (3) no known parties other than the Secured Lenders holding or asserting liens or other interests in the assets that are the subject of the transaction. Every three months, the Debtors will provide the Secured Lenders, the Creditors' Committee and the U.S. Trustee a report itemizing the assets sold and consideration received for each De Minimis Sale consummation during the prior three months. E. Effects of Sale All buyers will take the assets the Debtors sold pursuant to the Miscellaneous Sale Procedures "as is" and "where is," without any representations or warranties as to the quality or fitness of the assets. However, the buyers will take title to the assets free and clear of liens, claims, encumbrances and other interests because all the liens, claims, encumbrances and other interests will attach to the proceeds of the sale pursuant to Section 363(f). (Pillowtex Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 609/392-0900) PRIMUS TELECOMMS: Redeeming $33.6 Million of 11.75% Senior Notes ---------------------------------------------------------------- PRIMUS Telecommunications Group, Incorporated (Nasdaq:PRTL), a global telecommunications services provider offering an integrated portfolio of voice, data, Internet and hosting services, has given notice to the Trustee under the Indenture for the 11.75% Senior Notes due August 2004 of its intent to redeem the remaining $33.6 million principal amount of the Notes on October 17, 2003. The Notes will be redeemed at par plus accrued interest to the date of redemption. PRIMUS Telecommunications Group, Incorporated (NASDAQ:PRTL) -- whose June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $127 million -- is a global facilities- based telecommunications services provider offering international and domestic voice, Internet, data and hosting services to business and residential retail customers and other carriers located primarily in the United States, Canada, Australia, the United Kingdom and western Europe. PRIMUS provides services over its global network of owned and leased transmission facilities, including approximately 250 points-of-presence throughout the world, ownership interests in over 23 undersea fiber optic cable systems, 19 carrier-grade international gateway and domestic switches, and a variety of operating relationships that allow it to deliver traffic worldwide. PRIMUS also has deployed a global state-of-the-art broadband fiber optic ATM+IP network and data centers to offer customers Internet, data, hosting and e-commerce services. Founded in 1994, Primus is based in McLean, VA. QUIN-T CORP: Unknown Creditors' Claims Bar Date Set for Sept. 26 ---------------------------------------------------------------- The U.S. Bankruptcy Court for the District of New Hampshire fixes September 26, 2003, as the deadline for creditors of Quin-T Corporation who did not receive actual notice of the commencement of the Debtor's case and the Asbestos claimants, to file their proofs of claim against the Debtor or be forever barred from asserting their claims. The Unknown Claimants must mail or hand-deliver their proof of claim forms to the Clerk of the Bankruptcy Court. A copy must also be sent on the Debtor's Counsel, at: Bruce A. Harwood, Esq. Sheehan Phinney Bass + Green, PA 1000 Elm Street PO Box 3701 Manchester, NH 03105-3701 Quin-T Corporation filed for Chapter 11 relief on June 23, 2003, (Bankr. N.H. Case No. 03-12192). Bruce A. Harwood, Esq., at Sheehan Phinney Bass + Green, PA represents the Debtor in its restructuring efforts. ROMNET SUPPORT: Company to be Sold at Public Foreclosure Sale ------------------------------------------------------------- The following statement was issued by Robert E. Dixon for Sutter Opportunity Fund 2, LLC: Romnet Support Services, Inc., a wholly owned subsidiary of Carnegie International Corp. (Pink Sheets: CGYC), will be sold at a public foreclosure sale to be held September 26, 2003 at 10:00 A.M. The following notice appeared in today's issue of Investor's Business Daily. Please take notice that the undersigned will sell the property described below at a public sale at the offices of Sutter Capital Management, LLC, 150 Post Street, Suite 405 San Francisco, at 10:00 A.M. on September 26, 2003. The described property, collateral under a Pledge Agreement dated April 15, 2002 and executed by E. David Gable on behalf of RomNet Support Services, Inc. and Carnegie International Corporation, is being sold because of Debtors' default. The property to be sold is 1,000 shares of common stock of Romnet Support Services, Inc. Sutter Capital Management believes, based upon representations made by Carnegie and its Chairman, that the shares to be sold represent 100% of the outstanding shares of Romnet. The shares are to be sold as is, where is, with no representations whatsoever as to their value or legal status. Interested parties should contact Carnegie International Corporation for additional information about Romnet, or Sutter Capital Management for additional information about the sale. Sutter may be contacted by telephone at 415-788-1441 or by email at karen@suttercapital.com SAFETY-KLEEN: Sale of Waste Facilities to Energis for $5M Okayed ---------------------------------------------------------------- Safety-Kleen Systems obtained the Court's approval for the sale of personal property at Clarksville, Missouri, used at the waste fuels blending facility located there, and to sell its personal property at Artesia, Mississippi, used at that site's waste fuels blending facility, to Energis LLC, a subsidiary of Holcim Inc., for an aggregate purchase price of $5,100,062, free and clear of liens, claims and encumbrances. In addition, Systems will sign agreements ancillary to these sales, and to sign a new waste fuels processing services agreement with Energis. On May 1, 1995, Safety-Kleen Systems, Inc. and Holcim, Inc. entered into a waste-derived fuel supply agreement, under which Systems provided services at the Clarksville Facility. On June 1, 1995, Systems and Holcim entered into a waste-derived fuel supply agreement under which Systems provided services at the Artesia Facility. Under each of these Initial Fuel Agreements, Systems agreed to provide to Holcim certain quantities and qualities of waste-derived fuel for use in the kilns at Holcim's Clarksville and Artesia Facilities. Systems also agreed to provide certain technical advice and related assistance to Holcim with respect to the proper use of waste-derived fuel at he Clarksville and Artesia Facilities. In the years since the execution of the Initial Fuel Agreements, there have been significant changes in the market for waste- derived fuel products. These changes, which relate primarily to the market price for such products, led to a substantial increase in Systems' cost of supplying the Clarksville and Artesia Facilities with waste-derived fuel. The Clarksville and Artesia Facilities The Clarksville Facility is located at 14744 Highway 79 North, Clarksville, Missouri, in Pike County, and the Artesia Facility is located at 8677 Highway 45 South Alternate, Artesia, Mississippi, in Lowndes County. Certain assets at the Clarksville and Artesia Facilities are jointly owned by Systems and Holcim. The Clarksville and Artesia Facilities consist of hazardous waste- derived fuels receiving and blending facilities, uploading and rinsing operations, storage and blending tanks systems, and fuel transfer systems. The Clarksville and Artesia Facilities have container storage, as well as ancillary fuel processing equipment, including in-line grinders and pumps. Both facilities include on- site laboratories that are involved in acceptance, verification and fuels blending activities, and both Facilities are part of an energy recovery program to utilize hazardous waste-derived fuels as a supplemental fuel to replace fossil fuels in cement kilns. The Purchase Agreements These terms and conditions are the most significant in the Purchase Agreements, the Ancillary Agreements, and the New Fuel Agreement: 1. Purchase Price. Energis will pay: (a) $3,277,824 to Systems at closing for the Clarksville Property; and (b) $1,822,238 to Systems at closing for the Artesia Property. Thus the aggregate purchase price for both Facilities is $5,100,062. 2. Assignment of Contracts. Systems will assign to Energis those contracts necessary to the operation of the Facilities. 3. Purchaser's Assumed Liabilities. Energis will assume: (i) all liabilities and obligations relating to the Clarksville and Artesia Properties, the Permits for the operation of the Facilities, or liabilities for the operation of the Clarksville and Artesia Facilities caused by Energis' action or inaction, relating to the period on or after the Closing Date; (ii) certain real estate and personal property taxes for the 2003 tax year related to the Clarksville Property; and (iii) all liabilities and obligations for any surface, groundwater, or soil contamination related to or emanating from the Clarksville and Artesia Facilities, regardless of whether those liabilities and obligations arise from operations before, on, or after the Closing. 4. Seller's Retained Liability. Systems will retain: (i) all liabilities and obligations -- to third parties other than Energis -- relating to the Clarksville and Artesia Properties, the Permits, or the operation of the Clarksville and Artesia Facilities, caused by Systems' action or inaction, to the extent they relate to the period before the Closing; and (ii) certain environmental liabilities and obligations prior to the Closing. 5. Employees. Energis may offer employment to employees at the Clarksville and Artesia Facilities. 6. Indemnification by Systems. Systems will defend, indemnify, and hold harmless Energis and its affiliates against and from any and all liabilities suffered or incurred by Energis Indemnity Group with respect to: (i) breach of the Purchase Agreements; (ii) Seller-Retained Liabilities; (iii) third-party claims, other than by Energis Indemnity Group, in connection with Systems' use of the Clarksville and Artesia Properties before the Closing Date, other than a claim with respect to actual or alleged surface, groundwater, or soil contamination related to or emanating from the Clarksville and Artesia Facilities; and (iv) claims with respect to actual or alleged surface, groundwater, or soil contamination related to or emanating from the Clarksville and Artesia Facilities to the extent Systems had knowledge of such contamination as of the Closing and failed to disclose such contamination to Energis; provided, however, that Systems' maximum aggregate liability for indemnification claims under each of the Purchase Agreements will not exceed the purchase price under the agreement. 7. Indemnification by Energis. Energis will defend, indemnify, and hold harmless Systems and its affiliates against and from any and all liabilities suffered or incurred by SK Systems and its affiliates with respect to: (i) breach of the Purchase Agreements; (ii) the Buyer-Assumed Liabilities; (iii) claims in connection with Energis' use of the Clarksville and Artesia Properties or operation of the Clarksville and Artesia Facilities on or after the Closing Date; and (iv) claims with respect to actual or alleged surface, groundwater, or soil contamination related to or emanating from the Clarksville and Artesia Facilities, unless Systems had knowledge of such contamination as of the Closing and failed to disclose such contamination to Energis. (Safety-Kleen Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 609/392-0900) SEMCO ENERGY: Inks Definitive Pact to Sell Alaska Pipeline Co. -------------------------------------------------------------- SEMCO ENERGY, Inc. (NYSE: SEN) and Atlas Pipeline Partners, L.P. (Amex: APL) announced that SEMCO has entered into a definitive agreement to sell Alaska Pipeline Company to Atlas Pipeline Partners, L.P. for $95 Million. APC owns and operates the high-pressure gas pipelines that transport gas from Alaska's Cook Inlet gas fields to ENSTAR Natural Gas Company's distribution system and various commercial customers of ENSTAR. ENSTAR is a division of SEMCO ENERGY, serving 112,000 customers in south-central Alaska, including Anchorage. APC has no employees and ENSTAR is APC's only customer. Atlas Pipeline Partners, L.P. owns and operates natural gas pipeline gathering systems through its operating partnership and its operating subsidiaries. Its primary asset consists of approximately 1,380 miles of intrastate gathering systems located in eastern Ohio, western New York and western Pennsylvania. The sale is structured to have no effect on ENSTAR's customers or employees. ENSTAR will purchase all of APC's gas transmission capacity for at least 10 years and will operate APC's pipelines for a minimum of 5 years. There are no plans to change rates, the services offered, pipeline operations, customer service, gas supply, or staffing as a result of the sale. The sale is subject to various regulatory approvals, including approval by the Regulatory Commission of Alaska. McDonald Investments Inc. acted as adviser to SEMCO ENERGY in the transaction. "SEMCO ENERGY's mission is to provide excellent service to its customers and an attractive investment return to its shareholders. We have been pursuing actions, including the sale of certain Company assets, that will pay down debt in order to improve the financial position and thus the long-term value of the Company. The proceeds from the sale of APC will be used to reduce debt and is consistent with the goal of improving our capital structure," said Marcus Jackson, SEMCO ENERGY Chairman, President and Chief Executive Officer. Michael Staines, President and Chief Operating Officer of Atlas, expressed his pleasure at reaching this agreement and said "Atlas is aware of the importance of APC's pipeline system to south- central Alaska and looks forward to participating in the continuing development of the pipelines necessary to serve ENSTAR's customers." SEMCO ENERGY, Inc. (S&P, BB Corporate Credit Rating, Negative) is a diversified energy and infrastructure company that distributes natural gas to approximately 385,000 customers in Michigan and Alaska. It also owns and operates businesses involved in natural gas pipeline construction services, propane distribution and intrastate pipelines and natural gas storage in various regions of the United States. In addition, it provides information technology and outsourcing services, specializing in the mid-range computer market. SFMB ACQUISITION: October 3, 2003 Fixed as Claims Bar Date ---------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gives creditors of SFMB Acquisition Corp and its debtor-affiliates until October 3, 2003, at 4:00 p.m. (Eastern Time) to file their proofs of claim against the Debtors or be forever barred from asserting their claims. The Governmental Claims bar date is set for Nov. 12, 2003. Forms on which proofs of claim are to be filed and the procedures for filing have already been mailed to all known creditors. Creditors who have not received this mailing must make a written request to: Delaware Claims Agency, LLC Attn: SFMB Acquisition Corp, et al. PO Box 515 Wilmington, DE 19899 The Debtors filed for Chapter 11 relief on May 16, 2003, (Bankr. Del. Case No. 03-11524-PJW). Robert S. Brady, Esq., M. Blake Cleary, Esq., Scott Salerni, Esq., and Joseph M. Barry, Esq., at Young Conaway Stargatt & Taylor represent the Debtors in their restructuring efforts. SMART & FINAL INC: Divests Food & Supply Merchant Repositions ------------------------------------------------------------- Smart & Final Inc. (NYSE:SMF) has completed the previously announced divestitures of its foodservice direct delivery business units and its Florida stores, to reposition the company's focus on its core western U.S. store operations. Gordon Food Service purchased the Florida foodservice direct delivery and stores businesses, and Sysco Corporation purchased the northern California foodservice direct delivery operations. In addition, Smart & Final's northern California meat processing and distribution business was sold to Pacific Fresh Sea Food Company. The sales generated total cash proceeds of approximately $59 million and buyers' assumption of approximately $25 million in future operating lease obligations. From the cash proceeds, the company reduced the balance outstanding under its revolving credit facility, and the corresponding lender commitment amount, by $42 million. In addition, $14 million is being held in the company's real estate lease trust for acquisition of replacement properties or later reduction to the lease facility debt. A total of $4 million of cash proceeds is being held in escrow for later settlement of closing valuation matters. Ross Roeder, Smart & Final chairman and chief executive officer, said, "We are doing exactly what we said we would do when we began our restructuring efforts earlier this year. By refocusing Smart & Final on our core western U.S. store operations, we are positioning the company for substantially improved future performance, and we are taking important steps to improve our financial strength. At the same time, we have created a favorable outcome for our employees and customers. We are particularly pleased that the transactions preserved employment for over 700 of our associates." Roeder further noted that Smart & Final's western U.S. stores continue to perform well and are positioned to benefit from current industry trends. "We've seen strong comparable store growth in both our store formats: Cash & Carry wholesale stores and our Smart & Final warehouse stores. In the first half of 2003, western U.S. comparable store sales increased 3.9 percent over the same period of the prior year. We believe that this is among the strongest growth in food retailing," Roeder said. "Several factors are driving that growth," Roeder added. "First, although we now have exited the direct delivery business, we continue to serve foodservice customers through our stores. As direct delivery companies raise their minimum order requirements, we are seeing an increase in the number of restaurant and other foodservice customers shopping in our stores. I don't foresee that trend changing as the economy recovers." "In addition, Smart & Final warehouse stores are ideally positioned to meet the food and cooking-related supply needs of household customers, whose buying habits increasingly emphasize value. While our Cash & Carry stores are dedicated exclusively to business customers, our Smart & Final warehouse stores are open to businesses and households. Both customer groups shop at Smart & Final for a wide assortment of restaurant-quality products at low, warehouse prices," Roeder said. "All of Smart & Final's resources now are focused on our most profitable and fastest-growing operations. We believe we have effectively repositioned our company for strong future performance," Roeder concluded. Founded in 1871 in downtown Los Angeles, Smart & Final Inc. operated 228 non-membership warehouse stores for food and foodservice supplies in California, Oregon, Washington, Arizona, Nevada, Idaho and northern Mexico at the end of the 2003 second quarter. For more information, visit the company's Web site at http://www.smartandfinal.com The company's June 15, 2003 balance sheet shows that its total current liabilities outweighed its total current assets by about $120 million. As reported in Troubled Company Reporter's July 25, 2003 edition, the Company's second quarter 2003 results from discontinued operations were a loss of $41.7 million net of tax. Of this amount, $40.2 million net of tax reflects the estimated loss on sale and divestiture. The company anticipates that charges of an additional $6 million after-tax will be recorded in the balance of 2003, associated with lease termination costs and severance costs related to the Florida stores business. The company has obligations under a revolving credit facility and the synthetic lease facility that are subject to certain financial ratio covenants. Following the recording of the special charges the company was not in compliance with certain of these covenants at the end of the second quarter 2003, and by operation of the covenants the company would not be in compliance for a 12 month period thereafter. As a result, the company's obligations under the revolving credit facility and the synthetic lease facility have been classified as current liabilities in the company's balance sheet as of June 15, 2003. The company has received waivers of default effective as of June 15, 2003 and intends to negotiate amendment of certain covenants to achieve compliance in future periods. At the end of the second quarter 2003 the company reported balance sheet cash of $39.5 million and had approximately $14 million in available liquidity under the revolving credit agreement. SPIEGEL GROUP: Independent Examiner Discloses Irregularities ------------------------------------------------------------ To recall, the Securities and Exchange Commission filed a civil action against Spiegel, Inc. on March 7, 2003 in the United States District Court for the Northern District of Illinois. The SEC charged that Spiegel violated the federal securities laws by failing to file required periodic reports on Forms 10-K and 10-Q during 2002, and by failing to disclose advice from its auditor that Spiegel may not be able to continue as a "going concern." Upon commencement of the action, Spiegel consented to the entry of a partial final judgment of permanent injunction without admitting or denying the SEC's charges. Spiegel likewise consented to the District Court's appointment of an Independent Examiner to review Spiegel's financial records from January 1, 2000 to date, and to provide the District Court and the parties with a written report (i) discussing Spiegel's financial condition and (ii) identifying any material accounting irregularities. Independent Examiner Stephen J. Crimmins of Pepper Hamilton LLP delivered his report to the District Court on September 5, 2003. Easy Credit Program Facing the need to improve poor sales performance in its retail subsidiaries, Mr. Crimmins relates that Spiegel embarked by 1999 on a program that one of its audit committee members later called 'easy credit to pump up sales'." Through various techniques involving both its retail subsidiaries and its captive credit card bank subsidiary, Spiegel tilted its portfolio of credit card customers decidedly in the direction of high-risk subprime borrowers. These were customers who often could not get credit elsewhere and who could be counted on to respond to the opportunity to buy merchandise with the easy credit Spiegel offered them. At the time, Mr. Crimmins says, the "new economy" was booming, and Spiegel was getting these risky credit card receivables off its own balance sheet by selling them to various off-balance- sheet special purpose entities through an asset-backed securitization program. This use of "easy credit to pump up sales" worked in the short term, and Spiegel reported to its directors that it had achieved a "return to profitability." This result also personally benefited certain Spiegel senior executives who were entitled to performance-based compensation. But then the economy soured, and many of Spiegel's subprime customers stopped paying their credit card bills. Charge-offs of uncollectible credit card receivables climbed dramatically. With Spiegel's portfolio of credit card receivables suffering under this barrage of charge-offs, its asset-backed securitizations came dangerously close to hitting a performance "trigger" that would have sent Spiegel's securitizations spinning into a "rapid amortization" that would have destroyed Spiegel. Specifically to avoid this disaster, beginning in 2001, Spiegel manipulated at least one of the components used to calculate this securitization performance trigger, and in so doing, staved off a Spiegel bankruptcy for almost two years. Loans Breached As Spiegel's financial condition worsened in late 2001, it breached all four loan covenants contained in its bank loan agreements. Spiegel tried desperately to renegotiate its financing with a consortium of 18 banks, but a myriad of problems frustrated this effort. As Spiegel was preparing to file its 2001 Form 10-K annual report due in March 2002, its auditor KPMG advised that it would have to give Spiegel a "going concern" opinion, based on Spiegel's inability to conclude its bank refinancing arrangements and other problems. Spiegel decided not to file its Form 10-K with a going concern opinion. Soon afterwards, Nasdaq indicated that it would delist Spiegel. At the delisting hearing, Spiegel assured Nasdaq that it was only days away from concluding its refinancing arrangements, and that it would then be able to file its Form 10-K without a going concern opinion. After several days, Nasdaq advised Spiegel that it had a last chance to file its Form 10-K and that otherwise it would be immediately delisted. Spiegel's Chicago-based management -- supported by Spiegel's outside counsel Kirkland & Ellis and its outside auditors KPMG -- strongly recommended that Spiegel file its Form 10-K in late May 2002. But the ultimate decision makers for Spiegel were in Germany. Spiegel was only 10% an American public company. About 90% of its equity and all of its voting stock were in the hands of Michael Otto and his family in Hamburg, Germany. Indeed, Mr. Crimmins says, Spiegel operated in effect as the American division of Otto's huge multinational retail empire, including 89 companies with over 79,000 employees in 21 countries around the globe. On May 31, 2002 in Hamburg, Spiegel's executive or "board" committee -- consisting of Michael Otto and an executive of his private company Otto Versand GmbH, and Spiegel's audit committee -- consisting of one present and one former Otto Versand executive, rejected the views of Spiegel's management, Kirkland & Ellis and KPMG, and directed Spiegel not to file its already-late 2001 Form 10-K and not to file its already late first-quarter 2002 Form 10-Q. As time went by, they likewise directed Spiegel not to file its remaining 2002 Forms 10-Q. According to Mr. Crimmins, Spiegel's German decision-makers had been fully briefed on the array of serious problems Spiegel faced, including at a seven hour meeting with Spiegel's Chicago- based executives several weeks before. But they refused to allow Spiegel to file its reports with the SEC because they felt that a going concern opinion would cause Spiegel's suppliers to refuse to extend credit to Spiegel for the merchandise it purchased for resale. Such a result could lead Spiegel to bankruptcy. Likewise, Spiegel was concerned about the impact a going concern opinion would have on investors and employees. Material Information Kept from Investors "It was only the prospect of an SEC Enforcement Division investigation that made Spiegel begin to belatedly file reports in February 2003 -- after not having filed a single periodic report since November 2001 (its third-quarter 2001 Form 10-Q)," Mr. Crimmins says. This 15-month hiatus in periodic reporting left investors without the disclosures and other protections mandated by the federal securities laws. All investors could do during this period was to attempt to piece together several incomplete pieces of information from a few press releases and news stories. Mr. Crimmins points out that this matter involves not simply a failure to make required SEC filings. Rather, it involves a failure to make disclosure of material information about Spiegel's financial condition that investors needed to make their investment decisions about Spiegel. The SEC has already charged Spiegel with fraud for failing to disclose its auditors' going concern position. Investors likewise failed to get a variety of other material information about Spiegel's financial condition, including: * The material adverse change in Spiegel's balance sheet. In just the few months leading up to Spiegel's failure to file its 2001 Form 10-K in March 2002, its shareholders' equity dropped from $792 million to $215 million, its total assets shrank from $2.7 billion to $1.9 billion, and its cash and equivalents dropped from $73 million to $29 million. * The full story of the material adverse change in Spiegel's performance during 2001. Spiegel went from net earnings of $121 million in 2000 to a loss of $587 million in 2001, from operating income of $172 million in 2000 to a loss of $226 million in 2001, and from earnings from continuing operations of $112 million in 2000 to a loss of $285 million in 2001. In addition, Spiegel's only public statement in this regard -- contained in a February 2002 earnings release -- materially understated the magnitude of its poor performance in 2001. * Spiegel was in a liquidity crisis and would soon be illiquid. Its liquidity shortfall was $317.6 million in Spring 2002 and could be significantly greater. Its survival depended on continuing capital infusions from Otto affiliates, which were under no obligation to make these capital infusions. * Spiegel faced the possibility of involuntary bankruptcy from at least two directions. It was in default on all of its bank loan covenants, and its lenders could force it into bankruptcy. Additionally, Spiegel was deferring payments to certain of its vendors, who likewise could have pushed it into bankruptcy. * Spiegel's efforts to restructure its debt were running into serious obstacles. Negotiations with lenders were increasingly difficult for Spiegel due to: (i) significantly worse sales forecasts; (ii) severe credit restrictions being imposed by federal regulators on Spiegel's credit card bank, with resulting further negative impact on sales; and (iii) advice that Spiegel's credit card receivables portfolio was overvalued, and that its credit card bank could not be sold in its present condition. Nor were investors told that Spiegel had engaged in a number of undisclosed material accounting irregularities, including: * Deliberate manipulation of Spiegel's "interchange rate" -- a fee purportedly charged Spiegel's retail companies by its credit card bank -- in order to enhance reported performance of Spiegel's credit card receivables. Spiegel did this to avoid hitting a "trigger" that would plunge Spiegel's asset- backed securitization transactions into a "rapid amortization" that would have doomed Spiegel over a year earlier to the bankruptcy it eventually filed in 2003. * Failure to disclose, at various times throughout 2000 and 2001, additional violations and waivers of triggers in Spiegel's securitization transactions, as required by GAAP and the SEC. * Material overvaluation of Spiegel's "retained interest" in its securitization transactions. This resulted in an overstatement of Spiegel's assets on its December 30, 2000 consolidated balance sheet. * A serious failure in Spiegel's internal controls over its credit underwriting process that allowed its retail subsidiaries to pump up their sales by granting easy credit to high risk borrowers. * Failure to timely disclose Spiegel's violations of multiple covenants in its financing agreements as of December 29, 2001. These debt covenant breaches meant that Spiegel's sizable long-term debt became immediately due and payable. * Improper revenue recognition based on purchases by credit card customers who were more likely than not, as Spiegel knew, going to be unable to ultimately pay for the merchandise they bought on credit. Ultimately, Mr. Crimmins says, Spiegel was unable to dig itself out of this hole. Its financial condition just kept getting worse, which led to its bankruptcy filing on March 17, 2003. The Examiner's work has been supported by: -- a legal team from Pepper Hamilton LLP led by Richard A. Rossman; and -- a forensic accounting team from Kroll Zolfo Cooper LLC led by Lynn E. Turner and Roger Siefert. Mr. Rossman was the Chief of Staff of the Department of Justice Criminal Division under Attorney General Janet Reno. Previously, he served as the United States Attorney in Detroit. Mr. Turner was the Chief Accountant of the Securities and Exchange Commission under Chairman Arthur Levitt. Additionally, he has been an accountant with Coopers & Lybrand for nearly 20 years, a CFO and a director of public companies, and a professor of accounting and corporate governance. Mr. Siefert is the forensic accounting national practice leader at Kroll Zolfo Cooper LLC. The team reviewed an estimated 81,300 pages of documents. A full-text copy of the Independent Examiner's report is available for free at: http://www.sec.gov/Archives/edgar/data/276641/000094787103002136/ex99-2.txt Spiegel Will Continue to Cooperate In a press release dated September 12, 2003, The Spiegel Group stated that it remains committed to cooperating fully with the SEC in its investigation of the company's compliance with federal securities laws. The company is not commenting on the investigation or the content of the Independent Examiner's report. KPMG Defends Its Actions Criticized for its lack of concern about the Spiegel executives' illegal act, KPMG asserts that it acted "appropriately at all times and stands behind its actions in the Spiegel matter". KPMG's articulated reason for inaction is that it saw Spiegel audit committee minutes reciting that Spiegel made its decision not to file its Form 10-K after "consultation with the Company's outside law firm (White & Case)." But as a "Big 4" auditor of public companies, Mr. Crimmins says, KPMG should have been aware of an illegal act by Spiegel, based on (i) Spiegel's failure to file its Form 10-K annual report and its subsequent Form 10-Q quarterly reports; (ii) its failure to disclose material information regarding KPMG's own going concern position; and (iii) the Nasdaq delisting of Spiegel. "Yet there is no indication that KPMG discussed with Spiegel's audit committee a potential illegal act related to failure to comply with applicable securities laws and rules. There is no indication KPMG bothered to have any discussion with White & Case on this matter. And there is no indication that KPMG sought -- or requested Spiegel to seek -- an opinion from Spiegel's securities counsel Kirkland & Ellis concerning Spiegel's conduct. KPMG relied on a cryptic reference to a Spiegel consultation with White & Case -- not advice from White & Case supporting Spiegel -- and failed to gain a complete understanding of the views of either White & Case or Kirkland & Ellis on what on its face appeared to be a clear legal violation by KPMG's audit client Spiegel," Mr. Crimmins says. Former Executives May Face Charges Mr. Crimmins' disclosure could result in lawsuits against Spiegel's former directors and officers, especially Michael Otto's family. (Spiegel Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) STOCKHORN CDO: S&P Ratchets Class E Notes Rating to BB- from BB --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on three tranches of Stockhorn CDO Ltd.'s floating-rate notes. The rating actions reflect credit deterioration in the $500 million pool of reference credits. The notional amount of the reference pool will be reduced as a result of the defaults. The ratings also reflect the level of credit enhancement provided by subordination, Stockhorn's ability to meet its payment obligations as issuer of the notes, and Stockhorn's commitment to follow guidelines established for maintenance of the pool of reference credits. RATINGS LOWERED Stockhorn CDO Ltd. Class Rating To From C-1 A- A C-2 A- A D-1 BBB- BBB D-2 BBB- BBB E BB- BB SUREBEAM: Names Terrance Bruggeman New Chief Executive Officer -------------------------------------------------------------- SureBeam Corporation (Nasdaq: SUREE) announced that its Board of Directors has elected Terrance J. Bruggeman to the positions of President and Chief Executive Officer and as a member of the Board of Directors. "We are pleased to attract Mr. Bruggeman who has an exceptional track record in successfully commercializing technology-based companies and an equal record of managing businesses through challenging transitions," said John C. Arme, Chairman and interim Chief Executive Officer. Mr. Arme will remain as Chairman of the Board and assist in the leadership transition. "SureBeam has a life-saving technology solution to a very serious public health problem that causes thousands of deaths each year," said Mr. Bruggeman. "It is of great importance to society to get this technology accepted and used worldwide to address unnecessary food-borne illness. In addition, the SureBeam technology is very effective in reducing food and flower infestation, as well as reducing spoilage. We have every intention of making the necessary changes in our business model to succeed in this vision." Prior to joining SureBeam, Mr. Bruggeman served as Chairman and CEO with Aspetuck Capital Partners, Inc., a life science investment-banking firm. Aspetuck provides strategic advice, collaboration development, and merger and acquisition assistance for the biotech and medical technology industry. From early 2000 to mid 2002, Bruggeman was Chairman, President and CEO of Provasis Therapeutics, Inc., a therapeutic medical device company treating vascular diseases of the brain. From mid-1996 to early 1999, he was Chairman, President and CEO of Diversa Corporation, a biotechnology company developing novel enzymes and other bioactive compounds for use in agriculture, food and feeds, chemical processing, industrial and drug discovery applications. For more than 15 years, Mr. Bruggeman served as an interim CEO or advisor to financially troubled companies. He also was the founder and Senior Managing Director of the Financial Restructuring Group of Bear, Stearns & Company, a major Wall Street investment banking company. In addition, the Company announced that it is undertaking a detailed review of its business in light of a slower than expected growth in domestic processing volumes and delays in the progress of several of its system sales contracts. Recently the Company announced that it was seeking to consolidate its U. S. processing services business by closing its Vernon, California facility since the capacity utilization is currently inadequate to accomplish profitability in this business segment in the near term. The Company anticipates it will not meet its forecasted growth for 2003 and its EBITDA losses for 2003 will be greater than expected. Therefore, the Company withdraws its prior revenue and EBITDA loss guidance for 2003. During the past several months, SureBeam has taken a series of steps to reduce its cost structure including a significant reduction in its workforce and a reduction in its marketing expenditures. The Company continues to evaluate other opportunities to improve the adequacy of the cash resources available to execute its business plan, including the raising of additional capital. On August 21, SureBeam dismissed Deloitte & Touche as its auditing firm. The Company's Audit Committee of its Board of Directors has engaged a national accounting firm to conduct an independent review of certain of its past and present accounting policies. Following the completion of this work, the Audit Committee intends to appoint new auditors to complete the review of its second and third quarter financial results. Over the last several weeks the Company, along with several of its current and former executive officers, has been the subject of a number of lawsuits alleging, among other things, that it has issued false and misleading information about the Company and its prospects. SureBeam strongly denies any wrongdoing and believes the lawsuits are without merit. The Company intends to vigorously defend itself against these allegations. Pursuant to the terms of Mr. Bruggeman's three-year employment agreement, the Company will grant him an initial option covering 1,500,000 shares of common stock. The option stipulates that the shares can be purchased at the market price as of close of business, Monday, September 15, and will vest over the period of his contract. Headquartered in San Diego, California, SureBeam Corporation operates processing service centers located in Glendale Heights, Illinois; Sioux City, Iowa; College Station, Texas; and Rio de Janeiro, Brazil. The Company is a leading provider of electron beam food safety systems and services for the food industry. SureBeam's technology significantly improves food quality, extends product freshness, and provides disinfestation that helps to protect the environment. The SureBeam patented system is based on proven electron beam and x-ray technology that destroys harmful food-borne bacteria much like thermal pasteurization does to milk. This technology can also eliminate the need for toxic chemical fumigants used in pest control that may be harmful to the earth's ozone layer. * * * Liquidity and Capital Resources In its latest Form 10-Q filed with Securities and Exchange Commission, SureBeam Corporation reported: "We have used cash principally to construct systems for our strategic alliances and fund working capital advances for these strategic alliances, to construct our company-owned service center and systems in Brazil, and to fund our working capital requirements. We spend significant funds to construct systems for our strategic alliances in advance of payment. We also are spending significant funds on sales and marketing efforts relating to brand recognition and consumer acceptance programs. In addition, our service centers have operated at losses using significant funds. At March 31, 2003, we had available cash and cash equivalents of $20.2 million and restricted cash of $1.3 million. The restricted cash represents the money received as payment on our RESAL contract in anticipation of our first shipment of equipment. The cash will become unrestricted upon our shipment, which is scheduled for the second quarter of 2003. Status of Our $50.0 Million Credit Facility with Titan "During 2002, Titan extended to us a senior secured credit facility under which we could borrow up to a maximum of $50.0 million, subject to the terms and conditions of the credit facility. As of May 7, 2003, we have borrowed $25.0 million on this credit facility. The credit facility allows us to borrow, in addition to our previous borrowings, up to a maximum of $12.5 million per quarter through the fourth quarter of 2003, subject to the $50.0 million cumulative limitation on borrowing and the other terms and conditions of the credit facility. We are unable to borrow additional amounts if our cash balance is greater than $5.0 million. "We have not borrowed additional amounts on the credit facility since October 30, 2002, and, we do not anticipate borrowing, or being able to borrow, additional amounts on the credit facility during 2003 or during the remaining period that the credit facility is outstanding. As of March 31, 2003, we were in compliance with all covenants of the credit facility, however, we were not able to borrow additional funds during the second quarter because we did not meet the earnings before interest, taxes, depreciation and amortization (EBITDA) target for the first quarter of 2003 in our annual operating plan. We do not anticipate that we will have availability under the credit facility during the remaining period that the credit facility is outstanding. "We are obligated, with some exceptions, to use net proceeds from the sale of assets and securities to repay amounts advanced under the credit facility. During March 2003, the credit facility was amended to allow us to receive net proceeds of up to $25.0 million resulting from transactions involving the issuance of equity securities through September 30, 2004, without having to apply such net proceed towards repayment of the credit facility, provided that no default or event of default had occurred. We are required to make a mandatory prepayment on the credit facility in an amount equal to 50% of any net proceeds in excess of $25.0 million resulting from transactions involving the issuance of equity securities. "Under our credit facility, we are obligated to make minimum quarterly principal payments as follows: 13.75% of the outstanding principal balance as of December 31, 2003 during each quarter in 2004; 25% of the outstanding principal balance as of December 31, 2004 during each quarter in 2005; and, all remaining principal by December 31, 2005. The interest rate is Titan's effective weighted average term debt rate under Titan's credit agreement plus three percent. As of March 31, 2003, the interest rate on the credit facility was 7.92%. Interest is payable monthly beginning in January 2003. Through May 7, 2003, we have paid $1.4 million of interest related to the credit facility. The credit facility is secured by a first priority lien on all of our assets. Credit Facility Availability "During the quarter ending March 31, 2003, the maximum amount available for borrowing pursuant to the credit facility was $12.5 million, subject to the terms and conditions of the credit facility. The maximum amount available for borrowing in each of the second, third and fourth quarters of 2003 is based upon our earnings before interest, taxes, depreciation and amortization for the prior quarter as a percentage of the EBITDA target in our annual operating plan. "If actual EBITDA is negative $2.4 million or higher for the quarter ending March 31, 2003, then up to 100% of the quarterly maximum or $12.5 million will be available for borrowing during the quarter ending June 30, 2003. If our actual EBITDA is negative $3.0 million during the quarter ending March 31, 2003, then up to 50% of the quarterly maximum or $6.3 million will be available for borrowing during the quarter ending June 30, 2003. If our actual EBITDA is between negative $2.4 million and negative $3.0 million during the quarter ending March 31, 2003, then the maximum amount available for borrowing during the quarter ending June 30, 2003 shall be determined by linear interpolation between $6.3 million and $12.5 million. If our actual EBITDA is lower than negative $3.0 million for the quarter ending March 31, 2003, no amounts will be available for borrowing through the credit facility during the quarter ending June 30, 2003. No amounts are available for borrowing during the second quarter because our EBITDA was $6.8 million and therefore is less than the negative $3.0 million target. "For the quarter ending June 30, 2003, our target EBITDA is $505,000. If our actual EBITDA for the quarter ending June 30, 2003 is positive, but less than $126,000, or 25% of the target EBITDA, then the maximum amount available in the quarter ending September 30, 2003, would be $5.0 million, provided that no amounts would be available unless we covenant during the quarter ended September 30, 2003 to limit our total operating expenses (defined as research and development and selling, general and administrative expenses) to $5.0 million. No amounts would be available under the credit facility during the quarter ended September 30, 2003, if we have negative EBITDA for the quarter ending June 30, 2003. If our actual EBITDA for the quarter ended June 30, 2003 is $126,000, or 25% of the target EBITDA, then the maximum amount available in the quarter ended September 30, 2003, would be $6.3 million or 50% of the quarterly maximum and for each percentage of actual EBITDA above $126,000, or 25% of target EBITDA, the percentage of the quarterly maximum above 50% would be increased on a pro rata basis. "For the quarter ending September 30, 2003, our target EBITDA is $4.1 million. Therefore, if our actual EBITDA for the quarter ended September 30, 2003 is positive, but less than $1.0 million, or 25% of the target EBITDA, then the maximum amount available in the quarter ended December 31, 2003, would be $5.0 million, provided that no amounts would be available unless we covenant during the quarter ended December 31, 2003 to limit our total operating expenses (defined as research and development and selling, general and administrative expenses) to $5.0 million. No amounts would be available under the credit facility during the quarter ending December 31, 2003, if we have negative EBITDA for the quarter ending September 30, 2003. If our actual EBITDA for the quarter ended September 30, 2003 is $1.0 million, or 25% of the target EBITDA, then the maximum amount available in the quarter ended December 31, 2003, would be $6.3 million or 50% of the quarterly maximum and for each percentage of actual EBITDA above $1.0 million, or 25% of target EBITDA, the percentage of the quarterly maximum above 50% would be increased on a pro rata basis. "We do not anticipate that we will have further availability under the credit facility during the remaining period that the credit facility is outstanding. "The credit agreement also includes covenants limiting our incurrence of debt, investments, declaration of dividends and other restricted payments, sale of stock of subsidiaries and consolidations and mergers. The credit agreement, however, does not contain any financial covenants requiring us to maintain specific financial ratios. "In addition, Titan has guaranteed some of our lease obligations, and we are obligated to reimburse Titan for any payments they make under these guaranties. Any guarantee payments Titan makes reduces amounts available for future borrowing under the credit agreement. We will pay Titan a monthly fee of 10% of the guaranteed monthly payments. Some of the guaranteed leases have longer terms than the credit facility. If Titan remains a guarantor at the maturity date for the credit facility, then we plan to enter into a reimbursement agreement with Titan covering the outstanding guarantees. "For the three months ended March 31, 2003, we used cash in operations of $5.7 million as compared to having cash provided by operations of $5.5 million for the three months ended March 31, 2002. During the first quarter of 2003, our net loss plus depreciation and amortization were offset by an increase in working capital usage, particularly an increase in accounts receivable related to the increase of our unbilled receivables and restricted cash and was offset by the decrease in the amount due from Titan due to the $8.7 million we received for payment on our receivables during the quarter. Also during the quarter, we received $1.3 million of restricted cash related to a payment made based in a milestone payment on our RESAL contract. The release of the funds is tied to our initial shipment of equipment to Saudi Arabia that was delayed due to the war in Iraq but is now scheduled to ship in the second quarter of 2003. For the three months ended March 31, 2002, our net loss plus depreciation and amortization were offset by an increase in working capital usage, particularly an increase in our unbilled receivables and inventories and was offset by the decrease in the amount due from Titan due to the $19.5 million we received as payment on our receivables during the quarter. "We used approximately $1.5 million and $437,000 for investing activities for the three months ended March 31, 2003 and 2002, respectively. For the three months ended March 31, 2003 we had capital expenditures of $1.5 million primarily related to the continued construction of our company owned service centers. "The [Company's] consolidated financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. During the three months ended March 31, 2003, we have incurred substantial losses from operations and investments in infrastructure. Management believes that as we continue to expand significant funds on, sales and marketing, it is not anticipated that our revenues will sufficiently offset these expenses until at least 2004. Additionally, our construction and implementation period for systems sales to strategic alliances require a substantial use of cash for at least 12 to 18 months. Our arrangements to sell food irradiation systems to strategic alliances typically contain milestone provisions for payment, which are typically based upon time, stage of completion, and other factors. As a result, our unbilled receivables from our customers have increased $1.7 million for the three months ended March 31, 2003. Also, we have advanced funds aggregating $6.0 million to Hawaii Pride of which $230,000 was advanced during the three months ended March 31, 2003 and is included in selling, general and administrative expense in the accompanying consolidated financial statements. These advances were used primarily for land acquisition, for facility construction and for working capital purposes. We are not obligated to continue the funding of Hawaii Pride. We also have entered into a number of commitments to lease land and facilities in connection with construction of our four company-owned service centers all of which are operational. In addition, based on our customer requirements, we may expend funds to construct and install in-line systems that we will own and operate. "In addition to our current operating plans, which focus on increasing cash flow from operations, we are also evaluating a number of alternative plans to meet our future operating cash needs. These plans include raising additional funds from the capital markets. As of the date of the filing of this report, we have obtained $25.0 million under the senior secured credit facility with Titan. We do not anticipate making any additional borrowings under this credit facility. If the funds available from the capital markets are not available or not sufficient for us, or if we are unable to generate sufficient cash flow from operations, we may need to consider additional actions, including reducing or deferring capital expenditures, reducing or deferring research and development projects, curtailing construction of systems for customers in advance of payment and reducing marketing expenditures, which actions may have a material adverse impact on our ability to meet our business objectives. "At March 31, 2003, we had $20.2 million of cash and cash equivalents and $1.3 million of restricted cash. We believe that this balance will be sufficient to meet our cash needs through 2003. However, a variety of currently unanticipated events could require additional capital resources such as the acquisition of complementary businesses or technologies or increased working capital requirements to fund, among other things, construction of systems for our strategic alliances in advance of payment. Additionally, if our requirements vary from our current plans, we may require additional financing sooner than we anticipate. An inability in such circumstance to obtain additional financing on terms reasonable to us, or at all, could have a material adverse effect on our results of operations and financial condition." TITAN: Acquisition by Lockheed Spurs S&P to Keep Ratings Watch -------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB-' corporate credit and senior secured debt ratings, and 'B' subordinated rating of Titan Corp. on CreditWatch with positive implications. Titan, based in San Diego, California, develops and deploys communication and information technology solutions and services primarily for government customers. "The CreditWatch listing follows the announced acquisition of Titan by Lockheed Martin Corp.," said Standard & Poor's credit analyst Philip Schrank. Lockheed Martin is rated BBB/Stable/A-2. The transaction is valued at $2.4 billion, including the assumption of the approximately $580 million of Titan's debt outstanding. The transaction has been approved by the boards of directors of each company and is expected to close in the first quarter of 2004 pending various approvals and regulatory reviews. Titan and Lockheed Martin will commence an offer to exchange Titan's existing 8% senior subordinated notes due 2011, which will have substantially identical terms to the existing notes, except that the new notes will be registered under the Securities Act and will be guaranteed by Lockheed Martin. At the closing of the merger and issuance of the new notes, Standard & Poor's will equalize Titan's ratings to that of its new parent. TRICO MARINE: Completes Asset Sale to Enhance Liquidity Position ---------------------------------------------------------------- Trico Marine Services, Inc. (Nasdaq: TMAR) is continuing to make progress executing its liquidity enhancement plan. The Company completed the sale of one of its largest North Sea vessels for NOK 263.5 million, approximately $35.5 million. In addition, the company completed the sale of its Brazilian AHTS newbuild project for approximately $17.3 million. The Company recovered all of its direct vessel costs related to the project. As a result of the sale of its interest in the Brazilian AHTS newbuild project, the Company will no longer be liable for the remaining progress payments required to complete the vessel. Proceeds from the sales will be used to provide working capital and reduce the Company's outstanding bank debt. "The closing of the sales of these vessels marks another significant step in our plans to improve liquidity and strengthen our balance sheet," said Thomas E. Fairley, President and Chief Executive Officer. "We will continue to strive to improve Trico's financial condition to ensure the long-term success of the Company." Trico Marine (S&P, B Corporate Credit Rating, Negative) provides a broad range of marine support services to the oil and gas industry, primarily in the Gulf of Mexico, the North Sea, Latin America, and West Africa. The services provided by the Company's diversified fleet of vessels include the marine transportation of drilling materials, supplies and crews, and support for the construction, installation, maintenance and removal of offshore facilities. Trico has principal offices in Houma, Louisiana, and Houston, Texas. Visit http://www.tricomarine.comfor more information on the Company. TRICO MARINE: S&P Says Ratings Unaffected by Sale of Vessels ------------------------------------------------------------ Standard & Poor's Ratings Services said that its ratings and outlook on Trico Marine Services Inc. (B/Negative/--) are not affected by the announcement that Trico has completed the sale of a North Sea anchor handling towing and supply (AHTS) vessel for proceeds of about $35.5 million. Although the AHTS sale and the previously announced sale of Trico's Brazilian new-build vessel are positive events, Standard & Poor's has already factored these transactions into its current ratings and outlook. In Standard & Poor's opinion, Trico's debt leverage remains extremely high and significant deleveraging needs to occur before Standard & Poor's would consider a positive revision to its outlook or ratings on Trico. TWINLAB CORP: Seeks Nod to Tap P.J. Solomon as Investment Banker ---------------------------------------------------------------- Twinlab Corporation and its debtor-affiliates want to retain and employ Peter J. Solomon Company Limited as their investment banker while restructuring under chapter 11. The Debtors anticipate that Peter J. Solomon will: a) assist in assessing the operating and financial strategies for their businesses; b) familiarize itself with the business operations, properties, financial condition and prospects of the Debtors; c) advise and assist the Debtors with respect to strategic alternatives; d) review and analyze the business plans and financial projections prepared by the Debtors; e) advise and assist management in making presentations to Twinlab's Board of Directors; e) if requested, render an opinion as to the fairness of the consideration to be paid in a Transaction; f) prepare descriptive data concerning the Debtors; g) advise and assist the Debtors in identifying potential parties to a Transaction and financing sources; h) consult with and advise the Debtors concerning opportunities for any Transaction and advise the Debtors as to the status of dealings with any potential parties to a Transaction or financing source; i) negotiate and execute on the Debtors' behalf, confidentiality agreements with potential parties to a Transaction and deliver confidential memoranda or other date for distribution to such parties; j) advise and assist the Debtors in the course of their negotiations of a Transaction; k) evaluate the Company's debt capacity in light of the projected cash flows; l) advise and assist the Company on tactics and strategies for negotiating with its various creditors and constituencies; m) advise and assist the on the timing, nature and terms of any new securities or other inducements to be offered to creditors in connection with any exchange; and n) render such other financial advisory services as may from time to time be agreed upon by P.J. Solomon and the Debtors. Kenneth D. Baronoff, assures the Court that P.J. Solomon is a "disinterested person," as such is defined and required in the Bankruptcy Code. In this retention, the Debtors agree to pay P.J. Solomon: i) a monthly cash advisory fee of $75,000 for a minimum of three months; ii) in the event of a Financing Transaction, the Debtors will pay to P.J. Solomon a financing fee equal to the aggregate of: a) 1.0% of any senior secured or unsecured debt; b) 4.0% of the face amount of any junior or subordinated debt; and c) 6% of any preferred equity or common equity raised by P.J. Solomon in connection with the Debtors' reorganization; iii) in the Event of an Exchange Transaction, the Debtors will pay to P.J. Solomon an exchange fee of $750,000; iv) in the event of a Sale Transaction, the Debtors will pay to P.J. Solomon a transaction fee equal to the greater of $1,250,000 or 2.0% of the Aggregate Consideration; and v) in the event of a Reorganization Transaction, the Debtors will pay to P.J. Solomon a reorganization fee equal to the greater of $1,250,000 or 1.0% of total funded debt based on a reorganization of the Debtors pursuant to chapter 11 of the Bankruptcy Code. Headquartered in Hauppauge, New York, Twinlab Corporation manufactures and markets high quality, science-based, nutritional supplements. The Company filed for chapter 11 protection on September 4, 2003 (Bankr. S.D.N.Y. Case No. 03-15564). Michael P. Kessler, Esq., at Weil, Gotshal & Manges, LLP represents the Debtors in their restructuring efforts. UNITED AIRLINES: Court Approves Implementation of Selective KERP ---------------------------------------------------------------- U.S. Bankruptcy Court Judge Wedoff rules that the United Airlines Debtors' KERP is effective as of July 18, 2003 and will terminate on the date of Plan Confirmation. The aggregate amount of awards is not to exceed $7,500,000, less than the $9,500,000 requested by the Debtors. Judge Wedoff includes only 520 Participants, not the 600 requested. (United Airlines Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 609/392-0900) US FLOW CORP: Look for Schedules and Statements by October 12 ------------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of Michigan gave US Flow Corporation and its debtor-affiliates an extension to file their schedules of assets and liabilities, statements of financial affairs and lists of executory contracts and unexpired leases required under 11 U.S.C. Sec. 521(1). The Debtors have until October 12, 2003 to file their Schedules of Assets and Liabilities and Statement of Financial Affairs. Headquartered in Grand Rapids, Michigan, US Flow Corporation filed for chapter 11 protection on August 12, 2003 (Bankr. W.D. Mich. Case No. 03-09863). Robert F. Wardrop, II, Esq., at Wardrop & Wardrop, P.C., represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $69,056,000 in total assets and $123,461,000 in total debts. U.S. WIRELESS DATA: Secures $2.75-Mill. Bridge Loan from Brascan ---------------------------------------------------------------- U.S. Wireless Data (OTC: USWE) has entered into a term loan and security agreement with Brascan Financial Corporation, a financial services company that provides asset management and merchant banking services, pursuant to which Brascan has agreed to lend U.S. Wireless Data up to $2.75 million as a bridge loan. Brascan Financial is a subsidiary of Toronto-based Brascan Corporation. The loan was made pursuant to term sheets signed by USWD and Brascan in August 2003, which also contemplate, subject to a number of conditions, the agreement by Brascan to arrange for the purchase of $12.5 million of a newly issued Series D convertible preferred stock representing at least 60% of the shares of USWD common stock, on a fully diluted basis. "The transactions contemplated in the term sheets set the stage for a long-term and mutually beneficial relationship with both Brascan and its subsidiary MIST Inc. MIST is a Toronto-based provider of card issuance and payment processing products and gateway services to banks, non-bank card issuers and the payment processing industry. The combination of USWD's leading technology and Brascan's financial strength, coupled with the synergies that we feel can be developed with MIST, make for a powerful triumvirate in the electronic payment processing arena," said USWD Chairman and CEO Dean M. Leavitt. The loan is secured by a general security interest over all of the assets of U.S. Wireless Data and the principal amount of the loan plus any accrued and unpaid interest is due March 16, 2005. A portion of the funds will be used to repay a bridge loan in the principal amount of $300,000 previously made to USWD on August 28, 2003 by Brascan, which was necessary in order to enable USWD to continue its operations. The remaining amount of the loan is intended to provide U.S. Wireless Data with the working capital necessary to allow the company to continue operations through December 2003. Commenting on his company's newly formed relationship with USWD, George Myhal, President and CEO of Brascan Financial and Chairman of the Board of MIST, stated, "U.S. Wireless Data is clearly a leading provider of wireless payment products and services in the U.S. We look forward to helping the company capitalize on its superior technology and industry know-how by gaining market share in North America and expanding its presence in the payments industry to other markets around the world." In connection with the loan, Brascan received a warrant for 10 million shares of common stock at $.15 per share, exercisable only if the Series D financing is not consummated by December 31, 2003 or if USWD were to be acquired or were to sell substantially all of its assets. According to Mr. Leavitt, "Upon closing of the contemplated financing, and pursuant to the terms and conditions of definitive financing documentation, Brascan or its designee will become our majority stockholder, and will likely have majority representation on our board of directors." It is anticipated that the terms and provisions of the contemplated financing will have a substantial dilutive effect on the ownership interests of USWD's existing stockholders. The contemplated financing is subject to a number of conditions, including, the execution of definitive financing documentation and the successful completion of a reorganization of USWD's capital structure, which will include the restructuring of its currently issued and outstanding Series C Convertible Preferred Stock and Series C Warrants. Accordingly, there is no assurance that the Series D Financing will be consummated on the terms contemplated by the term sheets or at all. U.S. Wireless Data provides wireless transaction delivery and gateway services to the payments processing industry. Our customers include credit card processors, merchant acquirers, banks, automatic teller machine distributors and their respective sales organizations, as well as certain businesses seeking new solutions to make it easier for their customers to buy their products or services. We offer these entities turnkey wireless and other transaction management services. We also provide those entities with proprietary wireless enabling products designed to allow card acceptance where such acceptance has heretofore been too expensive or technologically unfeasible or to displace conventional telephone lines for increased speed, cost reduction or convenience. These services and products may be utilized by conventional card accepting retailers as well as emerging card accepting market segments such as vending machines, quickservice (fast-food) and quick casual restaurants, taxis and limousines, in-home service providers, door-to-door sales, contractors, delivery services, sporting events, and outdoor markets. Our services and products may also be used for gathering telemetric information such as mission critical operational data on a real- time basis from remote equipment such as vending machines. Further information is available at http://www.uswirelessdata.com * * * Financial Condition, Capital Resources and Liquidity In its most recent Form 10-QSB filed with the Securities and Exchange Commission, U.S. Wireless Data reported: "Since our inception we have incurred significant losses and negative cash flow (assuming the positive cash flow from capital transactions are excluded). As of March 31, 2003, we had an accumulated deficit of approximately $141 million. At March 31, 2003 our principal source of liquidity was approximately $1.27 million in cash and cash equivalents. At April 30, 2003, cash and cash equivalents aggregated approximately $1.07 million. "We need additional capital in the immediate future. Based on our current estimates of revenue levels, operating costs and other cash inflows and outlays, we will not have cash balances adequate for us to continue operations without a capital infusion within the next two months from mid May 2003. Our concerns about capital may lead us to take additional steps to cut costs and, depending on whether we are successful in our efforts to raise additional capital, may require us to eliminate or curtail certain of our projects and take additional steps to conserve cash that may adversely affect our operations. If we are unable to obtain additional capital as needed, we will be required to cease operations altogether. "In connection with our efforts to raise capital, we have hired investment bankers. We are exploring a number of alternatives for raising additional capital, including debt and equity financings, and strategic investments. In May 2003, we entered into an agreement to sell a portion of our trade receivables on a regular monthly basis. If we raise additional funds on an equity basis from other than a strategic partner, substantial dilution to existing shareholders would likely occur in light of the 'full ratchet' antidilution provisions of our Series C preferred stock and the related warrants. In fact, under certain scenarios, there may be virtually no value remaining to the common stock shareholders. Some of the alternatives that we are pursuing, though, may be less dilutive or non-dilutive to existing shareholders. However, we cannot be certain whether additional capital will be available when needed, if at all, or on acceptable terms. "Paymentech is obligated, subject to certain conditions, to purchase goods or services from us or our affiliates over a three (3) year period commencing September 1, 2002, in an amount aggregating at a minimum $3,472,500, with Paymentech obligated to pay us at least $1,000,000 during the first year, in installments of $83,333 per month, at least $1,150,000 during the second year, in installments of $95,833 per month, and at least $1,322,500 during the third year, in installments of $110,208. Paymentech has made such payments and is expected to continue to make such payments on a timely basis. "Paymentech has only recently begun to accelerate its purchase of services from us. Such purchases will be reflected in significant increases to our service and product sales revenues in comparison with prior periods but will have no immediate cash benefit. To the contrary, if Paymentech's purchases of services or products continue in the future, Paymentech will offset the amounts due us with the payments and credit balances that it has built up by making the payments referred to in the previous paragraph. Therefore, Paymentech's purchases of services or products from us will have a negative impact on our cash balance until the point at which it has exhausted the benefits of its prior period payments, even though revenues will increase. "Nevertheless, we anticipate our negative cash flow will continue to improve on a quarterly basis. A large percentage of our operating expenses are fixed and we expect to continue increasing our revenues without incurring significant increases in operating expenses. We are also focused on conserving cash and improving our cash flow through growth in the number of active sites and various product sales, including revenues from services and products for vending, and a continued reduction in cash expenses." VIRCO MFG. CORP: Wells Fargo Waives Second Quarter Covenants ------------------------------------------------------------ Virco Mfg. Corporation (Amex: VIR) released its second quarter results in the following letter to shareholders from Robert A. Virtue, President and CEO: "Following our interim report on July 17, when we announced the voluntary separation of 485 employees due to persistent sluggishness in our core classroom furniture market, order rates continued to decline. They now appear to have stabilized at about 25% below last year's rates for the comparable late-summer period. "From February through June, incoming order rates were running 14% below the prior year, a serious but not devastating decline that our preferred cost control methods of attrition and depreciation were capable of matching. In early July, concurrent with the release of lower state budgets, school districts reduced their furniture purchases another 11%. "At this point we took immediate action, announcing the voluntary severance that was completed two weeks later. After three more weeks of analyzing incoming orders and adjusting operating costs, we determined that deeper cuts were necessary. As a result, we laid off 160 employees during the first week of September. This brings the total number of employees lost this year through attrition, voluntary separation and layoff to 775, or 38% of our workforce. This is the largest workforce reduction in our history and it reflects the worst decline in school spending we've seen in 53 years of serving this market. "It is now clear that we will suffer a substantial loss for the year, only the fourth time in our history that this has happened. In addition to the workforce reductions already discussed, we will be taking the following actions to return Virco to profitability: * Quarterly cash dividend payments will be suspended until solid profitability returns * The traditional 10% stock dividend will also be suspended * Pensions will be frozen effective January 1, 2004, although all outstanding obligations will be funded at our current conservative discount rate and investment return assumptions * Stock repurchases will be limited to $250,000 per year "In total, our non-recurring costs for downsizing the company will be approximately $14,500,000, all of which will be recognized in the current year. Anticipated annual savings from these actions are $25,000,000 to $30,000,000, not including volume-related savings such as raw material, freight, utilities, and interest. "This approximate 2:1 ratio of annual savings to restructuring costs compares favorably to other restructurings reported by publicly held furniture manufacturers during the current recession. On average, the ratio of annual savings to restructuring costs runs about 1:1, primarily because the process of shutting down factories, as opposed to simple workforce reductions, entails the additional expense of inventory liquidation, machinery write-offs, etc. "Our current loan with Wells Fargo contains certain covenants that we will not meet this year. We are re-negotiating the loan to match it to our strength, which is our asset base. During the negotiations Wells Fargo has waived the second quarter covenants and we expect to have a new facility in place by the end of the third quarter. Tight inventory controls and continued low levels of capital expenditures should permit us to finish the year with less outstanding debt than in 2002, although we won't meet our goal of being debt-free. "In spite of a year-to-date sales decline of 23% and a beginning summer inventory 14% higher than last year's, our inventory as of this writing was $562,000 lower than on the same date last September. Our ability to control inventories in the face of uncertain market conditions is due to the maturation of Assemble- to-Ship, which we've explained in prior releases, and this year's associated seasonal shifting of employees. These combined programs allowed us to build much of the summer's inventory before June, then shift our experienced workers to the field where they performed deliveries and installations. We received such positive reviews from customers on the quality of our own installation teams that we intend to expand this program next year. Formerly, we used temporary labor for the bulk of this work. "Obviously the key question is 'What does the future hold?' Next year will very likely be a repeat of this one in terms of state and school district spending. This means our volume will probably come in below $200,000,000. If we're reasonably close to this number, the cuts we've made should generate a profit in fiscal 2004. Incoming order rates are being monitored closely and if they fall further, we will make proportionate adjustments. "One area where we're not cutting back is new product development. Technology continues to transform both classrooms and curricula, and we feel compelled to support this evolution. We're also re- engineering several traditional product lines to take advantage of ATS. The benefits of these two initiatives have been obscured by recession, but we continue to believe in their viability." WARNACO GROUP: Third Point Management Discloses 5% Equity Stage --------------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission, Daniel S. Loeb discloses that as of August 21, 2003, Third Point Management Company, L.L.C. owns 2,252,000 shares of Warnaco Group, Inc. Common Stock, par value $0.01 per share. Third Point, a Delaware limited liability company, is the investment manager or adviser to a variety of hedge funds and managed accounts. Mr. Loeb is the managing member of Third Point and controls Third Point's business activities. The Funds directly own the Common Stock. Third Point and Mr. Loeb may be deemed to have beneficial ownership over the Common Stock by virtue of the authority granted to them by the Funds. The Shares represent 5% of the total 45,025,183 Warnaco Outstanding Common Stock. The Funds expended an aggregate of approximately $20,515,936 of its own investment capital to acquire the 2,252,000 shares of Common Stock. The Shares were acquired in open market purchases. The transactions covering the period June 30, 2003 to August 20, 2003 are summarized as: Shares Shares Price per Date Purchased Sold Share ---- --------- ------ --------- June 30, 2003 24,241 $13.43000 June 30, 2003 24,241 13.43000 July 7, 2003 76,700 13.71670 July 31, 2003 32,868 15.60000 July 31, 2003 32,868 15.60000 August 11, 2003 51,000 14.30000 August 20, 2003 1,000 15.70000 Mr. Loeb reports that the purpose of the acquisition of the Shares by the Funds is for investment. Third Point and Mr. Loeb may cause the Funds to make further acquisitions of Common Stock from time to time or to dispose of any or all of the shares of Common Stock held by the Funds at any time. Third Point and Mr. Loeb are engaged in the investment business and analyze the operations, capital structure and markets of companies including Warnaco, on a continuous basis through analysis of the documentation and discussions with knowledgeable industry and market observers and with company representatives. From time to time, Third Point may hold discussions with third parties or with company management, where Third Point may suggest or take a position with respect to potential changes in operations, management or capital structure of the companies as a means of enhancing shareholder value. In an August 21, 2003 letter, Third Point and Mr. Loeb asked Warnaco's Board of Directors to implement changes in the membership of the Board as well as other changes in Warnaco's policy. Certain specific changes sought are: (a) A seat on the Board should be made available to Third Point and Mr. Loeb. An additional two seats should be made available to other shareholders; (b) Warnaco should retain financial advisors to explore alternatives to maximize shareholder value; (c) Stuart Buchalter should resign from the Board. The fact that Mr. Buchalter rejected a $310,000,000 bid for Standard Brands Paint in 1981 when he was Chief Executive Officer of that company, which subsequently filed for bankruptcy, makes him unfit to serve as a director of a public company in Third Point's and Mr. Loeb's opinion; (d) Joseph Gromek should resign from his position as Chief Executive Officer of the Company, as well as from the Board, and assume the role of Executive Vice President of Communications and Director of Investor Relations for the remainder of his contracted term with Warnaco; (e) Tony Alvarez should cease providing transitional services to Warnaco at a rate of $750 per hour and, if unwilling to cease, resign from the Board; (f) A permanent Chief Financial Officer should be hired and James Fogarty should resign from his position as Warnaco's Chief Financial Officer where he is providing accounting services at the rate of $495 per hour; (g) Sheila Hopkins did not know the number of outstanding Company shares when questioned and should resign from the Board for that and various other reasons; and (h) Certain design changes should be implemented in connection with Warnaco's retail stores and website. If Warnaco does not pursue the proposed courses of action, Mr. Loeb relates that Third Point may communicate, and coordinate their actions with other Warnaco stockholders to convene a special meeting to replace the Board members. Third Point understands that holders of at least 15% of the total outstanding shares of Common Stock may call a meeting. (Warnaco Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 609/392- 0900) WEIRTON STEEL: Solid Waste Demands Decision on Disposal Contract ---------------------------------------------------------------- Elmer Earl Bowser, Jr., Esq., at Snyder & Hassig, in New Martinsville, West Virginia, relates that in September 1998, Solid Waste Services, Inc. and its affiliates, Solid Waste Services of West Virginia, Inc. and Valero Terrestrial Corporation, on one hand, and Weirton Steel Corporation, on the other hand, entered into an Industrial Waste Stabilization, Transportation and Disposal Agreement. Pursuant to the Disposal Agreement, the Solid Waste Entities provide services to the Debtor including the transportation of waste and a lease of certain landfill space for the disposal of waste. Pursuant to the Agreement, on October 1, 1998, the Solid Waste Entities and the Debtor entered into a Lease Agreement for Dedicated Disposal Cell at Brooke County Landfill. The Lease requires the Debtor to dispose its waste material in the dedicated disposal cell at the Landfill. The Agreement and Lease provide for a 10-year term. Payment is due under the Agreement every 30 days, on a weekly basis. The prepetition average billings per month under the Agreement approximated $350,000 and the average billings per week approximated $80,800. Before the Petition Date, Mr. Bowser says, the Debtor was delinquent in making payments under the Agreement and in performing other material obligations under the Agreement and Lease. After the Petition Date, the Debtor also failed to comply with material terms of the Agreement. According to Mr. Bowser, the Solid Waste Entities' total prepetition claims against the Debtor amount to $6,587,408. As of the Petition Date, the minimum undisputed and past due amounts owed for the quarter preceding the Petition Date were: Date Amount ---- ------ February $218,959 March 424,888 April 369,772 May 1 through May 17 158,333 Since the Petition Date, the Debtor owes the Solid Waste Entities $604,873 in unpaid obligations plus unliquidated damages. Currently, the parties are in the middle of the 30-day public comment period, shortly after which the West Virginia DEP will render a decision on the Solid Waste Entities' permit renewal application. The permit submitted for approval contains a modification specifically tailored to encompass the Class F dedicated disposal Cell that the Debtor is leasing pursuant to the Lease so that it can be used exclusively for the disposal of the Debtor's waste. It is critical that the Solid Waste Entities know whether the Debtor will assume or reject the Agreement and Lease, Mr. Bowser notes. If the permit renewal is granted, and the Debtor later decides to reject the Agreement and Lease, the Solid Waste Entities will be left with a dedicated cell which they cannot use for other purposes and which will adversely impact their commercial landfill operation and development. On the other hand, if the Debtor were to reject the Agreement and Lease at this time, the application could be modified to eliminate any provision for the dedicated Cell in the future, and to request authorization for the Solid Waste Entities to incorporate the former dedicated Cell into their commercial landfill operation. Mr. Bowser reports that postpetition, the Debtor continues to breach material obligations under the Lease and the Agreements: A. Failure to Pay Stabilization Fees A stabilization fee has been required as of April 2001 due to a newly imposed requirement by the DEP that the Debtor's BOP filter cake waste material be stabilized before being disposed in the Cell. As of the Petition Date, the Debtor owes the Solid Waste Entities: (1) $1,114,295 in stabilization fees; and (2) approximately $5,280,000 in incurred damages that continue to accrue, which includes: -- a $4,275,000 loss of air space in the Cell which space is being consumed by the dirt that is being used as a stabilization material, -- the incurrence of $500,000 of handling costs for digging the dirt, and -- the creation of a $1,000,000 remediation project under the auspices of the DEP due to the premature consumption of air space in the Cell. Mr. Bowser asserts that under Sections 6(a) and (h) of the Agreement, the Solid Waste Entities are entitled to pass the costs of using dirt as stabilization agent to the Debtor due to a change in a "Governmental Requirement." After the Agreement and Lease went into effect, the DEP required the Solid Waste Entities to use a different waste as its stabilization agent for the Debtor's wet waste. The DEP negated the Solid Waste Entities' ability to use dry municipal waste from third parties as a stabilization agent. Mr. Bowser explains that the economic foundation of the business arrangement under the Agreement and Lease and the extremely preferred pricing that the Solid Waste Entities provided the Debtor was predicated upon the Solid Waste Entities' ability to use third party waste to stabilize wet waste. When the DEP unilaterally changed the approval previously given, it changed the terms of the Agreement and Lease. The Solid Waste Entities believe that the DEP's invalidation of the provision permitting them to use the third party waste as a stabilization agent for the Debtor's wet waste rendered that part of the Agreement and Lease null and void under Section 2(h) of the Agreement. Because the provision constitutes a material portion of the Agreement and Lease, both are null and void as a whole at this juncture, thus providing the Solid Waste Entities with a basis for terminating the contract. B. Failure to Pay Escrow Fees Since December 2001, the Public Service Commission of West Virginia began assessing an escrow charge of $3.04 per ton of waste disposed at the Cell. The Solid Waste Entities have paid and continue to pay this charge. Mr. Bowser reiterates that the Solid Waste Entities are entitled to pass the escrow fee to the Debtor under Sections 6(a) and (h) of the Agreement due to a change in a "Governmental Requirement." Mr. Bowser relates that the Debtor owes the Solid Waste Entities: (1) as of the Petition Date, $135,456 in escrow fees; and (2) since the Petition Date, additional $16,873 in escrow fees, with the fees continuing to accrue at the approximate rate of $15,200 to $18,240 per month. C. Failure to Provide Anticipated Disposal Volume Under the Agreement, the parties agreed that the Debtor would dispose of waste materials in the Cell amounting to 150,000 to 200,000 tons per year. This volume was initiated immediately upon execution of the Agreement, and has become part of the parties' course of dealing for almost five years. However, just before the Petition Date, the Debtor informed the Solid Waste Entities that it intended to eliminate 55% of the waste disposal stream under the Agreement. This loss of revenue was to result from the Debtor's plan to reuse or recycle its BOP filter cake and blast furnace cake waste rather than dispose it. Under the duty of good faith and fair dealing, the Solid Waste Entities submit that the Debtor should be required to continue to provide for a waste disposal stream with a volume that matches the parties' long-established course of dealing. Mr. Bowser notes that the change in the use of the waste constituted a material change under the Agreement, has frustrated the initial purpose of the Agreement and Lease, and rendered them commercially impracticable for the Solid Waste Entities to perform. D. Failure to Provide and Pay For Transportation of Waste Under the Agreement, the Debtor is required to utilize and pay for the Solid Waste Entities' services to transport the diverted BOP filter cake and blast furnace cake waste to third party processors. After the Petition Date, the Debtor granted the transportation right and revenue to a third party in violation of the Agreement. As a result, the Debtor owes the Solid Waste Entities postpetition fees for $588,000. The fees continue to accrue at a rate of $196,000 a month. On June 12, 2003, the Debtor and the Solid Waste Entities entered into an agreement, providing that: (a) the Solid Waste Entities would continue to transport waste and lease landfill space for the disposal of waste, pursuant to the terms of the Agreement and the Lease; and (b) the Debtor would comply with all of its postpetition obligations under the Agreement and the Lease. While the Debtor has been current as to certain postpetition monetary obligations owed under the Agreement for services performed by the Solid Waste Entities, it has not complied with many of its postpetition obligations under the Agreement and Lease, which are both monetary and non-monetary in nature. Thus, the Debtor is in breach of the June 2003 Agreement. Furthermore, the Debtor failed to comply with various material postpetition obligations under the Lease. Accordingly, the Debtor is in violation of Section 365(d)(3) of the Bankruptcy Code that requires a debtor to timely and fully perform all postpetition obligations under a non-residential real property lease until the lease is assumed or rejected. Because of the significant economic effect of the breaches, coupled with the undisputed prepetition liability, the disputed liability, as well as the material alteration of the economic model of the Agreement through action of the DEP and the Debtor, the Solid Waste Entities should not be required to wait until confirmation of the Debtor's Chapter 11 plan for the Debtor to make a decision regarding assumption or rejection of either the Agreement or the Lease. Therefore, the Solid Waste Entities ask the Court to: (a) grant them relief from the automatic stay to terminate the Agreement and Lease or, alternatively, compel the Debtor to provide adequate protection of their interests in the Agreement and Lease; (b) require the Debtor to assume or reject the Agreement without further delay; (c) shorten the time within which the Debtor is required to assume or reject the Lease, and require the assumption or rejection; (d) require: (1) the Debtor to provide immediate payment in cash for the Damages; (2) the Debtor to immediately provide a deposit of funds equal to the Damages as security against future breaches; and (3) the strict compliance by the Debtor going forward with the June 12, 2003 Agreement and with the underlying postpetition obligations under the Agreement and the Lease; (e) require the Debtor to timely and fully perform its obligations under the Lease as of the Petition Date, including payment of the Damages attributable to the non- performance of the obligations as administrative expense claims of the Debtor's estate under Section 503(b) of the Bankruptcy Code; and (f) require the Debtor to pay the Damages owed under the Agreement and the Lease, as administrative expense claims of the Debtor's estate. (Weirton Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) WICKES INC: Nasdaq Will Delist Shares from SmallCap Market ---------------------------------------------------------- Wickes, Inc. (NASDAQSC:WIKS), a leading distributor of building materials and manufacturer of value-added building components, announced that on September 12, 2003, the Company received a Nasdaq Staff Determination indicating that Nasdaq has denied the Company's request for continued listing on The Nasdaq SmallCap Market. The Company's common stock will be delisted from The Nasdaq SmallCap Market at the opening of business on September 23, 2003. Nasdaq has advised the Company that its common stock may be immediately eligible for quotation on the OTC Bulletin Board under the trading symbol WIKS, effective with the opening of business on September 23, 2003, provided a market maker enters a quote for the common stock on that date. However, there can be no assurance that the Company's common stock will in fact be quoted on the OTC Bulletin Board. The delisting is the result of the Company's failure to comply with the minimum requirements for continued listing set forth in Marketplace Rule 4310(C)(2)(B), which include: $2,500,000 of stockholders' equity, $35,000,000 of market value of listed securities or $500,000 of net income during the relevant fiscal years. As previously disclosed, Nasdaq notified the Company on August 21, 2003 that it was not in compliance with its listing requirements. In its September 12, 2003 letter, Nasdaq advised the Company that it had provided neither sufficient evidence of its ability to achieve near term compliance with the continued listing requirements nor sufficient evidence that the Company can sustain such compliance over an extended period of time. The Nasdaq also expressed concern about the Company's ability to continue as a going concern beyond the end of 2003, citing the Company's Form 10-Q for the period ended June 28, 2003, in which the Company disclosed that it does not believe it will generate sufficient cash from operations to pay the principal amount of its Senior Subordinated Notes when due on December 15, 2003 and that even if the principal amount of the Senior Subordinated Notes were paid it will need to increase revenues and operating income to provide sufficient value to pay the principal and accrued interest on its Senior Secured Notes when due on July 29, 2005. Wickes, Inc. -- whose June 28, 2003 balance sheet shows a total shareholders' equity deficit of about $9 million -- is a leading distributor of building materials and manufacturer of value-added building components in the United States, serving primarily building and remodeling professionals. The Company distributes materials nationally and internationally, operating building materials centers and component manufacturing plants in the Midwest, Northeast and South. The Company's building component manufacturing facilities produce value-added products such as roof trusses, floor systems, framed wall panels, pre-hung door units and window assemblies. Wickes, Inc.'s Web site, http://www.wickes.comoffers a full range of services about the building materials and construction industry. W.R. GRACE: Montana Dist. Court Orders Debtor to Pay $54.5 Mill. ---------------------------------------------------------------- The District Court of Montana has ordered W.R. Grace & Co. to pay over $54.5 million to reimburse the federal government for the costs of investigation and cleanup of asbestos contamination in Libby, Montana. According to the U.S. Dept. of Justice and U.S. Environmental Protection Agency, this could be the largest judgment after trial in the history of the federal Superfund law. Judge Donald W. Molloy issued the ruling on August 26, 2003. Judge Molloy found W.R. Grace liable for costs related to the investigation and cleanup of asbestos contamination in Libby. Judge Molloy further ruled that the EPA's revised method for calculating indirect or overhead costs is appropriate and those costs may be recovered from W.R. Grace. This is the first time a federal district court has ruled on EPA's revised method for calculating overhead costs. W.R. Grace owned and operated a vermiculite mine and vermiculite processing facilities in Libby, Montana, from 1963 to 1990. The vermiculite ore found in Libby is contaminated with asbestos fibers. Mining and processing activities resulted in the spread of vermiculite -- and the associated asbestos fibers -- to numerous homes, businesses and schools throughout the town. Asbestos, a recognized human carcinogen, is known to cause lung cancer and mesothelioma, a lethal tumor of the lining of the chest and abdominal cavities. Exposure to asbestos can cause asbestosis, a disease characterized by fibrotic scarring of the lungs. EPA has been removing asbestos-contaminated soils and vermiculite in and near Libby since May 2000. The EPA recognizes that any payments on the judgment must be approved by the bankruptcy court. Accordingly, W.R. Grace & Co. says that it will record a third- quarter, pre-tax charge of at least $50 million because of the ruling. In a press release, W.R. Grace remarked that the charge will adjust its accruals to the expected total costs, and estimates its total liability at about $110 million. (W.R. Grace Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., 609/392-0900) * Unions Propose Protection for Workers of Bankrupt Companies ------------------------------------------------------------- The Canadian Labour Congress on Wednesday will propose a number of innovative ideas to protect workers in the all-too- frequent event of business bankruptcy or insolvency. Hassan Yussuff, Canadian Labour Congress Secretary-Treasurer, made these and other recommendations in an appearance Wednesday before the Standing Senate Committee on Banking, Trade and Commerce. The Committee is examining the government's proposed changes to the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act. Yussuff was joined at that time by representatives of the Canadian Auto Workers and the United Steelworkers. "Workers' lives are too often affected negatively by insolvencies and bankruptcies - large and small," Yussuff noted. "With their jobs and livelihoods at stake, workers should not face these situations as unsecured creditors. If there is to be any fairness, this must be addressed." The Canadian Labour Congress, the national voice of the labour movement, represents 2.5 million Canadian workers. The CLC brings together Canada's national and international unions along with the provincial and territorial federations of labour and 137 district labour councils. Web site: http://www.clc-ctc.ca * DebtTraders' Real-Time Bond Pricing ------------------------------------- Issuer Coupon Maturity Bid - Ask Weekly change ------ ------ -------- --------- ------------- Federal-Mogul 7.5% due 2004 14.5 - 16.5 0.0 Finova Group 7.5% due 2009 43.5 - 44.5 +0.5 Freeport-McMoran 7.5% due 2006 102.5 - 103.5 0.0 Global Crossing Hldgs 9.5% due 2009 4.5 - 5.0 +0.25 Globalstar 11.375% due 2004 3.0 - 3.5 -0.5 Lucent Technologies 6.45% due 2029 68.25 - 69.25 -0.75 Polaroid Corporation 6.75% due 2002 11.0 - 12.0 0.0 Westpoint Stevens 7.875% due 2005 20.0 - 22.0 0.0 Xerox Corporation 8.0% due 2027 84.0 - 86.0 -1.5 Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. 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